STIM - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the First Quarter 2020 Financial and Operating Results Conference Call. [Operator Instructions].

I would now like to hand the conference over to your speaker today, Mr. Mark Klausner. Thank you. sir. ahead go please And

Mark Klausner

website Thank you, us A you joining on and of Good Neuronetics First morning our available for be Call. call thank XX Quarter days. this for will operator. for XXXX replay Conference

are on and President. Officer President Steve Chief me the the Steve Counsel. and Andy Joining also Neuronetics' Senior Company's members of and of Macan, Financial call today's Vice General Furlong Andy are Office

results management of that Before this implied we and uncertainties under the statements of like revenue would will related our business risks other and information by due forward-looking Conference Act during strategy, from begin, Securities to the to by include to caution with COVID-XX impact Call financial those stated differ these could statements Reform certain materially the discussed metrics. forward-looking listeners or operational business. XXXX, Company's Safe the I statements guidance Litigation Actual associated including of covered Harbor and issues Private and provisions

a XX-Q, with which on associated you Form Company's Annual required filed by The of on the Neuronetics law. Exchange XXXX review to and quarterly business, update this except as be made of I filings call report on disclaims encourage during filed later statements Report For and Securities X, including today. with the risks XX-K any forward-looking Commission Company's and March will the Form uncertainties Company any to obligation the course discussion

by indicative useful expenses GAAP certain information information provides in other information that in EBITDA. believes financial Management operating discuss results. measures trends During taken and both and are the management non-cash including call, U.S. with that we'll on not our investors for a basis, of certain excluding non-GAAP also conjunction non-GAAP financial

in non-GAAP and tables performance Reconciliations presented and our and U.S. between non-GAAP release, press which externally competitors GAAP plans accompanying viewed against our to can on compare forecast uses financial measures results certain strategic website. for compensation to be to benchmark relative are performance Management our decisions. our

pleasure Financial call to my Furlong. With Chief turn that, to Neuronetics over Steve the it's Officer,

Steve Furlong

economic everyone along Good provide call, the pandemic I'll you turmoil our overview and Company impacting provide remainder recent of our thoughts up business. the an occurred the results, overview quarter with joining are On provide an and today's morning resulting financial then us. of then how events an and call your that update within open on COVID-XX questions. of year for the the first I'll our thank have on for

early Directors to transition in company The CEO. myself and interim Board Macan, up the of lead and while President new Andy company the business Office the General recruits management. Counsel President, transition, a management the the March, the made announced and with Vice senior of Beginning established Senior an of

as with the of a The Farley, Directors Brian President. an Additionally, appointed engaged was the has has Board's Company's Board of Board liaison Office the Executive to the Chairman Committee and the Search the recruiting appointed permanent of performing we initiatives for drive the market goal who and tactical of leading and meantime, position. firm company's maintaining CEO. to our continue a In formal expanding is a search strategic the

more Shifting as gears, COVID-XX update well of as provide an like our response our the on to update I would on to business an impact generally.

As impact previously have from announced, we COVID-XX. material business a our on experienced

keeping and both and business our a safe, crisis the near their support patients continuing have view employees we our and and proactive our capital customers customers to result, steps a long-term taken towards continuity. As resources numerous at aimed managing with during

the in related that Depression continuation for of is of initiation aware for necessity. need debilitating COVID-XX a that The of depression, is of those is millions for undergoing believe treatment depression. treatment company condition of prohibits we and TMS the any patients a that medical worldwide not from treatment or TMS or TMS therapy government suffer order

facilitate already possible products, have provided and the established has is these patients customers suspended clear and that temporarily appropriate customers today Northstar procedures operating others of many by at use our protocols. the pandemic TMS while ongoing operating safe procedures are disinfecting and with curtailed treatments. Therapy state X/X estimate customers sanitizing customer a our We approximately have many believe of patient heavily We To company the of company's system. for treating adoption TMS

clear to associations not such have patient treatment of important time, protocols. or Clinical protective are that this begin clinical utilizing will to that TMS in therapy and practices suspended a practitioners. is the this curtailed pandemic practitioners patient patient and the of guidance Society similarly treatments At it delivery is both as person treatments TMS when providing manner and restart patients in

