NPCE - Earnings call 3 2023

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Operator

Ladies and gentlemen, greetings, and welcome to the NeuroPace, Inc.

Third Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Irina Ridley, Chief Legal Officer. Please go ahead.

Irina Ridley

afternoon. Good joining Conference Third Call. for and XXXX for Results Operating us you Quarter NeuroPace's Financial Thank Financial On Joel Officer; Chief Becker, call, Chief today's we Executive and will Rebecca hear from Officer. Kuhn,

results for today, XX, A at on of copy neuropace.com. released available Earlier press is company's the XXXX. release NeuroPace the the quarter ended third September financial website

meaning laws, that Before call, we this are you that include statements to safe we forward-looking throughout the begin, securities I would harbor like future of within Private relate Securities this Act performance Reform pursuant to statements made the Litigation statements. results make which that remind events, Any made statements federal provisions of to forward-looking call of the of are XXXX. predictions or expectations will or during

and including of around expansion, recovery, prospects our to of from forward-looking our should for on place or and business opportunities, to statements, statements undue differ on assumptions. These opportunity, actual and clinical by and financial implied forward-looking future COVID-XX and estimates expense impact current and forecasts management, projections, those performance, those material commercial trials NeuroPace's the you on could events operating growth relating based risks market of conditions, various market market involve results uncertainties statements. these materially estimates statements. that are Accordingly, these those revenue and cause All business reliance trends not

any XX, for ended X, report reports our in March that quarterly file filed Form public uncertainties with XX-K on of the as ended and Risk please the may SEC, on associated descriptions SEC our And section to detailed filed XX, risks the September including XXXX, year the Form annual be the the Factors XX-Q filings our with our with our December with to the From for the well future. with the we refer as SEC of SEC report on quarter XXXX, business, XXXX.

contains of future disclaims call law, information, on statements, information, projections is of or only believe except as XXXX. conference NeuroPace event revise update intention to This financial as by any any accurate obligation, broadcast new because live X, whether time-sensitive or forward-looking the otherwise. or we or which November required

now that, with over Becker. Officer, call will I Chief turn to the And Joel NeuroPace's Joel? Executive

Joel Becker

you, good everyone. and Thank Irina, afternoon,

As meaningful you saw believe marked we earlier quarter I revenue will updating a third by are we growth drive established and in issued to and strong business the milestones, year-over-year we which The execution. press today, look release operating of forward on future several strong growth. our well you fundamentals had

call, today's and from remainder the our On Q&A. Rebecca I then key turn business XXXX. priorities the to I XXXX the will of the to present performance financial XXXX Kuhn, provide over details third our before review for into CFO, will for highlights call the quarter call of the quarter to and of opening

and a revenue second for was $XX.X device. the X% experienced XXXX, procedures as slight representing to replacement we reduction quarter down Total year of to in as of as battery compared transition seasonality compared longer-lasting and anticipated, XX% to prior million, the growth of the the the and we newer quarter complete number third

implants both our by or comprehensive primarily NAUTILUS utilization centers Strong RNS driven prescribers year-over-year through by our epilepsy and initial of and by study. again growth adoption performance implant was CECs, and within increased system

Medical. contribution with to our from We DIXI partnership higher increasingly also see continue

reach tailwind will end become to replacement that a replacement of now R&S implant begin once approximately We As of the at expected, revenue battery newer revenue. service. devices life of the revenue more decline, with total X% longer-lasting believe continues to

and to full the the guidance up $XX million from to from $XX.X year last $XX we up $XX.X of QX our to a results, are million to at of quarter year. communicated $XX million, of we million light range raising the range start $XX revenue XXXX million million In set

margin with performance XX.X% QX pleased period our QX, XXXX. in also year were XX.X% improvement We in up to and in gross the from prior XX.X%

