BrainsWay Ltd. Price & Performance (BWAY)

Welcome to the Brainsway Fourth Quarter and Full Year twenty twenty four Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. 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.

Thank you all and welcome to Brainspace fourth quarter and full year twenty twenty four earnings conference call. With us today are Brainsway's Chief Executive Officer Adar Levy and Chief Financial Officer, Ito Morom. The format for today's call will be a discussion of recent trends and business updates from Hidar, 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 months and full year ended 12/31/2024. A copy of the press release is available on the company's Investor Relations website. 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 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. [indiscernible] I would now like to turn the call over to Hudar.

Please go ahead, Hudar.

Thank you, Brian.

Well, We are excited to announce today that we completed 2024 with another quarter of rapidly growing sales of our market leading deep TMS system. The steady rise in our performance reflects the successful execution of of our strategy focused on building sales momentum and scale of our commercial distribution around the world. As you will see, these results further reinforce Brainsway's true business and technological leadership position in the TMS field. On the top line, we generated $11,400,000 in revenue marking a 27% year over year increase. Our multiyear agreement with large enterprise networks strengthened customer partnership beyond one time sales, ensuring alignment with their evolving needs. Additionally, our lease based business model option continues to expand our recurring revenue base providing a more stable foundation for long term growth. In the fourth quarter of twenty twenty four, we shipped a total of 75 deep TMS systems, representative representing a 25% increase compared with the same period last year. I think it is worth noting that combined with our growing backlog and record revenues, we have established a positive book to bill ratio over the past several quarters. This underscores the exceptional execution of our commercial team as we continue to partner with larger enterprise customers.

Those that have consistently delivered the highest return on our sales and marketing investment. We have significantly expanded our market presence. Making deep TMS accessible to more customers than ever before. To support this growth, we optimized our sales force to accelerate expansion within larger institutionals and enterprise accounts, in The U. S. And internationally. Our global reach now extend across key markets including Canada, Asia, India and Europe. As we successfully transition into this new phase of growth, we are driving increased profitability further setting us apart in our industry. This is reflected in our strong gross margin, which was 75% in the fourth quarter and for the full year. We generated positive quarterly net income for the fifth consecutive quarter positive adjusted EBITDA and cash flow from operation for the sixth consecutive quarter. Looking ahead, we are introducing full year 2025 revenue in the range of $49,000,000 to $51,000,000 This would represent a growth of 20% to 24% over 2024. We also anticipate generating operating income of 3% to 4% and adjusted EBITDA of 1112% for the full year 2025. We aim to further solidify our market leadership by leveraging our strong sales momentum and executing key strategic investment across three core areas: advancing our next generation DeepTMS three sixty conducting clinical trials to expand and enhance treatment capabilities and strengthening our commercial presence through targeted sales and marketing initiatives.

Our primary objectives are to drive market awareness, execute on our R and D roadmap and expand access to deep TMS. We believe that these are critical as we work to further cement our role in shaping the future of mental health treatment. On the commercial front, we expect to see increased sales around OCD in 2025. As our system is the first TMS therapy approved, for obsessive compulsive disorder.

OCD is a difficult to treat disease with limited treatment options with substantial potential market of roughly four hundred thousand patients annually are resistant to to current treatment options. As a reminder, our most recent data for this indication are very positive with over sixty percent of patients responding to deep TMS treatment. Turning to depression, doctors have been reporting and in As a reminder, this refers to the patient with major depressive disorder who also exhibit comorbid and anxiety symptoms. This is a large addressable medical need that affect approximately ten million to sixty million adults in The U. S. Each year. As a reminder, our system was the first TMS device cleared by the FDA to effectively treat this condition. We have also seen an increase in utilization of DIPTMS to treat elderly patients with MDD the second half of twenty twenty four. Disruption in the market follows the U. S. FDA's groundbreaking decision to raise the average limit from 68 to 86 years old for the indication in June 2024. As life expenses continue to rise, many are looking for innovative therapeutic solutions to alleviate the significant burden this condition places on our aging population. This clearance made our system the first and only TMS device approved to treat elderly patients with MDD.

