Brainsway Q2 2025 Earnings Call Transcript

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August 13, 2025

Key Takeaways

  • Positive Sentiment: We delivered record quarterly revenue of $12.6 million, up 26% year-over-year, and shipped 88 Deep TMS systems—a 35% increase—raising our installed base to 1,522 systems.
  • Positive Sentiment: Multi-year lease agreements now represent 70% of customer engagements, contributing to a $62 million backlog of remaining performance obligations and providing clear revenue visibility.
  • Positive Sentiment: The company raised full-year 2025 guidance to $50 million–$52 million in revenue (22–27% growth) with expected operating profit of 4–5% and adjusted EBITDA of 12–13%.
  • Positive Sentiment: Data for an accelerated Deep TMS protocol reducing the acute phase from four weeks to six days have been submitted to the FDA, with a decision expected in Q4 2025, potentially boosting patient adoption.
  • Neutral Sentiment: As part of a new strategy, we completed a $5 million minority investment in Stella MSO and aim for at least five similar partnerships in 2025 and ten more in 2026 to expand clinic access.
AI Generated. May Contain Errors.
Earnings Conference Call
Brainsway Q2 2025
00:00 / 00:00

There are 6 speakers on the call.

Operator

Day, and welcome to the Brainsway Second Quarter twenty twenty five Earnings Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Garth Russell with Investor Relations from LifeSci Advisors. Please go ahead.

Speaker 1

Thank you all, and welcome to Brainsway's second quarter twenty twenty five earnings conference call. With us today are Brainsway's Chief Executive Officer, Hidar Levy and Chief Financial Officer, Yiddul Marang. The format for today's call will be a discussion of recent trends and business updates from Hidar, 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 months ended 06/30/2025.

Speaker 1

A copy of this 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, Rangeway's anticipated future operating and financial performance, business plans and prospects and expectations for its products and pipeline, which are all subject to risks and uncertainties, including shifts in the market conditions resulting from geopolitical, supply chain and other factors as well as the use of non GAAP financial measures. Additional information regarding these and other risk factors 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 like to turn the call over to Hidar.

Speaker 2

Thank you, Garth. Welcome, everyone, and thank you for joining us today. We are excited to announce record quarterly revenue of $12,600,000 reported for the 2025. This represents a 26% increase compared to the same period last year. In addition, we shipped a total of 88 Deep TMS systems during the quarter, representing a 35% increase compared to the same period last year.

Speaker 2

This brings our total installed base to 1,522 systems. A key part of our success, which has allowed us to report steady growth and strong gross margin, is our focus on generating recurring revenue streams through multiyear lease agreements. These agreements now make up approximately 70% of our recent customer engagement. In addition to signing new agreements, we have had a high rate of customer retention with many customers deciding to extend and even extend their agreement out several years. Currently, we have a backlog of signed agreement with remaining performance obligation totaling approximately $62,000,000 This backlog provide us with a clear visibility into the future and a foundation from which to grow.

Speaker 2

We believe the stability and visibility in our business driven by the growing share of customer engagement tied to multi year leasing agreement over the past several quarters clearly demonstrate our evolution from a pioneer of breakthrough technology into a scalable growth platform. With the wind at our backs, we have been able to further establish our leadership position in the noninvasive neuromodulation space. I am proud of how efficient our team is at executing our business model, which is designed to innovate, repeat, extend and compound. Those far under this model, we have focused on three key pillars to drive long term growth, including further elevating market awareness of Deep TMS and its clinical impact, advancing our R and D roadmap to unlock new and expanded treatment indication, and broadening patient access through global expansion and health system integration. At the core of these three initiatives is our regulatory approvals and clinical data, which continue to set Deep TMS apart, elevating our platform in the market.

