electroCore - Earnings Call - Q4 2024

Executive Summary

• Q4 2024 revenue was $7.0M, the ninth consecutive record quarter, up 36% year over year; full-year 2024 revenue reached $25.2M (+57% YoY), driven by 85% growth in VA/DoD prescription gammaCore and 174% growth in Truvaga wellness sales.
• Gross margin remained strong at 85% for FY2024 (vs. 83% in FY2023), with management expecting mid‑80s% going forward; operating leverage improved materially as net loss narrowed 37% for the year.
• Management withheld formal 2025 guidance pending closing of the NeuroMetrix acquisition (expected Q2 2025), while highlighting VA growth, DTC Truvaga momentum, and new channel/product catalysts (Quell Fibromyalgia, Spark Biomedical).
• Near-term stock reaction catalysts: (1) new five-year VA Federal Supply Schedule contract effective June 15, 2025, validating VA demand and improving contracting clarity; (2) Truvaga Plus launched on Amazon, expanding DTC reach; (3) pending NeuroMetrix acquisition to add Quell Fibromyalgia across the VA channel.

What Went Well and What Went Wrong

What Went Well

• VA/DoD channel growth accelerated: Q4 VA revenue was $4.6M (+47% YoY), with 170 VA facilities purchasing gammaCore and ~9.1M covered lives; strong clinical adoption sustained.
• Truvaga DTC momentum: Q4 Truvaga revenue was ~$1.2M (+271% YoY), with ROAS improving to 2.99 in Q4 (FY ROAS 2.7); >11,500 handsets sold and ~0.5M app sessions, indicating favorable unit economics and engagement.
• Operating leverage: FY gross margin 85% (vs. 83% prior year) and FY net loss improved to $11.9M (from $18.8M), reflecting scale benefits and disciplined R&D spend, particularly winding down Truvaga Plus development.
• Quote: “Our focus now is to expand our presence within the key sales channels we have developed to deliver continued growth and progress towards profitability.” – CEO Dan Goldberger.

What Went Wrong

• TAC‑STIM variability and DoD procurement opacity continued to make sales difficult to predict; FY TAC‑STIM fell to $1.2M (from $1.7M).
• U.S. commercial prescription channel declined 15% for FY2024 as some cash‑pay prescribers migrated to Truvaga; Joerns/Kaiser ramp slower than expected, with only 1–2 prescriptions processed per month to date.
• VA macro distractions (e.g., early retirement offers, RIF memos) created supply‑chain side noise, though clinical cadence remained steady; the FSS contracting office extended in short increments before the follow‑on award.

Transcript

Operator (participant)

Recording in progress.

Right, and welcome to the electroCore Fourth Quarter and Full Year 2024 Earnings Conference Call. As part of our ongoing efforts to reduce costs and drive profitability, management has opted to host this earnings call on Zoom rather than using a more costly service provider. This will be our first time hosting the call independently, so we appreciate your patience as we work through any potential technical issues. At this time, all participants have been placed in a listen-only mode. Please make sure to mute yourself. A question-and-answer session will follow the formal presentation, and instructions for participants that are logged into the online webinar will be provided after management's prepared remarks. As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Dan Goldberger, electroCore's Chief Executive Officer.

Dan Goldberger (CEO)

Thank you all for participating in today's electroCore earnings call. Joining me today is Josh Lev, our Chief Financial Officer, and our investor relations firm, FNKIR. Earlier today, electroCore published results for the fourth quarter and full year ended December 31, 2024. A copy of the press release is available on the company's website. I apologize for the late start this afternoon. We are in Washington, D.C. for meetings at the FDA this week. 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. Frankly, 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, March 12th, 2025.

For those of you who may be new to our company, electroCore was founded in 2005 to commercialize the use of our proprietary non-invasive vagus nerve stimulation for medical and general wellness applications. The vagus nerve is the longest cranial nerve in the body, bringing information from the visceral organs to the brain. Stimulating the vagus nerve affects many important autonomic functions in the brain and in the body, including neurotransmitter levels, inflammation levels, and metabolism.

Surgically implanted vagus nerve stimulators have been available from other companies for more than 40 years for chronic conditions like epilepsy and depression, so a large and growing database confirms the safety and efficacy of the technique. Building on that science, electroCore pioneered non-invasive vagus nerve stimulation, and our products are now available by prescription for certain headache conditions and without a prescription for general wellness and human performance.

Our pipeline of possible indications and products continues to grow as clinicians, researchers, and wellness advocates conduct investigator-initiated trials to advance the benefits of non-invasive vagus nerve stimulation. We demonstrated rapid growth for several years, resulting in a five-year compound annual growth rate of approximately 60%. Revenue for 2024 was $25.2 million, up 57%. In the fourth quarter, we recorded revenue of $7 million, our ninth consecutive record revenue quarter, and a 36% increase over the fourth quarter of the prior year.

Total revenue, excluding TAC-STIM, increased by 68% for the year and increased 44% in the fourth quarter. Full year gross margins were 85% as compared to 83% last year, and we narrowed our net loss by 37% for the year. We expect our gross margins to remain in the mid-80s in spite of the trade policies currently being implemented by the new administration.

