Good day and thank you for standing by. Welcome to the Neuronetics Reports first-quarter 2021 financial and operating results conference call. [Operator instructions] 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 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 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 No. 1 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 or NPCs. After beginning our newly aligned commercial organization together in late January to introduce these concept and conduct training, we were able to shift into execution of the strategy we’d 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…

Thank you, Keith. Total revenue for the first quarter was $12.3 million, an increase of 7% over first-quarter 2020 revenue of $11.5 million. During the quarter, total U.S. revenue increased by 6% and international revenue increased by 63% over the prior-year quarter. The U.S. revenue growth was driven by an increase in U.S. treatment session revenue and the international revenue growth was driven by an increase in NeuroStar advanced therapy system sales. U.S. NeuroStar advanced therapy system revenue was $1.8 million. Compared to the prior-year revenue of $2.6 million, it was down 32%. The decrease was primarily driven by lower NeuroStar System sales in the quarter as a result of the launch of our new commercial organization during the quarter. In the quarter, the company sold 23 systems, down from 38 in the first quarter of 2020. U.S. treatment session revenue was $9.6 million, an increase of 18% over first-quarter 2020 revenue of $8.2 million. The growth was primarily driven by an increase in per-click treatment-session volume over the prior-year period. In the first quarter of 2021, revenue per active site was approximately $10,512 compared to approximately $9,418 in the prior-year quarter. As a reminder, we calculate this metric by dividing total U.S. treatment session revenue by the beginning of quarter active sites. Over time, with some level of seasonality, as we continue to execute on our commercial strategy, we would expect this metric to increase. Gross margin for the first quarter of 2021 was 81.9% compared to the first-quarter 2020 gross margin of 75.5%. The increase was primarily a result of a change in the product mix compared to the prior-year quarter. Operating expenses during the quarter were $17 million, a decrease of $2 million or 11% compared to the first quarter of 2020. The decrease was primarily due…

Thanks, Steve. Turning to our expectations for the remainder of 2021. We will continue to be focused on building awareness and motivating patients with depression to request Neurostar, and training our customers on the best practices to educate patients, who are searching for an alternative to drugs on the benefits of NeuroStar. Specifically, we will work to optimize our digital and social media campaigns, expand our concierge call center efforts, launch new customer programs and continue to put the pieces in place to execute on our clinical and regulatory strategy. Now more than ever, as our -- as leader in this space, Neuronetics is best positioned to partner with psychiatrists to treat depression. We have over 1,200 installed NeuroStar Systems globally. Our set of published clinical studies on TMS and depression, surpasses all others. We’ve built a strong understanding of how patients are treated through our Outcomes Registry, which is the largest registry covering patients with depression. We also have the largest and most comprehensive field-based commercial team, one that is incentivized to help physicians improve access to care and offer more MDD patients relief from their depression. The team includes NPC’s, BDMs, reimbursement specialists, and clinical trainers. And we are the only company to offer unlimited clinical training as part of our partnership. We understand that treaters change, patients are unique and clinical training whenever and wherever is needed i’s critical to positive patient outcomes. We remain very enthusiastic about the massive opportunity that lies ahead at Neuronetics. Despite being in the early innings, we have seen very encouraging success with the introduction of our new commercial strategy. As our BDMs and NPC’s have more time in the field and as we successfully implement education and training programs within our greater population of our customer base, we expect to continue to see the positive impact of these initiatives accelerate throughout the year. We look forward to our continued execution as we look to bring the benefits of NeuroStar advanced therapy for mental health to all patients suffering from drug resistant depression. I’d now like to open the line for questions.

[Operator instructions] Our first question comes from the line of Margaret Kaczor from William Blair. Your line is now open.

Hey. Good morning everyone. Thanks for taking the question. So being a math person, I can’t help but try to do the math on the 3,000 treatment sessions per day that you guys suggested you saw in April. And if I do that math, it kind of gets 180 to 270,000 treatments depending on where you -- whether you count weekends or not. Maybe walk me through why we should or shouldn’t be doing that math. And then, should we continue to see that number continue to ramp higher throughout the year, given the sales and marketing initiatives that you guys are continuing to launch?

Thanks, Margaret. This is Steve. Yes, actually the math works. And so this -- it certainly hasn’t plateaued and we do expect that number to continue to increase as the programs we’ve rolled out continue to gain traction. And so we look at it -- if you look at 3,000 treatments per day, 240 working days times $65 ASP, it gets you pretty close to $50 million at that rate in annual treatment session revenue. Obviously, we -- our expectations are higher than that but coming out of the pandemic and getting to that 3,000 number in Q1, we’re very excited about the rest of the year.

