electroCore - Earnings Call - Q2 2025

Executive Summary

• Record revenue and a top-line beat: Q2 2025 net sales were $7.38M (+20% y/y, +9.8% q/q), above S&P Global consensus revenue of $7.24M; GAAP EPS was -$0.44 vs -$0.325 consensus, reflecting higher SG&A and a TAC-STIM bad debt charge. Revenue beat; EPS miss. (Consensus values from S&P Global)*
• Gross margin remained strong at 87% (vs 86% y/y; 85% in Q1), driven by VA channel growth and Truvaga, despite increased operating investments.
• Reiterated FY25 revenue guidance of ~$30.0M; raised net cash usage outlook for the remainder of 2025 to $3.9–$4.4M (from $3.8–$4.3M in Q1).
• Liquidity and investment to accelerate growth: closed a $7.2M net term debt facility with Avenue Capital; management increased the revenue level needed for cash breakeven to ~$11.5–$12.0M per quarter (from ~$9.5M), prioritizing long-term growth.
• Key catalysts: VA channel re-acceleration, Quell Fibromyalgia launch into VA, Truvaga scaling (Apple Health integration), and expanded commercial talent; risks include higher near-term OpEx, TAC‑STIM receivable risk, and ongoing IP litigation with an alleged copycat.

What Went Well and What Went Wrong

• What Went Well

  • VA returned to sequential growth; VA revenue rose from $4.72M in Q1 to $5.19M in Q2, underpinning the record quarter. “The VA hospital system continues to be our largest customer and…returned to above market growth in that channel.”
  • Strong gross margins sustained at 87% (vs 86% y/y; 85% in Q1), supporting operating leverage as top line scales.
  • Truvaga DTC momentum y/y with Apple Health integration and executive hire; Q2 Truvaga sales were $0.99M (+74% y/y), and the $500 Truvaga Plus SKU now accounts for ~80% of mix.

• What Went Wrong

  • EPS miss driven by elevated SG&A: SG&A rose to $9.44M (+$2.18M y/y), including $0.55M of TAC-STIM receivables bad debt; GAAP net loss widened to -$3.67M.
  • Truvaga sequential softness: despite +74% y/y, management called the sequential decline “frustrating,” citing media efficiency ratio dipping to ~2.0 vs higher levels late last year.
  • Increased breakeven target: management raised the revenue level needed to reach cash positivity to ~$11.5–$12.0M/quarter (from ~$9.5M) due to accelerated growth investments, delaying profitability.

Transcript

Speaker 2

Greetings and welcome to the ElectroCore second quarter 2025 earnings conference call. At this time, all participants have been placed in a listen-only mode. We'd ask you to please make sure that you mute yourself. A question and answer session will follow the formal presentation. As a reminder, this call is being recorded. It's now my pleasure to introduce you to your host, Daniel S. Goldberger, ElectroCore's Chief Executive Officer.

Speaker 3

Thank you all for participating in today's ElectroCore earnings call. Joining me today is Joshua S. Lev, our Chief Financial Officer, and our investor relations firm, FNKIR. Earlier today, ElectroCore published results for the second quarter ended June 30, 2025. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during the call that include forward-looking statements within the meaning of the Federal Securities Laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including without limitation any guidance, outlook, or future financial expectations or operational activities and performance, are based upon the company's current estimates and various assumptions.

These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list of the risks and uncertainties associated with the company's business, please see the company's filings with the Securities and Exchange Commission. ElectroCore disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information that is accurate only as of the live broadcast today, August 6, 2025. I want to take a moment and welcome James Theophilus to our Board of Directors as an Independent Director. Mr.

Theophilus is a very accomplished young man and a successful executive at Microsoft, including prior roles in the global healthcare and life sciences business for Microsoft, helping with the integration of Nuance and the launch of multiple healthcare-specific products for Microsoft. He now serves on the Azure Plus AI team, leading all go-to-market for finance at Microsoft for this product family. The Theophilus family has been an equity investor in ElectroCore since inception, almost 20 years ago, and I don't think they've sold any significant amount of their position in all that time. I look forward to working with Mr. Theophilus to build shareholder value at ElectroCore. Turning to our results, ElectroCore posted record revenue in the second quarter and continues to evolve from a single product into a broad-based bioelectronic technology company.

