CG MEDTECH, DIAGNOSTICS AND DIGITAL HEALTH & SERVICES FORUM - CERIBELL INC

Good morning. My name is Bill Plovonik. I'm a Senior Medical Device Analyst here with Canaccord, and welcome to our MedTech Diagnostics and Digital Health and Services Forum. I always have to read that because it's mouthful. With us next, we have Sarah Bell. It's going to be a fireside chat with Scott Blumberg, CFO. And so I'm going to just, first of all, Scott, thanks for joining. Thanks for having us. I'll kick this off so you just delivered another 30% growth quarter and if I got hot mic and picked up it's been crazy this company has done nothing but beat and raise since the IPO and I think you've been punished at some times and finally you're not being punished which it's just been an amazing ride so far but you posted 35 net new accounts record same store utilization you know heading into what may be the most product-rich stretch since the IPO with the Delirium launch, the Omnicoming, limited release now, and a couple of software clearances. Before we really dive in here, help us understand how the vision of the company has evolved since the IPO. I mean, when it was IPO, it was seizure detection tool, and now you're becoming a broader brain monitoring platform. And not just that evolution, but as you think of the competitive landscape, who do you view as your competitors? Yeah, the basic story has not changed, but our trajectory along that journey has. For years, even before the IPO, we've laid out a multi-phase vision. The first step was becoming the standard of care for seizure detection. And then the second phase has become a comprehensive critical care brain monitor. And with the introduction of delirium, which is our second major new patient population indication, and the Omni, which was designed for multimodal brain monitoring, we're bringing that vision to life. As far as competition goes, the reality is we're bring out a tool that replaces longstanding traditions and not directly competitive with any other type of novel tool. So in seizure, the standard of care is conventional EEG, which was designed quite literally a century ago for detection of epilepsy in outpatient clinics. And for delirium, the competition is a literal survey called the CAM-ICU that nurses fill out and ask the patient to engage. So what we're doing is bringing diagnostics, bringing rapid diagnostics using a device, overlaying AI, bringing continuous monitoring to a group of patients who've never really had that in any way, shape, or form. All right. We're going to start off with the core business utilization here. So you cited record double-digit year-over-year same-store utilization growth, and you said that you've expanded into more departments year-to-date than all of 2025. Which parts of the playbook, department expansion, physician engagement, protocolization, are doing the most work? And how much runway is left, given your top accounts monitor roughly three times the number of patients in the average account? Those are the three core strategies, absent things like delirium, where we're overlaying new technologies into the install base. And they all are contributors. I think we called out specifically department expansion this year because it was a bit more of a contributor relative to the other two than it was last year. And so what we said is in 2026, we've expanded to more departments in the first three quarters than we did in all of 2025. So you can see the acceleration there. We've also really kind of gone back to basics as we've extended the TACAM team and they've become more mature. we've really doubled down on the core provider engagement, making sure all doctors are trained, making sure that workflows are identified, new patient populations are brought into the fold, and they've all been meaningful. And this has been, over the last two quarters, probably the biggest step forward we've seen in same-store growth since our IPO. We saw positive momentum in Q2, and then the first quarter of double-digit percent utilization growth in Q3. So it's all working. On that topic, I mean, I've been doing this longer than I care to admit, but I don't think I've ever seen a company post-IPO add accounts, and the bigger the account base gets, see utilization per account go up. It's just a lot of large numbers, And typically, each incremental account is lower utilization. So, but this quarter, you know, we had the headband sold per active account was 50.4. That's our math. That was only up 7% year over year. You said it was double digit. How much, you Know, the purchases ran ahead. I mean, how much of a shift did that in kind of what would that have been normalized if it was 10, you Now, a double digit number, it's more like 51, 52. Yeah, I think that's the way to think about it. We run the entire business on literal usage. Because our device is cloud-enabled, unlike a lot of medical devices, we know actually when it's being used with precision. And so we use that for our internal analytics. We use that für our compensation of our team. And when we said double-digit, we're talking about actual usage. Customers buy and use at different rates. They tend to buy more than they use because they need a stock inventory. It was a little bit relative to the usage lower in in Q3, we didn't think the magnitude to give you a kind of an idea of the magnitude we didn' think the Magnitude was sufficient to make a proactive comment but you know you're smart you did the math and you saw 7% isn't double digit and so that that is the difference between you know seven and low double digit is the purchasing patterns. the purchasing patterns. As far as our guide for Q4, we assume that that normalizes to the level we've seen historically, but does not recorrect to account for the difference we saw in Q3. Gotcha. And then, you know, one of the big kind of thesis going into the year was just all the reps that were added, and they're going to start kind of gaining traction and contributing. On that topic, you had a record number of new accounts. How do we think about the cadence of account ads going forward it's it's at is it maintain this record number does it accelerate beyond that record number