Welcome to the Neuronetics Reports Second Quarter 2025 Financial and Operating Results. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the call over to Mark Klausner. Please go ahead.

Good morning, and thank you for joining us for the Neuronetics Second Quarter 2025 Conference Call. Joining me on today's call are Neuronetics' President and Chief Executive Officer, Keith Sullivan; and Steve Pfanstiel, Neuronetics' recently appointed Chief Financial Officer. 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 integration 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 quarterly report on 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 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, everyone, and thank you for joining us today. I'll begin by providing an overview of our second quarter performance and our key operational updates. Steve Pfanstiel will then provide a brief introduction and review our financial results. I'll conclude with our outlook before turning to Q&A. We had a strong second quarter at Neuronetics, both in terms of our ability to drive accelerated top line growth and progress towards cash flow positivity. While we still have some fine-tuning to do to optimize the efficiency of the Greenbrook operations, we are excited about the strength in the underlying business and feel the early results validate our thesis for the combination. Total revenue was $38.1 million, an 18% year-over-year increase on an adjusted pro forma basis. Revenue from the NeuroStar business was $15.1 million, comprised of NeuroStar system revenue of $3.5 million with 41 systems shipped, U.S. treatment session revenue of $10.8 million, up 13% on a pro forma basis and other revenue of $375,000. U.S. clinic revenue was $23 million, our largest quarterly clinic revenue to date and only the second time Greenbrook generated over $20 million in a single quarter. Beyond the strength of the revenue performance, we made progress on our path to cash flow positivity. Cash used in operations was $3.5 million, better than the previously guided target of under $5 million and a significant improvement from the first quarter. As we move through 2025, we continue to focus on 3 clear strategic priorities: first, executing on our Greenbrook growth strategy; second, continuing to scale our Better Me Provider or BMP Program; third, continuing to improve operating efficiencies and optimize cash collections. Our Greenbrook growth strategy continues to exceed expectations. The optimization of our regional account manager or RAM program is delivering strong results.…

Thank you, Keith, and good morning, everyone. It's a pleasure to be here today. I'm excited to be a part of the Neuronetics team. Throughout my career, I have always had a passion for healthcare, specifically in delivering solutions that make a difference in patients' lives. I was drawn to Neuronetics by the significant opportunity in mental healthcare, where there continues to be a profound and growing need to improve patients' lives. Neuronetics has built a unique and significant position in this space through its combination of the leading TMS treatment system in NeuroStar and through the breadth of its clinical presence with the Greenbrook network. In just a few short weeks, I've been able to see the dedication which Keith and the whole Neuronetics team bring every day to helping patients, and it's an honor to be part of this team. I will now turn to reviewing the financial results. Unless otherwise noted, all performance comparisons are being made for the second quarter of 2025 versus the second quarter of 2024. In the quarter, total revenue was $38.1 million, an increase of 132% compared to revenue of $16.5 million in the second quarter of 2024, primarily driven by the inclusion of Greenbrook operations following our acquisition. On an adjusted pro forma basis, adjusting for the impact of the Greenbrook acquisition and site closures, revenue increased 18%. Revenue from our NeuroStar business, representing our system revenue as well as U.S. treatment session revenue was $15.1 million. U.S. NeuroStar system revenue was $3.5 million, and we shipped 41 systems. This represents our second consecutive quarter of system ASP greater than $85,000, demonstrating the value of our system and its features in an increasingly competitive market. U.S. treatment session revenue was $10.8 million, a 13% increase compared to $9.6 million in the…

As we look forward to the remainder of 2025, I'm confident that we are well positioned to continue executing on the 3 strategic priorities and to drive sustainable growth for our shareholders. Our Greenbrook integration and growth strategy exceeded our expectations in Q2, demonstrating the significant value creation potential for this combination. Going forward, we will continue the systematic rollout of SPRAVATO and the buy and bill model, advance our operational improvement initiatives while simultaneously expanding our BMP program across our customer base. Most importantly, we remain focused on achieving cash flow positive from operations in 2025. Our strong second quarter performance, combined with our learnings on billing of SPRAVATO, ongoing operational improvements and cost synergy realization gives us the confidence in reaching this important milestone in the fourth quarter. The integration of Neuronetics and Greenbrook is creating exactly the value we anticipated when we announced this transaction, a vertically integrated organization capable of providing broad access to innovative mental health treatments while driving sustainable growth and profitability. With that overview, I will now open the call for questions. Operator?

[Operator Instructions] Our first question comes from Bill Plovanic from Canaccord.

Can you hear me okay?

We can.

