NeuroPace Inc Q1 FY2026 Earnings Call

Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the NeuroPace First Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the conference over to Scott R. Schaper, Head of Investor Relations. You may begin.

Thank you, operator, and welcome to NeuroPace's first quarter 2026 earnings conference call. Our agenda begins with Joel D. Becker, NeuroPace's Chief Executive Officer, who will summarize our recent performance and strategic progress, followed by a detailed financial review and outlook from Patrick F. Williams, our Chief Financial Officer. Following our prepared remarks, we will open the call for questions. Before we begin, I would like to remind you that certain statements made on today's call may constitute forward-looking statements within the meaning of federal securities laws. These statements include, among others, comments regarding our financial outlook for 2026, our commercial strategy, clinical and product development initiatives, regulatory matters, including our IGE PMA supplement, and our expectations regarding operating performance and profitability. Forward-looking statements are based on management's current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. A discussion of these risks and uncertainties can be found in today's press release and in our filings with the Securities and Exchange Commission, including our most recent Form 10-K and Form 10-Q. We undertake no obligation to update or revise any forward-looking statements except as required by law. In addition, we will discuss certain non-GAAP financial measures on today's call, including adjusted EBITDA. Reconciliations of non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release, which is available on the Investor Relations section of our website. With that, I will now turn the call over to NeuroPace's Chief Executive Officer, Joel D. Becker. Joel?

