Brainsway Q2 2024 Earnings Report

Brainsway EPS Results

• Actual EPS: $0.02
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: -$0.03

Brainsway Revenue Results

• Actual Revenue: $10.01 million
• Expected Revenue: $9.40 million
• Beat/Miss: Beat by +$610.00 thousand
• YoY Revenue Growth: N/A

Brainsway Announcement Details

• Quarter: Q2 2024
• Date: 8/6/2024
• Time: Before Market Opens
• Conference Call Date: Tuesday, August 6, 2024
• Conference Call Time: 8:30AM ET

Brainsway (NASDAQ:BWAY) Ltd is a medical device company specializing in non-invasive neuromodulation therapies. Publicly traded on the NASDAQ under the symbol BWAY, the company develops and commercializes deep transcranial magnetic stimulation (Deep TMS) systems designed to treat a range of neuropsychiatric and neurological disorders. Brainsway’s technology aims to offer an alternative or complement to traditional pharmacological therapies by targeting precise brain regions with its patented coil designs.

The company’s flagship Deep TMS platform utilizes proprietary H-coil arrays engineered to reach deeper cortical structures than conventional TMS devices. Brainsway has secured regulatory clearances in key markets, including U.S. Food and Drug Administration approvals for treatment-resistant major depressive disorder, obsessive-compulsive disorder, and smoking cessation. In addition to cleared indications, the company is pursuing clinical studies in areas such as migraine and substance use disorders to expand its therapeutic portfolio.

Founded in 2003 and headquartered in Jerusalem, Israel, Brainsway operates through subsidiaries and distribution partners across North America, Europe and the Asia-Pacific region. The company maintains a sales and support presence in the United States, including a facility in North Carolina, and collaborates with academic medical centers and independent clinics to facilitate training, research and patient access.

Brainsway’s leadership team brings together experts in neuroscience, clinical medicine and medical technology commercialization. The company continues to invest in research collaborations and real-world evidence initiatives aimed at demonstrating the long-term safety, efficacy and health-economic value of its Deep TMS solutions.

Brainsway Q2 2024 Earnings Call Transcript

Key Takeaways

• Revenue up 28% YoY to $10 million in Q2 2024, with positive net income for the third straight quarter and raised full-year guidance to $38.5 million–$40 million.
• Generated positive adjusted EBITDA and cash flow from operations for the fourth consecutive quarter, ending Q2 with $48.1 million cash and no debt.
• Shipped 114 deep TMS systems in H1 2024 (13% YoY increase), bringing the installed base to 1,215 units and securing exclusive distribution in Canada.
• FDA granted expanded indication for deep TMS in major depressive disorder patients aged 22–86, making it the only TMS approved for those over 68.
• Initiated a clinical trial of an accelerated six-day depression treatment protocol to improve patient convenience and potential adoption.

Presentation

[Operator]

Good day, and welcome to the BrainsWay second quarter 2024 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Brian Ritchie of LifeSci Advisors. Please go ahead.

[Brian Ritchie, Head of Investor Relations at LifeSci Advisors]

Thank you all, and welcome to BrainsWay's second quarter 2024 earnings conference call. With us today are BrainsWay's Chief Executive Officer, Hadar Levy, and Chief Financial Officer, Ido Marom. The format for today's call will be a discussion of recent trends and business updates from Hadar, followed by a detailed discussion of the financials. Then we will open up the call for your questions. Earlier today, BrainsWay released financial results for the three and six months ended June 30, 2024. A copy of the press release is available on the company's investor relations website.

[Brian Ritchie, Head of Investor Relations at LifeSci Advisors]

Before I turn the call over to Hadar, I would like to remind you that this conference call, including both management's prepared remarks and the question and answer session, may contain projections or other forward-looking statements regarding, among other topics, BrainsWay's anticipated future operating and financial performance, business plans and prospects, and expectations for its products and pipeline, which are all subject to risks and uncertainties, including shifting market conditions resulting from geopolitical, supply chain, and other factors, as well as the use of non-GAAP financial information. Additional information regarding these and other risks are available in the company's earnings release and in its other filings with the SEC, including the Risk Factors section contained in BrainsWay's Form 20-F. I would now like to turn the call over to Hadar.