So a couple of things. One, obviously, Greenbrook is doing very well. You've done a great job integrating that. I'm just kind of curious, as we look at the traditional STIM business kind of maybe a little slower than what we were looking for. Can you help us understand the dynamics? Are the referrals being pushed to the Greenbrook centers from the physicians because the BMP and they just have better kind of efficiencies? Or is there anything specific going on that's maybe making the traditional Neuronetics platform maybe not as successful as the Greenbrook?

No. Thanks for the question, Bill. After our analysis of the RAM referral approach to patient education and awareness, it became clear to us that the more efficient use of the marketing dollar and the time of our PDMs was to use both to follow up on the provider connection path. So under this program, our marketing dollars goes towards educating of the PCPs through our digital and social media platform. So once we have these educational meetings with the PCPs and their staff set up and we deploy the conduits to -- for the referrals to our NeuroStar customers and to primarily our BMP sites, so which we then have a simple way for patients to go from one office to the providers. So we know from the RAM program that this shift in strategy would take a few months to gain traction, and we felt that this quarter was the best time to start it. We were able to deliver 13% growth in spite of the shift, but we believe that the Provider Connection Program is way more efficient and will eventually turn to a higher conversion rate for our patients.

Okay. And then -- so it's basically you've shifted the strategy to the referrals versus maybe just driving patients and conversions in the traditional accounts, if I read that correctly. I'm just what type of impact on your marketing dollars does this have longer-term? It seems it would be -- it's a human focus and maybe less spend on external kind of marketing. Is that a right way to think about it?

I think, as I said, it will make our marketing dollars more efficient, which may give us an opportunity to lower that dollar volume. But in going to primary care physicians, we do have to go to some additional trade shows associated with it. We are providing educational meetings in localities. So we still have a marketing spend to help educate them. But similar to what we have seen with the RAMs, once we educate these offices and they get a patient sent to one of our BMP accounts and they see the results, then we can expand further and wider into those practices. So it's -- honestly, I think we're looking at the RAM example, and we're following that same playbook for the BMP accounts.

Okay. And then for Steven, welcome aboard. Just on the resubmitted claims, how much dollars are we talking about? What's the age of those? What's the percentage belief that you'll collect on those? And then just on the optimizing the SPRAVATO buy and bill, it just sounds like to me, in layman's terms, you're going to halt kind of expanding that program for now until you get the actual dollar reimbursement and timing of getting that cash flow in the door.

Yes, it's kind of 2 questions there. I'll try to tackle each of those. In terms of the revenue cycle management, I mean, we're really going after 2 things. I think you mentioned the aged AR, but we're also doing a much better job, and I'm looking at, say, January versus June of this year. In terms of our time to collect on that initial claim, where in, when we look at June, we're collecting 10% more of that revenue from June in the first month after those treatments happen. So we're getting very efficient on just collecting what's due to us on time. But yes, we've got still open AR from 2024 and earlier this year that as we've gotten more efficient, we're catching up on that piece. I think the problem is as you have any errors or issues with the submissions, you have to resubmit, that's a longer kind of time commitment there. But I think as the team is fixed that we're getting first pass, we go back and we know what we need to do on those other pieces. So I expect this will continue to be a tailwind, both catching up on aged claims, but also just improving on that time to collect of recent treatments. And I think that gives us lift through the balance of the year and into 2026 as well. In terms of BMB, I would make 2 comments there. I think the BMB offering has a potential kind of in 2 places. One is it allows us to increase the number of patients we have access to. There are plans where they're asking for both A&O and BMB to be a part of that program to be able to offer A&O, other places where only BMB is an offering. So that's an opportunity for us to seek out and drive additional treatment access to patients we didn't have. With that said, we have to make sure that the reimbursement is adequate so that we're getting appropriate profit on those treatments. And I think there's a couple of ways to look at that. Certainly, that drug cost, when you think about BMB is a pretty significant increase. So we may not get the same GP percent margin when we think about BMB versus A&O. But on a per treatment basis, we would want those GP dollars to be incremental or higher because of the increased burden that we have of buying that drug. So that's how we think about it, giving us access to incremental patients and driving growth, but also it should be a step backward in terms of profitability on a per treatment basis.

Our next question comes from Adam Maeder of Piper Sandler. Adam Maeder from Piper Sandler. Our next question comes from Dan Stauder of Citizens JMP.

Just first on Greenbrook, the clinical sales per site, it was $196,000 last quarter. This quarter, I think it was closer to $240,000, if I did that math right. But I just want to ask your opinion or get any commentary high level on how we should be thinking about this metric more steady state. It should be ramping up this year with SPRAVATO and some of the other optimization initiatives you're implementing. But long-term, what's the normalized level we should think about in our models?

Yes. Let me make sure I've got that, Dan. So you're asking about just what you think kind of it is on a per clinic or per site basis on the Greenbrook side?

