Prepared remarks
Good day and thank you for standing by. Welcome to the Neuronetics Second Quarter 2026 Financial and Operating Results Conference Call. Operator instructions: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mike Vallie from ICR Healthcare. Please go ahead.
Good morning and thank you for joining us for the Neuronetics second quarter 2026 conference call. Joining me on today's call are the Neuronetics President and Chief Executive Officer, Dan Reuvers, and the company's recently appointed Chief Financial Officer, Nir Naor. Before we begin, I would like to caution listeners that certain information discussed by management during this conference call will include forward-looking statements covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements related to our business, strategy, financial and revenue guidance, and other operational issues and metrics. Actual results can differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. For discussion of risks and uncertainties associated with Neuronetics' business, I encourage you to review the company's filings with the Securities and Exchange Commission, including the company's annual report on Form 10-K, which was filed in March, and the company's quarterly report on Form 10-Q for the quarter ending June 30, 2026. The company disclaims any obligation to update any forward-looking statements made during the course of this call except as required by law. During the call, we'll also discuss certain information on a non-GAAP basis, including EBITDA. Management believes that non-GAAP financial information taken in conjunction with U.S. GAAP financial measures provides useful information for both management and investors by excluding certain non-cash and other expenses that are not indicative of trends in our operating results. Reconciliations between U.S. GAAP and non-GAAP results are presented in the tables accompanying our press release, which can be viewed on our website. With that, it's my pleasure to turn the call over to Neuronetics President and Chief Executive Officer, Dan Reuvers.
Thanks, Mike, and good morning, everyone. Thank you for joining us. I'll walk you through the quarter and each side of the business, and then I'll turn it to Nir to cover the financials in greater detail. Then I'll come back with how we're thinking about the rest of the year before opening it up for questions. Having now spent several months in the role, meeting with customers, spending time in our clinics and working alongside our field team, I've gained a clearer view of where the business is performing and where opportunities exist. I'm pleased to report the second quarter began to reflect our steady execution against the goals I cited last quarter. Total revenue was $41.6 million, up approximately 9% versus the second quarter of last year. The results reflect the continued strength of Greenbrook and some early impacts of our NeuroStar TMS go-to-market pilot. Importantly, we began to show meaningful progress towards profitability and reduced our cash burn significantly. Starting with NeuroStar, total worldwide NeuroStar revenue was $14.7 million. On the capital side, we had a strong quarter. This reflected an encouraging early reception to our second quarter go-to-market pilot, including a deliberate change in how we compete for customers. For most of our history, we offered essentially one way to work with us, a treatment session model built around a high-touch partnership between Neuronetics and our customer. It's a model we believe in and one that continues to set us apart, with NeuroStar customers performing almost twice as many treatments per chair as the competitive landscape. A velocity improvement that directly reflects our unparalleled support. But as the TMS market has matured, we've seen that customers value different levels of support. Some want that full partnership. Others simply want to own the system outright, the way they would any other piece of capital equipment. Our prior strategy did not allow us to compete within this broader customer universe. To address this, while we're continuing to offer the treatment session model, along with our comprehensive support program, we've also introduced new and different ways a customer can choose to acquire a NeuroStar system. Specifically, they can purchase one outright or opt for a lease-financed option, which allows a customer to use the system over time without a significant upfront capital commitment. For customers who elect to purchase a system, we now offer support on an a la carte basis, allowing them to select the specific elements of our clinical and operational support that they want, rather than accessing it through a treatment session model. In each case, customers gain access to the same market-leading technology, and those who choose the session model retain the high-touch support that's always distinguished us. We introduced these approaches on a limited basis earlier this year and expanded the pilot through the second quarter. The early reception was encouraging, and we have since moved to a broader rollout. Over time, as more customers choose to own their systems, more of that value will be reflected in capital revenue, consumables, and service, and less in treatment session revenue. That shift reflects both the demand we're seeing for a capital model and our ability to compete for business that was previously out of reach. Consistent with our