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Edited Transcript of GTMS.TO earnings conference call or presentation 5-Aug-20 2:00pm GMT

Q2 2020 Greenbrook TMS Inc Earnings Call

Aug 21, 2020 (Thomson StreetEvents) -- Edited Transcript of Greenbrook TMS Inc earnings conference call or presentation Wednesday, August 5, 2020 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Bill Leonard

Greenbrook TMS Inc. - President, CEO & Director

* Erns Loubser

Greenbrook TMS Inc. - CFO, Treasurer & Corporate Secretary

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Conference Call Participants

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* David C. Martin

Bloom Burton & Co., Research Division - MD & Head of Equity Research

* David Francis Newman

Desjardins Securities Inc., Research Division - Analyst

* Justin Keywood

Stifel Nicolaus Canada Inc., Research Division - Director of Equity Research

* Noel John Atkinson

Clarus Securities Inc., Research Division - VP & Research Analyst of Growth and Innovation

* Tania Rae Gonsalves

Canaccord Genuity Corp., Research Division - Analyst of Healthcare

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Presentation

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Operator [1]

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Welcome to the Greenbrook TMS Inc. Second Quarter 2020 Results Conference Call and Webcast. (Operator Instructions) I would like to remind you that this conference call is being recorded today and is also being webcast on the company's website at www.greenbrooktms.com under the Investors section, Events. (Operator Instructions) Analysts and investors are reminded that any additional questions can be directed to the company at investorrelations@greenbrooktms.com.

This call contains forward-looking statements, which reflect the current expectations or beliefs of the company based on currently available information. Forward-looking statements are subject to a number of risks and uncertainties that may cause the actual results of the company to differ materially from those discussed in the forward-looking statements. Factors that could cause actual results or events to differ materially from current expectations are disclosed under the heading Risk Factors in the company's annual information form dated March 10, 2020, and in the company's MD&A for the period ended June 30, 2020, which are available on SEDAR and on the company's website. Any forward-looking statements speaks only as of the date on which it is made, and the company disclaims any intent or obligation to update any forward-looking statement unless required by law.

I would now like to turn the meeting over to Mr. Bill Leonard, President and Chief Executive Officer of Greenbrook TMS; and Erns Loubser, Chief Financial Officer. Go ahead, please, Mr. Leonard.

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Bill Leonard, Greenbrook TMS Inc. - President, CEO & Director [2]

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Thank you, Lindsey, and thank you to everyone for joining our conference call and webcast today. We are very excited about our Q2 2020 results, which demonstrates our ability to navigate and grow during the challenging operating environment imposed by the COVID-19 pandemic. Overall, we were able to continue to grow our business even more than we expected, exceeding our previously disclosed revenue guidance while finding ways to continue to provide the highest quality services and to protect our patients, employees and physician partners.

Despite the challenging operating environment imposed by COVID-19 pandemic, we showed a resilient performance and sustained strong year-over-year revenue growth. With access to TMS therapy now more essential than ever, we have increased efforts to expand patient interactions virtually and the corresponding increased usage of these platforms by both patients and physicians contribute to this positive result. COVID-19 forced us to adapt and innovate. We expect our learning and experience through these times to provide valuable lessons and strong leverage as we continue to focus on expanding our base of clinics.

Quarterly consolidated revenue for Q2 2020 increased by 21% to $9.8 million as compared to Q2 2019, significantly exceeding our previously disclosed guidance. On a year-to-date 2020 basis, consolidated revenue increased by 44% to $21.2 million. Furthermore, Q2 2020 consolidated revenue of $9.8 million represented a decrease of only 14% as compared to Q1 2020, again, significantly exceeding our previously disclosed guidance.

We added 3 active TMS Centers during Q2 2020 with an additional 12 TMS Centers in development. This brings our total network to 125 Greenbrook Centers, which is an increase of 62% from Q2 2019. We're also particularly proud of our ability to reach new patients during this difficult time. In June, we established a record monthly high and new patient treatment starts, which supports a strong upward trend following the initial impact of COVID-19 and position us well for what we hope to be a strong Q3 and beyond.

And now for a more detailed review of the company's financial and operating performance, I will turn it over to our CFO, Erns Loubser.

