Greenbrook Tms Inc (GBNH) 2021 Q4 法說會逐字稿

Welcome to the Greenbrook TMS Inc. fiscal 2021 results conference call and webcast. (Operator Instructions) I would like to remind you that this conference is being recorded today, and this is also being webcast on the company's website at www.greenbrooktms.com under the Investor section, Events. Operator Instructions)

This call contains forward-looking statements, which reflect the current expectations or beliefs of the company based on currently available information. Forward-looking statements are subject to a number of risks and uncertainties that may cause the actual results of the company to differ materially from those discussed in the forward-looking statements.

Factors that could cause actual results or events to differ materially from current expectations are discussed in the Risk Factors section of the company's annual report on Form 20-F for the fiscal year ended December 31, 2021; in the Risks and Uncertainties section of the Management's Discussion and Analysis for the fiscal years ended December 31, 2021, 2020, and 2019, which is included in the annual report; and in the company's other materials filed with the Canadian securities regulatory authorities and the US Securities and Exchange Commission from time to time, which are available on SEDAR, EDGAR, and on the company's website.

Any forward-looking statements speaks only as of the date on which it is made. And the company disclaims any intent or obligation to update any forward-looking statements, unless required by law. I would like to turn the meeting over to Mr. Bill Leonard, President and Chief Executive Officer of Greenbrook TMS; and Erns Loubser, Chief Financial Officer. Go ahead, please, Mr. Leonard.

Thank you, Blu, and thank you to everyone for joining our conference call and webcast today.

Despite the challenging operating environment over the past two years, our business continued to grow steadily with revenue increasing by 21% in fiscal year 2021 to a record $52.2 million as compared to fiscal 2020, and by 42% in Q4 2021 to a record of $14 million as compared to Q4 2020. We are extremely proud of our dedicated team, who consistently delivers the highest level of patient care in a very challenging operating environment.

Mental health remains a key focus in the US with the right unmet need for the treatment in all-time high, and we have the right platform to serve this need. We are excited about the ongoing rollout of our Spravato program at select TMS centers, which continued through Q4 2021. This program builds on our long-term business plan of utilizing our existing networks of TMS centers to deliver new and innovative treatments to patients suffering from MDD and other mental health disorders.

Providing Spravato at our TMS centers enables us to leverage capacity in an existing platform, which effectively enhances our profit margins. As of March 31, 2022, the company have expanded its offering of Spravato to 23 TMS centers across the US.

On October 1, 2021, the company completed the acquisition of Achieve TMS East and Achieve TMS Central LLC, which include the acquisition of 17 active TMS centers. We are very excited about this acquisition, as it strengthens our presence in New England and in the Central United States. This acquisition secures robust payer contracts, brand recognition, physician reputation, and a strong management team within these regions. We also expect the acquisition to serve as a foundation for continued growth within these regions and to realize operational synergies by leveraging our established infrastructure in adjacent regions.

From a development perspective, we added 31 active TMS centers in fiscal year 2021, including as I mentioned, 17 active TMS centers acquired as part of the Achieve TMS East and Central acquisition. As of December 31, 2021, our footprint consisted of 149 centers in 17 states.

And now for a more detailed review of the company's financial and operating performance, I will turn it over to our CFO, Erns Loubser.

Thank you, Bill. As Bill mentioned, annual revenue increased by 21% to a record $52.2 million as compared to fiscal 2020, and quarterly revenue increased by 42% to a record $14 million as compared to Q4 2020. Average revenue per treatment increased 5% to $231 in fiscal 2021 as compared to fiscal 2020, and by 26% to $229 in Q4 2021 as compared to Q4 2020.

The increase was primarily attributable to three key factors: the normalization of the adjustment to variable consideration estimates driven by stronger collections; more favorable rates negotiated in established markets; and a favorable payer mix. Same region sales growth was 19% in fiscal 2021 as compared to negative 1.5% in fiscal 2020.

Fiscal 2021 resulted in an entity-wide regional operating loss of only $300,000, a 51% reduction in the loss as compared to fiscal 2020. This is a result of increase in revenue, offset by an increase in direct center and regional cost as a result of operating 147 active centers as -- at December 31, 2021, as compared to 116 active TMS centers at December 31, 2020.

Q4 2021 resulted in entity-wide regional operating income of $40,000, a turnaround as compared to the entity-wide regional operating loss of $2.05 million in Q4 2020. Corporate G&A for fiscal 2021 increased 36% to $20.7 million, as compared to $15.1 million in fiscal 2020. This was predominantly due to one-time cost related to financing and acquisition activities during the year. The loss for the period and comprehensive loss decreased by 18% during fiscal 2021 to $24.9 million, as compared to fiscal 2020.

