NeuroPace (NPCE) Q4 2025 Earnings Call Transcript

Motley Fool Transcribing, The Motley FoolTue, March 3, 2026 at 11:09 PM UTC

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Date

Tuesday, March 3, 2026 at 4:30 p.m. ET

Call participants -

Chief Executive Officer — Joel Becker

Chief Financial Officer — Patrick Williams

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Takeaways -

Total revenue -- $26.6 million, representing 24% year-over-year growth, mainly from increased RNS system sales.

RNS system revenue -- $22.4 million, up 26% year over year, with continued adoption in level four centers and contribution from expanded community access.

Full-year revenue -- $100.0 million, marking 25% growth driven by higher RNS system sales.

Gross margin -- 77.4% for the quarter, up 200 basis points from the prior year, with RNS gross margin at 80.5%.

Operating expenses -- $22.3 million, a 13% increase, remaining below the 24% growth in revenue and indicating operating leverage.

Adjusted EBITDA -- Positive $900,000, a $1.9 million improvement year over year and the second consecutive positive quarter.

Cash and investments -- $61.1 million at quarter end, increasing by $1.1 million due to positive operating cash flow and free cash flow generation.

Long-term borrowings -- $58.9 million as of December 31, 2025.

Dixie Medical revenue -- $3.0 million, down 4% compared to the prior year, with commercial partnership concluded December 31, 2025.

Full-year gross margin -- 77.2%, improved from 72.9% one year ago, primarily due to higher-margin RNS revenue and manufacturing efficiency.

Net loss -- $2.7 million for the quarter, compared to $5.3 million one year prior; operating loss decreased from $3.7 million to $1.8 million.

PMA supplement submitted -- Nautilus trial results submitted to FDA for expanded RNS indication in idiopathic generalized epilepsy (IGE); 77% reduction in median seizure rates, favorable safety profile cited.

2026 revenue guidance -- $98 million to $100 million, assuming 20%-22% RNS growth in the core adult focal epilepsy indication, excluding IGE, service revenue, or Dixie Medical contributions.

Non-GAAP gross margin (projected 2026) -- 81.5%-82.5% on a continuing operations basis as RNS revenue mix increases.

Non-GAAP operating expense (projected 2026) -- $90 million to $92 million, excluding approximately $10 million in stock-based compensation.

SeizureID launch timeline -- Cloud-based, AI-enabled tool expected to be approved and launched in 2026 to support workflow automation and clinical efficiency.

RNS remote care -- Enables remote event detection and therapy adjustment, designed to reduce patient travel for programming and increase physician capacity.

Clinical development -- Active engagement with the FDA for IGE indication, with Breakthrough Device designation supporting the submission and ongoing dialogue.

Pediatric indication expansion -- Ongoing NEST collaboration to develop and submit meta-analysis data for pediatric focal epilepsy; timing not yet specified.

Nurse navigator team -- Investment in nurse navigators has doubled to improve patient flow through the implant pipeline and manage increasing procedural volumes.

Summary

NeuroPace (NASDAQ:NPCE) delivered significant revenue and margin growth, driven by core RNS system adoption in level four centers and improving operational discipline. Major commercial investments, particularly in nurse navigator resources and direct-to-consumer marketing, are intended to position the company for further scaling and procedural throughput. Management reported progress on regulatory expansion, notably with PMA supplement acceptance for the idiopathic generalized epilepsy (IGE) indication, and a strong clinical outcome—77% median seizure reduction—supporting the filing. Introduction of new AI-enabled software tools, including SeizureID, is anticipated to leverage more than 24 million patient iEEG datasets and enhance clinician efficiency, with cloud deployment planned for 2026. The company is transitioning reporting to focus on core RNS operations, as the Dixie Medical partnership has ended, and plans ongoing disciplined investment in R&D focused on long-term platform advancement.

The adoption opportunity in IGE is supported by a population segment lacking device-based alternatives, with management stating, "this is a meaningful opportunity for us" after the anticipated reimbursement extension and onboarding efforts.

Pricing increases for RNS have historically remained within "mid-single-digit, low- to mid-single-digit" percentage range with no "outsized" impact in the most recent quarter, according to Joel Becker.

The SeizureID tool is embedded as a software service accessible to RNS system users at no additional subscription fee, aiming to reduce provider workload and enable clinics to manage more patients efficiently.

The nurse navigator team investment has doubled, with the group focused on helping patients through the referral, diagnostic, and evaluation processes to improve pipeline flow and scheduling efficiency. The team works closely with field representatives and allied health personnel in different centers to facilitate patient movement through the pipeline.

The company will exclude Dixie Medical from revenue and segment reporting beginning fiscal year 2026, and service revenue will only be included in guidance if it becomes "meaningful and predictable."

Pediatric indication expansion is advancing through real-world data meta-analysis in collaboration with the FDA and NEST, though Joel Becker stated he is "not calling a specific submission time" at this stage.

Industry glossary -

RNS system: NeuroPace's brain-responsive neuromodulation device for treatment of refractory focal epilepsy, delivering targeted electrical stimulation in response to detected abnormal brain activity.

