Q1 2022 Greenbrook TMS Inc Earnings Call
Speaker 6: Welcome to the greenbook DMS Inc. Q1 2022 results. Conference call and webcastall lines are currently onneed to prevent any background noise.
Speaker 15: I would like to remind you that this conference call is being recorded today and is also being webcast on the company's website at W greenbrookkes DMS com under their Investors section events.
Speaker 15: After this speaker's remarks, there will be a question-and-answer session. Analysts and investors are reminded that any additional questions can be directed to the company at Investor Relations at brainbroook's PMS com.
Speaker 15: This call contains forward-looking statements which reflect the current expectations or beliefs of the company, based on current available information. Forward-looking state 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 and the forward-looking statements.
Speaker 15: Factors that would 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 two 20 F for the fiscal year ended December 31: 2021 , and in the risk and uncertainties section of the company's management discussion and analysis for the period ended March 31.022 thousand, and in the company's other materials filled with the agent, Securities regulatory authorities and the? U's Securities and Exchange Commission from turn to timewhich are available on cededar edar on the company's website.
Speaker 15: Any forward-looking statement speaks only of the date on which it is made and the company disclaims any intent or obligation to update any forward-looking statement unless required by. lawi would now like to turn the meeting over to MR bill leenard, President and Chief Executive Officer of Greenbrook TMS, and ernslobster, Chief Financial Officer.
Speaker 15: Go ahead Please, MR enard.
Speaker 16: Thank you Erica, and thank you to everyone for joining our conference call and webcast today.
Speaker 17: Despite the impact of the omniron COVID-19 barri and early in the quarter, the company conting to see growth in both revenue and new patient starts compared to Q1 2021 and.
Speaker 18: Quarterly revenue increased by 15% in Q1 2022 to thirteen point one million as compared to q1- 2020 1, while new patients starts increased by 15% to a record one thousand eight hundred and seventeen. And Q1 2022 as compared to Q1 2021, which we believe points to strong four momentum into Q2 2022 as patient volumes start to normalize late in the quarter.
Speaker 16: During Q1 2022, the company again need to manage staff COVID-19 protocols and refer over down, as many psychiatrists did not return to in-person practices and were're not accepting new patients.
Speaker 16: The results you are seeing are through exceptional efforts of our team working to continue to deliver the highest quality of patient care and a very challenging operating environment where mental health remains a key focus.
Speaker 16: We are excited about the ongoing rollout of spravado program at select TMS centers, which continued through Q1 2022. this program supports our long-term business plan of utilizing our network of TMS centers, deliver new and innovative treatments to patients suffering from MB and other mental health disorders.
Speaker 16: Providing BRAVO at our TMS centers enables us to leverage excess capacity in our existing centers, thereby enhancing our profit margins.
Speaker 16: As of March 31, twent thousand and 22, the company has expanded its offering of savado to 23 TMS centers across the U? S.
Speaker 19: We will continue to explore opportunities to expand our spravado offering throughout the U? S.
Speaker 16: From a development perspective.
Speaker 16: As at March 31, 20 andtwenty-two, our footprint consist of 100 and fortyy-eight centers in 17 states, up from 100 and twenty-eight centers as of March 31. twent thousand and twenty-one.
Speaker 18: Lastly, we're extremely excited to announce that we have entered into an agreement to acquire success, TMS.
Speaker 20: This acquisition add 45 active TMS centers to our footprint, with new management regions in the states of Illinois, New Jersey Nevada, Pennsylvania and Wisconsin.
Speaker 17: Bring our pro forma footprint to 191 active TMS centers.
Speaker 21: We believe that this acquisition will be transformed of to not only the business, but to the entire behavioral health space.
Speaker 20: It has the potential to add more than three million in revenue, opening up several new regions while enhancing our management capabilities in this Comm tremendous growth industry.
Speaker 16: We anticipate that the finanal benefits will be significant, as we believe that the near-term synergies we resulting from this acquisition may be able to produ produce EBITDA, positive operations for the combined business and accelerate our time lines to profitability.
