Executive Summary / Key Takeaways

• Neuronetics is undergoing a significant transformation, vertically integrating its leading NeuroStar Advanced Therapy System with a robust clinical service network following the Greenbrook TMS (GBNH) acquisition, aiming for sustainable growth and cash flow positivity.
• The company's core NeuroStar TMS technology, backed by the largest clinical data set in the industry, offers FDA-cleared, non-invasive treatment for adult and adolescent major depressive disorder (MDD), obsessive-compulsive disorder (OCD), and anxious depression.
• Recent financial performance in Q3 2025 shows strong revenue growth, particularly from clinic operations, and significant improvements in cash flow from operations, with a target of positive operating cash flow by Q4 2025.
• Strategic initiatives like the Better Me Provider (BMP) Program, NeuroStar Provider Connection, and optimized SPRAVATO rollout are driving patient access and operational efficiencies, supported by over $23 million in annualized cost synergies.
• While gross margins have shifted due to the clinic business mix and SPRAVATO optimization, the company's focus on operational excellence, expanded indications, and strategic partnerships positions it for long-term value creation in a growing mental health market.

A New Era for Neurohealth: Neuronetics' Integrated Approach

Neuronetics, Inc. (NASDAQ: STIM) is at the forefront of mental healthcare, driven by the belief that mental health is as vital as physical well-being. Established in 2001, the Malvern, Pennsylvania-based company pioneered the NeuroStar Advanced Therapy System, a non-invasive, office-based treatment utilizing transcranial magnetic stimulation (TMS). This technology creates a pulsed, MRI-strength magnetic field to stimulate specific brain areas associated with mood, offering a crucial alternative for patients with major depressive disorder (MDD) who have not found relief from traditional antidepressants. The company's strategic evolution culminated in a pivotal moment on December 9, 2024, with the acquisition of Greenbrook TMS Inc., transforming Neuronetics into a vertically integrated entity that not only supplies leading TMS systems but also directly provides TMS and SPRAVATO treatments through a network of 95 treatment centers across the United States.

The market for mental health treatments is substantial and growing, with major depressive disorder affecting an estimated 21 million adults in the U.S., 6.4 million of whom are unable to tolerate or receive adequate relief from antidepressant medication. Furthermore, adolescent depression is a significant concern, impacting approximately 4.3 million U.S. adolescents aged 15-21. In this landscape, Neuronetics' core strategy is to expand patient access to effective, non-drug alternatives, leveraging its technological leadership and integrated care delivery model.

Technological Edge and Expanding Horizons

The NeuroStar Advanced Therapy System stands as a technological differentiator in the neuromodulation space. It is supported by the largest clinical data set of any competing TMS system, a testament to its safety and efficacy. Through September 30, 2025, over 229,429 global patients have been treated with more than 8.20 million NeuroStar treatment sessions. The system's FDA clearances are extensive, covering adult MDD (for those who have failed prior antidepressant medication), as an adjunct for adults with obsessive-compulsive disorder (OCD), and for decreasing anxiety symptoms in adult MDD patients exhibiting comorbid anxiety.

A significant milestone was achieved in March 2024, when NeuroStar received FDA clearance as the first and only TMS treatment approved for adolescent patients aged 15-21 with MDD. This expansion into an underserved population is critical, as real-world clinical data from a study of 1,200 patients (aged 12-21) demonstrated that nearly 70% experienced clinically meaningful improvement with less than 1% reporting worsening symptoms. The NeuroStar Outcomes Database further highlights the system's effectiveness, showing up to an 83% response rate and 62% remission rate for MDD patients. These quantifiable clinical benefits underscore NeuroStar's competitive moat, enabling stronger physician adoption and favorable reimbursement.

Neuronetics is also actively investing in innovation to enhance its service delivery and operational efficiency. The company is rolling out self-check-in kiosks across its Greenbrook centers, with over 30 locations already live and a full network rollout anticipated by mid-November 2025. These kiosks are integrated with the electronic medical record (EMR) system, streamlining check-in, reducing front desk bottlenecks, and improving collections. Additionally, Neuronetics plans to leverage artificial intelligence (AI) and digital forms in the intake process, aiming to reduce the traditional 45-minute consultation call by allowing patients to complete personal health information from home. These initiatives are designed to optimize patient experience, free up staff for direct patient care, and drive operational efficiencies, directly contributing to improved financial performance.

