Neuronetics Reports First Quarter 2020 Financial and Operating Results

Neuronetics, Inc

MALVERN, PA — 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, announced its financial and operating results for the first quarter of 2020.

First Quarter 2020 Summary

  • The Company saw a significant negative impact as a result of COVID-19 and the resulting governmental responses and economic turmoil during the second half of March 2020
  • First quarter 2020 revenue was $11.5 million, compared to first quarter 2019 revenue of $12.7 million
  • Active installed base was 1,119, as of March 31, 2020, an increase of 20% over the prior year period

Recent Operational Highlights

  • On April 8, 2020 the Company announced a corporate restructuring and now expects operating expenses for the full year 2020 to be in the range of $58 to $60 million, compared to the previously issued guidance of $76 to $78 million. On an annualized basis, this restructuring is estimated to reduce annual operating expenses by $27 to $29 million.
  • On April 22, 2020 the Company received a Paycheck Protection Program loan in the amount of approximately $6.4 million. Due to questions concerning the eligibility of public companies similarly situated to the Company, the Company will repay its PPP loan on or before May 7, 2020.

“Despite a solid start to 2020 during January and February, both in terms of new system sales as well as revenue per active system, our business was materially impacted by the COVID-19 pandemic beginning in mid-March.  In response to the disruptions and economic uncertainty caused by the COVID-19 pandemic and related governmental responses, we have implemented a corporate restructuring program to preserve capital as we manage through the pandemic and the resulting impact on the global economy,” said Steve Furlong, Chief Financial Officer of Neuronetics and member of the interim Office of the President of Neuronetics. “We believe the restructuring actions we have taken best position us to weather the fallout from COVID-19, maintain our balance sheet strength and preserve our market leadership position. As we navigate these challenging times, we are focused on supporting the well-being of our employees and their families as well as our customers and their patients. We are ready to satisfy the increased demand for NeuroStar Advanced Therapy that we expect will materialize in the wake of the COVID-19 pandemic and associated global economic turmoil.”

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First Quarter 2020 Financial and Operating Results

Revenues by Geography  
Three Months ended March 31,  
2020     2019          
Amount     Amount     % Change  
(in thousands, except percentages)  
United States $ 11,177 $ 12,546 -11 %
International 299 182 64 %
Total revenues $ 11,476 $ 12,728 -10 %
Total revenue for the first quarter of 2020 was $11.5 million, a decrease of 10% versus first quarter 2019 revenue of $12.7 million as a result of the COVID-19 pandemic, related governmental responses and resulting economic turmoil. The decrease was primarily driven by an 11% reduction in U.S. revenue, offset by an increase in international revenue. The year over year growth in international revenue was primarily driven by increased system sales and treatment session purchases.
United States Revenues by Product Category  
Three Months ended March 31,  
2020     2019          
Amount     Amount     % Change  
(in thousands, except percentages)  
NeuroStar Advanced Therapy System $ 2,594 $ 3,350 -23 %
Treatment sessions 8,193 8,778 -7 %
Other 390 418 -7 %
Total United States revenues $ 11,177 $ 12,546 -11 %
United States NeuroStar Advanced
Therapy System Revenues by Type
Three Months ended March 31,
 
  2020     2019          
  Amount     Amount     % Change  
  (in thousands, except percentages)  
NeuroStar Capital $ 2,410 $ 2,939 -18 %
Operating lease 155 182 -15 %
Other 29 229 -87 %
Total U.S. NeuroStar Advanced Therapy System revenues $ 2,594 $ 3,350 -23 %
U.S. NeuroStar Advanced Therapy System revenue for the first quarter of 2020 was $2.6 million, a decrease of 23% versus first quarter 2019 revenue of $3.4 million. The decrease was primarily driven by a lower number of NeuroStar systems sold in the quarter, lower blended NeuroStar Capital System ASPs due to higher mix of sales type leases during the quarter, as well as lower other revenue related to fewer HP Coil upgrades sold in the first quarter of 2020. In the quarter, the Company sold 38 systems, down from 43 systems in the first quarter of 2019 as a result of the impact of COVID-19.

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As of March 31, 2020, the active unit installed base in the U.S. was 1,119. This represents an increase of 188 units, or 20%, over the active unit installed base as of March 31, 2019 and an increase of 34 units over the active installed base as of December 31, 2019.

U.S. treatment session revenue for the first quarter of 2020 was $8.2 million, a decrease of 7% versus first quarter 2019 revenue of $8.8 million. The decrease was primarily driven by a decline in average revenue per active system, largely driven by a reduction in per click treatment session volume during March caused by COVID-19.

Gross margin for the first quarter of 2020 was 75.5% compared to first quarter 2019 gross margin of 77.9%. The decrease was a result of lower blended NeuroStar Capital System ASPs, as well as lower per click treatment session volumes during the quarter.

Operating expenses during the first quarter of 2020 were $19.0 million, an increase of $2.1 million compared to $17.0 million in the first quarter of 2019. The increase was primarily driven by sales force expansion, higher product and clinical development expenses, as well as management transition costs.

Net loss for the first quarter of 2020 was $(12.6) million, or $(0.68) per share, as compared to first quarter 2019 net loss of $(7.5) million, or $(0.42) per share. Net loss per share was based on 18,680,542 and 18,026,015 weighted-average ordinary shares outstanding for the first quarters of 2020 and 2019, respectively.

EBITDA for the first quarter of 2020 was $(10.8) million as compared to the first quarter of 2019 EBITDA of $(6.4) million. See the accompanying financial table that reconciles EBITDA, which is a non-GAAP financial measure, to net loss.

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

COVID-19 Update

The Company was on track to meet its previously issued revenue guidance for the quarter prior to the escalation of the COVID-19 pandemic in the United States and the resulting governmental responses and economic turmoil. The Company experienced a material impact to revenue beginning in mid-March, particularly with regards to U.S. treatment session revenues. As noted in the Company’s April 8, 2020 press release, the Company expects that capital equipment sales and treatment session revenues will be materially impacted by this pandemic as customers are deferring capital purchase decisions, and new patient treatment starts and system utilization have declined compared to pre-COVID-19 projections.

The Company previously withdrew full year 2020 guidance on April 8, 2020. At this date, the Company is unable to estimate the specific duration or scale of the impact of the COVID-19 pandemic on its financial and operating results and is therefore only providing forward looking guidance as to the Company’s projected full year 2020 operating expense.

On April 27, 2020, the Company announced that it had applied for and received a $6.4 million loan from the Paycheck Protection Program. The Company intended to use the funds to protect jobs, fund payroll and cover other eligible expenses through June 30, 2020. When the Company applied for the loan, they state they had a good faith belief that their receipt of the funds was necessary and that they were an eligible borrow under the program. Due to questions concerning the eligibility of public companies similarly situated to the Company, the Company will repay its PPP loan on or before May 7, 2020.

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