Speaker 16: Furthermore, we believe that the acquisition will deepen management expertise access Ro busust, payer and physician networks and transform the business profile to access.
Speaker 17: The required debt financing sources.
Speaker 17: We also believe that the all-equity deal structure aligns incentives to build substantial shareholder value as a combined entity.
Speaker 16: And now with a more detailed review of the company's financial and operating performance, I will turn it over to our CFO . Earns losh.
Speaker 16: Thank you, boll. As boul mentioned, quarterly revenue increase by 15% to 13.1 million as compared to Q1 2021. This was predominantly due to the achieved pmt East and central acquisition which was completed in four 2021, as well as the increase in our new patient starts and treatment volumes from strong growth within our mature region year-over-year. Year-over-year growth was however, heavily impacted by provid 19 omomeicterrun variant, especially early in the quarter.
Speaker 22: Typical seasonal factors, amplified by harsh winter weather and the impact of COVID-19 omicranvient also affected growth over Q4 2021.
Speaker 23: Average revenue. Both treatment increased by 2% to 2- 21 in q1- 2020 -two, as compared to q1- two thousand and 21. this increase was permed primarily as tributed to a change in payer mix and the geographical distribution of revenue.
Speaker 22: Same region, sales growth was 8% in Q1 2020 -two.
Speaker 24: Q1 20 and 20. two, the resulted in an entity-wide regional operating loss of one million, a 30% reduction in the losses compared to Q1 first 2021. This was a result of the increase in revenue, offset by an increase in direct cent and regional costs as a result of operating one hundred and forty-six active TMS centers as of March 31 2022, as compared to one hundred and nineteen active TMS centers as of March thirty-first 2021.
Speaker 22: Corporate G for the four qone 2021 increased by 9% to five point one million, as compared to four point seven million. In Q1 2021, compared to Q4 2021, corpate GNA increased by only 3%, demonstrating a flattening of the GNA as the company matures.
Speaker 22: We continue to have operating revenue leverage in our platform and the planned revenue ramp and the contribution from success DMS acquisition BID with us. Stabilization in spend supports a near-term path to profitability.
Speaker 25: The last fter period and comprehensive loss increased by 2% during q1- 2020 -two as compared to q1- 2021 .
Speaker 24: From a balance sheet perspective, the counrents receivable balance in Q1 2022 decreased compared to Q4 2021 as we continue to see strong cash collections boeling off the momentum we saw in the second half of 2021.
Speaker 24: Our cash balance was five point seven million, including restricted cash, as at March 31 20- 22. as Bill mentioned, we are very excited about the success DMS transaction, which we expect will provide the company with significant, significant scale synergies and which we believe provide a highly compelling debt financing prospects.
Speaker 24: In conjunction with the acquisition, we are seeking additional debt financing from third-party lenders to fund the company's expansion plan and for general corporate and working capital purposes. The prospective debt is expected to strengthen the company's balance sheet, with a goal to fund the combined entity to cash flow self-sufficiency.
Speaker 24: We are currently in various stages of discussions with prospective lenders. Although there can be no assurance that the debt financing will be completed terms favorable to the company or at all, we believe the combined businesses of var attractive prospect to potential lenders.
Speaker 22: Moving to our cooperating metric.
Speaker 24: At at the end of Q1 2, Y and Twenty 1, the total team in centsored increased 16% to high one and 48 from one to one hundred twenty-eight a year ago.
Speaker 22: Compared to qy one 2020: one the number of consultation performs decreased by 3% to three five zero 1, while the number of new patients starts increased by 15% to a record of eight en hundred and seventeen and.
Speaker 25: This points to stronger conversion rates due to higher quality leads as a result of enhanced targeted marketing in Q1 2022 as compared to Q1 2021.
Speaker 26: The number of treatments performmed increased by 13% to 59.067 thousand as compared to Q1 2021.