PMA supplement: A regulatory filing seeking U.S. Food and Drug Administration approval to expand a medical device's approved indications or uses.

iEEG: Intracranial electroencephalography, involving the recording of electrical activity directly from the brain using implanted electrodes.

Level four centers: Comprehensive epilepsy centers classified by the NAEC as offering the highest level of diagnostic and treatment services, including advanced surgical options.

Dixie Medical: NeuroPace's former commercial partner for certain distributed products, with the partnership concluded as of December 31, 2025.

NEST: National Evaluation System for health Technology, an FDA-facilitated organization supporting the generation and analysis of real-world evidence for medical device regulatory submissions.

SeizureID: NeuroPace's proprietary, AI-enabled software designed to rapidly identify seizure activity within RNS patient data and streamline clinician workflow.

Adjusted EBITDA: A non-GAAP profitability measure defined by NeuroPace as earnings before interest, taxes, depreciation, amortization, and stock-based compensation, primarily used to assess current-period cash generation.

Full Conference Call Transcript

Joel Becker, NeuroPace, Inc. Chief Executive Officer, who will summarize our recent performance and strategic progress, followed by a detailed financial review and outlook from Patrick Williams, our Chief Financial Officer. Following our prepared remarks, we will open the call for questions. Before we begin, I would like to remind you that certain statements made on today's call may constitute forward-looking statements within the meaning of federal securities laws. These statements include, among others, comments regarding our financial outlook for 2026 and the first quarter of 2026, our commercial strategy, clinical and product development initiatives, regulatory matters including our PMA supplement, and our expectations regarding operating performance and profitability.

Forward-looking statements are based on management's current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. Some of these risks and uncertainties can be found in today's press release and in our filings with the Securities and Exchange Commission, including our most recent Form 10-K and Form 10-Q. We undertake no obligation to update or revise any forward-looking statements, except as required by law. In addition, we will discuss certain non-GAAP financial measures on today's call, including adjusted EBITDA. Reconciliations of non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release, which is available on the Investor Relations section of our website.

With that, I will now turn the call over to NeuroPace, Inc. Chief Executive Officer, Joel Becker. Joel.

Joel Becker: Thanks, Scott, and good afternoon, everyone. I will start with an overview of our fourth quarter results and how the team is executing against our strategy. I will then provide updates on our key clinical and product development initiatives and close with a brief recap of why 2025 was such an important execution year and how it sets us up for what we believe could be a transformational 2026. After that, Patrick will walk through the financials and our outlook before we open the line for Q&A. The fourth quarter capped off a strong year for NeuroPace, Inc. We delivered strong quarterly revenue of $26.6 million, representing 24% year-over-year growth.

This performance was primarily driven by strength in our core business, with RNS system revenue of $22.4 million, up 26% year-over-year. These results reflect the execution of the initial parts of our strategy: deepening adoption and utilization within our current adult focal epilepsy indication and customer base while continuing to expand access to RNS therapy through community pathways and preparing for future indication expansion. We again reached new highs in prescribers, accounts, and in our patient pipeline—clear reflections of broad-based momentum across the business. Following RNS growth of more than 30% in the third quarter, our 26% growth in the fourth quarter reflects sustained broad-based momentum and continued commercial execution. Taken together, RNS growth in 2025 was 29%.

The majority of our growth continues to come from level four centers, driven by increased adoption and utilization. At the same time, our community access efforts continue to contribute and scale as we expand referral pathways and site engagement. Stepping back, the message is consistent with what we said last quarter. Our results reflect the compounding effects of the recognition of the differentiated capabilities of the RNS system converging with ongoing best-in-class clinical data development, new tools for ease of use, improved commercial execution, and better referral management, which together are driving higher procedural volumes and expanding the addressable patient funnel.

We remain confident in our long-term growth trajectory of growing a minimum of 20% in our core RNS business with our current adult focal epilepsy indication. Financial discipline and operating leverage remained important highlights again this quarter. Gross margin was greater than 77%, up roughly 200 basis points year-over-year, driven by mix and manufacturing efficiencies, with RNS gross margin again greater than 80%. We also delivered our second consecutive quarter of positive adjusted EBITDA along with positive cash generation in the fourth quarter. These are important proof points that our operating model is scaling in a disciplined manner and that we are making meaningful progress towards sustainable profitability and cash flow breakeven.

As we mentioned in our pre-announcement in early January, we are reiterating our full year 2026 revenue guidance of $98 million to $100 million. This outlook assumes underlying core RNS growth of 20% to 22% within our current adult focal epilepsy indication and excludes any contribution from an idiopathic generalized epilepsy regulatory approval, service revenue, or Dixie Medical. Patrick will walk through our guidance and more, including the investments we plan to make in 2026. Strategically, we are continuing to invest in the commercial organization, including targeted sales representative additions, updates to our incentive structure, and additional nurse navigator resources dedicated to helping patients navigate the funnel from identification to evaluation to implant.

We believe these investments will pay dividends as they mature and become productive. Let me now turn to our clinical development initiatives, starting with Nautilus and our pursuit of an expanded indication in idiopathic generalized epilepsy, or IGE. During the quarter, we submitted our PMA supplement to the FDA seeking an expanded indication for the RNS system in IGE. The submission was supported by clinically meaningful and statistically significant 18-month results from Nautilus, including a robust 77% reduction in median seizure rates and a favorable safety profile in a highly refractory patient population.