Our supply chain does not currently involve geographies subject to the recent tariff news, and we continue to work on mitigating any impact on our supply chain. We're making progress towards positive cash flow from operations and GAAP profitability as revenue increases, gross margins hold steady, and we maintain discipline around operating expenses. Josh will discuss the financials in more detail later in the call. We launched our U.S. prescription headache business in 2017, selling primarily to specialty pharmacies. Since then, our prescription headache business has grown worldwide, including sales that are covered by national health systems such as the VA Hospital System in the United States and the National Health Service or NHS in the United Kingdom, cash pay sales through prescriber professional channels, and through certain managed care systems in the United States.

We currently have about 30 million covered lives in the U.S., and we look forward to creating more access in the future. Cash pay patients can often use their HSA/FSA accounts if they do not currently have insurance benefits. We launched two new non-prescription general wellness product lines in 2023. Truvaga is a direct-to-consumer health and wellness brand, and TAC-STIM is directed towards human performance for active duty military personnel.

The VA Hospital System continues to be our largest customer. gammaCore prescription therapy is free to patients covered by Veterans Administration benefits, representing about 9.1 million covered lives across approximately 1,300 healthcare facilities. Sales in the VA channel grew 85% to $17.8 million in the full year ended December 2024 from $9.6 million in 2023. Sales in the VA channel grew 47% to $4.6 million in the fourth quarter of 2024 from $3.1 million during the fourth quarter of 2023.

170 VA facilities have purchased prescription gammaCore products through December 31st, 2024, as compared to 147 through December 31st, 2023. The VA Hospital Administration 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 continue to make our therapy available either through our Federal Supply Schedule contract or via our distribution partnership with Level Government Services. Since 2022, we've dispensed gammaCore devices to approximately 8,500 veterans leveraging these contracting mechanisms, representing approximately 1.5% of the total addressable headache market within the VA System. Truvaga is positioned as a direct-to-consumer general wellness product for stress, relaxation, quality of sleep, and mental acuity. For the year ended December 2024, Truvaga net sales were $2.8 million, a 174% increase over 2023.

In the fourth quarter of 2024, Truvaga net sales were approximately $1.2 million, a 271% increase from the fourth quarter of 2023. Our revenue return on advertising spend was approximately 2.7 for the full year 2024 and $2.99 for the fourth quarter of 2024. In other words, during 2024, for every $1 we spent on media, we generated $2.70 of revenue. Our fourth quarter metric of $2.99 increased in part because of seasonal purchases associated with the holidays.

Truvaga return rates remained steady at approximately 11% to 12% of shipments for the full year and fourth quarter 2024. Since launching Truvaga, we sold more than 11,500 handsets, and customers have conducted approximately 500,000 sessions using the mobile app. We believe that the Truvaga business will continue to scale if we can maintain or improve these metrics. Most of our Truvaga revenue comes through our e-commerce platform, www.truvaga.com.

Following the successful launch of Truvaga Plus in April 2024, we began exploring additional channels to reach consumers, including influencers, affiliates, and resellers. Earlier this year, we launched on the Perks at Work platform, which boasts 30 million users globally across 90,000 companies, representing 70% of the Fortune 1000. In February 2025, we launched Truvaga Plus on Amazon. For the full year ended December 31, 2024, we recorded $1.2 million of TAC-STIM sales as compared to $1.7 million during the same period last year. TAC-STIM for human performance is being sold to select Air Force and Army Special Forces units for accelerated training, sustained attention, reduced fatigue, and improved mood, as defined by the Air Force Research Laboratory, or AFRL. We have a growing sales funnel for TAC-STIM, but the DOD acquisition process is opaque and lengthy.

Revenue from this product line will be hard to predict as active duty units purchase in bulk for pilot deployment. Our U.S. prescription gammaCore channel recorded revenue of $1.5 million during the full year of 2024, down 15% from 2023. There were 2,600 cumulative revenue-generating cash pay prescribers as of December 31, 2024, up from 1,840 on December 31, 2023. As expected, some of these customers have migrated to the Truvaga brand as awareness grows, and we continue modeling flat revenue from this category for the time being. 92 new Truvaga Plus partners, including 32 gammaCore customers, have added the Truvaga product line to their accounts. Last year, we announced the distribution agreement with Joerns Healthcare that gives us access to a certain managed care health system. Approximately 30 prescribers have written gammaCore in this channel, and we are now processing one or two prescriptions per month.

I remain optimistic that we are slowly gaining awareness and traction, and adoption will come over time. Revenue from channels outside the U.S. of $1.9 million for the full year ended December 31, 2024, were flat as compared to $1.8 million for the full year ended December 31, 2023. Most of our OUS revenue continues to be generated by the United Kingdom by prescriptions gammaCore sales funded by NHS, and we model flat revenue from this category for the time being.

Now, I'll turn to our business development activities. In December 2024, we announced that electroCore has entered into definitive agreement to acquire NeuroMetrix, giving us access to the Quell platform and accelerating our mission to become the clear leader in the bioelectronic health and wellness sector. The markets we are pursuing are massive. U.S. consumers spend nearly $20 billion annually out of pocket for chronic pain treatments.

