Neuronetics Inc (STIM) 2018 Q3 法說會逐字稿

Good morning, ladies and gentleman, and welcome to the Neuronetics Third Quarter 2018 Earnings Results Conference Call.

(Operator Instructions) As a reminder, this call is being recorded.

I would now like to turn the conference over to Mark Klausner from Westwicke Partners.

Sir, you may begin.

Good morning, and thank you for joining us for Neuronetics' Third Quarter 2018 Conference Call.

A replay of this call will be available on our website for 30 days.

Joining me on today's call are Neuronetics' Chief Executive Officer, Chris Thatcher; and its Chief Financial Officer, Peter Donato.

Before we begin, I would like to caution listeners that certain information discussed by management during this conference call will include forward-looking statements governed by the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements relating to our business strategy, financial and revenue guidance and other operational items and metrics.

Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business.

For a discussion of risks and uncertainties associated with Neuronetics' business, I encourage you to review the company's filings with the Securities and Exchange Commission, including the company's final prospectus relating to its initial public offering, and the company's quarterly report on Form 10-Q that will be filed today.

The company disclaims any obligation to update any forward-looking statements made during the course of this call, except as required by law.

During the call, we will also present certain financial information on a non-GAAP basis, including EBITDA.

Management believes that non-GAAP financial measures taken in conjunction with U.S. GAAP financial measures provide useful information for both management and investors by excluding certain noncash and other expenses that are not indicative of our core operating results.

Management uses non-GAAP measures to compare our performance relative to forecasts and strategic plans to benchmark our performance externally against competitors, and for certain compensation decisions.

Reconciliations between U.S. GAAP and non-GAAP results are presented in tables accompanying our earnings release.

Reconciliation of the non-GAAP financial measures to the approximate GAAP measures is provided in the company's press release for the quarter, which can be viewed on our website.

With that, it's my pleasure to turn the call over to Neuronetics' Chief Executive Officer, Chris Thatcher.

Good morning, everyone, and thank you for joining us on today's call.

I'll start by providing an update on our performance during the third quarter followed by an update on the progress we've made towards our key priorities.

I will then hand the call over to Peter, who will walk through our financial performance and guidance, after which, we will open the line up to take your questions.

The third quarter was very strong, with worldwide revenue growing by 31% over the prior year, and U.S. revenue growing by 30%.

Our performance continues to validate the commercial strategy that we have developed and put into place, our ability to execute in a competitive market, and most importantly, the promise of NeuroStar Advanced Therapy's clinical outcomes for patients, which offers a viable alternative for psychiatrists serving their patients with treatment-resistant depression.

As we've mentioned on our first call as a public company in August, we have 3 strategic priorities, as we seek to drive growth in our business.

As a reminder, the first one is to continue to drive the adoption of NeuroStar Advanced Therapy in the U.S. through the expansion of our sales force and the implementation of marketing initiatives.

Second, increasing reoccurring treatment session revenue by improving active system utilization by penetrating high-volume single and group practices.

And third, make progress towards obtaining reimbursement approval and expanding commercialization in Japan.

I would now like to provide an update on the progress we've made on each of these priorities.

During the third quarter, we continued to expand our sales force.

Our goal for 2018 was to add an incremental 15 BDM territories adding to the 29 BDM territories we had at the start of the year.

As a reminder, BDM or Business Development Managers are focused on capital sales.

During the first half of the year, we filled 10 of those 15 BDM territories, all of which were active by the end of the second quarter.

In the third quarter, we filled 4 of the remaining 5 territories, slightly ahead of plan.

And I'm pleased to report that each of those 4 territories are fully trained and active.

The plan is to fill the final position in Q4, and with a total of 44 BDM territories at the end of the fourth quarter and going into 2019, we believe we can continue to grow growth in the active installed base into the future.

We anticipate the continued expansion of our BDM territories in 2019.

We're very excited with the quality of the salespeople we've been able to attract, and we believe it speaks to the significant market opportunity for NeuroStar Advanced Therapy.

We have developed a proven sales strategy as demonstrated by consistent growth, both as a private and a public company.

However, I felt we could and can do better.

To help drive our ongoing commercial execution, we created a Chief Commercial Officer role in the second quarter to manage our larger and expanding sales and marketing teams, and manage the day-to-day commercial operations.

This role oversees approximately 130 people across a variety of functions, including sales, marketing, reimbursement and customer support.

Shifting gears to our marketing initiatives.

