UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended |
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ |
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Securities registered pursuant to Section 12(b) of the Act:
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There were
NEURONETICS, INC.
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2025
Table of Contents
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
NEURONETICS, INC.
Consolidated Balance Sheets
(Unaudited; In thousands, except per share data)
March 31, | December 31, | ||||||
| 2025 |
| 2024 | ||||
Assets |
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Current assets: |
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Cash and cash equivalents | $ | | $ | | |||
Restricted cash | | | |||||
Accounts receivable, net of allowance of credit losses of $ |
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Inventory |
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Current portion of net investments in sales-type leases |
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Current portion of prepaid commission expense |
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Current portion of notes receivable | | | |||||
Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Goodwill | | | |||||
Intangible assets, net | | | |||||
Operating lease right-of-use assets |
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Net investments in sales-type leases |
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Prepaid commission expense |
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Long-term notes receivable | |
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Other assets |
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Total assets | $ | | $ | | |||
Liabilities and Equity |
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Current liabilities: |
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Accounts payable | $ | | $ | | |||
Accrued expenses |
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Current portion of deferred revenue |
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Deferred and contingent consideration | | | |||||
Other payables | | | |||||
Current portion of operating lease liabilities |
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Total current liabilities |
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Long-term debt, net |
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Deferred revenue |
| — |
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Operating lease liabilities |
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Total liabilities |
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Commitments and contingencies (Note 20) |
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Equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
| ( |
| ( | |||
Total Stockholders' equity |
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Non-controlling interest | | | |||||
Total equity | | | |||||
Total liabilities and equity | $ | | $ | | |||
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
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NEURONETICS, INC.
Consolidated Statements of Operations
(Unaudited; In thousands, except per share data)
Three Months Ended | ||||||
March 31, | ||||||
2025 | 2024 | |||||
Revenues |
| $ | |
| $ | |
Cost of revenues |
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Gross profit |
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Operating expenses: |
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Sales and marketing |
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General and administrative |
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Research and development |
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Total operating expenses |
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Loss from operations |
| ( |
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Other (income) expense: |
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Interest expense |
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Other income, net |
| ( |
| ( | ||
Net loss | $ | ( | $ | ( | ||
Less: Net loss attributable to non-controlling interest | ( | — | ||||
Net loss attributable to Neuronetics stockholders’ | $ | ( | $ | ( | ||
Net loss per share of common stock outstanding, basic and diluted attributable to Neuronetics stockholders’ | $ | ( | $ | ( | ||
Weighted average common shares outstanding, basic and diluted |
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The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
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NEURONETICS, INC.
Consolidated Statements of Changes in Equity
(Unaudited; In thousands)
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| Additional |
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Common Stock | Paid-in | Accumulated | Noncontrolling | Total | |||||||||||||
| Shares |
| Amount |
| Capital |
| Deficit |
| Interest |
| Equity | ||||||
Balance at December 31, 2023 |
| | $ | | $ | | $ | ( | $ | — | $ | | |||||
Share-based awards and options exercises |
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| ( |
| — |
| — |
| — | |||||
Share-based compensation expense |
| — |
| — |
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| — |
| — |
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Net loss |
| — |
| — |
| — |
| ( |
| — |
| ( | |||||
Balance at March 31, 2024 |
| | $ | | $ | | $ | ( | $ | — | $ | | |||||
Balance at December 31, 2024 |
| | $ | | $ | | $ | ( | $ | | $ | | |||||
Share-based awards and options exercises |
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| ( |
| — |
| — |
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Issuance of common stock, net of issuance costs of $ | | | | — | — | | |||||||||||
Share-based compensation expense |
| — |
| — |
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| — |
| — |
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Net loss |
| — |
| — |
| — |
| ( |
| ( |
| ( | |||||
Balance at March 31, 2025 |
| | $ | | $ | | $ | ( | $ | | $ | | |||||
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
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NEURONETICS, INC.
Consolidated Statements of Cash Flows
(Unaudited; In thousands)
Three Months Ended March 31, | ||||||
2025 | 2024 | |||||
Cash flows from Operating activities: |
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Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Allowance for credit losses | — | | ||||
Inventory impairment | | | ||||
Share-based compensation |
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Non-cash interest expense |
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Changes in certain assets and liabilities: |
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Accounts receivable, net |
| ( |
| ( | ||
Inventory |
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Net investments in sales-type leases |
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Prepaid commission expense |
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Prepaid expenses and other assets |
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Accounts payable |
| ( |
| ( | ||
Accrued expenses |
| ( |
| ( | ||
Other liabilities | ( | — | ||||
Deferred revenue |
| ( |
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Net Cash used in Operating activities |
| ( |
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Cash flows from Investing activities: |
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Purchases of property and equipment and capitalized software |
| ( |
| ( | ||
Repayment of notes receivable | — | | ||||
Net Cash (used in) provided by Investing activities |
| ( |
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Cash flows from Financing activities: |
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Proceeds from the issuance of common stock | | — | ||||
Payments of common stock offering issuance costs | ( | — | ||||
Proceeds from exercises of stock options |
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Net Cash provided by Financing activities |
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| — | ||
Net increase (decrease) in Cash, Cash equivalents and Restricted cash |
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| ( | ||
Cash, Cash equivalents and Restricted cash, Beginning of Period |
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Cash, Cash equivalents and Restricted cash, End of Period | $ | | $ | | ||
Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheet: | ||||||
Cash and cash equivalents | | | ||||
Restricted cash | | — | ||||
Total cash, cash equivalents and restricted cash | $ | | $ | | ||
Supplemental disclosure of cash flow information: |
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Cash paid for interest | $ | | $ | | ||
Supplemental disclosure of non-cash investing and financing activities: |
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Purchases of property and equipment and capitalized software in accounts payable and accrued expenses | $ | | $ | | ||
Reduction of accounts receivable in current and long-term notes receivable | $ | — | $ | | ||
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
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1. DESCRIPTION OF BUSINESS
Neuronetics, Inc. (the “Company” or “Neuronetics” or the “Registrant”) believes that mental health is as important as physical health. As a global leader in neuroscience, the Company is delivering more treatment options to patients and healthcare providers by offering exceptional in-office treatments that produce extraordinary results. The Company’s first commercial product, the NeuroStar Advanced Therapy System, is a non-invasive and non-systemic office-based treatment that uses transcranial magnetic stimulation (“TMS”), to create a pulsed, magnetic resonance imaging (“MRI”)-strength magnetic field that induces electrical currents designed to stimulate specific areas of the brain associated with mood. The system was cleared in 2008 by the U.S. Food and Drug Administration (the “FDA”) to treat adult patients with major depressive disorder (“MDD”) who have failed to achieve satisfactory improvement from prior antidepressant medication in the current MDD episode. It is also cleared by the FDA as an adjunct for adults with obsessive-compulsive disorder (“OCD”) and for adolescent patients aged 15-21 with MDD. NeuroStar Advanced Therapy System is safe, clinically effective, reproducible and precise and we believe is supported by the largest clinical data set of any competing TMS system. We believe we are the market leader in TMS therapy based on over
Effective as of December 9, 2024, Neuronetics and Greenbrook TMS Inc. (“Greenbrook”) completed the planned acquisition whereby Neuronetics acquired all of the issued and outstanding common shares of Greenbrook by way of a court-approved plan of arrangement under the Business Corporations Act (Ontario) (the “Arrangement”).
The Company continues to operate as Neuronetics, Inc., and the Neuronetics shares continue to trade on the Nasdaq Global Market under the ticker “STIM”.
With the acquisition of Greenbrook, the Company now controls and operates a network of outpatient mental health services centers that specialize in the provision of TMS therapy, SPRAVATO® (esketamine nasal spray) and other treatment modalities for the treatment of depression and related psychiatric services.
Liquidity
As of March 31, 2025, the Company had cash and cash equivalents of $
On February 10, 2025, the Company completed a secondary public offering of its common stock in which the Company issued and sold
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The Company’s ability to meet its liquidity needs is dependent on growth in existing and acquired product lines and the realization of synergies subsequent to its acquisition of Greenbrook. Management believes that the Company’s cash and cash equivalents as of March 31, 2025 and anticipated revenues from sales of our products and services are sufficient to fund the Company’s operations for at least the next 12 months from the issuance of these consolidated financial statements.
2. BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards Codification and Accounting Standards Updates (“ASUs”) promulgated by the Financial Accounting Standards Board (the “FASB”).
Basis of Consolidation
The consolidated financial statements of the Company are presented in U.S. dollars and includes the accounts of Neuronetics and Greenbrook. All significant intercompany accounts and transactions have been eliminated in consolidation.
The Company consolidates entities in which it has a controlling financial interest based on either the variable interest entity (“VIE”) or voting interest model (“VOE”). The Company is required to first apply the VIE model to determine whether it holds a variable interest in an entity, and if so, whether the entity is a VIE. ASC Topic 810, Consolidation ("Topic 810") defines the criteria for determining the existence of VIEs and provides guidance for consolidation.
An entity is considered to be a VIE if (i) the entity does not have enough equity to finance its own activities without additional support, (ii) the entity's at-risk equity holders lack the characteristics of a controlling financial interest, or (iii) the entity is structured with non-substantive voting rights. The primary beneficiary of a VIE is the party that has the power to direct the activities that most significantly impact the performance of the entity and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the entity. The primary beneficiary is required to consolidate the VIE for financial reporting purposes. A VIE can have only one primary beneficiary but may not have a primary beneficiary if no party meets the criteria described above.
If the Company determines it does not hold a variable interest in a VIE, the Company applies the VOE model. To the extent the entity does not meet the definition of a VIE, Topic 810 guidance for voting interest entities is applied. The usual condition for a controlling financial interest, and therefore consolidation by the Company, is ownership of a majority voting interest of a corporation or a majority of kick-out rights for a limited partnership. The Company has determined that all its subsidiaries are VOEs primarily because it holds a majority voting interest in the entities.
Interim Consolidated Financial Statements
The accompanying unaudited interim consolidated financial statements have been prepared from the books and records of the Company in accordance with U.S. GAAP for interim financial information and Rule 10-01 of Regulation S-X promulgated by the U.S. Securities and Exchange Commission (the “SEC”), which permit reduced disclosures for interim periods. All adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the accompanying consolidated balance sheets and consolidated statements of operations and stockholders’ equity and consolidated cash flows have been made. Although these interim consolidated financial statements do not include all of the information and footnotes required for complete annual consolidated financial statements, management believes the disclosures are adequate to make the information presented not misleading. Unaudited interim consolidated statements of operations and
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interim consolidated statement of cash flows for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the full year. Unaudited interim consolidated financial statements and footnotes should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K filed with the SEC on March 27, 2025, wherein a more complete discussion of significant accounting policies and certain other information can be found.
Currency risk
Currency risk is the risk to the Company’s earnings that arises from fluctuations in foreign exchange rates and the degree of volatility of those rates. The Company has minimal exposure to currency risk as substantially all of the Company’s revenue, expenses, assets and liabilities are denominated in U.S. dollars. The Company pays certain vendors and payroll costs in Canadian dollars from time to time, but due to the limited size and nature of these payments, it does not give rise to significant currency risk.
Use of Estimates
The preparation of financial statements in accordance with U.S. GAAP and the rules and regulations of the SEC requires the use of estimates and assumptions, based on judgments considered reasonable, which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and assumptions on historical experience, known trends and events and various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Although management believes its estimates and assumptions are reasonable when made, they are based upon information available at the time they are made. Management evaluates the estimates and assumptions on an ongoing basis and, if necessary, makes adjustments. Due to the risks and uncertainties involved in the Company’s business and evolving market conditions, and given the subjective element of the estimates and assumptions made, actual results may differ materially from estimated results.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company’s complete summary of significant accounting policies can be found in “Summary of Significant Accounting Policies” in the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K filed with the SEC on March 27, 2025.
4. RECENT ACCOUNTING PRONOUNCEMENTS
In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires public companies to disclose for each reportable segment the significant expense categories and amounts for such expenses. ASU 2023-07 is effective for annual periods beginning December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Accordingly, we have expanded our interim consolidated financial statement disclosures in order to comply with the guidance.
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires public business entities to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. ASU 2023-09 will be effective for our annual period ended December 31, 2025. The Company is currently evaluating the impact of the adoption of ASU 2023-09 on its consolidated financial statements and related disclosures.
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In November 2024, the FASB issued ASU 2024-03, Income Statements–Reporting Comprehensive Income–Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires enhanced disclosure of income statement expense categories to improve transparency and provide financial statement users with more detailed information about the nature, amount, and timing of expenses impacting financial performance. ASU 2024-03 is effective for the Company for the annual reporting period beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted. The amendments in ASU 2024-03 may be adopted either on a prospective basis to financial statements issued for reporting periods after the effective date or on a retrospective basis to all periods presented. The Company is currently evaluating the impact of the adoption of ASU 2024-03 on its consolidated financial statements and related disclosures.
Other than the items noted above, there have been no new accounting pronouncements not yet effective or adopted in the current year that we believe have a material impact, or potential material impact, to our unaudited interim consolidated financial statements.
5. ACQUISITION
Effective as of December 9, 2024, pursuant to the Arrangement, the Company completed the acquisition of Greenbrook whereby the Company acquired all of the issued and outstanding common shares of Greenbrook, which became a wholly owned subsidiary. The results of operations and financial position of Greenbrook are included in the Company’s consolidated financial statements from the date of acquisition.
The allocation of the purchase price to the assets acquired and liabilities assumed was based on preliminary information and is subject to further adjustment within the measurement period.
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In accordance with the acquisition method of accounting for a business combination, the purchase price of $
Consideration transferred: | |||
Common stock | $ | | |
Cash consideration | | ||
Settlement of preexisting relationships | | ||
Total consideration transferred |
| $ | |
Assets acquired and liabilities assumed at fair value: | |||
Cash and Cash Equivalents | $ | | |
Restricted Cash | | ||
Accounts Receivable | | ||
Prepaid Expenses and Other Assets | | ||
Property and Equipment | | ||
Intangible Assets | | ||
Operating Right of Use Asset | | ||
Accounts Payable and Accrued Expenses | ( | ||
Other Payables | ( | ||
Deferred and Contingent Consideration | ( | ||
Operating Lease Liabilities | ( | ||
Total identifiable net assets |
| $ | |
Non-controlling interest | ( | ||
Fair value of net assets acquired less noncontrolling interests acquired | $ | | |
Goodwill | | ||
| $ | |
During the period ended March 31, 2025 , there were no adjustments to the fair value of the assets acquired, liabilities assumed or goodwill. The Company will continue to assess these values during the measurement period.
Unaudited Pro Forma Financial Information
The following table reflects the pro forma operating results for the Company, which gives effect to the acquisition of Greenbrook as if it had occurred on January 1, 2024. The pro forma results are based on assumptions that the Company believes are reasonable under the circumstances. The pro forma results are not necessarily indicative of future results. The pro forma financial information includes the historical results of the Company and Greenbrook with eliminations for all intercompany transactions and excludes the effects of any synergies or cost reduction initiatives related to the acquisition of Greenbrook.
Unaudited Pro Forma | |||
Period ended March 31, | |||
| 2024 | ||
Revenue | $ | | |
Net loss | $ | ( | |
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6. INTANGIBLE ASSETS
Intangible assets consist of the following as of March 31, 2025 and December 31, 2024 (in thousands):
| As of March 31, 2025 | ||||||||||||
Useful Life | Gross Value | Accumulated Amortization | Net Carrying Value | Weighted Average Remaining Useful Life | |||||||||
Management services agreements | $ | $ | ( | $ | | ||||||||
Trade name | ( | | |||||||||||
$ | $ | ( | $ | ||||||||||
| As of December 31, 2024 | ||||||||||||
Useful Life | Gross Value | Accumulated Amortization | Net Carrying Value | Weighted Average Remaining Useful Life | |||||||||
Management services agreements | $ | $ | ( | $ | | ||||||||
Trade name | ( | | |||||||||||
$ | $ | ( | $ | ||||||||||
Amortization expense for intangible assets was $
Amortization expense over the remaining life of the intangible assets will be recognized as follows (in thousands):
Year |
| Amortization expense | |
Remainder of 2025 | $ | ||
2026 | |||
2027 | |||
2028 | |||
2029 | |||
Thereafter | |||
$ |
7. FAIR VALUE MEASUREMENT AND FINANCIAL INSTRUMENTS
The carrying values of cash equivalents, accounts receivable, prepaids and other current assets, and accounts payable on the Company’s balance sheets approximated their fair values as of March 31, 2025 and December 31, 2024 due to their short-term nature. The carrying values of the Perceptive Facility (as defined below) approximated its fair value as of March 31, 2025 and December 31, 2024 due to its variable interest rate. The carrying value of the Company’s notes receivable approximated its fair value as of March 31, 2025 and December 31, 2024 due to its variable interest rate.
