Good day, and thank you for standing by. Welcome to the Neuronetics Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mark Klausner, Investor Relations. Please go ahead.

Good morning, and thank you for joining us for the Neuronetics Third Quarter 2025 Conference Call. Joining me on today's call are Neuronetics’ President and Chief Executive Officer, Keith Sullivan; and Steven Pfanstiel, Neuronetics’ Chief Financial Officer. Before I 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 the 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 was filed premarket 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 noncash 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, and thank you for joining us today. I'll begin by providing an overview of the third quarter performance and key operational updates. Steve Pfanstiel will then review our financial results, and I will conclude with some comments before turning to Q&A. In the third quarter, we built real momentum as we work through the integration and optimization of our combined operations. We are finding opportunities to improve efficiencies, take advantage of our scale and streamline operations to capture the full value of the combined businesses. Our recently announced partnership with Elite DNA is a great example of this, which I'll provide more details on later in the call. Total revenue was $37.3 million, up 11% on a pro forma basis compared to prior year quarter. This growth was primarily driven by strong performance at our Greenbrook clinics, which generated $21.8 million in revenue, up 25% on an adjusted pro forma basis compared to the prior year quarter. Our integration efforts are delivering high treatment volumes across the NeuroStar TMS and SPRAVATO patients. Within the NeuroStar business, we had a solid quarter for system sales with 40 systems shipped, an average selling price above our target for the third quarter in a row. That tells us customers see real value in our technology and support. Importantly, total NeuroStar treatment session utilization in the third quarter grew 11% versus the prior year on a pro forma basis. Beyond our revenue performance, we made significant strides on our path to cash flow positivity. That progress comes from careful expense management and better cash collections. Now turning to an update on our achievements during the third quarter. First, our Greenbrook growth strategy delivered strong results and continues to be a significant opportunity moving forward. Contributing to the growth is our…

Thanks, Keith, and good morning, everyone. Unless otherwise noted, all performance comparisons are being made for the third quarter of 2025 versus the third quarter of 2024. Total revenue in the third quarter of 2025 was $37.3 million, an increase of 101% compared to the revenue of $18.5 million in the third quarter of 2024. The increase is primarily driven by the inclusion of Greenbrook operations following our acquisition in December 2024. On an adjusted pro forma basis, which includes adjusting for both the impact of the Greenbrook acquisition and site closures, third quarter revenue in 2025 increased by 11% versus the prior year. Total revenue from our NeuroStar business, which includes our system revenue as well as our treatment session revenue was $15.5 million in the third quarter of 2025. On a pro forma basis, taking into account the impact of the intercompany revenue, this represents a decrease of 4% versus the prior year. The change was primarily driven by the previously announced realignment of our capital team to focus on strategic higher growth accounts and a change in customer purchasing patterns for treatment sessions in 2025 versus 2024. U.S. NeuroStar System revenue was $3.5 million in the third quarter of 2025 and included shipment of a total of 40 systems. The third quarter also represented our third consecutive quarter of system ASP greater than our target, demonstrating the value of our system and its features. U.S. treatment session revenue was $10.5 million in the third quarter of 2025. As Keith mentioned, third quarter NeuroStar treatment session utilization increased 11% versus the prior year and treatment session purchases in the third quarter were closely aligned with utilization. The decrease in third quarter treatment session revenue versus the prior year is largely due to the impact of a change in…

Thank you, Steve. Looking ahead, we are focused on driving growth across the business while being smart stewards of capital and cash collections. Before I end, I want to highlight 2 exciting near-term opportunities within the NeuroStar business. As outlined in last year's Q3 earnings call, one of the key benefits of the Greenbrook transaction is that our scale allows us to provide broader service offerings to all of our customers. By leveraging our central intake center operation, we can help manage patient calls and education more efficiently, potentially increasing conversion rates and reducing the administrative burden required to meet the demands of NeuroStar TMS. Late in the third quarter, we finalized a 3-year agreement to be the sole provider of TMS systems within Elite DNA Behavioral Health, one of Florida's largest and fastest-growing mental health networks, which has over 30 clinics. As part of this agreement, through a new wholly-owned subsidiary, we would utilize the intake center to pilot a fee-for-service offering to Elite DNA, which would include processing patient PHQ-10 responses as well as conducting and scheduling consultations and preassessments. In another important partnership, we deepened our relationship with Transformations Care Network, which operates 72 clinics in the Northeastern United States. Through our service offerings, we can accelerate time to treatment for patients by leveraging the Greenbrook Intake Center's expertise in performing benefits investigations. These partnerships will expand NeuroStar's footprint and will bring advanced NeuroStar TMS access to thousands of patients through a scalable, systemized model of care. Before we open up the call for questions, I would like to comment on the announcement today that I intend to retire from Neuronetics on June 30, 2026. I'm extremely proud of what we have accomplished in the 5-plus years with the company. These accomplishments include the acquisition of Greenbrook TMS, which has vertically integrated the company's value chain and the advancements of the NeuroStar TMS technology and the millions of treatments we have performed that have saved so many lives. Our performance in the third quarter, combined with the strength of our balance sheet has us entering the fourth quarter and 2026 with tremendous momentum and has the company well positioned for long-term growth. I am confident in the company's ability to execute on our priorities and create meaningful value for both our patients and our shareholders. I look forward to participating in the search for my successor and to working closely with the new CEO once on board to ensure a seamless transition. With that, I'd like to turn the call over to the operator for questions.

