Prepared remarks
Good morning, everyone. My name is Sachi, and I will be your conference operator today. At this time, I would like to welcome everyone to BrainsWay's Second Quarter 2026 Financial Results 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 its financial results for the three and six months ended June 30, 2026. A copy of the press release is available on the company's Investor Relations website, www.brainsway.com. Before I turn the call over to management, 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 are 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. Finally, please note that the company's S-K will be filed tomorrow at approximately 6:00 a.m. Eastern Time in accordance with the SEC's operating schedule. I would now like to turn the call over to Hadar.
Thank you. Welcome, everyone, and thank you for joining us today. We entered the second half of 2026 from a position of strength with accelerating growth, expanding profitability and increasing visibility into future revenue. But more importantly, we believe BrainsWay is entering the next phase of its evolution from a leading Deep TMS company into a broader platform for interventional psychiatry. Our second quarter results provide further evidence that the foundation of this platform is getting stronger. Revenue grew 35% to $17.1 million for the second quarter compared with $12.6 million in the prior year period. We achieved this level of growth while maintaining operational discipline, resulting in expanded margins and increased profitability. In the second quarter, operating income increased over 300% to $2.4 million compared with $0.6 million for the prior year. Adjusted EBITDA increased 141% to $3.5 million compared with $1.5 million for the same period last year, with adjusted EBITDA margin expanding to 20% from 11%. This also marked our 12th consecutive quarter of profitability, underscoring the scalable nature of the business model. These results matter not only because of the growth they represent today, but because every system we install, every reimbursement expansion we achieve and every new clinical indication we develop, strengthen the platform and expand our long-term opportunity. Let me take a minute to walk you through a few key metrics that we monitor each quarter to measure our continued growth. During the second quarter of 2026, we shipped 125 Deep TMS systems, a 42% increase over the same period last year, bringing our installed base to approximately 1,950 systems. Every system represents more than an initial placement. It creates potential for multiyear recurring revenue, additional utilization, new indications and protocols, deeper provider relationships and greater clinical data. And importantly, as we expand the capabilities of the platform, we increase the potential value of systems that are already in the field. Remaining performance obligations have increased to $80.4 million as of June 30, 2026, a 30% increase compared with the same period last year. We believe the continued growth in remaining performance obligations over the past several quarters demonstrates the strong market demand for Deep TMS as well as the success of our leasing strategy focused on servicing enterprise customers. This is an important evolution in our business model. As the installed base grows, we believe revenue visibility, recurring revenue and operating leverage can increasingly compound. Our strategy is built around what we believe is a powerful growth flywheel with a series of reinforcing growth drivers that build on one another over time. We believe the expanding clinical evidence for Deep TMS drives broader reimbursement, which in turn supports greater physicians' confidence and adoption. As adoption grows, our installed base expands, creating a large recurring revenue stream and increasing operating leverage. The resulting operating leverage and cash flow enable us to reinvest in additional clinical studies, reimbursement initiatives and strategic partnerships. At the foundation of our strategy is the strength of the Deep TMS platform itself. Our systems are supported by one of the industry's most extensive bodies of peer-reviewed clinical evidence, demonstrating efficacy across a broad range of neuropsychiatric disorders, including major depressive disorder, anxious depression, late-life depression, obsessive-compulsive disorder and smoking addiction. This growing body of evidence has resulted in multiple FDA clearances, increasing physicians' confidence, broader reimbursement support and ultimately accelerated adoption of Deep TMS. One of the clearest examples of our momentum is the continued expansion of reimbursement for Deep TMS. Commercial payers increasingly recognize the clinical value of this therapy, while prior authorization requirements continue to become less burdensome. Perhaps just as important for us, we have also seen reimbursement continue to expand to include an accelerated treatment protocol, which we call SWIFT. We currently estimate there are approximately 57 million covered lives in the U.S. with access to our SWIFT accelerated Deep TMS protocol. Every reimbursement expansion lowers barriers to treatment, increases provider confidence in investing in Deep TMS systems, expands patient access and supports higher utilization across our growing installed base. We believe SWIFT represents an important long-term growth opportunity for BrainsWay. By reducing treatment from several weeks to just a few days, SWIFT has the potential to improve convenience for patients, increase treatment capacity for providers and further strengthen the value proposition for payers. During the quarter, we presented the first prospective 12-month durability data for the SWIFT accelerated Deep TMS protocol. The study demonstrated that patients maintain meaningful clinical improvement through one year following