NeuroPace, Inc. (NASDAQ:NPCE) Q3 2025 Earnings Call Transcript

NeuroPace, Inc. (NASDAQ:NPCE) Q3 2025 Earnings Call Transcript November 4, 2025

NeuroPace, Inc. beats earnings expectations. Reported EPS is $-0.11, expectations were $-0.2.

Operator: Ladies and gentlemen, thank you for standing by. My name is Colby, and I’ll be your conference operator today. At this time, I would like to welcome you to the NeuroPace Q3 earnings call. [Operator Instructions] I would now like to turn the call over to Scott Scaper, Head of Investor of NeuroPace. Please go ahead.

Scott Scaper: Thank you, operator, and welcome to NeuroPace’s Third Quarter 2025 Earnings Conference Call. Our agenda begins with Joel Becker, NeuroPace’s Chief Executive Officer, who will summarize our recent highlights and ongoing strategic initiatives, followed by a financial review and outlook from Patrick Williams, our Chief Financial Officer. Following our prepared remarks, we will open this call up for your questions. At that time we ask the analyst to limit themselves to one question and one follow-up question each, so we can provide an opportunity for everyone participating today. Let’s quickly review our safe harbor statement. Some of the statements we will make on today’s call may constitute forward-looking statements.

These statements reflect management’s intentions, beliefs, and expectations about future events, strategies, products, regulatory, and operating plans and performance. All forward-looking statements included on this call are made as of the date hereof based on information currently available to NeuroPace are subject to various risks and uncertainties, and actual results could differ materially from those anticipated in the forward-looking statements. The factors that could cause actual results to differ materially from those expressed or implied by any of these forward-looking statements are detailed in NeuroPace’s annual report on Form 10-K, most recent quarterly report on Form 10-Q and other filings with the Securities and Exchange Commission.

Except as required by law, we assume no obligation to update any such forward-looking statements after the date of this call or to conform these forward-looking statements to actual results. And with that, I will now turn the call over to NeuroPace’s Chief Executive Officer, Joel Becker. Joel?

Joel Becker: Thanks, Scott, and good afternoon, everyone. I will start with an overview of our third quarter results and how the team is executing against our strategy. I will then provide updates on our key clinical and product development initiatives. After that, Patrick will walk through the financials and updated guidance before opening the line for Q&A. The third quarter was one of record results for NeuroPace and demonstration of the effectiveness of our strategy and its execution. Total revenue in the quarter was $27.4 million, delivering 30% year-over-year growth compared to $21.1 million in the prior year quarter. This record revenue was primarily driven by RNS initial implants, resulting in RNS revenue of $22.6 million and representing growth of 31% year-over-year.

RNS growth in the quarter was broad-based across geographies, customers, and programs. All sales regions exceeded planned sales for the quarter with the number of prescribers, accounts, and utilization nationally reaching all-time highs. These results demonstrate the compounding effects of the recognition of the differentiated capabilities of the RNS System, enhanced commercial leadership and execution, and improved referral management, driving higher procedural volumes. The majority of our growth came from Level 4 centers with increased adoption and utilization. Project CARE also contributed meaningfully and again improved sequentially and year-on-year. We also saw increased contribution from our direct-to-consumer efforts as well. We remain confident in our long-term growth trajectory of growing a minimum of 20% in our core RNS business with our current adult focal epilepsy indication.

Importantly, gross margin and operating leverage were also strong and continue to be highlights as we scaled growth in a disciplined manner. Additionally, during the quarter, NeuroPace generated positive adjusted EBITDA, a significant milestone for the company and the first time in our history. This important accomplishment reflects the scalability of our model and the progress we are making with disciplined expense management, consistent mix improvement, and increasing efficiency in both commercial and manufacturing operations. We are proud of this achievement. And while this metric may vary quarter-to-quarter, we remain committed to driving towards sustainable profitability and cash flow breakeven. Given the performance in the quarter, we are raising both our full year revenue and gross margin guidance ranges.

For revenue, we now expect a range of $97 million to $98 million or 21% to 23% year-over-year growth, an increase from previous guidance of $94 million to $98 million. Let me now turn to our key clinical and product development initiatives, starting with NAUTILUS and our recent meeting with the FDA. As expected, we completed our pre-submission meeting with the FDA in September, which we believe was a productive and engaged discussion of the study. We reviewed the totality of the evidence, safety, the primary effectiveness endpoint and the prespecified secondary endpoints as well as additional analysis. We continue to believe the safety and effectiveness profile of the NAUTILUS data supports a favorable benefit risk assessment for this highly underserved population, and our PMA supplement will incorporate the discussion points from our meeting.

We appreciate the opportunity to meet with FDA and the dialogue was consistent with our expectations. Development of our PMA supplement application is underway, and our timeline and plans remain on track to submit the PMA supplement for NAUTILUS before year-end. Moving on to our pediatric indication. We continue to work closely with the FDA and our collaboration partner, NEST, as we finalize the real-world evidence and protocol for our pediatric indication. We are working to ensure that the data set and protocol are both as strong as possible. As we continue this process, it has taken more time to align on that protocol and data set than we had initially built into our timeline. We remain confident about the approach of leveraging real-world evidence to gain this much-needed indication expansion in a pediatric patient population.