As across XX% expect we allocated XX% more and units, previously to be communicated. XX% up for margin XXXX XX%, the costs and increase volumes as to are between from gross

million of $X.X the XXXX. million with XXXX impact expense growth We priorities. third cash from without with Again, compromising gross our of of this remain resulted in in the performance, in customers committed quarter $X revenue of compared to key second margin disciplined collections burn in management, and combination along our with and continued the quarter growth has to revenue and on timing the focus of

the we to While to rate, and pleased was focus efforts we our with we'll manage we current believe Based as burn continue expenses factors, we're capital fund several of results, profitability. our believe result that sufficient cash QX cash on into planned on we XXXX. burn operations have the now our

our impact longer-term quarter, will achievements, in meaningful we business. number operating a execution I a expect operating our the significant prospects. turn were in would to attention reinforce achievements the focus our near continued strong on to which demonstrating have There like of now which and growth your on

activities our implants community program. of for our of the first in RNS initiation saw as our of We the the Project setting system part pilot CARE

the of patient expand FDA XXXX expand monitor and our approval complete to platform, in particularly into our took remote on the important generalized of streamlining our care, we enrollment significant indication QX in NAUTILUS the track in also community to updated We launch and we tablet nSight epilepsy. through remain into trial as steps

start like expansion. to We'd with CARE our Project

in with launching into of of refining on customers community first half We expecting of our and program launch full efforts the a have commercial pilot XXXX. our been group for community, the are focused strategy our

in process. have efforts interest to these some of significant the seen have advance customers pilot We eager these quicker through and been

and are are an to in a the are in we're result, Level setting community able functional patients but to epileptologists well, we to with not of patients system a importantly, that announce for initial neurosurgeons, not pilot RNS doing referred with implants we first been who of the therapy could expanded The X,XXX As or the group additional X happy customers. most to this Center pleased our would have the treatment. implanted RNS indicated group bring now to only

will expansion We in to these targeted be efforts. continue thoughtful and

note, for work initial X into important patients for do as We also of referred that are these appropriate work CECs in centers, treatment. centers. to on patients Level is alongside community the started Level and with remained community, our X It referral result have been identified to believe have we the we've a already ensuring additional focused further diagnosis to

broadly RNS therapy. We're access locally close to additional the Our to expansion excited as of expanding into the by the community plan treatment both more our and demonstrates the continue. provide benefits updates efforts to and opportunity gap

continued with progress XXXX. into pleased enrolling remain in are NAUTILUS complete and we our we patients trial on track Next, in QX our enrollment to

a to scale user not also on are patient we relates and to that as delivering product grow and clinically look business, only groups. superior, but clinician our focused our we As is user-friendly, both it

QX clinician nSight With may the have feedback. we've system mind, recently that as overwhelmingly enhanced RNS positive streamline enhancements launched in introduced seen, our you product We with management X designed experience. in data new to

or TRM, advancements RNS enable recently also remote use launches ahead the of important TRM of and in tablet and new system. efficiency of We nSight launched monitor schedule. The ease our the

data variety and that supported use across further to enable world-class of quality stakeholders a delivering easy that believe to and is by is a us scale. will product We grow

making We their continuing committed are for care, deliver patients. product optimal deliver that to improvements physicians to to streamline it to easier care

with momentum care saw for our financial to critical patients continued living to quarter the around results our this available we time make epilepsy to believe the transforming patients. suggest, delivered As is epilepsy. focus system drug-resistant on is which We in our RNS to more ways a efforts

should strategy, to additional focused treatment, our clinicians International our and of system. guideline, ILAE surgical RNS is if by community adoption be RNS has at This has exactly X involves once League CECs, or expanding ] appropriate. and existing increasing and of in indications help will drive fits in utilization [ clinicians believe the and are patient for that medications, our the We on our system referred tried and expanding system additional which CECs for among category. We RNS continue intervention RNS state failed that which even a not epilepsy, patient against they

With over to I call Rebecca review Rebecca? will results. financial now to turn the quarter our that, strong third

Rebecca Kuhn

in for NeuroPace third million the replacement for compared $XX.X of of Joel. X% $XX.X sequential a growth you, of of the role to our in in revenue down was representing revenue to million quarter decline compared quarter XXXX, seasonality and second Thank XXXX quarter and performance. million, the a played XXXX $XX.X XX% as third

system by results were utilization primarily of and driven QX treating by strong increased new in patients. physicians RNS Our adoption our

DIXI Medical from also generate continue to revenue meaningful We products.

revenue revenue. this anticipated, X% represented total Replacement and as approximately implant to decline again continued of quarter

margin quarter of XX.X% the XX.X% XXXX. third XXXX of compared XXXX XX.X% of third the second and for in quarter Gross quarter the was in to

