Neuronetics, which sells the NeuroStar transcranial magnetic stimulation system and runs the Greenbrook TMS clinic network, reported a $0.5 million operating profit for the third quarter, against a $7.3 million loss a year earlier. Its quarterly report, filed November 4, also repeats a warning the company has carried since May: it projects that its trailing twelve-month revenue (the latest four quarters) for the period ending March 31, 2027 will fall below the minimum its $65.0 million term loan requires, and that it would not have the cash to repay the loan if the lender called it. On that basis the filing concludes that substantial doubt exists about its ability to continue as a going concern, an accounting test of whether a company can meet its obligations over the next year.
Both statements hold because they measure different things. Operating profit counts revenue less costs, and it rose because revenue grew while the cost of producing it stayed flat and operating expenses fell. The loan’s revenue test counts only revenue.
Neuronetics reports no breach: the 10-Q says it was in compliance with its covenants under the loan at September 30. The risk is a future test, about five months away, that the company itself expects to fail. The size of the projected miss is not stated, and the current covenant schedule has been redacted from the filed loan amendments. The company says it remains in discussions with its lender and describes no agreement.
The threshold is not public
The facility is a credit agreement with Perceptive Credit Holdings IV, signed in July 2024. It carries two financial covenants, conditions the borrower must keep meeting: a minimum level of trailing twelve-month net revenue, tested each quarter, and a minimum balance of cash. The cash covenant is not the near-term constraint: after Amendment No. 5 it is $1.0 million through March 2027, rising to $5.0 million after December 2027.
The revenue schedule was last visible in December 2024, when Amendment No. 1 set it at $175.7 million for the twelve months ending March 31, 2027. Amendment No. 2 (March 2025) and Amendment No. 5 (March 12, 2026) each restated the whole table, and Neuronetics filed both with the new tables omitted. The 10-Q says the 2026 amendment changed “the required quarterly revenue covenants through December 31, 2026.” Trailing revenue was below the 2024 schedule at each 2026 quarter end (for example $159.8 million at September 30 against $165.1 million; Behavioral Wire’s sum of four quarters), yet the company reported compliance each time, which points to lower 2026 thresholds (the agreement defines “Net Revenue” in its own terms, which may differ slightly from reported revenue). Whether the March 2027 figure moved is not shown. The December 2024 number therefore cannot be treated as a measure of the projected gap, and this article does not use it as one.
What the company’s own numbers show is narrower. Full-year revenue guidance, unchanged at $160 million to $164 million, implies fourth-quarter revenue of $42.0 million to $46.0 million, 0.6% to 10.1% above the fourth quarter of 2025, against 12.5% growth in the third quarter. The first quarter was the year’s lowest in 2025 ($32.0 million) and so far in 2026 ($34.5 million, about 17.5% below the fourth quarter’s $41.8 million), and no quarter since the Greenbrook acquisition has exceeded $42.0 million. The filing does not tie the projected miss to these figures. The 10-Q adds that the actions within the company’s control “do not fully mitigate the risk.”
What a miss would mean
The loan is secured by substantially all of the company’s assets, including its intellectual property. A missed financial covenant is an event of default, and the agreement gives financial covenants no cure period (some other covenants get 30 days to cure). While a default continues, the interest margin rises automatically by four percentage points, about $2.6 million a year on $65.0 million (Behavioral Wire’s arithmetic). The lender may also, by notice, end its commitments and declare the loans immediately due. Acceleration is automatic only for insolvency-type defaults, which include being unable to pay debts as they come due; for a covenant miss it is otherwise the lender’s choice, which the 10-Q describes as one it may make “at its discretion.” If it did, the borrower would owe at least the principal, accrued interest and the early prepayment fee, which the 10-Q’s schedule puts at 4% of principal in the window containing March 2027. That is about $67.6 million before accrued interest and any other charges (Behavioral Wire’s calculation), against $22.1 million of cash and cash equivalents at September 30.
