BrainsWay Ltd. (BWAY)

Executive Summary / Key Takeaways

• BrainsWay is rapidly evolving into a scalable growth platform, driven by its proprietary Deep TMS technology and a strategic shift towards recurring revenue models, with multiyear lease agreements now comprising approximately 70% of new customer engagements.
• The company reported record Q2 2025 revenue of $12.6 million, a 26% year-over-year increase, and raised its full-year 2025 revenue guidance to $50 million to $52 million, reflecting strong market demand and a robust $62 million backlog.
• BrainsWay's technological differentiation, including multiple FDA clearances for conditions like MDD, OCD, and smoking addiction, alongside an advanced R&D pipeline for accelerated MDD protocols, alcohol use disorder, and at-home treatments, underpins its competitive advantage.
• Strategic minority investments in mental health providers like Stella MSO and the recent convertible loan to Neurolief Ltd. are expanding market access and addressable patient populations, particularly into the burgeoning at-home therapy segment.
• Despite its smaller scale compared to industry giants, BrainsWay maintains a strong financial position with $78.3 million in cash and a debt-free capital structure, enabling continued investment in innovation and market expansion.

Deep Roots, Broad Horizons: BrainsWay's Ascent in Mental Health Neurostimulation

BrainsWay Ltd., founded in 2003 and headquartered in Jerusalem, Israel, has established itself as a leader in noninvasive neurostimulation treatments for mental health disorders. The company's core business revolves around its proprietary Deep Transcranial Magnetic Stimulation (Deep TMS) platform, a technology designed to address a wide spectrum of psychiatric conditions. In an industry increasingly seeking effective, non-pharmacological interventions, BrainsWay's approach positions it at the forefront of a growing market for advanced mental health therapies.

The company's overarching strategy, encapsulated by its "innovate, repeat, expand, and compound" model, focuses on three key pillars: elevating market awareness of Deep TMS, advancing its R&D roadmap for new and expanded treatment indications, and broadening patient access through global expansion and health system integration. This strategic framework is not merely aspirational; it is deeply rooted in BrainsWay's history of clinical validation and technological advancement, which has consistently set it apart in the competitive landscape.

Technological Edge: The Power of Deep TMS and Future Innovations

BrainsWay's competitive advantage is fundamentally built upon its Deep TMS technology. Unlike first-generation, figure-8 coil TMS systems, Deep TMS utilizes patented H-coils that allow for deeper and broader stimulation of brain regions. This technological differentiation is critical, as it enables the treatment of a wider range of mental health disorders with demonstrated efficacy. BrainsWay is currently the only TMS modality cleared by the FDA with peer-reviewed published clinical evidence for a broad range of indications, including major depressive disorder (MDD), anxious depression, late-life depression, obsessive-compulsive disorder (OCD), and smoking addiction.

The tangible benefits of this technology are evident in its clinical performance. For instance, data for OCD treatment shows that over 60% of patients respond positively to Deep TMS therapy, addressing a significant unmet need for approximately 400,000 patients annually who are resistant to current treatment options. The system was also the first TMS device cleared by the FDA to effectively treat anxious depression, a condition affecting 10 to 16 million adults in the U.S. each year. Furthermore, the FDA's decision in June 2024 to raise the upper age limit for MDD treatment with Deep TMS from 68 to 86 years old made BrainsWay's system the first and only TMS device approved for elderly patients with MDD, significantly expanding its addressable patient population.

BrainsWay's commitment to innovation extends to a robust R&D pipeline. A randomized multicenter U.S. clinical trial evaluating an accelerated treatment protocol for MDD has seen data submitted to the FDA, with potential clearance anticipated in the fourth quarter of 2025. This accelerated protocol, which involves a significantly shorter acute phase (e.g., 6 days compared to a traditional 6-week regimen), has the potential to substantially improve convenience and appeal for prospective patients. The company is actively working with payers to improve reimbursement for this accelerated protocol in 2026.

Beyond MDD, BrainsWay is progressing with qualifying PTSD patients in Israel for Deep TMS and is collecting data for adolescent MDD. A significant future development is the planned launch of a multi-center trial for alcohol use disorder (AUD) in the second half of 2025, utilizing its next-generation Deep TMS 360 system. This TMS 360 machine is also slated for feasibility studies in neurology indications such as cognitive behavior and Parkinson's disease before the end of 2025, hinting at future expansion into broader neurological applications. These R&D initiatives are crucial for expanding BrainsWay's competitive moat, enhancing its market positioning, and driving long-term growth by continuously unlocking new treatment avenues and improving patient accessibility.