It's estimated that approximately 6% of U.S. adults suffer from fibromyalgia, and there are few credible treatment options available today. The acquisition is on track to close in the second quarter of 2025. NeuroMetrix is a publicly traded company on NASDAQ under the ticker NURO. NURO is a commercial-stage non-invasive bioelectronic health and wellness company with two product categories: Quell, a wearable app and cloud-enabled neuromodulation platform that is indicated for the treatment of fibromyalgia symptoms, known as Quell Fibromyalgia, and lower extremity chronic pain, Quell 2.0. Separately, the DPNCheck, a point-of-care screening test for peripheral neuropathy. Our focus for this transaction is to accelerate the commercialization of the prescription Quell Fibromyalgia product through our existing sales channels, especially the VA Hospital System in the United States.

In addition, we believe there are future opportunities to leverage and expand the Quell mobile application and health cloud platform for existing and future electroCore products. The combination of gammaCore and Quell Fibromyalgia creates a diversified, advanced portfolio of prescription products for non-invasive and non-pharmaceutical treatment of chronic pain. In the future, Quell 2.0 for lower extremity pain may be added to our non-prescription direct-to-consumer brands. This acquisition may enhance our ability to become the clear leader in the bioelectronic health and wellness sector.

Quell Fibromyalgia is a prescription non-invasive nerve stimulation device, a similar approach to electroCore's product suite. Quell Fibromyalgia is FDA authorized, covered by 27 issued U.S. utility patents, and NeuroMetrix invested more than 10 years and tens of millions of dollars in clinical work and product development. Quell Fibromyalgia provides flexible, precise, high-power nerve stimulation in a form factor the size of a credit card. We're excited about the acquisition of NeuroMetrix and are confident that we can leverage our established distribution channels, especially the VA Hospital System, to accelerate adoption of the Quell Fibromyalgia solution.

More information about NeuroMetrix can be found at www.neurometrix.com. On February 27, 2025, and subsequent to the end of the fourth quarter, we announced the distribution agreement with Spark Biomedical, giving us access to the Sparrow Ascent product line, an FDA-cleared non-invasive transcutaneous auricular neuromodulation device available by prescription for the treatment of opioid withdrawal symptoms. We plan to offer Sparrow in a limited number of VA Hospital sites beginning in the second quarter of 2025. If successful, we hope to expand distribution later this year. We believe the total addressable market in the United States for Sparrow is $2.4 billion associated with opioid detox and another $3.7 billion in relapse prevention.

More information on Spark Biomedical can be found at www.sparkbiomedical.com. Before I hand the call over to Josh for a review of our financials, I'd like to take this opportunity to thank Dr. Charles Theofilos for his long-time support of electroCore. On February 28, 2025, we announced the resignation of Dr. Theophilus from our board of directors. As a founder and patient investor of electroCore, we deeply appreciate his support for the company and wish him all the best. Now, I'll turn the call over to Josh for a review of our financials. Josh.

Josh Lev (CFO)

Thank you, Dan. Net sales for the year ended 2024 were $25.2 million, an increase of 57% as compared to $16 million for the full year ended 2023. The increase of $9.2 million is due to an increase in net sales across our prescription gammaCore medical devices sold to the VA and revenue from the sales of our non-prescription general wellness Truvaga brand. Gross profit for the full year of 2024 was $21.4 million as compared to $13.2 million for the full year of 2023.

The increase in gross profit was primarily driven by the increase in net sales. Gross margin was 85% for the full year of 2024 as compared to 83% in the full year of 2023. Total operating expenses in the full year of 2024 were approximately $33.6 million as compared to $32.5 million in the full year of 2023. Research and development expense in the full year of 2024 was $2.4 million as compared to $5.3 million in the full year of 2023.

This decrease was primarily due to a significant reduction in investments associated with the development of Truvaga Plus. Selling, general, and administrative expense in the full year of 2024 was $31.2 million as compared to $27.2 million in the full year of 2023. This increase was primarily due to greater variable sales and marketing expenses consistent with an increase in sales. In 2025, we plan on continuing to make targeted investments in sales and marketing to support our commercial efforts supporting all major U.S. channels. GAAP net loss in the full year of 2024 was $11.9 million compared to $18.8 million in the full year of 2023. This significant improvement was primarily due to the increase in net sales of $9.2 million for the full year of 2024 as compared to the same time period in 2023.

Net loss per share for the full year of 2024 was $1.59 as compared to $3.42 net loss per share in the full year of 2023. Adjusted EBITDA net loss in the full year of 2024 was $9 million as compared to adjusted EBITDA net loss of $15.4 million in the full year of 2023. These improved results are also primarily due to an increase in 2024 net sales and gross profits as compared to the same period in 2023. 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, marketable securities, and restricted cash at December 31, 2024, totaled approximately $12.2 million as compared to approximately $10.6 million as of December 31, 2023. Net cash used in operating activities for the full year 2024 was $7 million, a 53% reduction from $14.7 million for the full year of 2023. I'll turn the call back to Dan.

Dan Goldberger (CEO)

Thank you, Josh. I'm excited about the opportunities ahead. Our revenue continues to grow in our core business lines, including prescription products sold to the VA and health and wellness products sold to consumers. Our operating metrics show continued leverage, and I'm optimistic about the company's long-term prospects, both for the brands we developed and those that align with our established sales channels.

Demand for our prescription gammaCore therapy in the VA channel continues to grow based on clinical performance and our increased presence in the field. Our FSS contract has been extended to June 14, 2025, and we continue working with our VA contract specialists to secure a new follow-on contract. We rely on our field sales organization to drive revenue growth in the VA hospital and other prescription and B2B channels. Revenue growth scales with additional headcount in that sales function.