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Erns Loubser, Greenbrook TMS Inc. - CFO, Treasurer & Corporate Secretary [3]

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Thank you, Bill. As Bill mentioned, despite the impact of COVID-19, consolidated quarterly revenue increased by 21% to $9.8 million in Q2 2020. On a year-to-date basis, consolidated revenue increased by 44% to $21.2 million. Furthermore, Q2 2020 consolidated revenue represented a decrease of only 14% as compared to Q1 2020. This positive result was primarily attributable to the increased efforts to provide greater access to patients virtually, through the expanded use of online platforms and focused marketing efforts on the safety and accessibility of our TMS Centers. The continued development of our TMS Center network by adding 3 active TMS Centers coupled with the Achieve TMS acquisition, also contributed to the strong growth. COVID-19 has increased demand for mental health services, including an increase in psychiatric visitors -- visits and depression and anxiety scripts, which we believe will continue to promote growth as operating conditions normalize.

As expected, same-region sales growth was negative 19% in Q2 2020, but remained positive at 2% on a year-to-date basis. The negative growth experienced in Q2 2020 was directly attributable to the impact of COVID-19. As operating conditions continue to normalize, we believe this metric will revert back to the pre-COVID-19 levels. Average revenue per treatment increased by 5% to $230 in Q2 2020 and by 5% to $234 during the year-to-date 2020 period. This increase was predominantly attributable to an increase in reimbursement rates from certain players with which we've had long-standing relationships in our established regions, and its expansion to more favorable reimbursement jurisdictions.

Moving to regional operating income. In line with our expectations, we incurred a regional operating loss for Q2 2020 of $200,000 as compared to regional operating income of $1 million in Q2 2019. Regional operating income decreased 68% to $500,000 during the year-to-date period 2020. This is from a prior -- this is attributable to a reduction in patient treatments during the period as a result of COVID-19. The regional operating income margin was 2.4% in year-to-date 2020 compared to 11.1% year-to-date 2019, again, due to the impact of COVID-19. Year-over-year corporate -- aggregate corporate costs increased by only 9% to $3.1 million for Q2 2020 and by 35% to $7 million on a year-to-date basis 2020. Quarter-over-quarter aggregate corporate costs, however, decreased by 19% or $750,000 compared to Q1 2020, really illustrating the success of our cost mitigation strategies.

The modest year-over-year increase in corporate G&A and decrease quarter-over-quarter, respectively, is a result of the investment in our business infrastructure and increased staffing of our shared services function in fiscal 2019, coupled with the Achieve TMS acquisition, again, offset significantly by disciplined measures implemented to control costs as a result of COVID-19.

As anticipated, the Q2 2020 and year-to-date 2020 aggregate corporate costs growth rate has decreased significantly as compared to the fiscal 2019, as we continue to scale into our centralized business infrastructure. This is further highlighted by the growth in revenue eclipsing the growth rate in aggregate corporate cost in both Q2 2020 and on a year-to-date 2022 basis. The loss for the period increased predominantly as a result for the earnout -- of the earnout payable to the sellers of Achieve TMS, which demonstrates the strong performance even during these challenging times by that business.

From a balance sheet perspective, accounts receivable increased by 0 -- by $800,000 to $10.9 million in Q2 2020 compared to Q4 2019 and decreased by $100,000 compared to Q1 2020. The company has already started to realize the benefits of the recent enhancements made to the billing and reimbursement system. This is despite the continued number of new TMS Centers with effects of payer contracting and billing system setup impacts to normal cash conversion cycle. And slightly slower reimbursement time lines experienced from payers due to the disruption caused by COVID-19. We expect accounts receivable to continue to stabilize throughout fiscal 2020.

As of Q2 2020, we had approximately $13.6 million in cash on hand, including an unsecured loan of approximately $3.1 million under the United States Paycheck Protection Program received during the quarter. We also completed a public offering of common shares for an aggregate gross proceeds of approximately CAD 15 million during the quarter. The company is using the net proceeds from the offering to fund operating activities and for other working capital and general corporate purposes, effectively strengthening our balance sheet in this current uncertain economic environment.

Moving to our core operating metrics. As of the end of Q2 2020, the total number of TMS Centers increased by 62% to 125 from 77 a year ago. Of the 125, currently, 113 centers are active and contributing to revenue. The number of consultations performed increased by 7% to 2,075 compared to Q2 2019. We increased the number of TMS treatments performed by 16% to 42,581 over Q2 2019. Patient starts increased by 22% to 1,218 compared to Q2 2019.

Our forward-looking indicators were all skewed down as a result of COVID-19 experienced during the quarter. As Bill mentioned earlier, however, we have seen a positive sentiment towards the end of the quarter, established a record monthly high in new patient start in June, which supports a strong upward trend and which we believe will position us well for the next quarter and beyond.