The Perceptive First Amendment (as defined below) included contingently issuable warrants of up to
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at their fair value and will adjust the warrants to their fair value at each reporting period. At March 31, 2025, the fair value of the liability-classified warrants was de minimis.
Certain of the Company’s financial instruments are measured at fair value using a three-level hierarchy that prioritizes the inputs used to measure fair value. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
Level 1: | Inputs are quoted prices for identical instruments in active markets. |
Level 2: | Inputs are quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; or model-derived valuations whose inputs are observable or whose significant value drivers are observable. |
Level 3: | Inputs are unobservable and reflect the Company’s own assumptions, based on the best information available, including the Company’s own data. |
The following tables set forth the carrying amounts and fair values of the Company’s financial instruments as of March 31, 2025 and December 31, 2024 (in thousands):
| March 31, 2025 | ||||||||||||||
Fair Value Measurement Based on | |||||||||||||||
Quoted | Significant | ||||||||||||||
Prices In | Other | Significant | |||||||||||||
Active | Observable | Unobservable | |||||||||||||
Carrying | Markets | Inputs | Inputs | ||||||||||||
| Amount |
| Fair Value |
| (Level 1) |
| (Level 2) |
| (Level 3) | ||||||
Money market funds (cash equivalents) | $ | | $ | | $ | | $ | — | $ | — | |||||
| December 31, 2024 | ||||||||||||||
Fair Value Measurement Based on | |||||||||||||||
Quoted | Significant | ||||||||||||||
Prices In | Other | Significant | |||||||||||||
Active | Observable | Unobservable | |||||||||||||
Carrying | Markets | Inputs | Inputs | ||||||||||||
Amount | Fair Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||
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Money market funds (cash equivalents) | $ | $ | | $ | | $ | — | $ | — | ||||||
8. ACCOUNTS RECEIVABLE
The following table presents the composition of accounts receivable, net, as of March 31, 2025 and December 31, 2024 (in thousands):
March 31, | December 31, | ||||||
| 2025 |
| 2024 | ||||
Gross accounts receivable - trade | $ | | $ | | |||
Less: Allowances for credit losses |
| ( |
| ( | |||
Accounts receivable, net | $ | | $ | | |||
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9. INVENTORY
Inventory is stated at the lower of cost and net realizable value, with cost being determined on a first in, first out basis. The Company’s inventory is primarily comprised of finished goods and work-in-process.
10. PROPERTY AND EQUIPMENT AND CAPITALIZED SOFTWARE
The following table presents the composition of property and equipment, net, as of March 31, 2025 and December 31, 2024 (in thousands):
March 31, | December 31, | ||||||
| 2025 |
| 2024 | ||||
Laboratory equipment | $ | | $ | | |||
Office equipment |
| |
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Auto | | | |||||
Computer equipment and software |
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Manufacturing equipment |
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Clinical equipment | | | |||||
Leasehold improvements |
| |
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TMS devices | | | |||||
Rental equipment |
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Property and equipment, gross |
| |
| | |||
Less: Accumulated depreciation |
| ( |
| ( | |||
Property and equipment, net | $ | | $ | | |||
As of March 31, 2025 and December 31, 2024, the Company had capitalized software costs, net, of $
Depreciation and amortization expense related to property and equipment and capitalized software costs was $
11. NOTES RECEIVABLE
Greenbrook TMS Inc.
On March 31, 2023, the Company entered into a Secured Promissory Note and Guaranty Agreement (the “Promissory Note”) with TMS Neurohealth Centers Inc. (the “Maker”) and Greenbrook TMS Inc. and its subsidiaries, excluding the Maker, in the principal amount of $
The Promissory Note interest rate equaled the sum of (a) the floating interest rate of daily secured overnight financing rate as administered by the Federal Reserve Bank of New York on its website (“SOFR”) plus (b)
Effective as of December 9, 2024, pursuant to the Arrangement, the Promissory Note outstanding principal amount of $
Interest income recognized by the Company related to notes receivable was $
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12. LEASES
Lessee:
The Company has operating leases for its corporate headquarters, treatment centers, a training facility and office equipment, including copiers. The Company leases an approximately
The Company leases an approximately
Following the acquisition of Greenbrook, the Company has lease agreements related to its treatment centers and corporate offices. These lease agreements range from month-to-month to seven years in length.
Operating lease rent expense was $
The following table presents the supplemental cash flow information as a lessee related to leases (in thousands):
| Three Months Ended | ||||||
March 31, 2025 |
| March 31, 2024 | |||||
Cash paid for amounts included in the measurement of lease liabilities: |
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Operating cash flows from operating leases | $ | | $ | | |||
The following table sets forth by year the required future payments of operating lease liabilities (in thousands):
| ||||
Amount | ||||
Remainder of 2025 | $ | | ||
2026 | | |||
2027 |
| | ||
2028 |
| | ||
2029 | | |||
Thereafter |
| | ||
Total lease payments |
| | ||
Less imputed interest |
| ( | ||
Present value of operating lease liabilities | $ | | ||
Lessor sales-type leases:
Certain customers have purchased NeuroStar Advanced Therapy Systems on a rent-to-own basis. The lease term is or
15
the end of the lease or automatic transfer of ownership of the NeuroStar Advanced Therapy System at the end of the lease.
The following table sets forth a maturity analysis of the undiscounted lease receivables related to sales-type leases (in thousands):
| March 31, 2025 | |||
Remainder of 2025 | $ | | ||
2026 | | |||
2027 |
| | ||
Total sales-type lease receivables | $ | | ||
As of March 31, 2025 and December 31, 2024, the carrying amount of the lease receivables was $
Lessor operating leases:
NeuroStar Advanced Therapy Systems sold for which collection is not probable are accounted for as operating leases. For the three months ended March 31, 2025 and 2024, the Company recognized operating lease income of $
The Company maintained rental equipment, net, of $
13. PREPAID COMMISSION EXPENSE
The Company pays a commission on both NeuroStar Advanced Therapy System sales and treatment session sales. Since the commission paid for NeuroStar Advanced Therapy System sales is not commensurate with the commission paid for treatment sessions, the Company capitalizes commission expense associated with NeuroStar Advanced Therapy System sales commissions paid that is incremental to specifically anticipated future treatment session orders. In developing this estimate, the Company considered its historical treatment session sales and customer retention rates, as well as technology development life cycles and other industry factors. These costs are periodically reviewed for impairment.
NeuroStar Advanced Therapy System commissions are deferred and amortized on a straight-line basis over a
On the Company’s consolidated balance sheets, the current portion of capitalized contract costs is represented by the current portion of prepaid commission expense, while the long-term portion is included in prepaid commission expense. Amortization expense was $
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14. ACCRUED EXPENSES
The following table presents the composition of accrued expenses as of March 31, 2025 and December 31, 2024 (in thousands):
| March 31, |
| December 31, | |||
2025 | 2024 | |||||
Compensation and related benefits | $ | | $ | | ||
Consulting and professional fees |
| |
| | ||
Research and development expenses |
| |
| | ||
Sales and marketing expenses | | | ||||
Warranty |
| |
| | ||
Sales and other taxes payable |
| |
| | ||
Other |
| |
| | ||
Accrued expenses | $ | | $ | | ||
15. REVENUE AND DEFERRED REVENUE
Contract terms typically require payment upon shipment or installation of the NeuroStar Advanced Therapy System and additional payments as access codes for treatment sessions are delivered, which can span several years after the NeuroStar Advanced Therapy System is first delivered and installed. The timing of revenue recognition compared to billings and cash collections typically results in accounts receivable. However, sometimes customer advances and deposits may be required for certain customers and are recorded as contract liabilities (deferred revenue). For multi-year agreements, the Company generally invoices customers annually at the beginning of each annual coverage period and recognizes revenue over the term of the coverage period.
