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spk01: Good morning, everyone. My name is Julie, and I will be your conference operator today. At this time, I would like to welcome everyone to BrainsWay's first quarter 2024 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. Thank you, Troy Williams, Investor Relations from Life Science Advisors. You may begin your conference.
spk05: Thank you, Julie, and welcome to BrainsWay's first quarter 2024 earnings conference call. With us today are BrainsWay's Chief Executive Officer, Adar Levy, and Chief Financial Officer, Ido Marone. The format for today's call will be a discussion of recent trends and business updates from Adar, 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 ended March 31st, 2024. A copy of the press release is available on the company's investor relations website. Before I turn over the call to Dar, 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 pipelines. which are all subject to risks and uncertainties, including shifting market conditions as 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 filings with the SEC, including the risk factor sections contained in Brainsway's Form 20F. I would now like to turn the call over to Hadar.
spk03: Thank you, Troy. Welcome everyone and thank you for joining us today. I'm thrilled to report on the continued significant tailwind present throughout our entire business. As such, our outlook for the remainder of 2024 remains highly positive and we are well positioned to achieve the full year top line growth we anticipated and sustained the previously forecasted profitability momentum and positive cash generation. More on that in a moment. Let me begin, though, with an overview of our strong results from the first quarter. Our revenue grew 37% year over year in the first quarter of 2024. In addition, we generated positive quarterly net income for the second consecutive quarter. Also, our gross margin improved nearly 200 basis points year over year, and we recorded positive adjusted EBITDA and cash flow from operations for the third consecutive quarter. Based on these excellent results and our expectations for continued strong performance throughout the remainder of the year, we are reiterating our previously provided full year 2024 revenue guidance of 37 million to 40 million. This would represent growth of 16% to 26% of the full year 2023 revenue. In addition, We continue to anticipate that our profitability momentum and positive cash generation will continue throughout 2024. As our first quarter results and future expectations would indicate, we remain confident in the upward trajectory of our overall business, as well as the current market dynamics and the opportunities that lay ahead. I'd now like to take a few moments to discuss the key growth drivers behind the momentum in our business. We continue to optimize our existing commercial process, including enhancing our emphasis on larger institutional and enterprise customers that are playing an increasingly important role within the industry. We remain focused on adding our deep TMS technology into this expanding large mental health groups and networks. As our results indicate, we continue to execute well on this strategy. Recent key agreements include increased collaboration with significant existing partner, Katie's Way Plus, which provides comprehensive mental health services tailored to the unique needs of active duty military members, veterans, and their families. Katie's Way Plus recently ordered an additional 18 deep TMS systems and will now have an extensive network of approximately 40 devices. Moreover, our international business continues to perform extremely well. To this end, we recently installed our 11 deep TMS systems in Israel, a geography in which we have steadily increased our presence following the recent increase in reimbursement rates there. Looking more closely, At the first quarter, we shipped a net total of 57 systems. Moreover, demand for the OCD treatment indication continued to grow as we shipped 31 OCD quells as add-on elements to certain new and existing systems. Approximately 50% of our total install base now includes OCD treatment capability. In addition, we continue to be supported by an extremely strong balance sheet with 47.8 million in cash with no debt as of March 31st, 2024. In order to further leverage the favorable current commercial trends in our business, we recently appointed Honi Groen as Vice President of International Sales. Honi has over three decades of experience in global sales and business development within the medical technology industry, and she will be instrumental in advancing our efforts to expand BrainSway's global footprint. We are also focused on driving more long-term growth. This is being accomplished by expanding the clinical and real-world evidence in support of deep TMS in multiple large disease areas. The most recent example of this are the previously discussed human neuroscience publication on Parkinson's disease and the Journal of Clinical Medicine publication on late-life depression. Moreover, we recently appointed Dr. Gilad Mosaev as Chief Technology Officer. Dr. Mosaev has over 20 years of experience in the medical device industry, with a substantial portion of that time spent leading R&D efforts at multiple companies. He will be critical in our efforts to expand BrainSway innovative technology platform. In closing, we believe Rainsway remains in the strongest position it has ever been in. We have started 2024 just as we ended last year, which is with strong tailwinds throughout all aspects of our business. To reiterate, we continue to forecast top-line growth for full year 2024 of 16% to 26% over full year 2023 revenue. In addition, looking even further ahead, We remain focused on driving and leading innovation within the TMS industry and are highly confident in our ability to continue capturing significant market share, both in the US and internationally. With that, I will now turn the call over to Ido for his review for our first quarter 2024 financial results. Ido.
