BrainsWay in the first quarter: growth is profitable, collection is the next test

BrainsWay opened 2026 with a quarter that strengthens the business story more than it changes it: demand for Deep TMS systems continues to grow, operating leverage is already reaching the income statement, and the full-year guidance now looks more like a run rate to sustain than an aspirational target. First-quarter revenue was $15.5 million, up 35% year over year, and operating income was $2.0 million, equal to 12.9% of revenue and almost at the lower end of the company’s 2026 target. That matters for a medical device company that until recently was measured mainly by product adoption, FDA clearances and reimbursement expansion. Still, the quarter needs a cash-quality check: operating cash flow was only $1.2 million, trade receivables rose by $3.5 million, and cash fell by $9.1 million after the company directed $8.5 million into financial assets and strategic investments. The $75 million remaining performance obligation balance and 117 systems shipped improve visibility, but they are not the same as collected cash. The next test is therefore not only another quarter of revenue growth, but collection, conversion of backlog into revenue, margin preservation and proof that the company’s mental-health ecosystem investments expand the business without becoming a balance-sheet burden.

The quarter proves operating leverage, not only demand

This is no longer a classic medical-device story of a product waiting for a market. The company sells and leases Deep TMS systems for noninvasive treatment of brain disorders, mainly around major depressive disorder, OCD and smoking cessation, and generates revenue from system sales, leases and services. Its economics sit on two engines: expanding the installed base, then generating recurring or durable revenue from service, leases and higher utilization. That makes it primarily a growth and margin machine, not a financing-survival story.

The first quarter shows that this machine is starting to work at a profitable pace. Revenue rose to $15.5 million, gross margin remained around 75%, and operating expenses rose by roughly 20% against 35% revenue growth. Operating income therefore jumped from $0.6 million to $2.0 million, while Adjusted EBITDA rose from $1.3 million to $2.8 million. This is exactly the signal investors look for in medical growth companies: not only more sales, but expenses that are not chasing revenue at the same pace.

The numbers also matter because of the stock’s starting point. The TASE market cap before the results was approximately NIS 1.94 billion. At that level, the market is no longer satisfied with evidence that the technology works or that the company is growing. It needs to see a business that can keep growing without consuming the cash balance, and one that can expand sales channels without leaning too heavily on a single customer or unusually favorable payment timing.

Visibility is improving, collection decides growth quality

The strongest figure in the quarter is not only the revenue growth rate, but the combination of 117 Deep TMS systems shipped, up 44% year over year, an installed base of approximately 1,820 systems and approximately $75 million of remaining performance obligations. That backlog-like figure grew 25% year over year and supports the view that demand is not a one-off event. It also fits the company’s existing framing: a shift from one-time system sales toward a more recurring model, with multi-year contracts and enterprise customers.

But remaining performance obligations are not cash. On the quarter-end balance sheet, deferred revenue totaled only about $17.8 million, far below the reported RPO balance. At the same time, trade receivables increased from $4.1 million at the end of 2025 to $7.5 million at the end of March. This does not make the growth weak, but it changes its quality: more of the execution now needs to move through collection, not only through system shipment or contract signing.

The year-over-year comparison makes this clearer. In the first quarter of 2025, operating cash flow was $5.0 million, largely helped by a $6.3 million increase in deferred revenue. In the first quarter of 2026, operating cash flow fell to $1.2 million, as the $3.5 million increase in receivables absorbed a large part of profit and deferred revenue increased by only $0.4 million. This is not a profitability problem. It is a cash-timing test.

Customer concentration adds another caution layer. In 2025, one large U.S. customer contributed 34% of revenue, up from 19% in 2024. That can be an advantage, because a large enterprise customer can accelerate deployment and create multi-year contracts. It is also a risk, because a change in order pace, pricing or payments at that kind of customer can quickly affect revenue, receivables and cash flow. The current quarter does not disclose a customer split, so the follow-up now moves to receivables, deferred revenue and RPO movement over the next quarters.

Cash moved into strategic investments

The all-in cash picture in the quarter is weaker than the profitability headline. Here, all-in cash means cash after the period’s actual cash uses: operating cash flow, purchases of property and equipment and system components, financial investments, repayment of development-grant liabilities, lease payments and small additional items. On that basis, cash fell from $67.7 million at the start of the year to $58.6 million at the end of March, a decline of $9.1 million.

The point is not that the core business is burning cash. Before financial investments and grant and lease repayments, free cash flow after purchases of property and equipment and system components was positive but modest, at about $0.4 million. After development-grant and lease repayments, and before financial asset purchases, the picture was already slightly negative. So when the company talks about profitability and positive cash flow, the framing matters: recurring cash generation and strategic capital deployment are different things.

Those investments are part of the business shift. During the quarter, the company made an additional $6 million investment in Neurolief after a regulatory milestone, bringing the convertible-loan investment to $11 million. It also made an initial $1 million investment in BrainStim and an additional $1 million investment in Axis after a revenue milestone. Together with investments made in 2025, non-current financial assets rose to $23.2 million.

This can be the right move: it gives the company access to care channels, partners and customers in mental health, and may help expand use of its technology without increasing operating expenses at the same rate. But that value is still less transparent than revenue from Deep TMS systems. Part of it sits in private companies, part depends on milestones, and part will prove itself only if the investments open a sales channel, a home-use path or a clinic network that increases demand for the company’s systems. Until then, the investments buy a business option and reduce excess available cash at the same time.

2026 is a commercial proof year

The full-year guidance makes the next quarters very measurable. The company expects 2026 revenue of $66 million to $68 million, 27% to 30% growth over 2025, operating income of 13% to 14% of revenue and Adjusted EBITDA of $12 million to $14 million. After a $15.5 million first quarter, reaching the revenue range requires an average of about $16.8 million to $17.5 million in each of the next three quarters. That is not a large break from the first-quarter level, but it does require further growth from an already higher base.

The commercial triggers are clear. First insurer coverage for the accelerated SWIFT protocol after FDA clearance, broader payer support for TMS administered by psychiatric mental health nurse practitioners, patient recruitment in the AUD study and a planned second-quarter FDA filing for PTSD symptoms in MDD patients can all expand the market. But only some of those belong to near-term revenue. Reimbursement and provider-authorization changes can affect utilization and deployment faster. Trials, new indications and investments in complementary companies are longer options.

The current read leans positive, but it depends on execution quality rather than growth alone. The first quarter proves that the company can convert revenue into operating income when expenses stay under control. It also reminds investors that multi-year contracts and enterprise customers require consistent collection, lower concentration and cash flow that can support investment without eroding the cash advantage. If receivables stabilize, RPO continues to grow and operating margin remains around the target range, the market gets evidence that the company has moved from selling technology to producing recurring profitability. If cash flow stays behind profit and private investments continue to absorb cash without visible commercial contribution, the positive case becomes weaker.