Speaker 24: As B mentioned, market conditions were challenging during Q1 2022. however, patients starts bans back strongly late in the quarter, leading to what we believe is strong momentum in Q2 2022.
Speaker 27: Furthermore, we expect that acquisition of success DMS will provide significant scale to the business, with an anticipated immediate post-closing annualized contribution of over three million in revenue, representing over 50% growth as compared to greenbrooks 2021 annual revenue. We also believe tangible near-term synergies will accelerate the path to profitability and cash flow flow self-sufficiency back to you both.
Speaker 28: thankcerns. Despite the impact of the COVID-19 mainten oncrime variant Earth in the quarter, we continue to see brazilient growth, both revenue and new patients parts, with the latter producing a record result during Q1 2022. Our sboado program adds our reperto of innovative treatments, building on the company's long-term business plans of utilizing its center network as the platform serve patients suffering major depression disorder and other mental health disorders.
Speaker 21: Expect this to be a core growth driver going forward.
Speaker 17: I would like to reiterate that we are extremely proud of our dedicate team that continues to deliver the highest level patient care in a very challenging operating environment. Most importantly, we believe our business is a needed one mental health treatment and demand is that unprecedented levels. Our business fundamentals remain sound and with the acquisition of success CMS, we believe will become an even more prominent player in behavioral health market, positioning us better than ever to serve the unmet need for mental health support across the United States.
Speaker 16: We now treated over 24 thousand patients.
Speaker 17: With over 84 thousand treatments to perform a significant positive impact on the lives of so many patients suffering from mental health disorders.
Speaker 18: We look forward to keeping an update on the progress of the company. Thank you for your time a day and with that operator. We will not take questions.
Speaker 15: Thank you. The floor is now open for questions. I would like to inform everyone: in order to ask a question, you will need the press barard and the number one on your telephone. Ke AD.
Speaker 15: Again that's Star and the number one on your telephone key EDS.
Speaker 15: 'll pause for just a moment to compile with you any roster.
Speaker 6: Your first question comes from the line of David Martin from bloomburton. Your line is open.
Speaker 29: Good morning. belan earns a few questions.
Speaker 30: So the press release and Bill you mentioned, that success would potentially add three million in revenues or more. I'm just wondering what were the revenues in the most recent quarter for that business and also what was the EBITDA for the most recent reported quarter.
Speaker 31: So David, we haven't disclosed that publicly need. But what I can say when we reference North or 30.000099 million revenue, that's kind of on their run rate basis. That's the basis for making and making that statement and, as we said, there's significant synergies requiring that business on a pro forma basis that that would be a profitable business.
Speaker 32: Okay what's the average age of the success centers versus the average age of yourwer centers? And what about size? I'm not sure how you measure. Are they comparable in size on an average basis?
Speaker 22: That's a really good question, David. A little bit of a different footprint. So there's kind of 2, two advantages of centers. They've got about 30, 30 location that is established, that would we will label established- and then about 15 or just not 30 established and the balance being very nearly established. So typly biggger centers generating sending significant amount and average revenue and a nice margin profile on those on those centers.
Speaker 33: And then, what about the typical size of their centers? Is it in line with the size of your centers- and I'm not talking how much revenue you're putting through now- But like the size of the footprint and the number of TMS devices?
Speaker 34: Yes very similar ours in terms of square footage. They have the ability to kind of put up there up the forer devices are more in a center. Their core centers are similar to our original centers that we start at agree book, versus the ones that we acquired to achieve.
Speaker 35: Okay and one more question than I'll get back in the queue. So with this potential acquisition, you'd added a number of new regions or States, but there is some overlap in Florida. I'm wondering: are you overlapping on a cityad basis and you'd shut some of the centers down, or is there no real overlap there, even though you're both in the same state?
Speaker 28: Yes great question, David. There's actually no overlap with the centers soever and our green bookok business will be more on the Western side of Florida and they're more in kind of Miami Fort laudero area. So of the centers we've talked about on this call, there's no overlap, So it would be a nice growth in our footprint.