spk02: Thank you, Adar. Revenue for the first quarter of 2024 was $9.1 million, a 37% increase compared to the prior year period revenue of $6.6 million. We placed 57 deep TMS systems in the first quarter. Our total installed base was 1,158 systems as of March 31st, 2024, compared to 932 systems at the same point in the prior year. Gross profit for the first quarter of 2024 was $6.8 million or a 75% gross margin. This is compared to $4.8 million or a 73% gross margin during the prior year period. Moving on to operating expenses. For the first quarter of 2024, sales and marketing expenses were $3.8 million compared to $4.9 million for the first quarter of 2023. Research and development expenses were $1.6 million for the first quarter of 2024 compared to $1.8 million for the first quarter of 2023. General and administrative expenses for the first quarter of 2024 were $1.3 million compared to $1.8 million for the first quarter of 2023. Total operating expenses for the first quarter of 2024 were $6.7 million compared to $8.5 million or a 21% decrease from the prior year period. Operating profit for the first quarter was $100,000 compared to an operating loss of $3.7 million for the same period in 2023. Adjusted EBITDA was $700,000 representing our third consecutive quarter of positive adjusted EBITDA and compared to a loss of $2.9 million for the first quarter of 2023. For the first quarter ended March 31, 2024, we achieved net income of $100,000 compared to a net loss of $2.4 million in the same period of 2023. We ended the first quarter with cash, cash equivalents, and short-term deposits of $47.8 million and no debt. as compared to $46.2 million at December 31st, 2023. This was the third consecutive quarter during which positive cash flow was achieved. Based on our robust US pipeline and continued momentum internationally, we are reiterating our full year 2024 revenue guidance in the range of $37 million to $40 million and anticipated and anticipate positive cash flow and profitability momentum throughout the year. This concludes our prepared remarks. I will now ask the operator to please open up the call for questions. Operator?
spk01: Thank you, ladies and gentlemen. Should you have a question, please press star 1. If you'd like to withdraw a question, please press star 2. Again, to ask a question, press star 1. One moment, please, for your first question. Your first question comes from Jeff Cohen from Leidenberg. Please go ahead.
spk04: Hi, good morning. How are you?
spk03: Very good. Thank you. Thank you.
spk04: So, firstly, any color you can provide on territory expansion or geography expansion, at least in the U.S. and abroad, perhaps some new territories and new areas of focus.
spk03: In the U.S., we've got broad coverage in almost all relevant states, all the most growing states. So we continue the same. There is great potential and strong momentum in the U.S. marketplace with an increasing demand. Internationally, we're seeing some very good momentum in the forest with Korea, Taiwan, India that are currently the main drivers on the international market, but also in some areas in Europe as well.
spk04: Got it. Okay, that's helpful. And then What might we expect over the course of 2024 on the study front as far as anything neuro-related such as Parkinson's, epilepsy, stroke, etc.?
spk03: So we're actively selling those indications internationally. We've got the C mark for the neuro indication and the demand looking very good so far. We continue to collect the data and we'll come into some kind of internal discussion, what should be our next indication in the pipeline at the beginning of next year, either on the addiction or the neuro side, probably at the beginning of next year.
spk04: Got it. Okay. And then regarding treatment, Hadar, as far as some of the shorter courses that have been talked about and offered as far as theta burst or a handful of treatments versus the traditional treatment, any color there on news, U.S. or internationally, as far as some of the treatment paradigms, as far as number of sessions that folks are receiving?
spk03: Yeah, we're seeing some very interesting trend on the accelerated TMS, which is the short protocol. And we just launched a new clinical trial together with the FDA. Just to see the benefits from this short protocol, we really believe that's going to be will gain some very good demand and momentum. But definitely the ability to shorten the amount of days that you need to come to the clinic, I think it's crucial for the industry. And we're hoping to get some good progress this year with this clinical trial.
spk04: Got it. And then I guess lastly, maybe for Ido, could you talk about the top line of guidance? I know you're reaffirming the 37 to 40 for the calendar year 2024. Any additional information you can provide on perhaps the cadence of those revenues or how they may play out for the year?
spk02: I can say that we are still, as Adam mentioned in his remarks, we are confident with our guidance of the range of the 37 to 40 million. Our backlog is strong and our booking as of Q1 was right on target as we anticipated. So we believe that this target and this guidance that we gave around the 37 to 40 million is covered by a strong backlog and a strong a strong pipeline that we have that will enable us to achieve this target.
spk04: Perfect. Okay, that does it for us. Thanks for taking the questions. Thank you, Jeff.
spk01: Your next question comes from Steve Litchman from OpenArmor. Please go ahead.
spk06: Thank you. Hi, guys. Just on that last point relative to the pipeline, can you talk a little bit more about sort of the composition of that and Are you continuing to see significant interest out of large customers? Anything that's notable on that front in terms of what the makeup of that pipeline looks like for you?
spk03: Yeah, I think I would say it's kind of a mix of both private offices, but I think the main growth is coming on what we're seeing also on our pipeline. is coming from growing small and mid-sized account, and also from current customers that the business model works for them. They're making some, they have a good business, they see some good results, and they want to continue to grow. So I would say it's a mix of current customers and new customers, a private psychiatrist, and a growing enterprise account.
spk06: All right. What are the next steps on smoking? I know you've talked in the past about partnership potential. Can you update us there on that indication?
spk03: Yes, we are having an active dialogue with potentially interested parties on a consistent basis. It's still under a kind of a business development scenario, so there is no timeline related to establishment of a formal agreement yet, but there is lots of interest on the addiction space overall, not just only on the smoking. So we are actively speaking with some interested parties on taking the addiction indication and distribute the product and hopefully do something significant before the end of the year.