Okay. So that’s quite positive. Can I push you a little bit on the 182 to 270. You’re assuming just weekdays, not weekends, right? So it’s fair, 240?

Yes, we’re just assuming Monday through Friday.

Okay. And then, if we start to think about some of the -- that treatment site accelerating, how aggressive are you guys going to try to be to try to put a secondary system purchase in some of these accounts? What’s the right level or right point at which you want to do that versus just adding more new accounts?

Yes, I mean -- the term aggressive makes it sound like we’re pushing our customers to take systems on our behalf. But with the scheduling course of MDD, I think once a customer gets to five or six patients per day, it really does necessitate that need for a second system. And so, again, with the real-time insight that we have via the TrakStar, we know where our customer is at any specific point in time. And it’s really at that point once they start doing four or five, that the NPCs will start looking at their workflow and scheduling quirks, and then either recommend or not recommend that second system. So it will be a balance between new customers and second system sales into our existing install base.

Okay. And just last question for me. As we look at that guidance and what you said just now about treatment revenues and potential secondary unit placements or at least demand, let’s say, in some of these accounts that are seeing a rebound, why shouldn’t we assume a bigger impact from the new BDMs you’ve hired in the second quarter? And how should we think about that evolution as we go toward the second half in terms of productivity? Thanks guys.

You’re welcome. So yes, as we’ve communicated, our plan and guidance is somewhat back-end loaded. I think, in fairness to Keith and myself and the commercial team, e have a little more than two and a half months under our belt. Getting experienced with their forecasting capabilities and also with them having to rebuild their sales funnel. I think coming out of Q1 we’re very pleased with the performance in Q1, and also where they are relative to new opportunities. Again, I think we’ll be able to get more aggressive once we work through Q2, and really get a better understanding of the cadence of the team before we really go out and start aggressively pushing guidance in the full-year forecast. Again, what we saw to date, we’re very pleased and we do expect that productivity to continue to increase in the second quarter and also throughout the second half of the year.

Great. Thanks guys.

Thank you.

Thank you, Margaret.

Our next question comes from the line of Marie Thibault from BTIG. Your line is now open. Marie, your line is now open.

I apologize. I was on mute. Thanks for taking the question. I wanted to ask a question, maybe for Keith here on rep productivity and whether the new BDMs and NPC’s you hired earlier this year are progressing as hoped. I know that you had expected those folks to be productive quite quickly. So, would love to just get a qualitative understanding of how their progress is going.

Very good. Thanks, Marie. On the capital side, the BDMs, I think we’re exactly on track of where we expected to be. They -- again, they didn’t get into the field until February 1 as a result of two and a half weeks of training and then our national sales meeting. Once they did get into the field, we were quite pleased with the number of opportunities that they were creating in our dynamics database system. I think for a capital rep to sit down and type a opportunity in, and all the data that needs to go into to create that opportunity, it was impressive that we got several hundred of them. So, we’re pleased with where we are on the capital side. On the NPC, side we rolled out two programs -- two major programs to them, and I think they’ve done heroes work to bring those to all of their accounts. What we learned early on was most of our accounts need to start at the very beginning of our 5 stars to Success program. And so when an NPC has 35 accounts that they need to train, they have to hustle to get around to all of them to deliver quality training to each one of their staff. Again, we were able to get 90 of our accounts to the three-star level, which is the minimum requirement to participate in our call center. And we -- I found it amazing that our NPCs were able to get 90 of them in at that level. So we’re pleased with productivity on both sides of the ball.

Great to hear. And then maybe looking ahead, you mentioned work on new indications. Can you give us an update on what indications you’re circling? And then, we know that reimbursement is obviously important to commercialization there, so how you’re thinking about the reimbursement progress.

So honestly, Marie, I would -- I will tell you that we are looking at speaking to the FDA about two indications and I would rather not discuss those publicly at this moment. We are in discussions with the FDA and we have an upcoming meeting with them. So once that is concluded, I can give more information on it. But we -- and we are also -- we have hired a regulatory consultant to help with our reim -- I’m sorry, a reimbursement consultant to help with our reimbursement strategy around those two indications. I think as we progress with the FDA, and we see what direction we’re going to be able to go, we will be able to deploy this consultant to help us create the plan.

Okay. Fair enough. One last one, probably just a housekeeping item, maybe Steve can help with. I saw 916 active sites at the end of last quarter to start Q1. Could you give us the number for where you ended at the end of Q1?