The data presented at the American Epilepsy Society meeting in December reinforced what physicians have increasingly come to recognize about RNS: it is a safe, durable, and clinically impactful therapy for drug-resistant epilepsy supported by rigorous evidence in a patient population that has long lacked meaningful treatment options. The PMA supplement was submitted on December 15, and the FDA accepted the submission, initiating the 180-day review clock. Our dialogue with the agency remains productive, and we continue to prepare for a mid-cycle meeting. As a reminder, we have a Breakthrough Device designation, which has supported a consistent and collaborative engagement process, enabling ongoing dialogue as the review progresses.

Based on our interactions to date, we believe the process remains on track. To be clear, our 2026 outlook reflects the strength of the core business and does not include any contribution from IGE. If approved on our current timeline, we would incorporate that into guidance as we gain further visibility around specific potential approval timing. Now turning to product development. Our focus is on continuing to advance the ease of use, efficiency, and effectiveness of the RNS system—building a scalable, data-driven neuromodulation platform.

As part of our product pipeline, we are advancing a suite of NeuroPace AI tools designed to enhance physician workflow, improve patient outcomes, and unlock the full value of the now more than 24 million intracranial EEG recordings. These initiatives span workflow automation, personalized treatment optimization, remote programming capabilities, and long-term platform evolution. The first example of this is SeizureID. SeizureID is an AI-enabled tool designed to analyze a patient's iEEG records, rapidly identify seizures and seizure trends, and provide clinicians with the most clinically relevant data upon which to focus. This is a highly desired capability and addresses a real workflow challenge.

Clinicians can, at times, spend meaningful time reviewing data for RNS patients, and our goal is to reduce the time required while improving the ability to act on insights. Importantly, the SeizureID submission is paired with moving our clinician platform to the cloud, which improves scalability and supports faster deployment of software and data products over time. We expect SeizureID approval in 2026. Second, we are advancing RNS Remote Care. This capability enables physicians to remotely detect events and adjust therapy settings during telehealth visits, eliminating the need for patients to travel to the clinic for programming.

We believe Remote Care meaningfully improves access, particularly for patients who cannot routinely travel to comprehensive epilepsy centers, and increases physician capacity by allowing clinicians to manage more patients more efficiently. Third, we are also advancing the development of a foundation model leveraging our proprietary intracranial EEG dataset and clinical experience of now over 8,000 patient implants across 33,000 patient-years. We believe this is a key strategic moat, and we also recognize that we are stewards of this data, with the responsibility to translate it into meaningful improvements in care.

The goal of this work is a multimodal model that integrates multiple data inputs, including iEEG patterns and other clinically relevant signals, to help identify optimal treatment settings and improve seizure control, with a focus on increasing median seizure reduction rates, increasing the rate of seizure freedom, and expanding the proportion of patients who achieve meaningful clinical benefit. We believe that there are meaningful opportunities to advance the current best-in-class outcomes, and this work also lays a foundation for a future customer-facing adaptive treatment tool that can help clinicians more efficiently deliver personalized neuromodulation at scale. Finally, automated initial detection and therapy programming and our next-generation platform remain in development and progressing according to plans.

We remain bullish on the R&D pipeline, and we believe we are building a product roadmap that expands the reach and impact of personalized, closed-loop neuromodulation. Let me close with a broader reflection on 2025. 2025 was a tremendous year for NeuroPace. We delivered 25% revenue growth to $100 million, improved gross margin to over 77%, with RNS gross margin sustained above 80%, and made significant progress toward cash flow breakeven. We also made significant progress on all three of our development levers: market development, clinical development, and product development. We strengthened the leadership team and increased organizational execution muscle.

We sharpened our strategic focus on our core RNS business and achieved multiple favorable reimbursement updates that improved the economic profile for hospitals and physicians. Additionally, we advanced key clinical programs, including—2025 was a strong year of execution that sets up 2026 to be a transformational year for NeuroPace, with ongoing momentum in the market from which to build top-line growth, the launch of SeizureID designed to improve efficiency and ease of use, the potential for the first-of-its-kind indication expansion into the IGE population for the RNS system, and the planned submission of remote patient care enabling remote patient programming. With that, I will turn it over to Patrick for a review of the financials and outlook. Patrick?

Patrick Williams: Thank you, Joel. I will review our fourth quarter and full year 2025 performance in more detail and then provide additional context around our full year 2026 guidance, which is consistent with our preannouncement in early January. We will also be introducing a non-GAAP profitability metric of adjusted EBITDA, which we define as earnings before interest, taxes, depreciation, amortization, and stock-based compensation. We believe this metric can serve as a proxy for current-period cash generation as we move toward cash flow breakeven, and I have provided additional reference tables for both historical and go-forward reconciliations in today's press release.

Please note that we have very little depreciation and no amortization, so essentially stock-based compensation makes up nearly all of the adjusted portion of our adjusted EBITDA. Revenue in the fourth quarter of 2025 grew 24% to $26.6 million compared to $21.5 million in the prior-year quarter. Growth was primarily driven by increased sales of the RNS system, which grew 26% to $20.4 million. Service revenue tied to our data collaborations in the quarter totaled approximately $890,000. Revenue from Dixie Medical was approximately $3.0 million, representing a decline of 4% compared to 2024, ahead of the previously issued guidance as the team worked to sell existing inventory prior to the ending of our commercial partnership, which concluded on 12/31/2025.