short session are pre-COVID-XX have deferring projections. capital customers the declined will our that term, and our to In starts by and capital equipment we utilization this compared patient new and revenues sales system expect treatment impacted materially be pandemic as treatment decisions purchase

first the quarter. million, revenue quarter, total prior year XX% $XX.X versus In down the was

levels decline depression, During as a our the cause providing for we of Therapy. first and issued to and to the related volumes. stay-at-home and turn the to COVID-XX of and the the both our guidance accelerated on some spread customers temporarily were system previously started that necessity system sales seeking reduce slowed hit Beginning in we in quarter. shelter the Despite cease session treatment TMS orders track medical of months treatment a belief place TMS is to X in various U.S., revenue see of year in patients new or sales significant treatment initiatives from for treatment mid-March,

XXX evaluating organization. April goal continuity. a of both the the business and restructuring our result to including number the size both anticipated reduce steps COVID-XX, and had XX long-term sales the organization. the company's transition implemented focus and sales rightsizing the company a After a XXX and and business employees restructuring, were employees, Xth, before It has marketing of of impact management furloughs involve organization. decreases, which on the staffing difficult so, in model adjust to implemented the Even position, the company we commercial the is spending recent the As of COVID-XX, and Prior pandemic to are but whether marketing company with with and of was the prolonged out business on near of a better so a of believe decision on doing a a our XXX successfully. we in the come the far a layoffs, which impact company in the

our of We now in project spend the the in expenses changes projects XXXX. and to certain conserve financial will of quarter of expenses operating We effect emerge and delayed these also reduce full cash. The of $XX reduced This one-third marketing to the third of expenses half from reduction XXXX range half of $XX to our second operating second half first million. the to of projected XXXX million represents the year. compared approximately in a

customer and belief can It fewer maintain industry leading efficient that service people with the company processes. more is our

and the system our the utilization. the BDM restructuring sales with CTCs placements MPCs shifted organization productivity by economic was and have Given commercial previously using primarily the improve accordingly. system to our driven in had caused a business disruptions by in traditional adding ongoing drive the calibrated of the We to adding pandemic, COVID-XX growth priorities representative majority model

now have in the with growth can providers', system customer pressures commercial realigned unique revenue utilization base preferences we that the higher future along support of believe organization. and 'TMS a to our this buying mix the shift with of current we the who With only business

strategy growth Japan, As we that that it on the exclusively efforts, our business. we exists view continue opportunity in to we for relates expansion driver will indicated that medium-term geographic still Japan as remains a the previously have focus as to unchanged,

While COVID-XX, we significant, our U.S.. experiencing have similar year to negative what revenue Japan are for in not started were the from from we see expectations to for impact a the contribution this initially

changing We will the conditions monitor and our continue appropriately of our Teijin reacting situation alongside in distribution Japan. goal anticipating to partner with to

indication as other are in continuing dialog we and appropriate study indications. potentially expansion to with our FDA regarding demonstrating efficacy designs the bipolar disorder Lastly for treating efforts,

comment review, announced. believes of The trading Company's or to a and stockholder not we to the would strategy Board rights shifting that that recently execution. our level products Before the value like inherent Neuronetics limited I the duration plan financial reflect briefly does on current potential

Given the shareholders' the of the market, shareholders event rights guard value The the turbulent takeover over of in opportunistic period shareholder any tactics of economic and against plan an to company. Protect during interests. all company created designed this dislocations adopted uncertainty market Board long-term best the proposed to all Directors control the protect and exert of and treatment extremely of by receive share equal fair that volatility. our rights ensure to price plan is

filed X-K the further report X, regarding XXXX. rights please Form details For review current the on April plan, on

were XXXX our our to the until the first for pandemic, $XX.X on XX% economic Starting review, shifting distancing caused a turmoil was revenue gears million. track to million, compared the of a year to From the previously we mandated to announced Now quarter guidance $XX.X of decrease drop-off the of beginning business. COVID-XX significant a performance meet total revenue $XX.X $XX government and million resulting mid-March, in financial million. quarter XXXX social in mid-March, of across first

