Q3 2023 BrainsWay Ltd Earnings Call
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Good day, and welcome to brain right third quarter 2020 earnings call.
At this time all participants are in a listen only mode.
A question and answer session will follow the presentation.
If anyone should require operator assistance during the conference. Please press Star then zero on your telephone keypad.
As a reminder, this conference is being recorded.
I'll now turn the conference over to Brian Ritchie. Please go ahead.
Thank you all and welcome to brain suites third quarter 2023 earnings conference call with US today are range waste Chief Executive officer of Dar Levy.
<unk> Financial Officer, you Don Morel the format for today's call will be a discussion of recent trends and business updates from the dark followed by a detailed discussion of the financials and we will open up the call for your questions.
Earlier today <unk> released financial results for the three and nine months ended September 30 of 2023, a copy of the press release is available on the company's Investor Relations website.
Before I turn the call over to him 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 strangely its anticipated future operating and financial performance business plans and prospects.
Expectations for chips 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 in its other filings with the SEC, including the risk factors section contained in brain waves.
<unk>, 20th I would now like to turn the call over to her doll. Please go ahead.
Thank you Brian.
Welcome everyone and thank you for joining us today.
To begin I would like to extend our gratitude to so many of you who have continued to reach out to us to express our concern regarding the health and safety of our employees give them. There are bolt ons for filing is taking place in and around Israel well no one in Israel and is unaffected by this.
Hence unfolding, we remained resilient and we will emerge stronger.
We are encourage our team in Israel to prioritize their wellbeing look after their physical and mental health and spent time with loved ones.
As a company, we remain committed to the consistent availability and delivery.
Products and services and the impact of our current events on our operation remains limited.
We have taken steps to ensure that we have enough inventory in stock on hand to continue our supply of devices on an uninterrupted basis to meet our projections and our additional contingency plan in place should there be any need for alternative supply channel in the future.
Of course, we will provide further updates if and when material events so warrant.
With that I will now discuss the strong momentum that currently exists throughout our entire business.
You will recall our goal of growing the company's 2023 topline or a 2022, while targeting breakeven operating income and positive adjusted EBITDA in the fourth quarter.
Our plan for the achievement of these objectives remain on truck and in some areas ahead of initial projections, where I'll discuss this further shortly but we were very pleased to nearly reached breakeven operating income and to record positive adjusted EBITDA in the third quarter one one.
Or sooner than anticipated.
We continue to optimize our existing commercial process, including enhancing our emphasize on larger institutional and enterprise customers that are playing an increasingly important role within the industry.
We remain focused on adding deep Tms technology into this expanding large mental health group all networks.
As our results indicate we are executing well on this strategy.
Recent key agreement include the formation of an important partnership with mental health clinical treatment provider with an increasingly expanding footprint in the northeast region of the U S.
As a result of this partnership and the series of successive order a total of 10 deep Tms systems will be installed by this provider in 2020 three alone with the potential for additional system thereafter.
In addition, our long standing partner Katie's way plus all the other.
An additional 10 deep Tms systems, which will which will be more than double its existing offering.
This agreement is especially gratifying in that it will support Katie's way plus and it's vital mission to provide focus care to your service members veterans and their families.
Moreover, our international business continued to perform very well to this end we extended the availability of our deep Tms technology in Taiwan, where the most recent delivery system increased installed base in this important Asia Pacific country to 16 systems.
Importantly, the momentum we experienced in our business during the first half of the year.
In the third in the first quarter and our outlook for the fourth quarter is positive as well.
On the top line.
Third quarter revenue increased 61% year over year, and we shipped a net total of 56 systems during the third quarter. Moreover, demand for OCD treatment indication continue to grow as we shipped 48, OCD coils as add on elements to certain new and existing systems.
Nearly 50% of our total installed base now includes OCD treatment capability.
As we said would be the case, our third quarter bottom line included men.
The full benefit of the cost optimization measures we executed on earlier this year as we generated substantial improvement in operating and adjusted EBITDA results. We expect further bottom line improvement in the fourth quarter.
In addition, we continue to be supported by an extremely strong balance sheet.
Having ended the period with $44 $2 million in cash with no debt.
Moreover, we were cash flow positive in the third quarter.
As always third quarter results reflect we are confident in the upward trajectory of our overall business and look forward to further progress in the fourth quarter.