The going-concern conclusion is not itself a default. In Amendment No. 5 the lender waived the loan’s bar on a going-concern qualification for fiscal 2025 and 2026 periods and agreed that such a qualification, including one citing prospective covenant breaches, is not a default until the underlying event occurs. The waiver ends with fiscal 2026, and the amendment says it implies no willingness to grant similar relief.
Where the profit came from
| Quarter | NeuroStar revenue | Greenbrook revenue | Total revenue |
|---|---|---|---|
| Q3 2025 | $15.5M | $21.8M | $37.3M |
| Q4 2025 | $18.3M | $23.5M | $41.8M |
| Q1 2026 | $12.9M | $21.5M | $34.5M |
| Q2 2026 | $14.7M | $26.9M | $41.6M |
| Q3 2026 | $15.8M | $26.2M | $42.0M |
Source: Neuronetics Forms 10-Q and 10-K, segment notes. Fourth-quarter 2025 is Behavioral Wire’s subtraction of nine-month from full-year figures. Components may not sum because of rounding.
Of the $7.9 million improvement in operating income, $4.8 million came from higher gross profit (revenue rose $4.7 million while cost of revenues stayed at $20.1 million) and $3.1 million from lower operating expenses, down 13% to $21.3 million. Interest expense was $2.1 million ($1.9 million of it in cash), more than the operating profit or the $1.9 million of adjusted EBITDA (a non-GAAP measure), so Neuronetics still reported a $1.6 million net loss.
Year over year, Greenbrook supplied nearly all of the revenue growth: $4.4 million of the $4.7 million increase (Greenbrook revenue rose 20.1%), while NeuroStar rose 1.8%. Against the second quarter the pattern reversed: Greenbrook slipped from $26.9 million and NeuroStar rose from $14.7 million. The company called it a record third quarter for both Greenbrook and NeuroStar system sales. One quarter does not show which business will carry the growth.
Total cash, including $5.8 million of restricted cash, was $27.9 million at September 30, against $24.9 million at June 30. By Behavioral Wire’s subtraction of the year-to-date statements, operations and investing added about $0.8 million of the $2.9 million increase and financing about $2.1 million: $2.2 million of stock-option exercises (all after June 30) and about $0.6 million of at-the-market share sales, less other payments. About $33.1 million of at-the-market capacity remains. That is authorization to sell, not cash; at the third-quarter average price of about $3.20 (Behavioral Wire’s derivation from the year-to-date figures) it would equal about 10 million shares, 13% of those outstanding (illustrative arithmetic, not a forecast).
The lender sentence
In May the company said it “remains actively engaged in ongoing collaborative and constructive discussions with its lender.” August’s report dropped the sentence, and November’s restores a shorter version: “The Company remains engaged in discussions with its lender.” The filings do not show what is being discussed, how far the talks have gone or why the wording changed. No amendment, waiver or refinancing has been filed since Amendment No. 5.
What could change the outcome
The filings point to four routes. None is agreed or disclosed as under negotiation:
- Another amendment or a waiver. The agreement has been amended five times since 2024, three of them (Nos. 1, 2 and 5) changing the revenue test. A sixth that reset or suspended the March 2027 test would remove the projected miss. The company says in its annual report that it cannot assure that its lender would grant a waiver.
- Refinancing. Replacing the facility would remove the covenant, at the cost of a prepayment fee. The filings disclose no replacement lender.
- More revenue. This is the only route within the company’s control. The 10-Q lists better revenue cycle management, new treatment options at the clinics and new NeuroStar sales strategies.
- Equity or other financing. The at-the-market capacity is an option, not an agreement, and the 10-Q says additional financing may not be available on acceptable terms, or at all. New shares would dilute existing holders.
The lender could also do nothing. After a miss, calling the loan is its option, not a requirement, though the higher default rate would apply while the default continued.
For shareholders, revenue decides whether a default occurs, and the lender’s response decides what follows. One profitable quarter before financing costs does not answer a revenue test. By the company’s own projection, that test is still ahead.