Speaker 2

As a reminder, Deep TMS is the only TMS modality cleared by the FDA and with peer reviewed published clinical evidence for a broad range of indications, including depression, anxious depression, late life depression, OCD, and smoking addiction. Recently, we announced Brainsway would provide independent educational grant to fund two new continuing medical education or CME courses designed to extend clinician knowledge and confidence in the use of Deep TMS. These activities aim to deepen understanding of our robust clinical evidence supporting TMS, clarify distinction between Deep TMS and first generation figure of eight core TMS, and provide practical guidance for integrating TMS into clinical practice. The courses are led by key opinion leaders in the field of psychiatry and brain stimulation, and we are proud to be able to support this effort. Over the past two years, we are focused on strengthening our engagement with large enterprise customers and building valuable partnership to drive sales.

Speaker 2

This approach has benefited us to our customers as they receive higher end engagement and support from our team. Most recently, we achieved an extensive order of systems with a multi phase delivery plan through the end of the year by a fast growing US mental health network in the Western And Southern US. As an update on our clinical initiative, we recently submitted data to the US FDA from our randomized multicenter US clinical trial, which evaluated an accelerated treatment protocol for the Deep TMS system for major depressive disorder treatment as compared to the current standard of care Deep TMS protocol. As a reminder, the traditional Deep TMS protocol involves a four week acute treatment phase with one session on each day of treatment. This is now being compared to an accelerated protocol, which involves a significantly shorter acute phase taking place over several treatment days.

Speaker 2

We believe this accelerated protocol has the potential to improve convenience and thereby make Deep TMS substantially more appealing to prospective patients. We're also continuing to progress with Israel Ministry of Defense Rehabilitation Department in qualifying patients with post traumatic stress disorder or PTSD for Deep TMS and will keep you posted of any changes. Moving on to our investment initiative. As previously announced, in late twenty twenty four, we identified a new opportunity to generate shareholder value by making minority interest investment in mental health providers as well as other enterprises that we believe are complementary to our business. This strategy allows us to tap into a market we know well, building additional market awareness, r and d roadmap, data analysis capability, and extending access to Deep TMS while avoiding stepping into an operational role outside of our core focus as a Deep TMS technology company.

Speaker 2

To support us in this initiative, we engaged Valo Equity Partner, which made a $20,000,000 strategic equity investment in our company. This investment provided us with the capital needed to quickly move ahead with this strategy on a broader and more meaningful scale. We are pleased with the rollout of this initiative and recently made an initial investment at the end of the second quarter. Under this agreement, we completed a $5,000,000 financing transaction with Stella MSO, a management services organization servicing more than 20 mental health clinic across US that have treated over 30,000 patients to date. This is just the first of what we expect to be many investment under this strategy.

Speaker 2

We are actively engaged with several other mental health clinics enterprises for similar engagement. We look forward to keeping you updated on this initiative. We believe that these activities are critical as we work to further cement a role in shaping the future of mental health treatment. With that, I will now turn the call over to Ido for his review of our second quarter twenty twenty five financial results. Iddo?

Speaker 3

Thank you, Adar. As Adar noted, Q2 twenty twenty five was another record quarter for BrentSweet with revenue of $12,600,000 representing a 26% increase compared to $10,000,000 in the same period last year. During the quarter, we placed 88 Deep TMS systems, bringing our total installed base to fifteen twenty two systems as of 06/30/2025, compared to twelve fifteen systems a year ago. Gross profit for the quarter was $9,500,000 up $2,000,000 from $7,500,000 in the prior year period, while maintaining a strong gross margin of 75 in both periods. This stability continues to reflect the strength of our recurring revenue model and disciplined cost management.

Speaker 3

Turning to operating expenses. Sales and marketing totaled $4,900,000 compared to $3,800,000 in Q2 twenty twenty four, an increase of 1,100,000 driven by targeted investment in commercial expansions and marketing programs. Research and development expenses were $2,300,000 compared to $1,700,000 last year, an increase of $600,000 primarily from our ongoing clinical trials and development activities. General and administrative expenses were $1,600,000 compared to $1,400,000 in the prior year period, an increase of $200,000 mainly due to additional legal fees and due diligence costs related to the Stella investment and other initiatives as reflected in our adjusted EBITDA reconciliation table, including in our press release issued earlier today. Operating profit was approximately $600,000 in line with the same period last year.

