NeuroPace, Inc. (NPCE) Q4 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

NeuroPace's earnings call reveals strong financial performance with significant revenue and gross margin growth, positive adjusted EBITDA, and reduced net loss. The raised revenue and gross margin guidance for 2025 further indicates optimism. Despite increased operating expenses, the strategic focus on RNS and upcoming FDA submissions, combined with favorable analyst sentiment, supports a positive outlook. The Q&A section highlights the potential of generalized epilepsy opportunities and Project CARE's growth contribution, reinforcing positive sentiment. Given these factors, a positive stock price reaction is expected over the next two weeks.

Key Financial Performance

Quarterly Revenue $26.6 million, representing 24% year-over-year growth. This performance was primarily driven by strength in the core RNS business with RNS System revenue of $22.4 million, up 26% year-over-year. The growth reflects increased adoption and utilization within the adult focal epilepsy indication and customer base, as well as expanded access to RNS therapy through community pathways.

Gross Margin Greater than 77%, up roughly 200 basis points year-over-year. This improvement was driven by mix and manufacturing efficiencies, with RNS gross margin again greater than 80%.

Adjusted EBITDA Positive $900,000 in the fourth quarter, a $1.9 million improvement compared to the prior year quarter. This marks the second consecutive quarter of positive adjusted EBITDA, reflecting scaling of the operating model in a disciplined manner.

Net Loss $2.7 million for the fourth quarter compared with a net loss of $5.3 million in the prior year quarter. The improvement reflects better financial discipline and operating leverage.

Full Year Revenue $100 million, representing 25% year-over-year growth. This was driven primarily by increased RNS System sales, which also grew 25% for the full year.

Full Year Gross Margin 77.2% compared with 73.9% in 2024. The improvement was due to increasing contribution from higher-margin RNS revenue, improved manufacturing efficiency, and favorable pricing.

Operating Expenses $22.3 million in the fourth quarter compared with $19.8 million in the prior year quarter, representing a 13% increase. The growth was primarily due to personnel-related expenses associated with scaling commercial activities and investments in R&D.

Cash, Cash Equivalents, and Short-Term Investments $61.1 million at the end of the fourth quarter, a $1.1 million increase compared with $60 million at the end of the prior quarter. This was driven by positive operating cash flow of approximately $500,000 and positive free cash flow of approximately $400,000.

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Operating Highlights

RNS System: Achieved $22.4 million in revenue in Q4 2025, a 26% year-over-year growth. Sustained broad-based momentum with increased adoption and utilization. Gross margin for RNS exceeded 80%.

Seizure ID: AI-enabled tool designed to analyze iEEG records, identify seizures, and provide relevant data to clinicians. Expected approval in H1 2026.

RNS Remote Care: Enables remote detection of events and therapy adjustments during telehealth visits. Improves access and efficiency for patients and clinicians.

Next-generation platform: Focuses on adaptive treatment tools and personalized neuromodulation to improve seizure control and expand patient benefits.

Adult focal epilepsy market: Continued penetration with significant runway for adoption and utilization in Level 4 centers and community pathways.

Idiopathic Generalized Epilepsy (IGE): Submitted PMA supplement to FDA for expanded indication. Supported by 77% reduction in median seizure rates in clinical trials. FDA review process is ongoing.

Revenue growth: Achieved 24% year-over-year growth in Q4 2025, with total revenue of $26.6 million. Full-year revenue reached $100 million, a 25% increase.

Gross margin: Improved to 77.4% in Q4 2025, driven by manufacturing efficiencies and favorable pricing.

Adjusted EBITDA: Positive $900,000 in Q4 2025, marking the second consecutive quarter of positive adjusted EBITDA.

Cash flow: Generated positive operating cash flow of $500,000 and free cash flow of $400,000 in Q4 2025.

Commercial investments: Invested in sales representatives, incentive structures, and nurse navigator resources to enhance patient funnel management.

NeuroPace AI tools: Developing AI tools for workflow automation, treatment optimization, and remote programming capabilities.

Clinical development: Advancing NAUTILUS trial for IGE and preparing for potential FDA approval. Focused on expanding RNS indications.

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Risk or Challenges

Regulatory Approval for IGE: The company is awaiting FDA approval for an expanded indication for the RNS System in idiopathic generalized epilepsy (IGE). Any delays or issues in the regulatory process could impact the timeline for market expansion and revenue growth.

Dependence on Level 4 Centers: The majority of growth is driven by Level 4 centers. Over-reliance on these centers could limit scalability and expose the company to risks if these centers face operational or financial challenges.

Supply Chain and Manufacturing: While manufacturing efficiencies have improved, any disruptions in the supply chain or manufacturing processes could impact gross margins and product availability.

Commercial Investments: The company is making significant investments in its commercial organization, including sales representatives and nurse navigators. If these investments do not yield expected returns, it could strain financial resources.

Data and AI Tool Development: The development of AI tools like Seizure ID and remote care capabilities is critical for future growth. Delays or failures in these initiatives could hinder operational efficiency and market competitiveness.

Financial Sustainability: Although the company has shown positive adjusted EBITDA, it is still operating at a net loss. Sustained losses could impact long-term financial stability.

Market Penetration Challenges: The company is still early in penetrating the adult focal epilepsy market. Slow adoption rates or challenges in expanding community access could limit growth.

Discontinued Operations with DIXI Medical: The conclusion of the DIXI Medical partnership could lead to transitional challenges and impact short-term revenue.

