Neuropace, Inc.

Good afternoon and welcome to NeuroPace fourth quarter 2025 conference call. As a reminder, this call is being recorded. I would now like to turn the call over to Scott Schaefer, head of investor relations at NeuroPace for a few introductory comments.

Thank you, operator, and welcome to NeuroPace's fourth quarter and full year 2025 earnings conference call. Our agenda begins with Joel Becker, Narrow Paces Chief Executive Officer, who will summarize our recent performance and strategic progress, followed by a detailed financial review and outlook from Patrick 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 and the first quarter of 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 on 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 Narrow Paces Chief Executive Officer, Joel Becker.

Joel. Thanks, Scott, and good afternoon, everyone. I will start with an overview of our fourth quarter results and how the team is executing against our strategy. I will then provide updates on our key clinical and product development initiatives and close with a brief recap of why 2025 was such an important execution year and how it sets us up for what we believe could be a transformational 2026. After that, Patrick will walk through the financials and our outlook before we open the line for Q&A. The fourth quarter capped off a strong year for NeuroPace. We delivered strong quarterly revenue of $26.6 million, representing 24% year-over-year growth. This performance was primarily driven by strength in our core R&S business, with R&S system revenue of $22.4 million, up 26% year-over-year. These results reflect the execution of the initial parts of our strategy. deepening adoption and utilization within our current adult focal epilepsy indication and customer base, while continuing to expand access to RNS therapy through community pathways and preparing for future indication expansion. We again reached new highs in prescribers' accounts and in our patient pipeline, clear reflections of broad-based momentum across the business. Following R&S growth of more than 30% in the third quarter, our 26% growth in the fourth quarter reflects sustained broad-based momentum and continued commercial execution. Taken together, R&S growth in the second half of 2025 was 29%. The majority of our growth continues to come from level four centers, driven by increased adoption and utilization. At the same time, our community access efforts continue to contribute and scale as we expand referral pathways and site engagement. Stepping back, the message is consistent with what we said last quarter. Our results reflect the compounding effects of the recognition of the differentiated capabilities of the RNS system converging with ongoing best-in-class clinical data development, new tools for ease of use, improved commercial execution, and better referral management, which together are driving higher procedural volumes and expanding the addressable patient funnel. We remain confident in our long-term growth trajectory of growing a minimum of 20% in our core RNS business with our current adult focal epilepsy indication. Financial discipline and operating leverage remained important highlights again this quarter. Gross margin was greater than 77%, up roughly 200 basis points year over year, driven by mix and manufacturing efficiencies, with R&S gross margin, again, greater than 80%. We also delivered our second consecutive quarter of positive adjusted EBITDA along with positive cash generation in the fourth quarter. These are important proof points that our operating model is scaling in a disciplined manner and that we are making meaningful progress towards sustainable profitability and cash flow breakeven. As we mentioned in our pre-announcement in early January, we are reiterating our full year 2026 revenue guidance of $98 million to $100 million. This outlook assumes underlying core RNS growth of 20% to 22% within our current adult focal epilepsy indication and excludes any contribution from an idiopathic generalized epilepsy regulatory approval, service revenue, or Dixie Medical. Patrick will walk through our guidance in more detail, including the investments we plan to make in 2026. Strategically, we are continuing to invest in the commercial organization, including targeted sales representative additions, updates to our incentive structure, and additional nurse navigator resources dedicated to helping patients navigate the funnel from identification to evaluation to implant. We believe these investments will pay dividends as they mature and become productive. Let me now turn to our clinical development initiatives, starting with Nautilus and our pursuit of an expanded indication in idiopathic generalized epilepsy, or IgE. During the quarter, we submitted our PMA supplement to the FDA, seeking an expanded indication for the RNS system in IgE. The submission was supported by clinically meaningful and statistically significant 18-month results from Nautilus, including a robust 77% reduction in median seizure rates and a favorable safety profile in a highly refractory patient population. The data presented at the American Epilepsy Society meeting in December reinforced what physicians have increasingly come to recognize about RNS. It is a safe, durable, and clinically impactful therapy for drug-resistant epilepsy supported by rigorous evidence in a patient population that has long lacked meaningful treatment options. The PMA supplement was submitted on December 15th, and the FDA accepted the submission, initiating the 180-day review clock. Our dialogue with the agency remains productive, and we continue to prepare for a mid-cycle meeting. As a reminder, we have a breakthrough device designation, which has supported a consistent and collaborative engagement process, enabling ongoing dialogue as the review progresses. Based on our interactions today, we believe the process remains on track. To be clear, our 2026 outlook reflects the strength of the core business, and does not include any contribution from IGE. If approved on our current timeline, we would incorporate that into guidance as we gain further visibility around specific potential approval timing. Now, turning to product development. Our focus is on continuing to advance the ease of use, efficiency, and effectiveness of the RNS system, building a scalable data-driven neuromodulation platform. As part of our product pipeline, we are advancing a suite of neural-based AI tools designed to enhance physician workflow, improve patient outcomes, and unlock the full value of the now more than 24 million intracranial EEG recordings. These initiatives span workflow automation, personalized treatment optimization, remote programming capabilities, and long-term platform evolution. The first example of this is seizure ID. Seizure ID is an AI-enabled tool designed to analyze a patient's IEEG records, rapidly identify seizures and seizure trends, and provide clinicians with the most clinically relevant data upon which to focus. Highly desired capability and addresses a real workflow challenge. Clinicians can, at times, spend a meaningful time reviewing data for our next patients. And our goal is to reduce the time required while improving the ability to act on insights. Importantly, the seizure ID submission is paired with moving our clinician platform to the cloud, which improves the scalability and supports faster deployment of software and data products over time. We expect seizure ID approval in the first half of 2026. Second, we are advancing RNS remote care. This capability enables physicians to remotely detect events and adjust therapy settings during telehealth visits, eliminating the need for patients to travel to the clinic for programming. We believe remote care meaningfully improves access. particularly for patients who cannot routinely travel to comprehensive epilepsy centers, and increases physician capacity by allowing clinicians to manage more patients more efficiently. Third, we are also advancing the development of a foundation model, leveraging our proprietary intracranial EEG dataset and clinical experience of now over 8,000 patient implants across 33,000 patient years. We believe this is a key strategic mode, and we also recognize that we are stewards of this data with the responsibility to translate it into meaningful improvements in care. The goal of this work is a multimodal model that integrates multiple data inputs, including IEEG patterns and other clinically relevant signals to help identify optimal treatment settings and improve seizure control with a focus on increasing median seizure reduction rates, increasing the rates of seizure freedom, and expanding the proportion of patients to achieve meaningful clinical benefits. We believe that there are meaningful opportunities to advance the current best-in-class outcomes, and this work also lays the foundation for a future customer-facing adaptive treatment tool that can help clinicians more efficiently deliver personalized neuromodulation at scale. Finally, automated initial detection and therapy programming and our next generation platform remain in development and progressing according to plans. We remain bullish on the R&D pipeline, and we believe we are building a product roadmap that expands the reach and impact of personalized closed-loop neuromodulation. Let me close with a broader reflection on 2025. 2025 was a tremendous year for NeuroPace. We delivered 25% revenue growth to $100 million, improved gross margin to over 77%, with R&S gross margins sustained above 80%, and made significant progress toward cash flow break-evens. We also made significant progress on all three of our development levers, market development, clinical development, and product development. We strengthened the leadership team and increased organizational execution muscle. We sharpened our strategic focus on our core R&S business and achieved multiple favorable reimbursement updates that improved the economic profile for hospitals and physicians. Additionally, we advanced key clinical programs, including models from data generation to submission. We submitted seizure ID and made significant progress on the development of our next generation device platform. We also strengthened our balance sheet and financial flexibility through the refinancing completed earlier in the year. Taken together, 2025 was a strong year of execution. that sets up 2026 to be a transformational year for NeuroPACE, with ongoing momentum in the market from which to build top line growth, the launch of seizure ID designed to improve efficiency and ease of use, the potential for the first of its kind indication expansion into the IgE population for the RNS system, and the planned submission of remote patient care enabling remote patient programming. With that, I'll turn it over to Patrick for a review of the financials and outlook. Patrick?