[Hadar Levy, CEO at BrainsWay]

Thank you, Brian. Welcome, everyone, and thank you for joining us today. As reported earlier this morning, we had another outstanding quarter of growth. Most importantly, demand for our industry-leading Deep TMS system continues to be strong, resulting in a year-over-year increase in revenues of 28% to $10 million for the second quarter of 2024. In addition, we generated positive quarterly net income for the third consecutive quarter and positive Adjusted EBITDA and cash flow from operations for the fourth consecutive quarter. We also continue to be supported by an extremely strong balance sheet, with $48.1 million in cash and no debt as of June thirtieth, 2024.

[Hadar Levy, CEO at BrainsWay]

Our outlook for the second half of 2024 remains strong, and we are now raising the lower end of the guidance for full year 2024 revenue to a range of $38.5 million-$40 million. Therefore, we are now projecting growth of between 21% and 25% over our 2023 revenues. We also continue to anticipate that our profitability, momentum, and positive cash generation will extend for the full year. I would like to take a few moments to dive a little deeper into our key growth drivers. Looking more closely at the second quarter performance, we shipped a net total of 114 systems during the first two quarters, a 13% increase compared to the first half of 2023, resulting in an installed base of 1,215 total Deep TMS systems.

[Hadar Levy, CEO at BrainsWay]

Demand in our OCD treatment indication remains strong, and we continue to maintain treatment capability for this important indication on about 50% of our total installed base. We also remain laser-focused on catering to the needs of our diverse customer base, their businesses, and the patients they serve. We continue to make progress in our penetration of both existing and new customer bases. This includes continuing to strengthen and expand partnerships with larger institutional and enterprise customers, which play an increasingly important role within the industry. We remain committed to incorporating our proprietary Deep TMS technology into this expanding mental health groups and networks. We have also looked to generate new sources of growth by increasing our international footprint through existing and new strategic distribution agreements. Currently, we have an exclusive distribution and agent agreements in several important countries around the globe, including in Asia and Europe.

[Hadar Levy, CEO at BrainsWay]

In June, we announced adding Canada to this list after signing an exclusive multi-year distribution agreement with a strong Canadian specialty distributor that services both the acute hospital and non-acute healthcare spaces. This agreement offers us broad market entry into Canada via its team of over 35 sales professionals. The agreement establishes a multi-year framework of minimum quantity orders, beginning with 11 Deep TMS systems in the first year, with successively increasing quotas in subsequent years. In order to support our future commercial efforts, our clinical development, medical, and regulatory teams continue their work on expanding the clinical benefits of our system. Most recently, we announced that the FDA granted us with an expanded indication for Deep TMS treatment of major depressive disorder in patient ages 22-86. This represent an important change from the previous upper age limit, which had been set at 68.

[Hadar Levy, CEO at BrainsWay]

It also marks an important regulatory achievement, making Deep TMS as the first and only form of TMS indicated for the treatment of patients over the age of 68, suffering from major depressive disorder, including those with comorbid and anxiety symptoms. We believe this important decision by the FDA will have a direct impact on our patients, since depression does not disappear at age 68. On the contrary, it is prevalent, but often more challenging to treat, because certain brain targets sometimes move further away from the scalp at patient age. We believe that the deeper and broader stimulation of Deep TMS helps overcome these age-related challenges, and we're able to demonstrate compelling clinical data on the efficacy of Deep TMS in older patients as part of our application to the FDA that preceded this labeling extension.

[Hadar Levy, CEO at BrainsWay]

Moving on, we also recently initiated clinical trial, evaluating an accelerated depression treatment protocol for our Deep TMS system. Previously published post-marketing data that has shown that outcome achieved with accelerated Deep TMS protocol were comparable with those from longer traditional protocols. We believe that an accelerated treatment protocol has the potential to improve convenience and make Deep TMS substantially more appealing to many prospective patients. In closing, the BrainsWay team has executed extremely well across multiple fronts of our corporate strategy during the first half of 2024. As a result, we have generated strong growth, increased profitability, and are opening up new pathway for future growth. I could not be prouder of the progress we have made and look forward to a strong second half of the year and beyond.

[Hadar Levy, CEO at BrainsWay]

With that, I will now turn the call over to Ido for his review of our second quarter 2024 financial results. Ido?

[Ido Marom, CFO at BrainsWay]

Thank you, Hadar. I want to take a minute to express my excitement around the commercial traction we continue to have, ranging from our progress with enterprise account in the U.S. to our continued international expansion. As Hadar just mentioned, revenue for the second quarter of 2024 was $10 million, a 28% increase compared to the prior year period revenue of $7.8 million. Gross profit for the second quarter of 2024 was $7.5 million or a 75% gross margin. This is compared to $5.7 million or a 73% gross margin during the prior year period. Moving on to operating expenses. For the second quarter of 2024, sales and marketing expenses were $3.8 million, compared to $4 million for the second quarter of 2023.