Sure. It was 900. So slightly down, and so we continued to monitor the practices that are either embracing telehealth, have permanently closed or are in a different state of transition. So we really weren’t surprised by that number. Also, it was the one-year anniversary of the beginning of COVID, and the way we identify active is they had to have either purchased or treated a patient in the past year. And so a number of sites had dropped off based on that definition. Again there’s about 50 sites that are still on telehealth that our practice consultants are working with to get them back, so they’re treating patients once again.

Okay. So you would expect that number to climb throughout the year then?

Oh, yes.

Yes.

All right. Perfect. Thank you.

Thank you.

Thank you. Our next question comes from the line of Bill Plovanic from Canaccord. Your line is now open.

Great. Thanks. Good morning. Just a couple of questions for me. The first is really related to the new marketing programs you’ve put in place. Just trying to understand, it seems like the engagement has picked up, especially in the targeted areas. But I guess, in terms of the metrics you look at and you plan on sharing in the future, I was just wondering if we’re going to get any granularity on the conversion of those appointments that you’re seeing going in in the patients. And that kind of ties into one of my other questions. I’ve just run in the math, it looks like the patients added in the first quarter was down versus the fourth quarter, but just wanted to get clarity on that as well.

Yes. I mean, we have, I would say, a pretty impressive metric deck, Bill. We don’t share it, but we do track utilization by site by per day. Our utilization is up over 55% compared to 2019. Our MTs which is indicative of new patient starts are up significantly over 2019 and 2020. I’m not sure what you’re looking at that would indicate that we had a patient decline from Q4 to Q1. Obviously, Q1 is always our lightest quarter just due to the reset of medical plans and deductibles. And so we do see a decline historically, but I mean 9.8 in treatment session revenue, we thought that was phenomenal. And we also had a number of days lost due to weather. We have a number of our service providers very dense in both Chicago and Texas, and they lost multiple trading days. So that number could have been easily north of $10.5 million. Again, we’re extremely pleased with all the data we’re looking at and continue to be excited about the rollout of these marketing programs. I will say as that the NPCs work with the month of March, there was a great uptick in the last couple of weeks when our customers really got a better understanding of the programs, how they worked and what the benefits were, and we had a number of, I would say, very impressive orders at the end of the -- end of March, and those have continued through Feb -- through April. So again, everything that we’re monitoring here internally is extremely positive.

And then, on the accounts that are joining the call center, it looks like you have about 10% of your treatment sites are on there at this point. Is this something that you would get to a 100% over time or is it targeting more the high volume? And if so, when do you expect to achieve that penetration range?

I’m not sure we can ever get to 100%, honestly, Bill. I think some accounts aren’t going to want to participate in it. But I think our goal is to get as many as possible onto it. We want to go through all five stars with with every account. So the first three is really focused around getting great clinical results, getting their office setup to receive the patients, understanding reimbursement and then doing internal marketing with their patients and counseling both their front desk staff as well as their counselors on how to talk to these patients. So I think as many accounts as are willing, we’ll get at least those first three steps. Our goal is to get a 100% of them. Whether they let us or not is unclear, but I think as we gain traction in the field, I think we’ll get more and more accounts.

Great. Thank you. And then the last question for me just is, just the initial feedback with the program, now that you’ve implemented it from the initial marketing, any changes or major changes or even small minor tweaks of note that we should think about as you continue to deploy these programs? And that’s all I have. Thank you.

I think from the overall design of the programs, both the 5 stars to Success and the precision pulse, I think the foundation of those programs is solid, and we have no plans on altering them after looking at what’s going on in the field for the last 10 weeks. I think our marketing, messaging and look and feel will always continue to evolve, and we’re in the process of introducing a new website in the next couple of months where we’re talking to agencies about new creative. So all of those things will continue to be fluid and being guided by our marketing research. No major structural changes at all and I think the -- our patient journey has turned out to be a home run for us. I think it resonates with accounts they -- when we speak to the accounts and we point out opportunities for training, they’re very receptive to it.

Thank you. Our next question comes from the line of Matthew O'Brien from Piper Sandler. Your line is now open.

Thanks. Good morning and thanks for taking the question. I guess, Keith or Steve, just for starters on the capital side of things, that was the only one number out of everything that was a little bit lighter than I’m sure some people were modeling, us included. The session number was great. So basically you had this group -- your BDMs out of the field for a month. So the 23, if you just analyze, would have been maybe closer to mid 30s. And then, you also took the price up, I guess the first part is that 35-ish number about right, just the price up that looks like as well. Is that something that is durable? And then just to round out this question, are you seeing anything competitively that should be pointed out from brands where either the mag companies that potentially could have weighed on the number of capital placements that you had in Q1?