Thank you, Joel. I will review our fourth quarter and full year 2025 performance in more detail and then provide additional context around our full year 2026 guidance, which is consistent with our pre-announcement in early January. We will also be introducing a non-GAAP profitability metric of adjusted EBITDA, which we define as earnings before interest, taxes, depreciation, amortization, and stock-based compensation. We believe this metric can serve as a proxy for current period cash generation as we move toward cash flow breakeven and have provided additional reference tables for both historical and go-forward reconciliations in today's press release. Please note that we have very little depreciation and no amortization, so essentially stock-based compensation makes up nearly all of the adjusted portion of our adjusted EBITDA. Total revenue in the fourth quarter of 2025 grew 24% to $26.6 million, compared with $21.5 million in the prior year quarter. Growth was primarily driven by increased sales of the RNS system, which grew 26% to $22.4 million. Service revenue tied to our data collaborations in the quarter totaled approximately $890,000. Revenue from Dixie Medical was approximately $3 million, representing a decline of 4% compared to the fourth quarter of 2024, and ahead of the previously issued guidance as the team worked to sell existing inventory prior to the ending of our commercial partnership, which concluded on December 31st, 2025. As a reminder, the distribution agreement contractually allowed Neuropace to sell back any remaining inventory at prior paid costs back to Dixie, which already has largely been completed in the first quarter of 2026. Gross margin for the fourth quarter was 77.4% compared with 75.4% in the fourth quarter of 2024 and 77.4% in the third quarter of 2025. The year-over-year improvement was primarily driven by increased revenue contribution from higher margin R&S revenue, benefit from improved manufacturing efficiency, and increasing R&S ASP as a result of strong pricing conversions. R&S gross margin in the quarter was 80.5% compared with 80.1% in the fourth quarter of 2024. Total operating expenses in the fourth quarter were $22.3 million compared with $19.8 million in the prior year quarter and came in better than expectations in both general and administrative and sales and marketing, while research and development expense was in line with expectations. Operating expense growth of 13% in the quarter remained meaningfully below our revenue growth of 24%, Again, demonstrating underlying operating leverage as we scale. Before moving to the components of operating expense and down the rest of the income statement, I wanted to note that stock-based compensation, depreciation, and amortization are included in our GAAP operating expenses for the fourth quarter and full year 2025. Beginning in Q1 2026, we will provide operating expense line items on a non-GAAP or adjusted basis, excluding these expenses. which I will cover in more detail when I discuss guidance. In the fourth quarter, sales and marketing expense was $10.9 million compared with $10 million in the fourth quarter of 2024. The year over year increase was largely due to personnel related expenses associated with ongoing scaling of commercial activities, investment in direct to consumer marketing, and other sales related expenses. Research and development expense in the fourth quarter was $7 million compared with $6.1 million in the fourth quarter of 2024. The year-over-year increase was primarily driven by personnel-related expenses associated with the development of next-generation platform, AI-enabled tools, and ongoing clinical trials. General and administrative expense in the fourth quarter was $4.4 million compared with $3.8 million in the fourth quarter of 2024. This increase was primarily due to an increase in personnel-related expenses. Loss from operations in the fourth quarter. was $1.8 million compared with the loss from operations of $3.7 million in the prior year quarter. Net loss was $2.7 million for the fourth quarter compared with net loss of $5.3 million in the prior year quarter. Adjusted EBITDA was a positive $900,000 in the fourth quarter, a $1.9 million improvement compared to the prior year quarter and our second consecutive quarter of positive adjusted EBITDA. Notably, we ended the quarter with cash, cash equivalents, and short-term investments of $61.1 million, a $1.1 million increase compared with $60 million at the end of the prior quarter. This was driven by a positive operating cash flow of approximately $500,000, and we generated positive free cash flow of approximately $400,000, which demonstrates our disciplined financial approach of investing for growth and the underlying cash generation of our business model. Long-term borrowings totaled $58.9 million as of December 31st, 2025. For the full year, total revenue grew 25% to $100 million, driven primarily by increased R&S system sales, which grew 25% for the full year. Full year gross margin was 77.2% compared with 73.9% in 2024, primarily due to increasing contribution from higher margin R&S revenue, improved manufacturing efficiency, and favorable pricing. R&S gross margin was 81.9% for the full year compared to 78.4% in 