As we finalize the real-world evidence and protocol timing for submission will extend beyond 2025. We are not providing a revised submission date today, but we will provide updates as milestones are met. We are appreciative of the quality of the interactions with FDA and NEST and the ongoing collaboration as we pursue this unique opportunity. We look forward to advancing this indication expansion pathway and remain committed to bringing RNS therapy to the pediatric population. I also want to highlight the growing recognition that RNS and our unique closed-loop stimulation is receiving across the field. The September issue of the Journal of Clinical Neurophysiology was entirely dedicated to the use of data and feedback for personalizing intracranial neuromodulation and several articles featured RNS at the center of that conversation.

This journal is one of the most widely respected peer-reviewed publications in the field of epilepsy and brain modulation. It is the official journal of the American Clinical Neurophysiology Society and a key forum where leading researchers and clinicians publish data that shape standards of care. The editors described a critical shift underway in epilepsy therapy, away from one-size-fits-all stimulation and toward data-guided patient-specific neuromodulation. Driving that shift is the convergence of long-term intracranial EEG, advanced neuroimaging, and artificial intelligence, and the critical importance of developing individualized treatments in clinical settings. For years, the RNS System has generated data and outcomes that define what personalized closed-loop therapy could be.

Now as AI and computational tools mature, the importance of the RNS System’s unique ability to monitor and record data and then tailor individual therapies for specific patients through its differentiated closed-loop capabilities is coming further into focus. We believe the broader scientific community is recognizing that the RNS System platform is best positioned to capitalize on this new era of innovation that is beginning to shape the future of epilepsy neuromodulation and brain computer interface development. We are now seeing a number of factors we have been working on deliberately for years start to come together at the same time. The clinical maturity of closed-loop neuromodulation, the scale and quality of our long-term intracranial EEG data set, and the computational tools to act on that data in real time.

And critically, we now have the tenured domain knowledge and execution muscle on the team to capture this opportunity. This convergence is creating an environment for the potential of accelerated adoption of closed-loop personalized neuromodulation. We believe the RNS System is uniquely positioned to capitalize on this new era of data-guided epilepsy care and longer term on the direction the field is heading in neuromodulation and brain computer interface or BCI. Now to an update on product development. Our RNS development pipeline is focused on extending the platform advantages just mentioned with greater on-device analytics capabilities, streamlined programming workflows, and enhanced connectivity to further improve both the quality and time to improved outcomes as well as enhance efficiency and ease of use to support wider adoption.

We recently submitted to the FDA our seizure iEEG AI software tool, the first of a suite of planned NeuroPace AI applications, which utilizes our proprietary iEEG data and AI development efforts and is designed to improve clinical outcomes. With that, I’ll turn it over to our Chief Financial Officer, Patrick Williams, to review the financials and our outlook. Patrick?

Patrick Williams: Thank you, Joel. Before getting into our results, I wanted to take a moment to reflect on my first full quarter with the company. The strength of the product, the commitment of the team and the sheer scale of opportunity still ahead is now much clearer to me and makes me even more optimistic. The execution improvements being undertaken and feedback from physicians I have met with have reinforced that this is a company with a differentiated technology and with a long growth runway. In today’s press release, we have provided a financial supplement, which breaks out our historical RNS, DIXI, and service revenue by quarter from Q1 2024 through today’s Q3 2025 results. We believe this additional detail will allow investors and analysts to more easily reconcile our historical performance with our go-forward reporting structure as we move into 2026, where we will be substantially done with distributing any further DIXI product.

Let me now walk you through our third quarter financial results. Our third quarter revenue growth was driven primarily by continued strength in our RNS system sales, totaling $22.6 million, representing growth of 31% compared to the prior year period, supported by higher procedural volumes, broad-based increased utilization within existing centers, and growing contributions from Level 3 and community centers as our investment and focus in these areas scale. Additionally, we generated approximately $770,000 of research service revenue in the quarter tied to our ongoing data collaborations. DIXI sales grew 8%, coming in at approximately $4 million in the quarter as the distribution agreement officially ended on September 30, and the entire company begins to focus more on RNS in line with our strategic rationale.

As a reminder, the distribution agreement with DIXI provides for a 6-month wind-down period, which lasts until the end of Q1 2026. At the end of this wind-down period, the distribution agreement contractually allows NeuroPace to sell back any remaining inventory at prior paid costs back to DIXI. Thus, there is minimal to no inventory excess or obsolescence exposure related to this termination. Finally, although the distribution agreement allows for a wind-down period through Q1 2026, we currently believe we will be substantially done with DIXI sales by the end of 2025. We do not expect any material sales in Q1 2026 as our organization and notably, our commercial team strategically shifts its focus solely on our core RNS business and the potential upcoming FDA approval of expanded indications.

We are raising our full year revenue guidance to a range of $97 million to $98 million, up from our previous guidance range of $94 million to $98 million. This updated guidance reflects an increase of approximately 21% to 23% over our reported total revenue for 2024. Our increased revenue guidance is primarily driven by our RNS System, which we expect to be in the range of $20 million to $21 million in the fourth quarter. At the midpoint of this range, RNS revenue growth for the second half of 2025 would be approximately 23%, an acceleration over our RNS first half revenue growth results of 21%. This revised total company guidance incorporates a lower contribution from DIXI products of approximately $3 million in the fourth quarter due to the aforementioned strategic shift and wind down of the DIXI product line.