expectations, NeuroStar revenue was down slightly versus prior year, with capital revenue up double digits, while treatment session revenue was down double digits versus a year ago. Almost half of the reduction in the sessions revenue reflected the continued normalization of customer inventory, now at the lower levels we'd expect to maintain. The balance was from units no longer active. Underneath that, demand for treatment sessions remained strong within accounts that were active a year ago, with utilization up approximately 10% among them. The broader point is the TMS market itself continues to grow both across the industry and within our accounts. The decline in our session revenue reflects the change in our model, not the demand for the therapy. Ultimately, as we introduce new commercial options and we see some mix shifts, our second-half revenue may be a bit choppier, but the changes position us for renewed and sustainable growth as we enter 2027. We're also continuing to invest in the platform itself. In May, we announced a strategic collaboration with ANT Neuro to co-promote their FDA-cleared neuronavigation technology with NeuroStar. Providers are looking for tools that bring more visualization, consistency, and personalization into how they plan and deliver treatment. And this partnership lets us offer that alongside the NeuroStar system. We have the largest installed base of TMS systems in the country, which gives us the ability to bring innovations like this to market and scale them across the field. Moving to Greenbrook, which was the star of the quarter. The operational discipline that we'd been building into the clinic business continued. Greenbrook revenue was $26.9 million, up approximately 17% year-over-year. Beyond the top-line growth at Greenbrook, our work on revenue cycle management continued to produce results, with cash collections growing even faster than revenue. Focusing on better qualifying patients' eligibility, cleaner claims submissions, and more efficient collections were key contributors, along with improved reimbursement rates through more effective payer contracting across both TMS and SPRAVATO. We also began using AI in the insurance authorization process, which has helped us reduce operating costs. This reflects the operational discipline that we've been building into these clinics, and it's converting into cash, not just billings. And we believe there's still runway ahead of us. The other lever is occupancy. These clinics carry a largely fixed cost base, so the more efficiently we can run each site and the more patients we treat, the more profitable each location becomes. That's where much of our operational focus continues to sit today. With available capacity, we're closely examining our sales methods, including number of field reps, direct-to-consumer ad spend, and peer-to-peer education events, attempting to improve referrals while doing so with the most efficient patient acquisition cost. This, too, remains a meaningful incremental profitability driver. Before we move on, I wanted to provide an update on changes to our senior leadership team. As you might imagine, I spent a fair amount of time in my first 100 days evaluating our leadership team and structure. As a result, I made some changes to our leadership team, including reducing executive headcount and flattening our structure. This should allow us to get and stay closer to the details of the business. Some of the key changes include the recent appointment of Nir Naor as Chief Financial Officer. Nir brings more than 20 years of finance experience across medical device and care delivery businesses, including at his last company, where he helped the business reach profitability and achieve positive cash flow within a year. That experience is directly relevant to our priorities at this stage of our business, and I'm confident he'll be a key thought partner as we execute on our priorities. We also promoted Corey Anderson to Executive Vice President and General Manager of Greenbrook. Corey has been with us more than five years overseeing both our technology and clinical data efforts, as well as leading the commercial readiness efforts of psychedelics with our partners at Compass Pathways. Putting a dedicated leader with a rich understanding of the interventional psychiatry space as the head of Greenbrook reflects its importance to our future and the types of initiatives that will help us continue to drive growth in that part of the business. And in June, we appointed Rob Green as Senior Vice President of Sales. Rob spent his career leading commercial organizations across healthcare and medical technology, including in capital equipment and service. As we roll out new commercial models for NeuroStar, Rob's experience will be central to executing that strategy. Separately, we consolidated roles in marketing and operations, and Andy McCann will be stepping down as Chief Legal Officer later this month. With this team in place, we're well-positioned to execute our strategy and the priorities that we're reviewing this morning. Stepping back, we moved forward this quarter on what matters most, competing for NeuroStar customers who were previously out of reach, running our Greenbrook clinics more efficiently, and advancing our goals towards profitability and cash generation. I'll turn it over to Nir to take you through the financials and I'll come back with our outlook for the rest of the year. Nir?
