Good day and welcome to the BrainsWay Second Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] 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.…

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, as 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. Operator?

[Operator Instructions] Our first question comes from Steve Lichtman of Oppenheimer. Go ahead, please.

Thank you. Good morning, guys. I guess just starting out on international, after the agreements that you've signed, Hadar, over the past couple 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 like 20% international. We can see that the Asia Pacific is growing very well and we see a very big increase in demand for technology in India, in South Korea, Taiwan, Thailand. And there is definitely a very strong demand also 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 maybe to even expand it to some other indication next year. So we are now -- we just launched a few feasibility study with this machine. We believe that the rotational will be one of our main technology, Deep TMS technology, for the future. And once I will have more information to update, I will be more than glad to update all the investors. On the addiction part, we're still in discussions with several partners that are showing very high interest on the addiction space. Not too many news to date, but I believe that I'm 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 a 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 the growth and to expand faster. Few ways could be to invest and grow organically. And that's exactly what we do on every day. We are looking on some empty territories that could potentially generate some additional footprint and additional revenue stream for us, we're also looking for some additional modalities to sell and to increase our top line revenue from each one of the centers. But that's exactly what we're going to do with our growing cash balance. We're going to inject it and to 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 reference 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 on the -- on some of the press releases Our intention is to make this treatment much more convenient to 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 in terms of 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 and specifically located in some of the nursing home facilities in the US. And I think one of our major targets today is to try and target some of those elderly population centers in the US around the nursing home and some other facilities that can help us to generate more leads and to increase the top line revenue.

Got it, perfect. Couple more quick ones. In Canada, the 11 system placements, are they all active at this point in time?

Are you referring to the systems, if the systems are already active?

Yes, that was my question. Yeah, on the 11 place in Canada.

No, no, not yet. I mean, they should get delivered before the end of the year. That's the commitment. And we are now focusing on the training and on some of the marketing aspect. And the plan is to launch this marketing in Q3.

Perfect, okay. And then lastly, 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 continue to grow and we feel very, very comfortable with the current pipeline and the current 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 you additional questions if there's time.

Okay, I will answer the first question regarding the profitability. So, in short, the answer is yes. We are planning to continue to grow, and once we are growing, and as you can see, we grow quarter over quarter by $1 million with the revenue, which most of it goes directly to our net profit. And 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. So first of all, we are mainly focusing on the large enterprise account that has the ability to -- and the demand to grow with us. So, that will continue to be our main focus to penetrate faster. The second is, 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 of our product. And also, I believe our very unique business model that the offering to our customers is very unique in terms of lease, in terms of pay per use, and all the support that we're providing to our customers can, I believe, will continue and accelerate the penetration into the market in the US. With regards to the elderly patients, we try to filter down, to narrow down the number of nursing home centers in the US. And we're going to focus and to see what could be the demand. But even today in almost every clinic in the US, there are elderly patients above the age of 68. And now they can treat those patients, and they can also get reimbursement and to promote this. So I believe all this combination can really lead to some 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, so yes, I believe that -- I think the market should expect some additional news from the company about reporting on some additional partnership, significant partnership in the US and internationally, because that's our main focus. That's exactly what we do when we wake up every morning and we believe that's the best way to promote and to grow the business. In terms of the expansion in Israel, so I believe that the demand in Israel continue to grow in the hospital and also on the private market, there is a very good reimbursement in Israel and that's probably the main driver for growth in Israel. We also, I believe that in Israel, we potentially can also treat some other indication all based on the need and reimbursement. So I do project that also the Israeli market will continue to grow. And you also mentioned the other distribution channel like Korea and Taiwan. So, each one of them have a minimal quantity of system that they need to order from us on a yearly basis. Based on what I'm seeing on the visibility that we see, we remain very, very positive that they will order at least the minimal quantity, if not even more.

Awesome, and what -- sorry, what are the 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. So, the Canadian deal is a multi-year system deal that should generate some, I would say, even significant revenue for the company. As I said, this is a very, very serious distributor with over 35 sales professionals. In terms of the business model, since we don't have, we're not selling direct into Canadian, and we're using distributor, we have a transfer pricing between the BrainsWay and the distributor. So, the ASP will be lower. However, I do anticipate that the demand in this market will be significant. On your question, listen, I think that we are feeling very, very proud with the strong cash balance that is in our hand today. We are exploring all options on the table. So what -- how can we invest this money back in our business to grow the business? How can we do something significant and interesting to our shareholders? Everything is in very, very preliminary discussion because didn’t been -- we haven't been in this situation a year ago. So I'm lucky that we are in this position today, in a strong position. And I believe that we will make some more updates down the road about the use of proceed that we have today on our balance sheet.

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

Thank you so much.

[Operator Instructions] 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 of 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.