As a reminder, the distribution agreement contractually allowed NeuroPace to sell back any remaining inventory at prior paid cost back to Dixie, which already has largely been completed in 2026. Gross margin for the fourth quarter was 77.4% compared with 75.4% in 2024 and 77.4% in 2025. The year-over-year improvement was primarily driven by increased revenue contribution from higher-margin RNS revenue, benefit from improved manufacturing efficiency, and increasing RNS ASP as a result of strong pricing conversion. RNS gross margin in the quarter was 80.5% compared with 80.1% in 2024.

Total operating expenses in the fourth quarter were $22.3 million compared with $19.8 million in the prior-year quarter and came in better than expectations in both general and administrative and sales and marketing, while research and development expense was in line with expectations. Operating expense growth of 13% in the quarter remained meaningfully below our revenue growth of 24%, again demonstrating underlying operating leverage as we scale. Before moving to the components of operating expense and down the rest of the income statement, I wanted to note that stock-based compensation, depreciation, and amortization are included in our GAAP operating expenses for the fourth quarter and full year 2025.

Beginning in Q1 2026, we will provide operating expense line items on a non-GAAP or adjusted basis excluding these expenses, which I will cover in more detail when I discuss guidance. In the fourth quarter, sales and marketing expense was $10.9 million compared with $10.0 million in 2024. The year-over-year increase was largely due to personnel-related expenses associated with ongoing scaling of commercial activities, investment in direct-to-consumer marketing, and other sales-related expenses. Research and development expense in the fourth quarter was $7.0 million compared with $6.1 million in 2024. The year-over-year increase was primarily driven by personnel-related expenses associated with the development of next-generation platform, AI-enabled tools, and ongoing clinical trials.

General and administrative expense in the fourth quarter was $4.4 million compared with $3.8 million in 2024. This increase was primarily due to an increase in personnel-related expenses. Loss from operations in the fourth quarter was $1.8 million compared with a loss from operations of $3.7 million in the prior-year quarter. Net loss was $2.7 million for the fourth quarter compared with net loss of $5.3 million in the prior-year quarter. Adjusted EBITDA was a positive $900,000 in the fourth quarter, a $1.9 million improvement compared to the prior-year quarter and our second consecutive quarter of positive adjusted EBITDA.

Notably, we ended the quarter with cash, cash equivalents, and short-term investments of $61.1 million, a $1.1 million increase compared with $60.0 million at the end of the prior quarter. This was driven by positive operating cash flow of approximately $500,000, and we generated positive free cash flow of approximately $400,000, which demonstrates our disciplined financial approach of investing for growth and the underlying cash generation of our business model. Long-term borrowings totaled $58.9 million as of 12/31/2025. For the full year, total revenue grew 25% to $100.0 million, driven primarily by increased RNS system sales, which grew 25% for the full year.

Full-year gross margin was 77.2% compared with 72.9% in 2024, primarily due to increasing contribution from higher-margin RNS revenue, improved manufacturing efficiency, and favorable pricing. RNS gross margin was 81.9% for the full year, compared to 78.4% in 2024. Total operating expenses for the full year were $93.6 million compared with $80.8 million in 2024, representing growth of 16%. Excluding one-time items incurred in the second quarter related to executive transition, total operating expense growth for 2025 represented approximately 13% year-over-year on a normalized basis, consistent with our approach of showing leverage compared to our sales growth through disciplined expense management. Stock-based compensation for the year included in operating expenses was approximately $10.0 million.

Adjusted EBITDA for the full year was a loss of $5.0 million, a $6.2 million improvement compared to the prior year. As we disclosed, we expect to begin reporting our Dixie-related financial results as discontinued operations beginning in 2026. On a continuing operations basis, our 2026 reporting and comparable periods presented will exclude the impact of Dixie. Again, today's press release has additional tables which break out revenue, cost of goods, and operating expenses for Dixie, and should facilitate updating financial models on a historical basis as we move to continuing operations basis starting in 2026. I would encourage everyone to review tables one and two in today's press release.

Table one provides the appropriate continuing operations baseline for 2025, and table two represents our 2026 outlook on a comparable basis. Together, these tables provide the clearest framework for year-over-year analysis. Turning to our outlook for 2026 on a continuing operations basis, as Joel said, we are reiterating full year 2026 revenue guidance of $98 million to $100 million, representing underlying RNS growth of 20% to 22% compared to full year 2025 and excludes any contribution from Dixie. Regarding service, we may generate modest service revenue throughout 2026; however, it is not included in our current guidance. If that revenue becomes more meaningful and predictable, we will begin incorporating it into our outlook starting with our first quarter earnings call.

For the first quarter of 2026, we still expect revenue to be in the range of $21 million to $22 million. Consistent with historical patterns, growth rates in the first half tend to moderate relative to the acceleration we see exiting the prior year. This reflects normal timing of procedural volumes and activity levels and provides a prudent starting point for the year as we continue to ramp new commercial investments and build momentum throughout the year. We provided first quarter revenue guidance to establish a clear starting point for 2026 as we transition to a continuing operations presentation. We do not anticipate providing quarterly revenue guidance on an ongoing basis.

