Ceribell, Inc. Q3 FY2025 Earnings Call

Good afternoon, and thank you all for participating in today's call. Joining me from Ceribell are Jane Chao, Co-Founder and Chief Executive Officer; and Scott Blumberg, Chief Financial Officer. Earlier today, Ceribell issued a press release announcing financial results for the quarter ended September 30, 2025. A copy of the press release is available on the Investor Relations section of the company's website. Before we begin, I'd like to remind you that management will make remarks during this call that include forward-looking statements within the meaning of federal securities laws and that these are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our public filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q filed with the SEC on August 5, 2025. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, November 4, 2025. Ceribell disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. With that, I'll turn the call over to Jane.

Thanks, Brian. Good afternoon, and thank you all for joining us for our third quarter 2025 earnings call. I'm very pleased to report on another strong quarter as we continue to execute on our key growth initiatives, while solidifying our position as the category leader in the point-of-care EEG. We have continued to expand patient access through new account growth and increased utilization, while advancing our robust product pipeline. We believe the strength of these initiatives is clearly reflected in our results. Total revenue for the third quarter of 2025 was $22.6 million. This reflects 31% growth over the same period last year and marks our 30th consecutive quarter of sequential revenue growth. Our performance is the result of the predictable recurring nature of our business model and continued excellence in commercial execution to launch new accounts and drive increased usage. Given these trends and momentum we built exiting the quarter, we remain confident in our core commercial strategy, and we are raising our full year 2025 revenue guidance. We now expect to deliver $87 million to $89 million in revenue for the full year 2025, which represents 34% year-over-year growth at the midpoint. Our success to date reflects not only strong commercial execution, but also the foundational work we have done to unlock what we believe to be an immediately addressable $2 billion market opportunity. Our primary focus is on establishing point-of-care EEG as a new standard of care for seizure management in the acute care setting. We believe that every ICU and emergency department should have access to the Ceribell system and the benefits our solution provides. The need is both urgent and profound. There are roughly 3 million patients in the U.S. at risk for seizures in the acute care setting. Many of these patients will face long delays in diagnosis with conventional EEG, spending hours or even days. Others may never receive monitoring at all due to limited access to EEG or lack of clinical awareness. The consequences are significant as prolonged and untreated seizures can lead to severe and permanent brain damage or even death. Comparatively, the SAFER-EEG clinical trial has shown that the Ceribell system reduces the median time to EEG by 19 hours, while reducing patients' severe disability rate by 18%. At the same time, patients who are treated with antiseizure medication without EEG confirming seizures based on observation alone may be exposed to unnecessary risks, including incubation and extended ICU stays. The Ceribell system has been shown to enable a median reduction in ICU length of stay by 4.1 days. Ultimately, patients' lives and their quality of life are on the line, and we believe our platform can enable more timely and appropriate care. Helping these patients receive the care they need starts with working to make the Ceribell system available to hospitals across the U.S. To this end, we have steadily made strong progress in expanding our account base. As of September 30, we had 615 active accounts. This marks an increase of 31 accounts over the prior quarter, which is our largest sequential increase since becoming a public company. In parallel, we continue to broaden our reach across additional sites of care. As part of these efforts, we received FedRAMP High Authorization in the second quarter of this year, providing access to the nearly 200 hospitals within the VA system. We are pleased to report that following a successful recent pilot, we have been informed that the VA system intends to expand the usage of the Ceribell system even further in the coming quarters. As we expand into new facilities nationwide, we are also working with our current customers to drive usage and increase access across departments and patient populations. Our efforts to date have been successful with utilization per account increasing nearly threefold over the past 5 years. Still, we believe we are only 30% penetrated within our active account base, leaving substantial room for continued growth. Our top-performing accounts prove EEG solutions that we believe could what's possible. Usage within our top 10% accounts is roughly 3x higher than in average accounts of similar size, and these top accounts are still growing. This means that there are still over 5,000 hospitals that do not have a point-of-care seizure detection, illustrating the sentiment that we hear from physicians. The more EEG you perform, the more seizures you find. We aim to facilitate the replication and expansion of best practices used by these top accounts through continued training and education, clinical evidence generation, protocol development and expansion to new departments, including the ED. Our CAM team is critical in leading this effort, which is well underway. Finally, beyond the adult population, we continue to invest in expanding access to pediatric and neonatal populations. Earlier this year, we received 510(k) clearance for Clarity in the pediatric population, making it the only seizure detection algorithm cleared