Our units. was more gross of in offset sold to lower increased The increase distribution gross increase in Medical manufacturing spread DIXI over RNS our products partially the products. primarily in gross as produced the costs margin overhead due margin were RNS margin fixed by for

in to SG&A. allocation operating on We million and of management, were period Consistent the with compromising revenue focus R&D remain of prior expenses committed third expenses $XX.X quarters operating growth. a percentage the cash resource this compared million of effectively as managing XXXX $XX.X were our both year, and quarter same in Total and lower without prior the expenses revenue for operating year. with maintained appropriate our

third research with R&D of expenses. and due million the in expenses our decrease This period of in grant $X.X and in to million compared expense increase reduces was studies same clinical for the in decrease development a XXXX which funding, an was quarter XXXX. $X.X primarily

increase expenses, SG&A as with in expense $XX.X the by in period. primarily of due increase This personnel-related million million $XX.X compared prior the compensation third of increase quarter in to result period. increase the sales-based prior in compared to year variable XXXX an a the year in an was revenue driven was

sales increases outside an Medical general expenses services and with had distributing reduced in associated and insurance. DIXI were offset partially These also sales, expenses, marketing support expenses, by and including primarily We administrative increase products.

from million the Net XXXX. prior million quarter XXXX of expense recorded year XXXX compared for period. in third Loss of the $XX.X interest quarter $X.X loss $X.X quarter in third $X in period. compared third the million million $X.X operations year with of million quarter the We third to $XX.X in the the in million was compared in was with prior

of Our September as short-term was balance cash million. $XX.X and XX, investments XXXX,

view totaled of borrowings principal September September XXXX. on long-term with XXXX, Our XX, full the $XX.X XX, million as

$XX.X $XX.X to million $XX our million, $XX full As Joe QX of mentioned, on year call. million we to that range are million up guidance XXXX set of a a revenue raising to range earnings from we

by mainly Products. increases initial supported We implants be revenue revenue in expect that of sale the Medical and DIXI growth will from

of all the substantially of devices to prior RNS the be Replacement of anticipated XXXX. completed generation by end still is

the in reach indicated, the devices XXXX once their experienced decline anticipated begin is end of previously reverse, replacement revenue to introduced As have life. to newer in battery we longer-lasting the

XX% to overall revenue and proportion are XX% to our due We gross our XX%, in margin in fluctuations guidance of up DIXI see other increasing Medical factors. gross We the variability margin from XX%. to may to to revenue

include our million updating the expected to expenses to guidance $XX million reducing to to expenses. expenses noncash are in of $XX $X the for end range. upper We $XX Operating million, operating are million

current of in XXXX. of that capital into to quarter our have continued a the million, improvement burn XXXX sufficient Based $X XXXX. million in burn now our over cash third the was quarter rate, fund we operations on planned believe we second $X.X cash Our

turn I over would like remarks. call Joel closing for now the back to to

Joel Becker

XXXX positioned Rebecca. Thank we well of this positive you, on build momentum. entered final Overall, to quarter the

among about seen and streamline We with CEC in to care. higher are into with market pleased beginning our advancements our NAUTILUS in we the utilization customers, have are focus implants the brought community by on encouraged drive enrolling to the to adoption happy and product patients our the progress excited important trial initial patient we've centers, among our development

and epileptologists In to an an short, CEC, epilepsy ever to enriching establish number to at continuing and our reach foothold streamlining continue drug-resistant expanding data utility forefront treatment. neurosurgeons, of we value, the by extend of stronger

discipline and expense operating through importantly, and ongoing with strong cash performance growth, demonstrated management we on executing margin by Additionally remain focused execution. are operating and revenue gross as

XXXX are and us remains reiterate, clinical current comfortable commercial, operations positioning momentum sheet providing balance ample we our burn guidance into Our XXXX, strong to us for on based our cash year To beyond. cash our our for on fund rest the to continued runway and execute the rate, planned operating of strategy. extending strong,

we questions fielded ] the would exposure. [ other tech to like to I Lastly, have med and community members address of GLP-X the relative