is the rest of this uh the the rep become product more efficient how do we think about it we haven't given a specific guide but i think there's reasons to believe in acceleration i think the two the two things that drive account ads is first the The investment we had in the sales org at the time of IPO, we've said generally you see some productivity at year one, max productivity at year two, meaning the max number of accounts they had in any given time period. That investment took about a year. And so we're now at the phase where the front of the investment kind of cycle is hitting two years and the back is hitting one year. And so as you age into next year, you kind of that ship sales and most of the folks hit their kind of max productivity. You take that, you overlay the strategic account management function, which is something we built this year, starting in Q1, which is a team focused on regional health systems top-down to support the bottom-up efforts of the hospitals, and they're pushing bigger deals through the pipeline. Now, they haven't come out of the other end of the pipeline yet, and so we still are tracking that to ensure that that continues to evolve as expected, but both of those, I think, are reasons to believe that our new ads next year will be higher than what we added this year. And how do we think about that on the strategic accounts? You know, when they come in, like, today, what's a typical new account ad look like? Is it onesies, twosies? And then, you know, how many systems would you place type of deal versus one of these strategic accounts. How should we think of the scale difference? The strategic account management function is meant to replicate what we've seen our best reps do. In most cases, we start at the account level and we get a hospital to sign on board. And an average rep might take that success and then go to the next hospital and then go tothe next hospital, and then the nexthospital. What we saw our best reps do along the past four or five years is they would get one or two proof points and then they would go to administration and say, look how well it's working at hospital A and hospital B. You've got seven other hospitals in the system. Why don't we adopt broadly across all the hospitals? becomes harder and harder to do with more territories and fragmentation of the health systems across multiple territories. So that's what we're trying to replicate. The reps who did that effectively are the, you know, the two standard deviation to the right reps who are more productive than other folks. And so we're tying to create that quarterbacking function to try to bite off more accounts at once. And, so, ultimately, the way it would translate is more ads. Is there a risk of a slowdown in new account ads? Because maybe if you're going one to one to one, you kind of get a cadence, but if all of a sudden you do one or two and then you try to add five, get through an admin of a hospital may take longer than if you were trying to just do a one or a two at a time. Has that been contemplated? I think it's possible on an individual system level. I would say, first of all, the reps are still knocking on every door, right so we're not giving up on that but uh and and that effort is spread so i think over the course of a quarter a year etc you know while we may you know if the question is would i rather take two deals now or five deals two months from now the answer is obviously five deals two months for now um sometimes we make those decisions but um i don't think at broad scale it'll result in a slowdown it sounds like they're parallel paths like the local reps still working and the SAMs are just layered on top doing their thing. Okay. And then you mentioned that commercial infrastructure is now set and Delirium is going to be sold, will be sold through the existing CAMs and TMs. Does that mean no meaningful headcount additions in 2027? How do we think about scaling the organization from here? We've done a lot of investing this year. On the CAM side, not only do we invest to accommodate the larger account base that we've built this year, but we've also narrowed span of control a little bit across the CAM infrastructure, meaning they manage fewer accounts. And we did that specifically with the Delirium launch in mind. It's the same people, but there is an effort required to launch the account, so we wanted to ensure that capacity was never an inhibitor. I think there will certainly be some level of growth as we continue to grow the account base on the CAM side. As far as broader investments go, we've got a huge amount of opportunity, but we also have a very clear mission that we're committed to of achieving cash flow break-even with cash on hand. And so we're continuously monitoring our spend to ensure we're balancing driving growth and capturing opportunity in front of us with making sure control our own destiny and i i wanted to take a step back and and again ask the question to try to clarify so you know your typical on average if you go in and open one hospital like how many systems would you place in one hospital or you know i guess the 50 units per active account would be the answer so it does it matter how many systems and departments you get into or is it always land and expand you start in one department go into others and kind of build over time and so you know is it truly oh instead of one it's five so it could be like exponential growth for a little while as these sam's uh you know contracts start kicking in uh as far as account placements go or uh we tend to believe that for an average size account two recorders is sufficient for a department. We will pursue, you know, our two biggest departments are the ICU and the ED. Larger hospitals might have specialized ICUs, step-down unit, floor, things like that, but those are the core two. We increasingly aim to try to launch broadly across both the ICU and ED from day one. In cases where that's not feasible or results in a material delay, we'll take one and then the cam will go back and try to expand. But, you know, we do keep placing more recorders. That comes with a cost increase. It's about $500 per month for additional recorders That said, we also