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Neuronetics(STIM) - 2024 Q2 - Earnings Call Transcript
STIMNeuronetics(STIM)2024-08-12 17:59
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Financial Data and Key Metrics - Revenue for Q2 2024 was 16.5million,down716.5 million, down 7% year-over-year, primarily due to lower Treatment Session revenue [5] - US Treatment Session revenue was 11.7 million, a decrease of 5% year-over-year [9] - Gross margin improved to 74%, up 150 basis points from 72.5% in Q2 2023, driven by the shift to a new contract manufacturer [9] - Net loss for the quarter was 9.8million,or9.8 million, or 0.33 per share, compared to a net loss of 4.9million,or4.9 million, or 0.17 per share, in Q2 2023 [10] - EBITDA for Q2 2024 was negative 8million,comparedtonegative8 million, compared to negative 3.3 million in Q2 2023 [10] - Cash and cash equivalents stood at 42.6millionasofJune30,2024,withanewdebtfacilityofupto42.6 million as of June 30, 2024, with a new debt facility of up to 90 million secured in late July [11] Business Line Performance - Utilization in the local consumable segment increased by 18%, but Treatment Session revenue declined by 5% due to cash flow constraints caused by the Change Healthcare cybersecurity breach [5] - Revenue from US NeuroStar Advanced Therapy Systems was 4million,with50systemsrecognized,meetingthehighendofthequarterlyguidance[9]−TheBetterMeprogram(BMP)showedsignificantimprovements,withparticipatingpracticesincreasing24−hourfollow−upratesby6.4timesandproviderstreating614 million, with 50 systems recognized, meeting the high end of the quarterly guidance [9] - The Better Me program (BMP) showed significant improvements, with participating practices increasing 24-hour follow-up rates by 6.4 times and providers treating 61% more patients after advanced clinical training [6] Market Performance - The company launched NeuroStar TMS therapy for adolescents, with over 425 adolescent patients treated since April 2024 [7] - Insurance coverage for adolescents aged 15-21 expanded, with major providers like Blue Cross Blue Shield of Michigan and Aetna updating their policies [7] - A TV advertising campaign in Tampa, Florida, is being piloted to increase awareness of NeuroStar TMS and drive patient engagement [6] Strategic Direction and Industry Competition - The company announced a definitive agreement to acquire Greenbrook TMS, the largest TMS provider in the US, creating a vertically integrated mental health company [13][15] - The merger is expected to accelerate the path to profitability, with pro forma revenue of 145 million for the combined entity in 2023 and mid-teens revenue growth expected in 2025 and 2026 [21] - Cost synergies of at least 15millionannuallyareanticipated,primarilyfrommarketingandback−officeoptimizations[21]ManagementCommentaryonOperatingEnvironmentandFutureOutlook−ManagementbelievesthenegativeimpactfromtheChangeHealthcarecybersecuritybreachistransientandexpectsrevenuepatternstonormalizeinthesecondhalfof2024[5]−ThecompanyremainsconfidentinachievingcashflowpositivityinQ42024andexpectsfull−yearrevenueintherangeof15 million annually are anticipated, primarily from marketing and back-office optimizations [21] Management Commentary on Operating Environment and Future Outlook - Management believes the negative impact from the Change Healthcare cybersecurity breach is transient and expects revenue patterns to normalize in the second half of 2024 [5] - The company remains confident in achieving cash flow positivity in Q4 2024 and expects full-year revenue in the range of 78 million to 80million[12]−ThemergerwithGreenbrookisseenasatransformativeopportunitytoexpandaccesstomentalhealththerapiesandimproveoperationalefficiencies[17][18]OtherImportantInformation−Thecompanysecuredanewdebtfacilityofupto80 million [12] - The merger with Greenbrook is seen as a transformative opportunity to expand access to mental health therapies and improve operational efficiencies [17][18] Other Important Information - The company secured a new debt facility of up to 90 million with Perceptive Advisors, providing financial flexibility for commercial initiatives and clinical expansion [11] - The Better Me program (BMP) has been fully launched nationwide, with significant improvements in patient follow-up rates and treatment accessibility [6] - The company plans to pilot a TV advertising campaign in Tampa, Florida, to test the effectiveness of TV as a medium for increasing NeuroStar TMS awareness [6] Q&A Session Summary Question: Impact of Change Healthcare Cybersecurity Breach - The breach impacted revenue by approximately 2millioninQ22024,withcustomersdelayingordersduetocashflowconstraints[30]−Managementexpectsthesituationtonormalizebytheendof2024,withpositivetrendsinutilizationandinventorylevels[23]Question:TimingandRationaleforGreenbrookMerger−ThemergerwasacceleratedduetoGreenbrook′slendersconverting2 million in Q2 2024, with customers delaying orders due to cash flow constraints [30] - Management expects the situation to normalize by the end of 2024, with positive trends in utilization and inventory levels [23] Question: Timing and Rationale for Greenbrook Merger - The merger was accelerated due to Greenbrook's lenders converting 140 million in debt to common shares, significantly improving the financial profile of the combined entity [27] - The focus post-merger will be on increasing utilization in existing Greenbrook centers rather than expanding brick-and-mortar locations [28] Question: Revenue and Cost Synergies from Greenbrook Merger - The combined company expects mid-teens revenue growth in 2025 and 2026, driven by expanded Spravato offerings and marketing efficiencies [33] - Cost synergies of at least 15 million annually are anticipated, primarily from G&A and marketing optimizations [33] Question: Guidance and Inventory Management - Q3 revenue guidance of 18.5 million to 19.5millionisbasedonareturntonormalizedTreatmentSessionorderingpatterns[32]−ThecompanyexpectsareboundinQ4ascustomersreplenishinventorylevels[35]Question:RoadmapforGreenbrookIntegration−Theimmediatefocuspost−mergerwillbeonachieving19.5 million is based on a return to normalized Treatment Session ordering patterns [32] - The company expects a rebound in Q4 as customers replenish inventory levels [35] Question: Roadmap for Greenbrook Integration - The immediate focus post-merger will be on achieving 15 million in cost synergies and increasing utilization in Greenbrook's 120 treatment centers [39] - The company will also expand the Better Me program (BMP) and leverage Greenbrook's expertise in patient referral and education [40] Question: Long-Term Revenue per Active Site - The company aims to achieve revenue per active site of 15,000to15,000 to 17,000 per quarter, driven by increased utilization and operational efficiencies [42]