As of January 2025, we have 48 active 1099 entities representing about 80 sales agents, including subreps. That team is managed by eight territory business managers who are salaried employees. Our 1099 team grew rapidly from 34 groups in January 2024 to 48 groups in July 2024, but the total number of active groups has remained constant since then. Revenue growth rate has slowed somewhat since the number of 1099 groups leveled off. We expect the size of our team to grow in the second half of 2025 as we balance investment and future growth with the path to profitability.

The VA healthcare system is the nation's largest healthcare system, with an annual budget of $68 billion and employing more than 371,000 healthcare professionals, many of whom have been affected by macro forces. We are aware of ongoing disruptions in many of our VA hospital customers secondary to those macro forces. We have not seen any direct effect on the cadence of our business, but the distractions cannot be ignored.

That said, it's important to note that our gammaCore therapy continues to provide therapeutic benefits at a much lower cost compared to other migraine products available through the VA. In addition, we do not burden the VA or other providers with significant administrative requirements as our solution is not a drug. Accordingly, we're confident that gammaCore represents a fiscally attractive solution for the VA that is well aligned with our overall cost-cutting goals.

Truvaga 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 Truvaga products direct-to-consumer through our e-commerce site, www.truvaga.com, and amazon.com. Truvaga is also available through a small but growing number of business-to-business consumer initiatives such as Perks at Work and through a handful of resellers. We continue exploring the expansion of the Truvaga proposition through new product offerings and new channels. The pipeline of interest from different branches of our active duty military continues to develop for our TAC-STIM products. TAC-STIM revenue will continue to be hard to predict as active duty units evaluate and purchase in bulk for pilot deployment.

Longer term, we believe that there may be civilian crossover as first responders, elite athletes, transportation workers, traders, and e-gamers become aware of the human performance benefits published so far. Last week, the Vagus Nerve Society hosted a webinar entitled "VNS as a Tool to Improve Focus, Energy, and Readiness in Today's Warfighter." It was presented by Richard McKinley, PhD, of the 711th Human Performance Wing of the Air Force Research Laboratory.

If you missed it, our recording is available at the Vagus Nerve Society's website, www.vnssociety.org. For the full year of 2024, our sales and marketing expense increased by approximately $3.1 million, while sales grew by $9.2 million. In 2024, we began to see most of the top-line revenue growth dropping to the bottom line as our net loss declined during the same period by $6.9 million, demonstrating increasing leverage in the P&L.

Further out, we're working towards adding new products to our established sales channels. The acquisition of NeuroMetrix and the distribution agreement with Spark Biomedical will provide patients and prescribers with more non-invasive therapies for chronic pain and opioid withdrawal issues, respectively. These products, along with the gammaCore and Relivion products that we currently sell into the prescription VA channel, allow our field sales team to offer a growing suite of bioelectronic self-administered therapies for certain debilitating conditions. As we continue to build out our strategy of adding 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 had $12.2 million of cash equivalents at December 31, 2024, and we will maintain discipline around fixed operating expenses.

We expect that commissions and media spend will continue to scale with revenues, and we model approximately 30% of related sales on a blended basis. Therefore, we expect that our cash used in operations and adjusted EBITDA loss will continue to decline sequentially as revenue increases. Our business is growing nicely, but we are refraining from providing guidance for 2025 pending the close of the previously announced acquisition of NeuroMetrix. In summary, I believe the business is demonstrating operating leverage, and we will have a variety of strategic levers to pull to continue growing the business. At this time, I'll turn the call over to the operator. Operator, please open the line for questions.

Operator (participant)

Thank you, Dan. We're now going to open up the Q&A session. To ask a question, online participants can click the raise your hand icon, which you will find at the bottom of your Zoom screen. Raising your hand will alert us that you want to be called on to ask a live question. You'll be placed into queue and called on.

Just note you'll be on mute until you are called on, so just wait for your prompt before speaking. The second way to participate in Q&A is to use the Q&A widget, which will allow you to type in and text the question in. We will take questions from there as well, but just note if we run into a time constraint, someone from the IR team will get back to you if your question is not asked on today's call. With that, we will now begin and pause for a moment to build the queue. The first question will come from Anthony Vendetti. Anthony, we're just working to unmute your line.

Anthony Vendetti (Executive Managing Director)

Okay. Can you hear me now?

Dan Goldberger (CEO)

We can hear you.

Anthony Vendetti (Executive Managing Director)

Okay. Excellent. Dan, just on the NeuroMetrix acquisition, once that's complete, how do you intend to sell the Quell product? Are you going to put it into your existing sales channels? Do you have a plan on how you're going to price it, sell it? Maybe just give us a broad outline of the plans going forward.

Dan Goldberger (CEO)

Yeah. Thanks, Anthony. Good question. We got to close the transaction and then take a hard look. Quell Fibromyalgia is currently available in, I believe, roughly 20 VA hospitals through open market access. It's not on contract. Step one after closing the acquisition is to add the product to our FSS contract and through our relationship with Level Government Services to add it to the ECAT and a variety of other contracting mechanisms that will help streamline the process. We did a preliminary training of our sales team last month, but we'll do a more in-depth training of our sales team and in parallel of our customer service team and our medical affairs teams shortly after closing.