In order to achieve further growth, we continued to achieve significant progress in expanding the clinical and real world evidence in support of deep Tms.
We recently presented two posters.
Posters at the World Congress of Psychiatry, the first poster highlighted the benefit of deep Tms in the difficult to treat elderly population.
The second poster focused on the positive results from a group of patient recipient and accelerated deep Tms really Jim.
This accelerated treatment approach was also the subject of the publication of new real World Post marketing data demonstrating the efficacy of deep Tms administered although the multiple sessions each day to allow for quicker overall treatment time for depression patients.
The compelling result.
Published in the peer reviewed journal Psychiatry research and the data suggested that outcome can be achieved with accelerated deep Tms, which are comparable to those resulting from longer traditional protocols.
This preliminary results could be leveraged to support therefore, it to expand current labeling for deep Tms and we intend to further investigate the potential efficacy of accelerated depicted a mess in the treatment of depression.
On the commercial front following the re prioritized allocation of our commercial investment we have decided to seek a distribution partner for smoking cessation and indications.
Importantly, the data from the initial patients utilizing deep deep Tms therapy for smoking continues to look favorable and we're beginning to gain commercial traction with the suffering. In addition, the recent positive recommendations issued by the clinical team emphasize the advocates for reimbursement.
Related to CMS for the treatment of smoking addiction is an important step toward securing insurance coverage for this indication.
Moving on.
Before I pass the call over to adult for his review of our financial results I would like to reiterate our confidence in the breakthrough outlook for full year 2023 and beyond.
For full year 2023, we continue to expect to demonstrate revenue growth over 2022 and are now targeting positive operating income in the fourth quarter as well as positive adjusted EBITDA for the second consecutive quarter.
Looking ahead the market dynamic continues to show the Tms is a large market with strong momentum and there is ample room for brain sway to continue capturing significant market share both in the U S and internationally.
With that I will now turn the call over to adult for his review of our third quarter 2023 financial results at all.
Thank you though.
Revenue for the third quarter of 2023 was $8 $3 million at 61% increase compared to the prior year period revenue of $5 $2 million when.
On a sequential basis revenue in the third quarter grew 6% as compared to the second quarter of 2023.
We placed 56 deep Tms systems in the third quarter, our total installed base with 1041 system.
September 30th 2023, compared to a 851 system systems at the same point in the prior year.
Gross profit for the third quarter of 2023 was $6 $2 million or 74% gross margin.
This is compared to $3 8 million, daughter, or 74% gross margin during the prior year period.
Moving onto operating expenses.
For the third quarter of 2023 sales and marketing expenses were $3 $6 million compared to four 8 million for the third quarter of 2022.
Research and development expenses were $1 $5 million compared to $2 $2 million in the third quarter of 2022.
General and administrative expenses for the third quarter of 2023, we're at $1 2 million compared.
Compared to $1 7 million for the third quarter of 2022.
Operating loss for the third quarter was $133000.
Impaired to an operating loss of $4 9 million for the same period in 2022.
Its not that were previously mentioned.
EBITDA was $337000 representing the first time, we achieved positive adjusted EBITDA compared to a loss of $4 $1 million in the same period in 2022 weeks.
We expect to achieve a second consecutive quarter of positive adjusted EBITDA in the first in the fourth quarter.
For the third quarter ended September 32023, we incurred a net loss of $230000 compared to a net loss of $5 million in the same period of 2022.
We ended the third quarter with cash cash equivalents and short term deposits of $44 $2 million is.
Compared to $47 9 million.
At December 31st 2022.
Ever when compared to the cash balance of $43 $4 million in the previous quarter, we achieved positive cash flow from operating activities in the third quarter.
Based on our robust U S pipeline and continued momentum internationally, we are confidant.
Outlook for the remainder of 2023 and into the next year.
This conclude our prepared remarks I will now ask the operator to please open up the call for questions.
Later.
Okay.
Yeah.
Thank you very much.
Ladies and gentlemen, we will now begin the question answer session.
Yeah.
Yeah.
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Our first question is from Jay Cohen of Ladenburg Thalmann. Please go ahead.
Yeah.
Our apologies.
Next question is from Jason Bedford of Raymond James. Please go ahead.
Alright.
Morning.
Cities.
What's occurring there country right now.
But congrats on the progress you guys are doing a nice job of turning this business around here.
Can I ask you if you could compare the selling environment in the U S and the international right now and just as a bit of a.
