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NeuroMetrix, Inc. (NURO)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 revenue was $0.769M (-54% YoY), gross margin 64% (-360 bps YoY), OpEx $2.321M (-15% YoY), and net loss $1.488M ($0.74/sh); cash and securities were $16.430M and working capital was $16.9M .
  • DPNCheck drove the decline (revenue $0.536M, -62% YoY) amid the final year of CMS MA risk-adjustment phaseout; Quell grew 47% YoY to $0.192M with strong KPIs (540 starter kits +165% YoY; 3,682 refill months +13% YoY) .
  • Strategic review remains ongoing; ATM facility was terminated in April; Q1 RIF reduces personnel costs by over $0.5M per quarter going forward .
  • Guidance/timing pivot: company will pursue a De Novo submission for Quell CIPN in Q4 2024 with potential launch by end of 2025; OTC Quell relaunch targeted for Q4 2024; VA channel uptake emerging and targeted as a core focus in 2025 .
  • S&P Global/Capital IQ consensus estimates for Q2 2024 were unavailable for NURO; assessment vs Street cannot be provided (see Estimates Context) [SpgiEstimatesError].

What Went Well and What Went Wrong

What Went Well

  • Quell posted 47% YoY revenue growth to $192K, with strong engagement metrics (540 starter kits, +165% YoY; 3,682 refill months, +13% YoY), and Quell margins turned positive (36%) and trending upward .
  • VA reimbursement channel emerging for Quell fibromyalgia, expanding routes beyond cash-pay; management expects VA to be a core focus in 2025 .
  • Portfolio and market validation: Health Canada approved DPNCheck 2.0; multiple scientific abstracts on DPNCheck presented at major diabetes meetings in May/June 2024 .

Management quotes:

  • “We are starting to see uptake of Quell fibromyalgia in the Veterans Administration health system... we’ll be looking to grow steadily for the rest of the year and expect to make the VA a core focus in 2025.”
  • “We will make a De Novo submission for CIPN by the fourth quarter of this year with a potential commercial launch by the end of 2025...”
  • “At current scale, we are adequately funded with approximately $16.4 million in liquid assets and quarterly cash usage of about $1.4 million...”

What Went Wrong

  • DPNCheck revenue fell 62% YoY to $536K due to the final year of CMS MA risk-adjustment phaseout; international sales weakened on Japan distributor inventory overhang (expected to resume later in 2024) .
  • Gross margin compressed 360 bps YoY to 64%, reflecting adverse mix and lower indirect cost absorption from reduced volumes .
  • Continued net losses and professional service costs tied to the strategic review partially offset the OpEx benefit from the Q1 reduction in force .

Financial Results

MetricQ2 2023Q4 2023Q2 2024
Revenue ($USD)$1,655,744 $1,317,746 $769,148
Diluted EPS ($USD)($1.56) ($1.43) ($0.74)
Gross Margin (%)68% 64% 64%
Operating Expenses ($USD)$2,742,713 $2,705,073 $2,320,574
Gross Profit ($USD)$1,119,258 $847,974 $491,919
Net Loss ($USD)($1,537,029) ($1,649,547) ($1,487,932)
Cash & Securities ($USD)—$17,997,151 $16,429,956
Shares Outstanding (approx.)~1.0M ~1.5M ~2.0M

Segment breakdown (Q2 2024):

SegmentRevenue ($USD)YoY Growth
DPNCheck$536,000 -62%
Quell (Fibromyalgia + OTC)$192,000 +47%
Total Reported Revenue$769,148 -54%

KPIs:

KPIQ2 2024YoY
Quell Starter Kits (units)540 +165%
Quell Electrode Refill Months3,682 +13%
Working Capital ($USD)$16.9M —
Operating Cash Usage ($USD)~$1.4M ~$90K lower YoY

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Quell OTC relaunchQ4 2024OTC channel in commercial pause since late 2022 Restart OTC sales in Q4 2024 Raised timing/activation
Quell CIPN regulatory pathQ4 2024 submission; commercial timing510(k) filed Dec 2023; potential commercialization by end of 2024 or early 2025 pending FDA review Pursue De Novo submission in Q4 2024; potential launch by end of 2025 Slower timeline; pathway change
Operating expensesOngoingElevated OpEx in Q4 2023 from R&D and sales expansion RIF enacted in Q1 2024 reduces personnel costs by >$0.5M per quarter Lowered OpEx run-rate
DPNCheck Japan ordersH2 2024—Expect biosensor orders to resume later in 2024 after distributor inventory clears Positive outlook for resumption