2024. Total operating expenses for the full year were $93.6 million compared with $80.8 million in 2024, representing growth of 16%. Excluding one-time items incurred in the second quarter related to executive transition, total operating expense growth for 2025 represented approximately 13% year-over-year on a normalized basis. consistent with our approach of showing leverage compared to our sales growth through disciplined expense management. Stock-based compensation for the year included in operating expenses was approximately $10 million. Adjusted EBITDA for the full year was a loss of $5 million, a $6.2 million improvement compared to the prior year. As we disclosed, we expect to begin reporting our Dixie-related financial results as discontinued operations beginning in the first quarter of 2026. On a continuing operations basis, our 2026 reporting and comparable periods presented will exclude the impact of Dixie. Again, today's press release has additional tables which break out revenue, cost of goods, and operating expenses for Dixie and should facilitate updating financial models on a historical basis as we move to continuing operations basis starting in the first quarter of 2026. I would encourage everyone to review Tables 1 and 2 in today's press release. Table 1 provides the appropriate continuing operations baseline for 2025, and Table 2 represents our 2026 outlook on a comparable basis. Together, these tables provide the clearest framework for year-over-year analysis. Turning to our outlook for 2026 on a continuing operations basis, as Joel said, we are reiterating full-year 2026 revenue guidance of $98 million to $100 million representing underlying R&S growth of 20 to 22% compared to full year 2025 and excludes any contribution from Dixie. Regarding service, we may generate modest service revenue throughout 2026. However, it is not included in our current guidance. If that revenue becomes more meaningful and predictable, we will begin incorporating it into our outlook starting with our first quarter earnings call. For the first quarter of 2026, we still expect revenue to be in the range of $21 million to $22 million. Consistent with historical patterns, growth rates in the first half tend to moderate relative to the acceleration we see exiting the prior year. This reflects normal timing of procedural volumes and activity levels and provides a prudent starting point for the year as we continue to ramp new commercial investments and build momentum throughout the year. We provided first quarter revenue guidance to establish a clear starting point for 2026 as we transition to a continuing operations presentation. We do not anticipate providing quarterly revenue guidance on an ongoing basis. Turning to operating expense guidance for 2026, we will be presenting these figures on a non-GAAP or adjusted basis, excluding stock-based compensation, depreciation, and amortization for initial guidance, as well as throughout 2026 reporting. This change is intended to provide greater transparency into the underlying operating performance of the business, enhance visibility of operating leverage, and improve comparability across periods. We expect non-GAAP or adjusted gross margin to be between 81.5% and 82.5% on a continuing operations basis, reflecting higher margin R&S revenue and driven by continued manufacturing efficiency. This compares to our previously issued full year gross margin guidance of 81% to 82%, which included approximately $500,000 of stock-based compensation. We expect full year non-GAAP or adjusted operating expense to be in the range of $90 million to $92 million, excluding approximately $10 million in stock-based compensation. For the full year 2026, we expect non-GAAP or adjusted sales and marketing expense to total between $46 million and $48 million. which excludes approximately $3 million of stock-based compensation. Sales and marketing expense growth in 2026 reflects a deliberate front-loading of commercial investment. We expect productivity and leverage from these investments to increase meaningfully as we move through 2026 and into 2027. We expect non-GAAP or adjusted research and development expense to total approximately $27 million, which excludes approximately $3 million in stock-based compensation. 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 adoption. With major clinical milestones executed in 2025, we expect the mix of R&D spend to shift away from large-scale trial execution and increasingly toward product development and platform innovation. We remain focused on disciplined allocation of R&D capital towards programs that strengthen the platform enhance differentiation, and support long-term growth. We expect non-GAAP or adjusted general administrative expense to total approximately $17 million, which excludes approximately $4 million in stock-based compensation. 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 expect full year adjusted EBITDA to be approximately a loss in the range of $9 million to $10 million. And with the removal of Dixie revenue and normal seasonality, we expect adjusted EBITDA will likely dip in the first half before improving again in the second half consistent with historical patterns. With that, I'll turn it back to Joel.

