Good day, and welcome to the BrainsWay Third Quarter 2024 Earnings Conference Call. [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 third 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 nine months ended September 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 pipeline, 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 Form 20-F. I would now like to turn the call over to Hadar. Please go ahead, 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, global market demand for our industry-leading Deep TMS system continues to be strong and led to a year-over-year increase of 26% in revenue to a $10.5 million for the third quarter of 2024. In addition, we generated positive quarterly net income for the fourth consecutive quarter and positive adjusted EBITDA and cash flow from operations for the fifth consecutive quarter. Our performance this past quarter speaks to the strength of our team and market-leading technology. However, we still see significant room for development, and we are focused on expanding our position as a leader in the industry by executing our long-term growth strategy by making key investments across three core areas, including developing our next-generation Deep TMS 360 system, conducting clinical trial to broaden and enhance treatment capabilities and extending our commercial presence through targeted sales and marketing efforts. These investments in our long-term vision are supported by a strong balance sheet with no debt. As of September 30, 2024, we reported $48.4 million in cash. In addition, subsequent to the end of the quarter, we recently completed a strategic private investment equity financing with Valor Equity Partners for approximately $20 million in gross proceeds to date before any exercise of warrants by Valor. As a result, our pro forma cash position after the contribution from this financing is currently approximately $68.4 million. I'll discuss our strategy for this investment in a moment. In terms of guidance, our outlook for the fourth quarter of 2024 remains highly positive and we are increasing our full year 2024 revenue guidance to a range of $40 million to $41 million. This would represent growth of 26% to…

Thank you, Hadar. Revenue for the third quarter of 2024 was $10.5 million, a 26% increase compared to the prior year period revenue of $8.3 million. We placed 63 Deep TMS systems in the third quarter. Our total installed base was 1,278 systems as of September 30, 2024, compared to 1,041 systems at the same point in the prior year. Gross profit for the third quarter of 2024 was $7.7 million or a 74% gross margin. This is compared to $6.2 million or 74% gross margin during the prior year period. Moving on to operating expenses. For the third quarter of 2024, sales and marketing expenses were $4.1 million compared to $3.6 million for the third quarter of 2023. Research and development expenses were $1.8 million compared to $1.5 million in the third quarter of 2023. General and administrative expenses for the third quarter of 2024 were $1.5 million compared to $1.2 million for the third quarter of 2023. Operating profit for the third quarter was approximately $300,000 compared to an operating loss of $133,000 for the same period in 2023. Adjusted EBITDA was $1.1 million, representing the fifth consecutive quarter of positive adjusted EBITDA and compared to $344,000 for the third quarter of 2023. For the third quarter ended September 30, 2024, we recorded net income of approximately $650,000 compared to a net loss of $230,000 in the same period of 2023. We ended the third quarter with cash, cash equivalents and short-term deposits of $48.4 million as compared to $46.3 million on December 31, 2023, and $48.1 million at June 30, 2024. As Hadar mentioned earlier, based on our backlog and U.S. pipeline and continued momentum internationally, we continue to expect revenue in the range of $40 million to $41 million for full year 2024, which represents 25% to 29% growth over 2023 revenue. In addition, we anticipate reporting positive cash flow and profitability for the full year. As part of our guidance, we expect to report operating income of 3% to 4% and adjusted EBITDA of 10% to 11% for the full year of 2024. This concludes our prepared remarks. I will now ask the operator to please open up the call for questions. Operator?

[Operator Instructions] First question comes from Steven Lichtman with Oppenheimer. Please go ahead.

Thank you. Good morning and congratulations, Hadar on first question on Valor. Can you talk about where you think you can leverage their expertise the most? What are the areas of primary focus there? Certainly, you've talked about the TMS network. I think you've also talked about the at-home market. A little bit more, if you could, on where you see their expertise playing a part?

Yes, sure. Good morning, Steven, thank you for the question. I think we feel very blessed to partner with Valor Equity Partners. I think what this fund is pretty expert is to scaling up some growth ventures and opportunities around reimbursement, around opening some additional doors to large-scale enterprise accounts. So I believe helping us to make this technology much more accessible to large enterprise accounts and help us and provide all the necessary support around reimbursement and operations could be a great help for where we are today.

Great. And it's great to see the accelerated TMS program or trial underway. How quickly do you anticipate that enrolling? And can you remind us the follow-up period to get a sense of when we could and potentially see data there?

Yes. So this is more likely a 2025 clearance that we are hoping to receive from the FDA. We are hoping to complete the recruitment in -- sometimes in Q1 2025 and the submission will probably take some additional months. So we're expecting to finalize everything somewhere in the second or the third quarter of 2025.

Got it. And then lastly, just on the P&L. Obviously, the gross margin continues to afford you flexibility on the OpEx side. I appreciate the guidance for the year now. How are you thinking about balancing investment versus drop-through looking forward? What opportunities do you see maybe to reinvest on the OpEx side, again, given the firm gross margin that you have?