We now offer a growing suite of medical devices and wellness products that service both medical and consumer markets. The VA hospital system continues to be our largest customer, and as expected, we returned to above-market growth in that channel. We closed the acquisition of NeuroMetrix on May 1, and the integration has been completed ahead of schedule. We've added serious talent to our team, headlined by Kelly Benning as Senior Vice President of Truvega and James Theophilus as an Independent Director, along with other superstars in all functional areas of the company. For those who are new to the story, ElectroCore pioneered non-invasive vagus nerve stimulation. Today, the company offers a growing suite of non-invasive bioelectronic technologies that reduce chronic pain and improve quality of life for patients and wellness consumers in the U.S. and select international markets.

Our expanding portfolio is supported by a robust pipeline of indications and applications driven by clinicians, researchers, and wellness advocates. Science and data will always be our North Star. Our five-year CAGR is about 58%. In the second quarter of 2025, revenue reached a record $7.4 million, up 20% year over year and 10% sequentially. Gross margins remain strong at 87%, up slightly from 86% last year. We model gross margins in the mid-80s going forward. VA revenue grew 12% sequentially from $4.7 million in Q1 to $5.3 million in the second quarter of 2025. As of June 30, 2025, 188 VA facilities have purchased prescription GammaCore products, up from 175 a year ago. The VA Headache Centers of Excellence estimates approximately 600,000 patients are being treated for headache in the VA hospital system, including approximately 24,000 cluster headache patients.

We've now dispensed GammaCore devices to approximately 10,700 veterans, roughly 2% of the addressable headache market we see within the VA system. The total addressable market within the VA channel is even larger if we include headache in post-traumatic stress disorder patients or headache in mild traumatic brain injury patients. We believe there are as many as 550,000 fibromyalgia patients in the VA hospital system based on published incidence and prevalence data. Our recently acquired, wholly owned subsidiary NeuroMetrix has dispensed less than 500 qualified fibromyalgia stimulators since launch in 2024. We believe there's plenty of room to grow here as well. We focus on our success and opportunity in the VA channel while deferring investments in the larger commercial insurance channels. We intend to turn our attention to commercial market access later this year, and we're hopeful those efforts will bear fruit in the future.

Our direct-to-consumer general wellness brand, Truvega, posted $1 million in Q2 sales. That's 74% year-over-year growth, but a frustrating sequential decline. I'm confident that Truvega will return to sequential growth under Kelly's leadership and the initiatives we have in place. Our revenue return on advertising spend for the period was approximately $2.0, meaning for every $1 spent on media, we generated nearly $2 of revenue. Return rates across our e-commerce platforms are approximately 10% to 11%, consistent with prior periods. Truvega has now sold over 16,000 handsets, powering more than 1.1 million user sessions on our mobile app. We plan to accelerate marketing and promotional investments in our Truvega platform to drive growth in 2026 and beyond. We believe that a Truvega copycat from Eastern Europe has been infringing our patents and trademarks.

You may have seen some filings in federal court in the District of New Jersey about our escalating dispute. I'm sure you'll understand if we refrain from commenting beyond the public filings. As Kelly develops her strategic plan, we expect to add new use cases and target demographics for our NBNS products and launch additional health and wellness offerings, such as QUEL Relief for lower extremity pain. Based on the opportunities in front of us, we are now investing in people, marketing, and product to accelerate growth and drive scale in 2026 and 2027. This is a strategic decision to prioritize growth and long-term value creation, likely delaying company-wide profitability. Our U.S. prescription channel recorded revenue of $394,000 during the quarter ended June 30, 2025, down 17% year over year.