RNS do any clear, of index, not that that drugs. and a in does mass target way any epilepsy as the either of our GLP-X or obesity patient a believe body have be our we impacted me are platform as populations system correlation to Let not or technology result class

prepared I our now who to would the call concludes remarks. questions. Operator. for over to open call will operator, the This turn like the

Operator

be question Wells from will Fargo. Instructions] is conducting we a Chopra session. Our now gentlemen, [Operator with first and Ladies Vik question-and-answer

Vikramjeet Chopra

Congrats on just Maybe here. me a great for quarter. X

So a in some something what within initial additional primarily the driven then by you'd the talked growth performance, color you centers just please. about on had drove else it utilization implants I or out? on call I think follow-up, just there quarter. is implants, And Maybe existing in initial was

Joel Becker

you short really a bit growth us being sorry early. in quarter. implant initial with for in has I is there. thank where been appreciate the you on the preponderance that's answer, started question, for in and The R&S utilization. And It Vik, of today. the little the

Vikramjeet Chopra

maybe And for Great. then Rebecca. one

Given an out eye where just for highlight XXXX potential the the maybe are some year, top pertains it to headwinds we to tailwinds line. and keep as in

Rebecca Kuhn

to XXXX guiding on and not comment can't yet. what in expect we're really XXXX Vik, to just

So have we'll to get ask . further a think the we little that hold to question I you until down road. just

Operator

any Hi, Rick. the This Do is more you operator. have questions?

Vikramjeet Chopra

okay. I'm -- that's No,

Operator

Our Research. the of next line Michael question Wolfe Polark is with from

Michael Polark

level important, -- will your would what versus First referred appropriate be selection kind of Joel, centers. part I'm drive push heard level are So community patients appropriate that to one look the centers? on level? or X patients community. about decision What is into just curious, of at higher patient the that's the I in question. this treat comment to to patient the appropriate the move

practitioners program. terms what's And providing the X I Level this to about is level at already doing CARE versus your different curious guess then you're the CECs? just community Part you're the I'm of X what in support of

Joel Becker

regard treated as -- Mike be and need Thanks community, referred of who well Phase to Phase With patient patients I we question, the a for -- patients monitoring and of for can II are number questions. community, monitoring. need there those in who really the the back or to be rather the both push types that into just populations don't the

for go who are through -- who monitoring are patients the treated focal in to So drug being resistant Phase I only need community. candidates good to

identified have And the through as that managing that early patients then, community yes, work -- I mentioned, at the and being in for the we they're seen even folks go already, even patients. that done, center. look additional that candidates, with to as more monitoring of feel They additional patients we've populations do I and referred complex be Phase need can they support good think therapy other than like then will X Level types are a back

have Level or the center a -- really then both refer of didn't to people kind connection In terms X. they didn't of a RNS not with for for that because path ensuring a past, good an identified as making the they into sent therapy They're have where back the for ability relationship to candidates patients have be those get back as should that in managing have and may therapy, patient well. been that local

be are in patient back establishment of Phase as regard and and well that we're referrals, well to patients underlying the for the community they the the So disease, community. the I type complex both too identification of and things doing of whether more monitoring with those relationships through of can the in as type in

we're getting here. Admittedly, started just

some But efforts have about more Mike, program CARE over the yet, full we'll really full of it in look launch going to just returns here about half the with and those getting others, are say not I'm as seeing. faster we're is, the 'XX. to first because are little and there too bit the early a that say program, moved pilot we're to started the the some here who've of much we than So centers

Michael Polark

the mean, centers. to here and penetration discipline drive appreciate I imagine still to follow-up, operating around spending. and comments growth I I your have the I'm invest you For curious, within

into and to per depths? but do promote you to you se, as kind the field you I'm for putting sales of those creating 'XX still out guidance not look grow or territories maintaining 'XX, the territories within So asking territories of more envision have and business the support number more

the dynamics. about the over you're curious field years that balancing how versus just next organization breadth and couple the I'm thinking of

Joel Becker

Thank you, Mike.

program, things get say you. into we great more CARE but it we about further here can of will a And Another the give question. couple I as

as commented One, breadth have our in that had, we previously. the previously you some may recall, we here of invested we organization have of

sales those so territorial year. the we are contribute the have And the force from force more training resources to -- out field been fully. added had last beginning now and be perspective into to And a pipeline and through sales of coming expanded some able those folks the earlier