Thanks. Yeah, I mean you could extrapolate the 23 to the mid 30s, if the team was out in the field for the full quarter. I will say we were pleased with the number of opportunities that were created. I think many of the team realized that the selling cycle into psychiatrists is longer than I think they were used to. But again, it’s just the timing issue. That’s fine. And our expectations for Q2 are much higher than we saw in Q1. Again, in fairness to the BDM team, they really only had less than 10 weeks to transact coming right out of the gate, so the number they put up was pretty impressive. From an ASP perspective, the compensation plans this year, they do incent the BDMs to sell at higher pricing thresholds. And so, yes, we do expect that ASP to hold. And really the only variable with the capital equipment ASP will be the mix of the sales-type leases into the green brooks and successes of the world versus the traditional capital sales that the BDMs sell. So, yes, I think we mentioned on the fourth-quarter call, we actually had systems transacted at list price, but overall the ASPs have been higher in the first quarter. Competitively, no, we’re not really seeing anything different. There’s still 56,000 psychiatrists but the MAGs and brands where they do pop up here and there. But again, our value proposition and the partnerships that we provide to our customers really sets us apart. And you could see that in the uptick and the marketing programs that the customers signing on -- and we do make it very attractive right now for customers to purchase a second or a third system. So we’re going to keep doing what we’re doing. Obviously, market leader, best in class, so that should continue to set us apart.

Got it. And then the follow-up questions on that 3,000 patients per day comment. I know Steve, you got a lot of metrics in front of you, I don’t know how much you want to share but, can you just talk a little bit more about the dynamics around that? Backlog, moving from four drugs down to two making it easier to start on NeuroStar, COVID as a tailwind, if people are more depressed or recurring customers, just anymore color that you can provide on that, because that’s a pretty marked increase and really says something for the remainder of the year as far as your session business goes.

So Matt, our treatment sessions have steadily increased over the last several months, and I think -- quite honestly I think there may be some tailwinds with COVID but we really didn’t expect those patients to come into the pipeline until they failed the two to four drugs, which would put them at the end of this year or the beginning of next year. So I think, quite honestly, I’m going to credit, our marketing programs, driving awareness and our NPCs in the field as doing their jobs and teaching accounts how to speak to patients about the benefits of a NeuroStar treatment.

Okay. So, this feels like a more durable level to you Keith and then building from here. Is that fair?

The encouraging piece to us is, we don’t see a jump. It’s been a steady increase in utilization since COVID, since really the middle of last year, it’s been steadily increasing.

Got it. Thank you.

Thank you.

Thanks, Matt.

Thank you. Our next question comes from the line of Dave Turkaly from JMP Securities. Your line is now open.

Good morning. Keith, maybe one for you, because I think I’m hearing the shift in the organization. I just want to confirm it, so you have this patient focused new commercial organization, that seems to be the push going forward and sometimes in the past I think we were looking more at the product features like the ones on Slide 19 of your deck and maybe further indications. But it seems like that’s a -- this is a shift. So I’d just like to get your thoughts. It seems like this is your explicit goal to move the company in this direction. And I’d just like to hear you maybe explain why you think that’s so important.

I think there’s two things, Dave. One is a small number of psychiatrists and neurologists are doing TMS. And so, there is a massive opportunity out there to educate those physicians on the benefits of it. Those same physicians are writing a record number of prescriptions for antidepressants, and if we can focus our sales organization on talking to physicians on how to speak to patients suffering with MDD, I think we win. We are certainly focusing the inside organization through Cory and Fred, our Head of Regulatory, on how we can advance the ball in the number of treatments we can offer to physicians. But right now I think the depression market is still underserved and is still massive, and it’s only growing as the patients that exhibited depression in COVID times get to the two to four failed drug stage. I -- we have runway here that is is enormous, and so we’re focusing our outside team on that opportunity.

And I guess, it’s just a quick follow-up to one of the ones that was asked earlier. You look at the six or so competitors, it doesn’t seem to me like any of them are focused on this arena, but you have that chart on 17 that shows the differences. But do you think that’s a sustainable differentiated advantage for Neuronetics moving ahead?

Thank you. I think we’re the only ones that care whether those doctors are successful or not. We have a treatment session price that we’re proud of because that ties directly to the success of the company, to the success of the practice. And if we can -- when we go into an account, we talk to them about generating one patient per month per per practice, and that’s -- that one per month is $100,000 in revenue to that account. We’re the only ones that care whether that account is successful or not.

Thank you. Appreciate it.

Thank you. At this time, I am showing no further questions. I would like to turn the call back over to Keith Sullivan for closing remarks.

Thank you, operator, and thank you again for joining us on the call today. I look forward to updating you on the progress next quarterly call and I hope you are safe. Thank you.

This concludes the conference call today. You may now disconnect.