As expected, many cash-pay prescription customers have transitioned to the Truvega brand as awareness grows, and as of June 30, 2025, we've enrolled 182 Truvega Plus partners, including 49 GConscierge accounts who offer both product lines. Through the first half of 2025, these customers accounted for approximately $355,000 of Truvega sales, representing what would be a 14% year-over-year increase through the first six months of the period in that commercial space. We expect the transition to wellness offerings to continue in this channel as we look forward to adding new products such as QUEL Relief for fibromyalgia to these accounts as well. Revenue from outside the U.S. was $465,000 for the quarter, down 9% from the same period last year.

Most of our OUS revenue continues to be generated in the UK by prescription GammaCore sales funded by NHS, and we model flat revenue from this category for the time being. We entered into a term debt facility with Avenue Capital on August 4, 2025, which provided approximately $7.2 million of additional net cash at closing. A second tranche of $4.5 million may become available to the company as well. The term of the loan is 48 months, earning cash interest at 12.5% initially. The floating rate will be calculated as WSJ Prime plus 5% with that 12.5% floor. Avenue Capital has been granted 106,351 shares of ECORE Common as a commitment fee, and up to $2.5 million of the principal amount is convertible at $8.46 per share. Additional disclosure is available in our 10-Q.

This facility gives us increased liquidity as we invest in growth, and I believe we are pursuing our growth strategy from a position of strength. Josh will discuss operating expense, cash trajectory, and guidance in more detail later in the call. However, our cash balance as of June 30, 2025, was $7.4 million. That means our cash balance decreased by only $613,000 in the three months ended June 30, 2025, and a total of approximately $5 million in the first half of the year. We expect to consume about $4 million of cash in the second half of the year to execute our plan, including these accelerated investments, which would put our pro forma cash balance at December 31, 2025, at approximately $10.5 million, including the first tranche from the Avenue Capital loan.

As I mentioned above, we've decided to accelerate certain investments in the second half of the year to set the stage for significant revenue growth in 2026 and 2027. These investments will be directed towards Truvega initiatives and future prescription indications. Our board and management believe the time is right to invest in growth to create long-term value. As a result, our operating expenses will increase, and the revenue we require to be cash positive will increase accordingly. On our May 25 conference call, I said that we needed $9.5 million of quarterly revenue to be cash positive. Based on our more aggressive growth strategy, we'll now need $11.5 million to $12 million of quarterly revenue to cover our increased operating expense plan and demonstrate positive cash from operations.

That means 55% to 62% more than the $7.5 million of revenue we just posted, and I expect that we'll be able to hit those metrics later in 2026. It's important to remember that the contribution margin of our business model is still roughly 55% or more. Once we generate enough gross profit to cover our operating expenses, operating margins could increase dramatically. Now, I'll turn the call over to Josh for a review of our financials and select guidance. Josh? Thank you, Dan. Net sales for the second quarter of 2025 were $7.4 million, an increase of 20% as compared to $6.1 million for the second quarter of 2024. The increase of $1.2 million is due to an increase in net sales across our prescription and general wellness products. Gross profit for the second quarter was $6.4 million as compared to $5.3 million for the second quarter last year.

Gross margin was 87% compared to 86% for the second quarter last year. Total operating expenses in the second quarter were approximately $9.9 million compared to $7.9 million in the second quarter last year. Research and development expense in the second quarter was $511,000 as compared to $635,000 in the second quarter last year. This decrease was primarily due to reduced development costs. For the remainder of 2025, we expect our research and development expense to be higher than the comparable periods in 2024. Selling, general, and administrative expense in the second quarter was $9.4 million as compared to $7.3 million in the second quarter of 2024.

This increase was primarily due to the greater investment in selling and marketing costs, consistent with our increase in sales, $548,000 of bad debt expense associated with the taxed and receivable, increased expenses associated with professional fees, and increased rent expense associated with the Rockaway lease expansion. For the remainder of 2025, we plan on continuing to make targeted investments in product, people, sales, and marketing to support our commercial efforts. GAAP net loss was $3.7 million, or a loss of $0.44 per share, as compared to GAAP net loss of $2.7 million, or a net loss of $0.38 per share in the second quarter of 2024. The increase in GAAP net loss is primarily attributed to an increase in selling, general, and administrative expense, partially offset by an increase in gross profit.