From a balance sheet perspective, the accounts receivable balance remains stable despite the revenue growth, which as I mentioned, points to strong collections. We maintained adequate capitalization through fiscal 2021, with the completion of a private placement for gross proceeds of $23.5 million, public offering for gross proceeds of $13.2 million, and the forgiveness of the PPP loan. As of December 31, 2021, we had approximately $11.9 million of cash on hand including restricted cash related to the Achieve TMS East and Central acquisition, as Bill mentioned.

Moving to our core operating metrics. We saw continued year-over-year growth in all key operating metrics.

As of the end of fiscal 2021, the total TMS centers increased by 19% to 149 from the 125 a year ago. Compared to fiscal 2020, the number of consultations performed increased 25% to 14,108. The number of TMS treatments performed increased 15% to 226,286, and new patient starts increased by 18% to 6,429. From a quarterly perspective, the number of consultations performed remained stable at approximately 3,500. However, the number of TMS treatments performed during the quarter increased by 13% to 61,416. New patient starts also increased by 17% to 1,667, pointing to stronger conversion rates in the quarter.

As Bill mentioned, market conditions were challenging in fiscal 2021. But we remain optimistic as we are currently seeing positive trends in patient activity, with operating conditions starting to normalize in fiscal year 2022. Back to you, Bill.

Thanks, Erns. As I mentioned, despite the challenges we faced over the past two years, we saw continued growth in both revenue and patient treatments. Our Spravato program adds to our repertoire of an innovative treatment, building on the company's long-term business plans of utilizing its center's network as a platform to serve patients suffering from major depressive disorder, OCD, and other mental health disorders.

I would like to reiterate that we are extremely proud of our dedicated team that continue to deliver the highest level of patient care in a very challenging operating environment. Most importantly, our business is a needed one. Mental health treatment demand is at unprecedented levels. Our business fundamentals remain sound, and we are positioned better than ever to serve the unmet need in mental health support across the United States.

We're excited to continue our growth plans through 2022, with a specific focus on enhanced utilization of our established TMS center platform. We have now treated over 22,000 patients with over 790,000 treatments performed, a significant positive impact on the lives of so many patients suffering from mental health disorders.

We look forward to keeping you updated on the progress of the company. Thank you for your time today.

And with that, operator, we will now take questions.

(Operator Instructions) Frank Takkinen, Lake Street Capital.

Bill, Erns, thanks for taking my questions, and congrats on the progress. It seems like you're doing pretty well in a tough environment here. I wanted to start on the comments around specific focus on enhanced utilization of established TMS center platform. This makes a lot of sense. Obviously, there is a lot of opportunity in just improving same-store sales metrics in the established networks. Maybe dig a little bit deeper into this and how you're thinking about focusing in growth there, as well as new center additions in established regions?

Sure. Thanks for the question, Frank, and thanks for joining. Really, as we said in the call, we opened up about six regions prior to kind of COVID starting, right around that time frame. And that group has yet to see the ramp based on the operating conditions that we've seen in our other centers around the country during normal business times.

So for us, the focus, instead of just new centers across the country, is really getting that group of centers to begin to mature and ramp like we've seen in our previous marketplaces. Obviously, our focus on direct-to-consumer and our focus and our work with the community-based physicians, but we really believe that is a significant upside since those costs are already built in, management in place, physicians in place, and really a greater chance for us to run towards profitability with that group ramping up versus brand-new start-up cost.

Perfect. That's helpful. And then, maybe just to ask a little bit more specifically on COVID impacts. Can you talk to monthly impacts in the fourth quarter and how those trends continued into the first quarter of 2022?

Yeah. I'll start it off and kick it over to Erns on the actual numbers. But I think the reality in 2021 was we were booking. We were booking with COVID -- all companies. We were booking with COVID from the start, and then the Omicron came back at the end. And that was challenging to be honest with you.

From a contagious factor, Omicron was much more difficult to handle based on the fact -- the infection rate and was impacting doctors, our staff, and patients in midstream. A patient would end up getting COVID and have to kind of start and stop treatments or move away from. So from that, and you combine that with the balance you get with the labor market, really the impact started in kind of mid-November and carried into the quarter. But like we said on the call, we thought we did a tremendous job with our care team and working through those challenges.

Erns, you want to add a little bit more detail to that?