Speaker 32: Okay and is Florida one of their new regions or is at one of their established regions?
Speaker 36: That's an established region.
Speaker 37: Ok OK, that's it for me. I'll get back in the queue, thanks.
Speaker 6: Your next question comes from the line of Frank T get it from Lake Street line is open.
Speaker 38: Great maybelill earns congressed on the quarter G success.
Speaker 39: Wanted to just kind of follow up on that maturity of the network question and, more pointed it look like the per site productivity was really solid for success teamts, by my math, trending over seven thousand on a average basis. So maybe talk a little bit to that per's productivity and the different factors playing into that and how they're able to get the productivity to that level.
Speaker 40: Yeah I'll take that owner that you can jump in. I think when you look at their model, they've done a great job of establishing a significant brand in each marketplace they went to. I think the one thing it differs a little bit between the two organization is we tend to kind of add more centers, create more density in the marketplace, while they have kind of I don't have as much density but have ve done a really good job of kind of driving those patients. They re existing footprint. So I think that's where you see, at a higher level, revenue per center in terms of relation, as we tend to eat our young a little bit by establishing a wire group of centers within a region and anywhere from eight to 12, if not more.
Speaker 6: Got it. Okay, that's helpful. And then maybe I think you've spoken to a 25% to 30% regional operating profitability for Greenbrook. Do you think for the combined business is the skill and active metric to be looking at? And by my math I think if you start to factor in 25 percentto 30% operating pritability get to breakeven pretty quick. Sort kind of lines of the commentary you're providing. But maybe just speak to that metric and how it plays into cash flow. Positive operations of the combined business.
Speaker 22: Absolutely good question. So yes, as we've said before, that's kind of a target margins and what we do see, a more mature region and with the success adding the success platform and the synergies that we can execute there, we can certainly, we believe we can, we can meet those operating margin target kind of then or trrend up to there in the near term. So that's absolutely still the goal and, as I mentioned on earlier, that's why we're very excited about this, that acquisition, because it can accelerate our path to profitability.
Speaker 38: Okay perfect. And then just last one for me, maybe specific to green: Brook, on the new patient starts number, can you break out how that looked across January February , March and how that's pointed into the first month and a half or so in Q2?
Speaker 22: yesso, that was very heavily weighted. We heavily weighted towards the latter part of the quarter, January . In February were very heavily impacted, but by omiron we had DR absenteto, staff absentces and patients being H to come in, So and then we had a really- as we preproduiously mentioned the- really a strong March and that's kind of spolled into into April .
Speaker 38: Ok perfect, off there congressing guice.
Speaker 41: Thank you.
Speaker 15: Your next question comes from the line of tya Armstrong with art from canocord Unity. Your line is open.
Speaker 42: Good morning, gentlemen Congress on the corarter and the success deal.
Speaker 43: Wondering I guess, why it was elected to do an all-stock transaction versus doing some of this in cash given, given your current share price?
Speaker 44: I think 10 you a couple of things there. I think there's the way the valuation mechanism work. This was really on a pro forma basis, is a relative contribution that we've got value for value. So I think if market conditions were a little differently different, we were probably had to pay a bigger premium for this business. So So we believe it's an attractive entry point for two dilute on this basis is us just raising cash and buying that. So it is really is a relative value contribution and that's how we came up with the 40% dilutioni'm sorry if you could repeat the second part of your question. No only you answer my question now is that.
Speaker 45: And then and then. Secondly, the debt that you're seeking in conjunction with this deal, would it qualify as the- I guess the equity L bordinated de you need to raise under the terms of that Oxford term one?
Speaker 22: Yes the intention is to do a global financing that gets gets rid of that obligation and, as I mentioned in discussions with various parties, as it relates to the potential, we do that.
Speaker 38: Perfect perfect.