Adjusted EBITDA net loss was $2.4 million, as compared to adjusted EBITDA net loss of $1.9 million in the second quarter of 2024. A reconciliation of GAAP net loss to non-GAAP adjusted EBITDA net loss has been provided in the financial statement tables included in today's press release. Cash, cash equivalents, restricted cash, and marketable securities at June 30, 2025, totaled approximately $7.4 million, as compared to approximately $12.2 million as of December 31, 2024. Net cash used in operating activities for the second quarter of 2025 was $623,000, as compared to $4.4 million in the first quarter of 2025. Total cash used in operating activities in the first half of the year was approximately $5 million. Change in net cash in the second quarter of 2025 was $613,000 from the first quarter of 2025.

This significant reduction in net cash used is primarily due to changes in working capital, as well as an increase of $526,000 of cash from the NeuroMetrix balance sheet. In August 2025, the company raised net proceeds of approximately $7.2 million through a term debt facility with Avenue Capital. Pro forma cash as of June 30, 2025, including proceeds of the term debt, would have been $14.6 million. We are reiterating our full-year revenue outlook. For the full year of 2025, we expect total revenue to be approximately $30 million, and net cash used for the next two quarters to be between $3.9 million and $4.4 million. Pro forma cash balance at December 31, 2025, would have been approximately $10.5 million, including the first tranche from the Avenue Capital loan. I'll turn the call back to Dan.

Speaker 2

Thank you, Josh. I believe we have a tremendous amount of momentum going moving into the second half of 2025. Revenue in the VA has returned to sequential growth, and the integration of NeuroMetrix has been completed ahead of schedule. We're moving into the third quarter of 2025 with new bioelectronic products and technologies that we believe fit extremely well into our established channels and are increasing our efforts and investment to become a significant player in the health and wellness space. Although we expect profitability to be delayed as we increase spending on Truvega, our new term debt facility can provide us up to approximately $12 million of additional cash to execute on our plan. Demand for GammaCore in the VA channel continues to grow based on clinical performance and our increased presence in the field.

Our VA business returned to growth in the second quarter, and we're launching prescription QUEL Relief for fibromyalgia through our field sales organization. We rely on our field sales organization to drive revenue growth in the VA hospital and other prescription and B2B channels. We completed a restructuring of our field sales function earlier this year, and we currently have approximately 80 straight commission sales agents, including sub reps, managed by 12 Territory Business Managers who are salaried employees. Five of our 12 Territory Business Managers are relatively new, so we expect the size of our 1099 team to continue growing in the second half of 2025. Truvega Plus has been favorably received by the market since its April 2024 launch. The brand continues to show tons of potential as a direct-to-consumer general wellness offering. We sell Truvega products direct-to-consumer through our e-commerce site, www.truvega.com.

We've hired a new digital health executive, Kelly Benning, to manage our health and wellness commercial strategy and accelerate adoption of our Truvega product line in direct-to-consumer, business-to-business-to-consumer channels such as Truvega Partners, Perks at Work, and through a handful of resellers. We continue exploring the expansion of the Truvega proposition through new product offerings, new features like the integration with the Apple Health app, and we'll be increasingly more aggressive with those infringing our patent portfolio. The pipeline of interest from different branches of our active duty military continues to develop for our TAC-STIM products, and TAC-STIM revenue will continue to be hard to predict as active duty units evaluate and purchase in the VA for pilot deployment. We're getting better at validating requests for proposals for TAC-STIM, and our funnel currently holds approximately $500,000 of open quotes.

For the second quarter of 2025, our sales and marketing expense increased sequentially by approximately $300,000, while sales grew by roughly $660,000, showing continued operating leverage as we make further investments to drive sales in the future. We incurred the expense of several new W2 hires during the period that will become productive in the back half of the year and demonstrate the leverage we need to become cash positive in the future. As we continue to add new products to our established channels, we will also continue working towards additional indications for prescription GammaCore to treat post-traumatic stress disorder and other clinical opportunities. We really have not experienced much tariff exposure. Our tariff expense doubled from $2,800 in Q1 2025 to $5,600 in Q2 2025, but those amounts are obviously very small.