for patients 1 year and older. We're actively developing this market through our ongoing pilot of pediatric Clarity within our existing accounts as well as children's hospitals with full launch anticipated next year. Our confidence is backed by strong clinical data supporting our product. Recently, in September, we were pleased to see an abstract documenting technical validation of pediatric Clarity presented at the Neurocritical Care Society Annual Meeting. The retrospective study evaluated the performance of Clarity in detecting suspected status epilepticus across 645 pediatric patients aged 1 to 17. The results demonstrated a sensitivity of 94.4%, specificity of 93.1% and a negative predictive value of 99.8%. These findings suggest that Clarity can accurately monitor suspected status epilepticus in pediatric patients over 1 year old, providing timely and actionable guidance to bedside teams. With our AI-driven approach to product development, we expect these already excellent results to continue to improve as we build our database and continually refine our algorithms. We also remain committed to expanding access to our system in the neonatal population, having already developed a headcap that meets the needs of this vulnerable patient group. We remain on track with the development of a neonatal application of Clarity, which we anticipate to bring to market in 2026. In the meantime, we have launched multiple sites using the hardware without Clarity, and are conducting targeted market development efforts to better understand the nuances of the neonatal population. These investments reinforce our mission to helping to establish point-of-care EEG as a new standard of care for seizure detection in the acute care setting, serving all patients everywhere. We also estimate that the addition of pediatric and neonatal products could expand our current addressable market opportunity of $2 billion by approximately $400 million. We see tremendous growth runway as we advance our mission. We will continue to invest in evidence generation, product improvements, provider education and the replication of the best practices from top-performing centers. Collectively, these investments combined with our established advantages give us great confidence in our ability to strengthen our reputation as the category leader and a trusted partner for rapid EEG and seizure detection and monitoring. Before I turn it over to Scott, I want to also briefly touch on the second horizon of our vision, making EEG a new vital sign in acute care. This requires developing a multimodal system that can become a routine part of care for all patients at risk of a range of neurological abnormalities. We plan to achieve this by expanding our detection capabilities into new conditions such as delirium and stroke. Our nearest-term area of focus for innovation is advancement of our delirium algorithm. We are pleased to be able to say we remain firmly on track with our development timeline. As a reminder, this is a market where there is no commercially available diagnostic device despite delirium being a pervasive and challenging condition that affects over 30% of patients in the ICU. We are thrilled with our progress to date and expect to detail a more comprehensive vision for the opportunity and our associated commercial strategy in the coming quarters. It's important to note that our excitement around potential new indications such as delirium is directly connected to our mission to help establish point-of-care EEG as the standard of care. Broad adoption of the Ceribell system across our market for seizure detection gives us the installed base, data, trust, contractual relationships, security clearances and the sales infrastructure to rapidly develop and deploy new algorithms. We believe these new algorithms will significantly expand our total addressable market by introducing much needed solutions for new patient populations. We anticipate that we will also create synergistic value by allowing concurrent monitoring for patients at risk of multiple overlapping conditions. As a result, in addition to providing access to new patients, these pipeline products are expected to directly drive utilization within our installed base. We expect they will serve as a strong growth engine for years to come while largely leveraging our existing sales infrastructure. To summarize, I'm incredibly proud of what we have achieved this quarter. Over 600 hospitals have adopted Ceribell, and our team is making meaningful progress in penetrating deeper within these accounts. And still, we remain very early in our journey to establish point-of-care EEG as standard care in the $2 billion U.S. seizure detection market. We are currently used by roughly 10% of the hospitals that provide acute care service in the U.S. This means that there are still over 5,000 hospitals that do not have a point-of-care EEG solution that we believe could benefit from our technology. Within the customers that we do serve, we estimate we are only about 30% penetrated for patients who need timely seizure detection. Taken together, this suggests that we are only about 3% penetrated into our core market in the U.S. We aim to go deeper and wider to address the unmet needs of the remaining 97%, both through ongoing commercial efforts and by making investments in extending the life-changing benefits of the Ceribell system to additional patient populations. This includes monitoring neonatal and pediatric patients, which represents an incremental market opportunity of approximately $400 million as soon as next year. In parallel, we are working to go beyond seizure. We have made real progress in unlocking delirium and stroke. We believe that these indications represent a multibillion-dollar market expansion opportunity and serve as the foundation of our mission of making EEG a new vital sign. With that, I will now turn the call over to Scott Blumberg, our CFO, to provide a review of our third quarter results and outlook for the remainder of 2025.

