electroCore, Inc.

Greetings and welcome to the ElectroCorps First Quarter 2024 Earnings Conference Call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Dan Goldberger. Thank you, sir. You may begin.

Thank you all for participating in today's Electric Core earnings call. My name is Dan Goldberger. I'm the Chief Executive Officer of Electric Core, and I'm also a member of the Board of Directors. Joining me today is Brian Posner, Chief Financial Officer. Earlier today, Electric Core published results for the first quarter ended March 31, 2024. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during the call that include forward-looking statements within the meaning of the federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including without limitation any guidance outlook, or future financial expectations or operational activities and performances are based upon the company's current estimates and various assumptions. 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 of the risks and uncertainties associated with the company's business, please see the company's filings with the Securities and Exchange Commission. Electric Corps disclaims any intention or obligation, except as required by law, update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information that is accurate only as of the live broadcast today, May 8, 2024. ElectroCore was founded in 2005 to commercialize the use of our proprietary non-invasive vagus nerve stimulation for medical and general wellness applications. The vagus nerve is the longest cranial nerve in the body, bringing information from the visceral organs to the brain. Stimulating the vagus nerve affects many important autonomic functions in the brain and in the body, including neurotransmitter levels, inflammation levels, and metabolism. Surgically implanted vagus nerve stimulators have been available from other companies for more than 40 years for chronic conditions like epilepsy and depression. So a large and growing database confirms the safety and efficacy of the technique. non-invasive vagus nerve stimulation, and our products are now available by prescription for certain headache conditions and without a prescription for general wellness and human performance. Our pipeline of potential future indications and products continues to grow as clinicians, researchers, and wellness advocates conduct investigator-initiated trials to become more familiar with the benefits of non-invasive vagus nerve stimulations. We are thrilled to report a six consecutive record revenue quarter of $5.4 million for the three months ended March 31, 2024, a 96% increase over the prior year. That's a five-year compound annual growth rate from Q1 2019 to Q1 of 2024 of greater than 67%. Moreover, This growth has been accomplished with 84% gross margins. Brian will discuss the financials in more detail later on. We launched our US prescription headache business in 2017, selling primarily to specialty pharmacies. Since then, our prescription headache business has grown worldwide, including sales that are covered by national health systems, such as the VA hospital system in the United States and the National Health Service in the United Kingdom, cash pay sales, and through certain managed care systems in the United States. We launched two new non-prescription general wellness product lines last year. Truvega is a direct-to-consumer health and wellness brand, and TaxStem is our brand for human performance for active duty military personnel. Both new brands exceeded our expectations in their first full year of sales and continue driving excitement about the future. The VA hospital system continues to be our largest revenue channel. You'll recall that our GammaCorp prescription therapy is free to patients covered by Veterans Administration benefits, representing about 9 million covered lives across approximately 1,300 healthcare facilities. Sales in the VA channel grew 127% to $3.9 million in the first quarter of 2024 from $1.7 million during the first quarter of 2023. 151 VA facilities have purchased prescription GammaCorp products through March 31, 2024, as compared to 124 through March 31, 2023. The VA Hospital Administration Headaches Centers of Excellence, or HCOE, estimates approximately 600,000 patients are being treated for headaches in the VA hospital system. Since we've dispensed approximately 5,300 Gamma Corps devices to veterans since 2022, we believe that represents less than 1% of the total addressable market within the VA system. We use several contracting mechanisms to support sales to individual VA facilities, including open market access, our FSS, or Federal Supply Services Contract, and our non-exclusive distribution agreement with Lovell Government Services. Lovell is a service-disabled, veteran-owned small business, or SDVOSB, offering medical and pharmaceutical goods and services to federal healthcare providers. During first quarter of 2024, sales through Lovell accounted for approximately 13% of ROVA sales. TrueVega is currently positioned as a direct-to-consumer general wellness product for stress, relaxation, sleep, and mental acuity. For the first quarter of 2024, TrueVegan net sales were approximately $385,000 as compared to $147,000 during the first quarter of 2023. Our revenue return on advertising spend, what the industry calls a media efficiency ratio, or MER, was approximately 2.49 in the first quarter. In other words, were spending $1 to generate $2.49 of revenue. TrueVega return rates, which we continue to monitor closely, dropped slightly to approximately 8% of shipments. However, we modeled return rates at a more conservative 10% to 15%. Last month, we launched TrueVega Plus, our second TrueVega product offering. TrueVega Plus is a mobile app-enabled general wellness product. The first few weeks of sales of TrueVega Plus have again exceeded expectations, and we are enthusiastic about the potential our new app-enabled product provides for future iterations of our technology and engagement with consumers. Since launching TrueVega Plus, we've sold approximately 300 units, and customers have conducted approximately 2,400 sessions using the product. Our media efficiency ratio has expanded to 3.21 since launch. driven by higher pricing and early adoption of TrueVega Plus. Both TrueVega products are available exclusively through our e-commerce platform, www.truevega.com, and we are carefully managing our TrueVega advertising spend, return rates, and sessions as we offer two unique TrueVega propositions for health and wellness. We believe that the TrueVega business can scale nicely if we maintain or improve these metrics. TAC-STEM for human performance is being sold to select Air Force Special Forces and Army Special Forces units for accelerated training, sustained attention, reduced fatigue, and improved mood, as defined by the Air Force Research Laboratory, or AFRL. No prescription is required, and more information is available at www.tacstem.com. For the first quarter, ended March 31, 2024, we recorded $301,000 of TACSTEM sales as compared to $88,000 during the same period last year. The sales funnel for this product continues to grow as word spreads across active duty military units of the potential human performance benefits provided by TACSTEM. In parallel, we have developed a second generation product known internally as TACSTEM Black. In collaboration with AFRL, and we continue to build prototypes for evaluation by our government research partners. Even though we have an impressive sales funnel for TAC-STEM, we have stated before that revenue growth for this product line is likely to be lumpy as active duty units purchase and vote for pilot deployment, and we expect revenues for TAC-STEM in the second quarter of 2024 to be flat to down sequentially due to the timing of such orders. Our prescription physician dispense cash pay channel, including GC Direct and G Concierge, recorded revenue of $424,000 during the first quarter of 2024, down slightly from $436,000 in the first quarter of 2023. We expect at least some of these customers to migrate to the Truvega brand as awareness grows, so we are modeling flat revenue from this category for the time being. There were 2,023 cumulative revenue-generating cash pay prescribers as of March 31, 2024, up from 1,218 on March 31, 2023. Last year, we announced a distribution agreement with Jerns Healthcare LLC that we believe will add more than 12.5 million covered lives within a select managed care health system. The business model with Jerns is similar to how we work with the VA hospital system. Jerns handles adjudications, billing, and collections, while ElectraCore ships directly to patients and provides in-servicing and patient support. Our field sales team is responsible for building awareness among clinicians within those managed care systems. We continue to work with Jerns on the implementation, including the expansion into new geographic territories, and we recorded small recurring revenue from this relationship during the first quarter of 2024. Our field sales function is developing champions within the target managed care system. And we think insurance could be a source of revenue growth in the second half of 2024 and beyond. Revenue from channels outside the United States increased by 10% in US dollars to $449,000 in the first quarter of 2024, as compared to $410,000 for the first quarter of 2023. Revenue from channels outside the U.S. increased approximately 14% in local currency for the first quarter of 2024 as compared to the first quarter of 2023. Most of our OUS revenue continues to be generated in the United Kingdom by prescription gamma-core sales funded by the National Health Service, or NHS. Now, I'd like to turn to our clinical progress. On April 30th, 2024, we announced the results of our most recent TrueVega Plus consumer study conducted earlier this year. The 39-subject, 30-day in-home use test conducted by an independent third-party research firm demonstrated that TrueVega Plus helped its users improve sleep, focus, stress, energy, and mood. Health assessment evaluations were reported after seven and 30 days. Most notably, 82% of participants felt calmer and mentally healthier. 74% of participants felt they slept better, of which 72% reported they received between 30 minutes to two hours more sleep each night. After the study completed, 87% of users said they will continue to use Truvega Plus for ongoing overall wellness benefits. Two of our investigator-initiated trials the Acute Stroke Trial Novus in Leiden, Netherlands, and Gait and Mobility and Parkinson's Disease in Newcastle, UK, have been fully enrolled, and we expect to report top-line data later this year. We'll continue to provide updates about our pipeline and other opportunities as they become available. Now, I'd like to turn the call over to Brian for a review of our financials and other guidance items. Brian?

