Neuronetics, Inc.

Good day and welcome to Neuronetics fourth quarter and full year 2022 conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there'll be a question and answer session. Instructions will be given at that time. As a reminder, this call is being recorded. I would like to turn the call over to Mark Klausner. You may begin.

Good morning and thank you for joining us for the Neuronetics fourth quarter and full year 2022 conference call. 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 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 a 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 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 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.

Thank you, Mark. Good morning, and thank you for joining us. I'll begin by providing an overview of our recent performance, followed by an operational update. Steve will then review our financial results, and I'll conclude with some thoughts on 2023 before turning to Q&A. We are pleased with our performance throughout 2022, a year which included several record quarters and the achievements of key milestones. We shipped over 210 systems to customers bringing total system shift all time to over 2,000. In addition, our efforts to drive increased treatment session utilization has continued to pay off. As of the end of the year, the number of all-time treatment sessions surpassed 5.3 million across roughly 145,000 patients. This all contributed to the total revenue growth of 18% for 2022. proof that the investments made over the past two years in marketing, practice development, and patient education initiatives are working. I'm very proud of everything that we have accomplished in 2022, which we capped off by a strong fourth quarter. And I'd like to thank our employees who delivered this high level of success by way of their hard work throughout the year. For the fourth quarter, Total revenue was $18.2 million, up 21% over the fourth quarter of 2021. The strong performance was primarily driven by record treatment session revenue, as well as continued capital equipment sales growth. As we've seen, our programs and initiatives take root. NeuroStar System revenue was $4.6 million, up 64% over the fourth quarter of 2021. The success is due to the ongoing hard work of our strong team of area sales managers who found their groove in nurturing and converting a robust pipeline, which was strengthened by yet another sold-out Neurostar Summit. The U.S. treatment session revenue was an all-time record of $12.5 million, up 11% over the fourth quarter of 2021. This record revenue was the result of positive growth at the local per-click sites and was accomplished despite slower than anticipated growth at our largest service provider as they worked their way through merger integration. Our per-click success was driven by our investments in Five Star's training program, the expansion of our PHQ-10 tool into more offices, and greater availability of practice management training. Now, turning to our operational highlights. Our first focus area is increasing customer and patient awareness. We once again had a completely sold-out Neurostar Summit in Chicago attended by 50 participants from 38 different practices. This event received outstanding feedback, which led to the conversion of several high-quality customers and the growth of our pipeline. The Neurostar summits have proven to be the number one event for educating and partnering with new TMS practices. Our area sales managers have done an excellent job helping these potential customers see the benefits Neurostar can bring to them and their patients. The implementation of our proprietary PHQ-10 digital assessment tool, which allows our Neurostar practices easily identify patients within their practice who are candidates for and have expressed interest in a NeuroStar treatment has been extremely fruitful. We collected 98,000 PHQ-10s in 2022, and we will continue to enhance this tool to include new features within TrackStar to better manage and identify patients who are candidates for NeuroStar treatment. Our Neurostar University in Charlotte, North Carolina continues to receive excellent reviews from our customers. By year end, we had hosted eight full capacity classes with attendees representing 75 accounts. And we now have a lengthy waiting list. As we continue to evolve the capabilities of the platform, as well as the support services that we offer our customers, these classes will continue to be highly beneficial for both the new and existing users as we seek to leverage the power of NeuroStar to help more patients suffering from mental disorders. We have begun to see positive benefits linked directly to the NSU training classes, such as the increase of 23% in treatment session utilization and an increase in PHQ-10 utilization from these NSU attendees. Our second focus area is the continued optimization of our commercial organization. In the quarter, we started to see some benefits from the efficiencies gained from our newly implemented Salesforce reporting tools, which help our PDMs better understand our customers, their patient base, and utilization trends. These tools allow the PDMs to help our accounts set goals and measure their progress towards achieving them. In particular, allowing accounts to more efficiently and more effectively identify and treat people in need from within their own existing patient base. As planned, we hired four additional PDMs earlier this year due to the new account growth over the course of 2022. These additions will support the growth of our installed base and ensure we provide our customers with the highest level of service and support. Our third area of focus is leveraging exclusive commercial partnerships. We recently announced an expanded commercial partnership with Greenbrook TMS, which runs through year end 2028. Under the agreement, we will be the exclusive supplier of TMS equipment to Greenbrook. with all other TMS devices being replaced with Neurostars as their existing leases expire. This expanded partnership will deliver several important synergies, including co-branding and co-marketing opportunities, enhanced patient and clinical awareness, improved patient access to care, and a collaboration on product development and publication. Importantly, this agreement converts the entire Greenbrook organization, including Success TMS, to our consumable pricing model and away from a fixed price one. We will offer our full spectrum of support and programs to Greenbrook centers and practitioners. In particular, we will offer tailored NSU classes and integrate our PHQ-10s and TrackStar to help Greenbrook reach and treat patients more effectively. With the help of this agreement, NeuroNetics and GreenBrook will be able to make NeuroStar advanced therapy for mental health accessible to a growing number of people who are struggling with mental illness. While we are enthusiastic about the long-term partnership with GreenBrook and our ability to help them drive increased patient volume in their centers, I did want to highlight that we have continued to see disruption resulting from the merger of Greenbrook and Success and the subsequent integration of the two businesses. As Steve will mention later, when he provides our guidance, we expect some revenue headwinds in 2023 as they continue to work through combining their companies. Lastly, I want to provide an update with our clinical and regulatory progress. In January, we announced a peer-reviewed publication which shows Neurostar TMS as an effective non-drug treatment for depression with comorbid anxiety. Significant anxiety symptoms are present in the vast majority of depressed individuals, and the majority of patients with anxiety disorders also have associated depression. We were able to study actual results and establish the effectiveness of this crucial therapy option for patients with anxious depression, thanks to the strength of TrackStar and the largest clinical data set for TMS in depression. Now for a quick update on the expanded Medicare coverage. In February, NGS updated their healthcare policy, allowing nurse practitioners and physician assistants who are within their scope of practice to order and provide TMS treatments to their patients with major depressive disorder. This is a welcome change, as we have always recognized the importance of psychiatric nurse practitioners in delivering mental health care. This is especially true now given the shortage of healthcare professionals. In addition, UnitedHealthcare recently announced a positive coverage change which expands access to Neurostar therapy. Optum, the behavioral health benefit manager for United, reduced the number of prior medication failures for TMS eligibility from four down to two, and removed the requirement for a trial of evidence-based psychotherapy. As the largest healthcare insurer in the country, covering 23.8 million lives, UnitedHealthcare Optum's decision to make Neurostar more easily accessible and make a real difference in helping to alleviate the burden of drug-resistant depression. To continue to provide greater access to Neurostar therapy, we recently expanded our reimbursement team. This larger team will be able to increase our advocacy efforts related to favorable health policies and provide our customers with best-in-class reimbursement and billing support. In closing, I'd like to express my gratitude to our team for their dedication and perseverance in navigating the challenges of the current operating environment with ease. This hard work has enabled us to successfully execute on all initiatives during the year and bring relief to patients suffering from depression. Looking ahead to 2023, we anticipate that the momentum we have built will continue to grow as we build on the solid foundation we have laid throughout 2022. With that, I'd like to turn the call over to Steve. Thank you, Keith.