Thanks, Patrick. Let me briefly reconnect our results to the strategy. Our path to becoming the standard of care rests on three pillars, market development of our core R&S business, clinical development to expand R&S epilepsy indications, and product development to advance our R&D roadmap, including the NeuroPACE AI platform. Significant progress has been and continues to be made on all three pillars, and we are beginning to see the compounding effect of that progress. As you can hear in today's results and outlook, we have been executing and have a lot of opportunity in front of us. The core business is performing at a high level, the strategy is working, and we are executing with increasing consistency and discipline. What makes this moment especially exciting is that the opportunity in front of NeuroPace is getting bigger on multiple fronts at the same time. In the near term, we are still early in penetrating the adult focal epilepsy market, and we continue to see meaningful runway to drive adoption and utilization in level four centers and expand access in the community. We are investing deliberately to scale our commercial engine and to optimize how patients move through the funnel from identification to evaluation to implant, translating strong product demand into durable procedural growth. On the clinical front, we remain encouraged by the opportunity to bring RNS to the IgE population, which remains highly underserved. We continue to engage constructively with the FDA, and we will be thoughtful and disciplined as we prepare for what could be a meaningful new chapter in indication expansion. We have a unique installed base of customers, a unique data set, and we are investing to turn that advantage into practical tools designed to make RNS therapy even more efficient, effective, and easy to use. Seizure ID is a near-term example of how we can reduce physician burden and improve utilization. From there, our pipeline development projects are focused on activating our unique data and associated AI capabilities to create a step change in how personalized neuromodulation is delivered adaptively and further enabling RNS's potential to improve outcomes across the responder spectrum and expand the impact of therapy. Looking ahead, we believe we have a durable growth engine in the core business. We are building leverage in the model as we scale, and we are investing in product and clinical programs that we believe can expand the reach of RNS and extend NeuroPACE's leadership in personalized closed-loop neuromodulation. We are proud of what the team delivered in 2025, and we are energized by what is possible in 2026 and beyond. Operator, we are now ready to take questions.

