NeuroPace (NPCE) Q1 2026 Earnings Transcript

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Date

Tuesday, May 12, 2026 at 4:30 p.m. ET

Call participants

• Chief Executive Officer — Joel D. Becker
• Chief Financial Officer — Patrick F. Williams

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Takeaways

• Total revenue -- $22.1 million reported, with $22.0 million excluding DIXI Medical, reflecting 8% growth and RNS system revenue of $21.7 million.
• RNS system revenue growth -- 19.5% year over year, reaching $21.7 million versus $18.2 million in the prior year.
• Service revenue -- $314 thousand generated from data collaborations, including a new partnership.
• Non-GAAP gross margin -- 82.5%, compared to 83.6% in the prior year; prior period included a 120-basis-point inventory revaluation benefit; underlying margin expanded due to pricing.
• Non-GAAP operating expenses -- $21.5 million, up from $19.4 million, rising 10% and staying below 20% revenue growth.
• Sales and marketing expense -- $11.0 million, increased from $9.6 million, reflecting commercial team investments.
• Research and development expense -- $6.5 million, down slightly from $6.6 million, with reduced clinical study spending offset by AI and platform investment.
• General and administrative expense -- $4.0 million, up from $3.3 million, driven by personnel costs.
• Non-GAAP loss from operations -- $3.3 million, improved from a $4.1 million loss previously.
• Adjusted EBITDA loss -- $3.3 million, compared to a loss of $4.1 million in the prior year.
• GAAP net loss -- $6.7 million, slightly higher than $6.6 million in the prior year, with both periods inclusive of DIXI Medical.
• Cash and equivalents -- $54.8 million at period end, down from $61.2 million at year-end, reflecting normal first quarter outflows.
• Raised 2026 revenue guidance -- Guidance increased to $99 million-$101 million from $98 million-$100 million; incorporates 21%-23% RNS revenue growth and $500 thousand service revenue visibility.
• RNS market penetration -- Achieved all-time highs in active prescribers, accounts, and patient pipeline, with growth led by Level 4 epilepsy centers and expanding referrals from community relationships.
• Guidance exclusion -- 2026 guidance excludes any contribution from IGE indication expansion; potential IGE approvals would prompt future updated outlooks.
• Regulatory process -- FDA exercised a 180-day PMA review clock pause for follow-up questions during the Nautilus supplement review; NeuroPace has responded and anticipates a midyear determination.
• Clinical outcomes (NAUTILUS) -- 18-month data showed a 77% median reduction in generalized tonic-clonic seizures, over 30% decline in injury events, and a 44% decrease in benzodiazepine rescue usage.
• Clinical evidence (focal epilepsy) -- Recent 3-year post-approval study published in Neurology reported 82% median seizure reduction in drug-resistant focal epilepsy.
• AI and product development -- NeuroPace AI suite, including ECOG Assistant, is in advanced development with early favorable performance; model leverages data from over 8,000 implants and 26 million iEEG recordings.
• Replacement cycle -- Less than 5% of revenue and below 10% of volume was from RNS replacements; early stages of replacement cycle, expected to gain significance in future periods.
• Pediatric and LGS initiatives -- Pediatric effort advancing through retrospective real-world data analysis; LGS trial enrollment completed, with early positive signals and further updates planned.
• Reimbursement update -- Positive developments in OPPS and APC mapping for device replacement, facilitating better reimbursement alignment for replacements as their volume rises.

Summary

NeuroPace (NASDAQ:NPCE) delivered accelerated RNS system growth and operational leverage while revising 2026 guidance higher, driven by improving pipeline metrics, successful commercial investments, and data-driven momentum across focal epilepsy. Management clarified that current revenue forecasts exclude any potential impact from IGE indication expansion, with updates to be provided following regulatory approval and clearer reimbursement dynamics. The company highlighted advancing AI-enabled clinical tools and referenced unique longitudinal iEEG data capabilities as integral to its ongoing differentiation and adoption strategy, reinforcing its market position in data-driven neuromodulation solutions.

• PMA supplement review for IGE remains ongoing, with the FDA pausing the review clock to request clarifying data and context; NeuroPace anticipates a determination by midyear based on continued productive interactions.
• Reported gross margin improvement, after normalizing for the prior year's one-time inventory benefit, signaling favorable pricing trends and scale leverage.
• Management emphasized that expanded service revenue visibility now supports including $500 thousand in 2026 revenue guidance.
• Pediatric and LGS data initiatives are progressing, supported by a growing body of real-world clinical evidence and a newly completed pilot LGS trial in collaboration with the NIH.

Industry glossary

• RNS system: Brain-responsive neuromodulation device that provides real-time, patient-specific epilepsy therapy and records continuous intracranial EEG.
• Level 4 comprehensive epilepsy center: Specialized clinical center designated for treating complex refractory epilepsy cases requiring advanced diagnostics and interventions.
• PMA supplement: Regulatory submission seeking to alter or expand indications for use of an already-approved medical device under the FDA's Premarket Approval framework.
• IGE: Idiopathic generalized epilepsy, an epilepsy syndrome not previously included in RNS device labeling or reimbursement coverage.
• NAUTILUS: Clinical study evaluating the RNS system for treatment of idiopathic generalized epilepsy.
• OPPS: Outpatient Prospective Payment System, Medicare's reimbursement structure for outpatient procedures and device services.
• APC mapping: Assignment of device procedures to Ambulatory Payment Classifications used for Medicare outpatient reimbursement.
• LGS: Lennox-Gastaut syndrome, a severe form of childhood-onset epilepsy often resistant to conventional therapies.
• ECOG Assistant: AI-driven clinician support tool developed by NeuroPace to aid seizure detection and review within intracranial EEG datasets.
• iEEG: Intracranial electroencephalography; direct brain recording used for seizure localization and analysis.