[Operator Instructions] Our first question comes from the line of William Plovanic of Canaccord Genuity.

Just to kick it off, I was wondering, definitely, you're seeing solid growth on pro forma in the Greenbrook sites and maybe less so in the former NeuroStar sites. I'm just kind of curious what's really driving those dynamics?

Yes, Bill, thanks for the question. I think on the Greenbrook side, certainly, we've given out kind of our clinic activity and looking at that quarter-over-quarter, you could see that's up nearly 28% year-over-year. I think that is leaning into SPRAVATO, inclusive of the Buy & Bill offering, although we're being very smart about how we optimize that. But also, we continue to see growth on the TMS segment as well. So I think in general, we've got the right clinics to be driving that growth. We're very focused on having a nice extra growth driver in SPRAVATO, especially with B&B. But we just see kind of continued strong growth in Greenbrook driving along. On the NeuroStar side of the business, I think the big thing to remember is we look at kind of, hey, what are the actual treatment utilization. So how many times of our systems being used year-over-year. What we're seeing is that's more than double digit year-over-year compared to Q3 a year ago. I think the change and why we're not seeing that happen translate to revenue growth is that this year, we're seeing those treatment session usage match the purchases. That makes sense. It means our customers are keeping a pretty steady level of treatment session inventory. This is different from 2024, where we saw customers strategically increasing inventory levels. Some of that was their own purchasing processes. There were some marketing, other incentives that drove a little bit of that. But particularly in Q3 of last year, we were still dealing with the impact of the Change Healthcare cyber events, which caused a lot of our customers to shift orders from Q2 into Q3. So in fact, while we're up utilization 11% year-over-year, that's more than offset by the fact that our customers in Q3 of last year bought 13% more than they utilized in Q3. So that's 11 days they increased inventory just in Q3 of last year. So that headwind is really kind of what's driving, I would say, the lack of translation of that utilization increase to the revenue side. I think the positive note is for us is as we enter 2026, we expect it will be with normalized inventory levels, and we wouldn't expect this kind of headwind to reoccur as we get into '26. We'll have normal kind of comparator periods.

Perfect. Okay. And then just on the gross margin dynamics, it's really been different, the reality or the outcomes versus what the expectations were at the time of the Greenbrook merger. And I'm just trying to figure out kind of what changed different than expected? And are there any onetime headwinds kind of hitting things today? How should we think about this?

Yes. I'll start with the general comment there. When I look at the margin, I really view it as we're kind of a mix of kind of a higher margin and a lower-margin business. If you look at the NeuroStar margins prior to the acquisition, go look Q3 year-to-date, you'd see that our GP margin was just under 75%, right in that mid-70% range. That cost structure for the NeuroStar business largely remains the same today. There's been no significant change there. So really, what's happened is we mixed in this Greenbrook acquisition with the clinic business, we know that's operating at a lower margin. So the big piece in my mind is, okay, as you bring these together, it's understanding that revenue mix and how much are you growing on the NeuroStar side relative to Greenbrook. So trying to bring that together, it's somewhat a math, but really the big picture is what is that revenue mix that's going to drive ultimately that gross profit margin. Now with that said, in the quarter, if I compare, say, Q3 to Q2, we saw a slight decline of about 70 basis points in our overall margin. I would say between Q2 and Q3, these were smaller items, really not significant long-term drivers. We had capital sales that were a little bit higher percent of the NeuroStar sales. We were still optimizing Buy & Bill in Q3. We had some carryover of patients where we know it's just not as advantageous from a reimbursement standpoint. And we had some revenue in Q3 from our Compass collaboration that we had revenue in Q2 that didn't repeat in Q3. If you just excluded that kind of episodic Compass revenue, that would account for 60 of the 70 basis point change we saw between Q2 and Q3. If I think long term, what I'm probably most excited about on the Greenbrook side is we see the opportunity to optimize SPRAVATO, making sure we stick with A&O where that makes financial sense and then expanding B&B where the reimbursement allows us to do that. With the volumes we're seeing, we have some pretty significant leverage that we'll see in the 95 clinics. And that is our focus, getting those 95 clinics as efficient as possible, where we'll be able to leverage provider fees, which are a big part of that cost of goods. But also we're leaning into some of the automation and other things that I think are going to help us continue to drive high patient growth and high treatments, but also do that very cost effectively where we're not having to add cost and in some cases, hopefully reduce costs.

