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Neuronetics Reports Third Quarter 2020 Financial and Operating Results

Neuronetics
·14 min read

MALVERN, Pa., Nov. 02, 2020 (GLOBE NEWSWIRE) -- Neuronetics, Inc. (NASDAQ: STIM), a commercial stage medical technology company focused on designing, developing and marketing products that improve the quality of life for patients who suffer from psychiatric disorders, today announced its financial and operating results for the third quarter of 2020.

Third Quarter 2020 Summary

  • Third quarter 2020 revenue was $12.4 million, compared to third quarter 2019 revenue of $16.0 million primarily due to the impact of the COVID-19 pandemic

  • Third quarter 2020 revenue increased 28% over the second quarter 2020

  • Third quarter 2020 operating expenses declined by 33%, or $5.9 million as compared to the third quarter of 2019 primarily as a result of cost reduction initiatives

  • Installed base was 1,143 systems, as of September 30, 2020, an increase of 11% over prior year period

  • Cash and cash equivalents were $50.7 million as of September 30, 2020

“We are very pleased with our performance during the third quarter. We saw a strong sequential rebound in the business, increasing total quarterly revenue 28% over the second quarter, and we made steady progress operationally with the restructuring of our commercial organization as well as the analysis of vast clinical datasets contained within our TrakStar system,” said Keith J. Sullivan, President and Chief Executive Officer of Neuronetics. “Looking ahead, we will continue refining our long-term commercial strategy and strengthen our foundation during the fourth quarter to execute on that strategy in 2021. We have done a great job building momentum in key areas of the business, including reimbursement, clinical data development, customer segmentation, and the development of a new indication strategy, which should complement the work we are doing with our commercial strategy to drive strong future performance.”

Third Quarter 2020 Financial and Operating Results

Revenues by Geography

Three Months ended September 30,

2020

2019

Amount

Amount

% Change

(in thousands, except percentages)

United States

$

12,029

$

15,294

-21

%

International

419

706

-41

%

Total revenues

$

12,448

$

16,000

-22

%

Total revenue for the third quarter of 2020 was $12.4 million, a decrease of 22% versus third quarter 2019 revenue of $16.0 million primarily as a result of the COVID-19 pandemic and the resulting governmental actions to limit the spread of the virus. During the quarter, total U.S. revenue declined by 21% and international revenue declined by 41% over the prior year quarter. On a sequential basis, total revenue increased 28% over the second quarter of 2020.

United States Revenues by Product Category
Three Months ended September 30,

2020

2019

Amount

Amount

% Change

(in thousands, except percentages)

NeuroStar Advanced Therapy System

$

2,541

$

4,616

-45

%

Treatment sessions

9,083

10,252

-11

%

Other

405

426

-5

%

Total United States revenues

$

12,029

$

15,294

-21

%


United States NeuroStar Advanced
Therapy System Revenues by Type
Three Months ended September 30,

2020

2019

Amount

Amount

% Change

(in thousands, except percentages)

NeuroStar Capital

$

2,438

$

4,264

-43

%

Operating lease

88

185

-52

%

Other

15

167

-91

%

Total U.S. NeuroStar Advanced

Therapy System revenues

$

2,541

$

4,616

-45

%

U.S. NeuroStar Advanced Therapy System revenue for the third quarter of 2020 was $2.5 million, a decrease of 45% versus third quarter 2019 revenue of $4.6 million. The decrease was primarily driven by a lower number of NeuroStar systems sold in the quarter as many prospective customers limited access to their offices in response to the COVID-19 pandemic. In the quarter, the Company sold 39 systems, down from 68 systems in the third quarter of 2019. On a sequential basis, U.S. NeuroStar Advanced Therapy System revenue increased 9% over the second quarter of 2020.

As of September 30, 2020, the installed base in the U.S. was 1,143 systems. This represents an increase of 111 units, or 11%, over the installed base as of September 30, 2019.