We are also working on collecting data on deep TMS for potential treatment for adolescent depression patients. And we'll update you all to the extent we make progress on this front as well. In September, we announced that the Israeli Ministry of Defense Rehabilitation Department of deep TMS therapy for qualifying patient at Israeli public hospitals. With post traumatic stress disorder or PTSD. Will continue working to expand the available reimbursement for PTSD in Israel with the goal of potentially including more Israeli medical centers as well as adding private clinic settings. Another recent development on the research front was recent publication in the Journal of Psychiatric Research showing that deep TMS therapy combined with psychedelic therapies was significantly more effective in reducing depression levels among adult patients compared with standard medication alone. We believe this promising data support additional research into the potential benefits of treating depression with a combination of deep TMS and psychedelic therapies. Importantly, we continue to make progress in our randomized multi center U. S. Clinical trial evaluating an accelerated treatment protocol for the deep TMS system for MDD treatment as compared to the current standard of care deep TMS protocol.

As a reminder, the traditional Deep TMS protocol involves a four week acute treatment phase with one session on each day of the treatment. This is now being compared to an accelerated protocol, which involves a significantly shorter acute phase taking place over several treatment days. This has the potential to improve convenience and thereby make deep TMS substantially more appealing to many prospective patients.

Turning to alcohol use disorder, or AUD. We recently announced positive pilot data from a small independent third party study conducted at Stanford University evaluating an accelerated protocol using our deep TMS technology to treat alcohol addiction patient. Which was reported in a publication in the Brain Stimulation Journal. We believe these promising preliminary results will pave the way for further research into the potential benefit of treating AUD and other addiction with deep TMS using an accelerated protocol. This critical investment in our long term R and D and clinical vision are supported by a strong balance sheet with no debt. At 12/31/2024, we reported $69,400,000 in cash. This includes approximately $20,000,000 in gross proceeds received to date from our equity financing successfully completed with Valo Equity Partners. This financing will be used to support the key action items I just discussed, which are aimed at expanding our commercial footprint and supporting broader access for patients to deep TMS. Obviously, the most important aspect of our growth strategy centers around our innovative deep TMS system and the large enterprise customers we are focused on servicing. As a growing segment of our customer base, this enterprise accounts have been a major driver behind the larger and repeat order for our deep TMS systems over the past year. [indiscernible] In addition, by elevating our customer base, we have seen new doors open additional enterprise customers of the same size and caliber if not larger.

With the opportunity to achieve additional large and repeat orders from both new and existing enterprise customers, we see additional meaningful room to grow in the years to come. In closing, our team is executing our strategy on several fronts, As a result, we now stand as the clear leader in TMS therapy. Uniquely positioned to expand mental health access while delivering shareholder value through transformative therapies [indiscernible] Operational excellence sustainable growth. With that, I will now turn the call over to Ido for his review of our fourth quarter and full year 2024 financial results. [indiscernible] Thank you, Adar. Revenue for the fourth quarter of twenty twenty four was $11,400,000 a 27% increase compared to the prior year period revenue of $9,000,000 We placed 75 net deep TMS systems in the fourth quarter. We Our total installed base was thirteen fifty three systems as of December 31, 2024, compared to eleven oh one systems at the same point in the prior year. As a result of our strong performance in the fourth quarter, we hit the top end of our guidance with $41,000,000 of revenue recorded for the full year 2024. This represents a 2929% increase compared to the $31,800,000 reported for 2023.

Gross profit for the fourth quarter of twenty twenty four was $8,500,000 or 75% gross margin. This is compared to $6,700,000 during the prior year period at the same gross margin. Gross profit for the full year 2024 was $30,600,000 or 75% gross margin. This is compared to $23,500,000 or 74% gross margin during 2023. Moving on to operating expenses. For the fourth quarter of twenty twenty four, sales and marketing expenses were $4,500,000 compared to $4,000,000 for the fourth quarter of twenty twenty three. For full year 2024, sales and marketing expenses were $16,200,000 compared to $16,500,000 for 2023. Research and development expenses were $2,000,000 compared to $1,400,000 in the fourth quarter of twenty twenty three. R and D expenses for the full year 2024 were $7,200,000 compared to $6,700,000 in 2023. General and administrative expenses for the fourth quarter of twenty twenty four were $1,600,000 compared to $1,200,000 for the fourth quarter of twenty twenty three. General and administrative expenses for the twelve months ended 12/31/2024 were $5,800,000 compared to $5,300,000 for 2023. Operating profit for the fourth quarter was approximately $430,000 compared to approximately $180,000 for the same period in 2023. Operating profit for the full year 2024 was approximately $1,400,000 compared to an operating loss of $5,000,000 2023.

Adjusted EBITDA was $1,400,000 representing the sixth consecutive quarter of positive adjusted EBITDA. Compared to approximately $750,000 for the fourth quarter of twenty twenty three. For the full year 2024, we reported adjusted EBITDA of $4,500,000 which is also at the top end of our guidance representing 11% of revenue.

