Neuronetics, Inc.

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 US 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.

Thanks, 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 the rest of 2023 before turning to Q&A. We delivered a solid performance during the second quarter. as our commercial and customer education initiatives have continued to gain traction. U.S. capital sales remain consistent, and despite some of the ongoing headwinds associated with the integration of our two largest customers, our treatment session revenues continue to increase. Total revenue was $17.6 million, up 8% over the second quarter of 2022, primarily driven by strong treatment session growth combined with an on-plan Neurostar system expansion. Neurostar system revenue was 4.5 million. As previously mentioned, our objective is to ship 45 to 50 systems per quarter. As we believe this range enables our team to dedicate sufficient time and resources to ensure the long-term success of our customers with Neurostar. Consistent with this plan, We concluded the quarter by shipping a total of 54 systems. Importantly, nearly half of the Neurostar ship during the quarter were to customers buying their second systems, which points to the value we are delivering to these practices by helping them educate and treat more patients in need. The sustained strength of our capital equipment sales can be attributed to the continued execution by our experienced capital sales team. as well as the positive impacts of our Neurostar summits. Our most recent summit held in Scottsdale, Arizona, was again sold out and ultimately resulted in approximately 20 system sales during the event. These Neurostar summits remain a crucial element of our strategy, providing a platform to educate customers about the impact Neurostar can have on improving patients' lives. The U.S. treatment session revenue was 12.3 million, up 9% over the second quarter of 2022. The strong performance was primarily driven by the 19% year-over-year increase in local consumable utilization, along with the improving performance among our national accounts. Across the board, these results were driven by the positive impacts of our key initiatives, such as Neurostar University, our comprehensive Five Stars training program, the expanded utilization of our PHQ-10 tool, and the increased accessibility of the practice management training. Along these lines, we wanted to provide an update on the progress made at our largest customer, Greenbrook TMS. During the quarter, we continue to see improving performance across active Greenbrook sites. Treatment session volumes and related revenues remain somewhat depressed as a result of their office closures. But we are actively working with the Greenbrook team to address the ongoing challenges stemming from the merger with Success TMS and the integration process. We have collaborated closely with their leadership team at various levels to implement a mutually beneficial strategy moving forward. This included implementing initiatives to enhance awareness, expand patient access to care, and effectively redeploy systems from the recently closed stores. In total, approximately 50 systems were taken out of service, due to store closures, and to date, over 35 of these systems have been relocated into existing stores where they have replaced competitive systems. We expect the remaining systems to have been relocated by the end of the third quarter. Additionally, in support of Green Brook's growth, all of the Green Brook regional vice presidents have attended a Neurostar University class, and we are scheduling their trainers and treaters to attend upcoming classes to provide them with a proven playbook for practice success so they can better serve their patients. As we continue to support the Greenbrook team, we are encouraged by the positive impact that tactics learned at NSU have had as they deployed them in their clinic. While legacy success stores are currently lagging behind Greenbrook stores in terms of performance, We are confident that through education and training efforts, we can help get that portion of the business back on track. We look forward to continuing our strong partnership with Greenbrook as we work together to advance the adoption of PMS as a therapy for mental illness. Now turning to our operational highlights. Our first focus of 2023 is increasing the number of customers who participate in NSU. Neurostar University continues to receive excellent reviews from our customers. By quarter end, we had hosted 13 fully booked classes with over 260 attendees. We are experiencing sustained high demand with all of our courses fully booked out on a three-month rolling basis. In August, we will celebrate the one-year anniversary of the program. which we have updated twice to streamline our customers' experience at NSU to make it as impactful as possible. Our customers continue to derive significant benefits directly from the NSU training session. For example, for sites that became active before January 1st of 2022, Neurostar University attendees have experienced a 68% increase in utilization. whereas non-attendees from that same period only experienced an 8% increase. Additionally, attendees have increasingly leveraged our other programs, such as the Five Stars and Co-op Marketing, which has, over time, led to increased overall performance. This highlights the positive impact of our techniques when properly deployed, empowering practices to better serve their patients. We remain committed to providing the support and training to our customers, ensuring that they can fully leverage their potential. Our second focus for 2023 was to incorporate a higher percent of our customers into the co-op marketing program to continue to build awareness of Neurostar. We have seen the positive impacts of our new co-op marketing program, which launched on April 1st. The program features a prescriptive roadmap of effective marketing tactics to market inside and outside the practice. New marketing and training collateral were created, and we revamped myneurostar.com to digitize the execution of the program. Since its implementation, we've observed increased use of the co-op program, especially by NSU attendees. Existing co-op accounts are also demonstrating increased engagement with the program, with a 27% increase in activity quarter over quarter. This reflects their deeper adoption of and partnership with our platform. Additionally, participating co-op accounts saw a notable increase in utilization sequentially. This enhanced program is driving growth and increasing patient access to Neurostar therapy. Our third and final focus area for 2023 is creating a network of accounts across the country that follow Neurostar best practices. This program will provide the opportunity for our customers to be part of a premier group that demonstrate their commitment to providing the best patient experience and care with Neurostar. After soliciting feedback from our Neurostar patient advocates and 800 people who have been diagnosed with depression, we are branding this program the Better Me Guarantee and intend to launch it in the third quarter of this year. By establishing specific benchmarks, such as delivering consistently high levels of service and expanding patient marketing efforts within and outside the practice, we anticipate observing tangible advancement among customers who fully leverage the distinctive benefits of being a Better Me Guarantee provider. We will expand on the specifics of this program on our third quarter earnings call. Shifting gears to an update on the clinical and regulatory efforts. In June, we announced the 510 clearance for the OCD MT-CAP technology for Neurostar. This unique innovation streamlines the treatment process by simplifying coil placement and reducing steps involved in determining a patient's motor threshold. The OCD-CAP complements Neurostar's existing capability positioning it as the only TMS . This advancement signifies our commitment to delivering the latest technology to optimize treatment efficiency and provide effective care for individuals struggling with OCD. We are continuing to work to expand the use for our unique therapy. We have recently filed a 510 submission with the FDA seeking to expand our potential patient population. While we don't want to comment on the specifics of the filing for competitive purposes, we do expect to hear back from the FDA on the filing by the end of the year and look forward to sharing progress as it occurs. Moving to reimbursement, we are pleased to announce Blue Cross Blue Shield of Michigan has expanded eligibility for depression patients to receive TMS treatment. This policy update reduces the requirement of attempted antidepressant medications from four to two prior to TMS treatment eligibility. By prioritizing early access to relief, Blue Cross Blue Shield of Michigan is enabling millions of people to benefit from our therapy. This policy change reflects the growing recognition by commercial and government payers of the need for enhanced mental health coverage, particularly in light of the nationwide shortage of mental health care providers. Additionally, Aetna, one of the largest healthcare plans in the country covering over 16.8 million lives, has implemented changes that will make our treatment more accessible. Aetna now allows TMS treatment to be ordered and conducted under the supervision of behavioral health nurse practitioners. Also, Aetna has removed the four-month psychotherapy trial requirement before a patient can receive their initial TMS treatment, making it easier for individuals to start their treatment sooner. The latest update from Aetna Opening up access to care through nurse practitioners and reducing eligibility requirements is a step forward and builds on the momentum we have seen with other commercial and government payers, expanding coverage for TMS therapy. We are pleased with the achievements made in the second quarter. Our commercial team received strong support through effective marketing initiatives. comprehensive training program, and dedicated practice assistance, which all contributed to our success. I appreciate the ongoing dedication of our entire organization and their efforts in strengthening our leadership position in the industry. With that, I'd like to turn the call over to Steve.