And with regard to service revenue, we expect approximately $750,000 in the fourth quarter, similar to our third quarter results and is based on our current projections of achieving certain milestone triggers outlined in these service contracts. Turning to gross margin. Total company gross margin for the third quarter 2025 was 77.4% compared to 73.2% in the prior year quarter and 77.1% in the second quarter 2025. RNS System gross margin remained very strong at above 80%, benefiting from improved manufacturing efficiency, favorable pricing, and continued leverage as we scale. This strength was partially offset by the lower-margin DIXI products, which carry gross margins slightly below 50% and were again impacted by incremental tariffs. Based on our strong year-to-date gross margins and increasing revenue contribution from our higher-margin RNS product, we are raising our full year gross margin guidance to a range of 76% to 77%, up from our previous guidance range of 75% to 76%.

As we move into 2026 and substantially exit the DIXI product line, our revenue and gross margin will essentially only be the RNS system, which we believe will carry a gross margin greater than 80%. Total operating expenses were $23.8 million in the third quarter of 2025 compared with $19.7 million in the prior year quarter, in line with expectations with better-than-expected general and administrative expense and areas of research and development expense, offset by higher-than-anticipated selling expenses due to an overperformance in sales as well as higher variable compensation accruals across the organization. Operating expense growth of 21% in the quarter remained meaningfully below our revenue growth of 30%. Stock-based compensation in the quarter totaled $2.6 million.

As Joel mentioned, we continue to demonstrate underlying operating leverage resulting from our focus on driving revenue growth while also effectively managing our operating expenses and gross margin. We plan to continue to focus on balancing these objectives as we drive towards cash flow breakeven. We now expect total operating expenses for 2025 to range between $94 million and $95 million, a slight increase at the lower end from our previous guidance range of $92 million to $95 million to reflect the increased expense in the third quarter related to sales overperformance and increasing variable compensation related to expenses we expect to incur by year-end. This range reflects 16% to 18% operating expense growth on a year-over-year basis and is well below our revenue growth rate.

Included in our total full year expense is approximately $11 million in stock-based compensation, a non-cash expense. As we started last quarter and as part of an ongoing effort and commitment to provide increased transparency and support the ability to model our business, we will again break out and provide commentary on sales and marketing, research and development, and general and administrative components rather than referring to SG&A as a single line item. Sales and marketing expense was $12.6 million in the third quarter of 2025, up from $9.9 million in the prior year quarter and slightly up from $12 million in the second quarter of 2025. The year-over-year increase was largely due to personnel-related expenses associated with ongoing scaling of our commercial activities, investment in direct-to-consumer marketing and other sales-related expenses.

The slight sequential increase was primarily due to higher variable incentive compensation related to sales over performance. We now expect sales and marketing expense to total between $47 million to $48 million for the full year 2025, slightly up from our previous guidance range, primarily driven by the aforementioned increase in variable compensation related to higher sales performance. R&D expense was $6.6 million in the third quarter of 2025, up from $5.8 million in the prior year quarter and slightly down compared to $6.8 million in the second quarter of 2025. The year-over-year increase was primarily driven by personnel-related expenses associated with the development of a next-generation platform, AI-enabled tools, and ongoing clinical trials.

We now expect R&D expense to total approximately $28 million for the full year 2025 or at the higher end of the range of our prior guidance as investment in next-generation products continues, including final preparation of our IGE PMA supplement, which is still on track for submission by the end of this year. G&A expense was $4.6 million in the third quarter of 2025, an increase when compared to $4 million in the prior year quarter and down sequentially from $6.1 million in the second quarter of 2025. The year-over-year increase was primarily driven by personnel-related expenses. The larger sequential decrease was driven by nonrecurring costs associated with an executive transition in the second quarter. We now expect G&A expense to be at the lower end of our previously guided range and to come in at approximately $19 million for the full year 2025.

Loss from operations was $2.6 million compared to a loss from operations of $4.2 million in the prior year and a loss of operations of $6.8 million in the second quarter of 2025. We recorded $1.6 million in interest expense compared to $2.2 million in the prior year quarter, reflecting the benefits of our debt refinancing earlier this year at more favorable terms. We continue to expect interest expense of approximately $8 million for the full year 2025. Regarding interest income, we expect approximately $2.5 million in income for the full year 2025. Net loss for the quarter was $3.5 million compared to a net loss of $5.5 million in the prior year period and a net loss of $8.7 million in the second quarter of 2025. Our free cash flow, defined as operating cash flow less capital expenditures, was negative $2 million in the third quarter of 2025 compared to negative $1.8 million in the third quarter of 2024.

The year-over-year change primarily reflects higher revenue and gross margins, are partially offset by an increase in inventory as we place final orders for the DIXI product line. Lastly, as Joel mentioned previously, adjusted EBITDA, defined as EBITDA, excluding stock-based compensation, was a positive $0.1 million in the quarter compared to a negative $1.6 million in the third quarter of 2024 and negative $3.5 million in the second quarter of 2025. Finally, ending with our balance sheet, our cash and short-term investments balance as of September 30, 2025, was $60 million. We continue to believe this gives us sufficient capital to fund operations through cash flow breakeven. And with that, I would now like to turn the call back over to Joel for closing remarks.

