Q3 2023 Greenbrook TMS Inc Earnings Call
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Welcome to the Greenbrier, TNF and FY 'twenty Q3 results conference call and webcast outlines.
All lines are currently on mute to prevent any background noise.
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 www that green brick Tms dot com under the investors section event.
After the Speakers' remarks, there will be a question and answer session.
Analysts and investors are reminded but any additional questions can be directed to the company and investor relations at Green brick TNF dotcom.
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 I discussed in the risk factors section of the company's annual report on form 20-F for the fiscal year ended December 31st Tony Kenney Q and the company's other materials filed with the Canadian Securities regulatory authorities and the U S Securities and Exchange Commission.
From time to time, which are available in theater, 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 now like to turn the meeting over to Mr. Bill <unk>, President and Chief Executive Officer of Greenbrier, TNF and Peter village and certain financial often go ahead. Please.
Thank you Blair and thank you to everyone for joining our conference call and webcast today.
During Q3 2023, we continue to focus on the execution of our restructuring plan and we are very pleased with the progress to date.
The reduction in head count rationalization of the marketing spend extinguishment of the lease liabilities and a reduction of other recurring corporate general and administrative expenses has effectively removed $23 million in annualized cost from the company as compared to Q4 2020 to achieve.
Having our targeted range of 22% to $25 million and cost reductions.
We remain optimistic about our future as we execute on the remaining components of the restructuring plan.
Quarterly revenue decreased by 13% to $18 million.
Down $2 8 million as compared to Q3 2022, despite the closure of 53 treatment centers or 29% of the active treatment centers in connection with the restructuring plan.
<unk> Q3 2022.
Year to date 2023 revenue increased by 17% to $56 3 million predominantly due to the success Tms acquisition that was completed in July 2022.
Q3, 2023 revenue provided resilient proved to be resilient at approximately 80 per 6% of the total quarterly revenue achieved in Q4 2022. Despite the closure of 53 treatment centers mentioned above and general liquidity constraints prohibiting any meaningful investment in marketing year to do.
<unk>, which impacted the revenue we were able to generate.
Despite this our base level post restructuring quarterly revenue continues to prove very encouraging and presents a great foundation for future profitability, especially in context of our newly rationalized our cost structure.
We believe reverting back to more optimal levels of marketing investment will enhance our Tms business. The continued rollout of this bravado program, including the launch of buy and Bill and a significant focus on contract negotiations with payers provide the holistic path to this goal.
We have also commenced the rollout of medication management program as an additional revenue stream and a mechanism to build an internal patient pipeline, which has already yielded positive results to the business.
While liquidity constraint still remain we are confident in our ability to have continued access to capital to drive us to self sufficiency as evidenced by our recent financial financing transaction with our supportive insiders and lender.
On the strategic partnership side, we continue to work with nor next leadership closely at various levels to implement a mutually beneficial strategy as it relates to enhancing Tms awareness exposed expanding patient access to care and effectively redeploying systems from recently closed treatment centers.
We're also very excited about the launch of their new better meet guarantee pilot program, which we believe will allow us to further increase our access to patients suffering from mental health disorders.
Early results of the pilot show an increase on historical averages in Leeds and book consoles, which should translate into patients.
Although we have achieved our previously announced annual cost savings, we continue to execute on the remaining components of the restructuring plan.
Given the ongoing nature of execution the reduction in costs were only partially reflected in Q3 2023, and we expect our new operating structure will continue to allow us to rationalize costs, while further reducing business complexity streamline our operating model and drive operational efficiencies.
We believe that mental health remains a key focus of the United States and the unmet demand for treatment remains at an all time high.
With our network of treatments that are well positioned to serve the unmet demand.
We believe our business fundamentals are stronger than ever with the growth does provide a program the opportunity to increase marketing investment that our streamlined business the introduction of medication management and the potential future treatment option, including psychedelics.
At the end of Q3 2023, the company had a footprint of 130 treatment centers as of today, we have 56 treatment centers offerings to provide Doe and we expect to have 70 day treatment centers offerings to provide out by the end of the year through an accelerated rollout plan.
And now for more detailed review of the company's financial and operating performance I will turn it over to our interim CFO Peter Willett.
Thank you Bill as Bill mentioned revenue in Q3, 2023 decreased by 13% to $18 million down $2 8 million as compared to Q3 2022. Despite the closure of these three treatment centers or approximately 29% of after treatment centers in connection with the restructuring plan.
Q3, 2022.