This is compared to an adjusted EBITDA loss of $2,400,000 for 2023. For the fourth quarter ended 12/31/2024, we recorded net income of $1,500,000 including $1,000,000 due to a positive impact from the valuation of warrants issued to Valor Equity Partners. Compared to $127,000 in the same period of 2023. For full year 2024, we recorded net income of approximately $2,900,000 compared to a net loss of $4,200,000 in 2023. We ended the year with cash, cash equivalents and short term deposits of $69,400,000 on 12/31/2024, which includes the $20,000,000 in gross proceeds received to date from the private equity investment by Valor Equity Partners announced this past September.

As Adar mentioned earlier, based on our backlog and U. S. Pipeline, and continued momentum internationally, we expect revenue in the range of $49,000,000 to $51,000,000 for full year 2025. Which represents 20% to 24% growth over 2024 revenue. In addition, we anticipate reporting operating income of 3% to 4% of revenue and adjusted EBITDA of 11% for the full year 2025. This concludes our prepared remarks. I will now ask the operator to please open up the call for questions. Operator, We will now begin the question and answer session. The first question comes from Steven Litch with Oppenheimer. Please go ahead. [indiscernible] congratulations on the quarter and year.

The 75 placements was certainly a standout. Were there particular drivers this quarter that stood out that you'd like to highlight whether the enterprise network sales, international acceleration, so any further color on some of the drivers in the quarter?

Yes. Hi, Stephen, and thank you for your question. As always, the fourth quarter is always the strongest quarter for the company. However, we see we do see some some specific trends that I'm expect to continue also in 2025. Obviously, the main driver is the all the enterprise accounts that are contributing significantly to our future sales Very high demand is coming from those enterprise accounts. The other two aspects of it are the increase use for the and demand for the OCD. Which is also the H7 calls. We see a constant growing demand for this important indication. And I also mentioned, I think the last thing that is important also to add is the increase in utilization in our devices both from the need from MDD, anxious depression and also treating elderly patients. All of those together are managed to increase the demand in the fourth quarter.

Great. You mentioned progress on the accelerated treatment protocol. What's the latest in terms of timing there? When we could see data?

Yes. So we're on the final stage of the recruitment for this very, very important indication. Our intention is to finish the follow-up period, which is around thirty days and then start analyzing the data and submit it to the FDA. I do expect to come up with some news about this indication in the third quarter of twenty twenty five.

Got it. And then just lastly, I'll jump back in queue. On margin in 2025. Can you talk to what you anticipate for gross margin this year? Thank you.

Yes. So we do expect the gross margin to keep the gross margin on the same level as 2024 around around 75%. I'm always saying there is more room for improvement on the gross margin and we are taking the necessary step to try and improve it, but we are expecting the gross margin for 2025 to to stay on the same level as 2024. Around 75%. And same and also to keep the same profitability levels also on the on the bottom line and the EBITDA.

Great. Thanks, Adar.

Thank you, Stephen. Our next question comes from Jeffrey S. Cohen with Ladenburg Thielman. Please go ahead. Good morning, Hadar and Neil, and thank you for taking our questions. Just a couple on Arden. I wonder if you could talk about the psychedelics at current centers and newly placed centers.

Are you seeing that current centers have an increasing level of psychedelic therapy as far as percentage and are you seeing also with new placements as far as centers out there?

Yes. Thank you, Jeff. Good morning. What we are seeing is more and more psychedelic clinics are open and are looking to embed the deep TMS technology in their facilities. The main reason for that is that they already got as designated room. They got the stuff. And most of them are shooting for inter So some of them wants to try a combination of those two treatments. But there is definitely a big demand from those centers from what I'm seeing in the market. What will be the impact going forward? I think it's hard to tell, but there is definitely a room for us to grow. Through this channel. I see all those centers potentially offering our deep TMS technology going forward.

Okay, got it. And could you talk about MDD a little bit? Are you seeing any changes on the treatment paradigm with the payers out there in the marketplace? For MDD and also perhaps for OCD?

I would say that the paradigm for MDD was very positive in the last few years. They reduced the number of failures that are eligible for treatment from from four failures in the past to only one or two. I do see some constant increase in some of the feasible procedure So I think that the paradigm has been positive and I think it will stay positive as far as I see it because at the end of the day, this is a very effective treatment that is saving money for the for the peers. As for OCD, we also see a very steady and slow growth on the coverage by by our peers. Today, we've got coverage for close to one hundred people lives in The U. S. We need to do some more work with continue and increase this also for the OCD because that's the only available treatment effective treatment by TMS for those patients and I'm expecting the Paris to continue and embrace this technology and to cover it in the near future.