Joel Becker: Thank you, Patrick. The third quarter was a record quarter for NeuroPace and was driven by execution of our strategy and demonstrated strength across the business. We delivered record revenue, continued gross margin strength, and operating leverage, all of which demonstrate how our strategy and its execution are translating into results. At the same time, the broader field is recognizing what we’ve known for years, that responsive, data-driven neuromodulation represents the future of epilepsy care. We believe there is a growing view that the RNS system will serve as the foundation of the future standard in individualized brain neuromodulation. Multiple factors are beginning to converge that position RNS and NeuroPace to build on our current momentum.

We have world-class opportunities, world-class technology, world-class data, and a world-class team to deliver on them. These foundational factors position us to establish RNS as the standard of care in epilepsy neuromodulation. Thank you for your time today and for your continued interest in NeuroPace. Operator, we’ll now open the line for questions.

Operator: [Operator Instructions] Your first question comes from Rohin Patel with JPMorgan.

Q&A Session

Rohin Patel: Congrats on a good quarter here and strong RNS revenue growth. My first question is just on 2026 and your outlook. Trends seem to be progressing well on all fronts as we close out the year. So just as we look ahead, can you help us understand the preliminary thoughts on the growth outlook and specifically how you’re thinking about RNS growth given DIXI revenues will be coming off? And what are some of the key assumptions embedded in the outlook for new indication launches and some of these AI applications driving utilization and also Project CARE in the community setting?

Joel Becker: Hello, Rohin, thank you for your comments, and thanks for the question. This is Joel. So as we look forward to 2026, I think we’re guiding here for ’25 and for the quarter of Q4. So I’m not guiding formally for ’26, but we do think that a lot of the fundamental factors that are in place position us really well for the upcoming year. We’ve been clear when we think and talk about our longer-range planning, the core of our focal epilepsy indicated business, the RNS driver for that focal epilepsy indicated business is a business we’re confident in growing at 20% plus. We’re doing that, and that really serves as the foundation for the business. And then we see the things that we’re talking about here with regard to the key development initiatives, both our clinical development initiatives with IGE as well as pediatrics and then the positive effects that the R&D pipeline as well with regard to ease of use and efficiency in generating improved clinical outcomes.

A lot of those things are coming together to add on to the top of that core of the 20% plus growth in the currently indicated business. So we’re really pleased with Q3. We think that we’re really well positioned. We’ve got a lot of stuff converging and coming together here. And we’ll talk more about ’26 when we talk about ’26, but we think that gives us a strong foundation to build on that 20% plus. Patrick, would you have anything you want to add there?

Patrick Williams: Yes. I just wanted to add, and I really appreciate the question. And what we did was we did provide a financial supplement so that the analysts, the entire street will get very clear and transparent message in terms of what our historical revenue has been between DIXI and RNS. And I think what you’re talking about is very key because we want to make sure that people understand that right now, there’s still some DIXI revenue sitting in some people’s 2026 numbers, and it’s important that we really look at this on an RNS to RNS basis. So that was the basis of us giving that extra disclosure. And we would certainly expect that models will start reflecting that and show that likely 20% at a minimum growth for RNS.

Joel Becker: Yes. So important point, Patrick, and I know you’re up on it, Rohin. But with our prepared comments here, just emphasizing for folks that substantially all of the DIXI revenue will be complete here at the end of 2025. And so 2026 will be RNS and the RNS basis and the RNS growth should really be the focus of the model.

Rohin Patel: And then I had a follow-up. I mean this is a bit of a longer-term development for you. But in your prepared remarks, you discussed the confluence of all your efforts to date in data, neuromodulation, and the hardware improvements that you’ve made or plan to make over time. And you have these partnerships in drug development, such as the Rapport collaboration, which leverage this extensive EEG database and some of the AI capabilities to support partners in drug development and biomarker identification. So I know it’s early days, but is there any preliminary feedback you can provide from your partners on how you see the platform supporting drug discovery or personalized medicine in any way? And given this is starting to ramp, I know you called out about $700,000 in revenue, but early days, but starting to ramp.

Is there any — are there any milestones or proof points that investors should be watching for over the next year or so, either from more recurring revenue or other data points?

Joel Becker: It’s a great question, and thank you for emphasizing the topic. We do see that there are a number of things here that are really converging. And we are, we think, at a point of confluence here with regard to the data, the nature of some of the fields that are developing around us in terms of data science and then software as well as hardware development, as you mentioned. So I’ll comment in a couple of different areas that you mentioned. One, from a partnerships perspective, I think you can go back and look at some of the public disclosures from Rapport that the ability to really provide that window into the brain and which we do both for our development partners within clinical study partnerships provide a tremendous amount of value as well as to clinicians every day in managing patients out there, which is why we’re able to tailor and target therapy for individualized patients and demonstrate best-in-class results.