Thank you, Jane, and good afternoon, everyone. As Jane highlighted, total revenue for the third quarter of 2025 was $22.6 million, a 31% increase from $17.2 million in the third quarter of 2024. The increase is primarily driven by increased adoption of the Ceribell system across new and existing accounts. Product revenue for the third quarter of 2025 was $17 million, representing an increase of 28% from $13.3 million in the third quarter of 2024. Subscription revenue for the third quarter of 2025 was $5.6 million, representing an increase of 44% from $3.9 million in the third quarter of 2024. In Q3, we continue to drive deeper into our accounts, increasing usage per account year-over-year. This was achieved despite abnormally high purchases relative to usage in Q3 2024, which led to excess product revenue during the comparison period. As a reminder, we typically see reduced usage in Q2 and Q3 relative to Q1 and Q4, driven by lower ICU census in the summer months. Gross margin for the third quarter of 2025 was 88% compared to 87% in the prior year period. As we enter Q4, I'll remind you that we will begin to transition to utilizing inventory acquired after the implementation of increased tariffs on products originating in China. Despite this, we expect to maintain gross margins in the mid-80% range in Q4. As we reported last quarter, we took proactive steps this year to establish an additional manufacturing line in Vietnam, which is now fully operational. This reduces our exposure to China-based tariffs and positions us to benefit from potentially more favorable trade policies. Looking ahead, we believe initiatives undertaken this year to strengthen our supply chain and build resilience put us on track to deliver gross margins in the mid-80% range for full year 2026, assuming no changes to the currently proposed tariffs. Total operating expenses for the third quarter of 2025 were $34.6 million, an increase of 39% compared to $24.9 million in the third quarter of 2024. Noncash stock-based compensation expense was $3.3 million in the third quarter of 2025. The increase in operating expense was primarily attributable to investments in our commercial organization, increased headcount to support growth of the business, legal expenses, and expenses related to operating as a public company. Sales and weighted marketing expenses increased by $1.1 million in Q3 compared to Q2. The sequential increase was driven by salary and commission expenses associated with headcount expansion in Q3 as well as the full quarter impact of headcount additions from Q2. Net loss was $13.5 million for the third quarter of 2025 or a loss of $0.37 per share compared to a loss of $10.4 million or a loss of $1.85 per share in the third quarter of 2024. An average weighted share count of 36.8 million shares was used to determine loss per share for the third quarter of 2025. Our cash, cash equivalents, and marketable securities as of September 30, 2025, were $168.5 million. Earlier today, we filed a shelf registration statement on Form S-3 with the SEC as we recently became eligible to do so following the 1-year anniversary of our IPO. This is strictly a matter of standard corporate housekeeping as it allows us to maintain flexibility. But to be clear, we do not have any intention to pursue a financing transaction at this time. We remain committed to achieving cash flow breakeven with cash on hand and the strength of our balance sheet gives us a high degree of confidence that we can achieve this without raising additional capital. Turning now to our outlook for the remainder of 2025. Given our momentum in the third quarter of 2025, we now expect full year 2025 revenue to range from $87 million to $89 million, up from our prior guidance of $85 million to $88 million, which represents annual growth of 33% to 36% over 2024. We continue to add to our base of active accounts and have an extremely healthy backlog of accounts that have issued purchase orders to adopt the Ceribell System. While we do not provide guidance on our account base, it's worth noting that we intend to continue the practice we began in 2023 in which we defer launching new accounts in the second half of December. This approach is grounded in our historical experience that it is better to avoid launching during the holidays as we've seen an uninterrupted attention to a high-quality launch is necessary to maximize usage during the first few weeks following launch, which we believe is critical to establishing healthy long-term utilization rates. With that, I'll turn the call back to Jane.