We will then cut them loose to go call on the 150, 160 VA hospitals which are currently customers. It'll take a little bit longer for us to get on contract. I am very optimistic that the second quarter, depending on the timing of closing, is hard to predict. As we get into the second half of the year, that sales channel for the VA hospitals is going to work smoothly like it does for gammaCore. Longer term, bringing Quell Fibromyalgia to our insurance relationship with Kaiser, bringing it to some of our commercial accounts, getting on contract with other third-party payers is all very exciting. In parallel, in 2026, we want to look at taking the over-the-counter indication for lower extremity pain into some of our e-commerce channels. That is more of a 2026 opportunity.

Anthony Vendetti (Executive Managing Director)

Okay. Great. Thanks for that call, Dan. I appreciate it. I'll hop back in the queue.

Dan Goldberger (CEO)

Thanks, Anthony.

Operator (participant)

Great. Our next question will come from RK from HC Wainwright.

Dan Goldberger (CEO)

RK, it looks like you might be muted on your end. There you go. I guess we're having technical difficulties with RK.

Operator (participant)

Okay. We will come back to you, RK. This time, I'll go to Tyler Bussian of Brookline Capital.

Tyler Bussian (Biotechnology Research Analyst)

Can you guys hear me?

Dan Goldberger (CEO)

Yes.

Tyler Bussian (Biotechnology Research Analyst)

Testing one, two. Okay. I think I see that I'm talking. Dan and Josh, hey, congrats on the great year. Looks like everything is going forward smoothly. My primary question revolves around kind of the Joerns element for electroCore. That kind of segment in general seems like it maybe has taken off a little bit slower than we would have thought about this time last year. Can you talk a little bit about Joerns in a little more detail, kind of what's going on and what are your plans in that space for 2025?

Dan Goldberger (CEO)

Yeah. It has taken much longer. It's been much more of a grind than we had hoped a year ago. The wheel is starting.

Tyler Bussian (Biotechnology Research Analyst)

I can't hear you.

Dan Goldberger (CEO)

Testing one, two, three. Can others hear me?

Josh Lev (CFO)

Dan, we hear you.

Tyler Bussian (Biotechnology Research Analyst)

There you go. I switched on my end now. Can you repeat that? Sorry, Dan. I had something screwed up.

Dan Goldberger (CEO)

Yeah. Tyler, we agree with your observation. It's taken much longer to get traction in that channel with Joerns and ultimately Kaiser. That said, we're starting to see some green shoots. We've got more than 30 repeating prescribers now, mostly in Southern California, some in the Northern California region. We're processing one or two prescriptions per month, not nearly enough to be meaningful revenue, but the wheel is starting to turn.

The prescribers are starting to understand how to enter it into their system. Success breeds success. I am very optimistic. It's going to be slow. At some point, we will reach a tipping point. I continue to be optimistic it'll be sooner rather than later.

Tyler Bussian (Biotechnology Research Analyst)

Great. Thank you very much. I'll get back in the queue.

Operator (participant)

Okay. Our next question will come from Mark Gomes. Mark, we're going to enable you to ask a question and just unmute yourself when you see it.

Mark Gomes (Director of Operational Risk Programs)

Am I unmuted?

Dan Goldberger (CEO)

Yes, you are.

Mark Gomes (Director of Operational Risk Programs)

All right. There we go. Hey, guys. Great work. Looking at the Kaiser—sorry about that—the Kaiser channel, how would you contrast the start there to the start that you had in the VA system? Is there similarities there and therefore some parallels we can draw with regard to how that can ramp up over time?

Dan Goldberger (CEO)

Hey, that's very perceptive, Mark. You're absolutely right. When we started selling in the VA hospital system in 2018, it was onesies, twosies, a lot of head scratching. It takes a while to get the flywheel turning. Kaiser is taking longer, candidly, than our original initiatives in the VA hospital system. The Kaiser facilities are much more locked down. By that, I mean they're very careful about letting sales reps, for example, into the facilities to talk to clinicians. It's a very methodical, very constrained process. We are starting to get through there. I don't know how much longer it's going to take, but we're not giving up by any stretch.

Mark Gomes (Director of Operational Risk Programs)

Would it be fair to say then that once you get in, it's hard to get kicked out? And therefore, because of the competitive advantage of being there and tougher for others to get in, that ends up being an advantage once you do?

Dan Goldberger (CEO)

Exactly right. The Kaiser system is well known to be a very sticky business that it's hard to break in. Once you do, and if you're providing a clinically meaningful benefit at a fair price, those contracts are very sticky.

Mark Gomes (Director of Operational Risk Programs)

Very good.

Dan Goldberger (CEO)

Thank you.

Mark Gomes (Director of Operational Risk Programs)

Great. You made mention of seeking to become a leader in bioelectric devices. That's a much broader category than just vagus nerve stimulation or just the acquisition and partnership that you recently made. Your last organization, you grew to, if I remember right, $100 million in revenue. Do you think that's a fair number for what you can grow this business to, or do you think you can grow it less or more?