At this time, I would like to remind everyone in order to ask a question, please press star then the number one on your telephone keypad. We request that you limit yourself to one question and one follow-up. You're welcome to re-queue with additional questions. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Frank Ticanin with Lake Street Capital Markets. Your line is open.

Frank Ticanin All right. Thank you for taking the questions, and congrats again on a really solid finish to the year. I was hoping I could start with one on the generalized opportunity. I know we've talked about it a lot, but as we get closer and closer, just looking for additional detail. How should we think about how quickly you can translate from an approval into collecting revenue? And really what I'm getting at is what is left to be done once you do have that approval in hand before you can start shipping product? And then as a bigger picture question, do you think the generalized opportunity could eventually be a larger revenue generator for NeuroPace than the focal opportunity?

Those are great questions, Frank. Thank you. With regard to what's left to be done pending the The potential approval, the first things that need to be done are to really extend coverage in the private payer community. And so we have, as you know, very well established coverage for the RNS system today for the adult focal indications. And the generalized indication is expected to follow much in the same lines, but we do need to get that coverage extended. As you might expect, we're not waiting for approval to make progress on that. We already have internal processes underway to prepare for and target the key payers to provide for that coverage extension, but that's really the key step. And then, of course, we have the initial introduction training and scaling activities that need to take place, in particular with referring physicians. Our treating physicians are already quite familiar with generalized epilepsy, but a lot of what we see from the referral community and out in the community will take some time for us to bring the therapy and the information and the referral pathways to them. But we do see referral pathways are well established here. A lot of these generalized patients today do end up in level four centers. We have well-understood technology and well-understood implant techniques, and so that teaching and training is already under our belt. We've got a sales force that we're going to be leveraging into common call points, and so they already understand how to bring the technology out to folks, and so it's really a matter of extending that into the referral community and expanding the coverage for the new indications, and those are things that we'll be looking to move into with some momentum here.

Yeah, Frank, maybe I'll go one layer deeper on some of the details related to reimbursement, because I know there's a lot of people that are newer to our story. Number one, it is the exact same device that we'll be implanting, and I think that's important for everyone to understand. It's the same calling point, and from a reimbursement standpoint, it'll be the same DRG as well as CPT codes that will be used. And then, as Joel said, we will work on the private payers, In terms of the grand scheme of things, Medicare, Medicaid probably makes up 20 to 25% right now of our overall payer mix, and then the rest of it is the private payers, and that will take a little bit of time to get on board. And then you did ask a question, which I know that we were at your conference recently, and we've been talking about this for quite some time, but we certainly believe that when we add this expanded indication that the proverbial one plus one might be greater than two at the end of the day. Obviously, we're excited about this. This came from the national sales meeting. A lot of momentum and excitement around IGE coming, and so we look forward to getting the approval and moving forward.