Thanks, Scott, and good afternoon, everyone. I will start with an overview of our first quarter results and how the team is executing against our strategy, followed by updates on key clinical and product development initiatives. After that, Patrick will walk through the financials and our revised outlook before we open the line for Q&A. The first quarter reflects continued execution against the priorities we outlined earlier this year. We delivered total revenue of $22.1 million in the quarter and, excluding DIXI Medical, we delivered $22.0 million in revenue, representing 8% year-over-year growth with RNS system revenue of $21.7 million. Importantly, the underlying fundamentals of the business remain solid, as we reached new all-time highs in active prescribers, accounts, and patient pipeline during the quarter. These are leading indicators we track closely and give us confidence in the durability of demand for the RNS system. The majority of growth continues to be driven by level 4 comprehensive epilepsy centers, which remain the core of our commercial focus. In addition, we continue to see encouraging trends in the front end of the patient funnel with the rate of new patients being added to the pipeline continuing to accelerate. While the majority of procedures remain concentrated within level 4 comprehensive epilepsy centers, community relationships are increasingly serving as durable referral channels. We believe this is important not only for continued penetration of the adult focal population, but also for establishing referral pathways that will be relevant as we potentially expand into IGE. Regarding guidance, we are raising our full year 2026 revenue guidance to a range of $99 million to $101 million, up from $98 million to $100 million previously. This reflects 21% to 23% underlying RNS growth from our existing adult focal indication and does not include any contribution from idiopathic generalized epilepsy, or IGE, indication expansion. From a market development perspective, we continue to invest in the commercial organization. This includes targeted sales representative additions in key geographies, updates to our sales incentive structure to better align with growth objectives, and additional resources dedicated to helping patients navigate the funnel from identification to implant. These investments are designed to reduce friction in the pathway and increase procedural consistency over time. We expect them to become increasingly productive throughout 2026. Let me now turn to clinical development. During the quarter, we completed our FDA mid-cycle review meeting with the Nautilus PMA supplement, sometimes referred to as a Day 100 meeting, which we viewed as a productive step in the overall regulatory pathway. As a reminder, the PMA supplement was submitted on December 15, and the 180-day review clock began upon acceptance of that submission. As part of the PMA supplement review process, the FDA has the ability to pause the 180-day review clock to request additional information or clarification. During the quarter, the agency exercised that option to seek certain follow-up information in conjunction with our mid-cycle review meeting. We view this as a standard and constructive part of the review process, and we were pleased with how quickly the agency provided their questions, which allowed us to respond promptly and thoroughly with robust information during and following the meeting. At this time, we have responded to the agency's request and the dialogue continues to be productive. Importantly, based on our interactions to date, we continue to believe a midyear determination remains on track. The Breakthrough Device designation continues to be meaningful in this process, allowing for more consistent interaction and timely feedback as the review progresses. The ongoing dialogue we are experiencing, including the ability to address clarifying questions in real time, is consistent with the intent of that program and reflects the collaborative nature of the review. As a reminder, our 2026 revenue guidance does not include any contribution from IGE indication expansion. If approved on our current timeline, contribution would begin in the second half of the year, and we would provide updated guidance at the appropriate time once we have greater visibility into timing and reimbursement dynamics. From a data perspective, we remain confident in the totality of the NAUTILUS clinical results. As a reminder, 18-month data presented at the American Academy of Neurology annual meeting in April demonstrated a 77% median reduction in generalized tonic-clonic seizures with sustained reductions over time along with favorable safety outcomes in a highly refractory population. Additionally, reductions in absence and myoclonic seizures exceeded those observed for generalized tonic-clonic seizures. Injury events also declined by approximately 30% following treatment, and the use of benzodiazepines as rescue medication for generalized tonic-clonic seizures was 44% lower compared with baseline. The strong physician- and patient-reported clinical improvement — these clinical findings are meaningful because they speak to the real-world impact beyond seizure counts, including fewer seizure-related injuries and reduced reliance on rescue interventions, both of which can translate into improved safety and quality of life. In parallel, we continue to build our leadership position in clinical evidence. Our three-year post-approval study results in drug-resistant focal epilepsy were published in the journal Neurology in late April, demonstrating an 82% median seizure reduction in study subjects. This publication reflects data from a rigorously conducted FDA-monitored prospective study, not retrospective registry data, and reinforces the durability and strength of long-term outcomes with the RNS system. Now turning to product development. The roadmap we outlined on our fourth quarter call remains on track. Our priorities continue to be our suite of NeuroPace AI tools, development of a multimodal foundational model, remote care, and progress toward automated detection and next-generation system development. Our ECOG Assistant, previously known as Seizure ID, represents the first step in our NeuroPace AI suite. This is an AI-enabled tool designed to assist clinicians in analyzing patients' iEEG records of interest and efficiently identify likely electrographic seizure activity upon which to focus their clinical decision-making. This is a highly desired capability addressing a real workflow challenge and supports clinicians in their ability to individualize care. We are encouraged by the early performance we are seeing in internal testing and validation work of this tool. We believe this product can serve two important purposes. First, it lowers the barrier for new physicians adopting RNS by simplifying data review. Second, it deepens engagement among existing high-utilizing centers by improving efficiency, allowing clinicians to manage more RNS patients within their practice. Importantly, submission is paired with moving our clinician platform to the cloud, which improves scalability and supports faster deployment of software and data products over time. We expect ECOG Assistant approval in 2026. We are also advancing the development of a multimodal foundational model leveraging our proprietary intracranial iEEG dataset and the clinical experience derived from more than 8,000 patient implants across 35,000 patient-years. The EEG component of this model is currently in training, and although we are approximately one-third of the way through the training process, early internal validation work has been encouraging. Even at this early stage, the model is outperforming prior internal algorithmic approaches we had been developing. We believe this reflects the power of scale in our dataset and reinforces the strategic value of the more than 26 million intracranial iEEG recordings we have accumulated. Importantly, we are uniquely positioned here — no other neuromodulation platform has a comparable depth of longitudinal intracranial EEG data linked to therapy and outcomes — and leadership in this area matters as the field moves toward a data-guided personalized neuromodulation approach. As the model continues to train and refine, we see meaningful opportunity to enhance treatment optimization, improve outcomes, and further differentiate the RNS platform. With that, I will turn it over to Patrick for review of the financials and outlook. Patrick?

