10-Q: Neuronetics Q3 Revenue Soars 101% on Greenbrook Acquisition

Neuronetics, Inc. reported a significant revenue increase in Q3 2025, primarily driven by the Greenbrook TMS acquisition, despite continued operating losses and gross margin compression.

Summary

• Total revenues for the three months ended September 30, 2025, increased by 101% to $37.3 million, compared to $18.5 million for the same period in 2024.
• Total revenues for the nine months ended September 30, 2025, increased by 105% to $107.4 million, compared to $52.4 million for the same period in 2024.
• The revenue growth was primarily attributable to the inclusion of $21.8 million in clinic revenue from the Greenbrook acquisition in Q3 2025 and $63.5 million for the nine months ended September 30, 2025.
• Net loss for the three months ended September 30, 2025, was $9.4 million, an improvement from a net loss of $13.3 million in Q3 2024.
• Net loss for the nine months ended September 30, 2025, was $31.9 million, compared to $31.0 million for the same period in 2024.
• Gross margin decreased significantly from 75.6% in Q3 2024 to 45.9% in Q3 2025, primarily due to the inclusion of Greenbrook's lower-margin clinic business and a reduction in treatment session revenue.
• U.S. NeuroStar Advanced Therapy System revenue decreased by 15% to $3.5 million in Q3 2025, with 40 systems sold compared to 48 in Q3 2024.
• U.S. treatment session revenue decreased by 21% to $10.5 million in Q3 2025, partly due to the absence of Greenbrook as a third-party customer and a further decrease in volume with other customers.
• Cash and cash equivalents stood at $28.0 million as of September 30, 2025, up from $18.5 million at December 31, 2024.
• The company reported an accumulated deficit of $451.6 million as of September 30, 2025.
• Negative cash flows from operating activities were $21.3 million for the nine months ended September 30, 2025.
• Outstanding borrowings under the Perceptive Facility totaled $70.0 million as of September 30, 2025, with a final maturity in July 2029.
• There were 68,485,922 shares of common stock outstanding as of October 29, 2025.

Sentiment

Score: 4

Explanation: While revenue growth is strong due to the Greenbrook acquisition, the underlying core product sales are declining, and gross margins have significantly compressed. The company continues to incur substantial net losses and negative operating cash flow, indicating ongoing challenges to profitability and self-sustainability despite capital raises. The future outlook relies heavily on realizing synergies and achieving cash flow breakeven, which are not guaranteed.

Positives

• Total revenues increased by 101% in Q3 2025 to $37.3 million and by 105% for the nine months ended September 30, 2025, to $107.4 million, primarily driven by the Greenbrook acquisition.
• Net loss decreased in Q3 2025 to $9.4 million from $13.3 million in Q3 2024.
• Cash and cash equivalents increased to $28.0 million as of September 30, 2025, from $18.5 million at December 31, 2024.
• Successfully completed a secondary public offering in February 2025, raising $18.9 million in net proceeds.
• Generated $7.8 million in net proceeds from the At-The-Market (ATM) equity offering program by September 30, 2025, with $41.7 million remaining available.
• Research and development expenses decreased by 38% in Q3 2025 and 30% for the nine months ended September 30, 2025, due to personnel expense savings from restructuring.
• The minimum liquidity balance requirement under the Perceptive Facility was lowered to $2 million through September 30, 2026.
• Received the entire $2.9 million Employee Retention Credit (ERC) receivable during the nine months ended September 30, 2025.

Negatives

• The company continues to incur operating losses, with an accumulated deficit of $451.6 million as of September 30, 2025.
• Negative cash flows from operating activities amounted to $21.3 million for the nine months ended September 30, 2025.
• Gross margin significantly decreased from 75.6% in Q3 2024 to 45.9% in Q3 2025, primarily due to the lower-margin clinic business from the Greenbrook acquisition and reduced treatment session revenue.
• U.S. NeuroStar Advanced Therapy System revenue decreased by 15% in Q3 2025, with 40 systems sold compared to 48 in Q3 2024.
• U.S. treatment session revenue decreased by 21% in Q3 2025, partly due to Greenbrook no longer being a third-party customer and a further decrease in volume with other customers.
• General and administrative expenses increased by 49% in Q3 2025 and 86% for the nine months ended September 30, 2025, primarily due to the Greenbrook acquisition, despite some cost synergies.
• Interest expense increased by 28% in Q3 2025 and 10% for the nine months ended September 30, 2025, due to a higher outstanding debt balance.
• Other income, net, decreased by 77% in Q3 2025 and 72% for the nine months ended September 30, 2025, primarily due to decreased interest income.