Full Conference Call Transcript

Joel D. Becker, NeuroPace's Chief Executive Officer who will summarize our recent performance and strategic progress followed by a detailed financial review and outlook from Patrick F. Williams, our chief financial officer. Following our prepared remarks, we will open the call for questions. Before we begin, I would like to remind you that certain statements made on today's call may constitute forward looking statements within the meaning of federal securities laws. These statements include, among others, comments regarding our financial outlook for 2026, our commercial strategy, clinical and product development initiatives, regulatory matters, including our IGE PMA supplement, and our expectations regarding operating performance and profitability.

Forward looking statements are based on management's current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. A discussion of these risks and uncertainties can be found in today's press release And in our filings with the Securities and Exchange Commission including our most recent Form 10-K and Form 10-Q. We undertake no obligation to update or revise any forward looking statements except as required by law. In addition, we will discuss certain non GAAP financial measures on today's call. Including adjusted EBITDA.

Reconciliations of non GAAP measures to the most directly comparable GAAP measures are included in our earnings release, which is available on the Investor Relations section of our website. With that, I will now turn the call over to Neuropace's Chief Executive Officer, Joel D. Becker. Joel?

Joel D. Becker: Thanks, Scott, and good afternoon, everyone. I will start with an overview of our first quarter results and how the team is executing against our strategy followed by updates on key clinical and product development initiatives. After that, Patrick will walk through the financials and our revised outlook before we open the line for Q&A. The first quarter reflects continued execution against the priorities we outlined earlier this year. We delivered total revenue of $22.1 million in the quarter and excluding DIXI Medical, we delivered $22 million in revenue. Representing 8% year over year growth with RNS system revenue of $21.7 million.

Importantly, the underlying fundamentals of the business remain solid, as we reached new all time highs in active prescribers, accounts, and patient pipeline during the quarter. These are leading indicators we track closely and give us confidence in the durability of demand for the RNS system. The majority of growth continues to be driven by level 4 comprehensive epilepsy centers, which remain the core of our commercial focus. In addition, we continue to see encouraging trends in the front end of the patient funnel with the rate of new patients being added to the pipeline continuing to accelerate. While the majority of procedures remain concentrated within level 4 comprehensive epilepsy centers, community relationships are increasingly serving as durable referral channels.

We believe this is important not only for continued penetration of the adult focal population, but also for establishing referral pathways that will be relevant as we potentially expand into IGE. Regarding guidance, we are raising our full year 2026 revenue guidance to a range of $99 million to $101 million up from $98 million to $100 million previously. This reflects 21% to 23% underlying RNS growth from our existing adult focal indication and does not include any contribution from idiopathic generalized epilepsy or IGE indication expansion. From a market development perspective, we continue to invest in the commercial organization.

This includes targeted sales representative additions in key geographies, updates to our sales incentive structure to better align with growth objectives, and additional resources dedicated to helping patients navigate the funnel from identification to implant. These investments are designed to reduce friction in the pathway and increase procedural consistency over time. We expect them to become increasingly productive throughout 2026. Let me now turn to clinical development. During the quarter, we completed our FDA mid cycle review meeting with the Nautilus PMA supplement sometimes referred to as a Day 100 meeting, which we viewed as a productive step in the overall regulatory pathway.

As a reminder, the PMA supplement was submitted on December 15, and the 180-day review clock began upon acceptance of that submission. As part of the PMA supplement review process, the FDA has the ability to pause the 180-day review clock to request additional information or clarification. During the quarter, the agency exercised that option to seek certain follow-up information in conjunction with our mid cycle review meeting. We view this as a standard and constructive part of the review process. And we were pleased with how quickly the agency provided their questions which allowed us to respond promptly and thoroughly with robust information during and following the meeting.

At this time, we have responded to the agency's request and the dialogue continues to be productive. Importantly, based on our interactions to date, we continue to believe a midyear determination remains on track. The breakthrough device designation continues to be meaningful in this process allowing for more consistent interaction and timely feedback as the review progresses. The ongoing dialogue we are experiencing, including the ability to address clarifying questions in real time, is consistent with the intent of that program and reflects the collaborative nature of the review. As a reminder, our 2026 revenue guidance does not include any contribution from IGE indication expansion.

If approved on our current timeline, contribution would begin in the second half of the year. And we would provide updated guidance at the appropriate time once we have greater visibility into timing, and reimbursement dynamics. From a data perspective, we remain confident in the totality of the NAUTILUS clinical results. As a reminder, 18 month data presented at the American Academy of Neurology annual meeting in April demonstrated a 77% median reduction in generalized tonic clonic seizures with sustained reductions over time along with favorable safety outcomes in a highly refractory population. Additionally, reductions in absence, and myoclonic seizures exceeded those observed for generalized tonic clonic seizures.

Injury events also declined by approximately 30 percent following treatment. and the use of benzodiazepines as rescue medication for generalized tonic clonic seizures was 44% lower compared with baseline. The strong physician and patient reported clinical improvement, these clinical findings are meaningful because they speak to the real world impact beyond seizure counts. Including fewer seizure related injuries and reduced reliance on rescue interventions. Both of which can translate into improved safety and quality of life. In parallel, we continue to build our leadership position in clinical evidence. Our 3-year post-approval study results in drug resistant focal epilepsy were published in the journal neurology in late April. Demonstrating an 82% median seizure reduction in study subjects.

This publication reflects data from a rigorously conducted FDA monitored prospective study not retrospective registry data, and reinforces the durability and strength of long term outcomes with the RNS system. Now turning to product development. The road map we outlined on our fourth quarter call remains on track. Our priorities continue to be our suite of NeuroPace AI tools, development of a multimodal foundational model, remote care, and progress toward automated detection and next generation system development. Our ECOG assistant, previously known as Seizure ID, represents the first step in our NeuroPace AI suite.

This is an AI enabled tool designed to assist clinicians in analyzing patients' iEEG records of interest and efficiently identify likely electrographic seizure activity upon which to focus their clinical decision making. This is a highly desired capability addressing a real workflow challenge and supports clinicians in their ability to individualize care. We are encouraged by the early performance we are seeing in internal testing and validation work of this tool. We believe this product can serve 2 important purposes. First, it lowers the barrier for new physicians adopting RNS by simplifying data review. Second, it deepens engagement among existing high utilizing centers by improving efficiency allowing clinicians to manage more RNS patients within their practice.

