Neuronetics, Inc.

Good day and thank you for standing by. Welcome to the Neuronetics Report's first quarter 2021 financial and operating results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the call over to your speaker today, Mark Klausner. Please go ahead.

Good morning, and thank you for joining us for Neuronetics' first quarter 2021 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 Neuronetic's 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 and the Form 10-Q, which will be filed later 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 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'll begin by providing an overview of the first quarter performance, followed by an operational update. Steve will then review our financial results, and I will conclude with our thoughts for the balance of 2021 before turning to Q&A. From the time I joined the company in July of 2020 until the end of the year, my number one priority was to understand who our patients are, where they are, and how we can best educate them as they seek to find relief from their depression. As part of that exercise, we partnered with a market research firm to review the MDD patient landscape and identify the ideal patient population for NeuroStar Advanced Therapy for mental health. We wanted to learn what communication tactics would be most effective in reaching and developing relationships with those patients. With that study completed in late 2020, we used the findings to develop a new commercial strategy focused on building awareness of NeuroStar to ensure that we are helping our customers find and treat as many patients as possible. In parallel, we went through a process of optimizing our sales force, which included a rebuild and training of both the business development managers, or BDMs, and our neuro practice consultants, Cs. After beginning our newly aligned commercial organization together in late January to introduce these concepts and conduct training, we were able to shift into execution of the strategy we had worked multiple quarters to develop. We have seen early success and our first quarter performance reflects that traction. Despite many of the programs and initiatives not launching until the beginning of February, Starting with the review of the first quarter, total revenue was $12.3 million, up 7% over the first quarter of 2020, primarily driven by strong year-over-year growth in treatment session revenue. Our U.S. treatment session revenue was up 18% over the first quarter of 2020. This strong year-over-year performance was driven by growth in the installed base as well as the positive impacts of our new patient education programs and our NPCs beginning the process of training our existing accounts. Coming into the year, our goal was to have treatment session revenues approach 2019 levels by year end. I'm pleased to report that we have achieved this goal with the first quarter of 2021 treatment sessions. revenue surpassing first quarter of 2019 by 9%. One of the many metrics we captured through TrackStar is motor threshold tests, which we view as a leading indicator of treatment session revenue, as they represent new patient starts. During the first quarter, motor threshold tests increased by approximately 24% over the first quarter of 2020, indicating business is getting closer to normal. On the capital equipment side, US Neurostar Advanced Therapy System revenue declined by 32% over the first quarter of 2020. This performance was in line with our expectations for the newly hired sales force who were working within a shortened 60-day quarter, having been put into the field on February 1st. Despite the short window, our BDMs were able to engage with physicians and generate several hundred new opportunities within our CRM system in Q1 and are adding more every day. While it is difficult to say when those opportunities will convert into capital sales, we are very encouraged by the initial progress and continue to expect BDMs to be increasingly more productive through the balance of the year. To date, there have been over 112,000 patients who have been treated with the NeuroStar Advanced Therapy for mental health. A unique advantage we have relative to all other companies in our industry is the ability to accurately track treatment sessions and patient data on a real time basis. Through our TrackStar system, in which 80% of our installed units are linked via the cloud, we can track treatment session data in real time. giving us true insight into our business and patient trends as they develop. Our TrackStar data indicates that we have seen strong treatment session utilization trends in the first three months of the year. During the first quarter, the number of treatment sessions has increased by 15% over the first quarter of 2020, and more impressively, increased by over 55% compared to the first quarter of 2019. As we moved into April, for the first time ever, we are now averaging over 3,000 treatment sessions per day. Following the significant planning efforts over the last few quarters, the first quarter represented our transition into execution of key initiatives to build awareness and motivate patients with depression to request NeuroStar and train our customers on the best practices to educate patients who are searching for an alternative to drugs on the benefits of NeuroStar. During the quarter, we optimized our digital and social media marketing campaigns, expanded our concierge call center efforts, and launched two new customer programs. In addition, we continued to put the pieces into place to execute our clinical and regulatory strategy. beginning with our marketing campaigns. A key driver of our growth strategy is to leverage digital and social media marketing to build awareness, educate, and then