That ability to uniquely monitor, record, analyze, and then tailor therapy is really at the foundation of both those partnerships as well as then what I was mentioning in terms of the journal focus where personalized, individualized targeted neuromodulation shows a tremendous amount of potential. And the ability to integrate that data and then tailor the delivered therapy is something that the RNS system is really uniquely well positioned to take advantage of. So we think both with regard to partnerships, more on the way there. I won’t get into the specifics of it. But I think on the last call, we had mentioned UCB in addition to Rapport and we are working on others as well from a partnership perspective. And then, again, just that ability to use data, some of which is data analysis that humans just aren’t able to see the patterns in our unique set of tools, algorithms and AI software is going to put us in a position to be able to leverage the unique nature of the RNS platform.

So we’re particularly encouraged about both the near-term results in the business as well as where the platform is positioned from a hardware, software, and data perspective as we see that confluence of factors.

Operator: Your next question comes from Priya Sachdeva from UBS Financial.

Priya Sachdeva: Congrats on a great quarter. I think first for me, would just love to parse out the implied growth for 4Q. The full year midpoint kind of implies a pretty steep step down despite pretty strong double-digit growth year-to-date and it seems to us like no slowing in momentum. So would just love to understand what you’re seeing on the ground to help us give some context around that implied growth for 4Q? And then just a follow-up after.

Joel Becker: Thank you. Priya, good to hear from you, and thanks for the question. I’ll maybe start with where you ended there. What are we seeing on the ground? And I mentioned it in our prepared comments, but we really saw good execution and performance in a broad-based fashion across the business. So the core of the growth came out of the adoption and utilization in our Level 4 centers, which is great to see. It’s where the vast majority of our business is built today. And we — so we increased — just to break that down a little bit. We increased prescribers again to an all-time high. We increased accounts again to an all-time high. And we increased utilization to an all-time high at the same time. And it’s probably obvious, but those 3 things are difficult to do together.

And especially when you get new customers starting, new clinicians and accounts starting, many times, they’ll start a little bit slower than your customers who are more of a rhythm. And so we really appreciate the utilization — the adoption utilization and number of prescribers and accounts all headed the right direction up and to the right at the same time. One. Two, we saw really good execution across our commercial organization. Again, I mentioned it in my comments, but all of our sales regions executed above their planned sales level. And so the consistency of execution across that team, which is an enhanced team. We’ve made some changes and some investments there over the recent time, and it’s really great to see that execution across the business.

And then care and DTC both contributed nicely as well. So when we think about what are we seeing on the ground today, that’s where I’d start. Seeing really strong execution. When you think about Q4 then, just to get to your question, I think — so there’s a couple of components here. One is RNS, and we’ll talk about RNS here in a minute. But DIXI in particular, is one that I would point out. DIXI is forecast to be down. And we expect some of that just given the wind down of the business. And that’s the biggest net impact versus our previous expectations and why we’re kind of seeing some of the Q4 dynamics that we’re expecting. But I’d tell you, RNS here, as we look at RNS for Q4, I’m not guiding outside of what we’ve guided, but I will offer that the RNS business in Q4 in October and in the quarter is off to a solid start, both with regard to execution as well as to our patient pipeline.

And so we feel real good about all that with some uncertainty and some downside offsetting that a little bit with DIXI. And I’ll maybe ask Patrick to comment a little bit more on some of the levers.

Patrick Williams: Yes. Thanks, Joel. And I think Joel hit the nail on the head there. Look, we had a very strong quarter, and we really do try to look at this business in 6-month increments, and Joel has been very consistent prior to me coming here. And if you look at even at the midpoint, as I said in my prepared comments, once again, DIXI is the reason why the overall number didn’t go up as much as it did, and we talked about why that is. Let’s focus on RNS. RNS in the first half of the year grew 21%. And at the midpoint of our implied guidance of Q4 for RNS of $20 million to $21 million, we’re going to grow 23% in the second half of the year at that midpoint. And so we feel very comfortable with the durability of this business and where we’re moving as we go forward, and Joel already hit it. We’re off to a good start in Q4 with October, but that’s really the components of it. So a strong quarter overall.

Priya Sachdeva: I mean just a follow-up, great to hear the news on the PMA submission. And now that we have some increased clarity on the potential expansion, could you just remind us on the plan of attack into potential approval and how quickly we could see some incremental growth contribution? Congrats on a great quarter.

Patrick Williams: Thank you. So our plan is — in here, in particular, I’m referencing NAUTILUS in the idiopathic generalized epilepsy population. The plan is for submittal of the PMA supplement here before year-end 2025 and thinking about a 180-day clock there on a normal basis for a PMA supplement that would put us in mid-2026. And so that’s what we’ve talked about. We’re on track for that. Of course, they can each take on their personality and the time will take — the time that it takes, but we’re on track for submittal here in — before the end of the year and getting the clock started for midyear ’26.

Operator: Your next question comes from the line of Mike Kratky with Leerink Partners.

Michael Kratky: Congrats on a great quarter. To start, let me just say I’m immensely grateful for all the additional disclosures you’re providing moving forward. So massively appreciate that. Really impressive RNS growth this quarter. I guess to follow-up on a prior question, it looks like the implied 4Q guidance for gross margin might also be implying a bit of a step down. So especially if DIXI might be a little bit lighter than anticipated, how should we reconcile some of your commentary just on the RNS strength with the implied step down in gross margin? I would have probably thought that would have been a little bit higher as RNS ticks up as a percent of revenue.