Turning to operating expense guidance for 2026, we will be presenting these figures on a non-GAAP or adjusted basis excluding stock-based compensation, depreciation, and amortization—initial guidance as well as throughout 2026 reporting. This change is intended to provide greater transparency into the underlying operating performance of the business, enhance visibility of operating leverage, and improve comparability across periods. We expect non-GAAP or adjusted gross margin to be between 81.5% and 82.5% on a continuing operations basis, reflecting higher-margin RNS revenue and driven by continued manufacturing efficiency. This compares to our previously issued full year gross margin guidance of 81% to 82%, which included approximately $500,000 of stock-based compensation.

We expect full year non-GAAP operating expense to be in the range of $90 million to $92 million, excluding approximately $10 million in stock-based compensation. For the full year 2026, we expect non-GAAP or adjusted sales and marketing expense to total between $46 million and $48 million, which excludes approximately $3 million of stock-based compensation. Sales and marketing expense growth in 2026 reflects a deliberate front-loading of commercial investment. We expect productivity and leverage from these investments to increase meaningfully as we move through 2026 and into 2027. We expect non-GAAP or adjusted research and development expense to total approximately $27 million, which excludes approximately $3 million in stock-based compensation.

R&D expense growth in 2026 reflects continued investment in our next-generation platform and the development of the NeuroPace AI suite of tools designed to enhance physician workflow and drive adoption. With major clinical milestones executed in 2025, we expect the mix of R&D spend to shift away from large-scale trial execution and increasingly toward product development and platform innovation. We remain focused on disciplined allocation of R&D capital towards programs that strengthen the platform, enhance differentiation, and support long-term growth. We expect non-GAAP or adjusted general and administrative expense to total approximately $17 million, which excludes approximately $4 million in stock-based compensation.

G&A expense in 2026 primarily reflects the infrastructure required to support a growing commercial organization and corporate systems necessary to operate at scale. We remain disciplined in managing overhead as we drive operating leverage across the organization. We expect full year adjusted EBITDA to be approximately a loss in the range of $9 million to $10 million. And with the removal of Dixie revenue and normal seasonality, we expect adjusted EBITDA will likely dip in the first half before improving again in the second half, consistent with historical patterns. With that, I will turn it back to Joel.

Joel Becker: Thanks, Patrick. Let me briefly reconnect our results to the strategy. Our path to becoming the standard of care rests on three pillars: market development of our core RNS business, clinical development to expand RNS epilepsy indications, and product development to advance our R&D roadmap including the NeuroPace AI platform. Significant progress has been and continues to be made on all three pillars, and we are beginning to see the compounding effect of that progress. As you can hear in today's results and outlook, we have been executing and have a lot of opportunity in front of us. The core business is performing at a high level, the strategy is working, and we are executing with increasing consistency and discipline.

What makes this moment especially exciting is that the opportunity in front of NeuroPace is getting bigger on multiple fronts at the same time. In the near term, we are still early in penetrating the adult focal epilepsy market, and we continue to see meaningful runway to drive adoption and utilization in level four centers and expand access in the community. We are investing deliberately to scale our commercial engine and to optimize how patients move through the funnel from identification to evaluation to implant, translating strong product demand into durable procedural growth. On the clinical front, we remain encouraged by the opportunity to bring RNS to the IGE population, which remains highly underserved.

We continue to engage constructively with the FDA, and we will be thoughtful and disciplined as we prepare for what could be a meaningful new chapter in indication expansion. We have a unique installed base of customers, a unique dataset, and we are investing to turn that advantage into practical tools designed to make RNS therapy even more efficient, effective, and easy to use. SeizureID is a near-term example of how we can reduce physician burden and improve utilization.

From there, our pipeline development projects are focused on activating our unique data and associated AI capabilities to create a step change in how personalized neuromodulation is delivered adaptively and further enabling RNS' potential to improve outcomes across the responder spectrum and expand the impact of therapy. Looking ahead, we believe we have a durable growth engine in the core business. We are building leverage in the model as we scale, and we are investing in product and clinical programs that we believe can expand the reach of RNS and extend NeuroPace's leadership in personalized, closed-loop neuromodulation. We are proud of what the team delivered in 2025, and we are energized by what is possible in 2026 and beyond.

Operator, we are now ready to take questions. We will now open for questions.

Operator: I would like to remind everyone, in order to ask a question, please press star then the number one on your telephone keypad. We request that you limit yourself to one question and one follow-up. You are welcome to requeue with additional questions. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Frank Takkinen with Lake Street Capital Markets. Your line is open.

Frank Takkinen: Great. Thank you for taking the questions, and congrats again on a really solid finish to the year. I was hoping I could start with one on the generalized opportunity. I know we have talked about it a bit, but as we get closer and closer, just looking for additional detail. How should we think about how quickly you can translate from an approval into collecting revenue? And, really, what I am getting at is what is left to be done once you do have that approval in hand before you can start shipping product?

