Q1 2023 BrainsWay Ltd Earnings Call
Yeah.
Greetings and welcome to the brains My first quarter 2023 earnings call. At this time, all participants are in a listen only mode.
<unk> and answer session will follow the formal presentation, if anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded I would now like to turn the conference over to your host Brian Ritchie with lifestyle advisors. Thank you you may begin.
Thank you all and welcome to the brains waste first quarter 2023 earnings conference call with US today, our brains waste Chief Executive Officer, Dr Levy Chief.
Chief Financial Officer, Scott, Eric Lotto the format for today's call will be a discussion of recent trends and business updates from the Dar.
I would buy a detailed discussion of the financials from Scott then we will open up the call for your questions.
Earlier today range by released financial results for the three months ended March 31st 2023, a copy of the press release is available on the company's Investor Relations website.
Before I turn the call over to her door and Scott 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 ranged waste anticipated future operating and financial performance business play.
And prospects and expectations for its products and pipeline.
Which are all subject to risks and uncertainties, including shifting market conditions, resulting from the COVID-19 pandemic the global supply chain crisis 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.
Its other filings with the SEC, including the risk factors section contained in <unk> form 20-F.
I would now like to turn the call over to the door.
Thank you Brian .
Welcome everyone and thank you for joining us today.
We remain focused on implementing key initiatives aimed at growing the company's top line, while simultaneously advancing toward profitability.
We continued to optimize our existing commercial process, including enhancing our emphasize on larger institutional and enterprise customers.
And increasingly important for all of them within the industry.
As a reminder, our goal is to our deep Tms technology into this expanding large mental health group all networks.
I am pleased to report that the momentum resumed in our business during the first quarter as we said would be the case on our fourth quarter call.
Moreover, we continue to see positive signs in the U S marketplace of increasing demand for our deep Tms system and expect this momentum to continue throughout 2023.
Well I will let Scott provide you with the key details of our recent financial performance, our revenue increased 10% sequentially as compared to the fourth quarter of 2022.
And we shipped and this totaled 48 system during the first quarter, which was nearly 50% more than the net total from the fourth quarter of last year Importantly, our international business continued to thrive.
From a financial perspective, we executed a number of cost optimization measures in March that we expect to begin seeing the benefit off in the second quarter and more meaningfully in the second half of this year.
As we said we would we have re prioritized the allocation of our R&D resources and commercial investment.
Randy and some of our new clinical development focus areas evolve we will share further details with you.
Further to this we read we recently launched an investigator initiated study program.
The program is designed to support further research on deep Tms by the clinical research community through the other collaboration and equipment loan initiatives.
The program well as investigators interested in advancing current knowledge about deep Tms.
That's what really accepting applications through July through it we will share further details on this program later this year.
On the commercial side as we said on our last call we are focusing less on digital marketing than in the past, but our other more impactful sales initiatives are aggressively continuing.
As a reminder, we are targeting breakeven operating income in the fourth quarter of 2023, while demonstrating full year revenue growth over 2022.
Our first quarter performance was in line with our expectations and we are on our way to achieving this objective.
I'd now like to pivot to some of our recent accomplishments.
On the reimbursement from Blue Cross Blue Shield of Mississippi issued a health care policy updates that allows Tms transit health care professionals to older and provide care Ms treatment for that.
Their patience with M D D.
In addition, Unitedhealthcare has updated their Medicare advantage policy in states covered by National Government services Medicare to allow non physician practitioners nurse practitioners to order and administer Tms therapy to their patients with M. D D in states.
Or do they have a scope of practice to do so.
These policy changes increase access for patients with deep Tms system.
We also continue to build clinical evidence in support of deep Tms for use in multiple indications. Most recently, an expansive post marketing data analysis, demonstrating I response, and remission rates for depression anxious depression patients undergoing deep Tms treatment was published in psychiatry.
Research.
The data show substantial benefit of deep Tms treatment for depression with patients who had received 30 or more treatments, achieving an 82% response rate and a 65% remission rate.
Importantly, the average patient in this data analogies adult already felt more than seven medication trials in their lifetime until this study it was only on it anecdotally known just how effective deep Tms really is in a real world setting for depression patients that have had limited success with other treatment.
Option.
In addition, we have a significant presence earlier this month at the annual meeting of clinical Tms Society.
Multiple posters related to a deep Tms technology represented at the meeting, including one my Doctor Aaron Tendler breakthrough Chief Medical Officer, the detailed quality of life improvement following deep Tms for treatment resistant depression.
Foster highlight that the results of a secondary analysis on data from a multi site clinical trial for treatment resistant depression, which showed that 20 session of deep Tms significantly improved quality of life as well as the primary depressive symptoms.
Also presented at this meeting was a poster focused on individuals trajectories for responses to deep Tms in major depression, and steps toward potentially improving capabilities to predict and personalized deep Tms outcome in patients.
Later this month, we will also present multiple posters at the annual meeting of the American Psychiatric Association.
Before I turn the call over to Scott I would like to reiterate our confidence in our outlook for 2023, we continue to expect to demonstrate revenue growth over 2022 and are targeting breakeven operating income in the fourth quarter of 2023, the market dynamic continues to show the T M.
