NeuroPace — Third Quarter 2026 Earnings Summary

Financial Performance:

• Total revenue for Q3 2026 was $23.1 million, a 1.1% decline compared to $23.4 million in Q3 2025.
• RNS System revenue was $22.9 million, representing 1.4% growth year-over-year compared to Q3 2025.
• GAAP net loss was $3.3 million, an improvement from a $4.9 million net loss in Q3 2025.
• Non-GAAP net loss was $0.9 million, compared to a $2.3 million non-GAAP net loss in Q3 2025.
• Non-GAAP operating income was $0.4 million, compared to a $1.4 million loss in Q3 2025.
• Non-GAAP gross margin was 84.8%, up from 82.8% in Q3 2025, driven by improved labor absorption.
• Non-GAAP operating expenses were $19.2 million, down from $20.7 million in Q3 2025.
• Non-GAAP sales and marketing expense was $10.5 million, down from $11.2 million in Q3 2025, primarily due to decreased personnel-related expenses.
• Non-GAAP research and development expense was $5.5 million, down from $5.8 million in Q3 2025, driven by lower personnel expenses and reduced NIH grant funds.
• Non-GAAP general and administrative expense was $3.2 million, down from $3.7 million in Q3 2025, due to decreased variable compensation.
• Cash, cash equivalents, short-term investments, and restricted cash totaled $49.5 million as of September 30, 2026, down from $51.9 million at the end of the prior quarter.
• Long-term borrowings were $59.2 million as of September 30, 2026.
• GAAP operating expenses for the nine months ended September 30, 2026, were $69.2 million compared to $69.5 million in the prior year period.

Guidance and Future Outlook:

• Revised full-year 2026 total revenue guidance to $91 million to $92 million, representing underlying RNS growth of 10% to 11%, down from previous guidance of $99.5 million to $101.5 million.
• Revised full-year non-GAAP gross margin guidance to 83.0% to 83.5%, up from the previous range of 82.0% to 83.0%.
• Revised full-year non-GAAP operating expenses to $85 million to $86 million, down from the previous range of $90 million to $92 million; this excludes approximately $10 million in stock-based compensation.
• Revised full-year Adjusted EBITDA guidance to ($8.5) million to ($9.5) million, down from the previous range of ($7.5) million to ($8.5) million.
• Management expects fourth-quarter scheduled cases to begin recovering following isolated account-level issues and field organization changes in Q3.

Business Segments and Product Lines:

• The RNS System remains the primary revenue driver, with service revenue expected to be approximately $1 million for the full year 2026.
• Submitted a PMA-Supplement for Remote Care to the FDA, which enables physicians to program the RNS System via telehealth; the review cycle is planned for 180 days.
• Completed a Submission Issue Request (SIR) meeting with the FDA regarding the PMA supplement for idiopathic generalized epilepsy (IGE); an amendment incorporating feedback is expected to be submitted around year-end.
• Initiated enrollment in the AURORA real-world evidence study to support expansion of the RNS System indication to adolescents aged 12–17 with drug-resistant focal epilepsy; data collection is expected to complete in early 2027.
• Continued development of ECoG Assistant, broader AI programs, and the next-generation platform to extend reach to new patient populations.

Market and Competitive Landscape:

• Management cited ongoing demand for RNS therapy, compelling clinical outcomes, and a substantial opportunity within the current indication.
• The company aims to address travel and geographic barriers limiting access to RNS therapy, particularly for patients living far from epilepsy centers.
• The DIXI Medical product operations are presented as discontinued operations and are excluded from the financial results discussed.

Risks and Challenges:

• Q3 revenue was below expectations due to isolated account-level issues and disruptions from changes to the field organization.
• Risks include potential operating expenses higher than anticipated, gross margins lower than forecast, and reliance on third-party suppliers and vendors.
• Regulatory risks exist regarding the timing and approval of submissions for indication expansion (IGE, AURORA, Remote Care) and product development.
• Market acceptance and adoption of the RNS System, along with pricing and reimbursement availability, remain key uncertainties.

Management Commentary and Tone:

• Joel Becker, President and CEO, acknowledged Q3 revenue was below expectations but expressed confidence in the business returning to historical growth rates.
• Management emphasized a focus on improving commercial execution, deeper customer engagement, and translating the substantial opportunity in the core business into consistent growth.
• The tone regarding the innovation pipeline was positive, describing it as one of the most significant opportunities for substantial long-term growth.

Other Key Points:

• The company hosts a conference call on November 12, 2026, to discuss results, with a webcast available at the investor relations website.
• The press release includes detailed GAAP to Non-GAAP reconciliations for the three and nine months ended September 30, 2026, and 2025.
• Forward-looking statements are subject to risks including actual operating results differing from guidance and uncertainties related to market acceptance.