Release Date: November 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• NeuroPace Inc (NASDAQ:NPCE) reported a record revenue of $21.1 million for Q3 2024, marking a 28% increase compared to the same period last year.
• The company demonstrated disciplined operating expense management, reducing cash burn to $1.8 million for the quarter.
• NeuroPace Inc (NASDAQ:NPCE) increased its cash balance from $55.5 million at the end of Q2 to $56.8 million at the end of Q3, indicating strong financial health.
• The company successfully expanded its market penetration and utilization of both the RNS system and Dixie Medical products.
• NeuroPace Inc (NASDAQ:NPCE) is on track with its Nautilus study, which could lead to the RNS system being the first device with an FDA-approved indication for idiopathic generalized epilepsy.

Negative Points

• Gross margin for Q3 2024 was 73.2%, slightly down from 74.5% in the same quarter of 2023.
• R&D expenses increased to $5.8 million in Q3 2024 from $4.8 million in the same period of 2023, driven by personnel and program expenses.
• SG&A expenses rose to $13.9 million in Q3 2024, up from $13.4 million in the prior year period.
• The company reported a net loss of $5.5 million for Q3 2024, although this was an improvement from a $7.3 million loss in Q3 2023.
• There is potential quarter-to-quarter variability in revenue growth, which could impact future financial performance.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with NPCE.

Q: Joel, you've been on board for a number of quarters now. Can you parse out where you feel the primary growth is coming from in the core RNS growth? Is it the project care initiative, market share taking, or expanding the market? A: Joel Becker, CEO: The growth is a result of executing our strategy, which includes increasing adoption and utilization within level four centers, expanding site of service, and expanding indications. We're seeing growth from both adoption and utilization within level four centers and starting to see contributions from the project care initiative.

Q: Can you provide an update on the sales reps, particularly those placed in geographies for expansion opportunities outside of level four centers? A: Joel Becker, CEO: The initial group of sales reps has completed training and is now active. We are seeing increased growth in areas where we previously lacked coverage. We remain opportunistic about hiring to take advantage of growth opportunities and prepare for future expansion.

Q: Can you unpack the impact of the project care pilot program on growth, particularly between traction among epileptologists outside level four centers and patient referrals? A: Joel Becker, CEO: The project care program is contributing to growth through both implants within centers and referrals back to level four centers. We are seeing referrals for phase two management and some centers are referring patients for implants and then managing them post-implant.

Q: You posted a strong revenue beat in Q3. The updated guidance doesn't seem to build in much additional credit for Q4. Are there specific headwinds you'd call out? A: Joel Becker, CEO: We are pleased with the top-line momentum and expect 21% growth for the second half of the year. The fundamentals of the business are strong, and we are focused on maintaining this growth rate. There may be quarter-to-quarter variability, but we feel good about the business's direction.

Q: How should we think about the impact of project care in 2025? A: Joel Becker, CEO: We see project care as an important opportunity to continue growing and expanding the business. We plan to expand pilot activities and incorporate care more fully across our organization and customer base in 2025, alongside our focus on increasing adoption and utilization within level four centers and expanding indications.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.