Yeah, of course. And so, as Bill mentioned, we saw -- and as we previously spoke on the quarter, we saw a very strong October and geared up for what we expected to be a very strong Q4. But mid-November to December, we really saw the patient treatments drop off.

And the reason for that is as Bill mentioned, not only -- not necessarily this time due to lockdown, but the community-based physicians that we work with closing down their practices. A depressed patient has always been known for not wanting to leave the house and staff getting sick. So we were in a pretty good trajectory. And then December was not a good month. That has spilled over a little bit into January and February. But we are seeing, as I mentioned, a really good progress as market conditions continue to normalize in March 2022.

Perfect. And then just last one for me. I wanted to ask on Spravato. Congrats on getting to that 23 figure on time by the end of the quarter. Maybe just talk a little bit about early feedback you're getting. I'm assuming a much of it is anecdotal but talk to any feedback you're getting. And then how should we be thinking about your rollout plans of Spravato beyond the 23 that you've established so far into 2022?

Yeah. Absolutely, Frank. Ultimately, patients want to feel better. So it's important to have a variety of treatment options that best fit the patient's preferences. The response from both our community-based physicians and the patients themselves has been fantastic.

If you look at it, TMS therapy is still a really good treatment in our core product and treatment we offer. It's durable, and patients can fit it into their daily schedule between work or normal activities and return to activities.

For Spravato, sometimes it's easier for patients just to carve out a couple of days and want a more rapid response. So overall, we're really optimistic from the early response from both patients and our community providers, as it relates to expansion of the treatment modalities on our Greenbrook platform.

In terms of what's next for Spravato, I think that right now since we had a staggered rollout in Q1 of the 23 centers, some of them coming on board late March. The focus, which is the message through the company for the whole year, is utilization. So it will get that operators to ramp up Spravato. As per current expansion, we will continue to look at adding Spravato for additional centers on a case-by-case basis.

But that 23 we put in place really represent the shortest [timeline] to ramp up due to physician coverage and footprint. So we'll continue to look at some other opportunities. But for now, that focus will be to continue to increase utilization both on Spravato and also on TMS therapy.

Perfect. I'll stop there. Thanks for taking my questions, and congrats again on all the progress.

Thanks.

Noel Atkinson, Clarus Securities.

Hi, good morning, Bill and Erns. And thanks for taking our questions this morning. Just following up on the prior questions about Spravato. I was wondering if you could just remind us again about what you're seeing for relative average procedure revenue for Spravato versus TMS procedures?

As we previously said, we don't break that out currently. But it is just above the average that we're seeing currently. It's just above the TMS average for a treatment. Go ahead.

No, please continue.

No, no. So from a modeling perspective, the assumption is that rates will remain stable with the obvious potential for upside based on that reimbursement as it becomes a bigger part of our business.

Okay. In prior comments, management discussed targeting 5% to 10% of total revenue from Spravato on a run rate basis exiting 2022. You folks still hoping to be able to achieve that?

That's correct. Yeah. So our plan is -- at the same time, we said we had targeted the 23 centers by early 2022. We've obviously met that target, and our Spravato program is on target. So we believe to -- we should still be coming in in that range.

Okay. You also -- it looks like you did some cost reductions in December -- reduced some staff, that sort of thing. I was wondering if you could give us a sense of what the dollar cost savings were from some of those actions on a quarterly basis? And how much could spill into -- that we would sort of see as fresh savings in the Q1 results?

So I think our savings -- good question, Noel -- our savings is two-tiered at the corporate G&A level. And really, what we -- as I mentioned, we grew that 36%. But there was about $2 million of one-time costs in there. So really flattening that off in terms of we've got capacity, and we've got all the pieces in play. So we want to keep that number on a quarterly and annualized basis fairly stable going into 2022. So that's the number one.

And then the cost of saving on the regional and direct center side is really related to, as Bill mentioned, utilization of existing established cost base. And then also, we had some rationalization of our sales force to make sure we reward the star performers and rationalize the not-so-good performers. So you'll see that in the cost line item from a utilization perspective.

So once again, the similar dynamic, we want to keep the regional line item flat but scale the revenue.

Okay. And then just before I just jump back into the queue here, the average rate -- so it's bounced around a little bit through 2021. And part of that was -- I guess a material proportion of that was the ability to collect on accounts receivable. It looks like you still have a fair amount of the legacy, little longer-aged accounts receivable.

So is there a potential for improvement on the average rate in 2022 as you start to collect again? Or are we at the sort of the typical collection run rate here?