Thank you, Joel. I will review our Q1 2026 performance in more detail and then discuss our updated 2026 guidance. Before I walk through the quarter, I want to clarify our reporting presentation. While we previously anticipated presenting DIXI Medical as discontinued operations, beginning in the first quarter we now expect the discontinued operations presentation to begin with our Q2 2026 results. In the meantime, we are providing supplemental non-GAAP disclosures that exclude DIXI Medical in both current and prior periods to facilitate comparability. In addition, beginning this quarter, we are presenting gross margin and operating expenses on an adjusted non-GAAP basis, excluding stock-based compensation, consistent with full-year guidance given on our fourth quarter call. Reconciliations to the most directly comparable GAAP measures are included in today's press release. Excluding DIXI, total non-GAAP revenue in Q1 2026 was $22.0 million or 20.1% year-over-year, compared with $18.3 million in the prior year quarter. Growth was primarily driven by increased sales of the RNS system, which grew 19.5% to $21.7 million versus $18.2 million in Q1 2025. As we previewed on our fourth quarter call, growth in the first half tends to moderate relative to the acceleration we see exiting the prior year, and that pattern held true again. Service revenue tied to our data collaborations in the quarter, including a new partnership, totaled $314,000. Excluding DIXI, non-GAAP gross margin in Q1 2026 was 82.5%, compared to 83.6% in the prior year quarter. The Q1 2025 gross margin included a one-time inventory revaluation benefit of approximately 120 basis points. Excluding that impact, underlying gross margin expanded year-over-year, driven primarily by favorable pricing conversion. Total non-GAAP operating expenses for Q1 2026 were $21.5 million compared with $19.4 million in the prior year quarter, and came in better than expectations driven by hiring cadence and other personnel-related expenses. Non-GAAP operating expense growth of approximately 10% in the quarter remained meaningfully below our revenue growth of 20%, again demonstrating underlying operating leverage as we scale. Non-GAAP sales and marketing expense was $11.0 million, up from $9.6 million in the prior year quarter, reflecting headcount growth and personnel-related expenses as we continue investing in the commercial team and other sales-related expenses. Non-GAAP research and development expense was $6.5 million compared to $6.6 million in the prior year quarter. The slight decline reflects lower clinical study spend compared to the prior year period, partially offset by personnel investments supporting our AI roadmap and next-generation platform. Non-GAAP general and administrative expense was $4.0 million, up from $3.3 million in the prior year quarter, primarily reflecting increased personnel costs. Total stock-based compensation in the quarter was $2.3 million with $2.1 million included in operating expenses and the balance in cost of goods. Non-GAAP loss from operations for Q1 2026 was $3.3 million compared with a loss from operations of $4.1 million in the prior year quarter. Adjusted EBITDA loss was $3.3 million in the first quarter, an improvement compared to a loss of $4.1 million in the prior year quarter. GAAP net loss was $6.7 million for Q1 2026 compared with net loss of $6.6 million in the prior year quarter, which included DIXI Medical in both periods. We ended the quarter with $54.8 million in cash equivalents, short-term investments, and restricted cash, compared to $61.2 million at year-end 2025. The sequential decrease reflects typical first-quarter cash outflows, primarily driven by annual corporate bonus payments. Please note that as of March 31, 2026, we had approximately $700,000 of restricted cash related to DIXI Medical; approximately $600,000 has since been converted to cash and cash equivalents, and we expect the balance will be converted by year-end 2026. Turning now to our outlook for 2026. As Joel mentioned, we are raising full-year 2026 revenue guidance to $99 million to $101 million, up from previous guidance of $98 million to $100 million. The $1 million increase at the midpoint is driven by two factors: approximately $500,000 reflects improved visibility into service revenue, and approximately $500,000 reflects improved visibility into our core RNS outlook. Our increased guidance reflects underlying RNS revenue growth of 21% to 23% in our core business and continues to exclude any potential contribution from IGE indication expansion. On service revenue specifically, last quarter we noted that while we may generate modest service revenue during 2026, it was not included in our initial outlook given limited visibility at that time. As our planning has progressed, certain activities have become more predictable. We are now incorporating approximately $500,000 of service revenue into our updated 2026 guidance. As we have previously stated, given the underlying dynamics of a procedure-based business, it can be more informative to evaluate RNS performance over six-month periods. We remain confident in our ability to deliver 20% underlying RNS focal indication growth over time and we expect that 2026 will be consistent with that framework. Quarter-to-quarter fluctuations can occur, but our focus remains on sustained adoption and utilization trends across a broader time horizon. We continue to expect full-year non-GAAP or adjusted gross margin to be between 81.5% and 82.5%, reflecting continued leverage and favorable pricing. We continue to expect full-year non-GAAP or adjusted operating expense to remain in the range of $90 million to $92 million, excluding approximately $10 million in stock-based compensation, consistent with prior guidance. For the full year 2026, we continue to expect non-GAAP or adjusted sales and marketing expense to total between $46 million and $48 million. Sales and marketing expense growth in 2026 reflects the continued commercial investment and we expect productivity and leverage from these investments to increase meaningfully as we move through 2026 and into 2027. We continue to expect full-year non-GAAP or adjusted research and development expense to total approximately $27 million. R&D expense growth in 2026 reflects continued investment in our next-generation platform and the development of the NeuroPace AI suite of tools designed to enhance physician workflow and drive further adoption. We remain focused on disciplined allocation of R&D capital to programs that strengthen the platform, enhance differentiation, and support long-term growth. We continue to expect full-year non-GAAP or adjusted general and administrative expense to total approximately $17 million. G&A expense in 2026 primarily reflects the infrastructure required to support a growing commercial organization and corporate systems necessary to operate at scale. We remain disciplined in managing overhead as we drive operating leverage across the organization. We now expect more favorable full-year adjusted EBITDA to be a loss in the range of $8.5 million to $9.5 million, improved from a loss of $9 million to $10 million. And with that, I will turn it back to Joel.