Thank you, Daniel, and good morning, everyone. Let me start with a few thoughts on why I joined and then walk you through the quarter. I came to Neuronetics because I saw a business with a strong core, leading technology, and a national clinical network, as well as a clear opportunity to improve how it converts that into profitability and cash. That is what I've spent my career doing and that is what I intend to focus on here. And to our financials. Unless otherwise noted, all performance comparisons are being made to the second quarter of 2026 versus the second quarter of 2025. Total revenue in the second quarter was $41.6 million, an increase of 9.1% compared to revenue of $38.1 million in the second quarter of 2025. The increase in revenue was primarily driven by higher Greenbrook revenue. With the commercial model update that Dan mentioned in his comments, we intend to update our financial reporting on a go-forward basis to better align with the relevant operational metrics. As customers move between owning a system, financing one, purchasing support on an a la carte basis, or opting for the traditional session model, the split between capital and treatment session revenue no longer reflects the business in a consistent manner. We plan to manage the total growth of the NeuroStar franchise. With a host of contributing revenue lines such as sessions, capital, lease, service, consumables, and others, comparisons versus the past become less relevant for us. As a result, we will look at our NeuroStar business more holistically and intend to report it as a single revenue line going forward. Accordingly, total revenue from our NeuroStar business was $14.7 million in the second quarter of 2026, a decrease of 2.7%. For context, our session revenue was down double digits and our capital sales were up double digits. Greenbrook revenue was $26.9 million, a 16.8% increase. The results were driven by strong continuous provider growth and overall pricing improvement. Gross margin was 51.1% in the second quarter of 2026 compared to 46.6% in the prior year. This was a function of mix and our improving revenue cycle management efforts. Operational expenses during the quarter were $22.7 million, a decrease of $3.1 million, or 12%, compared to $25.8 million in the second quarter of 2025. This was largely due to lower general and administrative expenses and lower sales and marketing expenses. Continued cost efficiency measures were one of the key drivers for that change. Net loss for the quarter was $3.4 million, or $0.05 per share, compared to a net loss of $10.1 million, or $0.15 per share in the prior year. Adjusted EBITDA was positive $0.3 million as compared to negative $5.6 million in the prior year, an improvement of $5.9 million. Moving to the balance sheet and cash flow. As of June 30, total cash was $25 million, consisting of cash, cash equivalents, and restricted cash, as compared to $19 million as of March 31, 2026. Cash used by operations and investing in the second quarter was $1.4 million. This compares to cash used from operations and investing of $3.8 million in Q2 of 2025. During the quarter, we also raised $7.6 million in net proceeds through our at-the-market equity offering. Now turning to guidance. We're narrowing our total revenue range to $160 million to $164 million compared to prior guidance of $160 million to $166 million. We now expect gross margin range to be between 48% and 50% compared to prior guidance of 47% to 49%. We're lowering our OPEX guidance to $95 million to $100 million versus our prior guidance of $100 million to $105 million. The majority of this change is driven by decreased expectation of share-based compensation. Since share-based compensation fluctuates significantly, it's a non-cash component and is difficult to forecast going forward. We're going to guide to OPEX excluding share-based compensation. On this basis, we would expect this number to be $91 million to $96 million for the year. Our current estimate of share-based compensation is $4 million for the year. We're also updating our cash flow guidance to include both cash flow from operations and cash flow from investing as we consider this sum a more representative view of the company's organic cash utilization and estimate it to be in the range of negative $10.5 million to negative $14.5 million for the full year. This is compared to our prior guidance of cash flow from operations only in the range of negative $13 million to negative $17 million. We continue to target limited net cash utilization from operations and investing in the second half of the year. In summary, this was a quarter of solid financial progress. We grew revenue, improved our margins, reduced our cash burn, and strengthened our balance sheet, all while continuing to invest in the growth of the business. Our focus is on converting that progress into sustained profitability and positive operating cash flow. With that, I will turn it back to Dan for his closing remarks.
Thanks, Nir. Let me close with a few thoughts on where we go from here. During the quarter, we continued our collaboration with Compass Pathways to prepare for the anticipated commercial launch of their psychedelic therapeutic for treatment-resistant depression, or TRD. We also shared the stage with them at an investor panel last month to continue to educate the investor community about the potential market dynamics with a new treatment option for providers to prescribe for TRD patients. With their recent Phase 3 extended durability data readout, our enthusiasm for the opportunity continues to grow. The regulatory path is Compass's to run, and I'm not going to get ahead of it, but therapies like this, when they come to market, will require exactly the kind of delivery platform that we already operate. In-office drug delivery and monitoring, REMS programs, trained clinical staff, the benefits investigation and prior authorization infrastructure that we run every day for SPRAVATO. As new psilocybin treatments become available, they'll need places equipped to deliver them safely and at scale. Greenbrook's experience, scale, and available capacity positions us as an early leader in that space as we look forward to providing the most comprehensive menu of interventional psychiatry options for patients. More broadly, our priorities for the rest of the year are clear. We'll continue expanding how we compete within the TMS space with NeuroStar, keep driving operational discipline and cash generation at Greenbrook while seeking to help even more patients, expanding our occupancy, and positioning ourselves for the opportunities ahead in interventional psychiatry. Ultimately, we intend to be the destination of choice for the psychiatry community looking for the most effective treatment interventions for their patients. We have real work in front of us, but we have the team, the resources, and the momentum to see it through. Before I close, I'll note that earlier this month, we announced a constructive understanding with one of our largest shareholders, reflecting a shared commitment to maximizing long-term value for our shareholders. The Board and I welcome that alignment, and it reinforces the focus we all share on executing the priorities I've laid out this morning. I want to thank our employees for a hard-fought quarter and for the work that they do every day on behalf of the patients that we serve and our shareholders for their continued support. With that, operator, we're ready to open the line for questions.