Dan Goldberger (CEO)

Oh, absolutely. Look, Mark, we're building the infrastructure on the sales side between our field sales team, our customer service function, our supply chain management, and more and more leveraging e-commerce opportunities. We've got a great pipeline of organic products, but we're now demonstrating with NeuroMetrix and Spark the opportunity to bring in new products either through distribution or outright acquisition that go into and leverage the same distribution channels. I think $100 million will be a signpost along the way. I think we can build a very large business here around non-invasive nerve stimulation for a variety of health and wellness and medical indications.

Mark Gomes (Director of Operational Risk Programs)

Okay. There was a recent webinar that had military personnel kind of extolling the virtues of the vagus nerve stimulation and, in particular, singled out your device. During the Q&A, he stated that he thought that there were thousands of enlisted personnel that benefit from the device based on the research that he had done. Does that fit with what you're seeing? I guess if you could give us a little bit of a flavor of the process that it might take to start penetrating that as opposed to the trial units that have been sold to this point.

Dan Goldberger (CEO)

I wish I could. The supply chain, the purchasing process with the Department of Defense is really obscure. We have quotations out for a few thousand handsets. Some of them have been publicly disclosed on sam.gov. That's one of the contracting platforms that DOD uses. You can see how many requests for quotes we've gotten through that platform. It goes into a black hole, right?

We have a colonel or a lieutenant general who's very excited and who's acting as our champion for each of these quotes. They can't tell us where it's gotten lost in the DOD acquisition process. Not unlike the Kaiser system, the goal ultimately is to become a contract of record with the Department of Defense. I'm told that that'll take three or four years. The purchasing process is much more streamlined. We will keep doing it. Some of the civilian crossover opportunities might actually overtake what's going on with active duty military.

Mark Gomes (Director of Operational Risk Programs)

Okay. Thanks. Final question, and I'll leave you. The VA channel, Truvaga channel exploded quarter to quarter by my math. Is that average of a quarter to quarter number on the sales growth there? That was even before you announced getting into the Amazon channel. We'd like to hear a little bit of color on what happened in that channel this quarter and what you expect going forward, qualitative kind of marketing guidance. Thanks. I'll have to share it with us.

Dan Goldberger (CEO)

Yeah. You're absolutely right. December was especially big for Truvaga. We attribute that to the holiday season gift-giving. It has normalized. In the first quarter, it has normalized a little bit. We're not quite at the same run rate that we were in December, but we're seeing nice sequential growth month to month and quarter to quarter.

Operator (participant)

Great. Thank you, Dan. Our next question is going to come from Matt Schwarz. Matt, you want to unmute your line?

Matt Schwarz (EVP and Head of US Global Wealth Management Business Strategy & Analytics)

Yeah. Can you hear me?

Dan Goldberger (CEO)

Yes, we can hear you.

Matt Schwarz (EVP and Head of US Global Wealth Management Business Strategy & Analytics)

All right. Great. Thanks. I appreciate you taking my questions. I just had a few. The first is, I think you guys put an ATM in place not long ago. Can you comment on whether you used any of it and how much?

Dan Goldberger (CEO)

I'm not sure that that's public yet. I am going to deduct the question because we're not talking about that publicly at this point in time. I mean, we do have an ATM facility, yes.

Matt Schwarz (EVP and Head of US Global Wealth Management Business Strategy & Analytics)

Oh, okay. Oh, I figured it. I saw the cash. I thought actually go up versus the cash flow from ops. I figured you perhaps used it but,

Dan Goldberger (CEO)

We had some warrant exercises. Okay. I stand corrected. It is in the 10K. We used it just for a few days to make sure that we understand how to use it, about $200,000 worth in end of February, beginning of March. There were also some warrant exercises post the quarter close that add to the cash.

Matt Schwarz (EVP and Head of US Global Wealth Management Business Strategy & Analytics)

Okay. Great. Secondly, could you comment about—I think if I heard you correctly, you guys are still working on the VA contract. Is there any more color around that? I'm not super well-versed on how these negotiations work or when your last one expired and such.

Dan Goldberger (CEO)

Sure. We've been in this—the contracting office is slow. They've been giving us extensions. I think the current extension goes into June of this year. We've had conversations in the last month with the contracting officer, dotting I's and crossing T's and working on payment terms. I suspect that we're going to continue to be in this sort of three- or four-month extensions at a time. In parallel, we also sell our products with Level Government Services. Our products are on the Level contracts as well, so we have sort of a backup.

I want to say 40% of our business went through the Level contracts instead of our own contract. Actually, we make a little bit more money through Level because Level absorbs the credit card processing fees that we have to absorb, so the 2.5% to 3%. We're agnostic which contracting mechanism that we go through, but we like having both.

Matt Schwarz (EVP and Head of US Global Wealth Management Business Strategy & Analytics)

Okay. Got it. Okay. Lastly, am I right that the business that you're acquiring, NeuroMetrix, the product sales associated with that wasn't their total sales number, right? It's just a portion of it?

Dan Goldberger (CEO)

Correct. You're referring to NeuroMetrix?

Matt Schwarz (EVP and Head of US Global Wealth Management Business Strategy & Analytics)

Yes.

Dan Goldberger (CEO)

The product line that we're going to continue with is called Quell for pain management. Their DPNCheck product line for diabetes is going through a separate asset sale process. I'm not sure how much of that they've made public at this point.

