NeuroPace, Inc. Q1 FY2026 earnings call

Core Commercial Execution

• Q1 2026 total revenue (including Dixie Medical) was $22.1 million, with 8% year-over-year underlying growth excluding Dixie Medical
• Hit all-time new records for active prescribers, active accounts, and patient pipeline, with accelerating new patient additions to the pipeline
• Growth remains concentrated in Level 4 comprehensive epilepsy centers, the company's core commercial focus, while community partnerships are increasingly delivering durable referral flow for both existing and future indication expansion
• Invested in expanding the commercial organization: added targeted sales representative headcount in key geographies, updated sales incentive structures aligned with growth goals, and added resources to support patient navigation from identification to implant to reduce pathway friction
• Direct-to-consumer outreach and the newly expanded nurse navigator team are already improving patient funnel velocity

Clinical & Regulatory Progress

• Completed the FDA mid-cycle (Day 100) review meeting for the Nautilus PMA supplement for idiopathic generalized epilepsy (IGE) indication expansion, which management calls a productive step in the regulatory pathway
• FDA requested standard follow-up clarifying information on clinical data and analysis during the review, all questions have been responded to, and a mid-2026 approval determination remains on track; the PMA review's 180-day clock was paused per standard protocol for the information request
• 18-month Nautilus trial data published for IGE shows 77% median reduction in generalized tonic-clonic seizures, larger reductions for absence and myoclonic seizures, 30% lower seizure-related injuries, 44% lower benzodiazepine rescue use, and strong patient/physician reported outcomes
• Three-year post-approval study results for drug-resistant focal epilepsy were published in Neurology, demonstrating 82% median seizure reduction, reinforcing long-term safety and efficacy of the RNS System

Product Development

• The ECOG Assistant (formerly SeizureID), the first product in the NeuroPace AI suite, is completing internal validation; this AI tool streamlines clinician analysis of intracranial EEG data to simplify workflow and support broader RNS adoption, and is paired with a migration of the clinician platform to the cloud for better scalability. FDA approval is expected in Q2 2026
• Development of a multimodal foundational AI model leveraging NeuroPace's proprietary dataset of over 26 million longitudinal intracranial EEG recordings from 8,000+ implants (35,000 total patient years) is one-third complete; early validation shows the model outperforms all prior internal algorithms, creating a unique competitive moat in personalized data-guided neuromodulation
• Next-generation RNS system development remains on the roadmap per prior disclosures

Pipeline Expansion

• For pediatric indication expansion: the company is pursuing a real-world evidence strategy leveraging 29 published peer-reviewed studies (up from 8 in 2020) after prospective trial enrollment challenges; the work is ongoing and remains a high priority
• For Lennox-Gastaut Syndrome (LGS): 20-patient NIH-funded pilot trial enrollment is complete, early data is encouraging, and further regulatory plans are in development with results expected in the near term

NeuroPace operates a single core product segment centered on the RNS System for epilepsy treatment, plus a small discontinued Dixie Medical segment that will be classified as discontinued operations starting in Q2 2026. Excluding Dixie Medical, total Q1 2026 non-GAAP revenue was $22.0 million, representing 20.1% year-over-year growth. The RNS System contributed 98.6% of total segment revenue at $21.7 million, growing 19.5% year-over-year from $18.2 million in Q1 2025. Small service revenue from data collaborations totaled $314,000 in the quarter, accounting for the remaining 1.4% of total revenue. Non-GAAP gross margin for the quarter was 82.5% (83.6% in Q1 2025, which included a 120 basis point one-time inventory revaluation benefit; adjusted for that one-time impact, underlying gross margin expanded year-over-year).

• Full-year 2026 total revenue guidance was raised to $99 million to $101 million, an upward revision from the prior range of $98 million to $100 million; the $1 million increase at the midpoint is split evenly between improved visibility into core RNS System growth and $500,000 in added service revenue that was not included in prior guidance due to limited visibility
• The updated guidance continues to exclude any potential revenue contribution from IGE indication expansion; if approved mid-year, any contribution would start in the second half of 2026, and guidance will be updated after approval once reimbursement and adoption timing is clearer
• Full-year 2026 non-GAAP adjusted gross margin guidance is maintained at 81.5% to 82.5%
• Full-year 2026 non-GAAP adjusted operating expense guidance is maintained at $90 million to $92 million, excluding $10 million in stock-based compensation per prior guidance: sales and marketing is expected to be $46 million to $48 million, R&D is expected to be ~$27 million, and G&A is expected to be ~$17 million
• Full-year 2026 adjusted EBITDA loss guidance was improved to a range of $8.5 million to $9.5 million, down from the prior expected loss of $9 million to $10 million
• Management expects core RNS System underlying revenue growth of 21% to 23% for full-year 2026, with growth accelerating in the second half consistent with historical trends; first half 2026 growth is expected to be ~20% in line with the company's long-term target

