Greetings, and welcome to BrainsWay First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Bob Yedid with LifeSci Advisors. Thank you. You may begin.

Thank you, Doug, and thank you all. And welcome to BrainsWay’s first quarter 2022 earnings conference call. With us today are BrainsWay’s President and Chief Executive Officer, Chris von Jako; and Chief Financial Officer, Scott Areglado. The format for today’s call will be a discussion of recent trends and business updates from Chris, followed by a detailed discussion of the financials from Scott. Then we will open up your call – then we open up the call for your questions. Earlier today, BrainsWay released financial results for the three months March 31, 2022. The copy of the press release is available on the company’s Investor Relations website. Before I turn the call over to Chris and Scott, I’d 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 risk 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 Securities and Exchange Commission, including the risk factors section contained in BrainsWay’s Form 20-F. With those prepared remarks, it’s my pleasure to turn the call over to Chris von Jako, CEO. Chris?

Thank you, Bob. Welcome, everyone, and thank you for joining us today. To begin, our business continues to perform extremely well while the Omicron variant had a slight impact early in the first quarter, demand for our therapy in multiple indication continues to remain steady. Importantly, we expect that our current positive operating trends that are driving our strong growth in recent quarters highlighted by our latest achievements on commercial, clinical, regulatory and reimbursement fronts will lead to further growth for BrainsWay throughout 2022 and beyond. While I will review our future prospects in greater detail shortly, first, I will provide a brief summary of our most recent accomplishments and an overview of our key first quarter financial results. Our first quarter revenue of $8 million represented both the 30% increase over the first quarter of 2021 and our seventh consecutive quarter with year-over-year growth. The demand for Deep TMS was driven by depression, anxious depression, and OCD therapies, reflecting an emerging balance in the business. In fact, we shipped a nearly equal number of H1 helmets for depression and H7 helmets for OCD during the quarter. I’d like to discuss our key recent accomplishments within the prism of the 2022 key priorities I outlined on our last call. The first of these pillars is becoming the market leader in the non-invasive brain stimulation market. BrainsWay’s continued strong growth demonstrates that we are leading the way and we are taking steps that we believe will allow us to further this trend. To achieve this revenue growth, we’ve assembled a best-in-class commercial team. Most recently, we appointed Eric Hirt as our new Vice President of Sales. Eric is a veteran sales leader with more than 20 years of experience in the medical device sales at leading medical device companies such as…

Thank you, Chris. As Chris noted, revenue for the first quarter of 2022 was $8 million, a significant 30% increase compared to the prior year period revenue of $6.1 million. Revenue growth in the first quarter was driven by increased demand for our BrainsWay Deep TMS system with 36 system placements in the first quarter of 2022. This increases our install base to 790 systems as of March 31, 2022, as compared to 652 systems or 21% growth versus March 31, 2021. Gross profit for the first quarter of 2022 was $6.1 million or a 77% gross margin compared to $4.6 million or 76% during the prior year period. Moving on to operating expenses. For the first quarter of 2022, research and development expenses were $1.6 million as compared to $925,000 in the first quarter of 2021. Expenses are due primarily to data collection to drive reimbursement, expansion of our platform and other key indications and development of our next generation system. We expect these priorities to be a focus for our R&D team. Sales and marketing expenses for the first quarter of 2022 were $4.1 million compared to $3.1 million for the first quarter of 2021. As Chris mentioned earlier, we have increased our investments in our commercial team and have expanded our in person and digital marketing efforts. Awareness is key to driving long term growth. Moving on to G&A. Expenses for the first quarter of 2022 were $1.9 million compared to $1.4 million for the first quarter of 2021. Operating loss for the first quarter was $1.5 million compared to an operating loss of $801,000 for the same period in 2021. For the first quarter ended March 31, 2022, we incurred a net loss of $2 million compared to a net loss of $1.4 million in the same period of 2021. Moving onto the balance sheet. We ended the quarter with cash, cash equivalents and short-term deposits of $54.7 million, a decrease of $2.7 million as compared to Q4 2021. On the equity side, our current ordinary shares outstanding at the end of Q1 is approximately 33 million or 16.5 million American Depository Shares. With a strong balance sheet, we have the flexibility to expand our sales and marketing efforts to drive additional adoption of our multi-indication Deep TMS system, as well as invest in product development and clinical research to explore innovative new indications and markets for Deep TMS to ensure our technology remains highly differentiated. However, we will continue to be prudent in managing our investments. We are confident that these initiatives and investments will support long-term shareholder value. This concludes our prepared remarks. I will now ask the operator to please open up the call for questions. Operator?

Thank you. Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Jeffery Cohen with Ladenburg Thalmann. Please proceed with your question.

Hi, Chris and Scott. How are you?

Hi, Jeff. How are you?

So firstly, from our end, if you could talk about the commercial force, I know you went through the expansion on the regions and managers three in 2021 but what’s the size of the practice development consultants, at least domestically and also field engineers in North America.

Yes. We have eight practice development consultants as we talked about this, supporting our – soon to be 21 territory managers within – with three regions. And we have I believe 11 field clinical engineers.