As of March 31, 2025, the Company expects to recognize approximately the following percentages of deferred revenue by year:
| Revenue |
| |
Year: | Recognition |
| |
| % | ||
| | % | |
Total |
| | % |
Revenue recognized for the three months ended March 31, 2025 and 2024 that was included in the contract liability balance at the beginning of the year was $
Customers
Significant customers are those that represent more than 10% of the Company’s total revenue. For the period ended March 31, 2024,
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Geographical information
The following geographic data includes revenue generated from the Company’s third-party distributors. The Company’s revenue was generated in the following geographic regions and by product line for the periods indicated:
Revenues by Geography |
| ||||||||||
Three Months Ended March 31, |
| ||||||||||
2025 | 2024 |
| |||||||||
% of | % of |
| |||||||||
Amount | Revenues | Amount | Revenues |
| |||||||
(in thousands, except percentages) | |||||||||||
U.S. |
| $ | |
| | % | $ | |
| | % |
International |
| |
| | % |
| |
| | % | |
Total revenues | $ | |
| | % | $ | |
| | % | |
U.S. Revenues by Product Category |
| ||||||||||
Three Months Ended March 31, |
| ||||||||||
2025 | 2024 |
| |||||||||
% of | % of |
| |||||||||
| Amount |
| Revenues |
| Amount |
| Revenues |
| |||
| (in thousands, except percentages) | ||||||||||
NeuroStar Advanced Therapy System | $ | | | % | $ | | | % | |||
Treatment sessions |
| |
| | % |
| |
| | % | |
Clinic revenue | | | % | — | — | % | |||||
Other |
| |
| | % |
| |
| | % | |
Total U.S. revenues | $ | |
| | % | $ | |
| | % | |
International Revenues by Product Category |
| ||||||||||
Three Months Ended March 31, |
| ||||||||||
2025 | 2024 |
| |||||||||
% of | % of |
| |||||||||
| Amount |
| Revenues |
| Amount |
| Revenues |
| |||
| (in thousands, except percentages) | ||||||||||
NeuroStar Advanced Therapy System | $ | |
| | % | $ | |
| | % | |
Treatment sessions |
| |
| | % |
| |
| | % | |
Other |
| |
| | % |
| |
| | % | |
Total international revenues | $ | |
| | % | $ | |
| | % | |
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16. DEBT
The following table presents the composition of debt as of March 31, 2025 and December 31, 2024 (in thousands):
March 31, | December 31, | ||||||
| 2025 |
| 2024 | ||||
Outstanding principal | $ | | $ | | |||
Less debt discounts |
| ( |
| ( | |||
Total debt, net |
| |
| | |||
Less current portion |
| — |
| — | |||
Long-term debt, net | $ | | $ | | |||
For the three months ended March 31, 2025 the Company recognized interest expense of $
Perceptive Credit Facility
On July 25, 2024, the Company entered into a Credit Agreement and Guaranty with Perceptive Credit Holdings IV, LP (“Perceptive”) as collateral agent and other lenders defined in the agreement (the “Perceptive Facility”) which was used to partially repay the Company’s previous $
The Perceptive Facility permits the Company to borrow up to an aggregate amount of $
Each of the Tranche 1 Loan, Tranche 2 Loan and Tranche 3 Loan accrue interest from the date of borrowing through the date of repayment at a floating per annum rate of interest equal to the sum of
If the Company prepays either the Tranche 1 Loan, Tranche 2 Loan or Tranche 3 Loan prior to their respective scheduled maturity dates, the Company will also be required to pay prepayment fees to Perceptive equal to
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The Company’s obligations under the Perceptive Facility are secured by a first priority security interest in substantially all of the Company’s assets, including its intellectual property. The Perceptive Facility requires the Company to comply with a quarterly minimum trailing revenue covenant commencing March 2025 and a minimum liquidity covenant as well as affirmative and negative covenants.
The Perceptive Facility contains events of default, including, without limitation, events of default upon: (i) failure to make payment pursuant to the terms of the agreement; (ii) violation of covenants; (iii) material adverse changes to the Company’s business; (iv) insolvency; (v) material cross-defaults; (vi) significant judgments, orders or decrees for payments by the Company; (vii) incorrectness of representations and warranties; (viii) significant adverse events related to the Employee Retirement Income Security Act of 1974; (ix) failure by the Company to be registered with the SEC in good standing; or (x) failure by the Company to maintain a valid and perfected lien on the collateral securing the borrowing.
As consideration for the Perceptive Facility, the Company agreed to issue to Perceptive warrants to purchase up to
Effective as of December 9, 2024, the Company amended the Perceptive Facility and borrowed against the Tranche 3 Loan in a principal amount of $
The Company calculated the issuance date fair value of the warrants using the Black-Scholes option pricing model, which resulted in a fair value of $
Effective as of March 26, 2025, the Company amended the Perceptive Facility and revised the net revenue covenant to align with the Company’s pre-existing operating plan for the first quarter of 2025 (the “Perceptive Second Amendment”).
As of March 31, 2025, the Company had $
The Company was in compliance with the covenants under the Perceptive Facility as of March 31, 2025.
Solar Credit Facility
On March 2, 2020, the Company entered into a Loan and Security Agreement with Solar as collateral agent and other lenders as defined in the Solar Facility.
On March 7, 2024, the Company entered into a sixth amendment (the “Solar Sixth Amendment”) to the Solar Facility.
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Under the Solar Sixth Amendment, Solar (i) waived the specified events with respect to the Company’s non-compliance with the required revenue under the net product revenue covenant and (ii) amended the financial covenants to reflect current projections.
In connection with the Company’s entry into the Perceptive Facility, on July 25, 2024, the Company prepaid in full all outstanding obligations under and terminated the Solar Facility. In connection with this prepayment, the Company paid total consideration of $
17. COMMON STOCK
Common Stock Offering
On February 10, 2025, the Company completed a secondary public offering of its common stock in which the Company issued and sold
Common Stock
The following table summarizes the total number of shares of the Company’s common stock issued and reserved for issuance as of March 31, 2025 and December 31, 2024 (in thousands):
| March 31, 2025 |
| December 31, 2024 | ||
Shares of common stock issued |
| |
| | |
Shares of common stock reserved for issuance for: |
|
|
|
| |
Common stock warrants outstanding |
| |
| | |
Stock options outstanding |
| |
| | |
Restricted stock units outstanding |
| |
| | |
Shares available for grant under stock incentive plans |
| |
| | |
Shares available for sale under employee stock purchase plan |
| |
| | |
Total shares of common stock issued and reserved for issuance |
| |
| |
21
Common Stock Warrants
The following table summarizes the Company’s outstanding common stock warrants as of March 31, 2025, and December 31, 2024:
Warrants |
|
|
|
| |
Outstanding | |||||
(in thousands) | Exercise Price | Expiration Date | |||
| $ | | |||
| $ | | |||
|
|
|
|
| |
There have been
18. LOSS PER SHARE
The Company’s basic loss per common share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. The Company’s restricted stock awards (non-vested shares) are issued and outstanding at the time of grant but are excluded from the Company’s computation of weighted average shares outstanding in the determination of basic loss per share until vesting occurs.
A net loss cannot be diluted, so when the Company is in a net loss position, basic and diluted loss per common share are the same. If the Company achieves profitability in the future, the denominator of a diluted earnings per common share calculation will include both the weighted average number of shares outstanding and the number of common stock equivalents, if the inclusion of such common stock equivalents would be dilutive. Dilutive common stock equivalents potentially include warrants, stock options, non-vested restricted stock units and non-vested performance restricted stock units (“PRSUs”) using the treasury stock method, along with the effect, if any, from the potential conversion of outstanding securities, such as convertible preferred stock.
