Good day, and thank you for standing by. Welcome to the Neuronetics' Reports Second Quarter 2022 Financial and Operating Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mark Klausner. Please begin.

Good morning, and thank you for joining us for Neuronetics' second 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 second quarter performance, followed by an operational update. Steve will then review our financial results. I'll conclude with our thoughts for the balance of 2022 before turning to Q&A. Starting with a financial review for the second quarter. Total revenue was $16.3 million up 15% over the second quarter of 2021. Our strongest revenue performance since the fourth quarter of 2019 and our second straight quarter of mid-teens growth. The encouraging performance was primarily driven by a robust capital equipment sales, a solid uptick in utilization and gaining momentum built on our marketing program. Despite broad macro and market disruption, we saw marginal impact on our business, which we attribute to our team who has stayed ahead of the shifting environment. U.S. NeuroStar System revenue was $4.4 million up 70% over the second quarter of 2021, representing 20% growth over the last quarter and our fifth consecutive quarter of sequential growth. This was fueled by the conversion of a strong pipeline created by our capital sales team, which led to the highest systems sales in three years. This was made possible in part by our quarterly NeuroStar Summit, which boosts sales not only during and immediately following the event, but also six to nine months that follow. U.S. treatment session revenue was $11.3 million up 5% over the second quarter of 2021. growth was a result of improving utilization rates attributed to the increasing traction of marketing program, including the tap into new possibilities for depression digital campaign, which is garnered over $144 million impressions since its launch on March 3, and our partnership with Drew Robinson achieved hundreds of millions of new impressions, and other initiatives we have put into place over the…

Thank you, Keith. Total revenue for the second quarter was $16.3 million, an increase of 15% over a second quarter 2021 revenue of $14.2 million. U.S. NeuroStar Advanced Therapy System revenue was $4.4 million compared to the prior-year revenue of $2.6 million, it was up 70%. The increase was primarily driven by a strong capital pipeline by our maturing Salesforce and NeuroStar Summits. In the quarter, the company sold 59 systems, up from 36 systems in the second quarter of 2021. U.S. treatment session revenue was $11.3 million, an increase of 5% over second quarter 2021 revenue of $10.8 million driven by an increase in treatment session volumes relative to the prior-year specifically an uptick in per click customer utilization. In the second quarter of 2022, revenue per active site was approximately $11,300 compared to approximately $12,000 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. Gross margin was 75% compared to the second quarter 2021 gross margin of 81%. That decline was due to the increase in NeuroStar capital mix year-over-year. Operating expenses during the quarter were $22.1 million, an increase of $4.1 million compared to the second quarter of 2021. The increase was primarily driven by the implementation of new marketing initiatives, costs related to our expanded sales force and increased costs from inflationary pressures. During the quarter, we incurred approximately $2.2 million of non-cash stock based compensation expense. Net loss for the second quarter of 2022 was $10.4 million or $0.39 per share, as compared to a net loss of $7.5 million, or $0.29 per share during the second quarter of 2021. EBITDA for the second quarter of 2022 was negative $9.1 million as compared to negative $6.3 million for the second quarter of 2021. Moving now to the balance sheet. As of June 30 2022, cash and cash equivalents were $70.9 million. Subsequent to the end of the quarter, we collected $10.5 million in loan principal following the completed merger of Greenbrook and Success TMS. Now turning to guidance. For the full-year 2022, we now expect revenue in the range of $60 million to $62 million. For the third quarter of 2022, we expect revenue of $14.5 million to $15.5 million. We continue to expect to see year-over-year growth in each of the remaining quarters, along with a more normalized seasonal pattern with a slowdown in this third quarter before a strong fourth quarter, which is typically the largest of the year. We now expect total operating expenses for the full-year 2022 to be in the range of $86 million to $88 million. As a result of cost justification initiatives. I would now like to turn the call back over to Keith.