And then as a bigger picture question, do you think the generalized opportunity could eventually be a larger revenue generator for NeuroPace than the focal opportunity?

Joel Becker: Those are great questions, Frank. Thank you. With regard to what is left to be done pending the potential approval, the first things that need to be done are to really extend coverage in the private payer community. We have, as you know, very well-established coverage for the RNS system today for the adult focal indications, and the generalized indication is expected to follow much in the same lines, but we do need to get that coverage extended. As you might expect, we are not waiting for approval to make progress on that. We already have internal processes underway to prepare for and target the key payers to provide for that coverage extension, but that is really the key step.

And then, of course, we have the initial introduction, training, and scaling activities that need to take place. In particular with referring physicians, our treating physicians are already quite familiar with generalized epilepsy, but a lot of what we see from the referral community and out in the community will take some time for us to bring the therapy and the information and the referral pathways to them. But we do see referral pathways are well established here. A lot of these generalized patients today do end up in level four centers. We have a well-understood technology and well-understood implant techniques, and so that teaching and training is already under our belt.

We have got a sales force that we are going to be leveraging into common call points, and so they already understand how to bring the technology out to folks, and so it is really a matter of extending that into the referral community and expanding the coverage for the new indications, and those are things that we will be looking to move into with some momentum here.

Patrick Williams: Yeah, and, Frank, maybe I will go one layer deeper on some of the details related to reimbursement, because I know there are a lot of people that are newer to our story. Number one, it is the exact same device that we will be implanting, and I think that is important for everyone to understand. It is the same calling point, and from a reimbursement standpoint, it will be the same DRG as well as CPT codes that will be used. And then, as Joel said, we will work on the private payers.

In terms of the grand scheme of things, Medicare and Medicaid probably make up 20% to 25% right now of our overall payer mix, and then the rest of it is the private payers, and that will take a little bit of time to get on board. And then you did ask a question, which I know that we were at your conference recently, and we have been talking about this for quite some time, but you know, we certainly believe that when we add this expanded indication that the proverbial one plus one might be greater than two at the end of the day. So obviously, we are excited about this. Just came from the national sales meeting.

A lot of momentum and excitement around IGE coming, and so we look forward to getting the approval and moving forward.

Joel Becker: To that end, the underlying etiology here is really the largest overall segment is the adult focal population, and the generalized population breaks out into about 60% total, about 40% generalized. The biggest of the generalized segments is the idiopathic generalized epilepsy segment, which is what Nautilus is focused on here, and it is about half of that generalized population. It is the IGE population, so a significant patient segment here that, importantly, does not have any other approved device indications today. One, two, has an abbreviated diagnostic pathway. They do not require the specific localization of the seizure site through phase two testing—it is a generalized seizure—and so they do not need that specific testing.

And we know there are patients out there who today do not feel like they have any other options. And so when we think about the potential for adoption dynamics, there will be things, as you point out, at the start that we need to work our way through that will take a little bit of time, but as we do so, we think the dynamics around the idiopathic generalized population—what we can bring to patients that they have nothing for today—and the timeline associated with being able to have patients go through the treatment and workup protocol can also be shorter than in the adult focal population today.

So we like the adoption dynamics associated with IGE, and there will be some upfront work for us to do, but we think as we work our way through that, this is a meaningful opportunity for us.

Frank Takkinen: Got it. That is great color. I appreciate that. And then maybe just as a quick follow-up for Patrick. I heard the comment about less EBITDA in first half and that ramping really through the back half. Any other finer points you can put on that to kind of get us in the right spot for Q1 adjusted EBITDA?

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Patrick Williams: No. I think we provided, obviously, retrospective or historical view because we have got a couple of moving parts. Definitely look at table one to update your models for 2025—continuing operations that we anticipate will happen starting in Q1—and then for 2026, you can refer to table two. We did not break that out quarterly.

There will be a little bit of front-end loading on some of the OpEx if I look at it from a first half to second half, you know, a little greater than 50% in the first half, which is why we are seeing adjusted EBITDA go more negative, we will call it, in the first half, and then it will pick up in the second half. But again, I think you see that we can demonstrate leverage here. We are making a deliberate decision to really lean into investments here, especially on our commercial programming, marketing, sales, headcount, etcetera.

And so probably the best I can do in terms of just direction, and that should get the models in check pretty well.

Frank Takkinen: Perfect. Helpful. Thanks again, guys.

Operator: Your next question comes from the line of Unknown Analyst with Leerink Partners. Your line is open.

Unknown Analyst: Hi, everyone. Thanks for taking our questions. Congrats on all the progress and the FDA accepting your IGE filing for review. To start, can you provide—could you add any additional color just on the magnitude of pricing impact on RNS growth in the fourth quarter? Is that similar to what you have seen historically, and how much of an impact are you expecting that to have on RNS growth for 2026?

Joel Becker: It is a great question. And I would point to, over the past several years, we have consistently taken mid-single-digit, low- to mid-single-digit pricing increases annually. And I think, with the gross margin profile of the RNS platform in particular now in the low 80%, that has really been a combination of that disciplined pricing as well as the volume of the increase in manufacturing. And so we are really pleased with the way we have with discipline been able to manage gross margin. And to your question specifically, in Q4, there was not anything outstanding there that is different than what we have seen over time with pricing.