treatment, including sustained remission rates and continued improvements in functional outcome. Importantly, these findings help address one of the key questions surrounding accelerated treatment protocols, not simply whether patients improve quickly, but whether those improvements are durable over time. We believe these findings further strengthen the clinical evidence supporting SWIFT and the case for broader reimbursement adoption, an important driver behind broader adoption of Deep TMS. Beyond expanding adoption within our existing indication, we continue seeking to broaden the clinical utility of the Deep TMS platform. During the quarter, we presented results from the largest real-world study to date evaluating Deep TMS in patients with comorbid PTSD and major depressive disorder, which is one of the most challenging psychiatric populations to treat. Across 462 patients treated at 11 clinical sites, more than 83% experienced a meaningful response in PTSD symptoms, while substantial improvements were also observed in depression symptoms. We believe these findings further strengthen the growing body of evidence supporting Deep TMS across complex psychiatric disorders and reinforce our recent FDA submission seeking clearance for comorbid PTSD and MDD. If cleared, this would represent another important opportunity to expand the clinical utility of the Deep TMS platform, increasing the value proposition for every system already installed in the field without requiring providers to purchase additional capital equipment. Taken together, the clinical and regulatory advances are occurring against the backdrop of an interventional psychiatry market that we believe is entering an important period of long-term growth. Payers are steadily expanding reimbursement for neuromodulation therapies. Demand for non-pharmacologic treatment options continues to grow among both providers and patients, and awareness of conditions such as treatment-resistant depression, OCD and PTSD continue to expand. We believe BrainsWay is well positioned to benefit from these tailwinds given our clinical evidence base, pipeline strategy, reimbursement infrastructure and installed base of Deep TMS systems. Capturing these opportunities requires more than innovative technology. It also requires expanding patient access and investing in providers as they scale their practices. That is one of the key objectives of our strategic priority investment program. This initiative is designed to do much more than effectively deploy capital in promising investment targets. It allows us to partner with leading behavioral health providers and to align ourselves with organizations that have a plan to grow and succeed by accelerating patient access to care and building awareness of cutting-edge interventional psychiatry treatment approaches. During the quarter, we continued to execute against this strategy with a strategic investment in HopeMark Health, a growth-oriented behavioral health platform serving multiple clinics in the Greater Chicago area. Following the close of the quarter, we continued with this strategy through investment in Radial Health, an innovative mental health service platform combining clinical infrastructure, reimbursement capabilities and AI-guided decision support, as well as in Sound Minds Behavioral, a leading growth-oriented outpatient behavioral health platform with locations across the Mid-Atlantic and Northeast. These minority stake investments reflect our strategy of partnering with leading provider organizations and expanding our presence within the broader behavioral health ecosystem while allowing BrainsWay to remain focused on advancing our technology, clinical evidence and commercial execution. Looking ahead, we continue to assess a pipeline of investment opportunities and remain disciplined in identifying partners that can generate both financial growth and meaningful strategic value. Another important part of our long-term platform strategy is extending neuromodulation beyond the clinic. Today, Deep TMS anchors treatment in the clinical setting. Over time, we see an opportunity to extend the patient journey into the home and ultimately connect treatment with data and digital monitoring. That is the strategic context behind our investment in Neurolief. Following the FDA approval for its ProlivRx system in March, the commercial launch has begun and is progressing. While it remains early in the launch, we are encouraged by the progress being made by Neurolief and the execution discipline that they are demonstrating in their rollout. International expansion represents another important layer of our long-term opportunity. Across our current partner market, we estimate there are more than 170 million untreated patients. Importantly, we are not starting from zero. We are building on established commercial partnerships and existing infrastructure, providing what we believe is an attractive and capital-efficient path to scale. As interventional psychiatry expands globally, we believe our international footprint can become an increasingly important contributor to BrainsWay's growth. In closing, we are pleased with our performance this quarter, but we believe we are still in the early stage of a much larger opportunity. For many years, BrainsWay has been known as a Deep TMS company. Today, we are building something broader, a global platform for interventional psychiatry. Every system we install, every reimbursement expansion, every new indication and every strategic partnership strengthens that platform. We are building it from a position of increasing financial strength with strong growth, expanding profitability and greater revenue visibility. One platform, millions of patients, decades of growth. With that, I will now turn the call over to Ido for his review of our second quarter 2026 financial results. Ido?