A Scalable Growth Platform: Financial Performance and Recurring Revenue

BrainsWay's financial performance reflects its successful transition into a scalable growth platform. The company reported record quarterly revenue of $12.6 million for the second quarter of 2025, marking a substantial 26% increase compared to the same period last year. This strong top-line growth is further supported by a significant increase in system placements, with 88 Deep TMS systems shipped in Q2 2025, a 35% year-over-year increase, bringing the total installed base to 1,522 systems as of June 30, 2025.

A key driver of this stability and growth is BrainsWay's focus on generating recurring revenue streams through multiyear lease agreements, which now constitute approximately 70% of its recent customer engagements. This model, coupled with a high rate of customer retention and expansion, provides clear visibility into future revenues, evidenced by a backlog of signed agreements with remaining performance obligations totaling approximately $62 million, a 25% year-over-year increase.

The company consistently maintains a strong gross margin of 75%, as reported for Q2 2025, Q1 2025, and the full year 2024. This stability underscores the strength of its recurring revenue model and disciplined cost management.

BrainsWay also demonstrated improved profitability, with a net profit of $2 million in Q2 2025, up from $0.6 million in the prior year period, and adjusted EBITDA increasing to $1.5 million from $1.3 million. For the full year 2024, the company achieved $41.02 million in revenue, a 29% increase over 2023, and reported positive net income and adjusted EBITDA for the fifth and sixth consecutive quarters, respectively. Positive cash flow from operations in Q2 2025 further reinforces the efficiency of its collection and business model.

Strategic Expansion: Investments and Market Penetration

BrainsWay's growth strategy extends beyond organic sales to include targeted strategic investments and market penetration initiatives. The company has successfully focused on strengthening its engagement with large enterprise customers, with approximately 80% of new sales coming from greenfield opportunities. This approach has led to valuable partnerships and significant multi-system orders from fast-growing U.S. mental health networks.

International expansion is another critical component, with steady demand growing across Canada, Israel, Europe, and Asia. Recent successes include the placement of 15 new Deep TMS systems in Taiwan and South Korea, indicating strong commercial traction in the East Asian market. In Israel, the Ministry of Defense Rehabilitation Department's approval for reimbursement of Deep TMS therapy for PTSD patients at public hospitals opens new avenues for access and growth.

A pivotal strategic shift in late 2024 involved making minority interest investments in mental health providers and complementary enterprises. This initiative, supported by a $20 million strategic equity investment from Valor Equity Partners, aims to build market awareness, enhance R&D, improve data analysis, and extend Deep TMS access without BrainsWay taking on operational roles. The initial $5 million financing transaction with Stella MSO, a management services organization servicing over 20 mental health clinics, has already yielded dramatic results, with over a 50% increase in Deep TMS patient utilization at Stella MSO clinics. BrainsWay aims to sign at least 5 similar strategic financing arrangements by the end of 2025 and 10 more in 2026, with individual investments ranging from $2 million to $5 million.

Further expanding its total addressable market, BrainsWay made an initial strategic investment of a $5 million convertible loan in Neurolief Ltd. in August 2025, with an option to acquire the company. Neurolief is developing a wearable, non-invasive, multi-channel brain neuromodulation platform for at-home use. If Neurolief's Proliv™ Rx device receives FDA Premarket Approval for MDD treatment, it would be the first FDA-cleared medical device for MDD treatment deliverable outside the clinic, addressing a critical gap for millions of MDD patients and significantly broadening BrainsWay's market reach into the burgeoning at-home therapy segment.

Competitive Positioning: Deep TMS vs. the Field

BrainsWay operates in a competitive landscape that includes both direct and indirect rivals. Its technological and clinical differentiation positions it as an undisputed leader in the TMS market. The company's Deep TMS technology offers distinct advantages over first-generation, figure-8 coil TMS systems, which has led a growing number of customers to switch to BrainsWay, citing its clinical performance and economic value.