Speaker 45: And then, I guess on the quarter as well, the pricing came down a little bit.
Speaker 46: Quarter-over-quarter or any mention there was conseasonality to there, but I I guess that was under the assumption that seasonality shouldn't really affect pricing. It would more so just affect volumes. Could you talk to why regued that pricing change, apart from shifting in regional MX and fair mix et cetera?
Speaker 25: So have a couple of things, like you say, you've got the geographical contribution that plays a part there, and then pay mix, which is fairly consistent but shifts from time to time. And then you also have a phenomina Q1, where the higher deductible commercial plan are sometimes less than varable to start treatment, which you typically see a little bit of a bias to public payers, which kind of drives down a public payers pay a little bit less typically, which drives down that number a ong bit than Q1. Typically it's consistent with albeit, the variable conservation playing in, but kind of a consistent picture we see in the comparative quarter.
Speaker 45: Understood that makes perfect sense. Thank you for that color. I will leave it there, Thank you.
Speaker 47: Here next Western comes from the line of Justin Keywood, from stfo G P G M, P or. Line is open.
Speaker 48: Goods for taking my call. I was wondering if you could just provide a bit of background how you came across success, part of some of the due diligence that you went through, and if this was a competitive bid offer.
Speaker 49: Thanks Jo'. Good question. Look, I've known, I've known Bank client for a long time. He was one of the you know fields, was been in the industry from the start, very well known to behavior health marketplace, has been involved in other businesses and behavior health. He's run a great business and we always- we've always- stayed in touch in terms of the two businesses there. There are a large provider within the space, very well known, and we just always St kind of continue to dialogue meetings and just in general just to catch up on industry trends. So from that standpoint, just like we did with other prior acquisitions, there's always a relationship, somewhat of a small industry, So to speak, and you tend to kind of get together times. It's to kind make sure we'all focused on delivering a great patient care that we're all capable out.
Speaker 50: So that's kind of how we got together, with success we were very well aware of throughout their time expanding as as they move from the East Coast down to Florida and then into the Midwest.
Speaker 38: Great and how I understand, it seems like the total market share for gtms after the transaction it would probably be around 15%. First, if that's an accurate assessment, and then if there's other networks like success still out there, or is the industry rather pretty fragmented afterwards?
Speaker 51: Let me take that two parts. I'll go backwards on this. The industry is still roughly near 3000 installed devices. 90% of it still tends to be an individual psychiatrist. What the device in their office. There are some big players which I would consider more regional. I would say the achieve, the achieve group, both on the West Coast and achie on the in the Massachusetts area, and now success. So we're probably three of the larger players in the space. It's hard to kind of determine exactly who the biggest is because there's very few public companies in that mixso there tends to be 90% individual doctors and then you get about 10% kind of regional corporate players which I would say to fine as anywhere between five to 10 up to Twenty five locations. So as you can see, success is a specific, significant player in the space.
Speaker 18: I think you had a second part to that. Can you repeat that lease just?
Speaker 22: I was asking about the market share after the transaction. Yes again, it's hard to determine. I'd only be speculating, which I don't want to do, but I would think that, based on successes, businesses are. Is it? It would be a significant portion of the industry, of the wholepe.
Speaker 48: Okay understood. And then just on the closing of the transaction- and I read in the press release that it could take up to six months, which themms up pretty long. What would be the determining factors to have the transaction close sooner versus later?
Speaker 6: I mean. So there's a bunch of closing conditions on that, on the transaction. We obviously have all intention to close quickly. We one of the closing conditions is obviously the best financing. I think, as I said, this is a highly financiable deal. With the share structure there's intcentive to boll value together. So we've got confident that we can close sooner than that. But you obviously you don't know how long these things take- that we have every intention to close much, much sooner than that.
Speaker 52: Okay understood. Thank you for taking my questions. Thanks, Jo.
Speaker 53: Again if you would like to ask a questionions, simply pressed up one on your telephone, ebed.