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Guidance & Outlook

Revenue Guidance for 2026: NeuroPace expects full-year 2026 revenue to be between $98 million and $100 million, representing a growth of 20% to 22% in the core RNS business. This excludes any contributions from idiopathic generalized epilepsy (IGE) regulatory approval, service revenue, or DIXI Medical.

First Quarter 2026 Revenue Guidance: Revenue is expected to be in the range of $21 million to $22 million, reflecting normal procedural volume timing and activity levels.

Gross Margin Guidance for 2026: Non-GAAP or adjusted gross margin is expected to be between 81.5% and 82.5%, driven by higher-margin RNS revenue and manufacturing efficiency.

Operating Expense Guidance for 2026: Non-GAAP or adjusted operating expenses are expected to range between $90 million and $92 million, excluding approximately $10 million in stock-based compensation. This includes investments in sales and marketing ($46 million to $48 million), research and development ($27 million), and general and administrative expenses ($17 million).

Adjusted EBITDA Guidance for 2026: Adjusted EBITDA is expected to be a loss in the range of $9 million to $10 million, with improvements anticipated in the second half of the year.

Seizure ID Approval Timeline: The Seizure ID AI-enabled tool is expected to receive FDA approval in the first half of 2026.

Remote Care Development: NeuroPace is advancing RNS remote care capabilities, enabling remote detection of events and therapy adjustments during telehealth visits. This is expected to improve access and efficiency for patients and clinicians.

FDA Review for IGE Indication Expansion: The PMA supplement for the RNS System's expanded indication in idiopathic generalized epilepsy (IGE) is under FDA review, with a 180-day review clock initiated. Approval timing will be incorporated into guidance upon further visibility.

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Shareholder Return Plan

dividends: We believe these investments will pay dividends as they mature and become productive.

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Key Q&A

Q:How quickly can NeuroPace translate from an approval into collecting revenue for the generalized opportunity?

A:The key steps post-approval include extending coverage in the private payer community, initial introduction training, and scaling activities with referring physicians. NeuroPace is already preparing for these steps to ensure momentum post-approval.

Q:Could the generalized opportunity eventually be a larger revenue generator for NeuroPace than the focal opportunity?

A:Management believes the generalized opportunity has significant potential, with the idiopathic generalized epilepsy (IGE) segment being a major focus. They expect adoption dynamics to be favorable due to the lack of other approved device indications and a shorter diagnostic pathway for IGE patients.

Q:What is the expected impact on Q1 adjusted EBITDA?

A:Management expects adjusted EBITDA to be more negative in the first half of the year due to front-end loading of operational expenses, with improvement in the second half as investments in commercial programming, marketing, and sales headcount take effect.

Q:What was the magnitude of pricing impact on RNS growth in Q4?

A:There was no significant deviation in pricing impact in Q4 compared to historical trends. NeuroPace has consistently implemented low to mid-single-digit annual pricing increases, which have contributed to gross margin improvements.

Q:How is Project CARE contributing to growth?

A:Project CARE is contributing to growth by increasing the number of prescribers, implanters, and active centers. It complements growth in Level 4 centers and broader referral community efforts, supported by investments in direct-to-consumer marketing and commercial organization expansion.

Q:What are the current capacity dynamics across implanting centers?

A:Neurosurgeon capacity is generally sufficient to handle increasing device case volumes. Some centers may experience longer booking times, but this is the exception. NeuroPace is investing in nurse navigators to streamline patient flow and address potential bottlenecks.

Q:What is the Seizure ID opportunity and its logistics?

A:Seizure ID is a software capability provided with the RNS System to improve clinic efficiency by identifying likely seizure activity, reducing the time clinicians spend reviewing data. It is included with the RNS System and aims to encourage broader adoption of the technology.

Q:Are there significant biological differences in iEEG readings between IGE and focal epilepsy?

A:Yes, the underlying electrophysiology differs. Generalized seizures occur throughout the brain, unlike focal seizures that originate from a specific region. However, the RNS System can detect and treat both types effectively, with tailored therapy expected to improve outcomes over time.

Q:What updates are there on the pediatric NEST collaboration?

A:NeuroPace is working with NEST and the FDA to use real-world evidence for a meta-analysis submission for the focal pediatric population. While no specific submission timeline is provided, significant progress has been made in protocol agreement and data analysis.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on the timeline for pediatric NEST collaboration submission and the exact financial impact of Project CARE on recent growth.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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NeuroPace, Inc. (NPCE) Q4 2025 Earnings Call Transcript

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The earnings call summary shows positive revenue and gross margin guidance, strong clinical trial results, and AI tool launches. Despite some uncertainties in the Q&A, such as lack of specific milestones in partnerships and unclear responses, the raised guidance and strategic initiatives suggest a positive outlook. The positive sentiment is further supported by optimistic growth expectations and strategic focus on RNS expansion. Given these factors, the stock price is likely to experience a positive movement in the short term.

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The earnings call highlights strong financial performance with a 24% revenue increase, positive RNS sales growth, and a strategic focus on high-margin products. Despite a net loss, improved cash flow and sufficient liquidity are positive indicators. The Q&A section reveals confidence in growth targets, strong clinical data, and potential partnerships, boosting sentiment. However, a modest step-down in growth guidance and uncertainties around therapeutic partnerships slightly temper optimism. Overall, the positive aspects outweigh the concerns, suggesting a positive stock price reaction.

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