As we mentioned on our last call, during the second quarter, we launched a national TV advertising campaign aimed at raising patient awareness that NeuroStar Advanced Therapy can treat major depressive disorder, should anti-depression medications not work for them.

All of our website metrics were up significantly, immediately following the launch of the TV ads, and we believe that at least some of the uptick in treatment session revenue during the middle part of the year was due to the TV ads.

In addition to driving sales, another goal of these ads were to further develop the NeuroStar brand and increase the awareness of NeuroStar Advanced Therapy among major depressive disorder patients, their families and friends, as well as psychiatrists and physicians.

Based on the success of the initial TV ads, we have decided to launch another round of TV ads during the [first] quarter, in order to continue to increase treatment session revenue and brand awareness.

As some of you may know, October was Depression Awareness Month.

In conjunction with our ongoing marketing efforts, we launched additional PR, online interviews and televised satellite tour designed to increase national awareness and to educate the public on NeuroStar Advanced Therapy as an innovative depression treatment option, while sparking a much-needed dialogue on breaking the stigma associated with mental health.

The satellite tour was picked up by tens of TV stations across the country.

During October, the company hit a milestone as the 2 millionth NeuroStar Advanced Therapy treatment session was delivered.

It is incredibly rewarding to be part of a company that has transformed so many lives and continues to do so every day.

We remain focused on providing hope to those who need it most, and make sure as many people as possible know about this proven treatment, not just during national Depression Awareness Month, but throughout the year.

Subsequent to the end of the third quarter, the company attended the 31st Annual U.S. Psychiatric and Mental Health Congress, more commonly known as the Psych Congress held in Orlando.

While at the Congress, we hosted a context-sensing challenge, which allowed attendees to witness how easy it can be for a TMS System to lose contact with a patient during a treatment session, especially when the system lacks the ability to monitor a patient's positioning.

The smallest movement by the patient during treatment can result in a dramatic loss in the prescribed treatment dose.

Even a 1-millimeter movement of the head away from the coil can result in a 40% loss of the prescribed treatment dose.

Our patented continuous contact sensing solves this problem.

NeuroStar is the only TMS System in the market that provides contact sensing technology, to deliver the right dose to the right location every time to treat depression and maximize a patient's chance of achieving remission.

We believe that this allows for precise and reproducible treatments for each and every patient.

This is just one example of how we have developed our market-leading position.

Turning to our initiatives to drive reoccurring treatment session revenue.

On our last call, we discussed our strategy to introduce and integrate the CTC or the Clinical Training Consultant.

During the second quarter, we hit our 2018 target of hiring and training 9 CTCs.

The CTC position was created to allow the CPC or the Clinical Practice Consultant to focus on driving pull-through rather than spending time training and onboarding new practices.

While we are seeing accelerating revenues or volume increases for treatment sessions, it's too early to disaggregate and attribute that increase directly to this initiative.

However, there has clearly been a positive improvement to utilization.

So we're encouraged that the combination of all of our strategies, the BDM expansion, the CTC integration, high-volume, target account focus and market efforts -- marketing efforts are driving growth in the business, and have set the stage to continue our success in the fourth quarter and into 2019.

As Peter will discuss in more detail, we have seen a significant uptick in treatment session volume year-over-year.

This is being driven both by the increase in the active installed base, and an increase in the utilization per system.

Much of this increase is due to the execution of our HVT strategy, as we see these practices performing at higher volumes.

This speaks to the market demand for our therapy and the ability of motivated providers to attract patients.

As it relates to our product pipeline, we had a successful launch of our next-generation TrakStar practice management system during the second quarter.

Early feedback has been very positive, as practitioners have commented on the fact that they really like the cloud-based data management system, because they are able to better monitor system usage real-time across their existing offices along with employee usage of the system in order to increase efficiency across their network.

Lastly, we continue to make good progress towards achieving reimbursement in Japan by the end of 2018.

During the second quarter, the Ministry of Health, Labor and Welfare or MHLW accepted our submission for reimbursement.

Since that time we have had very positive interactions with MHLW.

We currently expect that our reimbursement code will be decided in the December of 2018, and published in March of 2019, at which point, we can commence commercial efforts.

In advance of the anticipated decision on reimbursement, our partner in Japan, Teijin Pharmaceuticals has been working diligently on market development efforts to be prepared to launch.

In order to do so, they have focused on sales rep training, physician training, and the establishment of key reference sites.

Teijin has made a significant investment in sales force education in order to have 100% of their reps fully trained on selling NeuroStar Advanced Therapy.