Thank you, Steve. We are very optimistic about what the second half of 2022 will bring. Our focus will remain on increased customer and patient awareness the continued optimization of our commercial organization, leveraging exclusive commercial partnerships, and clinical and regulatory progress. I'm extremely confident in our team's ability to take advantage of this opportunity that lies ahead to help treat the growing number of patients suffering with mental health disorders. The reason we are the market leader in TMS therapies for mental health disorders is that we have been able to build a team made up of industry best and brightest. And I would like to thank each and every one of them for their dedication and commitment to delivering innovative solutions for patients. With that, I'd like to open the line for questions.

[Operator Instructions]. And our first question comes from Adam Maeder of Piper Sandler. Your line is open.

Hi, good morning, Keith and Steve. Thanks for taking the questions here. And congrats on the progress. Solid treatment number and utilization improvement in Q2. I think you did note some softness around your two largest customers Greenbrook and Success due to the pending merger. Just wondering if we're able to give any more color on volumes there. It sounds like the treatment number could have been even better if not for this transient headwind. And then how do you expect volumes at this newly created entity to trend in Q3 and Q4? And then I had a follow-up or two. Thanks.

Well, thanks, Adam. I think it's natural that when two companies are going through a merger, that they're going to experience some disruption. I have full confidence that the combination of Success TMS and Greenbrook is going to be a huge winner. So I think that this -- I see this blip is temporary. And I think that it may continue as they go through their integration for the next few months. But at the end of the day, it's going to be a winner for them for us and the whole industry. So I don't see it as a big deal.

Okay, that's helpful, Keith. Appreciate that. And then maybe just to flip over to the system side. So really strong capital quarter, maybe just talk a little bit more about what drove the strength there. It sounds like pretty good pipeline conversion. And then as we look ahead, how do you think about like the CapEx environment, just given some of the macro landscape? I think you previously talked about 200 to 250 systems per year as being a good framework for models. So just wondering if that still holds?

So -- I think we started talking about it last year, when we brought on the new team that they started with pretty much at zero pipeline, and it would build over the quarters and it has. We started out at 24 systems in Q1 of last year and built every quarter since then. So I think we have a robust pipeline right now it continues to grow through the efforts of our great marketing team and through the NeuroStar summits that we have. So I know that there's softness in the economy, but currently we have a pretty strong pipeline with backups to it. So we're pretty confident that that 240 to 250 is still a good number for us.

Okay, great and good to hear, and maybe if I can just squeeze in one last one. I'll ask about First Coast and Novitas and the proposed policy updates there. Do we know exactly when we'll get a final decision, i.e., if those will become kind of official policy? And then would you expect other MACs to follow Novitas's. In some ways kind of looked at as a bellwether. So maybe just kind of level status on the situation there and any potential impact to the business? Thanks again, and congrats on the progress.

Thanks. I really can't tell you whether the other MACs are going to follow, if we look at history they have. So we're hoping that that it goes across the board. When all of these things become final, they have a review period, and then they have a question period, and then they make it final. So we're hoping that all of the changes become put into place, hopefully by the end of the year.

Perfect. I'll leave it there. Thank you.

Thanks.

Thank you. And our next question will come from Margaret Kaczor of William Blair. Your line is open.

Hey, good morning, everyone. Thanks for taking questions. Maybe this a good picture on the start, in other words we're talking about a quarter mark inside, commercial regulatory player. I'm trying to put out next quarter with updates. But can you give us some context, I guess for when the starts in fact, it's more materials, especially on that utilization, maybe revenue per system. And I'm just trying to get a sense is kind of step one, in terms of laying the foundation or further along in which [indiscernible].

Margaret, I -- we couldn't hear you very well, it was a little garbled. So are you able to repeat the question?

Sure. Can you hear me anybody?

A little. Give it a shot.

Keith, can you hear me?

Yes, we can.