No, I think there's certainly -- in terms of -- from a new business perspective, I think our average revenue per treatment is representative. What can -- what we've said before, we continue to collect on aged receivables. And changes we've made in our revenue cycle team has yielded significant results as well. So there is definitely upside as it relates to collecting on those older accounts.

Okay. Great. That's it for me. Thanks so much.

Thanks, Noel.

(Operator Instructions) Marie Thibault, BTIG.

Hello, Bill and Erns. Thanks for taking the questions, and congrats on the progress here. I wanted to ask a first question here on -- you called out stronger conversion rates during Q4. We would love to hear what factors are influencing that or what efforts are driving that success.

Sure. I mean really the conversion rates are something we monitor and measure every day. We have real-time data on the performance. We're constantly working and training that group of individuals at our call center and at our centers. The focus on that area is to really value and trust every lead that comes in to give it your best effort.

As you know, Marie, in covering this industry, it's really hard to get a patient in the door. When they finally have that courage to do so, you have to give them every opportunity to make that happen. The patient today is a little bit different in the sense that a little bit of the low-hanging fruit is gone, and you're dealing with a patient that has probably failed six, seven, eight cycles of meds. So it's much harder to get them into the center.

But once they're into the center and get through the consult process, our conversion rates are fantastic once we get them into the chair from consult to conversion. So that's something we constantly work with. That process is done on a front end by a call center, and then moves into the patient consultant at the center, where that patient can see the center, see the equipment, and have a chance to meet the doctor.

That is, again, something we monitor and kind of lead and measure every day.

Yeah. Okay. Sounds like some cumulative efforts coming together there. Sounds good.

A couple of questions here then on Spravato. Curious about the competitive landscape you're seeing for Spravato around those 23 centers where you have it, as well as how it's maybe changing, if at all, kind of the inflow of patients coming into your centers, whether Spravato is drawing them in and then they're learning about TMS that way. Just curious about how that sort of changing the dynamic of patient attraction to the TMS centers.

Yeah. Really good question. Obviously, physicians are comfortable with scripting for Spravato, as it is a drug. So that is something the psychiatric base is used to doing. So it does have a -- if you look on the Janssen website, there's a significant amount of doctors that are providing Spravato to their patients.

With that said, we have not -- there's competition in TMS as well, but we have not seen an impact to our rollout. In fact, we've done a great job in terms of not only rolling it out, but really created utilization at some of our early centers in a pilot.

As far as what that's done for the patient, I think I alluded to that in my earlier comments, which is the response from both patients and our community-based physicians who work with us has been outstanding.

And from my end, it's really giving that patient a chance to come in and our physician deciding what is best for them, whether it be TMS therapy or whether it be Spravato. What we're seeing is it's expanded our capture area in terms of the number of patients that are calling in. We have significant amount of calls coming in on Spravato. We do some direct-to-consumer work with Spravato, and we work closely with the manufacturers and also patients in the pipeline.

So for me, I'm really optimistic about the rollout of both the combination of Spravato and TMS therapy. It gives us the opportunity to decide what is best for that patient in terms of the treatment modality. And they actually do complement each other and actually cross-refer to each other in a sense that a patient may come in for TMS, but not at the moment -- they need a quicker onset of action -- may go to Spravato to start and then switch over to TMS.

So we think it's a feeder system for both. And again, the response has been really strong from both patients who have worked with Greenbrook in the past or new patients and more importantly, the community-based referrals working with us.

Okay. Very good. Thanks for all that color. Very helpful.

One last quick one for me then here. Just curious of any impact, as part of the macroeconomic environment, we're seeing today. I know you're further away from certainly supply chain logistics and input costs. But I'm curious of rates or any impacts to how you think about real estate, anything that we should be aware of on the macroeconomic front. And thanks, again, for taking the question.

I think in terms of -- as you mentioned -- and thanks, Marie, very good question. As you mentioned, the supply -- we've been shielded from the supply. We're lucky in that way that there's not a lot of short supply of the devices. I think the only impact which has been globally experienced by all companies is the labor market.

It's obviously challenging, especially at our technician level. I think the benefits that we have is that we really offer quality employment. We offer that individual a lot of patient face time and a really valuable experience to enhance their career. And to a certain extent, that has mitigated some of the challenges that we've experienced in the labor market. But that would be the main one that's impacted us.

Thank you.

There are no further questions at this time. I would now like to turn the call back over to Mr. Leonard.

Thank you very much for joining the call today. We look forward to keeping you updated on the progress of the company, and really have a good start to spring. And we'll talk to you all in a couple of months. Thanks, operator.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.