The following potentially dilutive securities outstanding as of March 31, 2025 and 2024 have been excluded from the denominator of the diluted loss per share of common stock outstanding calculation (in thousands):
March 31, | |||||
| 2025 |
| 2024 | ||
Stock options | | | |||
Non-vested PRSUs |
| |
| | |
Non-vested restricted stock units |
| |
| | |
Common stock warrants |
| |
| | |
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19. SHARE-BASED COMPENSATION
The amount of share-based compensation expense recognized by the Company by location in its consolidated statements of operations for the three months ended March 31, 2025 and 2024 is as follows (in thousands):
| Three Months Ended March 31, | ||||||
2025 |
| 2024 | |||||
Cost of revenues | $ | | $ | | |||
Sales and marketing |
| |
| | |||
General and administrative |
| |
| | |||
Research and development |
| |
| | |||
Total | $ | | $ | | |||
2018 Equity Incentive Plan
In June 2018, the Company adopted the 2018 Equity Incentive Plan, (the “2018 Plan”), which authorized the issuance of up to
2020 Inducement Incentive Plan
In December 2020, the Company adopted the 2020 Inducement Incentive Plan (the “2020 Plan”), which authorized the issuance of up to
23
Stock Options
The following table summarizes the Company’s stock option activity for the three months ended March 31, 2025:
|
|
|
|
| Weighted | Aggregate | ||||
Number of | Weighted | average | average | |||||||
Shares under | average | Remaining | Intrinsic | |||||||
Option | Exercise Price | Contractual | Value | |||||||
(in thousands) | per Option | Life (in years) | (in thousands) | |||||||
Outstanding at December 31, 2024 |
| | $ | |
|
| ||||
Granted |
| — | $ | — |
|
|
|
| ||
Exercised |
| ( | $ | |
|
|
| |||
Forfeited and Expired |
| ( | $ | |
|
|
|
| ||
Outstanding at March 31, 2025 |
| | $ | |
|
| $ | | ||
Exercisable at March 31, 2025 |
| | $ | |
|
| $ | | ||
Vested and expected to vest at March 31, 2025 |
| | $ | |
|
| $ | | ||
The Company recognized share-based compensation expense related to stock options of $
For the three months ended March 31, 2025, the Company did not grant stock options.
Restricted Stock Units and PRSUs
The following table summarizes the Company’s restricted stock unit and PRSU activity for March 31, 2025:
| Non-vested |
| Weighted |
| Non-vested |
| Weighted | |||
Restricted | average | PRSUs | average | |||||||
Stock Units | Grant-date | Grant-date | ||||||||
(in thousands) | Fair Value | (in thousands) | Fair Value | |||||||
Non-vested at December 31, 2024 | | $ | |
| | $ | | |||
Granted |
| | $ | |
| | $ | | ||
Vested |
| ( | $ | |
| — | $ | — | ||
Forfeited |
| ( | $ | |
| ( | $ | | ||
Non-vested at March 31, 2025 |
| | $ | |
| | $ | |
The Company recognized $
During the period ended March 31, 2025, the Company granted PRSUs to certain key employees of Neuronetics, with vesting subject to the recipient’s continued service with the Company through the applicable vesting date and the achievement of certain performance conditions as outlined in the award document. The awards are subject to the Company’s 2018 Plan.
The Company offers our board of directors and certain employees the opportunity to defer restricted stock units into an equity-based deferred equity compensation plan, the Restricted Stock Unit Deferral Election Plan (“RSUDEP”). Benefits from the RSUDEP are payable in shares of the Company’s stock and the awards under
24
the RSUDEP are unfunded to the plans’ participants. Restricted stock units deferred under the RSUDEP are counted against the total shares available for future issuance under the 2018 Plan. As at March 31, 2025, there were
20. COMMITMENTS AND CONTINGENCIES
Legal Matters
The Company is subject from time to time to various claims and legal actions arising during the ordinary course of its business. Management believes that there are currently no claims or legal actions that would reasonably be expected to have a material adverse effect on the Company’s results of operations, financial condition, or cash flows.
Other Matters
The Company is subject to various audits from government agencies including Medicaid and Medicare which involve the potential recoupment of reimbursements received from these agencies. These audits occur in the ordinary course of business, and their impact on the Company’s results of operations, financial condition or cash flows cannot be estimated.
21. SEGMENT INFORMATION
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company currently operates in
The accounting policies of the Company’s segment are the same as those described in the summary of significant accounting policies. The key measure of segment profit or loss that the CODM uses to allocate resources and assess performance is the Company’s net loss from operations, as reported on the accompanying statements of operations. The measure of segment assets is reported on the balance sheets as total consolidated assets with particular emphasis on the Company’s available liquidity, including its cash and cash equivalents and restricted cash.
25
The following table illustrates information about reported segment revenue, measures of a segment’s profit or loss, significant segment expenses, and measure of a segment's assets for the current reporting period.
| Three months ended March 31, | |||||
2025 |
| 2024 | ||||
Revenue | $ | | $ | | ||
Cost of revenues | | | ||||
Segment Gross profit | $ | | $ | | ||
Personnel | $ | | $ | | ||
Marketing | | | ||||
Research and development | | | ||||
Professional fees | | | ||||
Other segment expenses (a) | | | ||||
Segment Loss | $ | ( | $ | ( | ||
Unallocated | ||||||
Interest expense | | | ||||
Other income,net | $ | ( | ( | |||
Net Loss | $ | ( | $ | ( | ||
| (a) |
22. NONCONTROLLING INTEREST
The Company has operating agreements with
There were no changes in the Company’s non-wholly owned entities in the three-month period ended March 31, 2025.
26
23. GOVERNMENT ASSISTANCE
Employee Retention Credit
The Coronavirus Aid, Relief and Economic Security Act provided an Employee Retention Credit (the “ERC”), which was a refundable tax credit related to certain payroll taxes. The Company applied the grant model and determined that the criteria for recognition of the ERC was met during the year ended December 31, 2023 based on the Company’s determination of eligibility and filing of the ERC claim. As of March 31, 2025 and December 31, 2024 and, the $
During the period ended March 31, 2025 the Company received $
Subsequent to the period ended March 31, 2025, the Company received the remaining balance of the ERC receivable of $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations, as well as other sections in this Quarterly Report on Form 10-Q, should be read in conjunction with our unaudited interim consolidated financial statements and related notes thereto included elsewhere herein. In addition to historical financial information, some of the information contained in the following discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts, including statements regarding our future results of operations and financial position, business strategy, current and prospective products, product approvals, research and development costs, current and prospective collaborations, timing and likelihood of success, plans and objectives of management for future operations and future results of current and anticipated products, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “would,” “should,” “expect,” “plan,” “design,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “outlook” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described under the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed with the SEC on March 27, 2025. These risks and uncertainties include, without limitation, risks and uncertainties related to: the effect of the transaction with Greenbrook on our business relationships; operating results and business generally; our ability to execute our business strategy; our ability to achieve or sustain profitable operations due to our history of losses; our reliance on the sale and usage of our NeuroStar Advanced Therapy System to generate revenues; the scale and efficacy of our salesforce; our ability to retain talent; availability of coverage and reimbursement from third-party payors for treatments using our products; physician and patient demand for treatments using our products; developments in respect of competing technologies and therapies for the indications that our products treat; product defects; our revenue has been concentrated among a small number of customers; our ability to obtain and maintain intellectual property protection for our technology; developments in clinical trials or regulatory review of the NeuroStar Advanced Therapy System for additional indications; developments in regulation in the U.S. and other applicable jurisdictions; the terms of our credit facility; our ability to successfully roll-out our Better Me Provider Program on the planned timeline; our self-sustainability and existing cash balances; and our ability to achieve cash flow breakeven in the third quarter of 2025. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. The Company cautions investors not to place undue reliance on these forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for us to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q as a result of any new information, future events or changed circumstances or otherwise.
Overview
We believe that mental health is as important as physical health. As a global leader in neuroscience, we are delivering more treatment options to patients and healthcare providers by offering exceptional in-office treatments that produce extraordinary results. Our first commercial product, the NeuroStar Advanced Therapy System, is a non-invasive and non-systemic office-based treatment that uses TMS to create a pulsed, MRI-
28
strength magnetic field that induces electrical currents designed to stimulate specific areas of the brain associated with mood. The system is cleared by the FDA to treat adult patients with MDD that have failed to achieve satisfactory improvement from prior antidepressant medication in the current MDD episode. It is also cleared by the FDA as an adjunct for adults with OCD and for adolescent patients aged 15-21 with MDD. The NeuroStar Advanced Therapy System is also available in other parts of the world, including Japan, where it is listed under Japan’s national health insurance. NeuroStar Advanced Therapy System is safe, clinically effective, reproducible and precise and we believe is supported by the largest clinical data set of any competing TMS system. We believe we are the market leader in TMS therapy based on 202,318 global patients treated with over 7.4 million of our treatment sessions through March 31, 2025. We generated revenues of $32.0 million and $17.4 million for the three months ended March 31, 2025 and 2024, respectively.
