Neuronetics, Inc.

Good day and thank you for standing by. Welcome to the Neuronetics third quarter 2024 financial and operating results conference call. At this time, all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you need to press star one one on your telephone. You would then hear an automated message advising your hand is raised to withdraw your question. Please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mark Costner. Please go ahead.

Good morning, and thank you for joining us for the Neuronetics third quarter 2024 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 Greenbrook acquisition, 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-Q, which was filed earlier 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.

Mark, thanks for the introduction. Good morning, everyone, and thank you for joining us today. I'll begin by providing an overview of our recent performance, then discuss the status of the Greenbrook acquisition. Steve will then review our financial results, and I'll conclude with some thoughts on the balance of 2024 before turning to Q&A. Let me start with our performance in the quarter. Total revenue was 18.5 million, an increase of 4% over the third quarter of 2023. Neurostar system revenue was 4.1 million. During the quarter, we shipped 49 systems. U.S. treatment session revenue was 13.3 million. which represents a 2% increase compared to the third quarter of 2023. I'd like to turn to our acquisition of Greenbrook PMS. Last week, our shareholders approved the transaction, which we expect to close during the fourth quarter. We are incredibly excited about what this means for our organization, the employees of the combined company, our patients and customers, as well as our shareholders. Today, we are laser-focused on driving the long-term success of the combined company. As we work together to integrate and optimize the new Neuronetics, we have a comprehensive, proactive approach that focuses on three key areas to increase shareholder value. Operating expense reduction, operational efficiencies, and profitable revenue growth, starting with OpEx control. When we announced the transaction, we estimated synergies to be approximately $15 million. As we dug deeper into both our and GreenBrook's operation, we have identified an incremental $5 million, bringing the new cost synergy target to approximately $20 million. We have taken definitive action to take costs out that will benefit both businesses. On November 8th, we implemented a strategic reorganization of Neuronetics, streamlining departments to support our combined business model and reducing costs of programs that no longer align with our go-forward strategy. This reorganizational loan will generate approximately $3.5 million in annualized expense reduction. with the remaining $16.5 million in annualized synergies to be realized throughout 2024 and 2025. These synergies include a $6 million reduction in combined marketing spend, along with additional savings from consolidating back office functions. Turning to the operational efficiencies, Our operational efficiency initiatives are centered on optimizing our commercial organization, including our commercial team structure, the way we target customers and patients, and how we train our employees. We are beginning with a reinvigorated focus on driving improved productivity across both Green Brook sites and our existing customers. To support this, we are in the process of introducing a more efficient data-driven approach to help increase patient flow into Greenbrook and our other NeuroStar sites. We have done an analysis of physician prescription trends in our key markets, which has allowed us to identify psychiatrists and other providers who are currently treating patients for depression or other mental health disorders within a 10-mile radius of a Greenbrook or a NeuroStar site. Using this information, field personnel will be able, for the first time, to actively target providers who have patients who qualify for TMS or Spravato and will then be able to help institute a process for rapidly directing those patients who are seeking an alternative to antidepressants into a Greenbrook or a Neurostar site. We expect that this will allow us to be significantly more efficient at driving patient volume versus traditional broad-based marketing efforts. Another benefit of this data is that it allows us to more effectively allocate resources to territories and to enhance our efforts to reach the greatest number of patients and rationalize coverage areas. However, simply identifying potential patient referrals isn't enough to improve site productivity. We need to put best practices in place to allow our field personnel to educate providers on connecting patients with a Greenbrook or other Neurostar site. What we know from our study of patient experience is there is a significant drop-off in patients continuing into TMS therapy if they are not contacted almost immediately after expressing interest in the treatment. We are in the process of developing a comprehensive training program for our field personnel, which ensures that providers who are looking for an alternative to traditional pharmaceutical options for their patients are fully educated on our offerings and how they fit with a patient's care continuum. Under this new process, Patients who qualify for one of those services will be immediately contacted by one of our providers to begin the process of exploring the next step in their treatment paradigm. To complement this, we are also developing a training protocol for our field personnel related to managing the patient care continuum. This ensures that Greenbrook sites, as well as our other Neurostar customers, are well versed on how to help patients move on to the next step in their treatment. This includes the progression from traditional medical therapy to the most appropriate next therapy, whether it's TMS or Spravato. And if they do not achieve the desired result, continuing on to the therapy they have not yet tried. While we have been working with Greenbrook over the last few quarters to operationalize key tenets of our Better Me provider program, We are scheduling comprehensive training in November at Neurostar University to ensure consistent implementation of our new commercial structure and priorities. This includes establishing a patient review process to ensure optimal treatment outcomes across our network. Beyond cost and operational efficiencies, we are also focused on driving revenue growth. We are aggressively optimizing and expanding the ability to offer Spravato into all appropriate Greenbrook clinics and implementing the buy and build program across all sites that offer Spravato treatment. There are currently 83 Greenbrook sites utilizing Spravato. And we are planning to expand to all facilities in 2025. To maximize the revenue potential of our Spravato program, we are implementing a buy and bill model across all treatment sites. Under this model, Greenbrook directly purchases and maintains drug inventory at each practice location. Greenbrook then builds the patient insurance provider for both the drug itself, as well as the administration and observation services. While this requires managing medication inventory, it results in a higher overall reimbursement compared to billing for administration services. This enhanced reimbursement structure creates an additional revenue stream alongside our TMS treatments. As previously outlined, one of the key benefits of this transaction is that our scale allows us to provide broader service offerings to all of our customers. First, we can leverage our combined network of approximately 400 customer sites across Greenbrook and BMP customers to negotiate favorable regional and national payer contracts. Negotiating a block of contracts at once offers efficiencies to the payer, while potentially leading to better reimbursement rates and improved TMS economics. ultimately increasing practice profitability for our customers. These benefits also extend to medical management and bravado services, making it easier for customers to expand their practice offering. Secondly, we will also be able to offer more robust support in navigating the complex landscape of insurance reimbursement by providing billing services to our customers. which could speed up payment processing and reduce denied claims. Finally, we are also working to provide Neurostar customer access to Greenbrook's existing call center. By leveraging this centralized call center operation, we can help manage patient calls and education more efficiently, potentially increasing conversion rates and reducing the administrative burden required to meet the demand for TMS. As we move forward, we are focused on two main goals, advancing mental health treatment and increasing shareholder value. Through disciplined execution of our cost controls, operational improvements, and revenue growth initiatives, we have a clear path to profitability while expanding access to critical mental health treatment. The Greenbrook combination represents a transformative step in this journey. And based on what we have learned since announcing the transaction, we now believe that the combined organization will achieve cash flow break-even by the third quarter of 2025. And we're confident in our ability to deliver meaningful care for our patients and true value to our shareholders. With that, I'd like to turn the call over to Steve.