Thank you, Scott, and thank you all for your time today. In conclusion, I'm very pleased with our third quarter performance and our team's ability to continuously advance initiatives that will enable us to realize our broader strategic vision. I'd like to thank our employees, our customers, and the patients we serve for enabling us to continue our mission to help save lives while delivering substantial value to our stakeholders. Finally, we appreciate your support and continued interest in Ceribell. We look forward to providing you with updates on our progress in the quarters to come. I will now turn the call over to the operator for any Q&A.

Your first question comes from the line of Travis Steed from Bank of America.

Congrats, everybody. Maybe to start with just on kind of 2026 and curious if you have any early thoughts at this stage, thinking about account adds and utilization and pricing, especially with the NTAP expiring for next year?

I can take that. Travis, we're not providing commentary on 2026. We'll, of course, provide guidance in the coming call. I think the fundamentals of the business and the sources of growth in terms of adding new accounts and driving usage will remain our consistent drivers. As it relates to pricing, we've seen a very high degree of consistency in pricing in our Headband this year. We've seen an increase in the Clarity ASP as we've driven more recorders into existing sites and expect to maintain strong discipline as we think about pricing going forward.

Okay. That's fair. And then maybe a question on the neonatal opportunity. I appreciate all the information on the call. But when you think about launching that, maybe just provide a little more color on how the full launch looks for that in '26. And do you need to add new accounts that are neonatal accounts? Or do you kind of go deeper in your own accounts so you can go faster? Just trying to think about how that actually launches and rolls out.

Yes. In summary, both new accounts through neonatal and expanding existing accounts are important. We currently have around 200 out of the approximately 850 Level 3 and Level 4 NICUs in the country as part of our existing installed base. For these 200 NICUs, we are focused on departmental expansion, which falls under same-store growth to enhance utilization. Additionally, there are two market segments to consider. One includes the 280 children's hospitals where we have minimal presence, largely because our product is primarily designed for adults. This indicates potential for new account acquisition. Furthermore, we have observed strong interest from NICUs, particularly Level 3 community hospitals that often need to transfer patients due to a lack of EEG services. We expect this interest from NICUs will also contribute to the addition of new accounts.

Your next question comes from the line of Robbie Marcus from JPMorgan.

And congrats on a nice quarter. Two for me. First, I really want to ask on just the progress you're making in penetrating accounts, educating the different components of the hospital. And I know last year, you spent a lot of time and focus building the model to make sure that new accounts ramp up in a consistent and sustainable manner. And just your progress there and the traction you're getting?

Yes, the success we are experiencing is a continuation of our historical performance. We are actively driving not only account acquisition but also utilization. This year, we implemented several initiatives that have shown positive results. One initiative involves encouraging our team to introduce more recorders to existing accounts, which often leads to additional departments adopting our device. We have observed a strong correlation between growth and these efforts. Another initiative we've initiated this year involves partnering with physicians to develop protocols for patient populations, particularly in areas like cardiac arrest and post-hemorrhagic stroke, which are supported by guidelines. Since hospitals don’t update their guidelines frequently, we expect continued growth in this area next year. Additionally, we are focusing on continuing education for physicians and nurses, along with ongoing engagement with administrators to demonstrate the economic value of Ceribell using their clinical data.

Great. Maybe one on expenses. Your selling and marketing and R&D as per the guidance came in above the revenue growth. I respect you'll comment on 2026 on the fourth-quarter earnings call. But how are you thinking about revenue versus OpEx growth in the short and medium term? And how do you feel about your progress towards cash flow breakeven?

Yes. I think we came into this year with a successful IPO raising more than we intended and a big portion of that proceeds were invested in expanding the commercial infrastructure. The nature of our model is that there's a delayed impact. And so, the kind of the nature of the relationship between sales and marketing growth this year and revenue is a reflection of that, the investment comes ahead of the outcomes. Of course, we'll continue to look for opportunities to grow. But our current thinking, at least on the account acquisition side, is that the size of expansion we saw over the last year would probably be less in the coming year. And so, I'd expect the growth to moderate there a bit. The investments that we've made this year should start to generate impact as we get into 2026 here. As far as cash goes, with an 88% gross margin and pretty strong control over our investment, which is tied almost entirely to growth and very little to maintenance, we have the flexibility to continually adapt our investment strategy to ensure that we always stay safe in terms of having a sufficient cash cushion.