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

Thank you. And we will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. To be able to take as many questions as possible, we ask that you please limit yourself to one question and one follow-up, and you may rejoin the queue for additional follow-up questions. Again, it is star 1 to join the queue. And our first question comes from the line of Mike Kratky with Leerink Partners. Your line is open.

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

Thanks, Mike, and that is a great question. For us, we are particularly pleased with the trends that we see with regard to the patient pipeline. Our patient pipeline numbers are as strong as we have ever seen them. A lot of that comes from our work across three areas. First, our work with our level 4 center customers to make sure we are collaborating closely with them and that patients are being identified as they move through level 4 centers. Second, the work we have been doing in the community with referral populations is beginning to contribute nicely to the patient pipeline as well. Third, the investments we have made in our commercial organization — both the breadth of that organization and the way the leadership team is executing with disciplined systems and processes — are providing good visibility and tracking capability. The execution around those priorities is leading toward building what is as good a patient pipeline as we have seen to date.

The only thing I would add to that, Mike, is we are starting to look a lot deeper into the patient pipeline in terms of analytics and tracking that differently with our commercial team. We think of it as the velocity of the patient, which we know has a long sales cycle, but better understanding where they are within that healthcare continuum until they actually go to a neuromodulation device is helpful. We're leveraging predictive tools that are AI-based to get a little bit smarter in that area.

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

You bet, Mike. We had a very productive and interactive meeting with the agency. A couple of things I would highlight: first, we were pleased to receive the agency's questions in a timely fashion, which allowed us to prepare and have a robust, interactive discussion. The nature of the questions focused on clarification and context around various aspects of the data and the associated analyses that went into the PMA supplement. It is clear they are paying close attention to the data, as we would expect. The questions were really about clarifying some of that data and how to best understand and interpret it, and where we had provided associated analyses, they wanted to ensure they had appropriate context for those analyses. We have since followed up and submitted our formal responses to the agency's questions. Overall, we felt the meeting was productive and the dialogue continues to be constructive.

Thanks very much.