Importantly, submission is paired with moving our clinician platform to the cloud which improves scalability and supports faster deployment of software and data products over time. We expect ECOG assistant approval in the 2026. We are also advancing the development of a multimodal foundational model leveraging our proprietary intracranial iEEG dataset and the clinical experience derived from more than 8 thousand patient implants across 35 thousand patient-years. The EEG component of this model is currently in training, and although we are approximately 1-third of the way through the training process, early internal validation work has been encouraging. Even at this early stage, the model is outperforming prior internal algorithmic approaches we had been developing.

We believe this reflects the power of scale in our dataset and reinforces the strategic value of the more than 26 million intracranial iEEG recordings we have accumulated. Importantly, we are uniquely positioned here. No other neuromodulation platform has a comparable depth of longitudinal intracranial EEG data linked to therapy and outcomes. And leadership in this area matters. As the field moves toward a data guided personalized neuromodulation approach as the model continues to train and refine, we see meaningful opportunity to enhance treatment optimization improve outcomes and further differentiate the RNS platform. With that, I will turn it over to Patrick for review of the financials and outlook. Patrick?

Patrick F. Williams: Thank you, Joel. I will review our Q1 26 performance in more detail and then discuss our updated 2026 guidance. Before I walk through the quarter, I want to clarify our reporting presentation. While we previously anticipated presenting DIXI Medical as discontinued operations, beginning in the first quarter we now expect the discontinued operations presentation to begin with our Q2 26 results. In the meantime, we are providing supplemental non GAAP disclosures that exclude DIXI Medical in both current and prior periods to facilitate comparability. In addition, beginning this quarter, we are presenting gross margin and operating expenses on an adjusted non GAAP basis, excluding stock based compensation, consistent with full year guidance given on our fourth quarter call.

Reconciliations to the most directly comparable GAAP measures are included in today's press release. Excluding DIXI, total non GAAP revenue in Q1 2026 was $22 million or 20.1% year over year. Compared with $18.3 million in the prior year quarter. Growth was primarily driven by increased sales of the RNS system, which grew 19.5% to $21.7 million versus $18.2 million in Q1 2025. As we previewed on our fourth quarter call, growth in the first half tends to moderate relative to the acceleration we see exiting the prior year, and that pattern held true again. Service revenue tied to our data collaborations in the quarter including a new partnership, totaled $314 thousand.

Excluding DIXI, non-GAAP gross margin in Q1 2026 was 82.5%, compared to 83.6% in the prior year quarter. The Q1 2025 gross margin included a 1-time inventory revaluation benefit of approximately 120 basis points. Excluding that impact, underlying gross margin expanded year over year, driven primarily by favorable pricing conversion. Total non GAAP operating expenses for Q1 2026 were $21.5 million compared with $19.4 million in the prior year quarter, and came in better than expectations driven by hiring cadence and other personnel related expenses. Non GAAP operating expense growth of approximately 10% in the quarter remained meaningfully below our revenue growth of 20% again, demonstrating underlying operating leverage as we scale.

Non GAAP sales and marketing expense was $11 million up from $9.6 million in the prior year quarter, reflecting headcount growth in personnel related expenses, as we continue investing in the commercial team and other sales related expenses. Non GAAP research and development expense was $6.5 million compared to $6.6 million in the prior year quarter, The slight decline reflects lower clinical study spend compared to the prior year period. Partially offset by personnel investments supporting our AI road map and next generation platform. Non GAAP general and administrative expense was $4 million, up from $3.3 million in the prior year quarter primarily reflecting increased personnel costs.

Total stock based compensation in the quarter was $2.3 million with $2.1 million included in operating expenses and the balance in cost of goods. Non GAAP loss from operations for Q1 2026 was $3.3 million compared with a loss from operations of $4.1 million in the prior year quarter. Adjusted EBITDA loss was $3.3 million in the first quarter, an improvement compared to a loss of $4.1 million in the prior year quarter. GAAP net loss was $6.7 million for Q1 2026 compared with net loss of $6.6 million in the prior year quarter, which included DIXI Medical in both periods.

We ended the quarter with $54.8 million in cash equivalents, short term investments and restricted cash, compared to $61.2 million at year-end 2025. The sequential decrease reflects typical first quarter cash outflows primarily driven by annual corporate bonus payments. Please note that as of March 31, 2026, we had approximately $700 thousand of restricted cash related to DIXI Medical, Approximately $600 thousand has since been converted to cash and cash equivalents, and we expect the balance will be converted by year-end 2026. Turning now to our outlook for 2026.

As Joel mentioned, we are raising full year 2026 revenue guidance to $99 million to $101 million up from previous guidance of $98 million to $100 million The $1 million increase at the midpoint is driven by 2 factors, Approximately $500 thousand reflects improved visibility into service revenue, and approximately $500 thousand reflects improved visibility into our core RNS outlook. Our increased guidance reflects underlying RNS revenue growth, of 21% to 23%, in our core business and continues to exclude any potential contribution from IGE indication expansion. On service revenue specifically, last quarter, we noted that while we may generate modest service revenue during 2026, it was not included in our initial outlook given limited visibility at that time.

As our planning has progressed, certain activities have become more predictable. We are now incorporating approximately $500 thousand of service revenue into our updated 2026 guidance. As we have previously stated, given the underlying dynamics of a procedure based business, it can be more informative to evaluate RNS performance over 6 month periods. We remain confident in our ability to deliver 20% underlying RNS focal indication growth over time and we expect that 2026 will be consistent with that framework. Quarter to quarter fluctuations can occur, but our focus remains on sustained adoption and utilization trends across a broader time horizon.

We continue to expect full year non GAAP or adjusted gross margin to be between 81.5% and 82.5% reflecting continued leverage and favorable pricing. We continue to expect full year non GAAP or adjusted operating expense to remain in the range of $90 million to $92 million excluding approximately $10 million in stock based compensation consistent with prior guidance. For the full year 2026, we continue to expect non GAAP or adjusted sales and marketing expense to total between $46 million and $48 million Sales and marketing expense growth in 2026 reflects the continued commercial investment and we expect productivity and leverage from these investments to increase meaningfully as we move through 2026 and into 2027.