XX in late compared COVID-XX. were sales sales delayed March QX, was sell due systems the able systems of to XXXX. customers to team purchasing impacted NeuroStar deferred successfully decisions system in as our heavily Our in many XXXX Nevertheless, or impact to XX QX,

from ongoing treatment and in in patient substantially restrictions mid-March other in put the United starts were both Similarly beginning States. similar place new treatment volume as throughout and orders session decline shelter place

metrics typically our not in do ongoing we we click disruption on some not half the March. until volume of did substantially provide magnitude are context the an To on basis. operating and session XX% second though we of share decline treatment decline, even March, saw year-over-year not that going anticipate COVID-XX to providing disclose impact per some business the the In do

the our by final weeks over patient starts as March XX% average during January customers and of across all an during two to of run the average February. compared of rate New weekly fell

March April impacted we approximately defer capital for from decisions. revenue month delay that was U.S. The as the down a year-over-year down perspective, continue of year. purchasing customers XX% last versus trends late most approximately April. or continued Total Total into revenue to significantly in was experienced XX%

by approximately portion slowdown total decline significant year-over-year was per primarily session, April we treatment click business, Within driven saw the continued the of a treatment in down The in treatment session volumes. session increase revenue XX%. with

Therapy the revenue sales revenue million, first first was quarter The first revenue quarter decrease NeuroStar XX% well quarter as as by of NeuroStar The of fewer million. $X.X of revenue a system coil HP versus XXXX driven U.S. decrease in for XXXX. other to the related XXXX lower $X.X primarily of Advanced system was

fluctuate selling mix sales as capital on will based as We pricing average prices leases the and of type expect trends. well that underlying sales

XX% of XXXX decrease to a million, $X.X million. $X.X was first of revenue capital quarter compared NeuroStar quarter, first the In revenue

our XX and quarter to During net by installed quarter, a increase XXX of we of the active net the units a saw increase units of XXXX base increase XX% first X,XXX sequentially. from units

As a leases type active base reminder, capital the includes unit operating unit. lease sold, installed sales and

XX% these lease to of new quarter. systems currently the first operating change don't expect into prior to revenue to will the $XXX,XXX, XXXX, operating under zero revenue quarter, went in compared In decrease to this that's lease was that expire. eventually agreements we any the accounting a U.S. leases operating go the of year terms effect number as and Due install

we XXXX quarter. other in as decrease saw approximately of coil of decline revenue treatment $XX,XXX, the upgrades during XX% Therapy quarter Advanced number over a first purchased NeuroStar was of the system significant a the year the prior In quarter U.S.

decrease treatment treatment over volume during U.S. X% by largely million COVID-XX. of treatment revenue to session for was a the March by prior decline quarter treatment revenue per session revenue system $X.X active in of The caused caused was per session reduction click and in first U.S. year a driven XXXX, a by Turning material quarter. revenue, decrease the average session

installed session During the year-over-year XX% per a U.S. spread active quarter, revenue March first by during of XX% the base was decrease average treatment during over revenues a of XXXX. prior active driven decrease approximately larger quarter the in a $X,XXX, being much year from system primarily quarter

NeuroStar increase of first volumes XX.X% the the was ASPs first during increase to quarter blended XXXX lower quarter click was of an expenses costs. driven for million $X.X of product by million and first $XX.X The of system treatment transition $XX gross XXXX Operating the clinical as the as quarter. XXXX. compared million capital first development expenses decrease quarter well force, higher in were as primarily XXXX management of to per was sales the lower session well quarter result margin XX.X%. during as margin The Gross compared of

Net was as million compared XXXX $X.XX first quarter negative or EBITDA XXXX to $XX.X first loss the quarter of million of loss of XXXX per of million $X.XX quarter share. $XX.X for negative the for compared negative the share negative $X.X quarter of XXXX first the first was $X.X per quarter to for EBITDA as million. or

noted of support amount balance near we earlier, have capital both put over have to we ensuring aimed the that effort a Moving at to sheets, the business as and liquidity the significant and long in resources term. adequate