Back to you, Bill.

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Bill Leonard, Greenbrook TMS Inc. - President, CEO & Director [4]

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Thanks, Erns. As we mentioned earlier, we have demonstrated our ability to navigate and grow during the challenging operating environment imposed by COVID-19. Overall, we were able to exceed previously disclosed revenue guidance while continuing to provide the highest quality services and protecting our patient, employees and physician partners. We are particularly proud of our ability to reach new patients during this difficult time, and I am confident that our business will emerge even stronger as market conditions continue to normalize. The need for mental health support is an all-time high, and despite a slowdown in development activity, our development pipeline is stronger than ever and prime for expansion when market conditions allow. We have now treated over 13,000 patients with over 460,000 treatments performed. We are closing in on 0.5 million TMS therapy treatments, a significant positive impact on the lives of so many patients suffering from depression. We look forward to keeping you updated on the progress of the company throughout 2020.

Thank you for your time today. And with that, Lindsey, we will now take questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of David Newman with Desjardins.

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David Francis Newman, Desjardins Securities Inc., Research Division - Analyst [2]

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Solid results and the trends look positive. So congratulations. I just want to get a little bit more attribution though around your outlook overall. So if you had to go month by month, in terms of patient volumes, revenues, new patient starts and some of the metrics that you guys measure. How did July shape up? And how did June shape up? And how did this kind of trend month-by-month through the quarter? Just so we get a better sense of your optimism for the third quarter, which obviously is looking pretty decent.

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Bill Leonard, Greenbrook TMS Inc. - President, CEO & Director [3]

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Yes, great question, David. I think from our perspective, when Q2 started, the initial impact of the pandemic was felt late March and then into the start of Q2 in April. From that point, we did several key items operationally that really helped us start to trend up. I think the first thing we did was really from a marketing perspective was to really get the message out on what shelter-in-place and stay-at-home government mandate meant. We did a great job with utilizing platforms such as TV and news radio to make sure patients understood the need for care of their mental health indications. That was the first thing. Allowing us to utilize the platform virtually really created patients the opportunity to get to us without having to have multiple trips to the center. And then really, we start to see a significant impact and rise in our treatments and new patient starts from really May and then into a record-breaking June. Obviously, I can't speak a lot about July, but I will tell you that I don't believe June will be our forever high watermark for the company for the year.

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David Francis Newman, Desjardins Securities Inc., Research Division - Analyst [4]

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Okay. And do you think you -- as you look out, do you think you could -- it sounds like you could, but I just want to hear your thoughts on it. But do you think you could exceed pre COVID level run rates?

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Bill Leonard, Greenbrook TMS Inc. - President, CEO & Director [5]

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Yes. I mean I continue to see positive trends. I think we are still in the midst of the pandemic, with hotspots popping up throughout the U.S. With that said, there's a different sentiment right now. I think patients were really confused early on the whole government mandates of stay-at-home and shelter-in-place. I think now you're seeing an increase in depression scripts written, you're seeing an increase in psychiatric visits. We've seen numbers of 20% to 30% of new scripts written, which really builds a pipeline for us in the future months ahead. So obviously, I do think the company will continue to grow, as we stated earlier. I think we are in a great position as an organization to take advantage of, unfortunately, the growth in mental health needs. So we feel really confident about the position we're in and expect to see growth in the months to come.

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David Francis Newman, Desjardins Securities Inc., Research Division - Analyst [6]

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All right, Bill. And then Bill, if you look out, I think your target -- initial target was like 140 centers by the end of this year. And you're not about far off, to be honest. And you've got about 18 months of capital for OpEx and CapEx. I mean how are you thinking about center expansion again? If you're seeing this kind of activity level. So what are you guys thinking in terms of that, in terms of expansion?

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Bill Leonard, Greenbrook TMS Inc. - President, CEO & Director [7]

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Yes. We are still focused on being a growth company. We are really kind of making sure that the trends continue to kind of move upwards. And as far as growth is concerned, like I said earlier, our pipeline has gotten better. One thing COVID did do was create a really strong pipeline for us. We continue to explore opportunities and at the right time, we'll kind of get back on the development train, which we hope to be late this year into Q1.

