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NeuroPace Inc (NPCE)·Q2 2025 Earnings Summary

Executive Summary

  • Record Q2 revenue of $23.52M (+22% YoY) with gross margin at 77.1% (+370 bps YoY); management raised FY25 revenue to $94–$98M and gross margin to 75%–76% .
  • Mixed print vs Street: Revenue modestly beat, while EPS and EBITDA missed; one-time personnel costs (~$1.9M) and mix effects weighed on profitability even as RNS gross margin topped 80% .
  • Strategic positives: reimbursement stability (CMS kept RNS in MS‑DRG 023), debt refinanced into a new $75M MidCap facility (lower cash interest), and accelerating Project CARE contributions; cash and ST investments stood at $62.1M with a $15M undrawn revolver .
  • Clinical/regulatory: NAUTILUS one-year data showed statistically significant secondaries (79% median GTC seizure reduction at 12 months; >80% at 18 and 24 months to date) despite not meeting the primary effectiveness endpoint; Q‑Sub accepted and FDA meeting set; PMA supplement still expected 2H25 .

What Went Well and What Went Wrong

What Went Well

  • Revenue and margin execution: $23.52M revenue (+22% YoY) and 77.1% gross margin (vs. 73.4% LY; 77.0% in Q1), underpinned by RNS volume, manufacturing efficiencies, and favorable mix .
  • Guidance raised: FY25 revenue increased to $94–$98M (from $93–$97M) and gross margin to 75%–76% (from 73%–75%) reflecting strong 1H performance .
  • Commercial traction: record highs in active accounts and prescribers; Project CARE showed higher sequential implant contribution; RNS GM >80% supports path toward ~80% total GM over time .

What Went Wrong

  • Profitability below Street: EPS of $(0.26) vs consensus $(0.22)* and EBITDA of $(6.77)M vs $(3.90)M*, driven by ~$1.9M one-time personnel costs (severance/recruiting) and mix including lower-margin SEEG/DIXI .
  • Operating expense step-up: Total OpEx rose to $25.0M (vs $20.4M LY), including $1.6M non-recurring G&A tied to an executive transition (incl. $0.7M SBC) .
  • NAUTILUS primary miss: Trial did not reach statistical significance on the primary effectiveness endpoint, though secondaries were highly significant and clinically meaningful; management expects a constructive FDA process .

Financial Results

Core P&L and Profitability

MetricQ2 2024Q1 2025Q2 2025 ActualQ2 2025 ConsensusBeat/Miss
Revenue ($M)$19.26 $22.52 $23.52 $23.08*Beat
Gross Margin %73.4% 77.0% 77.1% N/A—
Total Operating Expenses ($M)$20.36 $22.49 $25.00 N/A—
Operating Loss ($M)$(6.23) $(5.15) $(6.82) N/A—
Net Loss ($M)$(7.51) $(6.59) $(8.65) N/A—
Diluted EPS ($)$(0.26) $(0.21) $(0.26) $(0.217)*Miss
EBITDA ($M)N/AN/AN/A$(3.90)*Miss

Values with an asterisk (*) are retrieved from S&P Global.

Cash Flow and Balance Sheet

MetricQ1 2025Q2 2025
Free Cash Flow ($M)N/A$(2.3)
Cash & Short‑Term Investments ($M)$66.3 $62.1
Long‑Term Borrowings ($M)$59.8 $58.6

KPIs and Mix

KPIQ2 2025
RNS System revenue growth YoY+16%
RNS Gross Margin %>80% (management commentary)
Active accounts & prescribersRecord highs
Project CAREHigher sequential implant contribution

Context vs Prior Quarters/Year

  • YoY: Revenue +22%; GM +370 bps; OpEx +$4.6M on one-time items; net loss widened modestly .
  • QoQ: Revenue up from $22.52M to $23.52M; GM +10 bps; OpEx rose with non-recurring costs .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total RevenueFY 2025$93–$97M $94–$98M Raised
Gross Margin %FY 202573%–75% 75%–76% Raised
Total Operating ExpensesFY 2025$92–$95M (incl. ~$11M SBC) $92–$95M (incl. ~$11M SBC) Maintained
Sales & MarketingFY 2025N/A$46–$47M (color on investments) New detail
R&DFY 2025N/A~$27–$28M New detail
G&AFY 2025N/A$19–$20M New detail
Interest ExpenseFY 2025N/A~$(8)M; ~$2M annual cash interest savings from refinancing New detail
Interest IncomeFY 2025N/A~$2.5M New detail