U.S. treatment session revenue for the third quarter of 2020 was $9.1 million, a decrease of 11% versus third quarter 2019 revenue of $10.3 million. The decrease was primarily driven by a reduction in per click treatment session volume during the quarter as a result of COVID-19. On a sequential basis, U.S. treatment session revenue increased 39% over the second quarter of 2020.

Gross margin for the third quarter of 2020 was 78.7% compared to third quarter 2019 gross margin of 73.9%. The increase was primarily a result of a change in the product mix of revenues versus the prior year as well as reduced field service expenses.

Operating expenses during the third quarter of 2020 were $12.2 million, a decrease of $5.9 million compared to $18.1 million in the third quarter of 2019. The decrease was primarily due to reduced sales and marketing expenses as well as reduced research and development costs.

Net loss for the third quarter of 2020 was $(3.4) million, or $(0.18) per share, as compared to third quarter 2019 net loss of $(6.9) million, or $(0.37) per share. Net loss per share was based on 18,809,335 and 18,507,558 weighted-average ordinary shares outstanding for the third quarters of 2020 and 2019, respectively.

EBITDA for the third quarter of 2020 was $(2.2) million as compared to the third quarter of 2019 EBITDA of $(5.6) million. See the accompanying financial table that reconciles EBITDA, which is a non-GAAP financial measure, to net loss.

Cash and cash equivalents were $50.7 million as of September 30, 2020. This compares to cash and cash equivalents of $63.6 million as of September 30, 2019 and $75.7 million as of December 31, 2019.

Business Outlook

For the full year 2020, the Company expects total revenue to be in the range of $46.7 to $47.2 million, which implies a revenue range for the fourth quarter of 2020 of $13.0 to $13.5 million.

For the full year 2020, the Company expects total operating expenses to be in the range of $59.0 to $61.0 million.

Webcast and Conference Call Information

Neuronetics’ management team will host a conference call on November 2, 2020 beginning at 4:30 p.m. Eastern Time. Investors interested in listening to the conference call on your telephone should dial (877) 472-8990 for United States callers or +1 (629) 228-0778 for international callers and reference confirmation code 1872153, approximately ten minutes prior to start time. To access the live audio webcast or subsequent archived recording, visit the Investor Relations section of Neuronetics’ website at ir.neuronetics.com. The replay will be available on the Company's website for approximately 60 days.

About Neuronetics

Neuronetics, Inc. is a commercial-stage medical technology company focused on designing, developing, and marketing products that improve the quality of life for patients who suffer from psychiatric disorders. Our first commercial product, the NeuroStar® Advanced Therapy System, is a non-invasive and non-systemic office-based treatment that uses transcranial magnetic stimulation, or TMS, to create a pulsed, MRI-strength magnetic field that induces electrical currents designed to stimulate specific areas of the brain associated with mood. The system is cleared by the United States Food and Drug Administration, or FDA, for the treatment of major depressive disorder in adult patients who have failed to achieve satisfactory improvement from prior antidepressant medication in the current episode. NeuroStar is also available in other parts of the world, including Japan, where it is listed under Japan’s national health insurance. Additional information can be found at www.neuronetics.com.

“Safe harbor” statement under the Private Securities Litigation Reform Act of 1995:

Statements in the press release regarding Neuronetics, Inc. (the “Company”) that are not historical facts constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by terms such as “outlook,” “potential,” “believe,” “expect,” “plan,” “anticipate,” “predict,” “may,” “will,” “could,” “would” and “should” as well as the negative of these terms and similar expressions. These statements include those relating to: the Company’s business outlook and current expectations for upcoming quarter and fiscal year 2020, including with respect to revenue, gross margins, operating expense, the level of new system sales, utilization levels and any specific projections provided; the Company’s expectations regarding domestic and international growth opportunities, additional indications and the build out of its NeuroStar Advanced Therapy System platform; expectations or beliefs regarding future events, potential markets or market size, and technological developments; and any statements of assumptions underlying any of the foregoing items. These statements are subject to significant risks and uncertainties and actual results could differ materially from those projected. The Company cautions investors not to place undue reliance on the forward-looking statements contained in this release. These risks and uncertainties include, without limitation, risks and uncertainties related to: the impact of COVID-19 on general political and economic conditions, including as a result of efforts by governmental authorities to mitigate COVID-19, such as travel bans, shelter in place orders and third-party business closures and the related impact on resource allocations, manufacturing and supply chains and patient access to commercial products; the Company’s ability to execute its business continuity, operational and budget plans in light of the COVID-19 outbreak; the Company’s ability to achieve or sustain profitable operations due to its history of losses; the Company’s reliance on the sale and usage of its NeuroStar Advanced Therapy System to generate revenues; the scale and efficacy of the Company’s salesforce; availability of coverage and reimbursement from third-party payors for treatments using the Company’s products; physician and patient demand for treatments using the Company’s products; developments in respect of competing technologies and therapies for the indications that the Company’s products treat; product defects; the Company’s ability to obtain and maintain intellectual property protection for its technology; developments in clinical trials or regulatory review of NeuroStar Advanced Therapy System for additional indications; and developments in regulation in the United States and other applicable jurisdictions. For a discussion of these and other related risks, please refer to the Company’s recent SEC filings which are available on the SEC’s website at www.sec.gov. These forward-looking statements are based on the Company's expectations and assumptions as of the date of this press release. Except as required by law, the Company undertakes no duty or obligation to update any forward-looking statements contained in this press release as a result of new information, future events or changes in the Company's expectations.

Investor Contact:

Mark R. Klausner
Westwicke Partners
443-213-0501
ir@neuronetics.com

Media Contact:

Chelsey Manko
Vault Communications
610-455-2778
cmanko@vaultcommunications.com

NEURONETICS, INC.
Statements of Operations
(Unaudited; In thousands, except per share data)

Three Months ended

Nine Months ended

September 30,

September 30,

2020

2019

2020

2019

Revenues

$

12,448

$

16,000

$

33,665

$

45,300

Cost of revenues

2,657

4,192

7,791

11,170

Gross Profit

9,791

11,808

25,874

34,130

Operating expenses:

Sales and marketing

6,053

10,362

24,927

31,477

General and administrative

4,210

4,285

13,508

13,145

Research and development

1,952

3,489

7,089

9,499

Total operating expenses

12,215

18,136

45,524

54,121

Loss from Operations

(2,424

)

(6,328

)

(19,650

)

(19,991

)

Other (income) expense:

Interest expense

1,002

930

4,435

2,780

Loss on extinguishment of debt

-

-

-

-

Other expense (income), net

(8

)

(391

)

(288

)

(1,281

)

Net Loss

$

(3,418

)

$

(6,867

)

$

(23,797

)

$

(21,490

)

Net loss per share of common stock outstanding, basic and diluted

$

(0.18

)

$

(0.37

)

$

(1.27

)

$

(1.17

)

Weighted-average common shares outstanding, basic and diluted

18,890

18,508

18,773

18,296


NEURONETICS, INC.
Balance Sheets
(Unaudited; In thousands, except per share data)

September 30,
2020

December 31,
2019

Assets

Current assets:

Cash and cash equivalents

$

50,719

$

75,708

Accounts receivable, net

5,564

6,569

Inventory

3,779

2,775

Current portion of net investments in sales-type leases

1,626

880

Current portion of prepaid commission expense

850

689

Prepaid expenses and other current assets

2,662

1,830

Total current assets

65,200

88,451

Property and equipment, net

787

1,107

Operating lease right-of-use assets

3,515

3,796

Net investments in sales-type leases

2,255

1,730

Prepaid commission expense

4,688

3,779

Other assets

1,894

1,305

Total Assets

$

78,339

$

100,168

Liabilities and Stockholders Equity

Current liabilities:

Accounts payable

$

2,368

$

4,625

Accrued expenses

6,171

9,031

Deferred revenue

2,115

2,228

Current portion of operating lease liabilities

585

559

Current portion of long-term debt, net

34,542

11,250

Total current liabilities

45,781

27,693

Long-term debt, net

-

19,898

Deferred revenue

1,863

2,106

Operating lease liabilities

3,217

2,619

Total Liabilities

50,861

52,316

Stockholders’ Equity:

Preferred stock, $0.01 par value: 10,000 shares authorized; no shares
issued or outstanding at September 30, 2020 and December 31, 2019

-

-

Common stock, $0.01 par value: 200,000 shares authorized; 18,809 and
18,645 shares issued and outstanding at September 30, 2020 and
December 31, 2019, respectively

189

186

Additional paid-in capital

301,172

297,753

Accumulated deficit

(273,883

)

(250,087

)

Total Stockholders' Equity

27,478

47,852

Total Liabilities and Stockholders’ Equity

$

78,339

$

100,168


NEURONETICS, INC.
Statements of Cash Flows
(Unaudited; In thousands)

Nine Months ended September 30,

2020

2019

Cash Flows from Operating Activities:

Net loss

$

(23,796

)

$

(21,490

)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

741

765

Share-based compensation

2,888

2,458

Non-cash interest expense

1,113

555

Cost of rental units purchased by customers

150

144

Loss on extinguishment of debt

622

-

Changes in certain assets and liabilities:

Accounts receivable, net

1,005

(1,933

)

Inventory

(1,004

)

(455

)

Net investment in sales-type leases

(1,271

)

(1,774

)

Leasehold reimbursement

875

-

Prepaid commission expense

(1,070

)

(2,907

)

Prepaid expenses and other assets

(1,263

)

183

Accounts payable

(2,340

)

10

Accrued expenses

(2,981

)

80

Deferred revenue

(356

)

285

Net Cash Used in Operating Activities

(26,687

)

(24,079

)

Cash Flows from Investing Activities:

Purchases of property and equipment and capitalized software

(615

)

(454

)

Net Cash Used in Investing Activities

(615

)

(454

)

Cash Flows from Financing Activities:

Proceeds from issuance of long-term debt

41,360

-

Repayment of long-term debt

(38,860

)

-

Payments of debt issuance costs

(721

)

-

Proceeds from exercises of stock options

534

2,320

Net Cash Provided by Financing Activities

2,313

2,320

Net Decrease in Cash and Cash Equivalents

(24,989

)

(22,213

)

Cash and Cash Equivalents, Beginning of Period

75,708

104,583

Cash and Cash Equivalents, End of Period

$

50,719

$

82,370

Non-GAAP Financial Measures (Unaudited)

EBITDA is not a measure of financial performance under generally accepted accounting principles in the United States, or GAAP, and should not be construed as a substitute for, or superior to, GAAP net loss. However, management uses both the GAAP and non-GAAP financial measures internally to evaluate and manage the Company’s operations and to better understand its business. Further, management believes the addition of the non-GAAP financial measure provides meaningful supplementary information to, and facilitates analysis by, investors in evaluating the Company’s financial performance, results of operations and trends. The Company’s calculation of EBITDA may not be comparable to similarly designated measures reported by other companies, since companies and investors may differ as to what type of events warrant adjustment.

The following table reconciles reported net loss to EBITDA:

Three Months ended

Nine Months ended

September 30,

September 30,

2020

2019

2020

2019

EBITDA Reconciliation

(in thousands)

(in thousands)

Net loss

$

(3,418

)

$

(6,867

)

$

(23,797

)

$

(21,490

)

Interest expense

1,002

930

4,435

2,780

Income taxes

-

-

-

-

Depreciation and amortization

207

308

741

765

EBITDA

$

(2,209

)

$

(5,629

)

$

(18,621

)

$

(17,945

)