appreciate that 75% of our revenue is selling headbands and the recorders are the conduit to headbands. We try to make it as easy as possible and reduce friction to acquire hospitals. I don't really see the strategic account changing that. That's really more about number of accounts versus number of departments. The departments is really driven by the launch team, which is still done by the TM and CAM in connection. And how should we think about the VA opportunity given, you know, we just ended the fiscal year. You know, this has been an opportunity for a while, but how does that, how should we think about it and the ramp on that? It's fairly similar to, 27 is fairly similar to 26 in terms of what we did and what we expect. So in 25, the federal fiscal year is October to September, so we secured a purchase order in September, which translated into launches Q4, Q1, Q2, with the greatest concentration happening in Q1. and we secured a similar size purchase order this September and I expect a similar rollout. The way I think about it in terms of the account progression is you saw our account ads in the mid-20s throughout most of 2025 and that jumped to low to mid-30s throughout the course of this year. Earlier this year, that jump was largely driven by the VA overlay because the reps hadn't matured yet. As you moved into this year now, most of the jump from mid- 20s to mid 30s is driven by maturation of the sales force so it potentially creates an overlay on top of our kind of innate productivity that'll roll in over a couple quarters and then we'll go back hopefully for the next cohort next fiscal year excellent i'm going to shift over to delirium you've now kind of announced that you're offering that as a free software add-on exchange for program commitments in in those it's interesting i don't know if i've ever seen your the commentary was program commitment but not a dollar commitment on the contract so you're committing them for training and different types of things what specifically are you looking out of them in terms of KPIs and how do you keep them honest if it's not a dollar commitment yeah you know the decision to approach that was one that we went into the pilot without a bias on and what we saw in the pilot was number one, that it did take some work to get folks educated, get everybody together, train them, design workflows, but that when that work was done properly, we saw a usage impact that was consistent across the significant majority of accounts and now sustained out three to four months for the earliest adopters. And so from there, you do simple math, which is do you slow things down via requiring a kind of lengthy contracting process as we've done by necessity with neonate and capture an additional revenue stream, or do you turn people on as quickly as possible and capture the usage impact more quickly? And the math suggests that the better approach is to reduce the barrier. How do we keep them honest? Ultimately, as you point out, there is no specific thing that says you have to use X, Y, and Z headbands. But in the pilot, but at least we've seen that those program commitments do translate. We'll continue to monitor it and see how that operates at scale when the launch is controlled by dozens of reps in the field versus a small, I think there were two sample regions as well as a decent amount of corporate involvement in the pilot. If that holds, we'll hold steady. If it changes, we will change our strategy. I think competitively though, I mean, the more things you're measuring, it just becomes that much more difficult for anybody to come into the market behind you. Yeah, I think that's right. There's, you know, there is no technology that monitors delirium that we're aware of other than us. So the pilot for deliriums showed a material durable increase in the headband utilization. How do we think about that? Like, what is that another 25% driver, another 25% driver, 50%? I think we asked the question when we were talking post-conference call of, you've given us a TAM for delirium, but how do we think about that in conjunction with seizure? Like, how much is overlapping versus incremental? Yeah, I think the street does not contemplate material, if any, contribution from deliriums. So the impact should be over and above the models that the street has. As far as quantifying it, we have committed to doing so in 2027. I think it would be irresponsible to do now because we did see a consistent enough usage pattern within the pilot to drive our commentary as well as our decision around the business model, but it is a small number of accounts and it was pretty centrally controlled. So I'd really like to see in the first few months of launch here how that translates at scale with the commercial org, but I know you needed to build your model and we're committed to helping you, just not quite yet. Well, I like it when you don't put it in. I prefer the upside. So NTAP went into effect October 1 for delirium, an extra almost 2,200 per patient. What's been the reaction from hospitals? I mean, you're not charging extra for it. Very little has come to my attention yet. It's only been a month. It's been a couple weeks on the launch and a month on the deliriums. I would think that one question that investors had coming into the October was, does the expiration of the status, NTAP, create some level of friction? I didn't hear that either. NTAP formerly an investor, I didn' fully understand that program when I was an investor. And it only applies to negative charge Medicare patients. So patients who are covered with Medicare and are the hospitals upside down on the patient. So I view it more as an insurance policy, and so I think it's more effective, it's been more effective for us in communicating with customers on the front end around adopting our technology as an assurance policy in addition to the core value that they expect to see on transfer reduction and length of stay reduction and unnecessary medication reduction and identifying seizure patients and getting appropriately reimbursed for those patients. So it has absolutely been valuable to us, but I don't think it's been as simple as it is directly tied to usage. And I'm