Good day and welcome to the BrainsWay Second Quarter 2024 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 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. 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 pipelines, which were 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.

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 30th, 2024. 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 to $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. 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 install 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 group 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 exclusive distribution and agent agreements in several important countries around the globe, including in Asia and Europe. 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 35,000 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 an expanded indication for Deep TMS treatment of major depressive disorder in patients aged 22 to 86. This represents an important change from the previous upper age limit which had been set at 68. It also marks an important regulatory achievement making Deep TMS 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 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 with 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 expansion. Moving on, we also recently initiated a clinical trial evaluating an accelerated depression treatment protocol for our Deep TMS system. Previously published post-marketing data has shown that outcomes achieved with the accelerated Deep TMS protocol were comparable to 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 pathways for future growth. I could not be prouder of the progress we've made and look forward to a strong second half of the year and beyond. With that, I will now turn the call over to Ido for his review of our second quarter 2024 financial results.

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 accounts in the US 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. 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. 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, 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 US pipeline and continued momentum internationally, we have narrowed our expected revenue for 2024 to be in the range of $38.5 million to $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.

Our first question comes from Steve Lichtman of Oppenheimer. Please go ahead.

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

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

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

Yeah, so on the pipeline, I think the 360 system is now in a pilot program for several indications. We're also planning to potentially expand it to some other indications next year. We just launched a few feasibility studies with this machine. We believe that the rotational will be one of our main technologies, Deep TMS technology, for the future. Once I have more information to update, I will be glad to update all the investors. Regarding the addiction part, we're still in discussions with several partners that are showing very high interest in the addiction space. Not too many news to date, but I am hoping to find the right distribution channel for us in the US and also internationally.

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

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

Great. Thanks, Hadar. Congrats on the progress.

Thank you, Steve.

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

Hello, Hadar and Ido. How are you?

Good. Good morning, Jeff.

Good, thank you.

So, a few questions for me here. 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?

Yeah, I can just share what we already announced in some press releases. Our intention is to make this treatment much more convenient for 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 six days.

From 30 to six days over six weeks? Once a week?

No, no, no. It's multiple sessions per day over six days.

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

Well, that's definitely a huge increase, and we're now targeting a TAM that will not exist for us, and that's a big TAM, specifically located in some of the nursing home facilities in the US. I think one of our major targets today is to try and focus on those elderly population centers in the US around the nursing homes and some other facilities that can help us generate more leads and increase the top line revenue.

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

No, no, not yet. They should get delivered before the end of the year. That's the commitment. We are now focusing on training and on some of the marketing aspects. The plan is to launch this marketing in Q3.

Perfect, okay. And then lastly, it 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 that trajectory of placements to accelerate throughout Q3 and Q4, and any commentary specific on the cadence over the back half of the year?

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

Super. Thanks for taking our questions. Congrats again.

Thank you, Jeff.

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

Good morning. This is Dan on for Ram. 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 additional questions if there's time.

Okay, I will answer the first question regarding profitability. So, in short, the answer is yes. We are planning to continue to grow, and as you can see, we grow quarter over quarter by $1 million in 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.

With regards to your penetration strategy, I think that we're trying a few different aspects here. First of all, we are mainly focusing on the large enterprise accounts that have the ability and demand to grow with us. That will continue to be our main focus to penetrate faster. The second is that I believe that the more we see demand on the OCD and the better reimbursement for the OCD indication, that could also potentially increase the demand for our product. I also believe our unique business model, which offers our customers unique leasing options and pay per use, along with our support, can continue and accelerate our penetration into the market in the US. Regarding the elderly patients, we will filter down and narrow the number of nursing home centers in the US and see what could be the demand. Even today, in almost every clinic in the US, there are elderly patients above the age of 68. Now they can be treated, and they can also receive reimbursement to promote this. All these factors will lead to positive growth going forward.

That's excellent. Thank you. Do you expect to publish, sorry, 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? Given the achievement of sustained profitability, what are your thoughts about payment of the dividend and/or share buybacks? And how is the progress on system placements in Israel and South Korea going respectively, and what are those expectations?

Okay, yes. I believe that the market should expect some additional news from the company about reporting on significant partnerships in the US and internationally because that's our main focus. That's exactly what we do every morning, and we believe that's the best way to promote and grow the business. In terms of expansion in Israel, I believe that the demand in Israel continues to grow in the hospital and also in the private market. There is very good reimbursement in Israel, which is a significant driver for growth there. I also believe that we could potentially treat some other indications based on need and reimbursement in Israel. I project that the Israeli market will continue to grow. You also mentioned distribution channels in Korea and Taiwan. Each of these has a minimal quantity of systems they need to order from us on a yearly basis. Based on the visibility we see, we remain very positive that they will order at least the minimal quantity, if not more.

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

Yeah. The Canadian deal is a multi-year system deal that should generate significant revenue for the company. As I said, this is a very serious distributor with over 35 sales professionals. In terms of the business model since we are not selling directly in Canada and using a distributor, we have transfer pricing between BrainsWay and the distributor. The ASP will be lower. However, I anticipate that the demand in this market will be significant. Regarding dividends or share buybacks, we are exploring all options on the table: how can we invest this money back in our business to grow? How can we do something significant for our shareholders? Everything is in very preliminary discussions because we weren't in this situation a year ago. I'm lucky that we're in this strong position today, and I believe we will make more updates about the use of proceeds on our balance sheet down the road.

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

Thank you so much.

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.

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.