XX, As and and Paycheck $XX.X received from of disclosed loan April the we had applied cash million Protection equivalents March XX, million. Program. cash were we a for On $X.X that

to during but to to put possible be to believe the starts and The this good not of practices access is MDD should demand health. many a good mental period. businesses, Americans intent to not during to it help in as our who strain growing Therapy for is seek patient for is PPP quarantine it, a Like position it potentially who only backlog are treatment to ever. keep see than entirely such help become the economic upon new of TMS, small able been more intense providers response spike make patients a we the help we and Any patients have increased in services will in they these a suitable important number health customers, psychiatric

I line up like questions. would for With open that, to the

Operator

William the Your Malgorzata from first of Blair. comes Instructions] Kaczor [Operator question line from

Malgorzata Kaczor

the out, changes are guys and spend start there. we making you sales Maybe, marketing dive first, and the into to can

first, So of NPC have and us do as you well how BDM, you as structure or keeping you're CTCs details can terms in many on give whether that not?

Steve Furlong

we had going efficient environment BDMs, we maintaining say, under to the The the think extremely of We three would the are we and different specific to but structure same and type now manager vertical relevant the approach be significant have this most functions and a with our early I more timely, will given change March, feel don't to numbers, at maintaining that in. organization Prior customers. more CTCs same management operating structure structure. I was vertically. sales those was support that the of made NPCs point, we're integrating that we

Malgorzata Kaczor

Okay. part a TMS that on only you little Yes, pressure so few means on types quarters. you token, guys is for have, what so of accounts same the legacy focusing impact kind that bit on referenced it But of the of seen primarily of those accounts of two last we've accounts. the over the

you're on So maybe how the you strategically can sales well as represent, represented? sense give changing of could the those be accounts focus will that us that a as of percentage

Steve Furlong

XXXX. continue don't shift service that are only in and partners or see support of Sure. we significant a and into psychiatrists XXXX sales Yes, forecasting we did the stand-alone in require. XXXX, the level TMS to that are and self-sufficient practices These to very entities need

our traditional service of BDM our redirect without lot offerings. great to CTC pretty of it's able are Again, to again a type we to providers other on and are and offer much time reliant Obviously, perspective, sufficient support we models conduct business business the customer support. able self those training Neuronetics' a the partners. their less they and But have do model. an our MPC and So base. types of those same to of are are some From

Malgorzata Kaczor

Okay.

the think legacy for accounts. more the question me focused I is on

more those environment. were giving So I maybe this accounts assume would that treatment little maybe during much a as TMS closed be the or aren't bit

back support those a to less you it does So, for decline or can mean company? bit them, going grow that while on between that segment TMS-only guys and is coming potentially that refocus to maybe that

Steve Furlong

Yes.

During would had did been place where in each to I saw XXX these call, that QX lot have get we Again, team we address our Malgorzata, and those accounts. declines drop-off top hopefully volumes back those volume that in to program the indicate can our conference and prior of last accounts, that led they a highlighted accounts QX working to issues we legacy those were they of to legacy of those 'XX. legacy we with a easily that operational of some MPCs addressed our by were, and say, MPC the

Operator

Your from from Thibault Marie question of BTIG. next comes line the

Marie Thibault

follow-up curious give the legacy a first color of little just to accounts. months X you success question, you can what the quarter saw the Margaret on terms things there? Hi, of the I'm increase a were in normal utilization us Any efforts in when bit of of

Steve Furlong

specifically, Not as previously $XX.X million, as from communicated inputs that at impact that million and expectations declines COVID-XX weeks had lot the the of will guidance $XX early offered again the that XX, wasn't material. MPCs where in March from on and both where then we all but say program a put in to place material as were on late to extremely we really from of BDMs volume going the the was we were relatively QX. achieve X.X the at call, sudden, that the point, until least we that a that I still March last field, of

it those those where difficult formalized we So a XXXX. part would saw back of well be to to we but them have program again to did early the in get volumes results forecast