We continue to expect full year non GAAP or adjusted research and development expense to total approximately $27 million R&D expense growth in 2026 reflects continued investment in our next generation platform and the development of the Neuropace AI suite of tools designed to enhance physician workflow, and drive further adoption. We remain focused on disciplined allocation of r and R&D capital to programs that strengthen the platform, enhance differentiation, and support long term growth. We continue to expect full year non GAAP or adjusted general and administrative expense to total approximately $17 million G&A expense in 2026 primarily reflects the infrastructure required to support a growing commercial organization, and corporate systems necessary to operate at scale.

We remain disciplined in managing overhead as we drive operating leverage across the organization. We now expect more favorable full year adjusted EBITDA to be a loss in the range of $8.5 million to $9.5 million improved from a loss $9 million to $10 million. And with that, I will turn it back to Joel.

Joel D. Becker: Thanks, Patrick. We are energized by the opportunity in front of us. We are executing and penetrating the adult focal market, progressing toward potential indication expansion into the IGE population, and advancing a differentiated product road map anchored in unique proprietary data where we are developing first of its kind and unique assistive and foundational AI data analysis tools. We believe that we are uniquely positioned at the intersection of data device, and neuromodulation. We will continue to lead on product innovation and clinical evidence and we remain focused on disciplined execution and thoughtful investment to drive durable long term growth. With that, operator, please open the line for questions.

Operator: Thank you. And we will now begin the question and answer session. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. To be able to take as many questions as possible, we ask that you please limit yourself to 1 question and 1 follow-up, and you may rejoin the queue for additional follow-up questions. Again, it is *1 to join the queue.

And our first question comes from the line of Mike Kratky with Leerink Partners. Your line is open.

Analyst (Mike Kratke): Hey, everyone. Congrats on all the progress, and thanks very much for taking our questions. So first, you had some really encouraging updates on achieving new all time highs in active prescribers, accounts, patient pipeline, 1 of your epilepsy competitors also recently mentioned a strengthening of the patient funnel in the U.S. So can you just help us understand what factors seem to be most responsible for this dynamic and where specifically are you seeing this materialize?

Joel D. Becker: Thanks, Mike, and it is a great question. So for us, we are particularly pleased with the trends that we see with regard to patient pipeline. Our patient pipeline numbers are as strong as we have ever seen them. And I think a lot of that comes well, a lot of that comes from our work in really 3 things. 1, our work with our level 4 center traditional customers to make sure that we are doing everything we can to collaborate with them, to have patient identified as they are moving through level 4 centers. 2, we have talked about in the past the work that we have been doing in the community.

And with the referral population, and that is beginning to contribute nicely to the patient pipeline as well. And then thirdly, the investments we have made in our commercial organization. Both the breadth of that organization as well as the way the leadership team is executing in the discipline systems and processes that we put in place to make sure that we have good visibility to and are tracking well. The execution around that priority or think are all leading toward building and really as good as we have seen it. Patient pipeline to date.

Patrick F. Williams: The only thing I would add to that, Mike, is we are starting to look a lot deeper into the patient pipeline in terms of analytics. And tracking that differently with our commercial team. And we think about it as sort of the velocity of that patient, which we know has a long sales cycle, but better understanding where they are at within that health care continuum, we will call it, until they actually go to a neuromodulation device. So more to come on that, but wanted to throw in there that you know, leveraging, you know, predictive tools that are AI based, etcetera, to get a little bit smarter in that area.

Analyst (Mike Kratke): Understood. Very helpful. And maybe just as a follow-up, but can you share any specifics in terms of what information FDA was looking for specifically as part of its mid cycle review?

Joel D. Becker: You bet, Mike. We had a-- we had a very productive and interactive meeting with the agency. A couple of things I would punch up there. 1, we were we were really pleased to get the questions that we got in such a timely fashion, so it made for good opportunity to prepare and then a robust and, again, interactive discussion with the agency. I would characterize the nature of the questions that we received. We are really focused on both clarification of and context around various aspects of the data and the associated analyses that had gone into the PMA supplement.

So, it is clear that they are, paying good and close attention to the data as we would expect. And, and the again, the questions were really around clarifying, some of that data, how to best understand and interpret it. And then where we had provided associated analysis wanting to make sure that they had appropriate context for that analysis. But, again, I would in addition to those facts, I would emphasize that we thought that, you know, when we got really good questions, we got them in a timely fashion. It resulted in a good and engaged discussion.

And we have since followed up and submitted our formal responses to those and all the questions that we have received until now. So, yeah, Very helpful.

Analyst (Mike Kratke): Thanks very much.

Operator: And our next question comes from the line of Priya Sachdeva with UBS. Your line is open.

Analyst (Priya Sachdeva): Hey, guys. Thanks so much for taking the question and congrats on a strong start to the year. Maybe first, if I could just, really encouraging to see the strong growth in RNS revenues. But would love to maybe if you could parse out how much of that was deeper market penetration, increasing utilization across your existing centers versus new physician capture, And if there was any pricing dynamics in the quarter, I think you did call out some increasing ASP. You know, if you could maybe just help us level set contributions from each and then 1? You bet.

Joel D. Becker: I will start here, Priya, and then ask Patrick if he has anything he would like to add. So as has been the case, the growth in the business really has been centered around increasing adoption and utilization within our level 4 centers. So adoption, you can see by the ongoing increasing number of all time high prescribers. And so we are we continue to be pleased with that. But then, you know, also continuing to work utilization and expansion of where the RNS system plays within those people's practices. And then the second part would be, as I mentioned earlier, the increasing contribution of patients who are identified for in either implanted at or referred from community settings?