Competitive Landscape and Strategic Positioning

Neuronetics operates in a competitive environment, facing both direct and indirect rivals. Direct competitors include companies like Brainsway (BRSW), LivaNova (LIVN), and Abbott (ABT), which offer various neuromodulation therapies. Neuronetics distinguishes itself through its specialized focus on non-invasive TMS for neurohealth disorders, backed by its extensive clinical data and specific FDA clearances, particularly as the first and only TMS for adolescents. This provides Neuronetics with a strong niche market position, especially among outpatient psychiatric practices.

Compared to Brainsway, Neuronetics' NeuroStar system emphasizes ease of use and a robust support network, which can foster strong customer loyalty. While Brainsway is recognized for advanced targeting capabilities, Neuronetics' comprehensive clinical evidence and patient-centric programs provide a significant competitive advantage. Financially, Neuronetics' profitability and cash flow, while improving, appear less robust than Brainsway's, which has shown signs of improving financial health through expanding sales.

Against LivaNova, which offers a broader, more diversified neuromodulation portfolio including invasive options, Neuronetics' non-invasive, targeted approach for psychiatric care offers greater accessibility for many patients. LivaNova's scale and diversified revenue streams contribute to more robust cash flow generation, potentially allowing for greater investment in new technologies. Neuronetics must continue to leverage its focused expertise and patient outcomes to compete effectively against larger, more diversified players.

Abbott, a healthcare conglomerate, brings global brand recognition and extensive R&D resources to its neuromodulation division. While Abbott's scale provides significant financial and operational advantages, Neuronetics' dedicated focus on neurohealth-specific innovations and its proprietary TMS technology allow it to maintain a strong position in its specialized market segment. Neuronetics' challenge is to strategically innovate and optimize its operations to counter the resource advantages of such large competitors.

Indirect competitors, including pharmaceutical companies offering antidepressants and providers of electroconvulsive therapy (ECT), also influence the market. The emergence of digital mental health solutions presents another alternative. These options can be perceived as more accessible or cheaper, potentially impacting Neuronetics' market share. However, NeuroStar's proven efficacy for treatment-resistant patients and its non-drug, non-invasive nature offer a compelling alternative that resonates with both patients and providers seeking different solutions. Neuronetics' dedicated health policy team actively partners with providers and payors to advocate for policy updates, further strengthening its competitive standing.

Financial Performance and Operational Momentum

Neuronetics' financial performance in the third quarter of 2025 reflects the initial successes of its vertical integration strategy. Total revenue reached $37.3 million, marking a substantial 101% increase year-over-year on a reported basis, and an 11% increase on an adjusted pro forma basis. This growth was primarily fueled by the strong performance of the Greenbrook clinics, which generated $21.8 million in revenue, up 25% on an adjusted pro forma basis compared to the prior year quarter.

The NeuroStar business, while seeing an 11% increase in total treatment session utilization on a pro forma basis, experienced a reported decrease in U.S. NeuroStar system revenue (down 15% to $3.5 million) and U.S. treatment session revenue (down 21% to $10.5 million) in Q3 2025. Management attributed the decline in reported treatment session revenue to a "comp issue" from 2024, when customers strategically increased inventory levels, a headwind expected to normalize by 2026. Despite the reported revenue decline, the average selling price (ASP) for NeuroStar systems remained above target for the third consecutive quarter, indicating strong perceived value.

For the nine months ended September 30, 2025, total revenue grew 105% to $107.4 million, with $63.5 million attributed to clinic revenue from the Greenbrook acquisition. However, the inclusion of Greenbrook's clinic business, which operates at a lower margin, significantly impacted the consolidated gross margin, which decreased from 75.6% in Q3 2024 to 45.9% in Q3 2025.

Operational expenses saw a mixed trend. Research and development expenses decreased by 38% to $1.5 million in Q3 2025, driven by personnel expense savings from restructuring post-acquisition. General and administrative expenses, however, increased by 49% to $11.1 million, primarily due to the addition of Greenbrook's G&A costs, partially offset by cost synergies. Overall, operating expenses for Q3 2025 increased by 12% to $24.4 million.

Despite these shifts, Neuronetics demonstrated significant progress towards profitability and cash flow positivity. The net loss for Q3 2025 improved to -$9.4 million (-$0.13 per share) from -$13.3 million (-$0.44 per share) in the prior year quarter.