And we really see the vast preponderance of the growth that we are experiencing associated with initial implants of the RNS system and primarily in our level four centers. So the pricing approach has been a good one. It has been a collaborative one with our customers and largely in line with their increases in reimbursement and costs as well. And so we have been in good lockstep with our customers in that regard and have been positive on gross margin along the volume increases that we have seen as the demand and access to RNS therapy has grown. But there was not anything specific or different in Q4 that contributed in an outsized fashion to the growth.

Unknown Analyst: Got it. Very helpful. And maybe just a follow-up. In terms of what you have seen from Project Care recently, can you help frame generally how much that is contributing in terms of prescribers or into some of the record numbers that you are seeing recently?

Joel Becker: It is a great question. And I think, again, what we are seeing is increasing numbers of prescribers and implanters and active centers, and that is coming from a combination of our level four center growth as well as then more and more growth in the referral community. The Care program is a part of the growth of what we are seeing in the referral community, but we are also investing further both in our DTC as well as then in our commercial organization expansion in more of an upstream referral focus that is not necessarily tied to Care implanting centers as well.

And so we really have, I think, three engines for growth here as we work to develop the market and prescribers in particular. One is the ongoing growth that we see in adoption and utilization in the level four centers. Two, it is the Care-specific program centers, where there will be either level three or community centers that both will do implants as well as refer, and then a broadening in the community for more prescribing and referring in what we will call programming centers. And so referral more broadly with Care and the referring physicians is a nice additive component to what we are also seeing as continued good growth in adoption and utilization within the level four centers.

So we are really getting it from multiple spots.

Unknown Analyst: Awesome. Thanks, Sean. See you next week.

Joel Becker: Thank you, Mike.

Operator: Your next question comes from the line of Priya Sakhteva with UBS. Your line is open.

Priya Sakhteva: Hi, guys. Congrats on a great quarter and strong end to the year. Maybe the first question that I have would be just if you could give us a state of the union on capacity dynamics across implanting centers. What do current backlog dynamics look like? I mean, a few of the checks that we have done suggest there could be a bottleneck from referring physician perspective, so we would love just to hear your thoughts on that and the market more broadly, and then one follow-up.

Joel Becker: Thank you, Priya. It is a really good question, and we pay close attention to that as well. And I think I have commented previously—I will stay in line with that—that generally, when it comes to neurosurgeon capacity, what our customers tell us is that they have capacity to handle increasing volume of device cases. And remember, for a functional neurosurgeon, the implantation of the RNS device is very well within their training and skill set, so they can execute these procedures as part of their daily work very well. What we will see on occasion is some centers that will be booking out further within their surgical timeline, but that is really the exception rather than the rule.

And I think the impression I would leave you with is there is plenty of capacity in the channel both for prescribers to refer, for epileptologists to then work patients up and take them into case conference, and then, generally, with regard to patients being able to move then into surgery. And one thing I would emphasize here is just that whole flow—that flow of patients is something that we are very much focused on here and are working together with our centers. And that is something that you will hear us refer to—nurse navigators. And our nurse navigator team is something that we are investing in meaningfully. In fact, we are doubling that group of people.

And what they do is work to help handhold patients through the referral process and the diagnostic process and the evaluation for surgery process that allows for efficient management and scheduling of everything that needs to happen. And so as you know, part of when you think about a pipeline and you think about constraints, part of it is balancing demand and part of it is making sure things are flowing well through a pipeline.

And our nurse navigator team, working closely with our field representatives and the allied health personnel in the different centers, does a lot of that and is going to be doing even more of that here, as we have identified that as something that can help, we believe, meaningfully move patients through that pipeline.

Patrick Williams: And if I could piggyback on the nurse navigators, that is a really important concept. We are starting to talk about it more, and as Joel said, we are leaning into that one. In fact, some of these nurse navigators actually came from level four CECs where they helped navigate patients on that side. So that is really a key point of getting them through the channel.

And then that is why we also wanted to make sure that they were all onboard coming into it at the beginning of this year in anticipation of IGE coming as we move through the year, making sure that they are in place and we have got the ability to move patients as quickly as possible.

Priya Sakhteva: Okay. Great. That was super helpful. Would just love to touch on the SeizureID opportunity and kind of the logistics behind it. Is it a platform that physicians will have to pay a subscription for? Is it something automatically implemented into their in-house softwares? And what, if anything, from a clinic efficiency perspective is baked into the guidance today? Thanks so much.

Joel Becker: That is a great question, Priya. And the SeizureID capability—the ability to access that—is something that will come along with people's use and implantation of the RNS system. It is the software capability that will be part of what we provide to customers. And our interest here is really with regard to efficiency and ease of use that allows clinicians to manage the RNS patients that they have in their practice even more effectively and as time efficiently as possible.

So what SeizureID does is it identifies the highly likely seizure activity and then presents that efficiently so that clinicians do not have to spend as much time reviewing all of the data that is available and can spend more time focused on the data that is most likely to result in an action.

