Neuronetics, Inc.

Good day, and thank you for standing by. Welcome to the Neuronetics First Quarter 2022 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. Please be advised that today's conference may be recorded. I would now like to hand the conference over to your host today, Mark Klausner. Please go ahead.

Good morning and thank you for joining us for Neuronetics first quarter 2022 conference call. Joining me on today's call are Neuronetics President and Chief Executive Officer Keith Sullivan and SVP Chief Financial Officer and Treasurer 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 can 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 and 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 forecasts 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'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'll conclude with our thoughts for the balance of 2022 before turning to Q&A. Starting with the review of the first quarter, total revenue was $14.2 million, up 15% over the first quarter of 2021, primarily driven by strong capital equipment sales, accelerating new patient starts, and solid utilization trends despite the COVID-related headwinds experienced early in the year. January was significantly impacted by the spike in Omicron cases in the U.S., but the utilization in February and March increased as the environment improved. We have continued to see positive trends across the business in the month of April. U.S. Neurostar system revenue was 3.6 million, up 108 percent over the first quarter of 2021, representing the strongest capital quarter since the beginning of the COVID-19 pandemic and the fourth consecutive quarter of sequential growth. This was driven by improving performance from our full-sized mature capital sales team who have built a robust pipeline since the reorganization of our sales force. We are also seeing continued contribution to system sales from our quarterly Neurostar summits. These programs offer potential customers hands-on product demonstration and educational seminars to optimize their TMS practices. These educational events have proven to be very effective, allowing prospects to meet the NeuroStar team, see a demonstration of a system, and understand how our partnership will garner success in their practice. For the first time, we finished the quarter with over 1,000 active sites. due in large part to the positive impacts of the optimization of our sales force over the last five quarters and the ongoing refinement of our marketing initiatives. U.S. treatment session revenue was $9.5 million. Results were impacted by Omicron in January. However, we were encouraged by an acceleration in motor thresholds in February and March, ultimately leading to a record number of motor threshold tests being completed in a quarter. The ramp was partly due to our PHQ-10s, our digital patient assessment tool, which allows our NeuroStar practices to easily identify patients within their practice who are candidates for treatment. In Q1, we also launched a new feature in TrackStar to provide greater visibility into the patient journey, tracking from PHQ-10 surveys all the way to treatment. Now turning to operational highlights. Throughout this quarter, we have focused in four areas to drive the growth of the organization. First, increased awareness of customers and patients. During the quarter, we hosted our first Neurostar Summit of the Year in San Diego, which was completely sold out and included over 85 prospective customers, making it our largest summit to date. We will continue to host these events throughout the year, with our next summit taking place in Atlanta during the second quarter. Through patient marketing and our newly launched campaigns, we have been able to increase our reach and provide better access to information on the ways we can benefit patients suffering from treatment-resistant depression. In March, we launched our new Tap into New Possibility campaign. aiming at driving awareness amongst patients and their caregivers. We have seen strong early traction highlighted by an exponential increase in weekly impressions across digital and social media. We will continue to progress as we move through the year. In addition, we saw positive momentum with all of our customer-focused programs, including our Five Stars, Precision Pulse program, and in particular, our PHQ-10 surveys. This proprietary tool is designed to help our customers identify existing patients within their practices who are candidates for the Neurostar therapy and are looking for a new alternative to manage their treatment-resistant depression. We have introduced our PHQ-10 tool to an increasing number of practices and have continued to advance the experience to maximize its impact. As we improve the process, we look to prudently expand to all of our customers during the year. In April, we opened Neurostar University, or NSU, in Charlotte, North Carolina. NSU is the only industry-specific training center of its kind, and in the coming months, we'll help train and onboard new sales and clinical employees, host company events, and importantly, train customers. During the two-day program, customers will become experts in our proven methodology by focusing on how to achieve the best clinical outcomes for their patients and how to market their NeuroStar business. We believe the benefits of this program, reinforced by our practice development team, will help ensure the success of NeuroStar within our customers' practices. To date, NeuroStar University is proving to be a valuable investment. Our sales force is encouraged by the early conversations with customers. As such, we plan to offer a steady cadence of two courses per month. Our second focus area is the continued optimization of our commercial organization. During the quarter, we identified an