Thank you, Hadar. During the second quarter of 2026, we continued to execute on our growth strategy, which drove a 35% increase in revenue to $17.1 million compared with $12.6 million for the same period last year. During the quarter, we placed 125 Deep TMS systems, bringing our total installed base to approximately 1,950 systems as of June 30, 2026. Gross profit for the quarter was $12.8 million, up 34% from $9.5 million in the prior year period, while gross margin remained stable at 75%. Turning to operating expenses, sales and marketing expenses for the second quarter of 2026 totaled $4.9 million, steady with the second quarter of 2025. This reflects continued operating leverage and improved efficiency across our sales organization, enabling us to support our commercial activities while maintaining a disciplined cost structure. Research and development expenses were $3.2 million compared with $2.3 million last year. The increase was primarily driven by investments in clinical development and research, including our ongoing PTSD and alcohol use disorder research initiatives. General and administrative expenses were $2.3 million compared with $1.6 million in the prior year period, an increase of approximately $0.7 million, driven by higher professional fees and administrative costs. Operating income was approximately $2.4 million compared with $0.6 million reported for the second quarter of 2025, with operating margin expanding to 14% of revenue from 5%. This performance reflects the scaling of our operations, the strength of our recurring revenue model and disciplined cost management. For the second quarter ended June 30, 2026, we reported net income of $2.7 million, up 34% compared with $2 million in the same period of 2025. Adjusted EBITDA was $3.5 million, an increase of 141% compared with $1.5 million in the second quarter of 2025. Adjusted EBITDA margin expanded to 20% from 11%. As Hadar mentioned earlier, this is the 12th consecutive quarter of positive adjusted EBITDA, and we are very excited by our progress in scaling our growth and profitability. Remaining performance obligations grew to $80.4 million as of June 30, 2026, a 30% year-over-year increase. We believe the steady increase in our RPOs reflects the strength of our business and execution against our long-term strategy. Cash flow from operations was $6.3 million in the second quarter of 2026 compared with $1.2 million in the first quarter, reflecting the strong payment term structure related to certain strategic deals. The capital structure of the company remained debt-free, giving us significant flexibility to pursue strategic growth initiatives, including our minority investment program. We reported cash and cash equivalents of $62.4 million as of June 30, 2026. We believe our strong capital position will support the continued growth of our core scientific and technology operations as well as our strategic investment program, which aims to increase patient access to innovative treatments while also building long-term value for our shareholders. Looking ahead, based on our strong first half performance and continued momentum, we are raising our full year 2026 guidance from a range of $66 million to $68 million to a range of $68 million to $70 million for the full year 2026. This new guidance range, if achieved, will represent a year-over-year expected growth rate of 30% to 34%. In addition, we are narrowing our ranges for operating margin to 13.5% to 14% of revenue and adjusted EBITDA to $13 million to $14 million, representing anticipated growth of approximately 90% to 100% over full year 2025. This concludes my prepared remarks, and I will now turn the call back to the operator to please open up the call for questions. Operator?
Questions and answers
The first question is from Sam Eiber from U.S. Bancorp BTIG.
Maybe I want to start on the guidance raise. Obviously, implying sustained 30% growth in the back half of the year. So maybe you can talk about some of the trends you're seeing into Q3 so far and generally, the confidence to sustain this premium growth rate.
Yes, thank you for the question. We have very high confidence based on what we are seeing and based on the growing remaining performance obligations that gives us very good visibility toward the second half of the year and also into 2027. There is definitely very strong demand across the board for Deep TMS products for MDD, OCD and specifically for the SWIFT protocol, which is today one of the main drivers for the demand. We continue to see strong demand for new systems and new orders toward the end of the year, and that's what's really increasing our confidence in raising the guidance.
Okay. Very helpful. And then maybe if I could use my follow-up here on the SWIFT protocol. I guess, generally, what are you hearing from providers that have adopted it so far? Are they generally aware that it exists? How much education do you need to do in the marketplace? And just generally, those that have adopted it, are they starting to see better throughput, better patient demand because of the reduced treatment burden? Generally, what are you hearing from those who have started to use it?
Yes, absolutely. The feedback is very strong. At the end of the day, it's not just a matter of better convenience for the patients, but also for the clinics. A busy clinic can really increase their utilization by using the SWIFT protocol, and they can see many more patients on a daily basis and even complete the full treatment protocol in a few days. There is clearly strong interest from both providers and patients. The main feedback is about the convenience for patients seeking an effective treatment in a much shorter time. The economics look very favorable for the clinic, and that's what I think is driving some payers to continue and expand reimbursement because demand is growing for the SWIFT protocol.
The next question is from Jeffrey Cohen from Ladenburg Thalmann.