To that end, the underlying etiology here is really the largest overall segment is the adult focal population, and the generalized population breaks out in about 60% focal, about 40% generalized. The biggest of the generalized segments is the idiopathic generalized epilepsy segment, which is what Nautilus is focused on here, and it's about half of that generalized population is the IGE population. So a significant patient segment here that importantly does not have any other approved device indications today, one, two, has an abbreviated diagnostic pathway. They don't require the specific localization of the seizure site through Phase II testing because it's a generalized seizure, and so they don't need that specific testing. And we know there are patients out there who today don't feel like they have any other options. And so when we think about the potential for adoption dynamics, there will be things, as you point out, at the start that we need to work our way through that will take a little bit of time. But as we do so, we think the dynamics around the idiopathic generalized population, what we can bring to patients that they have nothing for today, and the timeline associated with being able to have patients you know, go through the treatment and workup protocol can also be shorter than in the adult focal population today. So we like the adoption dynamics associated with IGE, and there'll be some upfront work for us to do. But we think as we work our way through that, this is a meaningful opportunity for us.

Got it. That's a great color. I appreciate that. And then maybe just as a quick follow-up for Patrick, heard the comment about less EBITDA in first half and that ramping really through the back half. Any other finer points you can put on that to kind of get us in the right spot for Q1 adjusted EBITDA?

No, I think, you know, we provided obviously a retrospective or historical view because we've got a couple of moving parts, right, continuing operations that we anticipate will happen starting in Q1. So definitely look at Table 1 to update your models for 2025. And then for 2026, you can refer to Table 2. We did not break that out quarterly. There will be a little bit of front-end loading on some of the OpEx. If I kind of looked at it from a first half to second half, you know, a little greater than 50% in the first half, which is why we're seeing adjusted EBITDA go more negative, we'll call it, in the first half, and then it'll pick up in the second half. Again, I think you see that we can demonstrate leverage here. We are making a deliberate decision to really lean into investments here, especially on our commercial programming, marketing, sales, headcount, et cetera. And so that's probably the best I can give you in terms of just direction, and that should get the models in check pretty well.

Perfect. Helpful. Thanks again, guys.

Your next question comes from the line of Mike Kretke with Learing Partners. Your line is open.

Hi, everyone. Thanks for taking our questions. Congrats on all the progress and the FDA accepting your IGE filing for review. Maybe to start, can you provide, can you add any additional color just on the magnitude of pricing impact on R&S growth in the fourth quarter? Is that similar to what you've seen historically? And how much of an impact are you expecting that to have on R&S growth for 2026?

It's a great question, Mike. I would point to over the past several years we have consistently taken low to mid single digit pricing increases annually and I think the gross margin profile of the RNS platform in particular is now in the low 80% and that's really been a combination of that disciplined pricing as well as then the volume of the increase in manufacturing and so we're really pleased with the way With discipline, we've been able to manage gross margin. And to your question specifically in Q4, there wasn't anything outstanding there that's different than what we've seen over time with pricing. And we really see the vast preponderance of the growth that we're experiencing associated with initial implants of the RNS system and primarily in our level four centers. Pricing approach has been a good one. It's been a collaborative one with our customers and largely in line with their increases in reimbursement and costs as well. And so we've been in good lockstep with our customers in that regard and been positive on gross margin along with the volume increases that we've seen as demand and access to RNS therapy has grown. but there wasn't anything specific or different in Q4 that contributed in an outsized fashion to the growth.

Got it. Very helpful. And maybe just a follow-up, but in terms of what you've seen from Project CARE recently, can you help frame generally how much that's contributing in terms of prescribers or factoring into some of the record numbers that you're seeing recently?

It's a great question. And I think, again, what What we're seeing is increasing numbers of prescribers and implanters and active centers. And that's coming from a combination of our level four center growth as well as then more and more growth in the referral community. The care program is a part of the growth of what we're seeing in the referral community. But we're also investing further both in our DTC as well as then in our commercial organization expansion in more of an upstream referral focus that isn't necessarily tied to care and planting centers as well. And so we really have, I think, three engines for growth here as we work to develop the market and prescribers in particular. is the ongoing growth that we see in adoption utilization in the level four centers too. It's the care specific program centers where there'll be either level three or community centers that will do implants as well as refer and then a broadening in the community for more prescribing and referring in what we'll call programming centers. And so referral more broadly with care and the the referring physicians is a nice additive component to what we're also seeing as continued good growth in adoption and utilization within the level four centers. So we're really getting it from multiple spots.