Compared to direct competitors like Neuronetics (STIM), which focuses on its NeuroStar system for MDD, BrainsWay's Deep TMS offers a broader range of FDA-cleared indications and deeper brain stimulation capabilities, potentially leading to superior patient outcomes in complex cases. While Neuronetics may emphasize ease of use in clinical settings, BrainsWay's technological breadth provides a stronger position in research-driven segments and for diverse mental health conditions. However, Neuronetics has shown trends of stronger cash flow generation through efficient market expansion, suggesting a potential lag in financial efficiency for BrainsWay.

Against LivaNova (LIVN), which offers neuromodulation therapies including invasive options, BrainsWay's noninvasive approach provides a significant advantage in patient accessibility and ease of implementation in outpatient settings. BrainsWay's specialized focus on noninvasive TMS for mental health could allow for faster innovation in new indications, while LivaNova benefits from a broader, more diversified product portfolio.

When compared to large healthcare conglomerates like Abbott Laboratories (ABT) and Boston Scientific (BSX), BrainsWay operates as a nimble innovator. While these larger players possess significant scale, global distribution, and R&D capabilities, BrainsWay's Deep TMS provides disorder-specific innovation, particularly for psychiatric applications. Its noninvasive nature also differentiates it from Boston Scientific's more invasive neuromodulation options. However, BrainsWay's smaller operational scale can lead to higher per-unit costs and potentially lower profitability compared to the economies of scale enjoyed by its larger rivals.

BrainsWay's competitive moats include its proprietary Deep TMS technology, which enables deeper brain stimulation and a wider range of FDA-cleared indications, and its robust regulatory licenses. These advantages foster customer loyalty and provide a barrier to entry for new competitors. However, vulnerabilities include its smaller operational scale, which can impact cost efficiency, and its R&D intensity, which requires significant ongoing investment. Indirect competitors, such as pharmaceutical companies offering drug-based treatments and emerging digital therapeutics, also pose a threat by offering potentially cheaper or more accessible alternatives, which could intensify price competition.

Outlook and Risks: Charting the Future Course

BrainsWay's management has expressed a confident outlook, raising its full-year 2025 revenue guidance to a range of $50 million to $52 million, representing 22% to 27% growth over 2024 revenue. The company also anticipates generating an operating profit in the range of 4% to 5% of revenue and adjusted EBITDA in the range of 12% to 13% for the full year 2025. This guidance is underpinned by strong first-half results, a healthy backlog, and continued momentum in both U.S. and international markets. Management expects gross margins to remain consistently strong at around 75% for 2025.

Key assumptions supporting this outlook include the successful commercialization of the accelerated MDD protocol, expected FDA clearance in Q4 2025, and continued expansion of its strategic financing arrangements with mental health networks. The planned launch of the AUD clinical trial with the Deep TMS 360 system and ongoing R&D for other indications are also expected to contribute to future growth.

Despite the positive outlook, BrainsWay faces several risks. Delays in regulatory approvals for new indications or accelerated protocols could impact growth timelines. Challenges in securing adequate reimbursement from third-party payers, particularly for new indications like OCD or the accelerated MDD protocol, could affect market adoption. Competition from existing and emerging technologies, including pharmaceutical alternatives and digital therapeutics, remains a constant factor. While management currently does not anticipate a material impact from geopolitical or supply chain factors, these external risks are continuously monitored. The success of its strategic minority investments also carries inherent risks, as the anticipated synergies and profitable returns are not guaranteed.

Conclusion

BrainsWay is demonstrating a compelling transformation, leveraging its differentiated Deep TMS technology and a strategic shift towards a recurring revenue model to establish itself as a scalable growth platform in the mental health neurostimulation market. The company's consistent financial performance, marked by record revenues and strong gross margins, coupled with a robust R&D pipeline and strategic investments, paints a picture of a company poised for continued expansion. Its leadership in FDA-cleared indications and innovative approaches to treatment protocols provide a significant competitive edge.

While BrainsWay operates in a competitive and evolving landscape, its focus on technological advancement, expanding patient access through strategic partnerships, and disciplined financial management positions it favorably. The successful execution of its accelerated MDD protocol, the rollout of the Deep TMS 360 system for new indications, and the strategic integration of at-home therapies through investments like Neurolief will be critical determinants of its long-term trajectory. For investors, BrainsWay represents an opportunity to participate in the growth of a company that is not only delivering innovative mental health solutions but also strategically expanding its market footprint and revenue streams.