We designed the NeuroStar Advanced Therapy System as a non-invasive therapeutic alternative to treat patients who suffer from MDD and to address many of the key limitations of existing treatment options. We generate revenues from initial capital sales of our systems, sales of our recurring treatment sessions and from service and repair and extended warranty contracts. Additionally, through our acquisition of Greenbrook we now derive revenue directly from our treatment centers, by providing TMS therapy and SPRAVATO for MDD and other mental health disorders. We derive the majority of our revenues from clinic revenue. For the three months ended March 31, 2025, revenues from sales of our treatment sessions, clinic revenue and NeuroStar Advanced Therapy Systems represented 31%, 59% and 9% of our U.S. revenues, respectively.
We currently sell our NeuroStar Advanced Therapy System and recurring treatment sessions in the U.S. through our sales and customer support team. Our sales force targets an estimated 53,000 psychiatrists across 26,000 practices. We expect to continue to expand our direct sales and customer support team to further penetrate the market by demonstrating the benefits of our NeuroStar Advanced Therapy System to psychiatrists and their MDD patients. Some of our customers have purchased or may purchase more than one NeuroStar Advanced Therapy System. Based on our commercial data, we believe psychiatrists can recoup their initial capital investment in our system by providing a standard course of treatment to approximately 12 patients. We believe psychiatrists can generate approximately $8,500 of average revenue per patient for a standard course of treatment, which may provide meaningful incremental income to their practices. We have a diverse customer base of psychiatrists in group psychiatric practices in the U.S. Patients are reimbursed by federal healthcare programs and the vast majority of commercial payors in the U.S. for treatment sessions utilizing our NeuroStar Advanced Therapy System. For the three months ended March 31, 2024, one customer Greenbrook, accounted for 10% of the Company’s revenue. Following the acquisition, there are no significant customers.
Clinic revenue consists of revenue attributable to the performance of treatments to patients operated in 15 states in the U.S. In circumstances where the net patient fees have not yet been received, the amount of revenue recognized is estimated based on an expected value approach. Due to the nature of the industry and complexity of our clinic revenue arrangements, where price lists are subject to the discretion of payors, variable consideration exists that may result in price concessions and constraints to the transaction price for the services rendered.
Clinic revenue reimbursements are derived from third-party payors including federal and state agencies (under the Medicare programs), managed care health plans and commercial insurance companies.
We market our products in a few select markets outside the U.S. through independent distributors. International revenues represented 2% and 4% of our total revenues for the three months ended March 31, 2025 and 2024, respectively. In October 2017, we entered into an exclusive distribution agreement with Teijin Pharma Limited for the distribution of our NeuroStar Advanced Therapy Systems and treatment sessions to customers who will treat patients with MDD in Japan. We received regulatory approval for our system in Japan in September 2017. We obtained reimbursement coverage for the NeuroStar Advanced Therapy System in Japan, which went into effect on June 1, 2019 and covers patients who are treated in the
29
largest inpatient and outpatient psychiatric facilities in Japan. We expect our international revenues to decrease as a percentage of our total revenue.
Our research and development efforts are focused on the following: hardware and software product developments and enhancements of our NeuroStar Advanced Therapy System and clinical development relating to additional indications. We outsource the manufacture of components of our NeuroStar Advanced Therapy Systems that are produced to our specifications, and individual components are either shipped directly from our third-party contract manufacturers to our customers or consolidated into pallets at our Malvern, Pennsylvania facility prior to shipment. Final installation of our NeuroStar Advanced Therapy Systems occurs at the customer site.
Total revenues increased by $14.6 million, or 84%, from $17.4 million for the three months ended March 31, 2024 to $32.0 million for the three months ended March 31, 2025. For the three months ended March 31, 2025, our U.S. revenues were $31.5 million compared to $16.8 million representing an increase of 87%. The increase was primarily attributable to an increase in clinic revenue. We incurred net losses of $12.7 million for the three months ended March 31, 2025 compared to net losses of $7.9 million for the three months ended March 31, 2024. As of March 31, 2025, we had an accumulated deficit of $432.5 million.
Global Economic Conditions
We are continuing to closely monitor macroeconomic impacts, including, but not limited to, developments affecting financial institutions, supply chains, unemployment rates, investment values, consumer confidence, inflationary and potential recessionary pressures, on our business, results of operations and financial results, which could adversely affect us.
Components of Our Results of Operations
Revenues
We have generated revenues primarily from the sale of our NeuroStar Advanced Therapy Systems and related sales and rentals of the NeuroStar Advanced Therapy System, clinic revenue and the recurring revenues from our sale of treatment sessions in the U.S.
NeuroStar Advanced Therapy System Revenues. NeuroStar Advanced Therapy System revenues consist primarily of sales or rentals of a capital component, including equipment upgrades to the initial sale of the NeuroStar Advanced Therapy System. NeuroStar Advanced Therapy Systems can be purchased outright or on a rent-to-own basis by certain customers.
Treatment Session Revenues. Treatment session revenues primarily include sales of treatment sessions and SenStar treatment links. The treatment sessions are access codes that are delivered electronically in the U.S. The SenStar treatment links are disposable units containing single-use access codes that are sold and used outside the U.S. Access codes are purchased separately by our customers, primarily on an as-needed basis, and are required by the NeuroStar Advanced Therapy System in order to deliver treatment sessions.
Clinic Revenue. Clinic revenue is determined based on net patient fees, which includes estimates for contractual allowances and discounts. Net patient fees are estimated using an expected value approach where management considers such variables as the average of previous net patient fees received by the applicable payor and fees received by other patients for similar services and the Company’s best estimate leveraging industry knowledge and expectations of third-party payors’ fee schedules. We expect clinic revenue to increase in 2025.
Other Revenues. Other revenues are derived primarily from service and repair, research collaboration agreements and extended warranty contracts with our existing customers.
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Refer to the section titled “Critical Accounting Policies and Use of Estimates—Revenue Recognition” in our Annual Report on Form 10-K filed with the SEC on March 27, 2025. Also, refer to “Summary of Significant Accounting Policies” in Notes to Interim Consolidated Financial Statements located in Part I – FINANCIAL INFORMATION, Item 1. Financial Statements.
Cost of Revenues and Gross Margin
Cost of revenues primarily consists of the costs of components and products purchased from our third-party contract manufacturers of our NeuroStar Advanced Therapy Systems as well as the cost of treatment packs for individual treatment sessions. We use third-party contract manufacturing partners to produce the components for and assemble the completed NeuroStar Advanced Therapy Systems. Cost of revenues also includes costs related to personnel, royalties, warranty, shipping, amortization of capitalized software and our operations and field service departments. Our treatment center costs include direct center and patient care costs, regional employee compensation, regional marketing expenses, and depreciation. We expect our cost of revenues to increase mainly for treatment centers, as our product mix changes.
Our gross profit is calculated by subtracting our cost of revenues from our revenues. We calculate our gross margin as our gross profit divided by our revenues. Our gross margin has been and will continue to be affected by a variety of factors, primarily product sales mix, pricing and third-party contract manufacturing costs. Our gross margins on revenues from sales of NeuroStar Advanced Therapy Systems and clinic revenue are lower than our gross margins on revenues from sales of treatment sessions and, as a result, the sales mix between NeuroStar Advanced Therapy Systems, clinic revenues and treatment sessions can affect the gross margin in any reporting period.
Sales and Marketing Expenses
Sales and marketing expenses consist of market research and commercial activities related to the sale of our NeuroStar Advanced Therapy Systems and treatment sessions and personnel costs including salaries and related benefits, sales commissions and share-based compensation for employees focused on these efforts. Other significant sales and marketing costs include conferences and trade shows, promotional and marketing activities, including direct and online marketing, practice support programs, primarily digital media campaigns, travel and training expenses.
We anticipate that our sales and marketing expenses will increase in 2025 relative to 2024 as a result of the addition of the Greenbrook sales and marketing related expenses.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel expenses, including salaries and related benefits, share-based compensation and travel expenses, for employees in executive, finance, information technology, legal and human resource functions. General and administrative expenses also include the cost of insurance, outside legal fees, accounting and other consulting services, audit fees from our independent registered public accounting firm, board of directors fees and other administrative costs, such as corporate facility costs, including rent, utilities, depreciation and maintenance not otherwise included in cost of revenues.