Awesome. Thanks, Joel, and see you next week.

Thank you, Mike.

Your next question comes from the line of Priya Secdeva with UBS. Your line is open.

Hi, guys. Congrats on a great quarter and a strong end to the year. Maybe the first question that I have would be just maybe if you could give us a state of the union on capacity dynamics across implanting centers. You know, what do current backlog dynamics look like? I mean, a few of the checks that we've done suggest there could be a bottleneck from a referring physician perspective. So we'd love just to hear your thoughts on that and, you know, the market more broadly and then one follow-up.

Thank you, Priya. It's a real good question. And we pay close attention to that as well. And I think I've commented previously, I'll stay in line with that, that generally when it comes to neurosurgeon capacity, when we ask, what our customers tell us is that they have capacity to handle increasing volume of device cases. And remember, for a functional neurosurgeon, the implantation of the RNS device is very well within their training and skill set, and so they can execute these procedures as part of their daily work very well. What we will see on occasion is some centers that will be booking out further within their surgical timeline But that's really the exception rather than the rule. And I think the impression I'd leave you with is there's plenty of capacity in the channel, both for prescribers to refer, for epileptologists to then work patients up and take them into case conference, and then generally with regard to patients being able to move then into surgery. And one thing I would emphasize here is just that whole flow, that flow of patients is something that we are very much focused on here and are working together with our centers. And that's something that you'll hear us refer to nurse navigators. And our nurse navigator team is something that we are investing in meaningfully. In fact, we're doubling that group of people. And what they do is work to help handhold patients through the referral process and the diagnostic process and the evaluation for surgery process that allows for efficient management and scheduling of everything that needs to happen. And so, as you know, when you think about a pipeline and you think about constraints, part of it is balancing demand and part of it is making sure things are flowing well through a pipeline. And our nurse navigator team's working closely with our field representatives and the allied health personnel in the different centers do a lot of that and are going to be doing even more of that here as we've identified that as something that can help, we believe, meaningfully move patients through that pipeline.

And if I could piggyback on the nurse navigators, it's a really important concept. You know, we're starting to talk about it more, and as Joel said, we are leaning into that one. In fact, some of these nurse navigators actually came from level four CECs where they help navigate patients on that side. So that's really a key point of getting them through the channel. And then that's why we also wanted to make sure that they were all on board coming into it at the beginning of this year in anticipation of IGE coming as we move through the year and making sure that they're in place and we've got the ability to move patients in as quickly as possible.

Okay, great. That was super helpful. Would just love to touch on the seizure IDE opportunity and kind of the logistics behind it. You know, is it a platform that physicians will have to pay a subscription for? Is it something automatically implemented into their in-house softwares? And what, if anything, from a clinic efficiency perspective is baked into the guidance today? Thanks so much.

That's a great question, Priya. And the seizure IDE capability, the ability to access that product is something that will come along with people's use and implantation of the RNS system. It's a software capability that will be part of what we provide to customers. And our interest here is really with regard to efficiency and ease of use that allows clinicians to manage the patient the rns patients that they have in their practice even more effectively and as time efficiently as possible so what what seizure id does is it identifies the highly likely seizure activity and then presents that efficiently so that clinicians don't have to spend as much time reviewing all of the data that's available and can spend more time focused on the data that's most likely to result in an action. And so our interest here is in being able to show people how they can have more and more patients, RNS patients, as part of their practices because they can get a significant amount of data, but they only need to review and interact with the most important parts of that data. and the data that's going to result in opportunities for them to treat patients better. And so our interest is to make that available by way of then encouraging more and more patients to be able to be treated with RNS systems and RNS implantation. Does that answer your question, Priya?

Yes, thanks so much.

Great. Thank you.

Your next question comes from the line of Yi Chen with HSC Winwright. Your line is open.

Hi. This is Eduardo on for Yi. I was hoping if I could maybe I'll follow up briefly on the IgE. I'm curious if there's any significant biological differences in the IEEG readings compared to focal epilepsy that could make continuous improvements more challenging. I know that, you know, something really promising about the technology is how you see that year-over-year physicians continuously improve, recognizing, and hopefully all these software improvements will improve that. I'm curious if there's a meaningful difference in the capabilities to improve for IGE versus focal.