Questions and answers
Operator instructions: Please proceed with your questions. Our first question comes from the line of William Plovanic with Canaccord.
First, congratulations on a solid quarter and the clear improvement in cash flow. I'll focus on the future rather than the past. Regarding Greenbrook, as you expand this service offering for the new psychedelics coming to market, could you help us understand the Greenbrook footprint as you optimize it: first, how many rooms are typically available on average per site? Second, as you become more cash-generating, should we expect you to open more facilities or expand existing ones? My understanding is that the Compass product requires about six hours of observation versus SPRAVATO at about two hours. So I'm trying to understand, as new drugs come to market with different requirements, how you address those capacity issues and balance them against revenue, particularly with respect to Greenbrook and your increased focus there.
Yes, good question. Thanks, Bill. So I think, first of all, I'll talk about psychedelics in a minute, but initially there's a lot of runway that continues to be available to us simply in improving the capacity that's available within so many of our sites. We have a fair amount of fixed costs, as you know, and we've talked about having available capacity as much as 40% that's still not consumed. So filling those chairs with patients that can benefit from our therapies is a top priority. We have a lot of improvement to occur even while we're waiting for the psychedelics to be introduced. That said, we think about it more as units of time and available capacity. A lot of these rooms where we treat patients for SPRAVATO can quite easily be converted to also administer psychedelics like COMP360. We already have capacity in the rooms, and it's a matter of making sure that we're filling these to better capacity, which is an opportunity for growth that we have even before some of the psychedelics come available. As they do, we have been putting a lot of energy into making sure that we're being thoughtful about how we would schedule those varying treatments. As we know, TMS is a matter of minutes, a couple of hours for SPRAVATO, and, to your point, probably closer to six hours for COMP360, in varying sequences for some of the other therapeutics to come later. We're starting to use AI for scheduling to optimize how we can make sure that we do that in the most productive way. So there's a lot of opportunity for us to continue to fill that capacity. Once we do and we need more space, certainly more sites or expanding those footprints is well within our roadmap. But initially, we will really focus on filling unused capacity, and then sequentially there will be an opportunity for us to look at expansion.
Excellent. If I could have one follow-up. On the cost structure changes you've made and the operating structure improvements, are you through the bulk of the changes and now it's more incremental tweaking? Or how should we think about the opportunity for further efficiency gains in the operating structure?
Yes, I think that a natural thing is sometimes we don't always look in the mirror first as executives. Starting with the leadership ranks and making sure that the structure and the people fill the right roles was important, and I feel really good about where we sit today. We've added talent and redistributed assignments to talented up-and-coming folks within the organization. I feel like we've made a lot of progress there. I think there's still opportunities for us. With a new CFO now in place, Nir and I will have an opportunity to more comprehensively continue to examine where additional opportunities might exist. But organizationally, I feel like we've made significant progress and I'm feeling very good about how we've anchored ourselves at this point.
Our next question comes from the line of Danny Stauder with Citizens Bank.
Really nice quarter, and Nir, congrats on the new role, it's great to have you on the call. Just on my first one, I want to make sure I understand the NeuroStar treatment session dynamic. It sounds like the normalization of inventory should continue through the rest of the year, so it should continue to be down, maybe with some offset from gains in capital. Is that the right way to think about it? And then do you think this is more of a dynamic for just new customers or do you expect a larger portion of your existing customers to transition to some of these other models and offerings that you have?