Got it. And then lastly for us, Shidar, could you talk about the the three sixty system and perhaps give us a sense of during 2025 what we may expect to to hear about as far as any studies or indication or any regulatory pathways? [indiscernible] I think the most exciting thing for us on the clinical side with the next gen, the 60 is to launch the multicenter trial in The U. S. With these specific three sixty system. We believe it represent the future of the TMS segment So the first use with this device on a multicenter trial in The U. S. Will be done through this multicenter trial that we plan to to launch on the second half of twenty twenty five. On the same time, we do aiming also to use and to launch some feasibility studies with the TMS-three 60 for Alzheimer's disease and Parkinson's because we believe that this algorithm breaking technology could be benefit for these two indications. But we need to start to do some small feasibilities studies with this technology.

Okay. And when you talk about a back half launch of a multicenter trial, are you referring to MDD specifically as the indication?

No, I'm referring for the AUD clinical trial on the second half of twenty twenty five.

Got it. Okay, perfect.

You very much for taking our questions.

Thank you, Jeff.

Our next question comes from Karl Burns with Northland Capital Markets. Please go ahead.

Thanks for the question and congratulations on the quarter. I'm just wondering, given the cash build that you have, do you see any opportunities for complementary acquisitions or anything that might be in the business development space that we should be looking for potentially in the next twelve to eighteen months or less?

Thanks.

Yes.

Thank you, Karl, and good morning. Yes, we do have a very stable situation with our balance sheet. But I think that 2025 is going to be a pivotal year for the company. Mostly on the innovative side, we're going to do lots of interesting and compelling studies in 2025. But we're also looking to continue and build our future and start planting all the right seeds for a long term growth for the company, which means to continue and strengthen our relationship and partnership with growing and profitable enterprise accounts. So and so, our intention is to grow organically, but also looking for some interesting collaboration and partnership with growing mental health and potentially also addiction centers that can really increase our backlog for the long run. In terms of acquisition, we are not actively looking for an acquisition on the horizon. We are always looking on some interesting technologies that could be [indiscernible] a completing technology to to the deep TMS system in the clinic but we're also developing some new technologies that we believe could help us to bring new product to the market. So just to summarize, we are looking to invest this money back into expanded growth for the company.

Enhance our collaboration with growing enterprise account and continue to invest in the future of of mental health and addiction arena.

Great. Thank you.

Thank you, Karl.

Our next question comes from Ram Selvaraju with H. C. Wainwright. Please go ahead.

Thanks very much for taking my questions and congratulations on a very solid end to 2024. Firstly, I wanted to ask if you could comment on the current broader macro economic and geopolitical situation. And if you expect any of this to pose any unaccustomed challenges or possible opportunities for BrainsWay as we look ahead to the rest of twenty twenty five. Particularly as this pertains to pricing dynamics, as well as uptake in emergent indications for the DPMS system.

Yes.

We don't see as of today any impact on the macro economics changes on [indiscernible] Based company. Most of our business is is in The U. S. And most of our team is also based in The U. S. Market. However, we do see lots of positive tailwinds to our business specifically around some of the new indication that we're about to bring to the market that relates to the mental health industry. I do believe that the accelerated deep TMS protocol could really mitigate some of the trends that we're seeing in the market. I do think that the PTSD treatment that has been approved by the for reimbursement in Israel and we are currently there is some few publication from a very favorable results that has been used by the VA in The U. S. Might increase the interest also on the macroeconomics and and might we potentially may benefit from it at the end. But for your question, the way that we think we see some of the microeconomics We've got lots of mitigation on the financial side and the way that we are partnering with our [indiscernible] down the road. So we remain very positive. At that front.

Just as a follow on to that question, I wanted to ask if you can confirm whether there has been in fact no impact to any governmental funding of exploratory work with the DeepTMS system in particular. I recall that one of these initiatives was being supported by NIH funding, as we all have heard there are cutbacks going on at NIH right now. Just wanted to confirm that this in fact does not affect any of the work that is being done with your system.

Yes, that's a very good question. I'm not aware of any pushback. I think we made some kind of a publication of granting from the NIH for the specific study. I would say on the contrary, I think that the funding that we, I think, announced was was relates to the addiction side. Which is a very, very compelling and important disease that I believe the government and also the public wants to see some progress. But as of to date, there was no restrictions for any kind of funding to some of our projects.

Thank you very much.

This concludes our question and answer session. I would like to turn the conference back over to Hudar for any closing remarks.

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

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