opportunity to provide greater coaching and field-based partnerships with our management team by growing our regional practice managers from four to seven. The addition of these three managers allows for smaller teams within smaller geographies, providing more frequent touchpoints and more value to our accounts. Our third focus area is leveraging exclusive commercial partnerships. We have continued to see the positive early benefits of the exclusive agreements signed in late 2021. and expect those to continue to drive incremental system placements and treatment session volumes as we progress through the year. To date, we have announced five-year commercial agreements with our three largest customers, Greenbrook TMS, Success TMS, and Transformations. Our commercial agreement with Greenbrook TMS, the country's largest TMS provider, will see them purchase all of their new TMS devices for on-label treatments exclusively from Neuronetics. In support of both our and Greenbrook's growth targets, Greenbrook will promote the use of Neurostar Advanced Therapy Systems in their centers. And in turn, we will be providing increased staff and patient education on the benefits of this treatment and joint marketing expansion. This education will include invitations to Neurostar University and PDM visits supported by co-op marketing dollars. Greenbrook has been a great partner for us for many years, and we look forward to continuing to work alongside their organization to reach more patients seeking treatment for their depression. Recently, we announced a five-year commercial agreement with Transformations Care Network, the nation's third largest mental health care provider. Mutually beneficial growth targets supported by co-op marketing will drive increased collaboration between our organizations. Transformations has been a valuable long-term partner, and increasing our relationship with them is a significant step to build broader awareness of the benefits of NeuroStar, improve patient access, and accelerate commercial adoption. In the fourth quarter of 2021, we announced a five-year contract extension with Success TMS, one of our longest standing accounts. As part of this agreement, Success TMS will exclusively utilize our NeuroStar Advanced Therapy for mental health systems. So why have some of the largest TMS providers in the country decided to sign long-term commercial agreements with us? It's not just the fact that we deliver the best clinical outcomes for patients, offer the best in class education and training. It's our ability to build awareness and improve patients' access to care. Our marketing and support initiatives are unparalleled among our competitors as we are uniquely invested in driving the long-term success of our partners in improving mental health outcomes. We look forward to the continued impact of these and other recently announced commercial agreements throughout the year. Lastly, I wanted to provide an update on our clinical and regulatory progress. As announced Tuesday, the FDA has granted clearance for NeuroStar as an adjunct treatment for the adult patients suffering from obsessive compulsive disorder. In the United States, over four million adults suffer from OCD, and approximately half of those patients have serious impairment. Importantly, this new indication can be remotely enabled on our customer's existing NeuroStar system, allowing NeuroStar to treat even more patients suffering from debilitating mental health disorders. We have planned a two-stage launch, beginning immediately with a limited pilot in approximately 40 practices. This will enable us to work closely with a select group of leading treatment centers to optimize the clinical, marketing, and commercial offering within the practice. The next phase of our launch, expected to begin in the third quarter of 2022, will roll out this new indication to the entire installed base of NeuroStar partners. I would like to thank our team. including our clinical and regulatory group for the amazing work they did to achieve this critical milestone. We have a second pending 510 application with the FDA, and we have been working collaboratively with the agency to address their questions. We are pleased with the progress we are making on this submission. We also filed a lawsuit in federal court yesterday against Brainsway. alleging that they have mischaracterized our efficacy data. We believe Brain's Way used inappropriate scientific methodology to present comparative effect size data on an apples to oranges basis designed to hurt our business. And this mischaracterization will mislead medical professionals, patients, and other TMS providers. Obviously, we take this very seriously. Because this is pending litigation, we cannot make further comments at this time. We are pleased with what we have been able to accomplish thus far in 2022. We drove strong revenue performance despite a tough environment at the beginning of the year, while also continuing to deliver on our operational objectives. The momentum we have generated over the last few quarters has only accelerated in recent months as a result of the achievements of some key milestones. During the quarter, as a result of our sales and marketing efforts, we surpassed the 4.5 million treatment session mark and now have over 125,000 patients treated all time. In addition, we signed our exclusive agreement with Greenbrook TMS. This week, we signed a five-year agreement with Transformation, and as we mentioned earlier, received our FDA clearance for OCD. These achievements will continue to build on the long-standing leadership position of Neuronetics. We look forward to our continued execution during the balance of the year as we seek to bring relief to even more patients suffering from mental health disorders. With that, I'd like to turn the call over to Steve.