Thanks, Danny. On the sessions inventory, to be clear, we feel that inventories are down about as low as we would expect them to be maintained. So I don't see continued inventory reductions in the back half of the year. After the second quarter, I think we've largely equilibrated to where we think normal sustainable inventories would be. From an existing customer standpoint, one of the things I want to make sure doesn't get lost is a comment I made earlier: our chairs receive almost twice as much patient velocity as the competitive landscape. Many customers selected us because of the comprehensive support we provide and the improvements it makes in their practice. We expect the majority of those sessions customers who have benefited from that comprehensive service will continue in that vein. We'll certainly offer more options; that's what our new go-to-market strategy is about—letting the customer decide where they see the value and how they want to pay for it. If a new customer chooses the capital route versus the traditional sessions route, they'll still pay for things like service, consumables, and training, which are currently embedded in the sessions structure. That's one reason we chose to report on this more holistically because there may be some noise moving back and forth. Some of the consumables and service revenue we've gotten has been embedded in the sessions revenue side. We're giving customers the option to decide how they want to pay for the value we bring. While we will expect to open ourselves up to new placements with this broader go-to-market, we also hear that a large segment of our customer base reminds us why they picked us in the first place: the comprehensive support we provide.
That's great, appreciate that. One quick follow-up: it's great to see the improvement in operating expenses below the top line. I wanted to focus on gross margin, that line was really strong even with clinic revenue being the primary driver of growth and making up a larger mix of sales. Could you give us more color on what drove that gross margin expansion? You called out some pricing improvement within clinics, so any color there or anything else on the execution would be great.
Sure, that's certainly a high point for the quarter, and as you know we raised our guidance on gross margin for the full year. We think some of these improvements are durable. The good news is that we saw strength in gross margin on both the Greenbrook and NeuroStar sides. On the Greenbrook side, much of it has to do with improved revenue cycle management: better patient qualification, cleaner claims, and more efficient accounts receivable. Those improvements lead to capturing more revenue on a billed dollar basis than we did in the past. Those are durable and are clearly contributing to the better gross margin on Greenbrook, along with some pricing improvements from our team's work with third-party payers. On the NeuroStar side, while sessions revenue was down a bit and capital was up, that points to the fact that as our mix equilibrates and is not exclusively sessions, our average selling price is going up. As capital grows, that can be a sustainable positive for gross margin as well. Both considerations are embedded in our updated guidance.
Our next question comes from the line of Sam Eiber with BTIG.
Maybe I can start on the Greenbrook side, a really strong quarter on that side of the business. Dan, wondering if you could help parse out some of the underlying trends you're seeing on the SPRAVATO side versus the TMS side of the business. And then, as I think about Compass and psilocybin entering the market, perhaps next year, talk about how your model is set up best by offering SPRAVATO, TMS, psilocybin, and why that's the best model for patients.
Yes, I think first of all on SPRAVATO versus TMS, we saw a bit more strength from SPRAVATO than TMS, but the overall business growth reflects that Greenbrook is becoming more of a destination of choice for referral sources. The SPRAVATO business is more durable; patients often return for maintenance treatments and tend to stay active in our network longer. That durability is good for us. On the Compass side, we believe we're well positioned to be a first-mover benefactor due to close collaboration and preparation with them, and because of existing infrastructure from our SPRAVATO participation: REMS certification, rooms set up, and available capacity. Those elements position us strongly. Regarding the blend, we want to position ourselves with referral sources as the destination of choice for whatever intervention is best suited for a given patient within interventional psychiatry. We've done that with TMS and SPRAVATO and we expect to do so with Compass. As additional therapeutics come out, we are positioning ourselves—both infrastructure and brand-wise—to be the place referral sources can entrust with their patients. The fact that we don't do medical management and psychotherapy gives referral sources confidence that they can send their patients to us and know they'll get them back. All of those are important parts of the ecosystem we're trying to build.
That's really helpful, Dan. Thanks for the added color. Maybe a follow-up on the comments around different sales methods you'll be evaluating with regard to field reps and direct-to-consumer spending. Are there certain KPIs that you'll be tracking or that we should be mindful of as you evaluate efficiently getting more patients through the door?
Externally, you can look at our operating expenses. Internally, patient acquisition cost is one KPI we're scrutinizing. The account managers that support Greenbrook have proven to be very effective for referral generation. We want to take a closer look at the balance in spend between our field team and direct-to-consumer ad spend, along with peer-to-peer education, and be more thoughtful about which channels return the most effectively. Expect us to pull and push on some levers and rebalance spend. There's a lot of analytics we're working on, but at the end of the day it comes down to patient acquisition cost and what's the most efficient way to get the right patient in a chair who can benefit from our therapies.
I am showing no further questions in the queue. I would now like to turn the call back over to Dan Reuvers for any closing comments.
Thanks, Operator, and thank you to everyone for joining today's call. We really look forward to updating you on our progress during our next quarterly call and hope everybody has a good rest of the summer. Thank you.
This concludes today's conference call. Thank you for your participation and you may now disconnect.