In summary, I believe we're poised for accelerating growth and will be increasing our investment in the health and wellness channel through the back half of 2025, with the expectation of broader Truvega adoption in 2026 and beyond. With the new term debt facility, we believe we have access to enough cash to execute on this plan. At this time, we'll turn the call over to the operator for questions.

Speaker 1

Thanks, Dan. We're now going to open the floor for Q&A. As a reminder, the best way to ask a question is to use the raise your hand feature located at the bottom of your Zoom screen, or if you're dialed in by dialing star nine, that will raise your hand. Once you've raised your hand, the operator will place you in the queue to speak. When it's your turn, you'll be prompted and unmuted so you can ask your question live. Just a quick reminder, in addition to everything we do on our end, you may need to manually unmute your microphone when called on. You can also type your question into the Q&A widget on your screen. We'll monitor that panel and address questions from there as well if time allows.

If we're unable to get to your question today due to time constraints, someone from the investor relations team will follow up with you after the call. Let's pause a brief moment now to get everyone a chance to raise their hand and submit a question. Our first question will come from Jeffrey Scott Cohen of Ladenburg. Jeffrey, we just need an unmute.

Speaker 0

Hello. Hello, Dan and Josh. Can you hear me okay?

Speaker 2

Hi, Jeff.

Speaker 0

Wonderful. Much better. Just a few questions from Aaron. Firstly, Dan, could you provide any insight into Truvega as far as composition of revenue with the two current SKUs that you have in the marketplace?

Speaker 3

Yeah, it's been an upside surprise to me, but our $500 Truvega Plus mobile app-enabled Truvega Plus is accounting for about 80% of our revenue in the category, and the less expensive Truvega 350 is lagging far behind.

Speaker 0

Got it. Okay. That's nice to hear. Could you talk a little bit about have you actually pursued any legal activity as far as patent infringement? If so, are you doing that through the U.S. courts or some type of ICC court filings that we should expect to hear about?

Speaker 3

There are some cross complaints that have been filed in federal court in the District of New Jersey, and we're not going to comment beyond what's in those public filings.

Speaker 0

Okay. Was there any cost associated during the second quarter, or do we expect to see some of that in the third quarter, or you'll let us know?

Speaker 3

Yeah, there was some legal expense that would have been incurred in the first and second quarter of this year.

Speaker 0

Got it. Lastly for us, you made some reference to new products in Q3. Should we be expecting new products in the marketplace? If so, could you talk about it? Do you expect there to be DTC or B2B type of products?

Speaker 3

I don't think I explicitly said new products. The prescription QUEL fibromyalgia, the production line is now up and running in Rockaway, and in late June, we started to make samples and demos available to our sales force. That is a product launch, but we've talked about the product historically. I'm not sure if that rises to the level of a new product, but from a revenue point of view, it's going to start, we think it'll start generating material revenue in the back half of this year.

Speaker 0

Got it. Okay, thanks for taking the questions. That does it for us. Congrats on the quarter.

Speaker 3

Appreciate it, Jeff.

Speaker 1

As a reminder, if you have a question, please use the raise your hand button or dial star nine. While we build the queue, I'll take a question that was submitted by Andrew Rehm. How much are you increasing marketing spend on an annualized basis?

Speaker 3

Thank you for the question, Andrew, but we're not breaking out components of SG&A, and total SG&A fluctuates quite a bit with timing. I'm afraid I can't explicitly answer that question. I think you'll see our SG&A line go up 5 to 6%.

Speaker 2

Per media.

Speaker 3

SG&A in our prescription businesses scales with revenue because there's a large commission component, and in our direct-to-consumer business, there's a component that scales with revenue around media and advertising spend. The blended average of all of that is about 30%, and if revenue goes up 20% like it did this quarter, then that variable component of SG&A would go up 30% of 20%, so about 6%. Sorry to be so vague about it.