So patients who are identified as good candidates for RNS in the community and either undergo the therapy there at a level 3 or community hospital or are identified for RNS therapy and then referred in for surgical placement of an RNS device in a level 4 center. The third thing I would I would identify here is the our DTC or direct to patient efforts as well as then, in our Q4 call, we made mention of investment in our nurse navigator team. And that is all designed to help fill the pipeline and then move patients with increasing velocity and decreased friction through the pipeline.

And so I think our nurse navigator team is beginning to have a nice impact there as well. With regard to pricing, as you know, we have we have had consistent and good, execution with regard to pricing. Pricing is somewhat of a tailwind for us here in the quarter, but the majority of the revenue is really associated with unit volume rather than a significant price effect, but a good tailwind.

Patrick F. Williams: Priya. The only thing I would add on pricing, Joel, articulated that well, is that we do plan to take as we have in prior years going forward. So this is not a onetime event. And as we said, we will continue to take pricing each and every year that we can. And it will be you know, you can expect kind of that low single digit type pricing increase that we would look to get.

Analyst (Priya Sachdeva): Okay. Got it. That was super helpful. And just 1 more for me. When we are thinking about IGE, and I know it is not baked into guidance for this year, but you know, when approval does come online, how quickly could we see a contribution? And then maybe if you could just remind us what the pathway from a reimbursement perspective looks like how quickly that could come online. Thanks so much.

Joel D. Becker: I will maybe start us out here, and then I will ask Patrick, who is very much involved with our reimbursement team and process here to comment on that as well. So first steps first, we are focused on getting the indication expansion, getting the approval from the agency. You know what that process looks like. I described it earlier here in my comments of working through that here now with the agency. In parallel with that, we are, working with our in internal team to make sure they are trained and, well prepared for the launch and all of our launch plans, etcetera. Are moving in parallel with that as well.

Once we do have approval, we will move into what is really a coverage expansion exercise. We have the device covered today It will be the same codes. For tomorrow, and our exercise then is really going to be working with the private payers to get coverage expansion. Obviously, we are gonna be working to do that on an off cycle basis, but certainly, we have got good visibility to contract cycles and ensuring that we are well prepared to be engaged with medical directors and health plans at the very least, as part of an on cycle process and, we intend to make sure that there is a case by case submission associated with the coverage expansion.

Very important as part of that process will be the published manuscript of the NAUTILUS data, and I am really pleased with progress we have been making there. We are ahead of expectations in terms of the timing of the submission and review of the Nautilus manuscript and results. And so, I mean, I am encouraged by having that and the time line it is on and being able to show the results that it shows and, the early review from the editorial reviewers was, very light. It was a well done manuscript, and is on a and on a good timeline there.

So I think, you know, we have also been we have also been preparing from a reimbursement perspective, and here I will I will hand it over to Patrick. But we, we have been planning and doing our research around, coverage expansion and have a number of outside experts as well that we are working with up to and including even having advisory board types of discussions for how people are going to be thinking about and reacting to the data and what will be particularly important to them, etcetera.

So it is approval with internal training and market development in parallel than all of the logistics mechanics and publication associated with, extending coverage from the current focal indication for the current product, with the private payers. Patrick, what would you add?

Patrick F. Williams: Priya. I think just some highlights. You asked the question just sort of cadence of when we can expect, and so we are still focused on midyear approval. Frank you for pointing out that, you know, we had a good quarter with RNS. We did raise guidance. but raise guidance on top of that above the beat. to not only include that beat in Q1, We do not have IgE indication expansion in there as we said.

So the cadence on that, because of what Joel just went through in detail in terms of the coverage policies with the private payers, which is, you know, close to 80%, we will call it, when you include the advantage programs with Medicare, Medicaid. it is gonna take a little bit of time to get on there. So I would say it is definitely a back end loaded if we think about the first 12 months, let's say, of launch. And so you are gonna see more coverage policies come on board as we move into months 7, 9, 10, 11 and 12, and so forth.

And so at the appropriate time, we will come back and give guidance to everyone. But I think the takeaway for you all is that it is the same exact DRG and CPT as Joel said. We believe we are being very proactive and being very patient advocate focused on making sure they get this approval. And so that is really the only thing that is gonna hold us back in terms of the adoption from a reimbursement standpoint.

Joel D. Becker: I would just wrap up there, Priya, when we when we have had discussions on the reimbursement side. I have been impressed as to hearing the feedback for how pleased people were with the clinical data. And how attuned people were that there are not approved options for these patients. And so it is just been encouraging to hear from that constituency, from that stakeholder group the recognition of the value of the data and the recognition of the clinical gap. That exists today.

Patrick F. Williams: And we are actually augmenting our internal reimbursement with some third party as especially as we launch to ensure that on a case by case basis, we can continue to advocate for those patients and we are feeling good about it. Again, we are kinda seeing a couple things. We are excited about it, but at the same time, we want to be thoughtful. As we do get approval and find out what that revenue cadence will look like. But we think there is a really, really good opportunity here to move things along quicker than maybe what most people may think of.

Analyst (Priya Sachdeva): Thanks so much.

Operator: And our next question comes from the line of Larry Biegelsen with Wells Fargo. Your line is open.

Analyst (Ross Osborn): Hey, guys. This is Ross Osborn on for Larry. Thanks for taking our questions. Hey, Ross. Looking for your RNS volumes, did the system have a diagnostic or a companion to surgery contribute to growth during the quarter and how you see this evolving over time?

Joel D. Becker: it is a great question. I think that as we think about both of those dynamics, 1, the unique capability to provide the window into the brain, to see what is really going on with these patients has, been increasingly recognized. And as we mentioned in our prepared comments, we really see the field moving more and more toward the ability to individualize and tailor therapy. For patients. And it is really that unique diagnostic capability that allows us to do that. To monitor, record, and then analyze that data and subsequently then tailored therapy. And that is we think, part of why we see improving results over time.

So, yes, the diagnostic capabilities of the device absolutely are contributing to our growth. And secondly, with regard to hybrid therapy or as a complement to resection therapy, we do hear that more and more. Especially within centers that you might consider to be somewhat more in quotes classically trained to really look for resection first. In places where either they know they cannot resect or to be able to inform surgical procedures, the use of the implantation of an RNS device prior to a surgical procedure to be able to best localize where they wanna resect.