A couple of questions from our end. So firstly, I wanted to jump back into the SWIFT protocol. Could you give us a sense of the payer environment and give us a sense of percent of new cases that are falling under the protocol? And then maybe give us a little bit of a sense of types of patients that are falling under that protocol, whether they be MDD or PTSD, OCD, et cetera.
Yes. So currently, we're only speaking about MDD patients. Obviously, once we look to get FDA approval for comorbid patients with PTSD and MDD, that could expand the eligible population. But today, we're focused on MDD patients who are typically drug resistant. These are patients seeking a better treatment because they are not responding well to medications or other treatment modalities. As I said earlier, we estimate about 57 million covered lives are eligible for SWIFT in the U.S. Reimbursement is a key initiative for adoption. Where reimbursement exists, adoption tends to accelerate. Providers vary in how quickly they submit cases to payers, but once reimbursement is available in a territory, you can see a significant increase in SWIFT adoption, potentially approaching 50% of the treated population in a local area. Overall, there is good adoption, but it depends on the local payer environment in each territory.
Okay. Got it. And then as a follow-up, you spoke about the $80.4 million performance obligations. I'm assuming that's lease systems, and I'm assuming that's a two- to three-year period. But could you tie that in also to some of the minority investments that you've made so far and how that pipeline may look or what we should anticipate for the back half of the year?
Yes. The backlog is growing, and we are very proud of this 30% increase. Remember, these are orders for which we have not yet recognized revenue. They represent backlog that will be recognized going forward. One of the main drivers supporting this growth is the minority investments we are making in growing provider platforms. Each of these partners is expanding: they are not only opening new locations, but also growing utilization of TMS within their businesses. Many of them are likely to have more than one system in each location. Based on that and on growing patient demand, they will continue to order systems from us as utilization grows and the interventional psychiatry market expands. I do anticipate this number will continue to grow toward the end of the year. That's what gives us good visibility as we enter 2027.
The next question is from Ahmed Mahmud from H.C. Wainwright.
This is Ahmed on for Ram. Could you give us some color on how ProlivRx sales are ramping? And when do you expect to decide whether to acquire Neurolief and what factors will determine that decision?
Yes. Thank you for the question. Neurolief is an important part of our future platform to extend our outreach into home-use care. Currently, Neurolief is running a launch mainly with the VA channel. They have received reimbursement from the VA channel and are deploying some of the first commercial sales within the VA, as well as in some private clinics. The progress is going very well. What we want to monitor over the next 90 days is the soft launch KPIs—what we call the soft launch—to see the main operational metrics that will inform the full launch and how we can accelerate growth. Today, we hold a minority investment in Neurolief via a convertible loan. We will decide whether to continue investing or to acquire Neurolief based on commercial milestones related to growth and profitability. There is still time to make that decision. Right now, we are encouraged by commercial progress and the soft launch they are conducting in the U.S. I expect to report more details on these important metrics toward the end of the year.
And if I could just follow up on the minority investments. Could you give us some color on the cadence and the number of minority investments you plan to make for the second half of this year? And when do you expect them to begin accelerating BrainsWay's revenue growth? And on a separate follow-up, might the optimized Deep TMS protocol be elevated earlier in the treatment continuum for major depression?
Yes. On the minority investments, we have made six minority investments to date. We continue to review a pipeline of opportunities carefully through a thorough due diligence process. There is definite interest from potential partners. My expectation is to invest in growing businesses with the right management teams and profitable models. I want to ensure I'm investing in a portfolio that can grow in interventional psychiatry. When those partners grow—meaning increased patient demand—you can expect growing demand for the Deep TMS platform. Again, my expectation is for more than one system in many locations, specifically due to adoption of the SWIFT protocol. If our partners execute well, they can expand to 10 to 15 locations per year. If they execute as expected, I anticipate continued strong demand and utilization of the Deep TMS platform. Regarding the continuum of care, once a patient has failed one or two medications, there are several options. We believe Deep TMS, specifically with the SWIFT protocol, is a very good option. Other modalities like psychedelics are gaining attention today, but the future continuum will likely offer combinations of modalities—psychedelics, Deep TMS and medication management. Deep TMS is reaching an inflection point in the continuum of care, and we are seeing better results and higher demand as a result.
There are no further questions at this time. I'd like to turn the floor back over to Hadar Levy for closing comments.
Thank you. So with that, we conclude our remarks for today. I want to thank all the investors and analysts for following the company. Thank you, and that's it for today. Have a good one.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.