And of going use to we're that capacity. a so a as to point, looking be lot starting

what are, support in the target more on as of efforts as prospecting be is that's of the mentioned focused We pilot targeted we're types Is to in populations, centers and required? and more very it what of is these we is the the well. or And part and learning support I program the previously, going patient right side? identifying clinical it be going are to initial

do then of more today. depth? the So it combination with organization do is Or we have that or your need of we an we optimized both on that question breadth will need more

can we be things, both the so resources that the level centers need get about reach, the exercise thinking both at the can what our and to we expand the or of we've of targeted pilot, like in and extend well look as got in but appropriately going resourcing do both of those going model lot we'll on utilizing today And looking on as and those so to that's centers support a what needs we're how that's the now then community. clinical

But getting able a half RNS and we're gotten a about and centers being here great lot the looking access of from excited of feedback to those pilot Again, 'XX. particularly really the in and really for the enthusiasm going early we've of first to with these lot forward therapy program, patients.

so And but we're that's on come more to where currently. at it,

Operator

question Frank Lake Street with the Takkinen is of Capital Markets. next line from Our

Frank Takkinen

was on about deeper into little Congrats you could gaining the was comment the your that, a a implants. may quarter. go I some forming maybe bit initial speak that market the users Are driving market? heard the share? to with to share hoping better returning underlying if get what could be you better we pockets market just implants, really I power growth of a growth. driver driver emerging? But of initial feel implants. us growth? There Or you that's little DIXI funnel can initial the is for anything of Is in

Joel Becker

Frank. You Thanks, bet.

as we really product centers. the of or within implant initial from within coming core increased strength good see segment. So And mentioned, utilization patients I did it a lot

well we're good And within centers. a and expanded adoption as core seeing centers utilization within so those seeing lot those of

inside rates as drivers. centers usage core as adoption that both is what So has been the of primary of of one well group rates

are to do focus, utilizing their take how really which areas system the way the of of of our thinking it populations. gets expand is key we patient about people RNS think inside I And one and

very focal centers. populations had combination therapy, patient to they other patients the been set in to through about more adoption of just thinking those expanding inside perhaps STEM specific as population, network of a or really targeted inside either areas of as think stimulation the or from core originally getting refractory R&S people broadly well utilization where So about expanding those

So that driving in has been growth sure. for helpful

inform been therapy. and centers, integration that where do And how DIXI and we've population visibility thinking well, then out are patient can in people certain further seeing get that vertical and a we pipeline have of we of, and been growth of patients getting out as good RNS have into benefit about seen

that's adoption is up some and within used, some and pipeline vertical the primary seeing and integration centers -- in those So into is centers the -- utilization as also group the of further way RNS well. expanding but core then the

Frank Takkinen

then bit. little QX And speak color. a good seasonally seasonality a maybe around That's slower. the it. I Got typically is to little about heard comments

little patterns you a regular how talk QX seasonality guidance maybe about into incorporated the implied So fourth and the that for bit into quarter?

Joel Becker

seasonality see some centers. we in over as Yes. in institutions vacation see the and We We clinicians did some summer. that that take did some far see so do

QX. QX does have where Christmas the see of some also relates and it also conference the the seasonality obviously, We is in year biggest AES, to, as holidays. Thanksgiving

expect So replacement replacement those -- contribution the with are well. of some here as given calendarization in the of the then revenue from dynamics, QX along revenue declining we minimum

we the So those some about be would that QX way is shaping point to as factors we think up.

Frank Takkinen

Got it. And then just quick last maybe to clarify. one, one

is of to I if X% think that based year-to-date of I X% whether was replacements is it's of X% months. it or revenue. not of XX a X% off or What trailing the didn't or I of? down QX heard distinction hear

Joel Becker

you want to... maybe Rebecca,

Rebecca Kuhn

X% a Sure. Frank, was QX number. -- X% that of revenue approximately

X% quarter. replacement third in our revenue was So revenue total about of the

Frank Takkinen

Perfect. again. Congrats

Joel Becker

Thanks, Frank.

