Business Overview: Neuronetics, Inc. (NASDAQ: STIM)

---

Executive Summary

Neuronetics, Inc. is a commercial-stage medical technology company and the U.S. market leader in transcranial magnetic stimulation (TMS) therapy for psychiatric disorders. Its flagship product, the NeuroStar Advanced Therapy System, is an FDA-cleared, non-invasive, office-based device that uses pulsed magnetic fields to treat adults with major depressive disorder who have not responded adequately to antidepressant medication.

For most of its history, Neuronetics sold NeuroStar systems and treatment sessions to independent psychiatric practices — a classic "razor and blades" medical device model. That changed fundamentally in December 2024, when Neuronetics acquired Greenbrook TMS Inc. for $38.8 million, turning the company into a vertically integrated operator: it now both sells NeuroStar systems to third-party practices and directly owns and operates a network of TMS/behavioral-health clinics (which also offer SPRAVATO esketamine therapy). The acquisition roughly doubled reported revenue to $149.2 million in FY2025, but also pulled gross margin down sharply, since company-operated clinics carry a very different cost structure than device sales.

Neuronetics matters as a bet on whether owning the patient-facing clinic channel — rather than just selling equipment into it — can turn a profitable niche medical-device franchise into a scaled, cash-generative mental-health care platform.

---

1. Core Business Model & How They Work

Neuronetics now runs two linked but distinct revenue models side by side.

[ NeuroStar System Sale to Independent Practice ] ▶️ [ Recurring Treatment-Session Revenue per Patient Course ] ▶️ [ Service/Warranty Revenue ]

[ Greenbrook-Operated Clinics ] ▶️ [ Direct Patient Treatment: NeuroStar TMS + SPRAVATO ] ▶️ [ Clinic Revenue (fee-for-service / insurance reimbursement) ]

Key Operational Drivers

1. Capital Equipment + Recurring Sessions (Legacy Model): A psychiatrist buys or leases a NeuroStar system, then Neuronetics earns ongoing, higher-margin revenue from each patient's treatment course (typically five sessions per week for up to six weeks) — treatment sessions have historically been the majority of U.S. device-side revenue.
2. Owned Clinics (Greenbrook, since Dec. 2024): Neuronetics now also owns and runs TMS/SPRAVATO treatment centers directly, generating clinic revenue rather than equipment/session revenue — a lower-margin but larger and faster-growing revenue stream (Greenbrook clinic revenue was $87.0 million in FY2025).
3. Insurance Reimbursement Dependency: Both models depend heavily on payor coverage; expanded coverage decisions (e.g., TRICARE West's 2026 expansion of TMS coverage, including for adolescents, across 26 states) directly drive volume.
4. Pipeline Diversification: A continuing collaboration with Compass Pathways on psilocybin therapy (COMP360) for treatment-resistant depression signals an attempt to extend beyond TMS into adjacent psychiatric treatment modalities.

---

2. Business Segments

Neuronetics does not report formal GAAP segments, but its post-Greenbrook business now functions as two clearly distinguishable revenue streams.

                 Neuronetics, Inc.
                /                  \
   NeuroStar Device & Sessions   Greenbrook-Operated Clinics
   (legacy device business)      (owned treatment centers)
   ~ sold to independent          ~ $87.0M FY2025 revenue
     psychiatric practices          (NeuroStar + SPRAVATO)

NeuroStar Device & Sessions

The original business: selling capital equipment (systems) and earning recurring revenue from treatment sessions and service contracts at independent, third-party-owned psychiatric practices. U.S. system revenue was $14.3 million in FY2025 (161 systems shipped), and U.S. treatment-session revenue was $43.3 million.

Greenbrook-Operated Clinics

Acquired for $38.8 million in December 2024, Greenbrook is now a wholly owned subsidiary operating a network of U.S. clinics that deliver NeuroStar TMS therapy and SPRAVATO (esketamine) treatment directly to patients. This segment contributed $87.0 million of FY2025 revenue (+28% on an adjusted pro forma basis) and is now the larger of the two revenue streams, though at meaningfully lower gross margin than the legacy device business.

---

3. Product Portfolio

---

4. Competitive Landscape

• Direct TMS device competitors: Brainsway, Magstim, MagVenture, CloudTMS, and Nexstim all offer competing TMS systems; Neuronetics' installed-base scale and FDA-indication breadth are its main points of differentiation against them.
• Pharmaceutical alternatives: Conventional antidepressants and, increasingly, esketamine-based therapies (a category Neuronetics itself now participates in via SPRAVATO at Greenbrook) compete for the same depressed-patient population, particularly before a patient tries device-based treatment.
• Emerging modalities: Psilocybin-based treatments in development (e.g., Compass Pathways' COMP360, which Neuronetics is collaborating on) represent a longer-horizon competitive and complementary dynamic for treatment-resistant depression.
• Clinic-operator competitors: As an owner-operator via Greenbrook, Neuronetics now also competes directly with other TMS and ketamine/esketamine clinic chains for patients and payor contracts, a competitive dimension it didn't face before the acquisition.

---

5. Strategic Strengths & Risks

Strengths

• U.S. TMS Market Leadership: A large installed base and FDA clearance breadth give Neuronetics real credibility and scale advantages versus smaller TMS device rivals.
• Vertical Integration Optionality: Owning Greenbrook's clinics gives Neuronetics a second lever — direct patient volume — that pure device/session revenue never offered, and insulates some revenue from independent practices' purchasing decisions.
• Expanding Payor Coverage: Incremental wins like TRICARE West's 2026 coverage expansion (including adolescents) directly expand the addressable, reimbursable patient population.

Risks

1. Margin Compression from the Clinic Business: Gross margin fell from roughly 72% (legacy device model) to about 48.5% for full-year 2025 as the lower-margin Greenbrook clinic revenue became the majority of the business — a structural, not one-time, shift.
2. Continued Net Losses and Cash Burn: FY2025 net loss was $39.1 million, and 2026 guidance still calls for negative operating cash flow ($13–17 million), meaning the integration has not yet turned the combined company cash-flow positive.
3. Integration and Leadership Transition Risk: A new CEO (Dan Reuvers, formerly of Tactile Medical) took over in March 2026, right as the company is still absorbing Greenbrook and working through debt-covenant amendments with its lender (Perceptive Advisors).
4. Reimbursement Dependency: Both the device and clinic businesses are exposed to insurance coverage decisions and reimbursement rates for TMS and SPRAVATO, which are outside the company's control.
5. Declining Legacy Device Metrics: U.S. system shipments and treatment-session revenue actually fell year-over-year in FY2025 even as total revenue grew, raising the question of whether the legacy device channel is being cannibalized or simply deprioritized in favor of owned clinics.

---

6. Financial Overview

---

7. Summary Conclusion

Neuronetics has transformed from a focused, high-margin TMS equipment maker into a larger but thinner-margin, vertically integrated behavioral-health operator, betting that owning the Greenbrook clinic channel outright is worth the gross-margin give-up. The core technology moat — NeuroStar's FDA clearances, installed base, and reimbursement footprint — remains real, but the company's near-term story now hinges less on TMS science and more on operational execution: integrating a clinic network, managing lender covenants, and doing it all under new CEO leadership, while the legacy device business it was built on continues to shrink.