They've also been very proactive in getting physicians trained, both on the science of TMS in general as well as the benefits of NeuroStar Advanced Therapy.

Year-to-date, 150 providers have gone through the general science training on TMS and about half have now completed NeuroStar Advanced Therapy training, and the remainder are on track to be completed by year-end.

These trainings have been very well attended, and there continues to be high demand for future events with an upcoming January 2019 TMS training session already fully booked with 150 physicians.

Teijin's free commercialization activities are well on their way.

They're establishing key sites throughout Japan to allow as many prospective accounts as possible to interact with the NeuroStar system and speak with KOLs on the treatment.

We will continue to provide updates on our progress in Japan, as key milestones are achieved.

I would now like to turn the call over to Peter for a financial review.

Peter?

Thanks, Chris.

Total revenue for the quarter was $13.7 million, a 31% increase over the prior year quarter.

U.S. revenue was $13.5 million, an increase of 30% over the third quarter of 2017.

OUS revenue was approximately $220,000, an increase of 135% versus the prior year period.

The increase in OUS revenue was primarily a function of milestone payments as well as a small number of treatment session sales to our Japanese distributor.

You should be aware that the milestone payments in Japan of $2.75 million collected to date are being amortized over the life of the contract.

U.S. NeuroStar Advanced Therapy System revenue was $3.9 million during the third quarter, a 38% increase over the prior year.

As a reminder, NeuroStar Advanced Therapy System revenue primarily consists of revenue from capital sales, but also includes revenue from coils, rentals and upgrades.

Capital revenue grew 58% driven by higher volume during the period as a result of our ongoing sales force expansion and marketing initiatives.

In addition, we saw a 1% increase in average selling price as compared to the prior year period.

These positive trends were partially offset by lower upgrade, rentals and other related revenue in the quarter.

During the quarter, we saw our active installed-base increase to 858 units, a net increase of 42 units from June 30, 2018, and an increase of 133 units from September 30, 2017.

Keep in mind, we define an active unit as a NeuroStar unit that was either purchased or rented during the quarter or one which has ordered NeuroStar treatment sessions during the last 12 months.

U.S. Treatment session revenue was $9.2 million for the third quarter of 2018, an increase of 28% over the prior year quarter.

The increase was primarily due to an approximate 31% increase in treatment sessions purchased, plus a 3% increase in other treatment session revenue.

This was partially offset by an approximate 6% decline in treatment session ASPs.

This pricing decline was slightly higher than our expectations due to the success of our HVT strategy, which has resulted in higher realization of volume pricing discounts that we provide to customers, who perform a significant number of procedures as Chris talked about earlier.

U.S. service and other revenue was approximately $400,000, a 15% increase as a result of our expanded active installed base.

Gross profit for the third quarter of 2018 was $10.7 million, an increase of $2.8 million from $7.9 million during the third quarter of 2017.

Gross margin for the third quarter of 2018 was 77.9%, which was higher than the third quarter of 2017 gross margin of 74.9%.

The improvement in gross margin was driven by increased leverage on our field service and operations cost as a result of higher year-over-year total revenues, which were slightly offset by lower international NeuroStar sales.

While we are starting to see operating leverage and expect to see a benefit from that in the future, we do not expect to see such a significant year-over-year uptick going forward.

As a reminder, we continue to drive gross margins toward the mid-70% range for 2018.

Sales and marketing expenses for the third quarter of 2018 were $9.7 million, an increase of $3.1 million over the prior year period.

The increase was primarily due to costs associated with the expansion of our sales force, as well as additional marketing efforts.

General administrative expenses were $3.2 million, an increase of about $1 million compared to the prior year.

The increase was primarily driven by higher expenses as a result of being a public company.

Research and development expenses for the third quarter of 2018 were $2.1 million, an increase of approximately $300,000 from the prior year period.

The increase was primarily due to continued investment in advanced development projects, partially offset by lower spending on clinical studies.

Net loss for the third quarter was $5 million, compared to a net loss of $3.8 million in the third quarter of 2017.

EBITDA, which is a non-GAAP measure for the third quarter of 2018 was a loss of $3.8 million compared to an EBITDA loss of $2.8 million in the third quarter of 2017, for all the reasons cited previously.

Moving to the balance sheet.

We ended the quarter with cash and cash equivalents of $106.8 million compared to $14.5 million at June 30, 2018 and $29.1 million at year-end 2017.

Cash usage during the quarter was in line with our expectations.