Your next question comes from the line of Brandon Vazquez from William Blair.

Can you start maybe by talking a little bit about utilization growth across accounts by tenure, especially those that you've been talking about some of these initiatives to establish protocols at the accounts where patients versus ID guidelines should be getting EEGs. Are those kind of older, more tenured accounts continuously growing in utilization? Just kind of curious, the question is more around your more tenured accounts. Has utilization growth been pretty consistent? Just to know if that's a good signal for growth going forward as your new accounts ramp?

Thank you, Brandon. There are several factors contributing to the growth we've observed from our more established or top accounts, and we expect these factors to continue influencing both our top accounts and others. The primary factor is the external guidelines. The stroke seizure management guidelines for stroke patients were introduced in 2022 and 2023, while the cardiac guidelines were issued at the end of 2019. Additionally, COVID has impacted the adoption of these guidelines, and many hospitals have not yet fully embraced them. For our top accounts, we notice that hospitals tend to gradually implement protocols, starting with cardiac arrest before addressing ICH patients. This trend is a consistent driver for growth. Even among our top accounts, not all patient groups have fully adopted the protocols, which is why we anticipate ongoing growth. The second factor is departmental expansion. Even our most established or highest usage accounts are not yet represented in every department. While they may be present in all the ICUs and emergency departments, they might not have penetrated the step-down units or the floors with the rapid response nursing teams. As we begin to introduce pediatric and neonatal services, we will see further expansion into departments. The third factor relates to our internal execution. We recognize that not every provider is trained, especially if they miss the initial training during site initiation turnover, which is particularly common during the night shifts. Our CAM team makes significant efforts to provide additional training during late hours for these night shifts, but this process is not yet fully complete. These are a few examples of the main drivers behind the growth of our established accounts, and we believe these factors apply not just to our top accounts but to all of our accounts.

Okay. Great. And then as a follow-up to that, I think, Jane, you were just kind of alluding to this, but you made an interesting comment on the prepared remarks that only 30% of accounts or in your current accounts, you're only 30% adopted rather. Is going further into your current accounts driven a lot in putting these protocols? And then I think like you said, going into new wings. Like how do you do that? What is the friction point of getting into these new wings? And then one unrelated follow-up, if I could just throw in there. Late last week, I think you guys got a new 510(k) clearance on the headcap. Any comments on the importance of that clearance?

Yes. When it comes to expanding into departments and implementing protocols, the key factor is execution. The potential barriers we face include resource availability on our side and the priorities of the hospitals. Sometimes, introducing a new protocol is challenging for the nursing team, especially if they are dealing with other priorities, like updating their Epic system. Although we encounter these practical challenges, we are confident that, over time, due to strong guideline recommendations and the clinical value and evidence we continue to produce, we will overcome them. Regarding the 510(k) headcap, you are asking about the neonatal headcap. The main difference with our latest clearance is that the previous version was labeled as approved for all ages. Through our pilot, we found that physicians and nurses preferred a more specific FDA clearance stating it was cleared for both preterm and term neonates, as they are particularly cautious about this vulnerable group. Our current headcap is cleared for both preterm and term neonatal populations, which exemplifies our strategy well. During our pilots, we gained insights that we hadn’t anticipated during product rollout. We expect this recently approved headcap to be ready for full commercialization following the clearance of neonatal clarity.

Your next question comes from the line of Josh Jennings from TD Cowen.

Congratulations on another strong quarter. I think, Jane, you've called out that Ceribell point-of-care EEG is kind of penetrated about 10% of U.S. acute care hospitals. The word of mouth according to our checks from the customer base is getting louder, buzz is getting stronger, the library of clinical evidence and the cost-effective data is growing. I was hoping to just maybe lead that intro into a question of, okay, can you add some quantitative or qualitative color just on where the new customer account pipeline or funnel sits today relative to the beginning of the year? And just in terms of giving us up thinking about the potential for account growth in 2026?

Yes, Josh, the numbers in our active account base represent launched accounts, meaning the customer is fully trained and live. We also track earlier stages, starting from when we receive a purchase order, and monitor the various engagement stages that lead to that order. While I won't provide specific figures, I can say that the funnel is expanding, which reflects the investments we've made in our commercial organization over the past year, as well as the increasing recognition of the necessity for this technology, which seems to grow daily.