Speaker 3

Adjusted EBITDA increased to $1,500,000 from $1,300,000 in the prior year period. Net profit for the quarter was $2,000,000 compared to $600,000 in the same period of 2024. From a balance sheet perspective, we ended the quarter with $78,300,000 in cash, cash equivalents, restricted cash and short term deposits, up $8,700,000 from the 2024 and up $30,200,000 from the same point last year. This increase was driven primarily by very strong collections during the quarter and was offset by our deployment of $5,000,000 for the minority equity investment in Stella MSO as part of our strategic initiatives. Our strong cash position also reflects the equity financing completed in Q4 twenty twenty four, which provided the resources to fund these growth investments while maintaining significant liquidity.

Speaker 3

In addition, deferred revenue also increased meaningfully, largely due to advanced collection from a significant multi year agreement with growing mental health network. As a result, remaining performance obligation grew to $62,000,000 a 25% year over year increase providing strong visibility into future revenue. Cash flow from operation in the quarter was positive, further reinforcing the strength of our recurring model and high collection efficiency. Our capital structures remain debt free, giving us significant flexibility to pursue strategic growth initiatives, including the investment program Adar outlined earlier. Based on our strong first half results, healthy backlog and continued momentum in both U.

Speaker 3

S. And international markets, we are raising our full year 2025 revenue guidance to a range of 50,000,000 to $52,000,000 representing 22% to 27% growth over 2024 revenue. We now expect operating profit in the range of 4% to 5% of revenue and adjusted EBITDA in the range of 12% to 13% for the year. This concludes my remarks, and I will now turn the call back to the operator to please open the call for questions. Operator?

Operator

Certainly. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.

Operator

If at any time your question has been addressed and you would like to withdraw your question, Our first question comes from Jeffrey Cohen with Ladenburg Thalmann. Go ahead.

Speaker 4

Good morning, Hidar and Hidar. Thanks for taking our questions. I guess, firstly, Hidar, could you talk about the accelerated protocol in the sense of if or when that comes to market as far as treatment days and potential pricing and payer flow, at least domestically, please.

Speaker 2

Yeah. Good morning, Jeff. So as I said, as part of my earlier call, we already submitted the data to the FDA, and we also published, the initial results from the from the study that looks very, very positive. In terms of timing, we're expecting to receive an answer from the FDA on the fourth quarter of this year with the hope to potentially even get a clearance before the end of the year. In terms of the commercialization part of this is we believe that's going to be a game changer.

Speaker 2

We believe that, you know, make shorten the daily visit at the clinic for only few days. We're talking about six days instead of four weeks acute phase plus additional two weeks of of maintenance treatment overall six weeks. So you compare six weeks to six days, that will really gonna make much easier and much more comfortable for patients to come and do this meaningful and important treatment at the clinic. In terms of reimbursement, so, you know, the current reimbursement is currently allowing up to two treatments per day. So we are actively working with on that to try and improve it, to match our, new protocol for the accelerated in order to to continue and expand this newer indication in 2026.

Speaker 4

Okay. Got it. That's helpful. And then as a follow-up, secondly, could you talk about the FTEs and the size of the commercial organization and talk about the the size over the past year and how they may look into the future.

Speaker 2

The FDA? Are you call are you calling to the the groups?

Speaker 4

The full time employees in the sales organization.

Speaker 2

Yeah. Okay. So the current sales team in is is around 16 direct sales folks spread it out in the in The US. However, we do have an additional 10 FCE practice development folks that are responsible for the utilization and supporting all our current customers and new customers with training and installation. So overall, we're speaking about 26 people that are supporting the the sales activity.

Speaker 4

Got it. And then lastly, I didn't hear any commentary regarding TMS three sixty and the pilot study. Any updates there? Thank you.

