Neuronetics, Inc. Common Stock 2026 Q2 Earnings Call

Please go ahead. Good morning, and thank you for joining us for the Neuronetics second quarter 2026 conference call.

Joining me on today's call are the Neuronetics President and Chief Executive Officer, Dan Reuvers, and the company's recently appointed Chief Financial Officer, Nir Naor. 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, 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 annual report on Form 10-K, which was filed in March, and the company's quarterly report on Form 10-Q for the quarter ending June 30, 2026. 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 will 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, provides 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.

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 is my pleasure to turn the call over to Neuronetics President and Chief Executive Officer, Dan Reuvers.

Thanks, Mike, and good morning, everyone. Thank you for joining us. I'll walk you through the quarter and each side of the business, then I'll turn it to Nir to cover the financials in greater detail. Then I'll come back with how we're thinking about the rest of the year before opening it up for questions. Having now spent several months in the role, meeting with customers, spending time in our clinics, and working alongside our field team, I've gained a clearer view of where the business is performing and where opportunities exist. I'm pleased to report the second quarter began to reflect our steady execution against the goals I cited last quarter. Total revenue was $41.6 million, up approximately 9% versus the second quarter of last year. The results reflect the continued strength of Greenbrook and some early impacts of our NeuroStar TMS go-to-market pilot.

Importantly, we began to show meaningful progress towards profitability and reduced our cash burn significantly. Starting with NeuroStar, total worldwide NeuroStar revenue was $14.7 million. On the capital side, we had a strong quarter. This reflected an encouraging early reception to our second quarter go-to-market pilot, including a deliberate change in how we compete for customers. For most of our history, we offered essentially one way to work with us, a treatment session model built around a high-touch partnership between Neuronetics and our customer. It's a model we believe in and one that continues to set us apart with NeuroStar customers performing almost twice as many treatments per chair as the competitive landscape, a velocity improvement that directly reflects our unparalleled support. But as the TMS markets matured, we've seen that customers value different levels of support. Some want that full partnership.

Others simply want to own the system outright, the way they would any other piece of capital equipment. Our prior strategy did not allow us to compete within this broader customer universe. To address this, while we're continuing to offer the treatment session model, along with our comprehensive support program, we've also introduced new and different ways a customer can choose to acquire a NeuroStar system. Specifically, they can purchase one outright or opt for a lease-financed option, which allows a customer to use the system over time without a significant upfront capital commitment. For customers who elect to purchase a system, we now offer a support on an à la carte basis, allowing them to select the specific elements of our clinical and operational support that they want, rather than accessing it through a treatment session model.

In each case, customers gain access to the same market-leading technology, and those who choose the session model retain the high-touch support that's always distinguished us. We introduced these approaches on a limited basis earlier this year and expanded the pilot through the second quarter. The early reception was encouraging, and we have since moved to a broader rollout. Over time, as more customers choose to own their systems, more of that value will be reflected in capital revenue, consumables, and service, and less in recurring session revenue. That shift reflects both the demand we're seeing for a capital model and our ability to compete for business that was previously out of reach. Consistent with our expectations, NeuroStar revenue was down slightly versus prior year, with capital revenue up double digits, while treatment session revenue was down double digits versus a year ago.

Almost half of the reduction in the sessions revenue reflected the continued normalization of customer inventory, now at the lower levels we would expect to maintain. The balance was from units no longer active. Underneath that, demand for treatment sessions remained strong within accounts that were active a year ago, with utilization up approximately 10% among them. The broader point is that TMS itself continues to grow both across the industry and within our accounts, and the decline in our session revenue reflects the change in our model, not the demand for the therapy. Ultimately, as we introduce new commercial options and we see some mix shifts, our second half revenue may be a bit choppier, but the changes position us for renewed and sustainable growth as we enter 2027. We are also continuing to invest in the platform itself.

In May, we announced a strategic collaboration with ANT Neuro to co-promote their FDA-cleared neuro navigation technology with NeuroStar. Providers are looking for tools that bring more visualization, consistency, and personalization into how they plan and deliver treatment, and this partnership lets us offer that alongside the NeuroStar system. We have the largest installed base of TMS systems in the country, which gives us the ability to bring innovations like this to market and scale them across the field. Moving to Greenbrook, which was the star of the quarter. The operational discipline that we have been building into the clinic business continued. Greenbrook revenue was $26.9 million, up approximately 17% year-over-year. Beyond the top-line growth at Greenbrook, our work on revenue cycle management continued to produce results, with cash collections growing even faster than revenue.

Focusing on better qualifying patients' eligibility, cleaner claims submissions, and more efficient collections were key contributors, along with improved reimbursement rates through more effective payer contracting across both TMS and SPRAVATO. We also began using AI in the insurance authorization process, which has helped us reduce operating costs. This reflects the operational discipline that we have been building into these clinics, and it is converting into cash, not just billings, and we believe there is still runway ahead of us. The other lever is occupancy. These clinics carry a largely fixed cost base, so the more efficiently we can run each site and the more patients we treat, the more profitable each location becomes. That is where much of our operational focus continues to sit today.

With available capacity, we are closely examining our sales methods, including number of field reps, direct-to-consumer ad spend, and peer-to-peer education events, attempting to improve referrals while doing so with the most efficient patient acquisition cost. This too remains a meaningful incremental profitability driver. Before we move on, I wanted to provide an update on changes to our senior leadership team. As you might imagine, I spent a fair amount of time in my first 100 days evaluating our leadership team and structure. As a result, I made some changes to our leadership team, including reducing executive headcount and flattening our structure. This should allow us to get and stay closer to the details of the business. Some of the key changes include the recent appointment of Nir Naor as Chief Financial Officer.

Nir brings more than 20 years of finance experience across medical device and care delivery businesses, including at his last company, where he helped the business reach profitability and achieve positive cash flow within a year. That experience is directly relevant to our priorities at this stage of our business, and I'm confident he'll be a key thought partner as we execute on our priorities. We also promoted Cory Anderson to Executive Vice President and General Manager of Greenbrook. Cory's been with us more than five years, overseeing both our technology and clinical data efforts, as well as leading the commercial readiness efforts of psychedelics with our partners at Compass Pathways.