Thank you, Keith. Unless otherwise noted, All performance comparisons are being made for the second quarter of 2023 versus the second quarter of 2022. Total revenue was $17.6 million, an increase of 8% over prior year revenue of $16.3 million. U.S. Neurostar Advanced Therapy System revenue was $4.5 million. versus $4.4 million in the prior year. We shipped 54 systems, down from 58 systems in 2022. As Keith noted, our current strategy is to ship between 45 and 50 systems per quarter. US treatment session revenue was $12.3 million, an increase of 9% over 2022 revenue of $11.3 million. the revenue growth was primarily driven by strong performance within our consumable customer segment. In the second quarter of 2023, revenue per active site was approximately $11,390 compared to approximately $11,280 in the prior year quarter. We are highly encouraged by the fact that despite a material increase in active sites Compared to this time last year, we were able to maintain revenue per site. We see this as evidence that our programs and initiatives are working. Gross margins were 72.5% compared to 75.3% in the prior year quarter. The decline in gross margin was driven by an increase in amortization expense associated with the latest product release. We also incurred one-time expenses related to our transition to a new contract manufacturer. Without these expenses, gross margins would have been 75.6%. Operating expenses during the quarter were $20.1 million, a decrease of $2 million, or 9%, compared to $22.1 million in the second quarter of 2022. In May, our ELP met to review and justify 2023 operating expenses. Consistent with the results achieved with a similar exercise in 2022, the team identified over $4.5 million in expense savings in the balance of 2023. some of which will be offset by increased co-marketing expenses related to Greenbrook. As a result, we have achieved a net reduction of $2.2 million in expenses, demonstrating our commitment to prudent financial management. During the quarter, we incurred approximately $2 million of non-cash stock-based compensation expense. Net loss for the quarter was $4.9 million or 17 cents per share as compared to a net loss of $10.4 million or 39 cents per share in the prior year quarter. EBITDA was negative $3.3 million as compared to negative $9.1 million in the prior year quarter. In the quarter, our EBITDA loss was reduced by $2.9 million related to the recognition of the employee retention credit. As of June 30, 2023, cash and cash equivalents were $45.9 million. We incurred significant expenses related to our contract manufacturing transition and also recognized significant capital revenue in June. which increased our accounts receivable balance at quarter end. As a reminder, we converted $6 million of Greenbrook accounts receivable into a senior secure loan on which Greenbrook has started making principal and interest payments. Now turning to guidance. For the full year, we now expect revenue in the range of $69 million to $73 million. increasing the bottom end of the range by $1 million. For the quarter, we expect revenue of $17 million to $18 million. We now expect total operating expenses for the year to be in the range of $82 million to $86 million, improved from prior guidance of $84 million to $88 million. We remain confident in our operating plan, which indicates that we will reach cash flow breakeven with our current cash on hand. Our path to profitability remains steady, supported by our projections for top-line growth, a strong gross margin profile, and diligent management of operating expenses. I would now like to turn the call back over to Keith.