Speaker 2

Yeah. So, you know, the the the the three sixty our plan is to launch the three sixty with with the alcohol use disorder trial, which we plan to launch it in the third quarter, let's say by the September. So that will be the first use of the three sixty machine. However, we also do some feasibility studies with this machine around cognitive behavior and Parkinson's, so in some quality of centers in The United States and maybe also in Europe before the end of the year. So I believe this next gen, the three sixty machine will be used one for feasibility studies on some neurology indication, but also it's gonna be the main system for the alcohol use disorder that we're planning to launch during this year.

Speaker 4

Perfect. Thanks for taking our questions. Nice quarter.

Speaker 2

Thank you, James.

Operator

Our next question comes from the line of Carl Burns with Northland Capital Markets. Please go ahead.

Speaker 5

Congratulations on your results. You know, with respect to the backlog, I would imagine that the super majority of that is from enterprise customers. But if you could elaborate, that would be great. And then also, what was the OCD placements during the quarter? If you can reference that number as well.

Speaker 5

Thanks.

Speaker 2

Yeah. So as as you mentioned, you know, we continue to focus a multiyear lease agreements, but most of them are coming from enterprise account. We'll continue to focus on enterprise account that are generating a substantial lease agreements for us, and that's helped us to continue and increase our backlog, the remaining performance obligation, and most important, the visibility for the next, at least for the next year or so. And I'm expecting this momentum to continue and stay very positive. In terms of the OCD, so we shipped 30 OCD systems in the second quarter.

Speaker 5

Great. Thank you.

Speaker 2

Thank you, Karl.

Operator

Our next question comes from Raghuram Selvaraju from H. S. Wainwright. Please go ahead.

Speaker 5

Good morning. This is Dan on for Ron. Thanks for taking our questions, and congratulations on the earnings beat. So we were curious how many about how many more of these strategic financing arrangements are you planning this year? If you have a plan number, what's likely to be the capital outlay per investment?

Speaker 5

Do you have a max cap per investment? Or is it a gonna be a flat rate moving forward?

Speaker 2

Yeah. So thank you for the thank you for this question, but and and, you know, we are that that's going to be a very strategic initiative for the company. We believe that there is a very high interest for this collaboration with growing and profitable mental health networks. The goal, my personal goal and the company goal is to sign at least five contracts before the end of the year, similar to what we announced with the Stella MSO. And for 2026 is to have 10 contracts.

Speaker 2

So overall, we're speaking about potential 15 contracts by the 2026. The size of this minority investment could be range between $2,000,000 up to $5,000,000 depends on the size of the mental health network the profitability and plan to extend. So overall, we are as I said, we are actively speaking with a few players today in the market, and my hope is to hit the target that we set to ourselves to sign five new agreement before the end of the year.

Speaker 5

Awesome. That's really exciting. Could you also just qualitatively talk about how the Stella financing arrangement's been working out so far?

Speaker 2

Oh, that's that's that's from our perspective, that's a great example of collaboration. So, you know, when we launched this collaboration with with Stella, we do what we are used to do. So besides bringing the best technology into their centers, is putting lots of emphasis on educating the centers, training the centers of what is working and what is broken in the process, and how can they yield more patient into this treatment modality. And we're seeing some dramatic increase in the utilization. I think we're seeing over 50% increase in the utilization for TMS patients at Stella MSO clinic, and that's fantastic.

Speaker 2

And, you know, I really believe on the experience and the playbook that my team already administered with Stella, and that's our plan to do the same thing with all the future collaboration with other mental health networks.

Speaker 5

That sounds awesome. Thank you so much.

Speaker 2

Thank you.

Operator

Thank you. Again, if you have a question, please press star then 1. We have no further questions at this time. I would like to turn the conference back over to Hadar Levy for any closing remarks.

Speaker 2

Yes. I would like to thank all the investors, analysts and other participants for their interest in Brainsway. With that, please enjoy the rest of your day. Thank you.

Operator

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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