electroCore, Inc.

Greetings, and welcome to the ElectroCorps Third Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. Please make sure to mute yourself. The question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero from your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dan Goldberger. Thank you, sir.

You may begin. Thank you all for participating in today's ElectraCorp earnings call. My name is Dan Goldberger. I am the Chief Executive Officer of ElectraCorp, and I'm also a member of the Board of Directors. Joining me today is Joshua Lev, our Chief Financial Officer. Josh was promoted to the CFO position effective October 4, 2024. He's been with us for almost five years and brings a track record of professional integrity and success. Earlier today, ElectroCorps published results for the third quarter ended September 30, 2024. A copy of the press release is available on the company's website. Before we begin, I would 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 Corps 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, November 13, 2024. For those of you who may be new to our company, ElectraCore 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. Building on that science, ElectraCore 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 advance the benefits of noninvasive vagus nerve stimulation. We have demonstrated rapid growth for several years now. In fact, This is our eighth consecutive record revenue quarter. Revenue was $6.6 million for the three months ended September 30th, 2024, a 45% increase over the prior year. Our five-year compound annual growth rate is 62%. Our gross margins remained steady at 84%, and we narrowed our net loss by 38% compared to the same period in 2023. We continue to make progress towards positive cash flow from operations and gap profitability as revenue increases, gross margins hold steady, and we maintain discipline around operating expenses. Joshua will discuss the financials in more detail later in the call. 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 systems 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 currently have about 30 million covered lives in the United States, and we look forward to creating more access in the future. Cash pay patients can often use their HSA, FSA accounts if they do not currently have insurance benefits. We launched two new non-prescription general wellness product lines last year. Truvega is a direct-to-consumer health and wellness brand, and TaxSim is our brand for human performance for active duty military personnel. The VA hospital system continues to be our largest customer. 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 75% to $4.8 million in the third quarter of 2024, from $2.7 million during the third quarter of 2023. VA facilities have purchased prescription GammaCorp products through September 30, 2024, as compared to 141 through September 30, 2023. The VA Hospital Administration Headache Centers of Excellence estimates approximately 600,000 patients are being treated for a headache in the VA hospital system, including approximately 24,000 cluster headache patients. We've dispensed GammaCore devices to approximately 6,700 veterans since 2022, representing a little bit more than 1% of the total addressable headache market within the VA hospital system. Truvega sales continue to show strong revenue growth. Truvega is currently positioned as a direct-to-consumer general wellness product for stress, relaxation, quality of sleep, and mental acuity. For the third quarter of 2024, Truvega net sales were approximately $657,000, a 147% increase from $266,000 during the third quarter of 2023. Our revenue return on advertising spend was approximately 2.53 in the third quarter. In other words, we're spending $1 to generate $2.53 of revenue. Truevega return rates remain steady at approximately 11% of shipments. Since launching Truevega, we have sold more than 8,000 handsets and customers have conducted approximately 189,000 sessions using the mobile app. We believe that the Truevega business will continue scaling nicely if we can maintain or improve these metrics. Most of our Truevega revenue is generated through our e-commerce platform, www.truevega.com. Following the successful launch of Truevega+, we began exploring additional channels to reach consumers, including influencers, affiliates, and resellers. Last week, we went live on the Perks at Work platform, which claims 30 million users globally across 90,000 companies, representing 70% of the Fortune 1000. And just yesterday, Men's Health published that TrueVega Plus was chosen as one of their 2025 Tech Awards. We plan to launch TrueVega Plus on Amazon early next year. TACSTEM revenues increased somewhat over the second quarter, but still lagged last year. TACSTEM for Human Performance is being sold to select Air Force 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.taxdim.com. For the third quarter ended September 30, 2024, we recorded $194,000 of tax-dim sales as compared to $601,000 during the same period last year. We have a growing sales funnel for TxDM, and we continue to believe that revenue from this product line is likely to be variable as active duty units purchase in bulk for pilot deployment. On October 1, 2024, subsequent to the end of the quarter, we filled a $550,000 Air Force purchase order. So, fourth quarter sales are off to a fast start. Our U.S. Prescription Gamma Core channel including GC Direct and G Concierge, recorded revenue of $441,000 during the third quarter of 2024, flat from $439,000 in the third quarter of 2023. There were 2,390 cumulative revenue generating cash pay prescribers as of September 30th, 2024, up from 1,662 on September 30th of 2023. We expect at least some of these customers will migrate to the Truvega brand as awareness grows and we continue modeling flat revenue from this category for the time being. 32 new Truvega Plus partners were onboarded in the third quarter, including 14 G Concierge customers that added the Truvega line product line to their accounts. Last year, We announced a distribution agreement with Jones Healthcare LLC that gives us access to a certain managed care health system. Our field sales team is responsible for building awareness among doctors and nurses within that managed care system. Approximately 25 prescribers have written for GammaCore in this channel, and we look forward to growing revenue next year. Revenue from channels outside the United States, or OUS, increased by 4% to $485,000 in the third quarter of 2024 as compared to $465,000 for the third 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'm going to turn to our scientific progress. In September 2024, the Air Force Research Labs presented results supporting the ability of electric horse TAC-STEM NBNS to accelerate pilot training. The presentation, titled Accelerating Sensorimotor Learning in a Flight Training Simulation Using Transcutaneous Vagus Nerve Stimulation, unquote, was presented at the 2024 Medical Health System Research Symposium in Orlando, Florida, and was based on a study conducted at AFRL's facilities at Wright-Patterson Air Force Base in Dayton, Ohio. The study was funded by the Department of the Air Force through AFRL and suggested that the learning rate was higher in the active NBNS group over a sham. In August 2024, AFRL published a paper entitled Transcutaneous Cervical Vagus Nerve Stimulation Enhances Second Language Vocabulary Acquisition while simultaneously mitigating fatigue and promoting focus, unquote. In the journal Scientific Reports, the paper is based on a study that was conducted at the Defense Language Institute in Monterey, California, 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. We continue to work with the FDA on a pathway for a post-traumatic stress disorder label, but that timeline remains uncertain. We'll provide updates about our pipeline and other opportunities as they become available. Before I turn the call over to Joshua Lev, our new CFO, I want to extend a heartfelt thank you to Brian Posner, As most of you know, Brian decided to retire from his position as our CFO in early October 2024. On behalf of the board, employees, shareholders, and myself, I want to thank Brian for his years of dedicated service. Brian played an instrumental role in establishing a solid foundation for growth. Brian, I miss you. Now, I'd like to turn the call over to Josh for a review of our financials.

