GlobeNewswire Inc | Aug 4, 2020 07:30AM EDT

August 04, 2020

MALVERN, Pa., Aug. 04, 2020 (GLOBE NEWSWIRE) -- Neuronetics, Inc. (NASDAQ: STIM), a commercial stage medical technology company focused on designing, developing and marketing products that improve the quality of life for patients who suffer from psychiatric disorders, today announced its financial and operating results for the second quarter of 2020.

Second Quarter 2020 Summary

-- Second quarter 2020 revenue was $9.7 million, compared to second quarter 2019 revenue of $16.6 million -- Second quarter operating expenses declined by 25%, or $4.7 million as compared to the second quarter of 2019 as a result of cost reduction initiatives -- Installed base was 1,122 systems, as of June30, 2020, an increase of 15% over the prior year period -- Cash and cash equivalents were $54.0 million as of June 30, 2020

Recent Operational Highlights

-- On July 14, 2020, the Company appointed Keith J. Sullivan as President and Chief Executive Officer. Mr. Sullivan was also appointed to the Companys Board of Directors. -- The Company received a number of favorable reimbursement decisions, primarily related to a reduction in failed pharmacotherapy treatments prior to approved use of NeuroStar Advanced Therapy from Cigna, Aetna, and HCSC / BCBS, who in aggregate cover approximately 53 million lives in the U.S.

I am excited to join Neuronetics and lead the team on our critical mission to improve mental health for an underserved patient population by expanding access to NeuroStar Advanced Therapy, said Keith J. Sullivan, President and Chief Executive Officer of Neuronetics. The world is facing an unprecedented challenge with COVID-19. I believe we have taken the right steps to position our company to emerge on the other side of the pandemic in a strong financial position and ready to execute on our business strategy.

This quarter was negatively impacted due to the effects of COVID-19; however, our results were favorable to our internal expectations established at the beginning of the quarter. The company experienced positive commercial trends during the second half of the quarter, and we are anticipating these trends will continue through the remainder of the year, said Steve Furlong, Chief Financial Officer of Neuronetics. Further, the cost reduction efforts announced in April will enable Neuronetics to execute against our operating plan and maintain our robust cash balance.

Second Quarter 2020 Financial and Operating Results

Revenues by Geography Three Months ended June30, 2020 2019 Amount Amount % Change (in thousands, except percentages) United States $ 9,267 $ 15,890 -42 %International 474 682 -30 %Total revenues $ 9,741 $ 16,572 -41 %

Total revenue for the second quarter of 2020 was $9.7 million, a decrease of 41% versus second quarter 2019 revenue of $16.6 million primarily as a result of the COVID-19 pandemic. During the quarter, total U.S. revenue declined by 42% and international revenue declined by 30% over the prior year quarter as a result of the COVID-19 pandemic and the resulting governmental actions to limit the spread of the virus.

United States Revenues by Product Category Three Months ended June30, 2020 2019 Amount Amount % Change (in thousands, except percentages) NeuroStar Advanced Therapy $ 2,338 $ 4,628 -49 %SystemTreatment sessions 6,547 10,847 -40 %Other 382 415 -8 %Total United States revenues $ 9,267 $ 15,890 -42 %

United States NeuroStar Advanced Therapy System Revenues by Type Three Months ended June30, 2020 2019 Amount Amount % Change (in thousands, except percentages) NeuroStar Capital $ 2,224 $ 4,034 -45 %Operating lease 114 187 -39 %Other - 407 -100 %Total U.S. NeuroStar Advanced $ 2,338 $ 4,628 -49 % Therapy System revenues

U.S. NeuroStar Advanced Therapy System revenue for the second quarter of 2020 was$2.3 million, a decrease of 49% versus second quarter 2019 revenue of$4.6 million. The decrease was primarily driven by a lower number of NeuroStar systems sold in the quarter as many prospective customers closed their practices or limited access to their offices in response to the COVID-19 pandemic, as well as lower other revenue related to fewer HP Coil upgrades sold in the second quarter of 2020. In the quarter, the Company sold 35 systems, down from 61 systems in the second quarter of 2019.

As ofJune30, 2020, the active unit installed base in the U.S. was 1,122 systems. This represents an increase of 146 units, or15%, over the active unit installed base as of June30, 2019 and an increase of 3 systems from the installed base as of March 31, 2020.