More critically, cash used in operations for Q3 2025 was -$0.8 million, marking the second consecutive quarter of substantial improvement from -$17 million in Q1 and -$3.5 million in Q2. This improvement was bolstered by enhanced revenue cycle management and the strategic shift of more patient payments to the time of service through kiosks. As of September 30, 2025, the company held $34.5 million in total cash, including restricted cash, and had $70 million in borrowings outstanding under its credit facility maturing in July 2029.

Strategic Initiatives and Future Outlook

Neuronetics' strategic initiatives are designed to capitalize on its integrated model and drive future growth. The Better Me Provider (BMP) Program is a key growth driver, with nearly 425 active sites and another 100 working towards qualification. BMP sites demonstrate superior performance, responding to patients faster and treating significantly more patients per quarter than non-BMP practices.

The NeuroStar Provider Connection Program extends this success by educating primary care physicians (PCPs), who treat 69% of depression patients, about NeuroStar TMS. This initiative has hosted over 300 PCP meetings since April 2025, generating referrals, particularly to BMP sites. Recent partnerships, such as the three-year exclusive agreement with Elite DNA Behavioral Health (over 30 clinics in Florida) and a deepened relationship with Transformations Care Network (72 clinics in the Northeastern U.S.), further expand NeuroStar's footprint and streamline patient support.

The Greenbrook growth strategy is delivering strong results, with high treatment volumes across NeuroStar TMS and SPRAVATO patients. The SPRAVATO rollout is on track for full implementation by year-end, with 84 of 89 eligible clinics now offering the therapy. Neuronetics is strategically optimizing its "Buy & Bill" (B&B) model for SPRAVATO, expanding it to states like Connecticut, Texas, Missouri, California, and Virginia where reimbursement economics are favorable, while also utilizing the "administer and observe" (A&O) model. This nuanced approach aims to maximize profitability despite initial challenges in navigating the complex reimbursement landscape.

From an operational standpoint, the company has realized over $23 million in annualized cost synergies from the Greenbrook acquisition, with 95% already in place by the end of 2024. These efficiencies, combined with ongoing improvements in revenue cycle management and the adoption of new technologies like self-check-in kiosks, are critical to achieving financial targets.

For the fourth quarter of 2025, Neuronetics expects net revenue between $40 million and $43 million. The full-year 2025 revenue guidance has been revised to $147 million to $150 million, primarily reflecting the optimized SPRAVATO B&B strategy. Gross margin for the full year is projected to be between 47% and 49%, a shift driven by the increased mix of lower-margin clinic revenue. Operating expenses are expected to remain between $100 million and $105 million for the full year. Critically, Neuronetics continues to target positive cash flow from operations in Q4 2025, with a projected range of -$2 million to +$2 million, and year-end total cash between $32 million and $36 million.

Risks and Challenges

Despite the positive momentum, Neuronetics faces several risks. The company has an accumulated deficit of $451.60 million and has incurred operating losses since its inception, highlighting the ongoing need to achieve and sustain profitability. Macroeconomic factors, including inflation and potential recessionary pressures, could impact gross margins if selling prices do not keep pace with rising costs. The variability in SPRAVATO reimbursement across states and payers, and the upfront capital outlay required for the "Buy & Bill" model (potentially up to $5 million for inventory), present ongoing operational and liquidity management challenges. While disruptions from the Change Healthcare cyber event in 2024 are largely resolved, unforeseen issues in healthcare reimbursement or regulatory changes could impact future revenue.

Conclusion

Neuronetics is undergoing a profound transformation, strategically leveraging its market-leading NeuroStar Advanced Therapy System and the newly acquired Greenbrook TMS network to redefine mental healthcare delivery. The company's commitment to technological innovation, evidenced by its extensive FDA clearances and robust clinical data, provides a strong foundation for expanding patient access and improving outcomes for conditions like MDD and OCD, including the underserved adolescent population. The successful integration of Greenbrook, coupled with the scaling of patient-centric programs like BMP and NeuroStar Provider Connection, is driving significant revenue growth and operational efficiencies. While the shift in business mix has impacted gross margins and the path to consistent profitability requires diligent execution, the substantial improvements in cash flow from operations and clear guidance towards cash flow positivity in Q4 2025 underscore a compelling investment thesis. Neuronetics' strategic focus on optimizing its service offerings, expanding its footprint through partnerships, and realizing cost synergies positions it for sustainable long-term value creation in a growing and critical healthcare sector.