It's a great question. And of course, the underlying electrophysiology is different. So with a focal patient, you have focal region of bad actor activity that then either causes seizures to propagate or multiple sites that cause seizures to propagate from that original nidus of seizure activity with regard to generalized seizures they are such as the name indicates seizures that happen everywhere all at once and are rapidly propagating all over the brain and so the ability to recognize those seizures and then tailor both implantation techniques as well as detection parameters and therapy parameters are different. What we have found, and this is what it was important in Nautilus to learn, is that we can in fact implant our electrodes in the network, the thalamus, the specific anatomic locations in the thalamus. We can in fact detect the seizures. We can, in fact, safely deliver the therapy. And so, you know, sometimes people will immediately go to the efficacy results associated with a new indication. That's appropriate. We're also very interested in those things. But one of the things that I think we've shown here with the safety and therapy profile is that you can safely and reproducibly treat idiopathic generalized epilepsy patients with the RNS system. And then one of the other unique aspects of the system is our ability to individually tailor therapy. So we know that we can detect and record and analyze idiopathic generalized epilepsy seizures similarly to the way that we do with focal patients. And then we have the ability to, again, update adapt and tailor both detection as well as therapy in these patients. And so we expect, we'll learn about it because our data only goes out as far as our data goes so far. But what we've seen in the 12 and 18 month data and what we've seen in the early 24 month data, we'll see what more we learn.

And of course, we would plan to follow these patients longer term in a post-approval environment as well, is that we expect that both the

tailoring of therapy over time for individualized patients will result in their individual improvement. When they see that improvement, the neuroplasticity and kind of the reverse remodeling of seizure activity would occur similarly in patients' brains who have generalized seizure activity. And then the longer that they're in that state, the more and more they improve. So long way around towards saying we think the fundamental underlying parameters of the therapy and the technology apply to treating idiopathic patients and the improvements that we would expect to see, even though the underlying electrophysiology is different.

Yeah, I would encourage everyone to answer that question if you want to see some data. On our website, we posted the latest investor relations deck, and slide 12, 13, and 14 get into some discrete details and As Joel said, you'll see there in our post-approval study for adult focal epilepsy, the progress we've made in, you know, years one, two, and three. And we're showing a 77% median seizure reduction at 18 months with our Nautilus for IGE. And that is certainly well above the original adult and then, you know, pretty far above the adult focal PAS. So, again, look at slides 12, 13, and 14 and see the real-world data that's out there. Real-world clinical data, sorry, that's out there.

Got it. That's really helpful. And then I'm curious about any updates on the pediatrics NEST collaboration, if we should expect anything in 2026 activity in that space.

Thank you for that question, Eduardo. We are very interested in and focused on the expansion of indications into the pediatric space as well. Remember that the Nautilus study does include pediatric indication age range as well, but what we're really focused on here then when you talk about the NEST interaction is the focal pediatric population. And in that population, the approach that we've taken is we're working with NEST, which is an FDA adjacent organization, FDA, and then and then people who have generated real-world evidence for focal pediatric patients to use that real-world evidence to develop a data set that can be submitted on a meta-analysis basis to the agency. We've been doing a lot of work with FDA and NEST and investigators. That work does take some extra time, as you might imagine. When you're doing all of the protocol agreement and data analysis up front in a retrospective analysis, it takes more time to get that organized and then the actual analysis and review process can go more quickly on the back end versus in a prospective study. You start with the protocol and then you have to actually go do the whole study. And so we're not calling a specific submission time here today. But what I tell you is that there's a lot of activity going on there. We're really pleased with the level of engagement. The agency has indicated an interest in working in real-world data scenarios, and we'll keep you updated as that develops.

Thanks so much, and congrats again on the quarter end of the year. Thank you, Eduardo.

Again, if you would like to ask a question, please press star then the number one on your telephone keypad. There's no further questions. I will turn the call back over to Joel Becker, CEO, for closing remarks.

Thank you all for your time and attention today, and thank you to the team here at NeuroPace. We're really pleased with the results in Q4 and in 2025. excited about 2026 and all that is to come in what has the potential to be a transformational year for NeuroPace. Thank you very much.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.