[Ido Marom, CFO at BrainsWay]

Research and development expenses were $1.7 million, compared to $1.9 million in the second quarter of 2023. General and administrative expenses for the second quarter of 2024 were $1.4 million, compared to $1.2 million for the second quarter of 2023. Operating profit for the second quarter was $586,000, compared to an operating loss of $1.3 million for the same period in 2023. Adjusted EBITDA was $1.2 million, representing the fourth consecutive quarter of positive adjusted EBITDA, and compared to a loss of $600,000 for the second quarter of 2023.

[Ido Marom, CFO at BrainsWay]

For the second quarter, ended June 30, 2024, we recorded net income of $600,000, compared to a net loss of $1.7 million in the same period of 2023. We ended the second quarter with cash, cash equivalents, and short-term deposits of $48.1 million, as compared to $46.3 million at December 31, 2023, and $47.8 million at March 31, 2024. As Hadar mentioned earlier, based on our robust U.S. pipeline and continued momentum internationally, we have narrowed our expected revenue for 2024 to be in the range of $38.5 million-$40 million and continue to anticipate positive cash flow and profitability for the full year. This concludes our prepared remarks. I will now ask the operator to please open up the calls for questions. Operator?

[Operator]

We will now begin the question-and-answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Steven Lichtman of Oppenheimer. Go ahead, please.

[Steven Lichtman, Analyst at Oppenheimer]

Thank you. Good morning, guys. I guess just starting out on international, after the agreements that you signed, Hadar, over the past couple of years outside the U.S., can you update us on what percent of your installed base is international today, and where do you see the biggest geographic opportunities?

[Hadar Levy, CEO at BrainsWay]

I would say that today the ratio between the domestic and international is 80% domestic and like 20% international. We can see that the Asia Pacific is growing very well. And we see a very big increase in demand for technology in India, in South Korea, Taiwan, Thailand. And there is definitely a very strong demand also from some European countries like France, Italy, and Spain.

[Steven Lichtman, Analyst at Oppenheimer]

Great. Thanks. On the pipeline, can you update us on TMS 360, and on any progress in distribution discussions for the smoking indication?

[Hadar Levy, CEO at BrainsWay]

Yeah. So, on the pipeline, you know, I think the 360 system is now in a pilot program for several indication. We're also planning maybe to even expand it to some other indication next year. So we are now, you know, we just launched a few feasibility study with this machine. We believe that the rotational will be one of our main technology, Deep TMS technology, for the future. And, once I will have more information to update, I will be more than glad to update all the investors.

[Hadar Levy, CEO at BrainsWay]

On the addiction part, we're still in discussions with several partners that are showing very high interest in the addiction space. You know, not too many news to date, but I believe that I'm hoping to find the right distribution channel for us in the U.S. and also internationally.

[Steven Lichtman, Analyst at Oppenheimer]

Got it. Then lastly, you obviously continue to get nice operating expense leverage. I was wondering, you know, given the strong gross margin profile, do you see opportunities for reinvestment in sales and marketing to, you know, to further accelerate the momentum that you have?

[Hadar Levy, CEO at BrainsWay]

Yeah, absolutely. We are always looking for any possible way to accelerate the growth and to expand faster. You know, by you know, a few ways could be to invest and grow organically, and that's exactly what we do on every day. We are looking on some empty territories that could potentially generate some additional footprint and additional revenue stream for us. We're also looking for some additional modalities to sell and to increase our top line revenue from each one of the centers. But that's exactly what we're going to do with our growing cash balance. We're going to inject it and to invest it back to grow the top line number.

[Steven Lichtman, Analyst at Oppenheimer]

Great. Thanks, Hadar. Congrats on the progress.

[Hadar Levy, CEO at BrainsWay]

Thank you, Steve.

[Operator]

Our next question comes from Jeffrey S. Cohen of Ladenburg Thalmann and Company. Go ahead, please.

[Jeffrey Scott Cohen, Analyst at Ladenburg Thalmann & Co. Inc.]

Hello, Hadar, how are you?

[Hadar Levy, CEO at BrainsWay]

Good. Good morning, Jeff. Good, thank you.

