Neuronetics, Inc.

Good morning, ladies and gentlemen, and welcome to the Neuronetics Report's fourth quarter and full year 2020 financial and operating results call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require any assistance during the conference, please press star then zero on your touchtone telephone. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Mark Klossner. Please go ahead, sir.

Good morning, and thank you for joining us for Neuronetics' fourth quarter 2020 conference call. A replay of this call will be available on our website for 30 days. Joining me on today's call are Neuronetics President and Chief Executive Officer Keith Sullivan and Chief Financial Officer Steve Furlong. Before we begin, I would like to caution listeners that certain information discussed by management during this conference call will include forward-looking statements covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements related to our business strategy, financial and revenue guidance, the impact of COVID-19, and other operational issues and metrics. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. For discussion of risks and uncertainties associated with Neuronetics business, I encourage you to review the company's filings with the Securities and Exchange Commission, including the company's annual report on Form 10-K, which will be filed after the close of market today. The company disclaims any obligation to update any forward-looking statements made during the course of this call, except as required by law. During the call, we'll also discuss certain information on a non-GAAP basis, including EBITDA. Management believes that non-GAAP financial information taken in conjunction with U.S. GAAP financial measures provide useful information for both management and investors by excluding certain non-cash and other expenses that are not indicative of trends in our operating results. Management... uses non-GAAP financial measures to compare our performance relative to forecast and strategic plans to benchmark our performance externally against competitors and for certain compensation decisions. Reconciliations between U.S. GAAP and non-GAAP results are presented in the tables accompanying our press release, which can be viewed on our website. With that, it's my pleasure to turn the call over to Neuronetics President and Chief Executive Officer, Keith Sullivan.

Good morning, and thank you for joining us. I will provide an overview of our fourth quarter performance and discuss the progress we made on our near-term focus areas. Steve will then give our fourth quarter financial results, and I'll conclude with our thoughts on 2021 before turning to questions and answers. Starting with the review of the fourth quarter, total revenue was $15.6 million, slightly ahead of our January pre-announcement of $15 million to $15.5 million. On a sequential basis, revenue was up 25% over the third quarter of 2020, driven by growth in both system sales and treatment session revenue. While total revenue was down year over year, we are encouraged by the continued recovery of the business and the momentum we have built going into 2021. On the capital equipment side, U.S. Neurostar Advanced Therapy system revenue grew by 42%, over the third quarter of 2020. Our fourth quarter is a seasonally strong quarter, and we did see some pent-up demand from the second and third quarters convert into sales, in addition to some customers looking to take advantage of the Section 179 tax incentive prior to year end. Total treatment session revenue was up 21 percent over the third quarter of 2020, and was down only 2% compared to the fourth quarter of 2019. We did not experience the typical seasonal decline in treatment sessions between Thanksgiving and New Year's due to the reduction in patient travel during COVID. Turning to the fourth quarter operational update, the most notable achievement during the quarter was the completion of our market research study. As previously mentioned, we engaged a market research firm to identify the proper target audience, the messaging that resonates with them, and the most efficient way to communicate with them. Ultimately, our goal was to take this information, analyze it, and then use it to develop optimal tools and business development strategies to help educate customers on the benefits of Neurostar Advanced Therapy for Mental Health. and ultimately drive increased patient volume. I'd like to highlight some of the key takeaways from the study. First, awareness of Neurostar advanced therapy for mental health as a safe, effective, non-drug therapy for the treatment of MDD is extremely low. Furthermore, even among patients who are under the care of a physician and have previously failed multiple courses of drugs, awareness of TMS as a treatment option is also very low. This points to a significant opportunity to engage a largely untapped patient population and help bring relief to a huge number of patients suffering from drug-resistant MDD. We believe this lack of awareness can be addressed on both the patient and the healthcare provider side, which is factored into our strategy going forward. From a market definition perspective, we identified a group of approximately 8 million patients suffering with depression in the U.S., or roughly 48% of the total MDD population, who are good candidates for Neurostar Advanced Therapy for Mental Health. This group includes patients up to 70 years old. that are unhappy about how they feel and their quality of life as a result of their current drug regimen, and they have a strong desire to do what is possible to treat their depression. When we described the benefits of Neurostar, these patients were highly interested and would consider it as a treatment option. Historically, our average patient has been a woman in their 50s, who tends to respond to traditional media sources like television and radio ads. There is a broader demographic that is highly active online. They will use social media to find a better alternative treatment and are willing to take action to explore these treatments. With this research completed, we now have a much better understanding of who our target patients are, how to effectively reach them, and how best to communicate with them. In addition to the development of the new communication strategy, we went through a process of optimizing our sales force. As part of that, we have added 28 new hires since January 1st, 18 BDMs or business development managers, 10 NPCs or Neurostar practice consultants. This brings our total number of BDMs to 22 and NPCs to 27. The group of new hires immediately went through two and a half weeks of virtual training and then spent a week out in the field ahead of our Salesforce kickoff meeting in mid-January. These new hires all have a track record of success in prior roles working with the capital equipment and ongoing treatment session model. We are very excited about the level of talent we have been able to attract. which speaks to the level of enthusiasm there is in the market for our company, our technology, and the opportunity. Typically, the ramp to full productivity is approximately six to nine months. We expect this new class to begin being productive during the second quarter. In December, we announced that we received FDA clearance for our TouchStar treatment, a three-minute treatment protocol used with our NeuroStar Advanced Therapy System. Our hope is that this third treatment protocol, in addition to the 38-minute and 19-minute options, will mean even more patients in need will have access to NeuroStar Advanced Therapy to help them in the battle with depression. We are currently working with a group of KOLs to determine how best to utilize the three-minute protocol with the TMS treatment paradigm for depression. Overall, we are pleased with our performance during the fourth quarter and what we were able to accomplish during what has been a universally challenging year. The organization went through a significant reorganization during the early part of 2020, followed by a management transition in the middle of the year. And then a change in focus from a capital-based company to a patient-focused company, all of which occurred during the uncertainty of COVID. Despite all of that, we have built a tremendous foundation to grow from going into 2021 and beyond. And we are incredibly excited to take what we have learned over the past few months and begin the process of building awareness of NeuroStar as a treatment for depression. With that, I'll turn the call over to Steve.