As a reminder, on July 2, 2018, we closed our IPO in which we issued and sold 6.325 million shares of our common stock at a public offering price of $17 per share.

We received net proceeds of $96.5 million after deducting all operating expenses, which given the timing of our offering was not reflected in our GAAP reported cash number at the end of Q2.

Turning to guidance.

For the full year 2018, we now expect total worldwide revenue of between $51 million and $52.5 million, representing growth in the range of 26% to 30% over the prior year.

This is an increase over our previous guidance range of $50 million to $51.5 million.

I will now hand the call back over to Chris.

Thank you, Peter.

We had very strong third quarter.

We were able to grow revenue by 31%, as we continue to sell more NeuroStar Advanced Therapy Systems, while at the same time driving greater pull-through within these placements.

This exceptional growth has come as a result of focused efforts on the long-term commercial strategy that we put in place, in combination with the development of our industry-leading TMS technology for the treatment of drug resistant-depression.

We're very excited about the future at Neuronetics.

Looking at the remainder of 2018 and 2019, we will continue to work diligently to bring NeuroStar Advanced Therapy to an even greater number of psychiatrists and their patients.

With that, I'd like to open the line for questions.

(Operator Instructions)

Our first question comes from Matthew O'Brien with Piper Jaffray.

Either Chris or Peter, just in looking at the guidance for the year, obviously, really good performance during Q3.

Guidance coming up a little bit for Q4 here -- for the full year, sorry, Q4 not changing much, an easier comp that you just saw here in Q3 -- here in Q4.

So just wanted to make sure there is not anything that we're missing from a system placement perspective?

A bigger bulk purchase in Q3?

Or anything along those lines that you're trying to signal here in Q4 that may weigh a little bit on the top line, even though it's still really good expected top line growth?

Yes, thanks, Matt.

This is Peter.

I'll let Chris answer with some color commentary, so just to put closure to first part of your question, there is nothing unusual or any bulks or nuances that would influence that guidance one way or the other.

So I'll let Chris add some more commentary around Q4.

Yes.

Matt, thanks for asking that question.

If you look at Q4, Q4 is one of our lowest quarterly growth rates year-over-year for treatment sessions.

Typically, what happens in Q4 is NeuroStar System sales are at the highest of the year.

And we're expecting terrific NeuroStar System sales in Q4.

Although we increased our CTCs, the increase in Q4 system sales provides a headwind to a pull-through efforts due to the higher number of installs and trainings required.

They're out there.

We're going to have to -- with the number systems expected in Q4, this will outstrip the CTC team and the CTC team will be involved in installs.

This happened again last year as well.

So there is a -- and there's also a couple of points of growth here.

In Q4, 2017, we benefited from the launch of the upgraded coil, and that's not going to occur this year.

But that's a couple of points of growth there as well.

Okay.

Very fair.

And then -- and obviously, the capital number was extremely strong this quarter.

Can you just deconstruct a little bit the performance among some of your more established reps versus some of the newer ones?

Because as I look at the numbers, versus what you did last year, there is -- I think there is an opportunity for the entire group to go up pretty meaningfully from a productivity per quarter perspective not -- they're not trending very well right now.

But is that a fair assessment?

Or just again, can you just kind of deconstruct the older reps versus the ones that you recently brought on board?

Yes, yes.

So good question.

So our model, the way we think about it is, as we add reps and as they mature, they become more productive.

And that typically occurs somewhere between 12 and 18 months they hit their stride and their performance is higher.

And so when you look at our hiring, we did a fair bit of hiring in the fourth quarter of last year, and then we paced it early part of this year.

On a weighted average Matt, we actually have slightly less experienced reps in Q4 of this year than we actually did in Q4 of last year.

So -- and then there is generally not a cliffing or a binary event that takes place, it's gradual over time.

So the productivity on a quarter-over-quarter basis is actually lower.

But our full-time equivalents are up almost 80-plus percent versus this time last year.

Got it.

And last one for me.

And I know it's really early, but I'm just a little bit curious about the impact of the CTCs on the CPCs?

Anything you can provide just a little bit of color, again, I get it's early as far as the impact that those folks are having on your treatment session business.

Yes.

So it's difficult, Matt.

I mean, the way to solve for that empirically is that we don't do any other activities in the field like BDM expansion, the marketing and soft target and high-value targets, just to track kind of what happens with those CTCs, that's a difficult exercise and not in the best interest of the business.

I think more intuitively, this time last year the CPCs were doing all the training.