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

Hey, guys. Thanks so much for taking the question and congrats on a strong start to the year. Maybe first, really encouraging to see the strong growth in RNS revenues. Would love to parse out how much of that was deeper market penetration and increasing utilization across your existing centers versus new physician capture. And was there any pricing dynamics in the quarter? I think you did call out some increasing ASP. Could you help us level-set contributions from each?

I'll start, Priya, and then ask Patrick if he wants to add. As has been the case, growth in the business has been centered around increasing adoption and utilization within our level 4 centers. Adoption is reflected in the increasing number of prescribers, and we continue to work on utilization and expansion of how the RNS system is used within those practices. Second, the increasing contribution of patients identified in community settings, either implanted at level 3 or community hospitals or referred in for surgical placement at level 4 centers, is meaningful. Third, our direct-to-consumer efforts and investment in our nurse navigator team are designed to help fill the pipeline and move patients with increasing velocity and decreased friction. Our nurse navigator team is beginning to have a positive impact. Regarding pricing, we have had consistent execution on pricing. Pricing was somewhat of a tailwind in the quarter, but the majority of the revenue change was associated with unit volume rather than a significant price effect.

Priya, the only thing I would add on pricing is that we plan to take pricing as we have in prior years. You can expect a low-single-digit type pricing increase each year where appropriate.

Okay, got it. That was super helpful. And just one more: when thinking about IGE, and I know it is not baked into guidance for this year, when approval does come online, how quickly could we see a contribution? And can you remind us what the pathway from a reimbursement perspective looks like and how quickly that could come online?

I'll start, and let Patrick add. First, we are focused on getting the indication expansion and approval from the agency. In parallel, we're training and preparing our internal teams for launch, and our launch plans are moving in parallel. Once approved, we will move into a coverage expansion exercise. The device has coverage today for the existing indication with the same codes; the exercise will be working with private payers to get coverage expansion. We will engage with medical directors and health plans and pursue case-by-case submissions as appropriate. A key input in that process will be the Nautilus manuscript publication; we're ahead of expectations on submission and review timing and encouraged by the early feedback on the manuscript. From a reimbursement perspective, we've been preparing and engaging outside experts, including advisory-style discussions to understand what will be important to payers. So the short answer is: approval first, then coverage expansion with private payers, which we will work aggressively to secure. Patrick, anything to add on cadence?

Priya, on cadence: we're still focused on a midyear approval. We did have a good quarter and raised guidance, but excluded IGE expansion from that guidance. Coverage policies with private payers, which account for roughly 80% when including Medicare Advantage, will take time. We expect adoption to be back-end loaded in the first 12 months after approval, with more coverage policies coming on board in months seven through twelve. We'll provide guidance once we have approval and greater visibility. The same DRG and CPT codes are used, and we are being proactive and patient-advocate focused in our preparations.

To wrap up on this point, during reimbursement-side discussions, we've been encouraged by payer feedback about the clinical data and the unmet need. Payers are attuned to the fact there are limited approved options for these patients and have recognized the value of the data.

We are augmenting our internal reimbursement capabilities with third-party support, especially at launch, to ensure case-by-case advocacy for patients. We're excited about the opportunity but will be thoughtful as we determine how the revenue cadence will unfold. We believe there is a very good opportunity to move things along quicker than some might expect.

Thanks so much.

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

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

That's a great question. The unique capability to provide a window into the brain and see what's really going on has been increasingly recognized. We see the field moving toward the ability to individualize and tailor therapy, and it's the diagnostic capability that allows us to do that — monitoring, recording, and analyzing data and subsequently tailoring therapy. So yes, the diagnostic capabilities of the device are contributing to growth. Regarding hybrid therapy or complementing resection, we hear this more and more, especially at centers traditionally focused on resection. Some centers will implant RNS prior to surgical procedures to better localize resection targets, or use RNS when disease is diffuse and parts are in eloquent cortex to combine RNS with resection. The modern RNS story is evolving from a niche application to treatment of multifocal disease, network stimulation, and adjunct to surgical procedures. We hear about adjacent-to-resection procedures increasingly.