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David Francis Newman, Desjardins Securities Inc., Research Division - Analyst [8]

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Very good. And the last one for me, guys. Just on the cost cutting efforts, obviously, you did a lot of good things here in terms of your ability to cut costs, including furloughing some employees which are now coming back. And any of the savings that you're -- that you might believe could become more permanent? Often, these are opportunities to come along where -- I mean that COVID is not really an opportunity, but it does allow you to sort of look in the mirror and kind of look at your cost structure and find inefficiencies, and you did cite that you're around USD 1.2 million in discretionary expenses realized. I assume that's an annualized number towards your $2 million target. But anything that could be -- as we're looking to sort of forecasting our cost structure going out, any that's going to be more permanent in nature?

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Erns Loubser, Greenbrook TMS Inc. - CFO, Treasurer & Corporate Secretary [9]

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I think we certainly, as we mentioned, what COVID-19 did, it forced us to innovate. And also, as you mentioned, forced us to look at kind of our cost structure and the optimal cost structure. So I think there's certainly lessons learned how we managed to fairly rapidly take costs out of the cost structure from Q1 to Q2, a $750,000 reduction. So I think there is opportunity and some lessons learned that we can rationalize that and learn going forward as it relates to, for instance, marketing expenses to keep the business even leaner than it was before.

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David Francis Newman, Desjardins Securities Inc., Research Division - Analyst [10]

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And, Erns. Was that -- was the $750,000, was that actually out of the income statement? Or is that an annualized number?

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Erns Loubser, Greenbrook TMS Inc. - CFO, Treasurer & Corporate Secretary [11]

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That was actually -- so we had about $3.8 million in corporate G&A in Q1, and we came in about a $3.1 million in -- just below $3.1 million in Q2. So that was actual cost cuts based on kind of our Q1 run rate to our Q2.

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Operator [12]

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Our next question comes from the line of Noel Atkinson with Clarus Securities.

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Noel John Atkinson, Clarus Securities Inc., Research Division - VP & Research Analyst of Growth and Innovation [13]

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Well done in Q2. I wanted to get your insight about Neuronetics. So they've announced recently some significant improvements in TMS therapy eligibility with several major insurers. And I just wanted to see how you think that flows through to hopefully benefiting Greenbrook?

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Bill Leonard, Greenbrook TMS Inc. - President, CEO & Director [14]

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Yes. We appreciate and applaud the work Neuronetics did to continue to expand accessibility for TMS therapy. As it relates to their announcement yesterday, to me, what I think you're seeing now is the momentum driving as with TMS therapy is close to first-line treatment as possible when you're getting down to 1 to 2 failed cycles of med, compared to when we started, where in 2013, '17, it was 4 to 6 cycles of meds. So I think now that the payers are seeing the results of TMS therapy and the need to support depression modalities, I think you're seeing positive movement. With that said, to me, what I loved about it was the fact that demographically, it opens up the opportunity for us to treat younger patients. Some of the patients in that 18 to 21 range, 22, 23, have not been on 4 or 5 cycles of meds yet. They've only been on 1 or 2, so it allows you to get to that demographic, that younger patient population sooner as opposed to later. There is a lag period. I think, for every 1 or 2 trials you make, it's probably a 6th month lag. So I do think it helps increase the pipeline and expand the demographics late fall -- late winter, early spring for Greenbrook. And we're in a great position to take advantage of it, not only with our footprint, but with our growth. And obviously, we have great doctors and a great patient experience.

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Noel John Atkinson, Clarus Securities Inc., Research Division - VP & Research Analyst of Growth and Innovation [15]

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Okay. Great. This might have been asked already, I apologize, I had to step off for a sec. But are you negotiating with any of your landlords in terms of rent forbearance or deferrals or anything like that?

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Bill Leonard, Greenbrook TMS Inc. - President, CEO & Director [16]

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I wouldn't say we're negotiating because unlike some businesses, we actually have been open and seeing patients. We have not closed any of our centers down. So our patients are actively coming to our centers on a day-to-day basis. So it would be difficult for us to negotiate kind of abatement when we are still actively using those centers, which is a good thing as we stayed open during this pandemic.

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Noel John Atkinson, Clarus Securities Inc., Research Division - VP & Research Analyst of Growth and Innovation [17]

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Okay. Then just finally, so you talked a little bit in your prepared remarks about COVID impact, and you had really strong new patient starts in June, and it sounds like into July. With these recent hotspots, as you say, sort of popping up in certain areas, like, are you seeing negative impact on patient activity when cases surge in these areas? Or is it different now that there aren't shelter-in-place restrictions?

