Neuronetics(STIM) - 2023 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements For the first quarter ended March 31, 2023, Neuronetics reported total revenues of $15.5 million, a 10% increase year-over-year, and a net loss of $10.5 million Balance Sheets Total assets decreased to $103.6 million as of March 31, 2023, primarily due to a reduction in cash and cash equivalents Balance Sheet Summary (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $ 55,443 | $ 70,340 | | Total current assets | $ 81,107 | $ 98,769 | | Total Assets | $ 103,604 | $ 116,884 | | Liabilities & Equity | | | | Total current liabilities | $ 15,130 | $ 33,199 | | Long-term debt, net | $ 36,641 | $ 22,829 | | Total Liabilities | $ 55,259 | $ 59,824 | | Total Stockholders' Equity | $ 48,345 | $ 57,060 | Statements of Operations Revenues increased to $15.5 million in Q1 2023, leading to a narrowed net loss of $10.5 million compared to the prior year Q1 2023 vs Q1 2022 Performance (in thousands, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Revenues | $ 15,540 | $ 14,181 | | Gross Profit | $ 11,396 | $ 10,696 | | Total operating expenses | $ 21,303 | $ 20,831 | | Loss from operations | $ (9,907) | $ (10,135) | | Net Loss | $ (10,520) | $ (10,838) | | Net loss per share, basic and diluted | $ (0.38) | $ (0.41) | Statements of Changes in Stockholders' Equity Stockholders' equity decreased to $48.3 million, primarily driven by the net loss for the quarter - The primary driver for the decrease in stockholders' equity during Q1 2023 was the net loss of $10.5 million[18] Statements of Cash Flows Net cash used in operating activities increased to $15.2 million in Q1 2023, resulting in a $14.9 million net decrease in cash Cash Flow Summary (in thousands) | Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $ (15,213) | $ (12,182) | | Net Cash Used in Investing Activities | $ (183) | $ (1,074) | | Net Cash Provided by (Used in) Financing Activities | $ 499 | $ (48) | | Net Decrease in Cash and Cash Equivalents | $ (14,897) | $ (13,304) | | Cash and Cash Equivalents, End of Period | $ 55,443 | $ 80,837 | Notes to Interim Financial Statements The notes detail business operations, liquidity, and financial instruments, including a new promissory note and credit facility amendment - The company is a commercial-stage medical technology firm focused on its NeuroStar Advanced Therapy System for treating major depressive disorder (MDD)[23] - As of March 31, 2023, the company had $55.4 million in cash and cash equivalents and an accumulated deficit of $356.4 million; management believes current cash is sufficient to fund operations for at least the next 12 months[24] - In Q1 2023, one customer accounted for 18% of total revenue, with accounts receivable from this customer at $1.0 million as of March 31, 2023[66] - On March 29, 2023, the company amended its credit facility with Solar, borrowing an additional $2.5 million and extending the maturity date to March 2028, with total outstanding principal at $37.5 million[71][72] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q1 2023 revenue growth to increased U.S. sales, while gross margin declined and R&D expenses significantly increased Results of Operations Total revenue increased 10% to $15.5 million, driven by U.S. NeuroStar system and treatment session growth, despite a gross margin decline Revenue Breakdown (in thousands) | Revenue Category | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $15,540 | $14,181 | 10% | | U.S. Revenue | $14,964 | $13,517 | 11% | | - NeuroStar System | $3,850 | $3,642 | 6% | | - Treatment Sessions | $10,643 | $9,469 | 12% | | International Revenue | $576 | $664 | (13)% | - Gross margin decreased from 75.4% to 73.3% year-over-year, primarily due to increased sales volume of lower-margin NeuroStar systems and higher capitalized software amortization[128] - Sales and marketing expenses decreased 6% to $11.9 million due to reduced marketing initiatives and personnel costs[129] - Research and development expenses increased 55% to $2.8 million, mainly because of lower capitalization of software project costs compared to the prior year[131] Liquidity and Capital Resources The company held $55.4 million in cash, with a net cash outflow from operations of $15.2 million, and believes it has sufficient liquidity for the next 12 months - The company had cash and cash equivalents of $55.4 million and an accumulated deficit of $356.4 million as of March 31, 2023[135] - Net cash used in operating activities was $15.2 million for Q1 2023, compared to $12.2 million for Q1 2022[135][140] - Management believes current cash and anticipated revenues are sufficient to fund operations for at least 12 months from the financial statement issuance date[135] Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk have occurred since the last annual report, and inflation has not materially impacted financial results - There have been no material changes to the company's market risk since the last annual report filed on March 7, 2023[147] - The company is monitoring inflation but does not believe it has had a material impact on its financial results to date[148] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes in internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2023[150] - No changes in internal control over financial reporting occurred during Q1 2023 that materially affected, or are reasonably likely to materially affect, internal controls[151] PART II – OTHER INFORMATION Legal Proceedings The company is involved in routine legal actions but expects no material adverse effect on its financial condition or operations - The company reports no current legal proceedings that are reasonably expected to have a material adverse effect on its business or financials[153] Risk Factors No material changes to the previously disclosed risk factors have occurred since the last annual report - No material changes to the risk factors disclosed in the Annual Report on Form 10-K have occurred[154] Exhibits The report includes key exhibits such as the Fourth Amendment to the Loan and Security Agreement and a new Secured Promissory Note - Key exhibits filed include the Fourth Amendment to the Loan and Security Agreement and a Secured Promissory Note with Greenbrook TMS Inc[161]