Patrick Williams: Yes. This is Patrick here. Fair question, Mike, and good to have you back on the call. Look, I would say that, as we said in our prepared comments, we continue to believe that RNS will be north of 80%. 80% is a minimum bar for us. And I would just chalk it up as us not wanting to get ahead of ourselves. There is some movement in DIXI. We did say approximately $3 million. Is there a chance we sell more than $3 million as we’re exiting the business? Potentially, and that could obviously have a drag on the overall gross margin. So I would really just view it as more of a mix issue related to DIXI as opposed to anything else. I will be very clear again, as I said in my prepared comments, as we move into 2026 and we are an RNS business, you should be modeling a gross margin that’s 80% at a minimum, and we’ll provide additional color when we officially guide 2026.

And then we had a good question on service revenue, so I might as well hit that real quick. Look, service revenue has very good margins for us. And I think the key there for everyone is we will come back to you when we see additional potential service revenue streams that we have. But rest assured, we will be looking to optimize and maximize as best we can the monetization of our really good data and how we can support some of these pharma collaborations.

Michael Kratky: And maybe just one follow-up. I really appreciate the color on Seizure ID. Can you just talk about how that fits into your broader portfolio? And is that something that you expect to generate revenue or will be more of a support tool moving forward?

Joel Becker: Thanks for that, Mike. Yes, we’re excited about Seizure ID. And as I mentioned, it’s the first in what we expect to be a suite of tools that we’ll be leveraging our proprietary EEG data and then AI-based algorithms that we’ve developed internally as well. So what we expect from Seizure ID is to make it more efficient and easy for clinicians to be able to identify episodes that are long episodes and the areas that they want to look at most closely for therapy and for changes in therapy to continue to improve outcomes. So the reason that matters is that for some patients, these cycles of particularly important EEG information are complex enough or occur over a long enough period of time that regardless, and we have tremendously talented and dedicated customers, a human can’t pick them out if those cycles are coming over sometimes weeks or months of a period of time.

And so when they look at that information and when Seizure ID looks at that information, it can very efficiently and effectively pick out those hallmark EEG patterns and make it easier for them to identify the areas of interest and then tailor therapy along with that. And so again, efficiency and ease of use leading to improved clinical outcomes is the focus of that particular tool. And the way we see that adding value in the business is through increased numbers of patients having access to an improved therapy causing us to both be able to compete with other treatment approaches as well as make RNS more easily accessible for people to have more RNS patients in their practice. So it’s really all about making RNS more accessible and the improvements associated with it more accessible.

And that’s how everybody will see value from Seizure ID.

Operator: Your next question comes from the line of Vik Chopra with Wells Fargo.

Unknown Analyst: This is Simran on for Vik. Maybe just to start off on the margin commentary, very helpful color. I guess I just want to clarify, should we be thinking about 80% gross margin as a baseline for 2026? And are there any additional like puts and takes that we should consider on the margin line going forward?

Joel Becker: Eighty percent is a fair number to model. RNS has been running ahead of that. The only caveat I would put is if there’s some trickling DIXI revenue that happens in Q1. But again, as I said, the wind-down period does officially end Q1 of 2026, but we plan to be substantially done with sales. But again, I think modeling an 80% would be very fair from that standpoint going forward.

Unknown Analyst: And then maybe just on NAUTILUS. I appreciate your reiteration of the timelines there. But when can we expect to see the full data set from NAUTILUS publicly?

Joel Becker: So there are a couple of different opportunities for us to get the data out with NAUTILUS. We do expect to have a poster abstract presented at AES, and we are also planning on submitting for a presentation at AAN next spring as well. So a couple of different opportunities there, and we’re looking forward to talking to people about the updated data.

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

Frank Takkinen: Congrats on a great quarter. I was curious if we could maybe talk a little bit more about the NAUTILUS data and your sense of industry awareness around that data. And I know it’s something you can’t market for and you won’t talk directly to, but I think the concept of off-label use is something we’ve discovered in our conversations with physicians. Just curious if that had maybe contributed some in the quarter in the practice — in accordance with the practice of medicine, if doctors are using that a little bit more off-label and that they have some clinical data to support that.

Joel Becker: So I think in the past, Frank, we have talked about that investigators are really the only people who are aware of the detail around the data outside of what’s been presented publicly. And the business performance in the quarter, it doesn’t come to mind for me that any — there’s nothing unusual in the quarter and nothing with regard to the practice of medicine variation that would have been impacted by the NAUTILUS results or any of the IGE data. I think as had been mentioned previously, we saw positive reactions from the investigator discussions with regard to the safety data as well as regard to the prespecified secondary endpoints. And so we were pleased to hear that from the investigator community, but nothing unusual in the quarter otherwise.