We have lots of plans also to embed into the OpEx budget in 2025, but we're also looking to balance it with some of our -- while targeting positive EBITDA for 2025 as well. Definitely, we are going to try and continue to invest in research and development and in clinical to build the long-term growth of the company but most important on the sales and marketing, while keeping the gross margin very healthy in a consistent manner similar to what we've seen in 2024.

Okay, got it. Thanks, Hadar.

Sure. Thank you, Steven.

Thank you. The next question comes from Jeff Cohen with Ladenburg Thalmann & Company. Please go ahead.

Hi. Good morning, Hadar and Ido. Thanks for taking our questions. A couple for Marom. I guess, firstly, could you talk about year-to-date units placed, which is tracking a fair amount better than our estimate and talk about leased versus sold and what trends you're seeing there and maybe how that looks for 2025? And also, could you mention coil helmets or coil helmets as a percent of fleet? Thank you.

Yes. Ido, do you want to maybe just start give an overview about the lease versus sales trends and number of units? I will complete the picture.

Yes, sure. So in terms of the revenue in our books for this current quarter, we had more or less a ratio of 60-40 towards the capital sales, but this was in terms of revenue recognition due to orders that we already received in the past. In terms of new sales, new bookings, which actually create our backlog for the future, we see kind of an increase towards the lease agreements versus the sales. So the ratio is actually more or less the opposite than the revenue recognition in the books currently around the 60-40 to the lease versus the capital. What was another question that I forgot.

Yes. I will just -- Jeff, I will also complete the picture on the number of units. So in Q3, we shipped 63 systems as compared to -- which is a very nice increase also from previous quarter. In terms of the additional 87 coils, we placed [87] coils in Q3.

Okay. That's super helpful. Thanks for that. And then I guess, secondly, could you talk a little bit about some of these expanded territories? Remind us what existed prior to the 15 systems in Taiwan and South Korea as well as any specific commentary regarding APAC and also LatAm. Thank you.

Yes. We are currently not working in LatAm. I think the most growing market for us as of today is Asia Pacific and Europe. We continue to sign on new distribution agreement. I think the most appealing one are the one in India, Taiwan, South Korea and Japan. Japan could be also be a very promising market, and we hope to see some of the benefits from it most in 2025. In Europe, we continue to see some very good demand and growing demand for our products, both in the mental health arena, but also in neurology and rehabilitation centers. We continue to look for the right distribution channels and we believe this is the best way for us to expand our growth in those growing markets.

Thanks. That's helpful. And just a quick one for you, Ido, if you could. Q3 share count and pro forma share count, any commentary there?

Again, can you repeat the question?

Share count for Q3 and pro forma.

It was very hard to hear you, so I apologize for that. Hadar can you hear and maybe repeat for me?

I think we had share count of 34.2 million. Any comment on that?

34.2 million shares. Ido, it was 34.2 million shares. Jeff, are you asking about the pro forma count?

Yes, if you have so.

Yes. The numbers are the same. It's the 33 million to 34 million. I can check the exact number. We will see a change in Q4, but no change that we had in Q3 about that. But I can check again and get back to you on that.

Okay, perfect. Thanks for taking our questions.

Sure.

Thank you. [Operator Instructions] The next question comes from Ram with HC Wainwright. Please go ahead.

Good morning. This is Dan on for Ram. Thanks for taking our questions and congratulations on the earnings Deep. We wanted to ask, do you expect to see any disruption to your Israeli business from geopolitical risk? And where do you see the principal drivers of growth coming from in 2025? And I'd like to ask a follow-up, if I could.

Yes, sure. So we don't see any disruption with currently coming from Israel. We've got a continuity plan in Israel in terms of production, and we have enough production, enough system to support the market for the next six months. But we're also exploring moving some of the operations outside of Israel. But currently, there is no disruption at all. For your second question in terms of the 2025 growth, I think the main growth will continue to derive from focusing on repeat sales business, repeat customers, focusing on enterprise accounts that potentially can sign with us on some strategic partnership and significant deals and the potential growth of the international business. I think all those three factors will continue to drive the growth of the revenue for the company.

Thank you. That makes sense. And what additional clinical indications do you expect to assess with Deep TMS going forward? Is there any specific areas or indications of interest? Thank you.

Yes. So I think on the horizon, we are looking to get FDA approval for a new protocol of accelerated TMS, which we hope to get it in 2025. We also have on our horizon is the expansion labeling for adolescents suffering from major depression and PTSD. So we are -- as we speak, we continue to collect the data in order to submit it to the FDA. And this is for the -- I would say, on the short term on the horizon. For the long term, we are planning also to launch a multicenter trial in addiction for alcohol use disorder and we're also evolving some additional neurology multicenter trials. It could be pain management or maybe Alzheimer's but it's still under discussion -- internal discussions.

Thank you. I appreciate the answers. Congratulations again.

Thank you so much.

Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Hadar Levy for any closing remarks.

Thank you. 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.