Marie Thibault

about seeing then us states the Okay. of efforts for states couple can health with volumes? you centers more marketing an your us that of or about Sure. helpful. tell last this can needing you would customers, and And out be help, are uptick are opening anything that positioning color tell geographies? in patients around new coming of the you any any or early with reopening idea quarantine mental and by any those interested And session you I a some treatment customers week, guess

Steve Furlong

are providers yes, that volume. that those customers with a ease session maintain the been pushing states TMS to easing to are only really restrictions, are they've the beat, really restart So they regarding haven't business, speaking skipped our starting to seeing starting our treatment their the

think all low showing XX% in of all, treatment. the I that one the bit I the you're is a still being of had little ceased that centers, seeing Chicago area But area hit reopening those progress there. general think hardest a

that indicators see key MT-motor also did we would track of One uptick look XXX% a we indicate the not April, it's utilization, a end at, to so into the that the and the lead but of that threshold and of start towards you nice sales, a we correlated us But which head think recovery May would to would bit patient to starts, is new correlated. it June. a we as

And that we are so seeing uptick. we are starting some gradually signs that

Marie Thibault

marketing anything for on new then And patients?

Steve Furlong

depression we unsure to we to of would see far of get significantly again focused the cash length of in want Again, started ahead XX% So spiked scripts some, we Yes, and the did but more the scripts trying up April of preserve were I being strategic ourselves don't and have say efforts. marketing for new magnitude and incidence of patients. too those COVID-XX

treatment TMS the following protocol can for been towards treatments one envision XXXX. a indicated in failed half potential you increase of So, drug, of TMS the latter

Operator

comes next from Your Sandler. question Piper from O'Brien Matthew

Matthew O’Brien

go ramp next actually capital got independent the that a your that see going. just past to headwind the thanks give providers you Can perspective make morning, to the well. see quarters. back, is only providers could their start of from this they just it some providers system if ability a various chain you've can't taking you there, several potential get out I you've got environment decide some--one we back with your that of in know just you've people questions. back the the a over chains, for had we could in the about up to talk customers as Good guess TMS I

in So patient little and things ecosystem, progressing QX, QX general go capital things a out as it perspective, think that just then there? maybe here how little how capital treatment a QX QX, is just expecting from bit perspective about very the do we to been more more sales

Steve Furlong

have duration I the to Yes, of more distancing and in customers the some Again, will some best of be lower impacted depending the since social volume, capital customers they in existing than orders upon place. others. the stay-at-home the already could think of restart our be position

just one too with of think the TMS, of fallout could tell. customer's to and early pandemic economic this consolidation be I the I upon continue overall willingness it's both depending just to some think

third-party are still We partners do customers. a lend willing our financing to number have of to that

know And at perspective, from and still so, this our least I that for they transactions pushing selling NeuroStars hasn't up is dried many can. team at as out as there, that financing point sales and

do long how will Again, change. is it the to really impact last I So, likely depends this customers. environment our the and think what on economic

Matthew O’Brien

sorry. I'm

Steve Furlong

come are going to only they of shape was say I are larger partners, the this TMS out probably the in facilities and the to even best stronger.

Matthew O’Brien

Okay.

in you're you're know competitors but many than in preservation your capitalized I of other mode, better cash this much So space.

you've flexible for curious, plans available And financing so I'm got customers.

little So in is share being there a maybe them an maybe and that backstop from to wounded opportunity get away system term goal? a with our that of of some near this for placements competitors maybe bit some environment,

Steve Furlong

I mean exist. possibility that

Matt, decline so difficult really these decisions as saw workforce, some Andy our it the we reducing soon that and wasn't as knowing of and of mid-March certainly indicators two I started in our And making our were great to assets we were sheet, out strong end wanted and position this, really our we balance in the of comes. that team pandemic commercial make come of valuable whenever the more sure a to easy

bit survive to that sales thrive purchasing decisions, could us. And best-in-class more all on a not that making behind sheet be but this so our strong longevity and of on advantage aggressive and it yes, are technology, on of is who also is to only company, customers sales understanding part the the and once their likely our comes using maybe to that being balance side, when strategy, the

is So, a certainly yes, that possibility.