Patrick Williams: Yes. I would echo that. And remember, we have a little bit of a long, let’s call it, “clinical sales cycle” here, right? It takes a little bit of time for a patient once they get into a Level 4 and then that journey that they go through, right? So I think the most exciting thing that we’re looking forward to is that when we submit and potentially get that IGE approval, the ability to put the entire organization behind that and be able to speak openly to doctors, obviously, and talk through that and being able to do both focal and IGE in the adult population is going to be a huge win for us. And some people would say 1 plus 1 may equal more than 2 when this is all done. So I think that awareness and our ability to support it is going to be a key tailwind as we move through 2026 and beyond.

Frank Takkinen: And then maybe just a big picture question. Clearly, you’ve been outpacing, I think, where some of your competitors have been growing. If you were to speculate, do you think more of your growth is coming from market expansion or market share taking?

Joel Becker: I think that it’s really a combination, Frank. And I think if we go back to the drivers here, we’re seeing an expanded adoption of RNS and we’re seeing expanded utilization as well. So people are expanding the use of RNS within their practices, and we think RNS is a unique technology that allows them to treat patients uniquely and differently than they can with other therapies. And so I think whether it’s specific focal patients or corticothalamic stimulation with a network stimulation approach or the things they can do from a hybrid perspective in addition to resection and surgical candidates, RNS opens up populations of people that can be treated according to the unique capabilities of RNS. And then I do think as well, with the data, in particular, the post-approval study data that has come out, we’re winning more than our fair share of the device appropriate patients because of the data and because of the technology.

So as I mentioned in a couple of different places in my prepared comments, I think there’s a number of different factors that are converging here. The data, the unique capability of the technology, the future potential that people see with the technology and whether that’s for future indications or for the future ability kind of future-proof your patient. Here’s how we can access today a unique platform that is positioned well for tomorrow and the way things are shaping up, I think we’re advancing on both fronts.

Operator: Your next question comes from the line of Ross Osborn with Cantor Fitzgerald.

Ross Osborn: Congrats on the strong quarter. Starting off, is there any color you can provide on where you think the label will shake out for IGE based upon your most recent interactions?

Joel Becker: Well, I think as we’ve discussed previously, we have — we plan to submit for the entire study population in NAUTILUS. And so I think you can get a pretty good idea for where the label will shake out based on the study patient population.

Ross Osborn: Okay. Great. And then sticking with expanded indications, what level or type of data generation do you think you’ll need to develop for the pediatric space to support approval?

Joel Becker: Well, I think with the pediatric space, it’s not so much data that would need to be developed. And that’s really our approach here is the use of real-world evidence to support a retrospective submission for this indication. And I feel like we’ve made a lot of really good progress with the agency, with NEST, with the clinical providers of the data. And so we think the data is there. It’s a matter of aligning the fit-for-purpose protocol and indices and endpoints with the real-world data that exists and what the agency is looking for. And so that’s really where our focus is. So I don’t think that we need to generate additional data. It’s a matter of really matching up a high-quality data set with a trial design that is going to meet those needs.

And I’m really — I’m pleased with the level of engagement and the work that’s been done there. But as you might expect, when you’re doing a real-world evidence study, a lot of the work goes on, on the front end versus a prospective study where a lot of the work goes in on the back end. And so we’re spending the time to make sure we’ve got that well aligned now. And again, we were very confident in the strategy, and that’s what we’re working on.

Patrick Williams: I think that’s the key point that Joel just hit at the end there, which is because of the uniqueness of this pathway that we’re looking at and the retrospective of using real-world data, there potentially is opportunity to make up time on the back end as opposed to your more classical like a NAUTILUS clinical trial that we’re doing. And so we’ll give everyone updates, obviously, on this as we move through it, but that would be a bit of the silver lining I would have people understand.

Operator: Your next question comes from Yi Chen with H.C. Wainwright.

Unknown Analyst: This is Eduardo on for Yi. Congrats on the great quarter. Just I guess, a question regarding Project CARE. There were some question earlier about it and how you’re seeing growth in Level 4 centers versus in kind of these other practitioners and especially in light of the potential IGE expansion, do you see Level 4 centers still being the primary places of growth? Or do you think having this different patient population involved could change the way you go about your sales tactics?

Joel Becker: The short answer is yes. And I’m not trying to be cheeky, Eduardo. We see the Level 4 centers being a key and primary source and focus of growth for us. That’s where we’ve built our business today. That’s where the growth is coming from today, and we see a significant runway to access and treat patients in the Level 4 centers. We see the care centers and indication expansion as complementary to that. It allows us to reach out for patients that either couldn’t have or wouldn’t have been referred into Level 4 centers that can be appropriately treated out in the community, and we see that. And then it also positions us for indication expansion into the IGE population potentially, where if patients don’t need to be referred into a Level 4 center for an SEEG study, it can allow them to be treated closer to home.

So we really view the 2 approaches as complementary. And I think we saw that complementary effect here in Q3. The vast majority of our growth came out of the Level 4 centers, but we also saw sequential as well as year-on-year growth within the care centers. And so I think it’s a both and rather than an either/or, and that’s where we’re focused.

Unknown Analyst: Thank you so much for the detail and the extra color there. I also wanted to follow-up if there’s any update. You guys had mentioned other investigator-initiated trials surrounding a variety of other indications: Depression, eating disorders, PTSD, and cognitive dysfunction. I’m curious any update there? Anything that we should be looking forward to or exciting developments in that space?