U.S. treatment session revenue for the second quarter of 2020 was $6.5 million, a decrease of 40% versus second quarter 2019 revenue of $10.8 million. The decrease was primarily driven by a reduction in per click treatment session volume during the quarter as a result of COVID-19.

Gross margin for the second quarter of 2020 was 76.2% compared to second quarter 2019 gross margin of 74.8%. The increase was primarily a result of a change in the product mix of revenues versus the prior year as well as reduced personnel supporting our installation efforts.

Operating expenses during the second quarter of 2020 were$14.3 million, a decrease of $4.7 million compared to $19.0 million in the second quarter of 2019. The decrease was primarily due to reduced sales and marketing expenses as well as reduced research and development costs.

Net loss for the second quarter of 2020 was$(7.8) million, or $(0.41) per share, as compared to second quarter 2019 net loss of$(7.1) million, or $(0.39) per share. Net loss per share was based on 18,747,019 and 18,350,527 weighted-average ordinary shares outstanding for the second quarters of 2020 and 2019, respectively.

EBITDA for the second quarter of 2020 was $(6.5) million as compared to the second quarter of 2019 EBITDA of$(5.9) million. See the accompanying financial table that reconciles EBITDA, which is a non-GAAP financial measure, to net loss.

Cash and cash equivalents were $54.0 million as of June30, 2020. This compares to cash and cash equivalents of $63.6 million as of March 31, 2020 and $75.7 million as ofDecember31, 2019.

Management and Board of Director Appointments

On July 14, 2020, the Company announced the appointment of Keith J. Sullivan as President and Chief Executive Officer. Mr. Sullivan was also appointed to the Companys Board of Directors.

On June 26, 2020, the Company announced the appointment of Bruce Shook to its Board of Directors, filling the seat vacated by Dr. Cheryl Blanchard following her appointment as chief executive officer of a public company.

On May 26, 2020, the Companys stockholders elected John Bakewell to the Board of Directors, replacing Stephen Campe who did not stand for reelection.

Positive Reimbursement Decisions

During the second quarter, the Company received numerous favorable reimbursement decisions, primarily related to a reduction in failed pharmacotherapy treatments prior to approved used of NeuroStar Advanced Therapy. The recent reimbursement decisions are as follows:

-- Cigna (16 million covered lives) reduced pharmacotherapy criteria from 4 failed drugs to 2 failed drugs or intolerance to 1 drug -- Aetna (22 million covered lives) Extended coverage to include patients between 18 and 21 years old, where it previously had been exclusively for 21 and overAdded a provision for retreatment approval based on 50% improvementReduced pharmacotherapy criteria from 4 failed drugs to 2 failed drugs -- HCSC / BCBS (15 million covered lives) reduced pharmacotherapy criteria from 4 failed drugs to 2 failed drugs

Business Outlook

Currently, the Company is unable to estimate the specific duration or severity of the impact of the COVID-19 pandemic on its financial and operating results and is therefore only providing forward looking guidance as to the Companys projected full year 2020 operating expense.

On April 8, 2020 the Company announced a corporate restructuring which would result in operating expenses for the full year 2020 to be in the range of $58 to $60 million, compared to the previously issued guidance of $76 to $78 million. This guidance remains unchanged.

Webcast and Conference Call Information

Neuronetics management team will host a conference call on August 4, 2020 beginning at 8:30 a.m. Eastern Time. Investors interested in listening to the conference call on your telephone should dial (877) 472-8990 for United States callers or +1 (629) 228-0778 for international callers and reference confirmation code 9783274, approximately ten minutes prior to start time. To access the live audio webcast or subsequent archived recording, visit the Investor Relations section of Neuronetics website at ir.neuronetics.com. The replay will be available on the Company's website for approximately 60 days.

About Neuronetics

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

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

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

Investor Contact:

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

Media Contact:

Gina KentVault Communications610-455-2763gkent@vaultcommunications.com

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

Three Months ended Six Months ended June30, June30, 2020 2019 2020 2019 Revenues $ 9,741 $ 16,572 $ 21,217 $ 29,300 Cost of revenues 2,323 4,171 5,134 6,978 Gross Profit 7,418 12,401 16,083 22,322 Operating expenses:Sales and 8,151 11,523 18,874 21,115 marketingGeneral and 4,010 4,261 9,298 8,860 administrativeResearch and 2,116 3,224 5,137 6,010 developmentTotal operating 14,277 19,008 33,309 35,985 expensesLoss from (6,859 ) (6,607 ) (17,226 ) (13,663 )OperationsOther (income) expense:Interest expense 986 931 2,509 1,850 Loss onextinguishment - - 924 - of debtOther expense (80 ) (444 ) (281 ) (890 )(income), netNet Loss $ (7,765 ) $ (7,094 ) $ (20,378 ) $ (14,623 ) Net loss pershare of commonstock $ (0.41 ) $ (0.39 ) $ (1.09 ) $ (0.80 )outstanding,basic anddilutedWeighted-averagecommon sharesoutstanding, 18,747 18,351 18,714 18,189 basic anddiluted