And then lastly, as I think about some of the operational efficiencies you announced that you're finding even a year later after the deal, I was wondering if you can quantify that for us. Is this another $2 million, another $5 million in cost savings? Because I mean you're so close to that cash flow positive, I mean it's a pretty important cost savings. So I'm just trying to wonder if you could quantify that for us. And Keith, I know you'll be around a couple more quarters, so I'm not saying goodbye yet.

Thanks, Bill.

Yes, Bill, I don't think we've specified kind of the total full impact that we can have. We are leaning into, like I said, on a few places where we have -- automation is going to help us. I think the challenge here in the short term, maybe in the next quarter or 2 is there are some places where I think investment is going to make sense short term that's going to drive long-term efficiency here. So the clinic kiosks are one we've talked about that was cost to implement in Q3 and Q4, but that's going to make us more efficient from a scheduling collection standpoint. There's also additional automation we can do. We've just started leaning into patient text alerts. I know that's been around for a little while, but we're adding that into our arsenal as well. So there's going to be investments in Q4 and probably even into Q1 that I think will offset some of those gains. Obviously, we guided -- kept the guidance the same on OpEx. But I do view it as long term, there's still a significant opportunity for cost reduction. And I think we'll provide more detail on that as we get towards next year.

Our next question comes from the line of Adam Maeder of Piper Sandler.

This is Kyle Winborne on for Adam. Maybe just to try a little bit more on the treatment session revenue in the quarter. Even when you add back kind of the $2.2 million that was attributable to Greenbrook, it was still down year-over-year. And I understand some of the commentary there, maybe it's a little bit of a comp issue year-over-year with the inventory dynamic. Just curious maybe like what gives you confidence going forward that there's enough resources to kind of drive success in both this business and the Greenbrook business, just kind of to alleviate any worries that like there's a little bit of cannibalization going on there. Just any additional color would be helpful kind of as we think about the treatment session business going forward.

Yes, absolutely. I think the key piece, and we've added 2 slides to our investor presentation deck towards the back, but we are showing kind of quarterly trends on utilization for the NeuroStar system. And I mentioned that earlier. That's the key to me, are our systems being used more and more for specific treatment sessions, that utilization piece, the fact that we see it at around 11% year-over-year, and we expect to continue to see that type of growth, that gives me just a lot of confidence that we have momentum in this business, and it really is a comp issue that we're dealing with from last year. Otherwise, I wasn't seeing double-digit increases year-over-year, maybe I feel different. It's actually the same on the Greenbrook side. If you look, the clinic visits year-over-year are up almost 28% from Q3 a year ago. Again, that's an incredible momentum we have in the business, not just for SPRAVATO but TMS as well, continuing to grow. Those to me are the kind of the leading signals to say, hey, do I have a healthy business? Do I feel good about, hey, driving to increased revenue growth on the NeuroStar side, but maintaining a high revenue growth on the Greenbrook side. Those are the trends we look at, and that's the type of thing that gives us comfort that we're executing. We're still finding ways to take cost out but continue to drive top line growth.

This is Keith. I also think a good indicator for us is what we're seeing on both the RAM referral side and the provider connection. Both of those are gaining traction within the primary care network, and we are seeing a large number of providers who are interested in sending their patients to either a Greenbrook clinic through the RAM program or through provider connection. So I think we have seen that when a provider refers a patient in, they show up at a much higher rate than a patient that we get off of our marketing. So it's very encouraging to see the adoption on both sides.

Super helpful color. And then maybe, I guess, last one for me on guidance, the $40 million to $43 million for Q4. I was curious if you could kind of just unpack the different businesses there. Just since this was a little bit below where we were and where the Street was for Q4, just would be helpful to kind of hear how you're thinking about the business trends for these different businesses looking out to the year-end.