engage patients to request Neurostar appointments. During the first quarter, our digital campaigns drove over 25 million online targeted audience impressions, which represented a material increase over the first quarter of 2020. Our media strategy optimizations based on market research resulted in a meaningful shift in the age demographic of the patients seeking treatment with NeuroStar, particularly those in our targeted age range who we did not directly target with previous marketing initiatives. Importantly, we saw the impact of our improved messaging in our ability to engage potential patients. In the quarter, These efforts to build awareness generated more than a 30% increase in patients who proactively requested an appointment with a psychiatrist in their area after seeing a NeuroStar advanced therapy for mental health advertisement online. A significant percentage of patients requesting appointments with NeuroStar are now coming through our concierge call center. The call center has ramped quickly since its launch and over 90 accounts are currently qualified to receive leads. The initial results are very exciting. In just a few months, thousands of patients were motivated to go online, pick up the phone to seek treatment with NeuroStar. This strong response rate validates the messaging and types of campaigns we have been running and proves the value we can deliver to the MDD patient population and our customers. This impressive increase in patient interest in NeuroStar provides our NPCs with a huge opportunity to prove out our value proposition and assist our customers in offering more patients hope for beating their depression with a NeuroStar treatment. As noted on the fourth quarter call, we recently launched two exciting programs aimed at making sure that our customers are able to assist as many patients as possible. The first program is the Five Stars to Success, which is proven, detailed, and a prescriptive formula to improve a customer's NeuroStar practice. The program, which is based on market research, is designed to focus on the patient journey to the practice. We want to ensure that from the initial expression of interest, through the initial consultations, to the decision to obtain treatment with NeuroStar that the patient does not get lost in the process. Approximately 30% of our accounts have begun the program, and a large number of our accounts have already earned their first three stars in the five-star program. The second program is Precision Pulse, which is designed to partner with our customers to build awareness among MDD patient population about Neurostar in their local areas. We have seen strong early adoption by customers, and we expect that as the year progresses, we will continue to see more customers participate. At the beginning of April, we hosted a quarterly regional sales meeting. Given the logistics of COVID and the size of the team, we decided to invite the entire sales team out of simplicity and efficiency. As a result of this meeting, we gained initial feedback on the five stars and precision pulse programs and additional market insights from the team. Based on the feedback, we are confident that we are focused in the right areas and have the right team in place to execute our strategy. We are very encouraged by the positive traction of our marketing and customer training efforts, and we will continue to work to refine our strategy to drive increased awareness among MDD patient population and help our customers identify and treat more patients. Lastly, we made strides towards executing on our long-term clinical and regulatory strategy. Shortly after our fourth quarter call in March, we named Corey Anderson our new Vice President of Clinical Affairs and Medical Operations. We were very excited to bring Corey on board and he has made an immediate impact on driving the clinical development of NeuroStar. In his first 60 days, Corey and his team have already opened a productive dialogue with the FDA to explore pathways to additional indications. As previously announced in late Q4 of 2020, we received FDA clearance for our TouchStar treatment, a three-minute treatment protocol used with our NeuroStar advanced therapy system. A software update is available at no charge to our entire installed base, and all new systems shipped since February have included the Touch Star protocol. It is still early days, but we are working with a group of 20 leading KOLs and industry societies to determine the most appropriate utilization of this treatment protocol. Overall, I am very proud of our performance in the first quarter and enthusiastic about how we are positioned for the future. Since I joined the company, we've accomplished all of the key milestones that we set out to achieve. The completion of the market research study, the development and introduction of a new commercial strategy, the expansion, optimization, and training of our commercial team, the addition of key talent throughout the organization, and progress towards the development of our clinical and regulatory strategy. I am very pleased by our initial success as we continue the execution of our strategic shift to a patient-focused company. We believe that long-term success in our industry requires much more than just selling a system to a physician. Success requires a deep understanding of patients with depression, and their journey to obtaining treatment beyond medications. Success also requires a true partnership with our customers as they treat an increasing number of patients with NeuroStar. Our partnership ensures that through our Five Stars to Success program, our customers have access to the best practices we have developed over the last 12 years to help practices reach patients. With that, I'll turn the call over to Steve.