Or to if they have a clear area for surgical intervention, but the disease is diffuse enough and they know they cannot resect some areas of eloquent cortex, for example, they will use an RNS device in combination as part of a hybrid therapy. So as we have talked about before, the really the modern RNS story we are going from a particularly kinda niche application within a focal patient population to multifocal disease to network stimulation, to adjacent to surgical procedures is really the progression that we see. And we do hear about adjacent to resection procedures more and more.

Analyst (Ross Osborn): Great. And then apologies if I missed this in your prepared remarks, but would you walk through your latest advances and timelines for pediatrics and LGS?

Joel D. Becker: You did not miss it. We did not include it in our prepared comments, but I will address both. With regard to pediatrics, as you know, we are working on a real world evidence strategy here using retrospective meta analysis, working with the agency itself, as well as a number of external parties to really aggregate and analyze the published data that is out there. We have worked to try and prospectively enroll in trials on the pediatric side. And as sometimes is the case where you have devices that are approved in the adult population, it is difficult to get people to for understandable reasons, to get people to consent to enroll children in the trial.

We think that the real world data approach is a particularly good 1 at this time in that if you look at the interest from the clinical and scientific community, as well as the amount of data that has been gathered and published, it is gathering momentum. Since 2020, for example, so in a little over the last 5 or maybe 6 years, in 2020, there were about 8 peer reviewed publications. For pediatric use of the RNS system Today, there are 29. And so there is an increasing amount of both interest as well as published data that really supports this kind of a real world evidence analysis. So we are we are underway in that process.

I think as you have heard me explain before, it is a little bit inverted from a prospective trial. We are in a retrospective trial. You do a lot of the work on the data alignment and structure upfront. And then once you have that, the back end of the process can go a little bit quicker. Whereas on a prospective trial, you can go a little bit quicker on the front end, and then you have to do all the work down downstream. So we are in the middle of that hard work now.

I am I am not gonna quote a timeline for you, but I would want you to know that it remains as significant priority for us. And, again, I think, there is a lot of momentum and a lot of interest within the clinical and scientific community here. On LGS, as folks may know, we have announced enrollment completion on our LGS trial, the first of its kind in a collaborative effort with NIH, to enroll a pilot group of 20 patients. In a trial looking at both safety as well as efficacy endpoints. Although in a pilot, trial design, More to come on the results here with regard to LGS, but we are encouraged with what we see.

We are in the process of developing our plans right now for how we will engage with the agency further. But encouraged with, what we see from that early data. And, do plan on advancing our work in LGS. And, again, stay tuned there. More to come in not too long. But LGS is absolutely on our minds, and we are encouraged with what we have seen.

Patrick F. Williams: I think the takeaway is that as we think about adoption dynamics in the clinical setting, not only IgE, as well with pediatrics and LGS as Joel just went through. We think those adoption dynamics are very exciting for us and much more so than what we have seen with focal over time. And so just another thing to look for in the future as we think about our clinical development efforts.

Analyst (Ross Osborn): Thank you. Thanks, Ross.

Operator: And our next question comes from the line of Lily Lozano with JPMorgan. Your line is open.

Analyst: Great. Thanks so much for taking the question. Maybe just to go back to the quarter and guidance. Like you said, you raised by more than the beat. You beat by a couple hundred thousand, and you are raising guidance by a million So can you talk through your thinking behind raising the guide this early in the year and where specifically that better visibility and incremental upside coming from, especially on the RNS side of the business?

Joel D. Becker: Absolutely, Lily. it is a great question. And I think both, you know, the performance in the quarter as well as then, historically, what we have seen in the business is really our basis for thinking about the business that way. If you go back over the past, I will I will call it the last 3 years, my direct involvement here just to speak to it personally. If you look at 2023, 2024, and 2025, we have seen more revenue in the second half of the year than the first half of the year.

We have seen you know, about 500-basis-point increase in growth rates in the second half of the year versus the first half of the year, and that is been very consistent across that time. And so that is what the calendarization looks like. Additionally, we have a team that we are investing in commercially, both from a sales perspective and from a marketing perspective. And we expect those investments to ramp and become more productive over the year, both the people to become more productive and the programs to become to become more installed. And then finally, as I mentioned, the patient funnel. Is as strong as we have seen it.

And so it is growing and robust really across the business. And so all of those factors, are really dynamics within the business. That, that put us in position to be able to make the decision to raise, the guide at this point. And then and then finally, from a more of an internal perspective, as I mentioned, we continue to really strengthen the operating system around the business and particular, the organization and the discipline around the leadership, the training, incentives, referral management, as Patrick mentioned.

And so it is it is not that we cannot and I suspect we will not have quarter to quarter variability in some of the results, but with, what we see in the business today as well as what we have seen in the business over time, Those are the dynamics that we are working to reflect in the guidance.

Analyst: Great. Very helpful. And then just to follow-up on generalized You mentioned there is no generalized included in the guidance. I know the main gating factor from here after approval is really getting commercial reimbursement. So it sounds like that is more of a 2027 event for that to be felt more materially in the numbers. But to my understanding, you can go after that 20% of the population that is Medicaid right off the bat. So why not include some contribution from Medicaid? Is that just conservatism, or is there some other reason that is not baked into the guidance for this year? Thanks so much.

Patrick F. Williams: Priya. No. it is a it is a fair question. And just to say again a little bit more on that is that, again, we are anticipating a midyear approval. But to stick with how we have been doing this since you know, back in late 25. We have kept IgE indication expansion out of our guidance and we will continue to do so until we get approval. Upon that time, you are correct. We would expect that on a case by case basis with that 20% Medicare Medicaid, we can likely move pretty quickly on that. that is why we are augmenting with third party reimbursement help, etcetera.

And then we will work with the other 80%, which is across private pay in the Advantage program. So I guess I would call it more than anything being thoughtful about waiting for an approval. that is a bit of a binary event. We feel very cautiously optimistic about when that is gonna happen, and we have said it. But we want to make sure we do not get ahead of ourselves and at the point of approval, we will absolutely come back and let people know what they can expect in contribution.