This year, we have 11 full-time bodies doing all of the training.

And as I mentioned in the last call, that gave us really good leverage in Q1, Q2 and Q3.

But that leverage starts to wane over the quarters.

And as we move into Q4, there is a big step-up here in system sales.

We have this 44-man army -- men and women army out there, who are really maturing, and we're expecting big things from them in Q4.

So I think they'll outstrip that leverage fortunately, unfortunately in Q4.

And then, we'll look to add more CTCs and CPCs here in the future.

Our next question comes from Margaret Kaczor with William Blair.

So first off, I was hoping to focus a little bit more on the utilization for active system, which for us by our math might even approach double-digit growth, which is quite strong.

So first, can you comment whether it reached double-digit growth?

And then second, maybe walk us through what could drive that as we go forward into Q4 and into 2019, especially, since it sounds like you're going to do a little bit more DTC study in Q4?

Right.

So we're really excited about the total NeuroStar treatment session revenue growth.

I mean this was a big step up and we've managed to improve quarter-over-quarter on that.

And then the other thing is, is we're selling a lot more systems, right?

So -- and those systems -- when we sell those systems, they don't really attribute to utilization very much in their first couple quarters.

So when you think about our NeuroStar treatment session utilization growing just north of 8% year-over-year with a 20% increase in the number of systems over prior year, I mean, that typically is dilutive to system utilization.

The fact that we can post high single-digit growth on a per unit basis, we're pretty proud of that right now.

Okay.

So maybe just to key-in further kind of on various reasons for that and kind of the spending on the DTC.

So if you go on Google trends and you start to see all the hits coming up on NeuroStar, or on iSpot.tv you can see the amount of ads that are going out on you guys whether it's you or whether it's some of the local ads that are going around out there to your depression tour.

But can you walk us through kind of the revenue return per dollars spent?

How quickly we should see a return on that spending?

And then whether or not you guys can target your ads better now that you have a little bit more experience with it as well?

Yes -- no, thanks, Margaret.

Yes, so we qualified the first DTC campaign as a beta.

And we learned a fair bit.

We learned a couple things as it relates to the channels in which we were going to extend through meaning actually the TV channels.

And so we've actually modified this campaign based on those learnings.

We're actually going to fewer shows that are more closely targeted actually to depression audience.

We can get some research.

We have some research now, where people with depression tend to watch.

The second thing is, is operationally what we're doing this time is we found out that if a provider doesn't call back through our website they can request an appointment or schedule an appointment or click a call.

And if they don't call back that patient immediately they lose that patient.

So we've actually worked with our providers leading into this round of DTC to tighten up that feedback loop.

So those are the things that we're doing differently.

I would call this a beta-plus program, and we're still experimenting.

We are -- we do know that we are breaking all of our records already right now in web sessions, physician-locator searches, and booking appointments at this stage of the campaign versus last year.

And the challenge there is then being able to track those patients, getting to the practice, and then once they get to the practice, turning them into treatment sessions.

So we're tightening that feedback loop on this next round.

And we'll be able to understand going forward a little better what that return on investment is.

But I think, we've qualified and quantified this before, this is not millions of dollars of spends, we're learning as it relates to what the return on investment is here.

But clearly, it did help us, I mean, the types of numbers that we're seeing here in the third quarter and in the back half of the second quarter are up, and this is just one reason why.

If you guys go to the next stage it sounds like you did get utilization growth right up.

And then just kind of last question on Japan.

I think you guys have a number of NeuroStar systems already in Japan.

And I think you referenced 150 physicians that are showing up to some of the training sessions.

So are those folks that already have a system?

And then once you do get reimbursement, should we assume a pretty quick ramp given the installed-base that is already out there?

Oh, yes, thanks.

So really there are no active commercial units in Japan currently.

And the only thing that's in our revenue line right now is an amortized milestone payment for the upfront milestone that we got from Teijin, when we signed the contract.

So what you're seeing -- so what's going on is the JSPN called -- has an annual meeting, 2 meetings a year where they train on the basic science of TMS.

And in June, they held their meeting and in 72 hours of notice of the meeting, the meeting was full.

And they announced a couple weeks ago that they're doing a course again in January, and within 2 days the meeting was full.

So these are people that don't have systems, that are really interested in learning more about the science.

And then what happens is our partner, Teijin, then takes about 20 of those providers every month and brings them to their facility and goes through the NeuroStar Advanced Therapy System in detail with them, so they're familiar with the technology.

And then what they are also working on right now is capital equipment budgets in 2019.