And I just was hoping to better understand how Ceribell is positioned with IDNs or health care systems. And has the company benefited from some IDNs kind of making best practices decisions or standard of care within their network? Or is that opportunity in front of Ceribell? Maybe just help us think about how you're positioned through the number of IDNs that are in play in the United States.

Thank you, Josh. Yes, we definitely have seen that the partnership with hospital systems has been a strong growth engine from previous years, including the current one. And we see a potentially even bigger opportunity ahead of us. I think historically, especially a few years back when we were much smaller, we often did not engage IDN at the headquarter level because we were so small. We were more engaging at the individual hospital level. As we're becoming available in 600-plus hospitals in the U.S., we are building our hospital system sales team and also training our entire sales team to not only think about individual hospitals but really think about hospital system level sales. So that requires, we call it bottom-up and top-down sales coordination. We more just started doing this systematically this year. So, we anticipate to continue executing and capture the opportunity here, becoming an even better partner for our customers.

Your next question comes from the line of Bill Plovanic from Canaccord Genuity.

And you did a good job on the pronunciation. So, start out with first, just I'm looking at the guidance, and it's pretty broad. Low end is about, I think, 23% year-over-year, high end is 25% or 35% year-over-year. Multiple questions here. First, what drives the lower end versus the higher end of that? I mean it's a pretty broad guidance range considering you're coming into the end of the year. I'm going to start with that and then multiple others.

Yes, Bill, our approach to guidance has not changed. We recognize the significance of providing achievable numbers, particularly as a company that has been public for just a year. This perspective influences how we consider guidance. For instance, we know or believe that Q4 seasonality will be stronger than Q3, which leads us to adopt a very conservative mindset when thinking about the lower end of our range. We prioritize derisking all uncertainties. Essentially, I see the range as a calibration of risk, reflecting our commitment to presenting figures that we are highly confident in.

Okay. I just want to know about your investments in the sales force post-IPO. Can you provide an update on the TMs and CAMs today? I noticed there was an increase of 31 net new active accounts sequentially, which is the highest number we've seen in a long time. Is this increase due to the new representatives you hired? What are the factors contributing to this growth this quarter?

As far as the commercial infrastructure goes, we haven't made any fundamental changes to our strategy since last quarter. We still have roughly the same number of territories planned in the mid-50s right now on the TM side. We have and we'll continue to invest in the CAM side of the business because that side of the org grows roughly in line with the growth of the account base. So, we're fully staffed on that side, but that will continue to grow. I think we also are looking opportunistically at areas to invest to accelerate further growth. And James' answer to a prior question, I think, is one area where we're looking very closely, which is IDN level systems. As far as the account adds go, we're obviously very pleased with the results this quarter. I know there's a lot of kind of emotional difference between the 29 we did last quarter, a couple of quarters ago 31. But I'd consider that largely in the kind of range of expected outcomes here, and we fully expected that the hires we make start to become productive as we get into 2026 here.

Okay. I believe Robbie raised a point about our strong revenue growth. However, we haven't seen the expected leverage in the profit and loss statement. A common question from investors is whether we will start to see that in the next year, even though I understand you haven't provided guidance yet.

The only reason we might not see leverage is if we decide to invest significantly in operating expenses to take advantage of a big growth opportunity. If and when we make that decision, we will inform the market clearly to avoid any surprises.

Okay. And then any update just on competition? The other question we get a lot of is just competition. What are you seeing in the marketplace? Are you losing any more accounts today or winning any more versus where you were 6 or 12 months ago? And then any update on the IP litigation? What are the next steps?

Yes. On the competition front, I would say in Q1 and Q2, we saw a significant increase in the competition activity, as we mentioned before. In Q3, I would say, there's nothing substantial change. We see continued growth of competition activities there. However, I would say our performance in 2025 speaks for itself. We have beat and raised our guidance every single quarter, and that shows that the competition is not meaningfully impacting our performance. And the reason we are achieving this is not only leveraging the superiority of our product, clinical evidence, and cybersecurity, we are also learning a lot about competition and putting strategy and plan in execution to address this. In terms of ITC litigation, as investors or you probably see ITC have outlined the milestones before the shutdown. At that time, the anticipated decision is September next year and the final ruling of January 2027. With the government shutdown, we anticipate some level of delay there, then we also expect that ITC would update the timeline as soon as the government reopens.