Year to date 2023 revenue increased by 17% to at least $6 3 million up $8 3 million as compared to year to date 2022 predominantly due to the success <unk> acquisition that was completed in July 2022.
Furthermore, Q3, 2023 revenue remained resilient on approximately 86% of total quarterly revenue achieved in Q4 2022. Despite the closure of three treatments are as mentioned above.
We reduced marketing expense, which represented 10% of marketing spend in Q4 2022.
Average revenue per treatment increased by 4% to $227 in Q3, 2022 and remain consistent at $222 and year to date 2023.
Quarter over quarter increase was primarily attributable to changes in payer mix, driven modalities and the geographical distribution of revenue.
Despite lower revenue levels in Q3, 2023, we continue to generate any wide regional operating income for the third consecutive quarter as a result of the significant cost reductions.
In connection with the restructuring plan.
With reduction hard challenge.
<unk> position of marketing spend extinguishment of lease liabilities and a reduction in other work for and corporate general and administrative expenses. The company has stabilized its cost structure and removed $23 million in loss costs as compared to Q4 2022.
Direct center and regional costs decreased by 19% to $17 5 million. During Q3 2023 compared to Q3 2022 day reduction in head count rationalization of marketing expense and a reduction other direct center expenses, resulting from the execution of the restructuring plan.
Given the ongoing nature of the restructuring plan execution the reduction in associated costs were only partially reflected in Q3 2023, but will be fully realized by the end of fiscal 2023.
Direct center and regional costs increased by 10% to $54 8 million during the year to date 2023 as compared to year to date 2022 predominantly due to the success Tms acquisition, partially offset by the cost savings in relation to the execution of the restructuring plan previously mentioned.
Andy wide regional operating income was <unk> 5 million during Q3 2023 as compared to an Andy wide regional operating loss of <unk> 8 million in Q3, 2022, and the company generated any wide regional operating income of $1 5 million certain year to date 2023 as compared.
And any wide regional regional operating loss of $2 million during the year to date 2022.
The increases were primarily a result of the significant cost reductions previously described.
Corporate G&A, excluding onetime costs and the revaluation of conversion instruments decreased by 10% comparing Q3, 2022 and by 20% compared to Q4 2022 as a result of the restructuring plan execution.
<unk> increased by 10% as compared with year to date 2022.
The success Tms opposition offset by the restructuring plan execution.
We believe we can continue to reduce corporate G&A costs as we execute on the remaining components of the restructuring plan.
The loss for the period and comprehensive loss decreased by 24% in Q3, 2023 to $12 7 million down $4 1 million as compared to Q3 2022, primarily due to the increase in regional operating income and decreases in corporate G&A as part of the execution of the restructuring plan.
The loss for the period and comprehensive loss increased by 7% to $34 4 million for year to date 2023 up $2 3 million as compared to year to date 2022, primarily due to increases in interest expenses arising from the additional debt financings the loss on the price contract termination.
The increase in share based compensation expense the increase in costs and depreciation as a result of the completion of the success Tms opposition.
And one time costs, partially offset by the increases in regional operating income and the cost savings associated with the execution of the restructuring plan.
From a balance sheet perspective accounts payable remained fairly stable as we have optimized our RCM function and now effectively generate cash revenue.
As of the end of Q3, 2023 was $1 8 million, including restricted cash.
Subsequent to Q3 2023, the company received $4 7 million in financing from our supportive lender and various investors we remain confidence in our ability to continue to access capital to move to a self sustaining business now more than ever. We believe we have to continually defined pathway to profitability with a state.
The cost base as Bill described earlier.
Moving to our core operating metrics.
At the end of Q3 2023, so after treatment centers decreased by 29% to $1 30 from 183 a year ago.
Compared to Q3 2022 number of consultations reformed decreased by 5% to 8334, while the number of new patient starts decreased by 11% to 2546 and a number of treatments reform decreased by 16% to 79400 idiots.
These decreases were mainly due to decreased tumor centers previously noted.
Compared to year to date 2022, the number of compensations reform increased by 58% a 26233, while the number of new patient starts increased by 24% to 8047 and number of treatments performed increased by 17% to 233870.
Yes.
These increases were primarily due to the completion of the successful opposition we.
We believe that the building more resources and focus to our best performing centers through the restructuring plan will increase conversions. This paired with a measured approach to increase marketing will boost our core Tms business and continued strong growth of our small program will be a catalyst for future revenue growth. Despite the reduction centers back to you.
No.