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2023)Current Period (Q2 2024)Trend
Quell commercializationAdded sales managers, telemedicine, VA reimbursement; strong prescription/refill growth Methodical approach; VA uptake beginning; OTC relaunch planned Q4; Quell margins positive and improving Improving execution; channel diversification
CIPN regulatory510(k) submitted Dec 2023; potential commercialization late 2024/early 2025 Switch to De Novo submission in Q4 2024; potential launch by end of 2025 Pathway/timing elongated
DPNCheck marketCMS MA changes compress revenue; pivot needed beyond MA; value-based care exploration MA phaseout final year; U.S. demand down; international (Japan) impacted; exploring new markets Persistent headwinds; pivot in progress
International & regulatoryChina/Japan distribution noted Health Canada approval for DPNCheck 2.0; Japan inventory overhang Mixed: regulatory progress vs distributor inventory
Capital/strategic reviewInitiated review; ATM usage in Q4 2023 -Ongoing review; new independent director; ATM terminated in April Continued governance/capital structure evolution

Management Commentary

  • “At current scale, we are adequately funded with approximately $16.4 million in liquid assets and quarterly cash usage of about $1.4 million... Our capital structure is simple, it's debt-free and common stock based.” — Thomas Higgins .
  • “We are starting to see uptake of Quell fibromyalgia in the Veterans Administration health system… we expect to make the VA a core focus in 2025.” — Shai Gozani .
  • “We will make a De Novo submission for CIPN by the fourth quarter of this year with a potential commercial launch by the end of 2025…” — Shai Gozani .
  • “Quell prescription and OTC indications represent a substantial growth opportunity… direct-to-patient telemedicine option… reimbursed Veterans Administration (VA) channel… planning to reactivate our OTC business.” — Shai Gozani (press release) .
  • “We implemented a substantial reduction-in-force at the end of Q1 to lower operating expenses by over $0.5M per quarter.” — Company statement .

Q&A Highlights

  • Commercial approach and pacing for Quell: management emphasized a deliberate, low-fixed-cost build (director of sales; variable compensation contract reps), with readiness to increase investment now that market playbooks (including VA) are clearer .
  • Product positioning: Quell delivers symptom relief with favorable safety; OTC relaunch will be e-commerce-led with careful margin management (own site; evaluating Amazon; avoiding low-margin brick-and-mortar) .
  • DPNCheck strategy: reiterated need to rotate into non-MA markets over several quarters given CMS changes; updates/pilots targeted through the year .

Estimates Context

  • S&P Global/Capital IQ consensus for Q2 2024 EPS and revenue was unavailable for NURO due to missing mapping; therefore, we cannot assess beats/misses vs Street (unavailable from S&P Global) [SpgiEstimatesError].
  • Implications: In absence of Street anchors, internal trajectory matters. YoY declines driven by DPNCheck MA dynamics were anticipated; Quell growth and VA channel development may support upward revisions to medium-term Quell contribution, while CIPN timeline elongation (De Novo) likely pushes any oncology contribution to late 2025+ .

Key Takeaways for Investors

  • DPNCheck decline remains the primary headwind in 2024 as MA risk-adjustment compensation sunsets; expect continued pressure until alternative markets scale and Japan inventory normalizes .
  • Quell is the growth vector: fibromyalgia traction, VA reimbursement channel, and OTC relaunch in Q4 2024 should drive sequential revenue and margin improvement; management is scaling variable-cost commercial capacity to preserve cash .
  • Regulatory path change for CIPN to De Novo implies a longer runway; calibrate expectations to potential oncology launch by end of 2025, contingent on FDA review .
  • Cost discipline is tangible: RIF reduces personnel costs by >$0.5M per quarter; gross margin holds at ~64% despite lower volumes, with Quell margin now positive and trending up .
  • Balance sheet supports execution: $16.43M in cash/securities, debt-free, working capital $16.9M; ATM terminated and independent director added amid ongoing strategic review .
  • Near-term catalysts: Q4 2024 OTC Quell relaunch, VA center expansion, potential DPNCheck order resumption in Japan; watch for pilot announcements in new DPNCheck markets .
  • Medium-term thesis: If Quell scales across fibromyalgia, OTC, and VA, and CIPN De Novo approval arrives on timeline, mix shift away from MA should structurally improve durability and margins; monitor execution pace and regulatory milestones .