We anticipate that our general and administrative expenses will increase in 2025 from 2024 due to an increase in the overall size of the general and administrative function within the consolidated company.
Research and Development Expenses
Research and development expenses consist primarily of personnel expenses, including salaries and related benefits and share-based compensation for employees in clinical development, product development, regulatory and quality assurance functions, as well as expenses associated with outsourced professional scientific development services and costs of investigative sites and consultants that conduct our preclinical
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and clinical development programs. We typically use our employee, consultant and infrastructure resources across our research and development programs.
We expect our research and development expenses to decrease during 2025 compared to our 2024 expenses.
Interest Expense
Interest expense consists of cash interest payable under our credit facility and the amortization of deferred financing costs related to our indebtedness.
Other Income, Net
Other income, net, consists primarily of interest income earned on our money market account balances and notes receivable.
Results of Operations
Comparison of the three months ended March 31, 2025 and 2024
Three Months Ended |
| |||||||||||
March 31, | Increase / (Decrease) | |||||||||||
| 2025 |
| 2024 |
| Dollars |
| Percentage |
| ||||
(in thousands, except percentages) |
| |||||||||||
Revenues | $ | 31,975 | $ | 17,417 | $ | 14,558 |
| 84 | % | |||
Cost of revenues |
| 16,237 |
| 4,329 |
| 11,908 |
| 275 | % | |||
Gross Profit |
| 15,738 |
| 13,088 |
| 2,650 |
| 20 | % | |||
Gross Margin |
| 49.2 | % |
| 75.1 | % |
|
|
| |||
| ||||||||||||
Operating expenses: |
|
|
|
|
|
|
| |||||
Sales and marketing |
| 11,999 |
| 11,641 |
| 358 |
| 3 | % | |||
General and administrative |
| 13,137 |
| 5,957 |
| 7,180 |
| 121 | % | |||
Research and development |
| 1,616 |
| 2,349 |
| (733) |
| (31) | % | |||
Total operating expenses |
| 26,752 |
| 19,947 |
| 6,805 | 34 | % | ||||
Loss from Operations |
| (11,014) | (6,859) |
| (4,155) |
| (61) | % | ||||
Other (income) expense: |
|
|
|
|
|
| ||||||
Interest expense |
| 1,922 |
| 1,826 |
| 96 |
| 5 | % | |||
Other income, net |
| (247) |
| (812) |
| 565 |
| (70) | % | |||
Net Loss | $ | (12,689) | $ | (7,873) | $ | (4,816) |
| (61) | % | |||
Revenues by Geography |
| ||||||||||
Three Months Ended March 31, |
| ||||||||||
2025 | 2024 |
| |||||||||
% of | % of |
| |||||||||
| Amount |
| Revenues |
| Amount |
| Revenues |
| |||
(in thousands, except percentages) |
| ||||||||||
U.S. | $ | 31,483 | 98 | % | $ | 16,793 | 96 | % | |||
International |
| 492 |
| 2 | % |
| 624 |
| 4 | % | |
Total revenues | $ | 31,975 |
| 100 | % | $ | 17,417 |
| 100 | % | |
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U.S. Revenues by Product Category |
| ||||||||||
Three Months Ended March 31, |
| ||||||||||
2025 | 2024 |
| |||||||||
% of | % of |
| |||||||||
| Amount |
| Revenues |
| Amount |
| Revenues |
| |||
(in thousands, except percentages) |
| ||||||||||
NeuroStar Advanced Therapy System | $ | 2,846 | 9 | % | $ | 3,310 | 20 | % | |||
Treatment sessions |
| 9,612 |
| 31 | % |
| 12,988 |
| 77 | % | |
Clinic revenue | 18,659 | 59 | % | — | — | % | |||||
Other |
| 366 |
| 1 | % |
| 495 |
| 3 | % | |
Total U.S. revenues | $ | 31,483 |
| 100 | % | $ | 16,793 |
| 100 | % | |
Revenues
Total revenue for the three months ended March 31, 2025 was $32.0 million, an increase of $14.6 million or 84% compared to the three months ended March 31, 2024 revenue of $17.4 million.
The revenue growth was primarily due to the inclusion of clinic revenue of $18.7 million as a result of the acquisition of Greenbrook, partially offset by the absence of sales to Greenbrook of $2.9 million and a decrease of sales of $1.1 million relating to NeuroStar Advanced Therapy Systems and treatment session revenue.
U.S. NeuroStar Advanced Therapy System revenue for the three months ended March 31, 2025 was $2.8 million, a decrease of 14% compared to $3.3 million in the first quarter of 2024. For the three months ended March 31, 2025, and 2024, the Company sold 31 and 40 systems, respectively. While the number of systems decreased, the average selling price per system increased by 9%.
U.S. treatment session revenue for the three months ended March 31, 2025 was $9.6 million, a decrease of 26% compared to $13 million in the first quarter of 2024.The decline was primarily attributable to the absence of $2.8 million in treatment session revenue to Greenbrook associated with the prior year quarter and a decrease in treatment session volume over the prior year quarter.
U.S. clinic revenue, which represents revenue generated by neurohealth clinics from the Greenbrook acquisition, was $18.7 million for the three months ended March 31, 2025.
Cost of Revenues and Gross Margin
Cost of revenues increased by $11.9 million, or 275%, from $4.3 million for the three months ended March 31, 2024 to $16.2 million for the three months ended March 31, 2025. Gross margin decreased from 75.1% for the three months ended March 31, 2024 to 49.2% for the three months ended March 31, 2025. The decrease in gross margin was primarily a result of the inclusion of Greenbrook’s clinic business and reduction in treatment session revenue.
Sales and Marketing Expenses
Sales and marketing expenses marginally increased by $0.4 million, or 3%, from $11.6 million for the three months ended March 31, 2024 to $12.0 million for the three months ended March 31, 2025. The increase was primarily due to the addition of the Greenbrook marketing activities.
General and Administrative Expenses
General and administrative expenses increased by $7.1 million, or 118%, from $6.0 million for the three months ended March 31, 2024 to $13.1 million for the three months ended March 31, 2025. The increase was primarily driven by the addition of Greenbrook general and administrative expenses of $6.2 million.
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Research and Development Expenses
Research and development expenses decreased by $0.7 million, or 31%, from $2.3 million for the three months ended March 31, 2024 to $1.6 million for the three months ended March 31, 2025. The decrease in research and development was driven by personnel expense savings related to restructuring post-acquisition.
Interest Expense
Interest expense increased by $0.1 million, or 5%, from $1.8 million for the three months ended March 31, 2024 to $1.9 million for the three months ended March 31, 2025 due to an overall increase in interest rate.
Other Income, Net
Other income, net, decreased by $0.6 million from $0.8 million for the three months ended March 31, 2024 to $0.2 million for the three months ended March 31, 2025, primarily as a result of decreased interest income earned on the Company’s money market accounts and notes receivable interest.
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Liquidity and Capital Resources
Overview
As of March 31, 2025, we had cash and cash equivalents of $20.2 million and an accumulated deficit of $432.5 million, compared to cash and cash equivalents of $18.5 million and an accumulated deficit of $419.8 million as of December 31, 2024. We incurred negative cash flows from operating activities of $17.0 million and $12.0 million for the three months ended March 31, 2025 and 2024, respectively. We have incurred operating losses since our inception, and we anticipate that our operating losses will lessen in the near term due to revenue growth and the pursuit of ongoing cost efficiencies in connection with our Greenbrook acquisition. The Company’s primary sources of capital to date have been proceeds from its IPO, private placements of its convertible preferred securities, borrowings under its credit facility, proceeds from its secondary public offerings of common stock and revenues from sales of its products. As of March 31, 2025, the Company had $60.0 million of borrowings outstanding under the Perceptive Facility, which has a final maturity on July 25, 2029. The Perceptive Facility is subject to certain financial covenants including a minimum net revenue covenant that escalates over the term of the Perceptive Facility and a minimum liquidity covenant.