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

You did not miss it — we did not include it in the prepared comments, but I'll address both. For pediatrics, we're working on a real-world evidence strategy using retrospective meta-analysis, working with the agency and external parties to aggregate and analyze published data. Prospective enrollment in pediatric trials has been challenging, which makes the real-world data approach particularly appropriate now. There has been growing interest and published data: in 2020 there were about eight peer-reviewed publications on pediatric RNS use; today, there are 29. That momentum supports a real-world evidence analysis. We're in the middle of the data alignment and structuring work now. I won't quote a specific timeline, but pediatric expansion remains a significant priority. For Lennox-Gastaut syndrome (LGS), we have completed enrollment in our LGS pilot trial — the first of its kind in collaboration with NIH — enrolling a pilot group of 20 patients with safety and efficacy endpoints. We are encouraged by early data and are developing plans for further engagement with the agency. More to come soon; LGS remains an active priority.

I think the takeaway is, as we think about adoption dynamics in the clinical setting, IGE, pediatrics, and LGS are all important and potentially even more impactful adoption drivers than what we've seen historically with focal indications. So those are things to watch as our clinical development efforts progress.

Thank you. Thanks, Ross.

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

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

Absolutely, Lily. It's a great question. First, the performance in the quarter and the historical cadence of our business are the basis for our decision. Over the past several years, we've seen more revenue in the second half of the year than the first half, with roughly a 500-basis-point increase in growth rates in the second half. That's been consistent. Second, our commercial investments in sales and marketing are ramping and we expect those investments to become more productive over the year as people and programs become more installed. Third, the patient funnel is as strong as we've seen and is growing across the business. Finally, we're strengthening our operating system around the business with improved organization, training, incentives, and referral management. All of these dynamics support the decision to raise guidance at this point. We may still see quarter-to-quarter variability, but the factors I mentioned give us confidence in the raised guidance.

Very helpful. And then just to follow up on generalized: you mentioned there is no generalized included in the guidance. I know the main gating factor after approval is commercial reimbursement. It sounds like that is more of a 2027 event for it to be felt materially in the numbers. But to my understanding, Medicare/Medicaid could be addressed sooner. Why not include some contribution from Medicaid? Is that just conservatism, or is there some other reason that is not baked into the guidance for this year?

Lily, that's a fair question. We are anticipating a midyear approval but have kept IGE indication expansion out of guidance and will continue to do so until we receive approval. Upon approval, you are correct that cases under Medicare and Medicaid could be addressed more quickly on a case-by-case basis, which is why we're augmenting with third-party reimbursement support. However, we prefer to be thoughtful and wait for the binary event of approval before including it in guidance. Once approved, you'll see contribution ramp as private payers adopt coverage policies, which we expect to be more back-end loaded across months seven to twelve following approval.

Perfect. Thank you.

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

Great. Thanks for taking the questions. Was hoping to start with one — on the reimbursement changes for 2026, I think last year you spoke to improvements in both OPPS and the physician fee schedule effective in 2026. Any anecdotal feedback or direct feedback from the field on how that reimbursement has been received or impacted the business?

Frank, 2026 has been a good year for us from a reimbursement standpoint. A lot of the legwork we did in 2025 came to fruition in 2026. When you don't hear pushback from the field team, that's generally a positive sign. As we go into 2027, we'll keep everyone posted. But at this point, following the final rules and the implementation in 2026, we're not anticipating adverse effects. Rest assured, we will continue to advocate for patients and make sure hospital accounts are reimbursed appropriately so that reimbursement does not become an impediment to installing our device.

The only thing I'd add is that we did have a positive development from an OPPS perspective, as Frank mentioned. Replacement cycle revenue is still a small part of the business, but we expect it to grow as RNS-320 devices reach replacement. That improvement in outpatient reimbursement should support replacement dynamics as those cycles increase.

Got it — that is helpful. And then maybe a bigger-picture question on Project Care. We're about two years into that initiative. Joel, could you review positives and negatives — what has surprised you positively, what has been more challenging, and any trends on utilization or new site activations over the last two years?