Okay, I just want to get to kind of talk about the updates that we heard this quarter to you put on short running, whether they're kind of marketing, commercial, regulatory. So can you give us some context of where -- when the impact of these growth specifically utilization growth and revenue per system growth will occur? And is there one of these that you can give more in your view share of today's metrics?

Yes, that's a good question. I think the utilization growth and the revenue growth is really come out of our marketing efforts. Utilization growth and the revenue growth is really come out of our marketing efforts, and our PHQ-10s. And our focus on patients within the practice, rather than patients coming out of the airwave. I think that with -- as we said in the prepared marks, there are plenty of patients that have failed two to four drugs within the practices. And the physicians have not been very good at being able to speak to them and educate them and then convert them to a NeuroStar patient. So I would say that if I look at what makes the biggest impact for us, it's our marketing efforts within the practice. It's our marketing efforts surrounding the practice and our PHQ-10s. And similar to the growth in our system revenue, we anticipate that with each quarter, our revenue has continue to grow on the treatment session side. And quite honestly, there is a little bit of buying patterns that we have to change within our practices. Some of them are used to buying on a per patient or even a partial patient basis. And we are -- through our programs working to really align their purchasing with the -- with our quarter and with our programs.

Okay. That's helpful. And maybe to follow-up a little bit more on the capital side as well. Obviously a good example are our sales reps that have to be number on the capital side. It seems like it's almost the systems throughout this quarter. So as we look forward, what you think, a good number, there should be, maybe what's being assuming guidance for the second half of this year? Thanks.

So we're still targeting the 240 to 250 systems for the year. I think we're on track to do that. I said, the last couple of quarters that if we're able to get 45 to 50 systems, every single quarter, we're good. This quarter, we got higher than that. And I do want to be cautious and that we have to be able to train them and make sure that we get them up and running. And I think at the current levels, even at 59 for this quarter, I think we can focus our efforts and our teams and make sure everybody gets the attention they need.

Great, thank you guys.

And our next question will come from William Plovanic of Canaccord Genuity.

Hey, good morning. Thanks for taking my question. Yes, great. Thanks, good morning. Thanks for taking my questions. Yes, so a couple of questions here. First, just, capital sales robust, obviously the pipeline is filling, but also ASP is lifting. And was there anything one-time in the quarter, I mean your ASP is getting close to 74,000, 75,000 a system. It's just this, is this sustainable, is it the impact of kind of all the marketing programs and everything you've done in terms of the value add versus discounting to sell systems?

So I think the programs that we have been talking about now for almost two years are gaining more and more traction. And I think we see it through our NeuroStar Summits, I mean we are right up front with them talking about treatment sessions. And but we then talk about every single thing that we do to help make them successful within their practice and outside of their practice. So I think that at the end of the day, the price of the system, and if it's $5,000 up or $5,000 down, it's negligible and a lease payment. So it's really not the issue for us. So our ASPs have been going up steadily. And we're -- I don't see that changing at all.

Great, and then thank you. And then on the PHQ-10 tool, I mean this sounds like, it's been almost revolutionary for you. And I think the commentary was you're getting great traction in the sites that are utilizing it. So my question is, what percentage of your sites are utilizing the PHQ-10 today?

It's about 250 of our sites.

And how many total sites do you have again?

1,044.

So about a quarter of this.

Okay, excellent. And then just, lastly in terms of the guide, it seems like you're bringing the quarter down, it's not a big fourth quarter up from this quarter. Is there something you're seeing or we should be thinking about or is this just given COVID and all the other headwinds out there, just kind of want to make sure you bake everything in? And that's my question. Thank you.

Hi, Bill it's Steve. Historically, the third quarter is usually flat to slightly down compared to Q3. And so that was a component of our guide for the current quarter. And for the year, yes, there's still lingering impacts with inflation and other factors, but we did pull up the low end of the range from 58 to 60. So we're pretty confident with that midpoint right now.

Great, thank you.

You're welcome.

And our next question will come from Marie Thibault of BTIG. Your line is open.