[Jeffrey Scott Cohen, Analyst at Ladenburg Thalmann & Co. Inc.]

So, a few questions from our end. I guess, firstly, I'm looking at the study referenced in the press release, the 104 patients. And regarding the protocol, any further information you can give us besides the six-week reference as far as the treatment protocol over the time period?

[Hadar Levy, CEO at BrainsWay]

Yeah, I can just share, you know, what we already announced on some of the press releases. Our intention is to make this treatment much more convenient to the patient and shorten the amount of days that they need to come to the clinic. So basically it's from 30 days to only 6 days.

[Jeffrey Scott Cohen, Analyst at Ladenburg Thalmann & Co. Inc.]

From 30 to 6 days over 6 weeks?

[Jeffrey Scott Cohen, Analyst at Ladenburg Thalmann & Co. Inc.]

Once a week then?

[Hadar Levy, CEO at BrainsWay]

No. It's multiple sessions per day, in terms of six days.

[Jeffrey Scott Cohen, Analyst at Ladenburg Thalmann & Co. Inc.]

Got it. Okay, perfect. That's helpful. Could you talk about the expanded label? Congrats on that, taking the age from 68-86. But how does that look as far as the TAM for MDD, from your perspective or data that exists out there?

[Hadar Levy, CEO at BrainsWay]

Well, that's definitely a huge increase, and you know, we're now targeting a TAM that was not exist for us, and that's a big TAM and specifically located in some of the nursing home facilities in the U.S. And you know, I think one of our major target today is to try and target some of those old elderly population centers in the U.S., around the nursing home and some other facilities that can help us to generate more leads and to increase the top line revenue.

[Jeffrey Scott Cohen, Analyst at Ladenburg Thalmann & Co. Inc.]

Got it. Perfect. A couple more quick ones. In Canada, the 11 system placements, are they all active at this point in time?

[Hadar Levy, CEO at BrainsWay]

Are you referring to the system, if the systems are already active?

[Jeffrey Scott Cohen, Analyst at Ladenburg Thalmann & Co. Inc.]

Yes, that was my question. Yeah, on the 11 place in Canada.

[Hadar Levy, CEO at BrainsWay]

No, no, not, no, not, not yet. I mean, they should get delivered before the end of the year. That's the commitment, and you know, we are now focusing on the training and on some of the marketing aspect, and the plan is to launch this market in Q3.

[Jeffrey Scott Cohen, Analyst at Ladenburg Thalmann & Co. Inc.]

Perfect. Okay. And then lastly, looks like you placed 114 Deep TMS in the first half of the year, but it seems that Q2 was over Q1. So if that's the case, would one expect the trajectory of placements to accelerate throughout Q3 and Q4? And any commentary specific on the cadence of the back half of the year?

[Hadar Levy, CEO at BrainsWay]

Yeah. As we said, we remain very positive. You know, I think we've got a very good understanding of the market, and we see the demand continue to grow, and we feel very, very comfortable with the current pipeline and the current backlog. So we are anticipating that the momentum of the growth will continue to stay where it is today.

[Jeffrey Scott Cohen, Analyst at Ladenburg Thalmann & Co. Inc.]

Super. Thanks for taking our questions. Congrats again.

[Hadar Levy, CEO at BrainsWay]

Thank you, Jeff.

[Operator]

Our next question comes from Raghuram Selvaraju of H.C. Wainwright. Go ahead, please.

[Dan Onferrom, Analyst at H.C. Wainwright]

Good morning. This is Dan on for Raghuram. Congratulations on the earnings growth. We have a few questions. Do you expect to be sustainably profitable going forward? What might be the principal drivers of this? How do you intend to accelerate market penetration in the MDD indication, and what proportion of uptake are you expecting in the elderly patient segment? And I'd like to ask a few additional questions if there's time.

[Ido Marom, CFO at BrainsWay]

Okay. I will answer the first question regarding the profitability. In short, the answer is yes. We are planning to continue to grow, and once we are growing, and as you can see, we grow a quarter-over-quarter, but by $1 million with the revenue, which most of it goes directly to our net profit. Our plan is to continue with our profitability through the second half of the year.

[Hadar Levy, CEO at BrainsWay]

With regards to your penetration strategy, and you know, I think that we're trying a few different aspects here. So first of all, we are mainly focusing on the large enterprise account that has the ability and the demand to grow with us. So that will continue to be our main focus to penetrate faster. The second is, you know, I believe that the more we see a demand on the OCD and the better reimbursement for the OCD indication, that could be also potentially increase the demand of our product.