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Bill Leonard, Greenbrook TMS Inc. - President, CEO & Director [18]

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Yes, I think a couple of things. One is the patient today in July, August, is different than that patient was in March, April. They understand the government mandates and shelter in place are not kind of in place right now. There is a little bit of a resurgence of COVID throughout the U.S. particular hotspots, as you discussed. But the patient kind of response has been different. They are seeking treatment. They are responding to our advertising and wanting to take care of their mental health needs. So that's been a different sentiment out there from a patient perspective. As far as the hotspots, the hotspots are popping up all the time. You can't listen to the news without hearing a different place. And obviously, we are watching that closely and addressing it. But I think the key fact here is that the patient unlike March and April is responding differently, and you also are supported by no mandates or shelter in place commentary from the government.

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Operator [19]

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Our next question comes from the line of David Martin with Bloom Burton.

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David C. Martin, Bloom Burton & Co., Research Division - MD & Head of Equity Research [20]

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And this one is kind of a follow-up to Noel's last question. So you've made some adaptations to your clinics in the way you deliver service to accommodate COVID, and it helped you keep patients who had started therapy on therapy. If there are more shelter-in-place regulations put in place, do you think that you'll be able to keep your patient starts up at normal levels because of the changes you've made and because of the change in mindset of the patients?

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Bill Leonard, Greenbrook TMS Inc. - President, CEO & Director [21]

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David, I think what we really learned and what we talked about earlier was the ability to adapt and innovate during this time. So we did prove that even when there was that mandate in place by the government, we did see an increase in our new patient starts, specifically in May and then into June. So we feel that during this course of time in the first 3 months of the pandemic, one thing that happened was we learned a lot of lessons. And I think those lessons apply as we go forward as this pandemic continues to kind of be out in the U.S. So from our standpoint, it's continuing. We had a really strong June, a record-breaking June, and we're really pleased with what we've seen in our July business as well.

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David C. Martin, Bloom Burton & Co., Research Division - MD & Head of Equity Research [22]

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You could operate through shelter-in-place rules. So like you could still get new patient starts if shelter-in-place hits certain regions?

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Bill Leonard, Greenbrook TMS Inc. - President, CEO & Director [23]

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Yes. Well, I mean, per CDC guidelines, we are actually -- Greenbrook is an essential service. So we are staying open during that time, which our patients are very excited to have the -- have someone be able to help them during this stressful time. And as I said earlier, we did -- we were able to operate on a month-over-month basis in Q2, continue to increase our new patient starts during shelter in place mandates.

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David C. Martin, Bloom Burton & Co., Research Division - MD & Head of Equity Research [24]

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Okay. And then the rebound in patient starts, is that across all your regions and somewhat uniform? Or is it different in different regions?

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Erns Loubser, Greenbrook TMS Inc. - CFO, Treasurer & Corporate Secretary [25]

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We've seen -- David, we've seen a fairly uniform bounce back. And it happened at different times. We had an initial impact, obviously, when shelter-in-place mandates came into play. And then we saw a gradual bounce back. But as Bill mentioned, as kind of our focused marketing efforts, informing patients what it means to come to our location has facilitated kind of a across the board, bounce back.

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David C. Martin, Bloom Burton & Co., Research Division - MD & Head of Equity Research [26]

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Okay. Revenue per treatment up versus last year, but it dipped a bit versus Q1 2020, in the first quarter this year. Is that because of mix of business in different regions? Or have you seen some payers reduce their reimbursement rates? What's that attributed to?

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Erns Loubser, Greenbrook TMS Inc. - CFO, Treasurer & Corporate Secretary [27]

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So 2 core things, no reduction in reimbursement rates. In every quarter, we deal with the payer mix, and that's a fairly random figure, although it stays fairly stable. But the main impact in this quarter was where we generate our revenue. So jurisdictionally, in terms of like St. Louis, for instance, performed pretty well. And that's a lower jurisdiction -- lower reimbursement jurisdiction. So it's just a product of where we generated our revenue and a little bit of contribution from payer mix. We expect that to normalize back up as we go through the year.

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David C. Martin, Bloom Burton & Co., Research Division - MD & Head of Equity Research [28]

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Okay. And then one last question. Any impact from new indications, OCD? Are you starting to see reimbursement for that?