Tag on to that question.
International U S mix in the quarter much different than in past quarters.
Yeah, Hi, Jason Thank you for the question.
So there is definitely an improvement.
India and the U S market is slowly improve me is slowly improving and we have a experienced large commercial wins recently.
In the U S and internationally.
We can see we continue to see positive sign in the U S marketplace of increasing demand.
For the deep Tms therapy.
And I'm expecting this momentum to two to continue outside the U S. Also we manage toward to sign with.
Some very impressive.
The agreement with distributors.
And the demand continue to grow there is a very large market outside of the outside of the U S and just to remind you we all solving some other approved indications.
Than the U S.
The demand for those indications is also continued to grow so I'm expecting both markets U S and international to continue to be to lever a strong momentum for us in.
In terms of your second question the ratio between U S and international continue to.
To stay the same I would say like a 70 30.
And international that's the current truck show in the previous quarter I think it's similar to this quarter as well and my I'm anticipating I'm.
Anticipating this ratio to also go into Q4.
Okay very helpful and then in terms of new systems.
Are they largely going to existing users or are you opening up new accounts as well.
So traditionally traditionally it's if it goes a 50 50 between new customers and current customers. Our practice development team is doing a phenomenal job with developing the Oh the current business.
To be much more successful to increase utilization and theyre ready to.
To pull the trigger and expand their practice.
The other 50 is with our capital sales team.
That continued to.
The Bush and increase the market.
Okay, great I'll get back in queue. Thank you.
Thank you.
Thank you very much. The next question is from Jay Cohen of Ladenburg Thalmann.
Yeah.
Good morning, Darren you know can you hear us okay, yes.
Yes, Hi, Jeff Good morning, Hi, Good morning, wonderful technical problems. So few questions for Maryann could you give us a sense of the 66 placements.
The quarter.
Percent of numbers that were.
<unk> purchase.
Yes, so we're actually the 56%.
He spent more than that amount.
And after a few returns like we always are when customer are ending their lease agreements.
Out of the net amount that we that we have shipped this quarter.
46 were for sales for purchasing the deals and the rest were for a leasing again net amount of leasing.
After a few weaker.
Okay perfect that's very helpful.
Could you talk about the accelerated deep Tms treatment approach a little bit as far as number of visits that have been studied minutes are on the system as far as durations and then maybe hypothesize with us a little bit about.
The payers and the costs and the reimbursements that may be the same or not.
So this is a very preliminary results on the accelerated to a message of different treatment for Jim.
That is basically we are providing.
Few treatment today.
Five treatments a day in a course of six days, we intend to to collect the data and potentially also to.
Work with the FDA on submitting a protocol for a study with the FDA in this matter.
It's too early for me to show they are therefore, the information but.
Based on the data that we collected so far all the data is very a favorable are very similar to the I would say too in.
In terms of safety and efficacy to what we've seen on the on the acute <unk> protocol.
Okay got it so the same energy delivery just over a six day period.
Mhm.
Got it Okay, and then lastly for us.
Current updates.
Rotational fields at all any studies or papers or presentations that are out there.
Yeah, We're planning we're planning to launch the first.
Multichannel system towards the end of the year.
We intend to do some feasibility study with this with this new and impressive technology.
With <unk> to investigate few area some of them relates to neurology like dementia.
And and stroke rehabilitation some of them relates also to tip psychiatry, but the current timing golf ball launched the first.
Our system is toward the end of the year.
Perfect.
Thanks for taking the questions. Thank you Jeff.
Thank you very much.
The next question is from Steven Lichtman of Oppenheimer. Please go.
Yeah.
Hi, everyone. Good morning, this is amir on for Steve.
And I just wanted to quickly ask you you've talked about positive developments at payers with regard to lowering hurdles.
N D D coverage.
Can you talk about whether this has started to change customer behavior.
And as a follow up are you seeing overall more demand as a result.
Thank you.
Yeah. Thank you for thank you for the question absolutely.
Absolutely.
And you know this is not a trend that started yesterday.
I would say in the last.
18 months, we see a relief from Paris.
To treat a with Tms.
There is a relief on the number of <unk> of.
Antidepressant failures before you can prescribe to the Tms treatment.
This is definitely something that is driving utilization and I'm expecting that it will continue.