And I stated it already that you should expect that it would be your point, as we get those private payers on board, that it would be more of a months 7 to 12, we will call it impact when we cycle through all coverage policies.

Analyst: Perfect. Thank you. Thanks, Lily.

Operator: And our next question comes from the line of Frank Takkinen with Lake Street Capital Markets. Your line is open.

Analyst (Frank Kaczynin): Great. Frank you for taking the questions. Was hoping to start with 1, and apologies if it already came up, I do not think it has. On the reimbursement changes for 2026. I think last year or last quarter you spoke to the improvements in both OPPS and the physician fee schedule effective at the 2026. Any anecdotal feedback or direct feedback from the field on how that reimbursement has been received or impacted the business?

Patrick F. Williams: Priya. Hey, Frank. You know, 2026 was a or it is still is a good year for us from a reimbursement standpoint. A lot of the legwork that we did in 2025 came to rich fruition in 2026. So I would say, overall, when you do not hear news and pushback from your field team, that is a good thing. As we go into 2027, you know, we will keep everyone posted on that. But at this point, we are in comment period, etcetera. We are not anticipating nor have we, you know, obviously given 2027 guidance yet. But rest assured, you can expect us to continue to push hard.

On making sure that we not only advocate for patients, but that the hospital accounts are being reimbursed appropriately to make sure that does not become a impediment to installing our neuromodulation device.

Joel D. Becker: The only thing I would add there, Frank, is that we did have a positive development from an OPPS perspective, as you mentioned. The replacement cycle for us is still a small amount of the business. But I know I do not need to emphasize for this group that is on its way. And so that is something that we believe will hold us in good stead here as those RNS 23 devices increasingly come back around for replacement, will be in a positive and improved reimbursement position with regard to outpatient device replacement as that cycle increases.

Analyst (Frank Kaczynin): Got it. that is helpful. And then maybe just a bigger picture question on Project Care. I think we are about 2 years into when that initiative was kicked off. Joel, maybe give us a review, I mean, puts and takes what has surprised positively, maybe what is been more challenging in this setting? Anything on utilization, if that is what is been driving some improvement, if it is new site activations, just any kind of big picture commentary that you have noticed over the last 2 years, on that would be great. Thanks. Thank you, Frank.

Joel D. Becker: I think, you know, things we have learned. We have learned, and you have heard me comment on some of this previously, is that there are a number of different segments that exist in the community or referral population. And having the flexibility to be able to address the needs of those different segments is important. 1, we have some centers community centers, level 3 centers who really it is they have got the patient population. They have got the epileptologists and neurologists there. They have got the functional neurosurgeons with capacity, the surgical equipment capital equipment requirements are there, and maybe there is a software package that is required in a contracting activity.

But other than that, they are really ready to go. And we can turn them into an implanting center. Where they can self sustain and, you know, that is great. There are others that will eventually look like that, But since they had not had access to the technology, it was not something that they were planning for, and so it takes some time then to develop those centers.

And as you know, with capital cycles and trainings and everything else that goes on at the hospital, level that takes a little longer, but that is also a very important and viable segment for us especially as we think about the idiopathic generalized population and not needing the phase 2 monitoring that requires someone to be transferred to a level 4 center for invasive EMU, SEE, monitoring that can aggregate the referral pathway timing. The third segment has been interesting, and that is centers that have all of the patient population and the neurology and epileptology capability and management infrastructure, and they do not really want to have the patients implanted at their center.

Not that they do not want patients implanted at their centers, but they would like to prioritize management of the patients. And so they are happy to have a connection made and a referral relationship developed that puts them in a position where they feel like their patients are gonna be taking care of. Remember, these are patients that have multiyear relationships. With their clinicians as they proceed through medication management, and they are disease progression. So to have a relationship developed where they can have somebody handed off and make sure they can get them back, and then we can do the training and the support around programming those patients. that is his third segment.

That exists and really works out quite well. And so I think we had maybe thought going into it, it would be a little more homogeneous than that. But that those have been some learnings. Think maybe not negative, I guess, maybe I would characterize it a little bit as a negative. there is just there is a lot of awareness building and development to do And so on the on the 1 hand, that is work that needs to be done and is a little bit of a, air quotes, negative surprise. You cannot assume that people are aware. Of things. On the other hand, we found it to be just a great opportunity.

And to be able to get out in the community the way we are now on an increase and be able to make people aware of and understand recent developments in and the data associated with, as well as referral opportunities for Again, all associated with learning. And why I think overall, to your point on big picture, from a big picture perspective, staging things the way that we have we got the PMA supplement to permit expansion beyond level 4 centers with the focal indication and doing that work has allowed us to learn about that dynamic and the referral population even more.

And then, we think that will skate rather nicely here with the work that we are doing for indication expansion with IgE and beyond. Little bit of a long way around, but hopefully, that answers your question.

Analyst (Frank Kaczynin): No. that is perfect. Comprehensive. Thank you very much. Thank you, Frank.

Operator: And our next question comes from the line of Anthony Petrone with Mizuho. Your line is open.

Analyst: Thanks for fitting us in here, and congrats on progress so far in 2026. Maybe just to come back to 2 reimbursement questions. 1 on the new APC mapping for vagus nerve stimulators there. It was a shift for new patient implants. To APC 1.58 thousand. That was a 48% increase for the category. And then end of service shifted from Level 4 to Level 5, and that was also roughly a 47%-48% uplift. So it just seems like, you know, from the Medicare level on an outpatient basis, there is reset receptivity to you know, good healthy levels of reimbursement for epilepsy.

So is there any kind of read through from what we have seen in vagus nerve you know, kinda transferred over to the RNS system once we get there for generalized and I think, and I believe, there is no wiser program exposure here, but just to confirm that the RNS system is not seeing any kind of prior authorization impact. Thanks. authorization impact in those 6 states from the WISER program.