Matt Schwarz (EVP and Head of US Global Wealth Management Business Strategy & Analytics)

I see. Yeah. Just the last piece of that is I'm trying to—I heard you say you may give guidance in the future once you have a better sense of the revenue contribution from the acquisition. Is that right?

Dan Goldberger (CEO)

Yeah. We're expecting to close the acquisition in the second quarter. At that point, we'll have a much better feel for what the Proforma Combined Company financials are going to look like for 2025. Rather than speculate, it's so close. We're going to try and do it right.

Matt Schwarz (EVP and Head of US Global Wealth Management Business Strategy & Analytics)

If you had to highlight—I know you've been putting up some great growth. I think consensus obviously has you growing quite a bit in 2025. If you had to highlight just at a high level without getting into the numbers where you think the best growth opportunity is in 2025, what would you?

Dan Goldberger (CEO)

Yeah. Look, we've got great momentum in our prescription gammaCore sales for headache. I think that's going to continue to grow. I think the percentage is going to—it's not going to grow at the same percentages because we're dealing with larger dollar amounts, but it's going to continue to grow well above market. Our direct-to-consumer continues to surprise us at how well that business is doing. That's off of a smaller base. I think that's going to continue to be an upside surprise for us. We're working on additional indications. We may get a lift from additional indications in the back half of the year. Of course, the one acquisition product from NeuroMetrix and the Spark Biomedical for substance abuse are upsides for the back half of 2025 and certainly for 2026.

Matt Schwarz (EVP and Head of US Global Wealth Management Business Strategy & Analytics)

Got it. Okay. Thank you.

Operator (participant)

Thanks, Matt. RK from HC Wainwright, let's try again. I know we had some technical issues the last time. RK, can you unmute?

Dan Goldberger (CEO)

He's not muted.

Operator (participant)

Okay. While we wait, maybe we can take some of the questions that have been submitted. Dan, a couple of questions about the availability of Truvaga Plus in the U.K. without a prescription and sales in the U.K. Do you want to spend a minute there?

Dan Goldberger (CEO)

We have not launched Truvaga outside of the U.S. We wanted to make sure that we understood the product quality first and return rates first and foremost, as well as the sale-to-cash cycle. We are looking at launching Truvaga 350 in Canada and the U.K. later this year. Truvaga Plus is mobile app-enabled. That's a little bit more complicated to launch outside the U.S. because every country has their own data management and personal data protection rules that we're not in a position to do the detailed engineering around all of that. We are going to explore launching Truvaga 350 in the U.K. and in Canada in the second half of this year.

Operator (participant)

Great. I do have RK's questions via email, so I'm going to read on his behalf. Is there an impact from the VA personnel reductions that have occurred that could impact the gammaCore business?

Dan Goldberger (CEO)

Nothing material yet, but we are watching the situation. There was a memo about a reduction in force, a significant reduction in force in the VA that came out at the beginning of March. Prior to that, there was a lot of distraction around the early retirement offers that were made. We are not seeing any explicit issues, but a lot of the people that we work with on the supply chain side are distracted, trying to figure out if they should take the early retirement buyout, worried about whether they are going to be affected by the RIF. On the clinical side, among the doctors and nurses and that staff, we really do not see any disruption. On the supply chain side, we are seeing some distraction.

Operator (participant)

Okay. Thank you. This one also comes from RK. What is your confidence on achieving a mid-80s gross margin in 2025? In the long term, what are the gross margins investors should expect?

Dan Goldberger (CEO)

Great question. We've got plenty of track record now with our prescription gammaCore and now with our direct-to-consumer Truvaga product line. There's a little bit of give and take with product mix. For 2025, most of our revenue is going to come from our legacy product lines, and we know what that gross margin profile looks like. As we get into the back half of the year, as I mentioned earlier, we think there's upside in the NeuroMetrix Quell product and in the Spark Sparrow product. Those gross margins are probably a little bit lower. As that product mix, if one or both of those products become material revenue, then that product mix might pull down gross margin. I really think that's more of a 2026 conversation than 2025. 2025 revenue is going to be dominated by our existing products.

Operator (participant)

Great. I'm going to take a question here that was submitted by Jeff Cohn of Ladenburg. Could you talk about the gammaCore U.S. commercial channel a little more? What are the 2025, 2026 plans there to fuel awareness and growth?

Dan Goldberger (CEO)

Great question. Joerns and Kaiser is the huge opportunity for us on the commercial channel. Our cash pay channels, when we launched Truvaga, we anticipated that a significant portion of our cash pay channel would migrate to the lower price point of Truvaga. And we're not surprised that some of that has happened. In 2026, assuming that we finally do get traction with Joerns this year, in 2026, we're going to look towards getting on contract with other indemnity insurance third-party payers. I think that's really what's going to be necessary to drive growth in the prescription commercial channel.

Operator (participant)

Great. We have two questions that came in from Larry Linton. The first one is, in the next three to five years, what do you think the percentage revenue mix would be between your existing portfolio products and the acquired or the assets that you're in the process of acquiring?

Dan Goldberger (CEO)

That's a great question. My crystal ball is very fuzzy. I think our prescription gammaCore business is going to continue to grow above market. The wild card is how much are we willing to invest in consumer wellness products and therefore how quickly that product line will grow. I can see scenarios where our health and wellness initiative overwhelms our more traditional prescription medical device business.