To grow that from this aspect on the other and also I believe that on the OCD are the continuation and the increase on the OCD coverage is also could be a good driver for the adoption of the deep Tms technology.
Great. Thank you and just quickly also moving on to international.
On your international expansion efforts, where do you see the biggest near term opportunities.
Can you guys update us on your outlook for international expansion in Asia and Europe.
<unk>.
Yes, I think you said.
Try to I would say that the main the main big hubs internationally or Asia.
Asia Pacific It could be a Japan China.
In India, we definitely going to go are growing those are market. Although we also have had great success with our in the Taiwan market and also in South Korea, but this is on Asia Pacific.
Very very very good footprint and I'm anticipating that this.
Imported market will continue to grow the.
The other important market is obviously Europe Europe, there is a really strong demand.
This is in a I would still say, it's an undeveloped.
Area for our technology, there is ample room for us to grow in those area.
We continue to look and find they are the right partnership and.
That's why when are we going to focus in 2024.
Thank you I'll hop back on queue. Thank you everyone.
Thank you.
Thank you very much.
Question is from Karl Benz also Boeckman telco market.
Thanks for the question and congratulations on progress most of my questions have been answered, but I was wondering if you know given the cash flow from operations.
Around $1 4 million generated in the quarter, where do you see that progressing and 25 and 26 you can and then also can you add a little more detail with respect to the prospects of the partnership relating to smoking cessation. Thanks.
Yeah. Thank you for the question. So for your first question, we are we're not providing guidance.
But what I can say that as part of our vision is to build a healthy.
And growing company.
Healthy means that yes, we still continue to focus on profitable on growing the company, but also looking very carefully on the profitability and the Bottomline results.
And.
And for your second.
Second question.
So we are we're having active dialogue with potentially interested parties.
On a consistent basis.
We are looking for the right partner for the smoking.
Addiction.
We believe that there is plenty of room for us to grow in this market and finding the right partner can really help us to push this important indication for it.
Thanks, and congratulations again.
Thank you so much.
Thank you very much.
The next question is from.
<unk> Yep.
H C Wainwright.
Yeah.
Hi, Thanks for taking our questions and congrats on the progress so our third quarter numbers came out very strong so just.
Just curious what are your expectations in terms of growth trends.
The fourth quarter and maybe for early 'twenty 'twenty, four and what would be the underlying assumption behind these expectations.
So again, we're not providing we're not providing guidance.
Guidance.
Fault for 2024.
But we do have a very strong confidence very very strong confidence in both our outlook going forward we definitely.
Believe that we will be able to grow year over year.
And continue to build a healthy and.
And strong profitability going forward.
Okay fair enough.
Speaking of extra clients do you expect the sales to gain traction, particularly in light of the clinical Tms Society recently published sports coverage recommendation or do you think you might need additional data in order to gain traction.
Yeah.
So the age for.
D H for ease of it is treating today is cleared for the smoking addiction.
We definitely believe that we see that.
The demand for this for this coil is growing I believe it will grow even faster with finding the right partner the right partner it could be a.
Now that is mainly focused on.
In addiction center as it can be cancer centers.
We are collecting a very important data on some other addiction.
Symptoms with D H fall and potentially that could be a could be used for some additional clinical trials, but it's too early for us to to show this information.
Alright.
You briefly spoke about entering the European market. So I'm, just curious whether that European strategy. It would be any different from say the other international markets, such as India, Taiwan or will it be sort of hybrid between U S and India, and China, India, and Taiwan market. Thank.
Thank you.
So so in Europe.
We are going to work out we're not going to work hard to sell directly.
We are going to find.
A strong distributor that is familiar with our with the space, we can find a more than one distributor.
You know one distributor can be focused on the.
Our mental health and another one could be focused on some neurology just to remind everyone that in Europe and.
In Europe, we are we have a clear path for 10 indication not only three like in the U S. So we are wide open to sell for some other indication and I anticipate that the.
The demand in this important countries.
Countries will continue to grow.
Thank you so much for taking our questions.
Thank you.
Thank you very much.
Ladies and gentlemen, we have reached the end of the question and answer session and I would like to turn the call back to the CEO to Hadar Levy for some closing remarks.
I would like to thank all of you the investors analyst and the other participants for their interest and brain sway without please enjoy the rest of the field day. Thank you.
Thank you very much sir.
That concludes this evening.
Disconnect your lines.
Yeah.
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