spk06: Got it. I apologize if you did mention this, but on DTMS360, How are things proceeding there in terms of that study, that evaluation of that new system?
spk03: TMS360, that's the next generation of our product. We're testing two aspects. the feasibility of the technology, and the second aspect is the clinical efficacy from this technology. We just launched it, and we've got a few patients that are enrolled to different studies. It's too early for us to tell, but I think that based on some feasibilities, studies that we have done internally. We're expecting to see some good results, but more to come, and once we're going to have some more information to share, we will do that.
spk06: And then just lastly, you've obviously been very disciplined on spend. Given the gross margin coming in solidly here, any thought about reinvesting at a higher level to even further drive revenue growth? How are you thinking about that balance as you look ahead?
spk03: Yes, listen, you know, I believe that we should invest the money back into the growth of our operation, and that's exactly what we're going to do. We're going to increase the number of the sales team, put some more marketing initiatives and also increase some of the investment on the R&D on the clinical. However, all the future investment will be aligned with our forecasted growth just to keep our profitability momentum and to be very, very sensitive to the cash flow positive generation.
spk06: Great. Thank you, Siddharth. Thank you, Steve.
spk01: Ladies and gentlemen, as a reminder, should you have a question, please press star 1. Your next question comes from Ram Selvaraju from H.C. Brunwright. Please go ahead.
spk00: Hi, thanks very much for taking my questions. A couple of metrics-related questions, if I may. Could you give us a sense of what you expect the total install base to be at the end of 2024? As I recall, at the end of 2023, it was 1100. I think you reported a quarter one end number of 1158. But if you could just maybe give us a sense of what your expectations are in terms of how they conform to your financial guidance, that would be helpful.
spk03: So, you know, I think we are increasing the footprint of our install base in a very steady way. Roughly between 50 to 60 units every quarter. That should lead you to the number of install base by the end of the year.
spk00: Okay, that's helpful. Secondly, there have been some notable changes with respect to the nature of the prior authorizations, particularly in the MDD space. And I'm talking in particular about the number of failed medications that are required before DTMS is deployed. Can you give us a sense of how that continues to evolve and whether you expect ultimately the standard to become sort of more like failure of only one or two medications as opposed to three or four?
spk03: So I would say that today the standard is much more close to failing in one or two medications than in three or four. So there was definitely an improvement in the in the last two years in this segment, and the main reason is the efficacy rates of the Deep TMS technology and the fact that this treatment is saving money to the insurance company. So it seems like, you know, I think that in terms of the way that the market is evolving, we're starting to see some more standardized of one fail before you can get the deep TMS treatment. And I think the overall insurance for our technologies, I think the trends, as I said, in the last two years was very favorable. And I don't see it changing unless there is something radical. But I think that we're getting some very good momentum and very good feedback on our treatment.
spk00: With respect to the comments you've previously made about KT's way and Brainsway's relationship to KT's way, can you comment on, A, what level of customer KT's way is? Is it among the biggest customers you have? I would imagine that that's the case, but just wanted to get some clarity on that. And secondly, how many other entities like Katie's Way are there out there that you might be able to forge similar relationships with, particularly as this pertains to providing mental health care to active duty military personnel?
spk03: Yeah. Katie's Way, I believe it's a wonderful story to our strategy. You know, they started as... as a small, mid-sized mental health network with few sites. And in the last two or three years, due to the collaboration between companies, we managed a way to grow together. So today, we got an install base of uh 40 system um i believe they will continue to grow uh by the way so they're spreading out i think i the business um seems working uh uh very well um and for your other question um there are many there are other katie's way uh in our pipeline um so you know i believe that due to the market demand due to the uh um the treatment and the uh and to the technology that we are providing, I see no reason why can't we grow more mental health companies like Katie's Way. Katie's Way is a little bit more unique because they are much more targeted into the active military and veterans space. However, in our pipeline, in our current install base, I can see... a lot of carries way like in our customer base that has the potential to grow.
spk00: And then lastly, with respect to your now growing cash position, strong balance sheet, and expectations for continued profitability and sales momentum, can you give us a sense of how you are thinking strategically about efficient deployment of that capital to continue to add value, and if you are considering the possibility of in-licensing or acquiring additional potentially complementary technologies at this time?
spk03: Yeah, yeah. In terms of the use of Proceed, we intend to grow the business organically and unorganically. So we're definitely looking on the right opportunity that is going to lay ahead of us. And there are very, very, very interesting opportunities today on the addiction space, on the neuro space, on the In some other areas that, you know, it's too early for me now to share with the audience, but we're definitely looking for the right opportunities that will help us to grow the business significantly to where we want to be.
spk06: Thank you.
spk03: Thank you.
spk01: And there are no further questions at this time. I will turn the call back over to Adar Seyo for closing remarks.
spk03: Great. Thank you so much. So I would like to thank you all, investors, analysts, and other participants for your interest in Brainsway. With that, please enjoy the rest of your day. Have a good day.
spk01: Ladies and gentlemen, this concludes today's conference call. You may now disconnect your lines. Thank you.
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