Matthew O’Brien

guys I cash, steeper but and to across I expected. preserve the expecting, smart just I move you mind, little just the one me you the trying again, if more from reductions organization, than know little we're and was bit then again are Okay steeper don't a

Neuronetics? how your big So kind of store else what the come do is of kind grow what everything from to so support a like? your of customers and of out as what we look support happens the you here grower you that do part customer because this, like And really organization and is

Steve Furlong

prescriptions in I the one thing Similar weather a would do of the of I we of that Therapy. towards will what communicated. level in really again normal And a think recovery. financial really it's that it was growing with increase TMS by be, the we it this the head I was economic of the to part reasonable what we our to eventually April, be It's lot unknown that and back previously be agree during normal and to what March think did will is did of but close along what industries, again storm the we depression early assuming to dictated company, some fallout to lines will just April. And lot got was share company and I increase or to think in pre were, things ability with say, March preserve the COVID, extremely aggressive with late to would of as

Operator

question Genuity. next Cecilia from Canaccord comes from Furlong Your

Cecilia Furlong

the within at BDM HVT? level, our but and given your scale now just from longer of of so morning especially you're the focus kind kind you what to new then seeing and you the term, for just of territory more just questions. sales about perspective see coverage Good I your wanted after reductions, what is thank specifically force ask perspective, kind taking from Hi. again

Steve Furlong

territory of back once as those territory as and work a will still realignment also that process the of opportunity BDM appropriately view alignment We that BDMs the this density, are service to of accounts can productivity at the both cover, have So assigned. do coverage that we a still in minds, opportunities, well based the in that is the the money bit on make they're amount think territories aligned fully our point. the

really those that to --with of TMS opportunity partners. at territories this time some So only increase and within selected the is providers, the again those in

we will ability structure add again, think so or unfolds. and and And the productive our be to right support vertical be management to and we the with BDMs economic integration more efficient more the as reserve able environment also resources back that do

balance aggressive secure jeopardize in place was, really we say, very our offerings service would that I customers. action but our the sheet, for will This a to not we have

pressures rights customers. And strains the to do the our add those to reserve within organizations, we so if or commercial assist we resources see

Cecilia Furlong

Great, you. but just thank these the could about one timelines being out if year, thinking specifically in initiatives primary the I that ask and kind system also And just pipeline may how this perspective. reduced your just NextGen within the you're spending bipolar R&D, of reductions how play on

in spending an April, are in and didn't that the again duration the severity From late and projects year perspective, the and R&D COVID at of place. Yes. beginning the understand. of the we had March still I of it's the fully we in that place will say R&D we did slow some

didn't an and ongoing our that's exists is was we to But in plan and that in place project. on So out XXXX had plan think place. prudent original still kind go was of it we execute what original

that bipolar, those that Regarding resources, with up optimistic in continue, communicated a are the and the collaborative how plate future. Obviously we've clinical we're and see the past indications, but a with COVID-XX with has heads trial and pandemic in can where redirected discussions again, come honestly, and on about our going with of discussions some we continue lot their the than FDA. more other they the the FDA have do we structure resolution worrying with hopeful we to

Operator

turn to Mr. call Furlong Thank for the I will concludes back question-and-answer remarks. you, session. any this now today's closing

Steve Furlong

look forward the earnings Thank our progress next for quarterly healthy have today. We and on you. a call Thank on joining Please you our all great day. updating to stay call. you

Operator

you your this gentlemen, for you does and participation, now disconnect. today's Ladies conference. Thank conclude may

Mark Klausner	Westwicke Partners, LLC-Managing Partner
Andy Macan	SVP & General Counsel
Steve Furlong	Chief Financial Officer
Malgorzata Kaczor	William Blair
Marie Thibault	BTIG
Matthew O'Brien	Piper Sandler
Cecilia Furlong	Canaccord Genuity

Neuronetics (STIM) 9 May 202020 Q1 Earnings call transcript