Joel D. Becker: Thank you, Anthony, and I will start here and then Patrick can help me. The first point is with regard to end of service and moving from 4 to 5, we had the same improvement in, what I mentioned earlier with regard to the cycle in the OPPS increase in reimbursement. So that is absolutely the case. There, I agree with your comments 100%. That when we saw those increases in reimbursement, we were encouraged not only because of the effect on RNS replacement, reimbursement, obviously, but that overall and generally, the reimbursing bodies are seeing the value associated with neuromodulation.

And are open to making sure that there is good access for hospitals and clinicians to be able to access the technology. So 1, also fortify an improvement in OPPS. 2, I shared the view on it is good news when people are investing in neuromodulation broadly and 3, there is no impact with regard to WISER for us, and we are not included.

Operator: And our next question comes from the line of Michael Polark with Wolfe Research. Your line is open.

Analyst (Michael Pollark): On the topic of generalized with the FDA, Joel, I am curious just as you assess their interest in the data, questions that you have received and answered, how much focus are how much focus have they placed on the primary endpoint in the NAUTILUS study, which did not meet significance versus all of the supplemental analysis. I am just trying to envision you know, in light of the kinda headline squish in the trial and all the constructive data underneath, how they may kind of are they wrestling with that? How they might conclude and what a label may or may not look like. Thank you. Thanks, Mike.

Joel D. Becker: As you might imagine and I will not I will not speak on FDA's on FDA's behalf. But I will give you my observations. My observations would be, as you might expect, they are they are focused on the totality of the data. They are looking at all of it. The primary safety, which did meet the primary efficacy, as you mentioned, which did not, and the prespecified secondaries that again, we think are particularly impactful and clinically relevant. And so I would I would say that they are taking a comprehensive and appropriate view of the totality of the evidence.

With regard to label, it is it is our interest to pursue a label that is aligned with the study population and the inclusion exclusion criteria in study, and that is really been our approach. Appreciate that, Joel.

Analyst (Michael Pollark): Thank you. I have 1 other reimbursement question. I in this question is not sky high, but I believe the RNS first time implant is on the so called inpatient only list. Maintained by Medicare. And I think over the years to come, it may come off And could trigger the creation of the level 6 outpatient APC.

Now it may be most of if not all, the cases would still be inpatient, but by virtue of Medicare cleaning up this inpatient only list and, you know, you, they would have to provide a pathway for the RNS system and some other devices in the outpatient setting and given the cost of the case is a lot higher, that would necessitate and maybe pull forward and finally make come to fruition this Level 6 creation sorry for the long-winded ramp, but it is a very you know, it is been a topic in neuro that is been discussed for a while, and I am I am curious if you agree or disagree strongly with anything.

I just said there. Thank you.

Joel D. Becker: Mike, what I would what I would tell you, and there are a lot of there are there are a lot of moving parts there associated with that. Is that we have been very engaged with regard to virtually all aspects of reimbursement from inpatient to outpatient to physician reimbursement. The move from 4 to 5, the maintenance of the DRG categorization change from the proposed rule to the final rule, the improvement in CPT rates, you know, really across all fronts. We have been both pleased with and highly engaged from a reimbursement perspective.

I think at this point, to talk further about going from 5 to 6 and kind of a secondary dependency for what may or may not happen with the inpatient is a couple of degrees removed from where I feel like I could credibly comment. I would I would leave you with we are very engaged in. You can see from the results associated with and are highly involved with reimbursement across all fronts. And, again, back to the question that was asked earlier, I think, it is encouraging for us to see the payers signaling a general openness to recognizing the value both clinically as well as economically.

So I cannot answer the 5 to 6 potentialities specifically, given where we sit today. But I like where, general trends are headed from a reimbursement perspective around neuromodulation.

Patrick F. Williams: Priya. And I would just add because this is a you know, I appreciate the question but I wanna be crystal clear with everyone. We feel very good about the reimbursement that we advocated for our patients, through 2025 that came into effect in 2026. We feel good about the pricing that we have as we move forward. And as Joel said, we continue to see the payers advocate on behalf of these patients that need intervention in order to get their lives back and have some life changing outcomes. And so not in the game of speculation, but rest assured, we are doing everything we can, including advocacy at the Hill, society advocacy, etcetera.

And so this will not be a headwind for us in our we will continue to advocate on behalf of patients. On the reimbursement side.

Analyst (Michael Pollark): Helpful color. Frank you both. Thanks. Mhmm. Thanks, Mike.

Operator: And our final question comes from the line of Yi Chen with H. C. Wainwright.

Analyst (Katie): Hi. This is Katie on for Yi. Just real quick to wrap this up. Could you give us an idea of how many implants for replacements versus new implants this quarter? Do you think that is a typical mix of what we should expect going through the rest of 2026?

Joel D. Becker: We I will ask Patrick to comment here, but we did see an in replacements. it is still a small number, but we did see mild increase in replacements. You know, we are gonna remember, the RNS-320s have got a nominal battery life of 11 years, and then so we are should be right at the kind of the front edge here of that replacement cycle, but still not seeing meaningful volume in the last quarter.

Patrick F. Williams: I agree. And what we talked about historically, said we are less than 5% of our revenue is replacement over time at this point. A little less than 10% as well on the unit side. And that is because when we do a replacement, we do not have to replace the leads. We just replace the 23 device, so there is less of an ASP that we incur the accounts. So I think the point here for everyone that we are excited about the replacement revenue that we come a bit of a recurring revenue stream as we go forward, but we are in a the very early stages of that.

But become more meaningful as we move throughout this year and certainly as we get into 2027, 2028, and beyond.

Operator: And ladies and gentlemen, that is all the time we have for questions today. I will now turn the conference back over to Mr. Joel D. Becker for closing remarks.

Joel D. Becker: Thank you. Thank you all for your time and attention today. 2026 is a year with transformational potential for NeuroPace. And we are well on our way to executing on this potential, while building on the momentum in our current business. We look forward to keeping you up to date throughout the year as we continue to execute our strategy and progress toward these significant opportunities and thanks again for your interest in and support of NeuroPace.

Operator: And, ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.

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