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24)Previous Mentions (Q1’25)Current Period (Q2’25)Trend
AI/TechnologyNext-gen platform, AI tools underway Software release planned 2H25; AI tools to aid efficiency Progress on AI workflow tool, next-gen seizure classifier; 2025 launch targeted Advancing to near-term launch
Supply Chain/Tariffs—Tariffs expected minimal impact No adverse update; strong GM points to manufacturing efficiencies Stable/benign
Reimbursement——CMS maintains MS‑DRG 023 for RNS (positive) Positive
Product Performance2024 GM 73.9%; steady growth RNS growth +26%; GM 77% Record revenue; GM 77.1%; RNS GM >80% Improving
Regional/Access (Project CARE)—Sequential growth in referrals/implants Increasing implant contribution; accounts/prescribers at record highs Scaling
Regulatory/NAUTILUS (IGE)On track for 2H25 submission On track 2H25; 1‑yr follow-ups complete Q‑Sub accepted; meeting set; strong secondaries; PMA supplement planned 2H25 Constructive engagement
R&D ExecutionAI and next-gen platform investments Continued progress; 2H25 software Continued progress; data moat (22M events) Building moat

Management Commentary

  • “We delivered another record revenue quarter… achieved with a total gross margin above 77% and RNS gross margin above 80%… We are raising both our full year revenue and gross margin guidance ranges.” — CEO Joel Becker .
  • “Based on our strong first half gross margins, we are raising our gross margin guidance to a range of 75% to 76%… expect total company gross margin to trend towards 80% over time as we scale RNS volumes and DIXI phases out.” — CFO Patrick Williams .
  • On NAUTILUS: “Median IgE GTC seizure reduction… signaling better than 80% reduction at both 18 and 24 months… 45.2% [of 42 patients with ≥9 months stimulation] were seizure‑free at 12 months” — CEO Joel Becker .
  • On financing: “Refinancing… gives us enhanced financial flexibility… removes near‑term debt maturity overhang.” — CEO Joel Becker .

Q&A Highlights

  • Guidance cadence: Management framed implied 2H GM deceleration as prudence; DIXI wind‑down could create mix “bumpiness,” but RNS fundamentals remain strong .
  • RNS growth algorithm: Confident in ≥20% CAGR for core RNS absent label expansions; Dixie divestiture to be reflected in long‑range update later in 2025 .
  • NAUTILUS regulatory path: Q‑Sub accepted; early FDA meeting set; pursuing broad IGE indication supported by significant secondary endpoints despite primary miss .
  • Profitability drivers: RNS GM >80% a key lever; refinancing expected to reduce annual cash interest by ~$2M and support path to cash flow breakeven over time .

Estimates Context

  • Q2 2025 vs S&P Global consensus:
    • Revenue: $23.52M vs $23.08M* — modest beat .
    • EPS: $(0.26) vs $(0.217)* — miss, driven by one‑time personnel costs and mix .
    • EBITDA: N/A reported; consensus $(3.90)M*; Street likely recalibrates EBITDA for one‑time items.
  • Revisions watch: Raised FY revenue and GM guidance should lift 2H revenue and margin estimates; EPS may lag near term given OpEx timing, but mix shift away from lower‑margin DIXI and interest savings are tailwinds .
    Values with an asterisk (*) are retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term: Print was revenue/GM positive with raised FY guide; profitability optics weighed by one‑time costs. Expect constructive sentiment on better GM trajectory and reimbursement stability .
  • Medium-term: Core RNS can sustain ≥20% growth with improving gross margin as DIXI phases out; AI tools and next‑gen platform add differentiation and may expand TAM over time .
  • Catalysts: FDA interaction and PMA supplement submission for NAUTILUS (2H25), pediatric submission (2025), AES presentation of PAS GTC data in December, and continued Project CARE scaling .
  • Financial runway: $62.1M cash/ST investments plus $15M undrawn revolver; refinancing reduces cash interest and supports investment pace while targeting cash flow breakeven longer term .
  • Watch items: Mix variability during DIXI wind‑down; execution on AI software launch; tracking RNS GM trend toward ~80% and operating leverage vs guidance .

Appendix: Additional Data and Disclosures

  • Q2 details: Sales & marketing $12.0M; R&D $6.8M; G&A $6.1M; free cash flow $(2.3)M; cash & ST investments $62.1M; LT debt $58.6M .
  • Other corporate updates: CMS maintained MS‑DRG 023 assignment; new $75M MidCap credit facility replacing CRG, with improved terms .
  • Non‑GAAP: Company did not present non‑GAAP EPS; Street EBITDA estimates shown for comparison only (S&P Global).

Notes:

  • All company figures and commentary are sourced from the Q2 2025 8‑K/press release and earnings call unless otherwise indicated –.
  • Values with an asterisk (*) are retrieved from S&P Global.