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Bill Leonard, Greenbrook TMS Inc. - President, CEO & Director [29]

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There's no reimbursement at this time for OCD. I know we recently met with Brainsway, and they continue to put work in to try to create a payer reimbursement model. I don't anticipate that to come into play in 2020 and hopefully, progress is made as we get into late 2021. We are having success, though, on individual reimbursement by patients from time to time. So we're starting to see some positive response from the payers on a case-by-case basis.

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David C. Martin, Bloom Burton & Co., Research Division - MD & Head of Equity Research [30]

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Are there any other indications where you're getting that kind of case-by-case basis reimbursement?

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Bill Leonard, Greenbrook TMS Inc. - President, CEO & Director [31]

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No other indication at this time, but I'm really excited about recent discussions with both Neuronetics and Brainsway on kind of the efforts they're making in terms of potential clinical trials beginning in 2021. So I think it's going to be an active pipeline as we go forward. So I think that TMS therapy sector is in great shape with not only new indications, but the increase of depression caused by COVID.

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Operator [32]

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Our next question comes from the line of Tania Gonsalves with Canaccord Genuity.

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Tania Rae Gonsalves, Canaccord Genuity Corp., Research Division - Analyst of Healthcare [33]

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A few for me. So following on Noel's question, if TMS does become a third-line treatment across the board, I know it's happened for 3 insurers or so right now. Can you quantify how this will change your addressable market? Like my rough math, if you're moving from third line treatment to second line treatment, you're getting another 20% of patients. Is -- does that seem reasonable to you?

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Bill Leonard, Greenbrook TMS Inc. - President, CEO & Director [34]

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Yes. First, I think you're defining third line as you're saying top therapy then meds, as I just want to understand if that's how you view it?

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Tania Rae Gonsalves, Canaccord Genuity Corp., Research Division - Analyst of Healthcare [35]

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I'm not counting top therapies. I'm saying 2 lines of meds, and then TMS?

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Bill Leonard, Greenbrook TMS Inc. - President, CEO & Director [36]

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Yes. Okay. Great. So yes, I think what Neuronetics said in terms of that patient population. It was an additional 50 million patients added to the pipeline, which, again, I think, is a younger demographic that allows us to attract at the Greenbrook centers. So I do think there's an increased pipeline that will become available to us.

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Tania Rae Gonsalves, Canaccord Genuity Corp., Research Division - Analyst of Healthcare [37]

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Excellent. And do you think over time, is there a risk for a decline in reimbursement rates as TMS becomes more accessible?

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Bill Leonard, Greenbrook TMS Inc. - President, CEO & Director [38]

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There's always that risk. But what I'll say to you is with such a high focus on mental health in the United States, I don't anticipate any significant changes over the reimbursement landscape in the next couple of years. Obviously, we have done a great job with actually increasing our reimbursement rate, both due to not only renegotiating in marketplaces that we have a strong footprint, but also in new jurisdictions such as California and Texas where the reimbursement rates are higher. So we continue to try to move that bar upwards, but for right now, we do not see a decline on the market yet.

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Erns Loubser, Greenbrook TMS Inc. - CFO, Treasurer & Corporate Secretary [39]

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And the other thing -- just adding to, Bill, in terms of keeping in mind the value proposition for payers in terms of it's a treatment-resistant depression patients and expensive patients and novel therapy for that in terms of TMS as essentially saves the payer money. So there's incentives to not only with the focus on mental health, but also from an economic benefit perspective to keep incentivizing folks to deliver TMS therapy.

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Tania Rae Gonsalves, Canaccord Genuity Corp., Research Division - Analyst of Healthcare [40]

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Okay. Perfect. That's very helpful. Now in terms of the cost-saving initiatives that you talked about, just a few questions there. So your 275 regional personnel count that was down only 9% quarter-over-quarter, I think. So were furloughs captured in this figure?

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Erns Loubser, Greenbrook TMS Inc. - CFO, Treasurer & Corporate Secretary [41]

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So there's a couple of things that happened. So we initially furloughed -- we had 2 waves of furloughs, 1 effective April 1 and 1 effective May 1 and that was kind of 20% to 25% of the workforce. What we had to do with the significant increase in volume, a lot of those furloughs had to do with volume-based employees like technicians, which really is a product of the number of treatments that we do. So we had to bring back quite a few more than half actually of those volume-based employees, and that's why you won't see the full 20% in those figures comparatively.