If our cash and cash equivalents and anticipated revenues from sales or our products and services are insufficient to satisfy our liquidity requirements, we may seek to sell additional common or preferred equity or debt securities or enter into a new credit facility or another form of third-party funding or seek other debt financing. If we raise additional funds by issuing equity or equity-linked securities, our stockholders would experience dilution and any new equity securities could have rights, preferences and privileges superior to those of holders of our common stock. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. We cannot be assured that additional equity, equity-linked or debt financing will be available on terms favorable to us or our stockholders, or at all. It is also possible that we may allocate significant amounts of capital towards products or technologies for which market demand is lower than expected and, as a result, abandon such efforts. If we are unable to maintain our current financing or obtain adequate additional financing when we require it, or if we obtain financing on terms which are not favorable to us, or if we expend capital on products or technologies that are unsuccessful, our ability to continue to support our business growth and to respond to business challenges could be significantly limited, or we may be required to delay the development, commercialization and marketing of our products.
Our current and future funding requirements will depend on many factors, including:
| ● | our ability to achieve revenue growth and improve operating margins; |
| ● | compliance with the terms and conditions, including covenants, set forth in our credit facility; |
| ● | the cost of expanding our operations and offerings, including our sales and marketing efforts; |
| ● | our ability to improve or maintain coverage and reimbursement arrangements with domestic third-party and government payors, particularly in Japan; |
| ● | our rate of progress in establishing coverage and reimbursement arrangements from international commercial third-party and government payors; |
| ● | our rate of progress in, and cost of the sales and marketing activities associated with, establishing adoption of our products and maintaining or improving our sales to our current customers; |
| ● | the cost of research and development activities, including research and development relating to additional indications of neurohealth disorders; |
| ● | the effect of competing technological and market developments; |
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| ● | efficiency of our clinic operations; and |
| ● | the potential cost of and delays in product development as a result of any regulatory oversight applicable to our products. |
As of March 31, 2025, there were no significant changes to our material cash requirements as set forth in our Annual Report on Form 10-K filed with the SEC on March 27, 2025.
Cash Flows
The following table sets forth a summary of our cash flows for the three months ended March 31, 2025 and 2024:
Three Months Ended March 31, | |||||||
| 2025 |
| 2024 | ||||
(in thousands) | |||||||
Net Cash used in Operating activities | $ | (16,993) | $ | (12,015) | |||
Net Cash (used in) provided by Investing activities |
| (219) |
| 68 | |||
Net Cash provided by Financing activities |
| 18,977 |
| — | |||
Net increase (decrease) in Cash, Cash equivalents and Restricted cash | $ | 1,765 | $ | (11,947) | |||
Net Cash used in Operating Activities
Net cash used in operating activities for the three months ended March 31, 2025 was $17.0 million, consisting primarily of a net loss of $12.7 million, and an increase in net operating assets of $6.9 million, partially offset by non-cash charges of $2.5 million, primarily consisting of depreciation and amortization and share-based compensation. The increase in net operating assets was primarily due to increases in accounts receivable, and decreases in accounts payable, accrued expenses, prepaid expenses and other assets and prepaid commission expense.
Net cash used in operating activities for the three months ended March 31, 2024 was $12.0 million, consisting primarily of a net loss of $7.9 million, an increase in accounts receivable of $2.7 million, a decrease in accrued bonus and accounts payable of $4.5 million and a decrease in other assets of $0.4 million, partially offset by non-cash charges of $2.7 million. Non-cash charges consisted of depreciation, allowance for credit losses and share-based compensation.
Net Cash (used in) provided by Investing Activities
Net cash used in investing activities for the three months ended March 31, 2025 was $0.2 million, which was primarily due to purchases of property and equipment and capitalized software costs.
Net cash provided by investing activities for the three months ended March 31, 2024 was $0.1 million. Net cash provided by investing activities for the three months ended March 31, 2024 was primarily due to repayment of notes receivable, partially offset by purchases of property and equipment and capitalized software costs.
Net Cash provided by Financing Activities
Net cash provided by financing activities for the three months ended March 31, 2025 was $19.0 and primarily consisted of net proceeds from our secondary public offering. There were no cash flows from financing activities for the three months ended March 31, 2024.
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Indebtedness
For information regarding the Perceptive Facility, refer to “Debt” in Notes to Interim Consolidated Financial Statements located in Part I – FINANCIAL INFORMATION, Item 1. Financial Statements..
Recent Accounting Pronouncements
Refer to “Summary of Significant Accounting Policies” and “Recent Accounting Pronouncements” in Notes to Interim Consolidated Financial Statements located in Part I – FINANCIAL INFORMATION, Item 1. Financial Statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Refer to the information described in “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” section of the Company’s Annual Report on Form 10-K filed with the SEC on March 27, 2025. There have been no material changes to our market risk described therein.
We are continuing to closely monitor macroeconomic impacts, including, but not limited to tariffs, developments affecting financial institutions, supply chains, unemployment rates, investment values, consumer confidence, inflationary and potential recessionary pressures, on our business, results of operations and financial results, which could adversely affect us. Although we do not believe inflation or tariffs have had a material impact on our financial condition, results of operations or cash flows to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain and increase our gross margin or decrease our operating expenses as a percentage of our revenues if the selling prices of our products do not increase as much or more than our costs increase.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The term “disclosure controls and procedures,” as defined in Rules 13a 15(e) and 15d 15(e) of the Exchange Act, refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. As required by Rules 13a 15(b) and 15d 15(b) of the Exchange Act, our management, with the participation of our principal executive officer and principal financial and accounting officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10 Q. Based on that evaluation, our principal executive officer and our principal financial and accounting officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2025.
Changes in Internal Control over Financial Reporting
Following the acquisition of Greenbrook as noted above, we are in the process of reviewing the internal control structure of Greenbrook and, if necessary, will make appropriate changes as we continue to integrate Greenbrook into our overall internal control over financial reporting process. During the quarter ended March 31, 2025, there were no changes in our internal control over financial reporting (as defined in Rule 13a 15(f) of the Exchange Act) that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
We are subject from time to time to various claims and legal actions arising during the ordinary course of our business. We believe that there are currently no claims or legal actions that would reasonably be expected to have a material adverse effect on our results of operations, financial condition, or cash flows.
Item 1A. Risk Factors.
You should carefully consider the information described in the “Risk Factors” section of the Company’s Annual Report on Form 10-K filed with the SEC on March 27, 2025.
Adverse global economic conditions could have a negative effect on our business, results of operations and financial condition and liquidity.
Sustained uncertainty about, or worsening of, current global economic conditions and further tariffs and escalations of tensions between the U.S. and its trading partners could result in a global economic slowdown and long-term changes to global trade. Such events may also cause patients to reduce, delay or forego spending on medical services, which could negatively affect demand for our products and services and our business, financial condition and results of operations. In addition, these conditions could increase the cost of production, including the cost of machinery, spare parts and other materials used in manufacturing our products, further pressuring margins and adversely impacting our operating performance.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Not applicable.
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Item 6. Exhibits.
The following is a list of exhibits filed as part of this Quarterly Report on Form 10-Q. Where so indicated, exhibits that were previously filed are incorporated by reference. For exhibits incorporated by reference, the location of the exhibit in the previous filing is indicated.
Exhibit |
| Description | |
10.1◊ | |||
10.2◊ | |||
10.3 | |||
10.4 | |||
10.5◊ | |||
10.6 | |||
23.1 | |||
31.1* | |||
31.2* | |||
32.1** | |||
32.2** | |||
101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because iXBRL tags are embedded within the Inline XBRL document. | ||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | ||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | ||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||
104 | Cover Page Interactive Data File (Formatted as Inline XBRL and contained Exhibit 101). | ||
* | Filed herewith. |
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◊ | Certain portions of this exhibit have been omitted to preserve the confidentiality of such information. The Company will furnish copies of any such information to the SEC or its staff upon request. |
** | This certification is being furnished solely to accompany this Quarterly Report on Form 10-Q pursuant to 18 U.S.C Section 1350 and is not being filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing of the registrant under the Securities Act or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing. |
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SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| NEURONETICS, INC. | ||
(Registrant) | |||
Date: May 06, 2025 | By: | /s/ Keith J. Sullivan | |
Name: | Keith J. Sullivan | ||
Title: | President and Chief Executive Officer | ||
(Principal Executive Officer) | |||
Date: May 06, 2025 | By: | /s/ Stephen Furlong | |
Name: | Stephen Furlong | ||
Title: | EVP, Chief Financial Officer and Treasurer | ||
(Principal Financial and Accounting Officer) | |||
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