Perfect. Okay. You talked about Chris current operational challenges, at least in the press release from Q1. How does that look into Q2? And can you talk about recent findings?

Yes. Well, in my prepared statement, it was really focused on, the beginning of the year with Omicron, the pandemic. I mean, sorry, COVID coming back. I don’t foresee that at this time, we obviously – we’re not feeling that at all at this point, Jeff.

Okay. Got it. And as far as system placements, I think you talked about, was it 45% now? Placements have OCD helmets, how that look for new placements?

So Jeff, yes, that’s right. I think I mentioned a number of times when I first started, I think we’re around 30%. So we continue to see an increase in the demand for the H7 for OCD. And now we’re up to about 45%. I think if you looked at the numbers almost – we’d almost equal the amount of H1 and H7 helmets. I think I’ve said in previous comments that – I think that number will probably reach up to about 60% at some point, but we just had a really great demand in the first quarter for the H7 helmets.

Okay, got it.

I think really driven by – I was going to say, really driven by obviously, the product – the progress we’ve made in the reimbursement side there, obviously.

Which leads to my next question, any trends across the board on your pricing – psychiatric pricing and reimbursement trends that you can call out of note?

Yes. No – I mean, obviously, Palmetto was a big thing from getting the OCD clearance to start on March 13, covering a bunch of Southern states on the east coast. And I think I mentioned also in the prepared statements that they went from four on the depression side and anxious depression side down to two, which was great that I think puts over 60% of Medicare now at either one or two failed medications for depression and anxious depression.

Okay. Got it. And then lastly a shout out and congrats to Hadar in the promotion. Thanks for taking our questions.

Thanks so much. Appreciate it.

Our next question comes from the line of Jayson Bedford with Raymond James. Please proceed with your question.

Hi, good morning. Just a few questions for me. Maybe just to follow-up on one of the questions earlier, when do you anticipate having 21 reps?

Probably, my guess is, before the end of this quarter, sometime that range beginning of next quarter.

Perfect. And then just maybe more broadly the selling environment, there’s been some mixed feedback, this earnings call on capital trends. I’m just curious as to how you would characterize the environment for capital right now. And then maybe just to put a finer point on it in terms of kind of the new boxes going out there. Are they going to existing customers, new customers would love to get a little bit more visibility there.

Yes, sure. When you said capital trends on this call, you mean during this earnings season or you talking about…

So – no, so capital and I realize that your end market is much different than most other companies in medical technology. But there’s been some mixed trends in terms of some folks saying, it’s a tighter capital environment. Some saying, no, there’s no issue it’s pre-loose. So I’d just be curious as to your thoughts on appetite for capital from your customer base.

Yes. I mean, obviously our customer base is a little bit different. We’re dealing with clinics in the community. Obviously, and I think in general, our pipeline is pretty full. So we continue to be obviously very positive on, how we see Q2 and the rest of the year trending. So I don’t – obviously it’s different in the hospital environment for sure.

Okay.

And then just your question about sort of the mix there. I think over the course of the pandemic the two years we had the pandemic, a large majority of our boxes that were going out were more focused, I think towards or high majority were focused to existing customers. And I think that was obvious, they understood the need, they understood the product, they understood how to actually make a great business. And they were expanding in either their current facility or an additional facility. We had seen in Q1, we kind of expanded into a number of new sites. So that number came down a bit, but I think our customers continue to fuel our growth and I think they will continue to fuel our growth in the future.

Okay. And then maybe just lastly, for me, it looks like there’s a new player in the OCD space, just wondering, does this change your perception of the opportunity at all and just from a positioning standpoint, does it change the message?

Well, I think, there’s a number of ways to look at this. Obviously, the information on that is pretty fresh, right. It came out yesterday and I’ll continue to highlight, we’re the only company that’s has Deep TMS and we’re the only Deep TMS company out there that’s received the clearance with pivotal sham controlled data on its own device. But you can look at another view as well, right. In general, the market basically is pretty big from an OCD perspective. And I think it’s going to bring more awareness and develop the market, which ultimately probably serves the benefits of everybody in the market itself. So we can look at it in two ways, I think, obviously we stand behind our product and we’ve represented it and we’ve seen really great things with it. So we’re looking for future success and driving continued OCD, both from adoption to new customers, existing customers, as well as also getting access with reimbursement.

Fair enough. Thank you.

Thanks, Jayson.

Our next question comes from the line of Steven Lichtman with Oppenheimer. Please proceed with your question.

Thank you, morning guys. I wanted to jump back onto the solid jump in OCD coils as a percent of total. Can you talk about where you’re seeing that picked up momentum? Obviously, you’re talking about reimbursement is where you’re seeing it correlated in areas where reimbursement turned on. Or is there a broader halo effect that you’re starting to see?

That’s a great question. I think in general, it’s been since we started this and started getting reimbursement, I think a year ago after this call was the first time we got coverage that was big with Centene as you remember, I think I called you after the call. But in general it has been a halo effect because people kind of feel the tide moving in the right direction, obviously in the some of the coverages that we have are, Centene is covered kind of across the country. So I think in general, it’s been a halo effect. You saw almost a 100% of the systems that we shipped had H7 coil. So I think it just speaks volume about the technology and what it’s doing for this very difficult disorder.