Joel Becker: I think it’s an exciting development, and we did talk about it at the Investor Day. So thank you for bringing that back up. I think one of the exciting developments is the things that we’ve talked about here in terms of tailored therapy, individualized and personalized therapy and what data and data science is doing to develop around us lend themselves very much toward alternative disease applications similarly to the way that they do with epilepsy. So I’m not going to get out too far ahead of that. But I would say that we think that a lot of the things that we’re excited about converging here converge in a way that allow us to level — my gosh, leverage the platform and that’s true in epilepsy. It’s also true in alternative disease applications.

And so we think that further points to how well the RNS system is positioned both for today as well as for tomorrow. And more to come on some of that when we do more formal investor updates, but I think you’re cluing in on something that we think is important and one that can be leveraged with RNS down the road even further.

Operator: And with our last question, the question comes from Paige Chamberlain with Wolfe Research.

Paige Chamberlain: I’m hoping to get some quantification around your market expansion efforts through Project CARE. I see a couple of goals you guys have laid out around this initiative. I want to ask you guys on 2. So first, I see the target of expanding your reach to an additional 1,800 epileptologists. I’m just wondering, benchmark how many of those have you reached so far and maybe just a general timeline and vision for that. The second one I see is to more than double the number of implants and referrals coming from CARE accounts in 2025. Curious the starting point for that going into 2025 and perhaps now sitting in November, are you on track to double?

Joel Becker: So thanks for the question — the questions. With regard to doubling in 2025, it’s really using 2024 as our baseline, and we’re really pleased with the progress that we’re making here in 2025. And our plans for CARE for this year are very much on track to answer your question. With regard to the 1,800 epileptologists that are out there, that’s absolutely the right number. And there are a number of different ways that we can look to reach that group of epileptologists starting with the first one is a very targeted approach. So we’ve identified centers, both Level 3 centers as well as community centers that have what I’ll call the complementary assets in place, which are the functional neurosurgeon capability, the patient population, the internal assets from an equipment and software perspective as well as administrative support and patient populations that we think make up good targets for us.

And that’s the group that we’re looking to penetrate first. And we’re still in the early days of the penetration of that group. We’re pleased with what we’re seeing, but we’ve got a long way to run in terms of that total group of 1,800 as well as a good forward-looking trajectory even in our initial targets. So again, early days with CARE, but we like both the sequential as well as year-on-year progress that we’re seeing and plans for ’25 are on track, and we think that CARE can be an important strategy for us longer term, both for the current patient populations as well as, as we expand into IGE. And we track all those metrics internally. We haven’t discussed them quite on a quarterly basis externally, but we’ll certainly take that into consideration.

But I think the key quantitative/qualitative is that we saw increase in prescribers in the quarter as well as an increase in utilization at that prescriber level. And so we’re very, very happy with the penetration that’s happening. CARE is clearly a part of that. And again, as we think going forward to kind of wrap this up with some of the other questions, as we get that additional indication, we think that we’ll hugely benefit from that. But with that said, we’ve got a huge runway with our adult focal epilepsy, which is why we’ve been very consistent on saying we believe we can grow at a minimum of 20% on the RNS platform for the foreseeable future.

Paige Chamberlain: I’ll sneak in one more, if I may. I echo the appreciation for the additional disclosure around DIXI and service revenue lines. I guess I’ll test my luck to see if we can get the same incremental detail around replacement. I know you guys obviously don’t break that out. But the trough sort of for this revenue line has been described as this year, earlier this year, we’re all doing our best to stab at this number. I’m just wondering if, directionally, you can nudge me should we be thinking about replacement revenue going north from here?

Joel Becker: Yes. Directionally, what we try to focus on is clearly our initial implants. At some point, it’ll start seeing a larger contribution from replacement as some of the competitive neuromodulation devices have a huge majority of their revenue is based on replacements. Ours is a very, very small percentage at the end of the day. So we call it less than 10%. And depending on the quarter, it’s kind of in that even mid-single digits. So more to come on that. We are — obviously have models that say when do we think replacements will come, but we’re still a little bit aways from having a significant cycle, especially with meaningful units being placed over the last, call it, 2 or 3 years. So we look forward to that time. But for now, I think modeling initial implants is probably fair, and we’ll provide more color as it becomes larger.

Operator: Thank you. And with no further questions in queue, I’d like to turn the conference back over to Joel Becker for any closing remarks.

Joel Becker: Thank you very much. We’re pleased with the performance in the quarter and the direction and trajectory of the business. And as I mentioned in my prepared comments, we believe that there are multiple factors that are beginning to converge here, both with the results that we see as well as the way RNS is positioned and NeuroPace is positioned to build on that momentum. We have world-class opportunities, world-class technology, world-class data, and we’ve got a world-class team in place to deliver on them. And these foundational factors are exciting for us and position RNS and NeuroPace in a position to really establish ourselves as the standard of care in epilepsy neuromodulation. I’d like to thank all of the members of the NeuroPace team for their ongoing tireless efforts to advance our mission. And thank you all for your time today and for your continued interest in NeuroPace.

Operator: This concludes today’s conference call. You may now disconnect.