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Tania Rae Gonsalves, Canaccord Genuity Corp., Research Division - Analyst of Healthcare [42]

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Perfect. Okay. Already answered my next question then. So then on the hiring freeze, do you have an idea of when you might take that off and when deferred executive salary will be paid out? Now that like you have a good quarter behind you, it seems like we've worked through the trough, I hope. Are you thinking about those things?

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Erns Loubser, Greenbrook TMS Inc. - CFO, Treasurer & Corporate Secretary [43]

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So in terms of the -- we -- as for the earlier question, I think there's a lot of lessons learned and -- in terms of containing costs. And so we're being very cautious as obviously, conditions -- operating conditions has gotten significantly better, but we're not completely through -- it's not a post COVID environment. We're still in the pandemic. So we'll keep a close eye on that. But on -- from an immediate perspective, we're not losing the hiring freeze quite yet.

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Tania Rae Gonsalves, Canaccord Genuity Corp., Research Division - Analyst of Healthcare [44]

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Okay. And the deferred executive salary, no time line yet?

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Erns Loubser, Greenbrook TMS Inc. - CFO, Treasurer & Corporate Secretary [45]

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No specific time lines on that yet.

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Tania Rae Gonsalves, Canaccord Genuity Corp., Research Division - Analyst of Healthcare [46]

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Okay. Perfect. It seems like a lot of the beat on volumes was driven by these virtual initiatives that you've put in place. Could you give us a little bit more color on those? And if there is any improvements that you're rolling out through the remainder of the year?

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Bill Leonard, Greenbrook TMS Inc. - President, CEO & Director [47]

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Yes, I think the increase in volume actually stemmed from a couple of things. One was, it definitely was the virtual platform because it created an opportunity for patients to reduce their visits during that kind of stay-at-home, shelter-in-place mandate. But we don't get there without the kind of the changes we made in marketing, specifically the platforms we were kind of transitioned to such as more news radio and a stronger digital kind of offering. So it was both a combination. The virtual platform has actually started before COVID happened. And what that was meant to do was we were trying to access more patients to get them through both the counsel process and a pre assessment process without entering into the center. As you know, eventually, that patient, once they move forward with the treatment, has to come in for the daily treatment. So you can't utilize the virtual platform. But I think overall, the virtual platform has responded very well. I think team and doctors have done a great job with it, and it's something we will continue to keep in place as it does allow us to extend our reach and to offer more patient interactions prior to kind of coming in for that actual treatment.

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Tania Rae Gonsalves, Canaccord Genuity Corp., Research Division - Analyst of Healthcare [48]

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Excellent. Okay. And just one more from me here. I know you've talked before about as you've done the raise, your balance sheet seems in pretty good shape now. But you've talked about embracing some sort of nondilutive financing. That will obviously give you an ammunition to pursue M&A, especially if the pricing outlook improved here during COVID. What are -- has there been any progress with that?

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Erns Loubser, Greenbrook TMS Inc. - CFO, Treasurer & Corporate Secretary [49]

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So that's spot on what you're saying, like our current cash resources allow us to run the business to essentially profitability. Having said that, we will explore nondilutive financing options to take advantage of, for instance, potential acquisitions or other significant growth opportunities. So -- that we -- that process, obviously, as we previously said, is ongoing, and we will continue to explore it.

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Operator [50]

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Our next question comes from the line of Justin Keywood with Stifel GMP.

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Justin Keywood, Stifel Nicolaus Canada Inc., Research Division - Director of Equity Research [51]

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I'm wondering on the 12 new centers in development, are you able to give some color if these are in previous regions or new ones?

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Bill Leonard, Greenbrook TMS Inc. - President, CEO & Director [52]

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It's -- those are centers -- those are regions that we established in the prior year that we are adding density to as we continue to grow our regional model out.

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Justin Keywood, Stifel Nicolaus Canada Inc., Research Division - Director of Equity Research [53]

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Okay. And then I'm wondering if you're able to secure more favorable lease rates now. I assume there's higher vacancy and would this be a benefit as far as the regions in development or the business development pipeline going forward?

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Erns Loubser, Greenbrook TMS Inc. - CFO, Treasurer & Corporate Secretary [54]

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We've certainly seen, in terms of lease rates that the landscapes could become less competitive, in terms of accessing space. Having said that, we've obviously got hotel development. So we're in a less active search for real estate at the moment. But I think going forward, that's certainly an opportunity to access more favorable rates there, as the market has contracted a little bit as it relates to competitiveness for real estate.

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Justin Keywood, Stifel Nicolaus Canada Inc., Research Division - Director of Equity Research [55]

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And is there an opportunity to renegotiate any of your prior lease? Are any coming up for renewal?

