BrainsWay Ltd. — FY 2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a quarterly filing; it does include unaudited quarterly results, including Q4 2023. Financial statements are prepared under IFRS and presented in U.S. dollars. Amounts below are in millions unless stated otherwise.
Business context
BrainsWay develops and commercializes Deep Transcranial Magnetic Stimulation (Deep TMS) systems for major depressive disorder (including anxious depression), obsessive-compulsive disorder and smoking addiction. It earns revenue from system sales, leases and related services. The United States generated approximately 75% of FY 2023 revenue. The installed base grew by 217 systems during 2023 to approximately 1,101.
Key financial metrics
| Metric | FY 2023 | FY 2022 |
|---|---|---|
| Revenue | $31.785 | $27.177 |
| Gross profit / gross margin | $23.477 / 73.9% | $20.048 / 73.8% |
| Operating loss / operating margin | $4.959 / (15.6%) | $12.683 / (46.7%) |
| Net loss / net margin | $4.197 / (13.2%) | $13.349 / (49.1%) |
| Operating cash flow | $1.284 provided | $9.760 used |
| Cash, cash equivalents, restricted cash and short-term deposits | $46.256 | $47.852 |
FY 2023 revenue rose 17%. Sales revenue increased to $20.372 million from $16.182 million, while lease revenue declined to $8.523 million from $9.244 million. Sale-related and other service revenue totaled $2.890 million, compared with $1.751 million. Operating expenses were $28.436 million, down from $32.731 million. Net finance income was $1.013 million, versus net finance expense of $0.351 million in 2022. Basic and diluted net loss per share was $0.13, compared with $0.40.
Q4 2023: Revenue was $9.029 million and gross profit was $6.739 million. The company reported operating income of $0.184 million and net income of $0.127 million, compared with Q4 2022 revenue of $6.033 million and a net loss of $3.867 million. The filing does not provide a clear standalone Q4 cash-flow figure.
At year-end, total assets were $62.972 million and equity was $41.581 million. The filing reports $7.085 million in the carrying value of IIA grant liabilities and $0.471 million in lease liabilities; it does not identify conventional borrowings in the presented balance sheet. The current portion of IIA grant liabilities was $1.008 million. The company held $35.465 million in short-term bank deposits, earning approximately 6% at the stated deposit terms.
Changes versus comparable periods
- Revenue increased 17% year over year, principally from higher system sales. Sales made up 64% of revenue in 2023 versus 60% in 2022.
- Gross margin was broadly stable. Operating loss narrowed by $7.724 million, and net loss narrowed by $9.152 million.
- Operating cash flow improved by $11.044 million, moving from a $9.760 million use of cash to $1.284 million provided. Management attributed the change to a lower loss and working-capital movements.
- R&D expense declined 13% to $6.665 million; selling and marketing expense declined 9% to $16.456 million; and general and administrative expense declined 23% to $5.315 million.
- Cash and cash equivalents alone fell to $10.520 million from $47.581 million, while $35.465 million was reported in short-term deposits. The $37.409 million investing cash outflow primarily reflected investment in short-term deposits, not solely operating expenditures.
Outlook, risks and unusual items
- Management expects revenue growth as it expands commercialization for MDD, OCD and smoking addiction, and says cost reductions should narrow the gap between revenue and operating expenses. It expects R&D, selling and marketing, and G&A expenses to decrease as resources are streamlined. It believes available cash and expected product revenue can fund operating needs for at least 12 months and capital expenditure needs for 24 months, based on its current plan. No numeric revenue or earnings guidance is provided.
- Smoking-addiction treatment had no third-party reimbursement at year-end. OCD coverage was emerging; management cited more than 90 million U.S. covered lives eligible for coverage by March 2024. Coverage criteria and reimbursement levels vary by payer.
- The filing cites supply and shipping disruptions, component price increases and reliance on single-source suppliers, with risks heightened by geopolitical instability and the Israel-Gaza war. Five employees were drafted to Israeli reserve service after the war began; the filing says four worked in R&D and manufacturing and one in finance.
- BrainsWay has a history of losses and an accumulated deficit of $101.302 million. Management believes existing capital is sufficient, but future funding needs depend on growth, margins, R&D, clinical trials, reimbursement and regulatory progress.
- Core technology depends on licensed intellectual property. The filing notes that an underlying U.S. patent expired in January 2024, with a divisional patent in that family due to expire in 2026; the company says other patents provide additional protection but cannot assure they fully offset the expiry.
- IIA grants entail royalties generally equal to 3% of applicable product sales, subject to grant-related limits and other terms. The maximum future royalties disclosed for active projects were approximately $11.008 million, including interest.
- Legal matters include a patient claim alleging hearing loss following a clinical study, which the company says it is defending, as well as employment-related and customer-collection matters. A lawsuit brought by Neuronetics was settled in January 2023 without admission of liability or wrongdoing. The company also reported removing systems and pursuing collections from a clinic network with outstanding debt.
- The company reported effective disclosure controls and effective internal control over financial reporting as of December 31, 2023; its auditor did not attest to internal-control effectiveness because of the emerging-growth-company exemption. It reported no cybersecurity incident that had materially affected results or financial condition and stated it does not maintain cyber liability insurance.
Important facts for investors to verify
- Reconcile the Q4 and annual results to the audited statements and confirm the drivers and sustainability of the improvement in losses and operating cash flow.
- Review cash availability, deposit maturities, future operating cash requirements and the assumptions behind management’s 12- and 24-month liquidity statements.
- Track system installations, sales versus lease mix, customer concentration, receivables aging and collections, especially given the disclosed clinic-network debt.
- Monitor reimbursement coverage and utilization for OCD, and whether smoking-addiction coverage or commercial demand develops.
- Assess the effect of Israel-related disruption, shipping and component costs, reserve call-ups, and supplier concentration on manufacturing and delivery.
- Review patent and licensing protection after the January 2024 patent expiry, IIA royalty obligations, and the status and potential costs of disclosed legal claims.
- Clarify the filing’s inconsistent employee-count disclosures: it reports 106 employees in several sections but 134 employees in another section.