Operator

JPMorgan. [ is question Our Robbie ] next with Marcus from

Unknown Analyst

in at of Lilly [ RNS or end the you actually markets It volumes EMU quarter. you Robbie. seeing at implants? the top are of for the through above you're basically to talk translating Could how like a that's and funnel on is good This most ] pre-pandemic and that levels, trends had terms seems

of into So how about are do quarter fourth kind XXXX? environment and And you think you? operating that the you thinking same

Joel Becker

strong. We an for was Thanks quarter question, ] the consistent what good a off I seeing we're had pipeline of high all-time the the strong Lilly. for [ really and and think as company.

we the and strength -- as strength the speaking I are top as pipeline And line of had. pipeline, of the consistency the those pipeline to well the both think data a good point, that so that's of really

EMUs pipeline commented the are we've see were QX, we while volumes would know we reiterate, that in think only pipeline strength I way I also where sure seeing of just perspective. we're consistent And necessarily in the the an same expansion. the market and to seeing that from previously and don't pipeline not throughput RNS good Still in then throughput back and all return, expansion, through we've continued EMUs. but EMU not really levels the to dynamics quite but EMU level and seeing We're good very

so when initial as the And tablet the well think of we've when nSight product us launches perspective, from 'XX. with seeing, what help in really the had pilot a we that DIXI look and feel 'XX terms the scale really product well implant we at as distribution we're market combine we've positioned well And growth I in been for there. are feel bullish we and going like then with as to as We into now the and CARE, starting that efficiency. see growth of in the growth, rest of we what that and DIXI see of terms that that you with implant

And I with that all structure We're number that, and of sales really gives execution, us that and properly we've compensation set to working in we're things up there. working some something here made business. the growth sales on consistent also lot sight our direct of to ensure things, on On internally, we've made here changes assessing progress to top including the a of leadership, that structure of line of a those we've haven't been mentioned [indiscernible].

the where we And markets about we're positioned own as well for both feel with so execution way products pipeline good as and really I in our here, organization. think

Unknown Analyst

Great.

coming Another utilization primarily follow-up. existing from growing like It growth accounts. sounds is in

stands trajectory we So opportunity? total the you do And new adds? center thinking penetration within if should where that's the about the case, center be how think of

Joel Becker

a additional strong most it's the cases today. we, across look And Level great got penetration Yes, course, add in to X continue to centers but question. we've of centers, a

has utilization focus within within our adoption customers. expanding and the current really So expanding been centers

group that So that's is where lot been, utilization adoption from given core within that the growth versus has necessarily add a most the X and groups. to seeing expanding additional where and of we within we're of of needing centers our those Level come have penetration focus centers

Operator

Joel questions, I conference no CEO, there to for are As over further Becker, hand the closing now comments. would

Joel Becker

Thanks I just thanks, you. everybody, Thank on questions. Yes, being for call for today. the the would --

were. $XX.X just guidance going from close revenue performance off million to million good with operating OpEx high cash and on really million the to for company some number million with $XX I would where coming an we as Again, with management another range year-on-year core of from revenue increasing consistent growth control strong $XX well. the good all-time here a with the initiatives $XX.X quarter and of XX%, up execution

and had, I think our expansion we've the we've the way half in execution for product sense business. setting within up here with the both that focus near-term got the the expansion within the and the the us centers, and urgency of with the initial X penetration level and Level recent launches pilot of DIXI the initiatives implants started of CARE with first opportunities is on

QX and increasing of on really in 'XX our well into X.X RNS like track advantage all States with here rest NAUTILUS that of the in being the top ] we're we for of into take United 'XX the IgE [ and On that, are expanding completing access feel drug-resistant this population, into positioned the to million today. enrollment patients

market target patients. is Our XX,XXX

focal that. we're the ourselves that the we're the U.S. a in and that these of activities, of time to in the taking of with in we're strategy with X.X Level period the year direction from expand business inside actions about with that XX,XXX And of population million drug-resistant to short the positioning population patients of So centers XX,XXX talking a X the here in

well really think that how consistent on show execution positioned So demonstration I focused we're we're that strategy. moving of on we're again, and really

being for of and I today, your call So everybody appreciate the time. part thanks

Operator

participation. has concluded. NeuroPace, your for of Thank Thank you. Inc. The now conference you

disconnect now lines. may your You

NeuroPace (NPCE) 6 Nov 232023 Q3 Earnings call transcript