• FDA approval of the IGE indication expansion is a binary event; there is uncertainty around the final regulatory outcome, timing of any final determination, and potential label scope, particularly given the Nautilus trial's primary efficacy endpoint did not meet statistical significance
• Full revenue contribution from IGE expansion depends on successful private payer coverage expansion, which will take time to cycle through existing contract schedules and creates adoption ramp uncertainty even after regulatory approval
• Development of new AI tools and the multimodal foundational model is ongoing, with uncertainty around final product performance, regulatory approval timing, and market adoption
• Community center expansion for Project CARE requires significant awareness building and infrastructure development, which is taking longer than initially expected due to heterogeneous community center needs and hospital capital/approval cycles
• Replacement revenue, while expected to grow over time, is still in very early stages and will not contribute meaningfully to 2026 results

Q: What factors are driving the current strong patient pipeline growth, and what clarifying information did FDA request during the Nautilus mid-cycle review?

A: Pipeline growth comes from three core areas: deepened collaboration with existing Level 4 epilepsy centers, growing contribution from community referral channels, and improved commercial team discipline, tracking, and AI-enabled predictive analytics for pipeline velocity. FDA's questions focused on clarification of clinical data and associated analysis included in the PMA supplement, which is standard for a mid-cycle review; NeuroPace has already submitted full responses to all requests received to date.

Q: What is the split of RNS revenue growth between penetration in existing centers vs new prescribers, pricing dynamics, and what would be the adoption and reimbursement cadence if IGE is approved?

A: Most growth comes from increasing adoption and utilization within existing Level 4 centers, with a growing contribution from community-identified patients either implanted locally or referred to Level 4 centers; direct-to-consumer outreach and nurse navigation are also contributing. Pricing provides a consistent low single-digit tailwind, with the majority of growth from unit volume, and management expects to continue low single-digit annual price increases going forward. If approved mid-year, IGE revenue will be back-end loaded in 2026, as private payer coverage expansion (80% of the market) takes several months to complete; Medicaid/Medicare reimbursement can move faster on a case-by-case basis, and the same existing DRG/CPT codes apply, so no new coding is required.

Q: Why raise guidance early in the year, and why is no IGE contribution included even though Medicaid coverage could start quickly after approval?

A: Guidance is raised based on consistent historical trends that show 500 basis points higher growth in the second half vs the first half across the last three years, the current record-strong patient pipeline that will flow to procedures later in the year, and expected increasing productivity from new commercial investments as the year progresses. IGE is excluded because approval remains a binary event; management will add any expected contribution to guidance only after formal approval is received, consistent with prior conservative guidance policy.

Q: What has been the impact of 2026 OPPS reimbursement changes, and what key learnings have come out of the multi-year Project CARE community expansion initiative?

A: 2026 reimbursement changes have gone live smoothly with no pushback from the field, and the improved outpatient reimbursement for device replacements puts NeuroPace in a strong position as the RNS320 replacement cycle grows. Project CARE learnings include that the community segment is not homogeneous: some community centers are immediately ready to start implanting, others need time for capital and staff development, and a third segment prefers to refer patients for implantation while retaining long-term patient management. Awareness building takes longer than initially expected, but the initiative has built important referral infrastructure that will benefit future IGE expansion.

Q: How has FDA approached the Nautilus trial's non-significant primary endpoint during review, and what is the current mix of replacement vs new implants?

A: FDA is taking a comprehensive approach focused on the totality of the data, including the positive safety endpoint, pre-specified secondary efficacy analyses that are clinically meaningful, and the overall strength of the evidence. Replacement implants are still in the very early stages of the cycle, representing less than 5% of revenue and less than 10% of unit volume in Q1 2026; replacement volume will grow gradually through 2026 and become more meaningful starting in 2027 and beyond.