[Hadar Levy, CEO at BrainsWay]

Also, I believe our very unique business model, that the offering to our customers is very unique in terms of lease, in terms of pay-per-use, and all the support that we're providing to our customers, I believe, will continue and accelerate the penetration into the market in the U.S. With regards to the elderly patients, so we try to filter down, to narrow down the number of nursing home centers in the U.S., and we're going to focus and to see what could be the demand.

[Hadar Levy, CEO at BrainsWay]

You know, even today, in almost every clinic in the U.S., there are elderly patients above the age of 68, and now they can treat those patients, and they can also get reimbursement, and to promote this. I believe all this combination can really lead to some positive growth going forward.

[Dan Onferrom, Analyst at H.C. Wainwright]

That's excellent. Thank you. Do you expect to establish partnerships with any organizations that are similar in purpose and alignment to Katie's Way Plus? If so, in what context and on what timeline? And given the achievement of sustained profitability, what are your thoughts about payment of a dividend, and/or share buybacks? How is the progress on system placements in Israel and South Korea going, respectively, and what are those expectations?

[Hadar Levy, CEO at BrainsWay]

Okay. So yes, I believe that, you know, I think the market should expect some additional news from the company about reporting on some additional partnership, significant partnership in the U.S. and internationally, well, because that's our main focus. That's exactly what we do when we wake up every morning, and we believe that's the best way to promote and to grow the business. In terms of the expansion in Israel, so I believe that the demand in Israel continue to grow, in the hospital , and also on the private market. There is a very good reimbursement in Israel, and that's probably the main driver for growth in Israel.

[Hadar Levy, CEO at BrainsWay]

We also, you know, I believe that in Israel we potentially can also treat some other indication all based on the need and reimbursement. So I do project that the also the Israeli market will continue to grow. And you also mentioned the other distribution channel, like Korea and Taiwan. So, you know, each one of them have a minimal quantity of system that they need to order from us on a yearly basis. Based on what I'm seeing and the visibility that we see, we remain very, very positive that they will order at least a minimal quantity, if not even more.

[Dan Onferrom, Analyst at H.C. Wainwright]

Awesome. What... Sorry, what are the thoughts about, given the achievement of sustained profitability on payment of dividends or share buybacks? Could you also add a little more color to the Canada agreement, specifically what the increased purchases might look like over time?

[Hadar Levy, CEO at BrainsWay]

Yeah. So, the Canadian deal is a multi-year system deal that should generate some, I would say, even significant revenue for the company. As I said, this is a very, very serious distributor with over 35 sales professionals. In terms of the business model, since we don't have—we're not selling direct in the Canadian, and we're using distributor, we have a transfer pricing between the BrainsWay and the distributor. So, you know, the ASP will be lower. However, I do anticipate that the demand in this market will be significant. On your question, listen, I think that we are feeling very, very proud with the strong cash balance that is in our hand today.

[Hadar Levy, CEO at BrainsWay]

We are exploring all options on the table. So, what, you know, how can we invest this money back in our business to grow the business? How can we do something significant and interesting to our shareholders? Everything is in very, very preliminary discussion because we haven't been in this situation a year ago. So I'm lucky that we are in this position today, in a strong position, and I believe that we will make some more updates down the road about the use of proceeds that we have today on our balance sheet.

[Dan Onferrom, Analyst at H.C. Wainwright]

Awesome. Thank you so much for your answers, and congratulations again on the earnings.

[Hadar Levy, CEO at BrainsWay]

Thank you so much.

[Operator]

Again, if you have a question, please press star, then one. This concludes our question and answer session. I would like to turn the conference back over to Hadar Levy, CEO of BrainsWay, for any closing remarks.

[Hadar Levy, CEO at BrainsWay]

I would like to thank all of the investors, analysts, and other participants of their interest in BrainsWay. With that, please enjoy the rest of your day. Thank you.

[Operator]

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Analysts

• Brian Ritchie, Head of Investor Relations at LifeSci Advisors
• Dan Onferrom, Analyst at H.C. Wainwright
• Hadar Levy, CEO at BrainsWay
• Ido Marom, CFO at BrainsWay
• Jeffrey Scott Cohen, Analyst at Ladenburg Thalmann & Co. Inc.
• Steven Lichtman, Analyst at Oppenheimer