Risks

• Ability to achieve or sustain profitable operations due to a history of losses.
• Reliance on the sale and usage of the NeuroStar Advanced Therapy System to generate revenues.
• The scale and efficacy of the salesforce.
• Ability to retain talent.
• Availability of coverage and reimbursement from third-party payors for treatments using products.
• Physician and patient demand for treatments using products.
• Developments in respect of competing technologies and therapies for the indications that products treat.
• Product defects.
• Ability to obtain and maintain intellectual property protection for 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.
• Potential effects of evolving and/or extensive government regulation.
• Compliance with the terms of the credit facility, including financial covenants.
• Ability to successfully roll-out the Better Me Provider Program on the planned timeline.
• Self-sustainability and existing cash balances.
• Ability to achieve cash flow breakeven in the fourth quarter of 2025.
• Macroeconomic impacts, including supply chains, trade and tariff policy, unemployment rates, investment values, consumer confidence, inflationary and potential recessionary pressures.
• Inflation or tariffs could adversely affect the ability to maintain and increase gross margin or decrease operating expenses if selling prices do not increase as much or more than costs.
• Potential recoupment of reimbursements from government agencies (Medicaid and Medicare audits).
• Impact of the One Big Beautiful Bill Act (OBBB Act) on consolidated financial statements.

Future Outlook

Management anticipates operating losses will lessen in the near term due to revenue growth and ongoing cost efficiencies from the Greenbrook acquisition. Cash and cash equivalents as of September 30, 2025, and anticipated revenues are believed to be sufficient to fund operations for at least the next 12 months. Clinic revenue is expected to increase in 2025, while cost of revenues is also expected to increase mainly for Treatment Centers due to product mix changes. Sales and marketing expenses and general and administrative expenses are anticipated to increase in 2025 due to the Greenbrook integration, but research and development expenses are expected to decrease. International revenues are projected to decrease as a percentage of total revenue. The company aims to achieve cash flow breakeven in the fourth quarter of 2025.

Management Comments

• "Management anticipates 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."
• "Management believes that the Company's cash and cash equivalents as of September 30, 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."
• "We expect clinic revenue to increase in 2025."
• "We expect our cost of revenues to increase mainly for Treatment Centers, as our product mix changes."
• "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."
• "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."
• "We expect our research and development expenses to decrease during 2025 compared to our 2024 expenses."
• "We expect our international revenues to decrease as a percentage of our total revenue."

Industry Context

Neuronetics operates in the growing neuroscience and mental health treatment sector, focusing on Transcranial Magnetic Stimulation (TMS) for Major Depressive Disorder (MDD), Obsessive-Compulsive Disorder (OCD), and anxious depression. The acquisition of Greenbrook TMS Inc. signifies a strategic move towards vertical integration, combining device sales (NeuroStar) with direct mental healthcare service provision through treatment centers. This positions Neuronetics as a more comprehensive player in the mental health market, addressing the increasing demand for effective, non-invasive therapies. The company's emphasis on NeuroStar's extensive clinical data set suggests a competitive advantage in a market where evidence-based treatments are highly valued. The offering of SPRAVATO alongside TMS in its centers indicates an adaptive approach to treatment-resistant depression, aligning with broader industry trends of multimodal therapy.

Comparison to Industry Standards

• The company believes it is the market leader in TMS therapy, having treated over 229,429 global patients with over 8.2 million treatment sessions through September 30, 2025.
• The NeuroStar Advanced Therapy System is stated to be supported by the largest clinical data set of any competing TMS system, suggesting a strong evidence base compared to rivals.
• Commercial data indicates psychiatrists can recoup their initial capital investment in the NeuroStar system by treating approximately 12 patients, providing a benchmark for practitioner return on investment.
• Psychiatrists are estimated to generate approximately $8,500 of average revenue per patient for a standard course of treatment, offering a revenue potential benchmark for practices.