Hi, Keith, Steve. Thank you for taking the questions. I want to ask my first one here on the treatment session revenue per active site, I understand it was down a little bit year-over-year, just because the installed base has been growing so quickly. But if you were to exclude some of the softness around the Greenbrook, and Success merger and sort of think forward to when some of the starts to catch up with the fast expansion installed base, what do you think is kind of the right growth for treatment session revenue per active site, given utilization, I think was around 7% this quarter?

I think our revenue growth should be matching our utilization growth, which this quarter on a per click basis was 15%. So, I think it's harder for us to grow the fixed price accounts. So a lot of our efforts are going on to the per click side of the business. And I think we expect that to grow at the 15% rate, at least.

Okay, very helpful. And then you mentioned quite a few new initiatives, things like NeuroStar University, which sound exciting. How do you expect to sort of control spend in the back half, given some of these new efforts? I think we're at about half of what you're expecting to spend in operating expenses for the year. So maybe you can tell us about any puts and takes on that metric?

Hey, Marie, it's Steve. Yes, so we just went through a pretty extensive forecasting exercise. For the remainder of the year, it was really a reconciliation or justification of what was in the budget and what the expectation is now, you saw we did take down the high-end of OpEx and reduced the range a little bit. I would say, if we didn't have some of the impacts of inflation, and some higher costs related to COGS, that number would have been even lower. So, I think we're very comfortable with where we're at, the team is aligned with the new program spend, and what we need to do from an R&D and clinical perspective. So we're pretty comfortable with that range right now.

And the NeuroStar University costs are all built into our budget that was planned.

Okay, perfect. One last quick one, if I can sneak it in here. I don't think I heard you reiterate a target of EBIT breakeven in 2024. Is that still a goal or something you're still working toward?

Yes it is.

All right. That's it for me. Thank you so much.

Thanks, Marie.

Thanks, Marie.

Thank you. And our last question will come from the line of Dave Turkaly of JMP. Your line is open.

Great, good morning. Keith, I know you don't want to answer this, but I'll try anyhow, with the two new indications, can you give us some thoughts in terms of even if it's 2023, I don't know 2024 like what percentage of your mix are you planning on? I mean, could this be 5% or 10% additional on top of what you can do in MDD or how are you thinking about these new launches and their impact?

So I think, our discussion around OCD has been that, we would expect a few million dollars over the next few years, it's really an opportunity for our physicians to add opportunities to treat patients that are within their patient base, that are battling OCD. So I don't anticipate it is going to be a majority, even 5% of our business. But it'll be meaningful to the physicians that that have patients that battle with OCD. Our opportunity out there is really patients with depression. And we're seeing it and we're seeing them raising their hands and asking for help. And we're training our accounts on how to get to them.

Got it. When you look at the protocol, I just want to confirm this. I think it's the same or very similar. And I think you mentioned in the release that insurers are sort of paying, I believe the same amount for these new indications, or at least for some of them. And I imagine you charge the same but just in terms of the actual positioning and the therapy, are there differences or is this going to be pretty much just like MDD?

They use the same codes and patients with depression often suffer with anxiety also. So they use the same codes, there is a different motor threshold test for OCD. And that's what we are educating our accounts on now. But outside of that, it's the exact same thing.

And I guess lastly, you mentioned or I guess your slideshow mentions that for OCD, some of the other competitors, you need to buy something else is that are they treating something differently, are they targeting a different area in the brain or why do they need that? And is that a big advantage for you?

They need -- some of our competitors need a second coil to be able to treat and so the physicians have to buy that from them. For us, it's a software push, and we're able to enable it remotely. But we are controlling that through the training. As we train them, we enable it on their system at no charge.

Thank you.

I would now like to turn the conference back to Keith Sullivan for closing remarks.

Thank you, operator, and thank you for joining us on the call today. We look forward to updating you on our progress in the next quarterly call.

This concludes today's conference call. Thank you for participating. You may now disconnect.