<unk> is a large market with strong momentum and there is ample room for brain swayed to capture a meaningful market share both in the U S and internationally.
Finally, as always we would like to thank our valued partners and providers, who battled the mental health crisis, each and every day as well as to the entire brings with him for elevating their commitment to excellence in delivering on our mission of advancing neuroscience to improve health and transform lives.
With that I will now pass the call to Scott for his review of our first quarter of 2023 financial results Scott.
Thank you Don and good morning, everyone.
Revenue for the first quarter of 2023 was $6 $6 million.
A 17% decrease compared to the prior year period revenue of $8 million. However, on a sequential basis revenue in the first quarter grew nearly 10% as compared to the fourth quarter of 2022.
As expected total revenue in the first quarter was impacted by the inability to recognize approximately $9 million of lease revenue due to the financial condition of one of our customers.
As previously discussed we anticipate that this customer's financial condition will impact our recurring revenue throughout 2023. However.
However, the momentum detailed by Hadar in direct sales in both the U S and internationally was not impacted by this customer.
We placed 48 deep Tms systems in the first quarter and continued to experience strong international performance, a sustainable trend for us as well as a return to solid contributions from the U S. R.
Our total installed base was 932 systems as of March 31, 2023, compared to 884 systems at March 31, 2022 or 18% growth.
Gross profit for the first quarter of 2023 was $4 $8 million or a 73% gross margin.
<unk> to $6 $1 million or a 77% gross margin during the prior year period.
The decrease in gross margin was largely attributable to revenue mix.
Moving on to operating expenses for the first quarter of 2023 sales and marketing expenses.
Were $4 $9 million compared to $4 $1 million for the first quarter of 2022.
Research and development expenses were $1 $8 million compared to $1 $6 million in the first quarter of 2022.
General and administrative expenses for the first quarter of 2023, well $1.8 million compared to $1 $9 million for the first quarter of 2022.
Included in total operating expenses in the first quarter of 2023 were approximately <unk> 5 million in one time severance costs.
With respect to expenses for full year 'twenty three as we said on our last call, we expect costs to moderately decrease as compared to 2022.
Saddam noted we are more strategically and prudently investing in our commercial and research activities.
Operating loss for the first quarter was $3 7 million compared to an operating loss of $1 5 million for the same period in 2022.
So the first quarter ended 2020 March 31, 2023, we incurred a net loss of $2 $4 million compared to a net loss of $2 million in the same period of 2022.
Moving onto the balance sheet, we ended the first quarter with cash cash equivalents and short term deposits.
A $44 $3 million as compared to 47.9 at December 31 2022.
Based on our robust U S pipeline continued momentum internationally, we are confident in our positive outlook for 2023.
To reiterate what had asset we anticipate annual growth over last year and to demonstrate improvements and cost containment over 2022.
This concludes our prepared remarks I will now ask the operator to please open up the call for questions operator.
Thank you if you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question. Kim You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
First question comes from the line of Steve Lichtman with Oppenheimer. Please proceed with your question.
Thank you good morning, guys.
I guess first a question on the pickup in placements you saw sequentially here you mentioned improving momentum can you talk about how international performed specifically and in the U S. You know well where are you seeing you know some of that sequential improvement.
Yeah, Hi, good morning.
So I'll start with the with the U S market, So I definitely see the U S market.
Holy improvement.
Improving and we are experience.
Some very large commercial wins.
In this in this market both for new customers, but also on current customers. The pipeline continues to grow and that's what keeps us very very positive with the with the outcome or the international markets.
Currently growing.
Hum.
I think quantified.
Investment in working with distributors outside of the U S.
You see some good proof of concept and we see some good demand.
Im afraid <unk> relates to the far east, but also in Europe .
And I anticipate this cause is.
International market to continue to grow.
Okay great.
And I was wondering if you could update us on the smoking cessation indication.
How is the limited launch progressing there and whats your outlook.
So we're still collecting the data from this.
Soft launch.
As you know we have seen some some pretty good results on the.
On the multicenter trial.
We do if we continue to see such a results also on the.
Soft launch, but it's too early for me just to share. Some additional information we are actively looking for some other profile of potential customer that may use this indication.
Okay got it and then just maybe lastly for me on the cost savings you know you mentioned being more targeted in R&D as.
As you think about some of the savings there and in the end the reduction in digital obviously, knowing your operating income goals, but how are you balancing that versus maybe some reinvestment on the sales and marketing side I mean, how should we think you think about that.
That balance looking ahead.
Yeah. That's a great question. So you know on.
On the R&D side, we just need to re prioritize.
Some of our peers and to push more.
Investment toward the sales and marketing in order to meet our objectives on the southern marketing again, it's all about optimization and D. R. O Y for each investment that we're making on marketing. So we are measuring it very carefully at least on the digital campaign. If we don't see some good R O y well.
You're going to reduce some of the spending.
But we definitely continue to push toward more boots on the ground and more aggressively.