Speaker 1

Okay. Our next question is coming from Charles Wallace of HCW.

Speaker 2

I think you need to unmute.

Speaker 1

To unmute, there you go.

Speaker 4

Hi, this is Charles Dunn for RK. Thanks for taking my questions. I guess first for me, can you kind of comment on what ultimately led you guys to this on the decision to ramp up spending now and potentially delaying profitability? The second question is, can you comment on the contribution of Amazon sales to the handsets in the quarter? Thank you.

Speaker 3

Yeah, we don't have much to say about Amazon just yet. We're still working out some issues with the plumbing and how orders get transferred from Amazon to our fulfillment. As far as the timing goes, we've restructured our sales force on the prescription side. We're seeing very exciting green shoots in our direct-to-consumer business. We closed the acquisition of NeuroMetrix. We've been able to attract some really compelling talent, starting with James Theophilus and Kelly Benning, who both bring quite a bit of digital health, direct-to-consumer know-how. For all those reasons, the time is now to put our foot on the gas pedal and drive more aggressive revenue growth. There's plenty of leverage in the income statement with our 85%, 86% gross margins. We're very confident that we're going to get to break even in a reasonable amount of time.

Speaker 4

Fantastic. Thanks for taking my questions.

Speaker 3

Of course.

Speaker 1

Again, if you have a question, please use the raise your hand button or press star nine. Dan, it appears that has exhausted the questions. Can I turn the call back over to you?

Speaker 3

Rob, I think there's a question in the chat box about NeuroMetrix products sold over the counter. Historically, certain versions of QUEL were available direct to consumer under the over-the-counter label, including Amazon. Now that we have the production line.

Speaker 0

Just five minutes, I'll call you right back.

Speaker 3

Now that we have the production line up and running, first, we want to take advantage of our prescription opportunity in the VA hospital system, and we will be looking at how or when to relaunch QUEL Relief through our direct-to-consumer channels.

Speaker 4

I think there was another question about timing.

Speaker 1

Let me read that out from the Q&A widget. How will this investment impact the time to profitability, and what are your thoughts on 2026 and profitability?

Speaker 3

We believe that the investments are going to accelerate revenue growth, right? We just announced 20% year-on-year revenue growth. We wouldn't be making these investments if we didn't think that that sequential and year-on-year growth rate wouldn't increase. We need to get to $11.5 million of quarterly revenue from $7.5 million. That's 50% plus or minus revenue growth, and I'd love to see that happen sooner rather than later.

Speaker 1

Great. Thank you, Dan. One more question from the tech spot. Can you talk about the return on advertising that you're seeing and how that has trended on the Truvega side?

Speaker 3

Yeah, I think we said in the script that for the quarter just ended, our media efficiency ratio was 2.0. In other words, a dollar of advertising spend generated $2 of revenue. That's a little bit lower than previous periods. We've got a variety of initiatives, and as I mentioned, some digital health executives joining the team, where I think we're going to be able to return those KPIs to where they were late last year.

Speaker 1

Okay, and what appears to be the final question, can you talk about Truvega and Apple Health and how that effort's going and what the compatibility is there?

Speaker 3

Great question. A few months ago, we announced the integration of Truvega into Apple Health. In and of itself, that's not a great big deal, but there are a tremendous number of third-party apps that offer diagnostic information, heart rate, breath rate, quality of sleep, and it gives us access to that much, much larger biohacker ecosystem through the API that lets us talk to Apple Health. Some folks in the biohacker community have been very active in coming up with use cases, and I look forward to being able to make announcements about that later this year.

Speaker 1

Thank you very much, Dan. That concludes the questions that were submitted. I now turn the call back over to you.

Speaker 3

Great. Thank you, everybody. Appreciate your time. So many people and counterparties have helped us get to this point. Special thanks to James Theophilus and his family office for their patience and support with us. Special thanks to the team at Avenue Capital for providing the liquidity that we've gotten access to, and we look forward to great things going forward.