Speaker 15: Your next question comes from the line of David Martin from bloomburton. Your line is open.
Speaker 32: Thanks for taking my follow-up. Some one of the questions you had earlier was about the revenue per center and it being higher success now than it is that your current centers- and you mentioned that that's because of the different approach to regions, where you put more centers into a region and success puts one center and tries to pull more patients in two Quest is it also due to the maturity of their centers and you do expect your existing centers to grow up into the range of revenue per center that success sees? And the second question related to it is: do you think you would change your strategy and make up more like successes going forward, or will you build concentration and successes area like you've been doing in yours?
Speaker 40: I think that startar went out. You know re, we're excited to work with success and I think from the start you're going to think the best of both worlds, both companies do some things really well and you're going to kind of maximize that opportunity. And again, as we said and just to clarify, it's not the success only does one center. They don't. They don't cover the region like we do, in a sense that' if you took our rockfill center and just left that alone, it's going to generate a higher level of revenue. But then we we kind of look at as a regional pros because that daily need for for the treatment, So we build around that center. We've added six 7, eight cycles centers to that mix which inherently grows the pie bigger but made that independent center, impacted it from a revenue standpoint, earns anything you want to add to that.
Speaker 54: yesbut that absolutely we to still expect our centers to ramp to to the maturity and we've always said that 708, one thousands percenters the potential there, success in terms of their strategy. There's probably slightly higher on on the revenue per center that as it relates to targets. But, as both mentioned, I think there's a lots of Lear learning and both on the synergy side and the development side we're going to take best of breed and combined, combined the model to optimize the total footprint. There's obviously merits and going closer to the- your patient to access patients that may not be available with a single hub center, and then you there's some benefit obviously to having single centers. So I think it's going to be a blendeder approach, going forward, both parties learning from each other to become a stronger business together.
Speaker 32: Okay great. Another thing: your number of regional personnel went down, but the shareiff services corporate personnel went up, and so to TMS providers. So I'm just wondering: adding it all together, did your overall employee you coun't go down or up, and I'm talking versus Q4 21 and our TMS providers considered company personnel.
Speaker 22: yesso TES providers are. So a good thing about that went up is covering doctors, those topically independent co tract contractors. That gets paid on a per D basis. Those downturn that you notice from six to bodyty in the regional personnel is some, as we, as we've said previously, we're really driving utilization and driving towards profitability. So with the natural attrition cycle I think we've become more efficient on the regional site aside and then a shared services per personnel. Those, those are additional of no, no big Department heads or core personnel there was, it was more kind of. On the billing, as we strengthen billing reimbursement, the goal ER capabilities.
Speaker 55: So did your corporate personnel count go down.
Speaker 56: annoyed and the corporate personnel.t, and then't go down the regional, does not? donean alkcon went down quite significantly.
Speaker 57: Okay okay. Last question: you announced a new deal with neuonthatx a little while back. I'm wondering: are the economics more favorable for you or that they negotiate a higher price? And are you still using brains late devices?
Speaker 58: Yes we did oun. They renewal with noredics. They've been a great partner of ours and we've been a great partner with them. So we continue. We kind of work together to drive the business. There's some opportunities to kind of increase marketing on both sides that has beneficial to us and that people drive patients. That benefits both nornetics and us. As far as brains way concerned, again the great part partner with us. We continue to work with them closely. So for now we're really thrilled to work with all the manufacturers, specifically the two we work with the most to drive more patients and more awareness. The industry.
Speaker 59: Ok thanks, that's it for me.
Speaker 6: There are no further questions at this time. I would like to turn the call back to our presenters for any closing remarks.
Speaker 28: Yes we're really excited about the opportunity to work, success and really kind of drive towards which is needed in the industry: more focus on mental health. We, our platform, has gotten stronger and we look forward to update you on the next call. Enjoyed the start of the summer and we'll talk you you soon.
Speaker 6: speconcludes today's conference call. Thank you all for by ING. You may now disconnect.