Built our pipeline and an improvement it's improving I just saved the pipeline is growing and that's why we remain very optimistic about the outlook for 2023.
Okay, great. Thanks Sundar.
Thank you.
Thank you. Our next question comes from line of Jeffrey Cohen with Ladenburg Thalmann. Please proceed with your question.
Hey, good morning, whose orange Scott how are you.
Yeah.
How are you so I guess firstly on M. D. D could you talk a little bit about some of.
The trends out there from the payers on the reimbursement front and the number of drug failures that are being required any any movement there over the past number of months.
Yes, sure there are always always always positive positive.
Our progress with.
With the Paris.
We saw.
Some relief from a form for failures.
In some of the big Big Perez from fall failures into two failures of medications.
So there is always an improvement what we just shared.
Sure some additional information with.
In Mississippi, we can also see some multiple expansion outside of psychiatry also to nurse practitioner.
That allows us to provide this for treatment.
And in some in some specific states. So there is always an improvement for this very important.
Treatment.
All functions.
Okay got it.
For the quarter or any trends to note on our leasing versus selling units.
Yes, sure Jeff So as I've mentioned in the prepared remarks, our leasing revenue.
Was impacted by about $900000.
So I continue to expect to see that through.
Through the rest of the year. So that's kind of just slightly change are leased.
Correct sales ratio here in terms of revenue, but not necessarily in terms of system placements going forward as we still continue to have strong momentum in placing systems.
Placing leased indirect sales on a go forward basis.
Okay got it and then lastly for us anything to speak of on the multi channel development.
There from Sundar talked to turn or anyone else.
Yeah sure well, we're extremely excited about.
This new innovation, we are planning to launch the first.
Multichannel system this year and two.
Start the beta site.
With 18 some.
Specific centers.
More to come around this subject, but it's definitely a very important milestone for <unk>.
Okay, perfect and what's the C approval pathway to start testing the system.
So we will start collecting.
Collecting some data with a few centers and obviously based on the state of.
Our safety.
We will be able to submit it to FDA to.
To get the FDA clearance.
Okay and will you be pursuing more than one indication for the for the system itself.
I believe so but.
You know when the time come we will show a bit more information about that.
Okay I got it that's super helpful. Okay. Thanks for taking our questions I appreciate it.
Thank you Jeff.
Thank you. Our next question comes from the line of Jason Bedford with Raymond James. Please proceed with your question.
Hi, This is Glenn show on for Jayson Bedford.
I just have one quick question.
And <unk> you saw a nice jump in OCD adoption do you expect this momentum to continue and are you seeing an uptake of OCD.
Internationally.
Yeah for sure.
We believe the OCD is one of the.
Key driver for our growth.
And also for differentiation.
<unk> was the only company.
Company that Ah.
Conducted the multicenter trial around the OCD and we truly do believe in this indication and we see some very very good result on the OCD and therefore, we are seeing very strong adoption I believe.
Most of our new cells are coming with not only the MTT call, but also.
The OCD the 87 coil.
I see the same almost the same momentum also fall on the international market. There is a good demand for these eight seven coil.
That can be used by the way.
Internationally.
But mainly for for OCD, but sometimes father indication, but definitely there is a good demand.
And good feedback on this call.
Okay. Thank you very much.
Thank you.
Thank you. Our next question comes from the line of Carl Byrnes with Northland Capital markets. Please proceed with your question.
Thanks for the question and congratulations on the results.
I noticed that the interest expense came in at about $1 4 million, which was up.
Pretty significantly sequentially was there anything of a one time nature of that and should we be looking at that.
Yeah, consistent number from the second and third fourth et cetera going forward. Thanks.
Yeah, Hi, good morning, so minded that was in the first quarter of 2023 that was actually finance income not expense <unk>.
And it was a one time expense and it has to do with.
The reversal.
How we calculate the value.
Innovation authority, along with Israel, and I can get into the math, it's a little complicated, but just it is a onetime expenses a onetime pickup in income and I expect our expense to resume back to normal levels similar to what we had in 'twenty two after that.
Got it thanks for that clarification.
Thank you, ladies and gentlemen, as a reminder, if you'd like to join the question queue. Please press star one on your telephone keypad.
Our next question comes from the line of approval on pot pie upon with H C. Wainwright. Please proceed with your question.
Hi, Scott Thanks for taking my question.
So just one from US I was hoping you could talk about the recent post marketing study data at <unk>.
How it stacks up against the RCT.
We felt that was a published previously I see that there is a superior treatment response and remission.
Or is this primarily due to the long live nature of the treatment or are there other factors at play.
No you know, we're always expecting to see some some improvement and better our resolve on the post marketing data.
Then to our clinical trials, but it's always a combination of all.
Durability.
And a number of additional troops to show the most incremental maintenance treatment that you provide the better the better the results. So we are not surprised that we know that.
The treatment is very safe and effective and.
And yet the results are extremely good and and we're very proud of these results.
Alright. Thank you that's it from us.
Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Mr. Levy for any final comments.
I would like to thank all of the investors analysts and other participants for their interest and brain sway with that please enjoy the rest of our day. Thank you.
Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.