We have learned that the referral and community ecosystem is heterogeneous and addressing different segments requires flexibility. First, some community or level 3 centers are ready to be implanting centers with the right clinicians, surgeons, and capital equipment — they can self-sustain quickly. Second, others need more time to develop the capabilities and go through capital cycles, training, and hospital-level processes. Third, there are centers that prefer to manage patients longitudinally but rely on referral relationships so their patients can get implanted elsewhere, while they maintain oversight and continue to manage medication and follow-up. We initially thought the landscape might be more homogeneous, so the heterogeneity has been a surprise in that sense. That requires more awareness-building and education, which is work but also represents a large opportunity. The work we did to expand the focal indication to permit implantation beyond level 4 centers has allowed us to learn about community dynamics and referral patterns, which should position us well as we pursue indication expansion into IGE and beyond.

That is perfect and comprehensive — thank you very much.

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

Thanks for fitting us in and congrats on progress so far in 2026. Maybe two reimbursement questions. One on the new APC mapping for vagus nerve stimulators — there was a notable increase in APC reimbursement for that category. Is there any read-through from what we've seen for vagus nerve stimulation to RNS once you get there for generalized? And can you confirm whether the RNS system is seeing any prior authorization impact from the WISER program in certain states?

Thanks, Anthony. First, when we saw increases in reimbursement for neuromodulation categories, that was encouraging. It signals payers are recognizing value in neuromodulation and are open to supporting access. We saw a positive development for OPPS that benefits replacement cycles and outpatient device replacement as those cycles increase. Second, we are not included in the WISER program and therefore have not seen prior-authorization impacts from that program.

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

On the topic of generalized and the FDA, Joel, how much focus has the agency placed on the primary endpoint in the NAUTILUS study, which did not meet significance, versus the supplemental analyses? Given the mixed headline result and constructive data underneath, are they wrestling with that and how might that influence a label?

I won't speak for the FDA, but my observation is they are looking at the totality of the evidence. They are focused on primary safety and efficacy signals as well as prespecified secondary endpoints that are clinically relevant. They are taking a comprehensive view of the evidence, which is appropriate. Regarding label, it is our interest to pursue a label aligned with the study population and the inclusion/exclusion criteria used in the study.

Thanks. One more reimbursement question — the RNS first-time implant is on the inpatient-only list maintained by Medicare. If that list is updated and cases move to outpatient, there could be a need to create a higher APC level for these cases. Any thoughts on that potential or timing?

There are many moving parts in that scenario. We have been very engaged in reimbursement discussions across inpatient and outpatient settings, physician reimbursement, and OPPS. While I can't credibly comment on all potential future changes like a move to APC Level 6, we are highly engaged and encouraged by payer signals that recognize the clinical and economic value of neuromodulation. In sum, we're monitoring developments and actively participating in advocacy.

To be crystal clear, we feel very good about the reimbursement outcomes we advocated for in 2025 that took effect in 2026. We're continuing advocacy efforts, including engagement with policymakers and societies, to support appropriate reimbursement as the landscape evolves.

Helpful color — thank you both.

And our final question comes from the line of Yi Chen with H.C. Wainwright. Your line is open.

Hi. This is Katie on for Yi. To wrap up, could you give us an idea of how many implants were replacements versus new implants this quarter? Do you think that mix is typical for the rest of 2026?

We did see a mild increase in replacements this quarter, but replacements remain a small portion of the business. RNS-320 devices have a nominal battery life of about 11 years, so we are at the front edge of the replacement cycle, but not yet seeing meaningful replacement volume.

Historically, less than 5% of revenue has been from replacements, and a little less than 10% on the unit side because replacements don't include lead replacement and therefore have a lower ASP impact. We're excited about the recurring revenue potential from replacements as the cycle progresses, but we are still in the very early stages. It should become more meaningful through the rest of this year and into 2027 and beyond.

Thank you.

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

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

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