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

June30, December31, 2020 2019Assets Current assets: Cash and cash equivalents $ 53,997 $ 75,708 Accounts receivable, net 6,636 6,569 Inventory 3,332 2,775 Current portion of net investments in sales-type 1,305 880 leasesCurrent portion of prepaid commission expense 851 689 Prepaid expenses and other current assets 1,091 1,830 Total current assets 67,212 88,451 Property and equipment, net 828 1,107 Operating lease right-of-use assets 3,610 3,796 Net investments in sales-type leases 2,082 1,730 Prepaid commission expense 4,340 3,779 Other assets 1,922 1,305 Total Assets $ 79,994 $ 100,168 Liabilities and Stockholders? Equity Current liabilities: Accounts payable $ 2,324 $ 4,625 Accrued expenses 5,661 9,031 Deferred revenue 2,413 2,228 Current portion of operating lease liabilities 577 559 Current portion of long-term debt, net 34,373 11,250 Total current liabilities 45,348 27,693 Long-term debt, net - 19,898 Deferred revenue 1,935 2,106 Operating lease liabilities 3,271 2,619 Total Liabilities 50,554 52,316 Stockholders? Equity: Preferred stock, $0.01 par value: 10,000 sharesauthorized; no shares - - issued or outstanding at June30, 2020 andDecember31, 2019Common stock, $0.01 par value: 200,000 sharesauthorized; 18,726 and 18,645 shares issued and outstanding at 188 186 June30, 2020 and December31, 2019, respectivelyAdditional paid-in capital 299,717 297,753 Accumulated deficit (270,465 ) (250,087 )Total Stockholders' Equity 29,440 47,852 Total Liabilities and Stockholders? Equity $ 79,994 $ 100,168

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

Six Months ended June30, 2020 2019 Cash Flows from Operating Activities: Net loss $ (20,378 ) $ (14,623 )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization 534 457 Share-based compensation 1,842 1,523 Non-cash interest expense 944 362 Cost of rental units purchased by customers 122 77 Loss on extinguishment of debt 622 - Changes in certain assets and liabilities: Accounts receivable, net (66 ) (1,216 )Inventory (557 ) (82 )Net investment in sales-type leases (777 ) (640 )Leasehold reimbursement 836 - Prepaid commission expense (723 ) (1,579 )Prepaid expenses and other assets 356 941 Accounts payable (2,408 ) (228 )Accrued expenses (3,492 ) (1,044 )Deferred revenue 14 (366 )Net Cash Used in Operating Activities (23,131 ) (16,418 )Cash Flows from Investing Activities: Purchases of property and equipment and (484 ) (398 )capitalized softwareNet Cash Used in Investing Activities (484 ) (398 )Cash Flows from Financing Activities: Proceeds from issuance of long-term debt 41,360 - Repayment of long-term debt (38,860 ) - Payments of debt issuance costs (721 ) - Proceeds from exercises of stock options 124 1,877 Net Cash Provided by Financing Activities 1,903 1,877 Net Decrease in Cash and Cash Equivalents (21,711 ) (14,939 )Cash and Cash Equivalents, Beginning of 75,708 104,583 PeriodCash and Cash Equivalents, End of Period $ 53,997 $ 89,644

Non-GAAP Financial Measures (Unaudited)

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

The following table reconciles reported net loss to EBITDA:

Three Months ended Six Months ended June30, June30, 2020 2019 2020 2019 EBITDA (in thousands) (in thousands) ReconciliationNet loss $ (7,765 ) $ (7,094 ) $ (20,378 ) $ (14,623 )Interest 986 931 2,509 1,850 expenseIncome taxes - - - - Depreciationand 233 253 534 457 amortizationEBITDA $ (6,546 ) $ (5,910 ) $ (17,335 ) $ (12,316 )