Yes, that's right. Just I think $196,000 you gave last quarter, I don't think you gave it this quarter, but just backing in from the 95 sites on the total clinic revenue.

Yes. I don't think we've put out a target for that. I think I would just continue to look at the total revenue trends for the business and what we've seen first half to second half. I mean, right now, when we look at first half year-to-date performance overall, it's been about 60% clinic revenue business. We expect that will continue to remain about that 60% level, and we provided guidance for the full year. So that kind of gives you an ability to track into what we see that Greenbrook revenue looking like for the full year. I think on a site basis, where it can be a little challenging to say there's a target there. Certainly, we can add beds, we can expand the size of some of these sites. So I think there's upward potential there. And we're seeing very nice volume growth on the Greenbrook side of the business. We saw that as we talk about the NeuroStar business on the treatment side as well, 13% on an adjusted pro forma basis. So I think that site number can go up -- continue to go up at a pretty high level.

Great. Appreciate that. And then just one follow-up on the adolescent indication. Great to see the progress here as well as the positive updates on the clinical and reimbursement side. But just as far as patient outreach, I imagine the marketing strategy here has to be a little bit more nuanced. So could you just give us any color on your approach? And how are you driving awareness and adoption? And what's driving that on your end?

We have the data for each one of our providers. And so we know which are taking care of adolescent patients. And we have targeted those folks through our Provider Connection Program and are educating them both by going to trade shows that they attend, but primarily in their offices. And it gives us a more intimate opportunity to explain to them the benefits that TMS can provide to those patients. So we've seen a very nice uplift from the Provider Connection Program when we can identify exactly who those providers are.

[Operator Instructions] Our next question comes from Adam Maeder of Piper Sandler.

Can you guys hear me?

We can, Adam. How are you?

This is actually Kyle on for Adam. Sorry about the technical difficulties there. I just wanted to ask, I guess, just one on kind of the cadence for the guidance here and how we're thinking about the back half. So I guess, if my math is right, just kind of looking at the Q3 guidance, I think we're kind of contemplating a steep ramp here in Q4. So just kind of trying to get an idea between kind of Q3 and Q4 for revenue and the different pieces there.

Yes, Kyle. I mean maybe the first point to make is we had a strong Q2 sales results. So we went from $32 million in sales in Q1 to over $38 million, I mean we were very pleased with that. We exceeded the guidance and the consensus for the quarter. I think in Q3, we just have seasonality in the business. That's a result of the July 4 holiday, summer vacation season. That generally impacts the overall treatments, just driving slower growth for that first half of the third quarter here. I think what we expect to see and what we've seen historically is a pretty significant increase as we go from Q3 to Q4, where we see the offsetting benefit, the tailwind of that seasonality coming back in Q4. So that's how we kind of look at this. That's where the guidance is set up. So having a $6 million increase from Q1 to Q2 and then having a similar increase in Q3 to Q4, I think that's consistent with what we're seeing in the business and then just the seasonality piece driving that.

Perfect. That's super helpful. And then maybe another one for you, just on the gross margin guide down a little bit, which I understand is just a function of Greenbrook becoming a larger portion of the mix. And you talked about back half, maybe you can get up kind of towards the higher end of that range since I think the front half was about 48%. How should we kind of expect maybe the trajectory of gross margins over the medium-term as we look out into 2026 for the combined business kind of on this trend?

Yes. We haven't provided any specific 2026 guidance, but I would say the mix is really going to be the biggest product of revenue, right, and that difference between NeuroStar and Greenbrook. If you look when we were stand-alone the NeuroStar margins were around mid-70%, 74%, 75%. And nothing has fundamentally changed in that cost structure. Greenbrook, if you just do the math on our 48% year-to-date, the Greenbrook gross profit margin is around 30%. I think the biggest thing we have going once you account for that mix piece, we do have upside, I think, especially on the Greenbrook side, just leveraging that fixed clinical infrastructure. The more efficient, the more treatments per chair you do in those Greenbrook clinics, you are leveraging that fixed overhead. I think that's going to help us on a continual basis even throughout 2026. And then I think the optimizing the BMB piece to drive incremental, but we know versus Q2, we're going to optimize where we make that offering and ensure we've got adequate reimbursement and pricing. So I think we'll be able to optimize relative to what I would consider a lower Q2 base on the bill and buy -- buy and bill portion of SPRAVATO.

This concludes the question-and-answer session. I would now like to turn the call over to Keith Sullivan for closing remarks.

Thank you for your interest in Neuronetics. We look forward to updating you on our next quarterly call. Have a great day.

This concludes the conference today. Thank you for your participation. You may now disconnect.