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Erns Loubser, Greenbrook TMS Inc. - CFO, Treasurer & Corporate Secretary [56]

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I think certainly coming up for renewal. We've done well at our head office from a renegotiation perspective. I think certainly, all centers that are coming up for renewal will have some negotiating leverage. And then obviously, any new centers when we do start-up the development train again.

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Justin Keywood, Stifel Nicolaus Canada Inc., Research Division - Director of Equity Research [57]

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Okay. It's good to hear. And then just on the GTMS offering in general, is there other therapies that you're looking at that you see as valid as far as incorporating in like outside of TMS therapy?

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Bill Leonard, Greenbrook TMS Inc. - President, CEO & Director [58]

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Yes, good question, Justin. I think what Greenbrook is today is the largest TMS provider, but it is 125 centers that has great doctors, a wonderful staff and an amazing patient experience. So what we have is the ability -- we have a platform and we have the ability to grow from that platform, whether it's additional TMS indications, or additional mental health services. So I think what we've always done is we've explored opportunities that may have an opportunity to increase our revenue stream that makes sense to us. We've explored panic disorder. We've explored SPRAVATO. So we'll continue to look at that to see what makes the most sense for us in terms of expansion in our centers. As of right now, we have not done that. There's still an underserved marketplace with depression that TMS therapy can benefit from. But we are actively always pursuing that with our Chief Medical Officer and our doctors to see what additional indications or products we can bring into the centers.

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Operator [59]

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(Operator Instructions) Our next question comes from David Newman with Desjardins.

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David Francis Newman, Desjardins Securities Inc., Research Division - Analyst [60]

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Just a quick follow-up, guys. Just on your potential for M&A here in this environment. Obviously, you're cashed up, last year, 18 months, but there might be evolving opportunities out there at good values. I mean, what's the landscape look like? Is everybody participating in this kind of rally here or some are suffering more?

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Bill Leonard, Greenbrook TMS Inc. - President, CEO & Director [61]

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I think the industry as a whole, you got to remember that there's about 90% of the industry is made up of individual practitioners with the device. And I believe that, that group of doctors has had a harder time of rebounding from the pandemic. You had a lot of them that switched to just straight telehealth. Some of them paused their TMS business and are now trying to reengage. So from our standpoint, really the pandemic put us in a better position in terms of a pipeline and interested parties who would like to work with us. Again, we will kind of -- we paused our development for specific reasons, but I do believe there's some great opportunities out there as we continue to kind of ramp back up and see our way through the pandemic. I think we're in a great position to kind of take advantage of what has happened due to the pandemic.

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David Francis Newman, Desjardins Securities Inc., Research Division - Analyst [62]

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And so are you seeing some that are near the point of capitulation here in this kind of environment, that where they are suffering too much and that might be able to sell-out at a decent value?

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Bill Leonard, Greenbrook TMS Inc. - President, CEO & Director [63]

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Yes. I think, again, I would say to you, there's still probably about 20% of the doctors who provide TMS service haven't even turned back on the devices right now. So obviously, a significant change in the landscape. Those that have started back up. I know from an outreach standpoint, my phone has -- my pipeline for development calls has increased, and I know our development team is anxious to kind of get back at it. So I really believe that we have an opportunity to make deals like we did with Achieve that make a lot of sense for the company that really puts us in a great position to expand our footprint.

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David Francis Newman, Desjardins Securities Inc., Research Division - Analyst [64]

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And when do you think you might pull the handcuffs off, Bill, and just kind of start looking at these a little more seriously?

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Bill Leonard, Greenbrook TMS Inc. - President, CEO & Director [65]

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Hopefully soon, but I'd say as soon as we have a better sense of where COVID kind of -- what happens with COVID next. But we're being cautious on it, but it's not like there's someone else. Coming in play right now and removing potential opportunities away from us. So we're starting to see some strong trends. And obviously, we're beginning to ramp up discussions in terms of potential opportunities.

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Operator [66]

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There are no further questions in queue at this time. I'll turn the call back over to our presenters for closing comments.

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Bill Leonard, Greenbrook TMS Inc. - President, CEO & Director [67]

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Well, thank you, everyone, today. I appreciate your opportunity to present the Greenbrook earnings report to you. Stay safe, stay healthy and look forward to updating you next on the Q3 call.

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Operator [68]

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This concludes today's conference call. You may now disconnect.