Thank you, Dan. Net sales for the three months ended September 30, 2024 were $6.6 million, an increase of 45% as compared to $4.5 million during the three months ended September 30, 2023. The increase of $2 million is due to an increase in net sales across our prescription GammaCorp medical devices sold in the United States and abroad and revenue from the sales of our non-prescription General Wellness TruVega brand. Gross profit increased by $1.6 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. Gross margin was stable at 84% for the three months ended September 30, 2024, as compared to 85% for the three months ended September 30, 2023. Total operating expenses in the third quarter of 2024 were approximately $8.1 million as compared to $8 million in the third quarter of 2023. Research and development expense in the third quarter of 2024 was $521,000 as compared to $1.2 million in the third quarter of 2023. This decrease was primarily due to a significant reduction in investments associated with our TrueVega Plus product. We expect R&D expense to remain steady for the foreseeable future. Selling, general, and administrative expenses of $7.6 million for the three months ended September 30th, 2024 increased by $895,000, or 13%, 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 and recognition of lease expense associated with the expansion of our facility in Rockaway, New Jersey. General and administrative expenses increased 1% year over year. We expect fixed G&A expenses to remain relatively flat and sales and marketing expenses to scale with revenue in the near term. Therefore, we anticipate progress towards positive adjusted EBITDA and GAAP profitability. GAAP net loss for the third quarter of 2024 was $2.5 million, or 31 cents per share, as compared to the $4 million net loss, or 68 cents per share, for the third quarter of 2023. This significant improvement was primarily due to the increase in net sales to $6.6 million for the third quarter of 2024 and our ability to drop incremental revenue to the bottom line. Adjusted EBITDA net loss in the third quarter of 2024 was $2.1 million as compared to adjusted EBITDA net loss of $3 million in the third quarter of 2023. These improved results are also primarily due to the increase in the third 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 at September 30, 2024, totaled approximately $13.2 million, as compared to approximately $10.6 million as of December 31, 2023. Net cash used in operating activities for the nine months ended September 30, 2024 was $5.7 million, a 51% reduction from the $11.5 million through nine months ended September 30, 2023. And now I'll turn the call back to Dan.