Legal Proceedings

• Subject to various claims and legal actions arising during the ordinary course of business, with management believing no current claims would have a material adverse effect.
• Subject to various audits from government agencies including Medicaid and Medicare, involving potential recoupment of reimbursements; no liability recorded as of September 30, 2025, based on best estimates.

Related Party Transactions

• The acquisition of Greenbrook TMS Inc. on December 9, 2024, involved the settlement of a preexisting $3.6 million Promissory Note outstanding principal amount from TMS Neurohealth Centers Inc. (a Greenbrook subsidiary) as additional purchase consideration.
• Prior to the acquisition, Greenbrook was a significant customer, accounting for 13% of revenue for the three months ended September 30, 2024, and 14% for the nine months ended September 30, 2024.

Stakeholder Impact

• Shareholders face potential dilution from ongoing and future equity offerings, and the continued operating losses and gross margin compression could impact share value.
• Employees may experience further restructuring and personnel expense savings, particularly in R&D, following the Greenbrook acquisition.
• Customers benefit from expanded access to NeuroStar Advanced Therapy System and additional mental health services through the integrated Greenbrook Treatment Centers.
• Creditors are exposed to an increased debt balance of $70.0 million under the Perceptive Facility, with ongoing compliance required for financial covenants.
• Suppliers, particularly third-party contract manufacturers, continue to be integral to the production of NeuroStar Advanced Therapy Systems.

Next Steps

• Continue to evaluate and finalize the fair values of assets acquired and liabilities assumed from the Greenbrook acquisition within the measurement period.
• Evaluate the impact of the adoption of ASU 2023-09 (Improvements to Income Tax Disclosures) on consolidated financial statements and related disclosures (effective for annual period ended December 31, 2025).
• Evaluate the impact of the adoption of ASU 2024-03 (Disaggregation of Income Statement Expenses) on consolidated financial statements and related disclosures (effective for annual reporting period beginning after December 15, 2026).
• Evaluate the expected impact of ASU 2025-05 (Measurement of Credit Losses for Accounts Receivable and Contract Assets) on consolidated financial statements and related disclosures (effective Q1 2026).
• Continue to expand the direct sales and customer support team to further penetrate the market.
• Focus research and development efforts on hardware and software product developments and enhancements, and clinical development for additional indications.
• Monitor macroeconomic impacts on business, results of operations, and financial results.
• Continue to review and integrate Greenbrook's internal control structure into the overall internal control over financial reporting process.
• Achieve cash flow breakeven in the fourth quarter of 2025 (forward-looking statement).
• Potentially borrow up to an additional $15.0 million under the Tranche 2 Loan of the Perceptive Facility on or before January 31, 2026, upon achieving specified net revenue.
• Potentially request to borrow up to an additional $25.0 million under the Tranche 3 Loan of the Perceptive Facility until June 30, 2026, with lender consent.

Key Dates

Recommendation

While Neuronetics has achieved substantial revenue growth through the Greenbrook acquisition and has bolstered its liquidity through recent capital raises, the underlying profitability remains a significant concern. The gross margin has compressed considerably, and the company continues to report net losses and negative operating cash flows. The decline in core NeuroStar system sales and treatment session revenue to third-party customers, excluding Greenbrook, suggests challenges in the organic growth of its primary product line. The company's ability to achieve cash flow breakeven in Q4 2025, as projected, and realize synergies from the acquisition will be critical. Until there is clear evidence of sustained profitability and positive operating cash flow, the stock presents a mixed picture of growth through acquisition versus ongoing operational challenges, warranting a "Hold" recommendation for investors to observe further developments.

Keywords

NeuroStar Advanced Therapy System, Transcranial Magnetic Stimulation, TMS, Major Depressive Disorder, MDD, Obsessive-Compulsive Disorder, OCD, Anxious Depression, Greenbrook TMS, Mental Health, Neuroscience, SEC 10-Q, Financial Results, Medical Devices, Healthcare Services, Capital Raise, Debt Facility, Nasdaq STIM