Okay. And then just last for me. I think you mentioned the shift to Vietnam with the manufacturing. We'll start to see the impact in Q4. I think you mentioned that will drive mid-80s gross margin. Is 100% of that into the quarter? Or is it kind of we'll see margins ramp down this year in Q4, and then hit that mid-80s for next year? How do we think about kind of cadence there?

Hi. This Q4, we'll be relying for the first part of the quarter on pre-tariff inventory, and then on for the remainder of the quarter only on China inventory because it's essentially inventory that was acquired before we had Vietnam up and running. So, Vietnam doesn't impact this quarter. As we move into next year, what you'll see is China inventory that we've acquired at a higher tariff rate mixed in with Vietnam inventory at a lower tariff rate currently and that should reflect itself in that continuation of the mid-80% gross margin into next year.

Your next question comes from the line of Jeffrey Cohen from Ladenburg Thalmann.

First, I wondered if you could dive into the VA channel a bit more and talk about some of the current accounts and some of the expanded accounts and what you may expect, how that implies into fourth quarter and next year as far as the growth specific to VA?

Yes, we cannot disclose specific numbers on the VA or particular hospital systems, but I’m excited to share what we can about the VA. They have a rigorous process that begins with piloting and then systematically rolls out in phases. Currently, the initial pilots have been very successful, with both physicians and administrators recognizing the clinical and financial value of our system. We are now set to roll out a larger cohort of VA accounts in the upcoming quarters, which will be one of the largest top-down rollouts in Ceribell's history. This is a significant win for our company and for the veterans we serve, especially those at risk of seizures.

Okay. Got it. And then as a follow-up, I know you spoke previously about the headcap and neonatals, but you made a comment about the utilization of hardware without clarity that was happening in Q3. Could you just expand upon that a little bit for us, please?

Yes, it's too early to discuss utilization at the account level for neonate at this stage because our pilot is primarily focused on population discussions, confirming signal quality, and ensuring ease of use. This doesn't accurately represent what actual commercial clinical usage would be. However, we can say that it has been very well received. We already have some case studies showing that physicians and nurses found it significantly beneficial for patients, either by detecting seizures early or preventing unnecessary medication, which is crucial for patient outcomes. Therefore, we are excited about the potential to launch the complete product, including hardware with Clarity, in 2026.

Thank you, Geoff. Perfect. Your final question comes from the line of Jayson Bedford from Raymond James.

This is Elaine on for Jason. So, by our math, you grew utilization year-over-year despite the tough comp from stocking in 3Q '24. So, I was just wondering how much would utilization have grown, excluding the stocking impact? And also, did you see the usual seasonality impact this quarter as well?

The quarter year-over-year growth comparison would have looked much more similar to the year-over-year growth we saw in Q1 and Q2 had there not been the purchases, the additional purchases in Q3. As far as seasonality goes, yes, of course, we'll know for sure after we get through Q4. But if you look kind of sequentially, Q1 was really strong and Q2 and Q3 on a sequential basis were less so. And that's been exactly consistent with what we've seen in the last 2 years. We're still obviously only a few years into this commercial journey, but this year has not surprised us in any way in terms of the quarter-to-quarter trends.

For my follow-up, I was wondering if you could provide more details on the utilization trends. Are specific departments driving the increased utilization? Are you seeing more activity in the ICU or the emergency department, for example? I know you mentioned some use cases.

Yes. Overall, we actually see a relatively broad growth driver. So, from departmental expansion to protocolization and even beyond the ICU and ED to the floor to the step-down units. And particularly, we do see a bit of even stronger growth in the emergency department compared to the ICU because EDs are in general, even less penetrated. So that's overall, but we don't see a single driver that accounts for the majority of the growth.

That concludes the question-and-answer session. I'd now like to turn the call back over to Jane Chao for closing remarks.

Thank you. Well, thank you, everyone, for your attention and for joining the call. Again, we are very excited and proud of what we have accomplished for Q3 and look forward to sharing our performance for next quarter and quarters to come. Thank you.

This concludes the meeting. You may now disconnect.