I'm very optimistic about the Quell product, both on the prescription side and on the health and wellness side. The substance abuse product from Spark has tremendous upside. As you know, substance abuse and managing it is a crisis in this country. I can't handicap what it's going to look like in three years, but it's going to be big.

Operator (participant)

Okay. We have two more questions over the text box and then one more live question. Can you talk about your capital adequacy? What funding do you anticipate needing over the near to midterm?

Dan Goldberger (CEO)

Yeah. That's a great question. It's something that the board and management look at very, very frequently. We finished the year with more than $12 million of cash in the fourth quarter. We used less than $1 million of cash.

We have plenty of runway to keep growing the revenue line and get to that cash-positive inflection. That said, there are places where we believe we could be growing faster if we were willing to make bigger investments. For example, to grow our field sales force and hire additional territory business managers. On the consumer side, you get more aggressive about our marketing and branding activities. Those are things that we look at on a regular basis. At this point in time, though, we feel like we have plenty of cash to execute the plan, and we have no plans to raise any capital.

Operator (participant)

Great. We have another question here about your strategy on how to drive sales of Truvaga through the website, but also on Amazon. A second part of that was, can you help this investor better understand the differentiating factors of Truvaga Plus to competing products that are out there and sold?

Dan Goldberger (CEO)

Yeah. Until now, most of our spending on Truvaga has been on search. Increasingly, we're spending money on social media to create awareness. We've started to kind of move up the value chain with influencers and affiliates. There's a huge ecosystem out there of especially biohacker influencers and increasingly affiliates. Amazon is a big step for us, right? Amazon, we're all consumers. Most of us prefer to buy something on Amazon if it's available there. It's just a much more seamless process. Amazon, of course, takes a fee, and so that affects our contribution margin. We're going to be monitoring that closely as we get more experience with Amazon.

Resellers longer term, that's chunky business, right? Because with a reseller, you sell a significant number of products. Maybe they get a discount, but then again, I don't have to spend the money on advertising. That could all work. That could also work very nicely. We see it, I guess you call it an omnichannel distribution and sales investment. We are very pleased with our metrics so far, and the numbers keep getting bigger and bigger.

Operator (participant)

Okay. I'm going to combine two questions here on the RX gammaCore side. VA and DOD business has been running in a range for the past three quarters now. Do you need to grow the salesforce again to reaccelerate this business? Can you just talk about how many salespeople you have today versus where you were six months ago?

Dan Goldberger (CEO)

Yeah. We talked about that in our prepared remarks. We have roughly 80 sales reps out there now that are straight commission. They get paid on a 1099. Many of them carry additional product lines besides ours. We have eight W-2 employees that are managing that group of 80 field sales reps. Those numbers have been constant since July, August of 2024. I want to get through closing the NeuroMetrix transaction. Assuming things are going smoothly, we're going to look at investing in growing that field sales function again as we get into the second half of the year. Absolutely, our prescription gammaCore sales and I expect our prescription fibromyalgia sales will ultimately scale with feet on the street and our ability to get the word out and educate clinical staff, doctors, and nurses.

Operator (participant)

Great. Thank you. We're going to take our last live question from Kenneth Steinhauser. Kenneth, we're going to elevate you. You're just going to need to unmute.

Kenneth Steinhauser (Managing Director)

Hi, Dan. Thank you for taking the question. I'm a retired pharmacist. I actually purchased two Truvaga Plus units. And thank you. Yeah. And thank you for the 15% discount, by the way. I appreciate it. You haven't mentioned that yet.

Dan Goldberger (CEO)

I don't talk about that too much, but okay.

Kenneth Steinhauser (Managing Director)

If anybody wants to know about a 15% discount, I'm on Yahoo, and you can reach me there. I have two family members, well, three family members that are using Truvaga Plus. One for GI symptoms, and it's worked very well. The other one for sleep. Now, the one for sleep is also doing very well, but he likes to share things with his significant other. I have a problem with the app because the app will only let one person in a household use the unit. Are you guys going to change that app so more than one person can use the unit? Is it something that's going to?

Dan Goldberger (CEO)

Yeah. We have a whole development pathway for the mobile app feature set. I have to balance that with our R&D spend, and we're trying to stay disciplined around operating expenses. That functionality is definitely on the pathway. One of the things we're really looking forward to is going live on Apple Health and making it interoperable with Apple Health so that people can track not just their vagus nerve stimulation, but also the impact on various heart rate, heart rate variability, quality of sleep through the Apple Health functionality. We have great things to do.

We're also going to be picking up some infrastructure from NeuroMetrix. They have a far more sophisticated mobile app and back infrastructure around the mobile app for a portal. We're just not there yet, and I have to juggle that against the investment required.

Kenneth Steinhauser (Managing Director)

Thank you very much for taking my question. I appreciate it.

Dan Goldberger (CEO)

Absolutely.

Operator (participant)

Dan, you want to go into your closing statement?

Dan Goldberger (CEO)

Absolutely. Thank you all. Love the more interactive calls. Sorry, we had a little bit of technical difficulties. As usual, I also want to thank our customers, the doctors and nurses that are acting as our champions, increasingly the biohackers out there that are picking up on Truvaga, and certainly our employees and our board of directors for their patience and support with us. Everybody have a good day.