And so our interest here is in being able to show people how they can have more and more patients as RNS patients as part of their practices, because they can get a significant amount of data, but they only need to review and interact with the most important parts of that data and the data that is going to result in opportunities for them to treat patients better. And so our interest is to make that available by way of then encouraging more and more patients to be able to be treated with RNS systems and RNS implantation. Does that answer your question, Priya?

Priya Sakhteva: Yes. Thanks so much.

Joel Becker: Great.

Patrick Williams: Thank you.

Operator: Your next question comes from the line of Yi Chen with H. Stephen Wright. Your line is open.

Yi Chen: Hi. This is Eduardo on for Yi. I was hoping if I could maybe follow up basically on the IGE. I am curious if there are any significant biological differences in the iEEG readings compared to focal epilepsy that could make continuous improvements more challenging. I know that something really promising about the technology is how you see that year over year physicians continuously improve, recognizing, and hopefully these software improvements will improve that. I am curious if there is a meaningful difference in the abilities—the capabilities—to improve for IGE versus focal.

Joel Becker: It is a great question. And, of course, the underlying electrophysiology is different. So with a focal patient, you have a focal region of “bad actor x” that then either causes seizures to propagate or multiple sites that cause seizures to propagate from that original nidus of seizure activity. With regard to generalized seizures, they are, such as the name indicates, seizures that happen everywhere all at once and are rapidly propagating all over the brain. And so the ability to recognize those seizures and then tailor both implantation techniques as well as detection parameters and therapy parameters are different.

What we have found—and this is what was important in Nautilus to learn—is that we can, in fact, implant our electrodes in the network, the thalamus, the specific anatomic locations in the thalamus, we can, in fact, detect the seizures, and we can, in fact, safely deliver the therapy. And so, sometimes people will immediately go to the efficacy results associated with the new indication—that is appropriate, we are also very interested in those things—but one of the things that I think we have shown here with the safety and therapy profile is that you can safely and reproducibly treat idiopathic generalized epilepsy patients with the RNS system.

And then one of the other unique aspects of the system is our ability to individually tailor therapy. So we know that we can detect and record and analyze idiopathic generalized epilepsy seizures similar to the way that we do with focal patients, and then we have the ability to, again, update, adapt, and tailor both detection as well as therapy in these patients. So we expect we will learn about it, because our data only goes out as far as our data goes so far.

But what we have seen in the 12- and 18-month data—and what we have seen in the early 24-month data, we will see what more we learn, and, of course, we would plan to follow these patients longer term in a post-approval environment as well—is that we expect that both the tailoring of therapy over time for individualized patients will result in their individual improvement. When they see that improvement, the neuroplasticity and the reverse remodeling of seizure activity would occur similarly in patients' brains who have generalized seizure activity, and then the longer that they are in that state, the more and more they improve.

So, long way around towards saying we think the fundamental underlying parameters of the therapy and the technology apply to treating idiopathic patients and the improvements that we would expect to see, even though the underlying electrophysiology is different.

Patrick Williams: Yeah, I would encourage everyone to answer that question, if you want to see some data. On our website, we posted the latest investor relations deck, and slides 12, 13, and 14 get into some discrete details. And as Joel said, you will see there in our post-approval study for adult focal epilepsy the progress we have made in years one, two, and three, and we are showing a 77% median seizure reduction at 18 months with our Nautilus for IGE, and it is certainly well above the original adult and then pretty far above adult focal PAS.

So, again, look at slides 12, 13, and 14 and see the real-world data that is out there—real-world clinical data, sorry, that is out there.

Yi Chen: Got it. That is really helpful. And then curious about any updates on the pediatrics NEST collaboration, if we should expect anything in 2026—activity in that space.

Joel Becker: We have—thank you for that question, Eduardo. We are very interested in and focused on expansion of indications into the pediatric space as well. Now, you will remember that the Nautilus study does include pediatric indication age range as well, but what we are really focused on here then, when you talk about the NEST interaction, is the focal pediatric population. And in that population, the approach that we have taken is we are working with NEST—which is an FDA-adjacent organization—FDA, and then people who have generated real-world evidence for focal pediatric patients to use that real-world evidence to develop a dataset that can be submitted on a meta-analysis basis to the agency.

We have been doing a lot of work with FDA and NEST and investigators. That work does take some extra time, as you might imagine. When you are doing all of the protocol agreement and data analysis upfront in a retrospective analysis, it takes more time to get that organized, and then the actual analysis and review process can go more quickly on the back end versus in a prospective study—you start with the protocol, and then you have to actually go do the whole study. And so we are not calling a specific submission time here today, but what I would tell you is that there is a lot of activity going on there.

We are really pleased with the level of engagement. The agency has indicated an interest in working in real-world data scenarios, and we will keep you as that develops.

Yi Chen: Got it. Thanks so much, and congrats again on the quarter and the year.

Joel Becker: Thank you, Eduardo.

Operator: Again, if you would like to ask a question, please press star then the number one on your telephone keypad. There are no further questions. I will turn the call back over to Joel Becker, CEO, for closing remarks.

Joel Becker: Thank you all for your time and attention today, and thank you to the team here at NeuroPace. We are really pleased with the results in Q4 and in 2025. We are excited about 2026 and all that is to come in what has the potential to be a transformational year for NeuroPace.

Patrick Williams: Thank you very much.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

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