Thanks, Peter our business has shown a remarkable resilience in spite of the challenges we've been face this year, our commitment to the execution of the restructuring plan continued to yield positive results in Q3, 2023, including our third consecutive quarter of regional operating income.
The company is in the final phases of the restructuring plan and anticipate the reductions made to the business cost structure will solidify our path to profitability. Once we are able to resume investment in activities to support our revenue growth. We're excited to continue our rollout of new treatment modalities, including our previously announced medication management pilot and are.
Totally introduced bravado buy and Bill program, which will complement our current administer an observed programs and allowing us to further enhance our access to patients.
We believe that mental health remains a key focus in the United States and the unmet demand for the treatment remains at an all time high.
Continue to offer innovative solutions for this unmet need and our leadership position and nationwide footprint continue to serve as a valuable platform to bring the needed help to patients struggling with depression.
As always I would like to take a moment to thank our amazing team. We are extremely proud of them as they continue to deliver the highest level of care through some recent turbulence. Most importantly, we know that we were making a difference we now treated over 40000 patients with more than $1 3 million treatments performed we are having a significant positive impact on the <unk>.
Lives of so many people 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 Blair, We will now take questions.
Thank you ladies.
Ladies and gentlemen, you will now begin the question and answer session. So do you have a question. Please press star followed by the number one on your Touchtone phone line again, that's star followed by the number of wine you will hear a three pronged acknowledging your request should use to decline from the polling process. Please press star followed by the number Tim.
If you are using a speaker phone please lift your handset before pressing on the team.
We have our first question coming from the line of Frank <unk> from Lake Street Capital markets. Please go ahead.
Great. Thanks for taking the questions. A bill was hoping you could start with just talking a little bit more about the Neurostar pilot program, what should we expect to see out of that what are some early learnings and.
And how should we expect that to impact the business going forward.
Yeah. Thanks, Frank good to hear from you. We're really excited about the pilot that we've kicked off with nor net ex.
There was a lot of thought put into it. The reality is it's a it focuses on a select group of practices that really adhere to kind of rigorous criteria to achieve the highest level of clinical excellence in patient care key areas like attending Northstar University getting that patient after treatments of 36, where we see that remission come into play.
And kind of really addressing kind of that customer service for the patient and through this we're going to see a significant Pat patient awareness brought on by the advertising through both the northern and through Greenberg.
While extremely early pilot has shown an increase on historical averages in our leads and bulk consoles, where like I said, we're only about five weeks into it we're starting to see some of those constitutes console to translate in the patients.
And so for me, having the access for our center personnel to have.
The awareness attract more patients and our ability to close and convert patients at the local levels really gives us an opportunity to expand care for those patients and get them to get them into the Green book centers. So I am excited and appreciative of the work with the Nordics and we look forward to kind of watch this fall as we continue to help them enhance the pilot from our <unk>.
<unk>.
Got it that's helpful color and then maybe just one more for me congrats on reaching your cost savings initiatives that you've put in place.
Was hoping you could just update us on how we should be thinking about EBIT breakeven level, how much more growth do we need now that we have the new infrastructure in place to reach that EBITDA breakeven level.
Yeah, I think great question, an outsized franchise.
Nice to hear from you.
From our perspective as we've previously.
Got it from its it's $21 5 million as a breakeven and we love to be.
Closer to that.
Julian Mark next year.
Revenue towards cash flow breakeven.
Yeah.
Great I'll stop there thanks for taking the questions.
Our next question comes from the line of David Martin from Bloom Burton. Please go ahead.
Good morning, Thanks for taking my question good afternoon.
You mentioned that the 23 million in annual cost reduction wasn't fully in the third quarter.
I'm wondering looking into fourth quarter, how much reduction we can see in the.
Various expense lines of direct center in patient care cost regional costs and corporate G&A.
Yeah.
Absolutely and thanks, David to your point I think we expect Q4 to end up is towards the higher end of that range towards the $25 million mark or exceed it I think where you'll see a lot of the cost savings come in that have not been baked in yet will be in corp, G&A with a little bit in the regional costs as well.
Yeah.
Okay.
Then beyond Q4, how much more do you think you'll take out on the cost structure.
I think as we mentioned on the call I think we always have all of our business and continue to rationalize our cost structure and at this point, it's too early to tell but we remain confident in our ability to <unk>.
Following our business and make the right calls appropriately relating to costs.
Okay related to Frank's question.
My volume broke up a bit when you said what kind of revenue you need for breakeven that's $100 million a year, yes previously mentioned on our call a couple of quarters ago.
