electroCore, Inc.

Greetings and welcome to the Electric Core second quarter 2024 earnings conference call. At this time, all participants are in listen-only mode. Please make sure you mute yourself. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star then zero on your phone. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Goldberger. Thank you, sir. You may begin.

Thank you all for participating in today's ElectroCorps earnings call. My name is Dan Goldberger. I'm the Chief Executive Officer of ElectroCorps and I'm also a member of the Board of Directors. Joining me today is Brian Posner, Chief Financial Officer. Earlier today, ElectroCorps published results for the second quarter ended June 30th, 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 performance, 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 Cord 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. This conference call contains time-sensitive information that is accurate only as of the live broadcast today, August 7th, 2024. ElectriCorps 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 techniques. Building on that science, Electric Core pioneered 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 stimulation. We are excited to report our seventh consecutive record revenue quarter at $6.1 million for the three months ended June 30th, 2024, a 73% increase over the prior year. That's a 69% five-year compound annual growth rate. We reported 86% gross margins and a 46% reduction in the company's net loss from the same period in 2023. We continue to make progress towards positive cash flow as revenue increases, gross margin expands, and we maintain discipline around operating expenses. Brian will discuss the financials in more detail later in the call. We launched our U.S. 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 through prescriber professional channels, 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 TACSTIM is our brand for human performance for active duty military personnel. Truvega sales exceeded our expectations for the quarter. We reported small TACSTIM sales for the quarter, but added substantially to the funnel of future opportunities. The VA hospital system continues to be our largest revenue channel. You'll recall that our Gamma Corp 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 120% to $4.6 million in the second quarter of 2024 from $2.1 million during the second quarter of 2023. 160 VA facilities have purchased prescription GammaCorp products through June 30th, 2024, as compared to 138 through June 30th, 2023. The VA Hospital Administration Headache Centers of Excellence estimates approximately 600,000 patients are being treated for headache in the VA hospital system. We've dispensed gamma core devices to approximately 6,100 veterans since 2022, representing approximately 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 federal supply services contract, and our distribution agreement with Level Government Services. During the second quarter of 2024, sales through Level accounted for approximately 27% of our VA sales, up from 13% during the first quarter of 2024. Truvega is currently positioned as a direct-to-consumer general wellness product for stress, relaxation, sleep, and mental acuity. For the second quarter of 2024, Total TrueVegan net sales were approximately $572,000 as compared to $290,000 during the second quarter of 2023. Our revenue return on advertising spend, what the industry calls a media efficiency ratio or MER, was approximately 2.81 in the second quarter. In other words, we're spending $1 to generate $2.81 of revenue. Truvega return rates increased slightly to approximately 10% of shipments. In April 2024, we launched Truvega Plus, our second Truvega product offering. Truvega Plus is a mobile app-enabled general wellness product. The first few months of sales of Truvega Plus have again exceeded expectations And we are enthusiastic about the potential our new mobile app enabled product provides for future iterations of our technology and engagement with consumers. Since launching Truvega Plus, we've sold approximately 1,200 handsets and customers have conducted approximately 60,000 sessions using the mobile app. We believe that the Truvega business can scale nicely if we maintain or improve these metrics. Most of our Truvega revenue is generated through our e-commerce platform, www.truvega.com. Following the successful launch of Truvega Plus, we are exploring other channels to reach consumers, including influencers, affiliates, and resellers. TACSIM 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.taxtim.com. For the second quarter ended June 30th, 2024, we recorded $55,000 of TACSTIM sales as compared to $311,000 during the same period last year. We announced the commercial launch of our second generation TACSTIM handset in June 2024. This version was developed in collaboration with AFRL and we believe that at least some TACSTEM sales were deferred as customers waited for the new handset. We have a growing sales funnel for TACSTEM and we continue to believe that revenue from this product line is likely to be lumpy as active duty units purchase in bulk for pilot deployment. To that end, we expect revenues for TACSTEM in the third quarter and back half of 2024 to be higher than in the second quarter and first half of 2024, respectively. Our U.S. prescription Gamma Core channel, including GC Direct and G Concierge, recorded revenue of $476,000 during the second quarter of 2024, up 7% from $445,000 in the second quarter of 2023. There were 2,216 cumulative revenue-generating cash-paid prescribers as of June 30, 2024, from 1,451 on June 30th, 2023. We previously stated that 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. We began experience that migration during the quarter as certain G Concierge customers are evaluating the Truvega product line. Last year, we announced a distribution agreement with Jones 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 Electric Core 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. Our field sales function is developing champions within the targeted managed care system. And while it is taking longer than we had hoped, we still believe Jerns could be an important source of revenue growth in the second half of 2024 and beyond. Revenue from channels outside of the United States, OUS, increased by 9% to $464,000 in the second quarter of 2024 as compared to $424,000 for the second 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 scientific progress. Last week, we announced that the Air Force Research Laboratories published a paper entitled Transcutaneous Cervical Vagus Nerve Stimulation Enhances Second Language Vocabulary Acquisition While Simultaneously Mitigating Fatigue and Promoting Focus, in the journal Scientific Reports. The paper is based on a study that was conducted at the Defense Language Institute in Monterey, California, U.S. Department of Defense's premier language school, and was supported by the DARPA Targeted Neuroplasticity Training Program. The paper showed a significant positive effect of NVNS on language recall. The paper goes on to document that the recall advantage that emerged during training was sustained after the completion of treatment. Two of our investigator-initiated trials, the acute stroke trial in Leiden, Netherlands, and the gait and mobility trial in Parkinson's disease in Newcastle, United Kingdom, have been fully enrolled, and we expect to report top-line data later this year. We continue to work with the FDA on a pathway for post-traumatic stress or PTSD label, but that timeline continues to be uncertain. We'll 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. Brian. Thank you, Dan.

Net sales for the three months ended June 30th, 2024 were $6.1 million. an increase of 73% as compared to $3.6 million during the three months ended June 30, 2023. The increase of $2.6 million is due to an increase in net sales across the majority of our major channels, including our prescription Damacor medical devices sold in the U.S. and abroad, and revenue from the sales of our non-prescription general wellness Trivega brands. Gross profit increased by $2.3 million for the three months ended June 30th, 2024 compared to the three months ended June 30th, 2023. Gross margin increased to 86% in the three months ended June 30th, 2024 as compared to 84% for the three months ended June 30th, 2023. Total operating expenses in the second quarter of 2024 were approximately $7.9 million as compared to $8 million in the second quarter of 2023. Research and development expense in the second quarter of 2024 was $600,000 as compared to $1.2 million in the second quarter of 2023. This decrease is primarily due to a significant deduction in investments. Selling, general, and administrative expense of $7.3 million for the three months ended June 30th, 2024 increased 458,000, or 7%, as compared to $6.8 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 second quarter of 2024 was $2.7 million, or 38 cents per share, as compared to the $4.9 million net loss of $1.03 per share for the second quarter of 2023. This significant improvement was primarily due to the increase in net sales to $6.1 million for the second quarter of 2024. Adjusted EBITDA net loss in the second quarter of 2024 was $1.9 million as compared to adjusted EBITDA net loss of $4.5 million in the second quarter of 2023. These improved results are also primarily due to the 73% increase in the second quarter 2024 net sales. 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, marketable securities and restricted cash June 30th, 2024 totaled approximately $14.5 million as compared to approximately $10.6 million as of December 31st, 2023. In June 2024, the company raised net proceeds of approximately $9 million through a registered direct offering and concurrent private placements priced at the market under NASDAQ rules. And now I'll turn the call back over to Dan.