Neuronetics’ Earnings Call: Growth Amid Challenges

Neuronetics ((STIM)) has held its Q4 earnings call. Read on for the main highlights of the call.

Neuronetics’ recent earnings call painted a mixed picture of both achievements and challenges. The company celebrated revenue growth and a transformative acquisition, while also acknowledging hurdles such as decreased gross margins and increased operating expenses. Despite these challenges, Neuronetics expressed confidence in its growth strategy for 2025.

Revenue Growth and Greenbrook Acquisition

Neuronetics reported a total revenue of $22.5 million for Q4 2024, marking an 11% increase over the same period in 2023. A significant highlight was the acquisition of Greenbrook TMS, which has transformed Neuronetics into a vertically integrated mental health care provider, potentially setting the stage for future growth.

Better Me Provider Program Success

The Better Me Provider (BMP) program has been a resounding success, expanding to over 350 sites and increasing patient volume by 36%. Practices involved in the BMP program are treating three times more patients per quarter compared to non-BMP practices, showcasing the program’s effectiveness in enhancing patient care and business growth.

FDA Clearance for Adolescent Treatment

Neuronetics achieved a significant milestone with the FDA clearance of NeuroStar as the first and only TMS treatment approved as a first-line therapy for depression in adolescents aged 15 to 21. This approval significantly expands the company’s total addressable market, opening new avenues for growth.

Cost Synergies and Financial Flexibility

The company has successfully captured over 90% of the identified $22 million in annualized cost synergies from the Greenbrook acquisition. This achievement has strengthened Neuronetics’ balance sheet, providing the financial flexibility needed to support future growth initiatives.

Decreased Gross Margin

Neuronetics reported a gross margin of 66.2% in Q4 2024, a decline from 77.6% in the previous year. This decrease was primarily attributed to the inclusion of the Greenbrook Clinics business, highlighting the financial impact of the acquisition.

Increased Operating Expenses

Operating expenses rose by 28% to $25.8 million, driven mainly by professional fees related to the acquisition and the integration of Greenbrook’s expenses. This increase reflects the challenges associated with the company’s recent expansion efforts.

Net Loss and Negative EBITDA

The company reported a net loss of $12.1 million for Q4 2024, compared to a net loss of $5.4 million in the same quarter of the previous year. EBITDA was negative $10.5 million, with non-recurring expenses related to the Greenbrook acquisition impacting these figures.

Cash and Cash Equivalents Decline

Neuronetics’ cash and cash equivalents decreased to $18.5 million as of December 31, 2024, down from $59.7 million at the end of 2023. This decline underscores the financial pressures faced by the company amid its recent strategic moves.

Forward-Looking Guidance

Looking ahead to 2025, Neuronetics has provided revenue guidance of $145 million to $155 million, with a gross margin around 55% and operating expenses between $90 million and $98 million. The company anticipates becoming cash flow positive by the third quarter of 2025, supported by identified cost synergies and a recent $18.9 million capital raise.

In conclusion, Neuronetics’ earnings call highlighted both the company’s achievements and the challenges it faces. While revenue growth and strategic acquisitions are promising, decreased margins and increased expenses pose hurdles. Nevertheless, the company remains optimistic about its growth strategy and financial outlook for 2025.