Yes, happy to share a little bit more color. Obviously, we guided to $40 million to $43 million for the fourth quarter, which translates to $147 million to $150 million for the full year. This really reflects, I think, just a couple of items. The biggest piece is really the impact of the SPRAVATO mix between A&O and B&B. We continue to see strong total SPRAVATO growth, but that mix between A&O and B&B is something we have to monitor. In the third quarter, A&O represented about 86% of our SPRAVATO volume. That was up 300 basis points from where we were in Q2. So obviously -- and that's a big revenue driver. In fact, if we had held our percentage of A&O flat from Q2 to Q3, our Q3 revenue would have been $38 million. So that's about a $0.75 million impact of shifting to a higher amount of A&O. We know A&O provides less revenue on a per patient basis. But with A&O, we don't have to cover the cost of the drug, handling the drug, inventory. And as we said, there's just times where B&B just doesn't make financial sense, we don't get the right margin return. So this $147 million to $150 million really reflects that shift of strategy to making sure we optimize that B&B offering. That's something we spent a lot of time on this past quarter, as Keith mentioned, the additional geographies that we're going to launch B&B here or just starting to launch in Q4. We wanted to be very deliberate and take our time on that. I was actually proud in Q3 of how quickly we were able to pivot and shift the percentage of A&O higher, moving in those regions where we just weren't getting the right return on B&B. We moved that very quickly, much more quickly than actually I would have thought. So our updated guidance is really, I think, primarily driven by this assumption of how we see the A&O and B&B mix evolving for the SPRAVATO business. Other than that, I don't think there's a lot of impact from what we've been seeing on the NeuroStar side of the business. Q4 is generally a good growth driver on the NeuroStar side of the business. We do have a little bit of summer seasonality as you look at the month of July and into August. But there's also some positive capital seasonality we see here in Q4, just things lined up for people to do heavier purchases at year-end. So hopefully, that gives you a little color on the trends as we think about the fourth quarter and the full year.

Our next question comes from the line of Daniel Stauder at Citizens.

First question I have was just on operating expense. It looks like you're making good progress on the G&A line, but I wanted to ask how we should be thinking about the sales and marketing spend, both as we contemplate fourth quarter and 2026. So from our understanding, the provider connection program should be a more efficient use of your marketing dollar, but just wanted to ask your broader thoughts on this spend and any strategy you have going forward.

Yes, Danny, I think on the OpEx, obviously, we kept that guidance flat to $100 million and $105 million. We don't break out the selling and marketing relative to the other. That would put our Q4 spend between [ 23% and 28% ] kind of for total OpEx there. I think we're going to continue to drive the cost efficiencies across the board. And those are in selling and marketing in addition to our other G&A pieces. In terms of Q4, I think I'd go back to what I said earlier is there's places where we're going to make investments in patient alerts, other technologies. We're doing some, I think, some great things doing more targeted marketing in several regions for the Greenbrook side of the business that I think could pay off. So for me, it's really a balance of there's some key investments we want to make that are going to drive long-term efficiency, but also things that are going to drive long-term top line growth. So I think as we get into '26, like I said, we'll give a little more color on some of the other efficiencies and cost reductions and where we see OpEx heading. But my commitment here is to make sure that we have great cost control. We're investing where it makes complete sense. But we still know that there are a ton of opportunities here for efficiencies via cost reduction. I just want to be really smart about how we evolve and make sure we put the right investments in place. So as we're reducing costs, we are not sacrificing top line growth.

Okay. Appreciate that. And just one follow-up for me. I wanted to ask on the adolescent indication. I think last quarter, you mentioned you saw an uptick in patient starts here and saw some pretty good trends. But I don't think you gave too much color on it today. So I was just curious on what you're seeing there in the third quarter and what we should expect in the rest of '25 and into '26. And also wanted to ask with this indication in mind, are you seeing more of a benefit from the provider connection program for these patients?

Thanks, Danny. This is Keith. So on the adolescent front, we are seeing an uptick every single quarter, and a lot of it is starting to come from the provider connection network where these primary care physicians really had no idea that there was another alternative for their younger patients with depression. So I don't think we're breaking out exactly how many patients that is, but it is good growth with it. We also mentioned on the call that we have another submission into the FDA that I think will also be meaningful as soon as we hear back from them.

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

Thank you for your interest in Neuronetics, and we look forward to updating you in the next quarterly call. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.