Thank you, Dan. Net sales for the three months ended March 31, 2024 increased 96% as compared to the three months ended March 31, 2023. The increase of $2.7 million is due to an increase in net sales across major channels, including our prescription GammaCore medical devices sold in the U.S. and abroad, and revenue from the sales of our non-prescription general wellness and human performance Travega and Taxbin brands. Gross profit increased by $2.2 million for the three months ended March 31st, 2024 compared to the three months ended March 31st, 2023. Gross margin was 84% for both periods. Total operating expenses in the first quarter ended March 31st, 2024 were approximately $8.4 million as compared to $8.5 million for the quarter ended March 31st, 2023. Research and development expense in the first quarter of 2024 was $399,000 as compared to $1.8 million in the first quarter of 2023. This decrease is primarily due to a significant reduction in investments associated with Trevega Plus. Selling, general, and administrative expense of $8 million for the three months ended March 31st, 2024 increased by $1.3 million or 19% as compared to $6.7 million for the comparable period in 2023. This increase was primarily due to our greater variable selling and marketing costs consistent with our increase in sales. GAAP net loss for the first quarter of 2024 was $3.5 million or 53 cents per share as compared to the $5.9 million net loss or $1.24 per share for the first quarter of 2023. This significant improvement was primarily due to the increase in net sales to $5.4 million for the first quarter of 2024 compared to $2.8 million during the same period of 2023. Adjusted EBITDA net loss in the first quarter of 2024 was $3.1 million as compared to adjusted EBITDA net loss of $5.1 million in the first quarter of 2023. These improved results are primarily due to the 96% increase in first quarter 2024 net sales over the first quarter of 2023. A reconciliation of GAAP net loss to non-GAAP adjusted EBITDA net loss has been provided in the financial statement tables included in today's press release. Cash, cash equivalents and restricted cash at March 31, 2024, sold approximately $8.1 million as compared to approximately $10.6 million as of December 31, 2023. And now I'll turn the call back over to Dan.