Great. Thanks, Chris. I guess just turning to the recent executive announcements with Hadar and Dr. Seidel, it seems like international expansion might be increasingly in focus when we – when as you were talking about both, is that right in a primary reason for the announcements and what do you see as the initial opportunities for expansion outside of the U.S. if so?

Yes. Steve, thanks. That’s a great question. So with Joe Seidel, it’s an absolute pleasure to get him on board. He’s had really great experience from a corporate development standpoint and strategy. We’re obviously going to utilize his resources with that. And you’re exactly correct from a Hadar standpoint, we are looking up internationally as well. We want to make sure that we’re growing both in the U.S. as well as internationally and for Hadar, what his achievements and what he’s done in the U.S. have been just phenomenal. And we want to lever – we want to sort of like lean on his expertise and be less, I would say opportunistic, which has been our – specifically our strategy internationally to be a little bit more strategic. So he is working on plans with that effort as we continue to move forward and I look forward in future calls to kind of highlight what our strategy will be internationally. But we’re focused in the few different markets internationally. We’ve had the – obviously some good luck with opportunities in Europe as well as in Asia. So we’re looking forward to expanding that, and that’s why we thought right now is the right time to make this call.

Okay, great. Then just lastly just wondering what your latest thoughts are on how on smoking cessation now with the full launch, obviously just beginning, but do you see potential for out of pocket pay for that indication or are you really – it’s – you need to see sort of that reimbursement and you’ll build toward that like with OCD.

It’s a mix with some of our customers, some of our customers have actually done well with cash pay. But we did some analysis on the market and actually looked at smokers in particular to find the ideal smoker that would be looking to quit and would want to pay for the technology. And we continue to have with the group from our limited and control market lease to have calls, we just had another call a couple weeks ago to update and educate them on that and we’re trying to learn from them as well. And then in addition to that, we are really focused on specifically on collecting data for reimbursement. And we just started that effort in a grand way in the last three weeks. So the more data we get the better and we can use that data to help us in our reimbursement strategy. So that’s what we’re doing today.

Got it. Thanks, Chris.

Thanks, Steve. Appreciate it.

Our next question comes from the line of Jason Wittes with Loop Capital. Please proceed with your question.

Hi, thanks for taking the questions. I don’t know if you have any comment about the – this lawsuit that was just filed relating to a anxious depression from Neuronetics.

Thanks, Jason. Thanks for bringing that up. Yes, I guess it just got, there’s a press release that was done. I mean in general, we stand behind our studies, which are peer reviewed and the representation of our data without getting too much into the detail. Our depression labeling expansion to include anxious depression followed our submission to the FDA of data from several pivotal studies, as well as other publicly available data. So we look forward to examining the specific factual and legal allegations in Neuronetics complaint and intend to mount a vigorous defense. As to the allegation that Neuronetics effect size was manipulated by presenting an endpoint, representing an incomplete course of therapy. We used the endpoint of four weeks after the start of the treatment, which is in the same as Neuronetics FDA cleared protocol. I hope that clarifies a little for…

That’s very helpful. It does clarify a lot. So I appreciate that response. So moving on then in terms of the distribution expansion from two to three regions, how long should that process take and in terms of when that, that gets fully executed? And I assume we’ll start to see the benefits immediately or starting in the next couple of quarters in terms of the effect on revenues.

Yes. So we start that process towards the end of last year Fran Hackett, our previous Vice President of Sales did an amazing job of actually developing three regions. We now have three sales directors that head up that that area. So that, that, that expansion is already done with the three regions. Now, – we’re now filling in the territory sales managers into each one of those regions as part of the expansion. We also, as I talked a little bit before when I think Jeff asked the question, we enhanced our practice development consulting group, as well as our fields clinical engineers to continue our – I would say unrivaled support when it comes to making sure that we’re enhancing customer success.

Great. Thank you very much. I’ll jump back in queue.

Thanks, Jason.

Thanks, Jason.

Our next question comes from the line of Carl Byrnes with Northland Capital Markets. Please proceed with your question.

Great. Thanks for the question and congratulations on the progress. What are your expectations with respect to gross profit margin through the balance of 2022 considering the OCD placement growth expansion of reimbursement and also expansion of the sales force? Thanks.

Thanks, Carl. Thanks for the congrats there. Scott, you want to take this?

Yes. So look, I think the increasing our revenues will – well, our gross profit should still remain sort of within the same range, Carl, like we’re going to expand the markets, but the – our gross profit should stay right where it is, right where it’s been consistent with prior quarters.

Great. Thanks.

Carl, was that it –

There are no further…

Sorry, operator.

That’s okay. There are no further questions in the queue. I’d like to hand the call back over to Chris von Jako for closing remarks.

I just want to thank everybody for making the call today. I appreciate the time and effort and your continued support of BrainsWay. With that, we’ll end the call.

Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.