So they're setting the stage with these providers roughly somewhere between 200 and 300 before capital equipment budgets are due, they'll have talked to and discussed the opportunity to put a NeuroStar Advanced Therapy System into their facility.

And our next question comes from Jason Mills with Canaccord Genuity.

Congratulations on a good quarter.

I was going to start somewhere else Chris, but the Japan discussion, I wanted to pull on that thread little bit more, it sounds interesting.

So can you frame the Japanese opportunity for us again, relative to the U.S. opportunity?

Just as you look at the geographical makeup of Japan, the patient makeup of Japan relative to the U.S., just as using the U.S. as a guide?

And just sort of give us some sort of a qualitative assessment of how Japan may play out next year?

Because I don't think many of us have much in the way of revenue and the stock probably doesn't trade on Japan next year, but if you're doing well in the U.S., and you get a kicker in Japan, it certainly will make a difference.

So maybe you level set us with Japan and how that rolls out in the first year?

Sure, Jason.

Yes, thanks for the question.

Right.

So when we think about the market opportunity, we think about the market opportunity in the serviceable addressable market to be about 1/3 of what it is in the U.S. The serviceable addressable market in the U.S. is about $3 billion.

The serviceable addressable market in Japan is about $1 billion.

The difference in Japan is, they actually have a much higher concentration of psychiatric-only hospitals, local community-based hospitals.

And a lot of their moderate to severe MDD patients are actually admitted to inpatient facilities.

And they're not treated on an outpatient basis.

So it's a little bit slightly different model.

That's why we picked our partner Teijin Pharma, because they have really good relationships within the inpatient hospitals throughout Japan, and these psychiatric hospitals throughout Japan.

So that's why we picked that partner.

We have not -- giving any guidance as it relates to revenues for Japan.

We will provide that in the -- during our first quarter call next year.

By that time, we'll better understand not just if we got reimbursement, what that reimbursement rate is, because that will certainly have some impact on the first year and the following year revenues.

The other thing -- the only other thing I'd say is that the awareness in Japan is on TMS is actually much higher than where the company started when the company got their approval in 2009.

And there is quite a bit good understanding of our success here in the States.

And so I view that adoption curve to potentially be better sooner, faster, steeper in Japan early versus the adoption current that we had when we first rolled out the product here.

And remember, the other thing is, is that we'll have national reimbursement.

So everyone will be covered come March 1, if everything goes through this year.

Everyone will be covered March 1. So we don't have to worry about converting the max in 95 other private payors.

We won't have that barrier of entry in our way.

Got it.

That's helpful.

And just a follow-up on this and then one for the U.S. Maybe give us a sense for the competitive landscape in Japan as you see it over the next couple of years?

You're doing fine here and there's a few smaller competitors that we get questions on, but clearly, in the United States here, you're doing just fine.

In Japan, what's that look like?

Yes.

So Japan -- we know that one of our competitors applied several years ago for approval.

And our understanding was that they didn't accept their clinical data.

But that was many years ago.

We understand that at least one of our competitors has applied for approval.

And it remains to be seen what MHLW will require, as it relates to the clinical data.

That said, we feel like we've got a head start for sure, I mean, we're going to be the only approved product in Japan to start.

And then, others will have to get their product approved during MHLW process.

So the competitive landscape will be a little bit less competitive than in this year in the U.S.

Okay.

And then just lastly for me in the United States, Chris, can you give us a sense for -- you placed more NeuroStar Systems than we were modeling this quarter, which is good.

And I'm just curious the makeup of those new system placements, specifically, into which they are going?

Maybe talk a little bit about the number of brand-new customers that you brought on board this quarter?

How that's trending?

Folks that are adding a second or a third system?

And what that might mean to utilization?

Just any context you can give with respect to the complexion of customers in the quarter?

Sure, Jason.

So we've seen over the last couple quarters more multisystem initial purchases from first-time customers.

And most of our purchases in any given quarter are from first-time customers.

And so -- and then, we are seeing the number of systems per location increase slightly from where we were at the beginning of the year.

So we are seeing some follow-on in our existing customer base, and we are seeing more multisystem purchases upfront.

And I'm showing no further question at this time.

I'd like to turn the call back to Mr. Chris Thatcher for any further remarks.

Thanks again, for joining us today.

And we look forward to updating you on our progress on our next call.

Ladies and gentleman, thank you for participating in today's conference.

This concludes today's program.

You may all disconnect.

Everyone, have a great day.