gonna take a step back here. Just as you think about where you are, I mean, you're basically a new standard of care and you're penetrating the market. So we're in a land grab stage. You don't really have competition. Where are we in the land grab state? Like if you think about here's the number of facilities we're in here's, the number penetration, Like, where are we today in that whole cycle? So we're in 747 hospitals, and there are roughly 6,000 hospitals in the US with an ICU and ED that we view as potential customers, so about 12 or 13% there. Within that, though, there's embedded the patients, right? And much of what we do is not convert people from conventional EEG to cerebellar EEG. We enable use of point-of-care EEG on patients So a lot of what we do is create a market out of nothing right the treat these patients empirically or otherwise. And our best guess it's very hard to estimate this because it's not like there's data on procedures, but our best guesses within those 747 hospital hospitals were roughly a third penetrated. but our best guess is within those 747 hospitals were roughly a third penetrated. And so when you take those two together, right, a third and 12% or 13%, we're about 4% of the market. You can multiply the two together. I'm going to ask about sepsis, then I'm gonna move over to Omni in the last couple of minutes here. But sepsIS looks like a big new population. You talked about it. Which care areas are you prioritizing first? And what will you share on delirium with 20? Well, we already talked about that. which care areas are you prioritizing? Yes, sepsis is super interesting because it's an area where there's significant risk of both seizure and delirium, but the level of awareness of seizure is lower than it should be. People don't generally think about sepsIS as a neurological condition, but the data shows that 20 or 30 percent of the time when a sepsi patient is altered, they have seizure and that those patients should be monitored. At the same time, we've seen fairly low penetration within sepsis of our seizure technology as a standalone. So sepsIS is one of the key patient populations we're presenting and educating customers on around delirium. There's greater awareness of deliriums and sepsIs than there is seizure. But the hope is that they get more value because they're going to find those seizure patients that they didn't know they were looking for, and they're gonna find deliriam. That'll reinforce the value prop, and it's a huge patient population. So that's one of the lead things when we say, hey, we work with customers for programmatic commitments. Part of that commitment is to identify patients on which you should be monitoring for delirium and also seizure. And now let's talk about Omni. What was the driver behind the development of Omni and, you know, the incremental capabilities it brings? and what has been the response thus far in your piloting of that product? So Omni has been in the works for many years, and the goal is to serve two purposes beyond our current purpose. Our current purpose is point-of-care rapid EEG, which we serve very, very well. Where Omni allows us to enter is both conventional EEG that's not served by point-off-care EEG and comprehensive brain monitoring. It's got a number of features, including the ability to operate while plugged in, i.e., longer duration or, you know, infinite duration effectively from a battery perspective, monitoring, video. It's kind of an added-on headband that covers the top of the head that clips onto our current headband, connects with other vital signs like EKG. It's Got a bigger screen that allows side-by-side presentation of delirium and seizure and other indications. So it's designed for both of those purposes. As far as feedback goes, we are launching an innovation pilot this quarter. So we've only shared the device with physicians kind of under NDA, and the feedback's been really, really positive, and especially amongst neurologists who have a 100-year history with conventional EEG, and ours is different. So now we're creating some features that allow us to bridge that gap. We are imminently going to share the technology at an upcoming conference with the market, and we'll see a broad scale of the buzz, but we're really excited about it. When and where is that conference? That's AES in December. All right. Do you know where it is? I do not. It moves around. It moves round. And how will Omni impact gross margins, operating margins, free cash flow? if you have a bigger system, I imagine it's a bigger price point. Yeah, how should we think about that? Yeah, Omni will be a higher COGS even at scale, right? We'll get it down over time. I think the two things that we have not decided yet which are going to inform that question is, number one, what's our pricing model? And number two, what does that COGS get to at scale? And we'll look at both of those. But I will point out that currently our recorder is embedded in our subscription cost, which is 96, 97% gross margin. And so we, you know, it's a fairly small portion of our cogs. And thus, we don't expect it to significantly change our gross margin profile as a company. All right, so your CFO, I'm gonna end with a financial question. You ended with about 117 118 million in cash, you got some debt capacity, you just read it earlier, your confidence and reaching cash flow breakeven with that, how much cushion does it give you and what's the right timeframe for breakeaven? I think it's one of the thing, we've seen the latest litigation, we've see, you haven't really seen a lot of leverage in the P&L, so the one kind of missing component here is just when do we see the leverage? Yeah, and we're literally going through our budget plot process right now and I appreciate that the street is curious about that question. I can tell you internally, I've run it every which way and we feel very confident in our position. I think we are looking at how to be a little more helpful to you as we move into next year to understand timing a little better, but not quite ready for that conversation yet. All right, I think we're definitely out of time here. Thank you very much. Thank you, very much, Bill.