We're still towards that target as our break even for cash.
Okay.
The buy and build strategy is to process higher per patient or is the drug costs just to flow through.
It's higher on contribution as well as revenue and cost so to your point, Dave you have a higher currently are reversals around 300.
While it's too early to tell based on the launch of our pilot we expect to be closer to 1000 with a sizeable increase in costs, but from a contribution standpoint, we expect again a significant increase from our current contribution so it's not just a.
Our flow through it essentially is a win for us from a contribution side.
Okay, and David David I, just want to I, just want to add to that because I think it's important.
They moved to buy and Bill and a specific marketplaces also ties in fact, it creates more access to care because some payer contracts do not allow you to participate in patient care provider unless you're a part of buy and bill.
Okay, Okay great.
There is $5 9 million that you need to pay down for device contract terminations.
Is that.
Early this year.
Later this year, what's the timing on that.
That will be completed by end of Q2 and 2024.
Okay.
And last thing usually you give corporate personnel counts and it wasn't I didn't see it in the press release this time.
What is the corporate personnel head count.
It would be fairly consistent with last quarter.
Yeah, I think from a year over year basis, David we're down.
North of 150 <unk> kind.
Kind of staff members over that time.
Over at the entire business not just a corporate.
Right Okay.
Okay.
Okay. Thanks, that's it for me.
Ladies and gentlemen, just a reminder, so do you have a question. Please press star followed by the number one on your Touchtone phone. We have our next question coming from the line of Ben Haner from Alliance Global. Please go ahead.
Good day, gentlemen, and thanks for taking the questions and nice to hear the progress on the restructuring.
First off for me on the pilot program for medication management is there any worry that that could upset in any way your existing referral base or is that sort of a pain point for them as well.
That's a great question and we actually spent a lot of time looking at this and I think from our perspective, there is a boatload of patients out there that are not being treated because they can gain access to care through psychiatric offices due to the waitlist so from our perspective.
This allows more access to care and I think a lot of those doctors really like to kind of have the cash pay business and what our company is involved in is we're on all of the payer contracts, so by having insurance kind of panel.
Really have an upset the applecart at this point and it is early in our kind of pile.
Pilot, but we are seeing some initial results that we're really excited about number one the ability to kind of hopefully shorten that pathway to both the Tms since per bottle, we've seen that already in the first five weeks, where we've been able to get patients into our interest provider in Tms, who have failed multiple med <unk> bed trials and in it.
Dish in patients who needed additional med trials to kind of qualify and meet the criteria for <unk> for <unk>, we've been able to cross.
Refer that also our Med management center.
Okay.
And may even be that it's a tailwind for you in that they may be more likely to refer to you just did not have to deal with those patients that are maybe more difficult or less desirable for themselves.
Yes. This is significant upside for us I mean, you have to think about a couple different ways like even if we didn't talk about this yet the fact that it enhances our direct consumer marketing spend it makes that it makes that spend kind of more viable because it allows us to take a patient who may have not even been interested in gms, but have they get into the program.
The other particular interesting point as for us.
It's going to shorten a pathway to that treatment I think the average in the industry now has a patient will pursue possibly gms source provider will probably after six or seven felt cycles emerge. We think we can shorten that pathway to generating great character, Tms or sabato much earlier in the treatment paradigm.
Okay.
And then that kind of gets into my.
My next question.
On these patients that you do attract with the medication management.
Are they by handful of sales cycles of Meds Intuit are they at zero as it were.
Where do they sit and what's a typical.
To the extent that that.
There is considered a typical cycle for these.
Yes.
If that makes sense.
It's a really good question and I look forward to answer that in more detail on the next call. What I will tell you just off the top because we're only a few weeks into this.
Youre going to get patients calling their for their first time suffering from depression, who obviously youre going to have their first introduction to a mental health crisis, and some that have kind of been through the gamut of multiple drugs that have not helped them. So it's all over the board right now.
Okay Thats.
Fair enough.
That's all I had gentlemen, thanks for taking the questions.
Thank you.
There are no further questions at this time I would now like to turn the call back over to Mr. Atlanta for final closing comments.
Thank you Blair I appreciate everyone joining our call. This quarter, we look forward to the continued progress on our company, we feel really good about our future opportunity I want to wish everyone, a happy Thanksgiving and a healthy and happy holiday season.
Thank you, Sir ladies and gentlemen. This concludes your conference call for today, we thank you for participating and ask could you. Please disconnect your lines have a lovely day.
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