NeuroPace raises 2025 revenue and gross margin guidance amid record RNS growth and DIXI wind-down

Earnings Call Insights: NeuroPace (NPCE) Q3 2025

MANAGEMENT VIEW

* CEO Joel Becker stated the third quarter delivered record results for NeuroPace, with total revenue reaching $27.4 million, representing 30% year-over-year growth. Becker indicated, "RNS initial implants drove RNS revenue of $22.6 million and 31% year-over-year growth." He cited broad-based RNS growth across geographies, accounts, and prescribers, with all sales regions surpassing planned sales. Becker emphasized, "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."
* Becker highlighted the company's achievement of positive adjusted EBITDA for the first time in its history. He also announced an increase in full year revenue and gross margin guidance, now expecting revenue in the range of $97 million to $98 million, up from previous guidance of $94 million to $98 million.
* On the clinical front, Becker reported completion of a pre-submission meeting with the FDA for NAUTILUS, targeting a PMA supplement submission before year-end. He also discussed delays in the pediatric indication pathway, noting the submission timing will now extend beyond 2025.
* Becker highlighted growing scientific recognition for the RNS System and described the convergence of AI, neuroimaging, and domain expertise as "creating an environment for the potential of accelerated adoption of closed-loop personalized neuromodulation."
* CFO Patrick Williams remarked, "The strength of the product, the commitment of the team and the sheer scale of opportunity still ahead is now much clearer to me and makes me even more optimistic." Williams noted that DIXI sales ended on September 30, with a wind-down period through Q1 2026, but "we currently believe we will be substantially done with DIXI sales by the end of 2025."

OUTLOOK

* The company raised its full year revenue guidance to $97 million to $98 million, representing 21% to 23% year-over-year growth, and increased its gross margin guidance to 76% to 77%, up from the previous range of 75% to 76%. Management expects RNS System revenue in Q4 to be $20 million to $21 million, and gross margin in 2026 to be greater than 80% as DIXI exits the mix.
* Becker stated, "Our timeline and plans remain on track to submit the PMA supplement for NAUTILUS before year-end." For the pediatric indication, submission will extend beyond 2025.

FINANCIAL RESULTS

* RNS System sales totaled $22.6 million in Q3 2025, with DIXI sales at approximately $4 million. Research service revenue contributed around $770,000. Total company gross margin was 77.4%. Operating expenses were $23.8 million, with stock-based compensation at $2.6 million.
* Loss from operations was $2.6 million, net loss was $3.5 million, and free cash flow stood at negative $2 million. Adjusted EBITDA was a positive $0.1 million, and cash/short-term investments at quarter-end were $60 million.
* The company reiterated that as DIXI sales wind down, revenue and margins will increasingly reflect the RNS System's performance.

Q&A

* Rohin Patel, JPMorgan: Asked about growth outlook for 2026 and key assumptions as DIXI revenues phase out. CEO Becker responded that 20%+ growth in the RNS core business remains the foundation and that "substantially all of the DIXI revenue will be complete here at the end of 2025."
* Patel followed up on data partnerships, asking for milestones or proof points to watch. Becker replied that partnerships are ramping, with reference to Rapport and UCB, and that "the ability to uniquely monitor, record, analyze, and then tailor therapy is really at the foundation."
* Priya Sachdeva, UBS: Queried about implied Q4 guidance and momentum. Becker explained that DIXI's wind-down is the primary factor for the Q4 guidance dynamics, but RNS is "off to a solid start" in October. Sachdeva also sought clarity on the NAUTILUS PMA timing; Becker confirmed submission before year-end, with a typical 180-day review period.
* Michael Kratky, Leerink: Asked about gross margin dynamics and Seizure ID's revenue impact. CFO Williams attributed any gross margin variability to DIXI mix and reiterated, "as we move into 2026 and we are an RNS business, you should be modeling a gross margin that's 80% at a minimum."
* Simran (for Vik Chopra, Wells Fargo): Asked if 80% gross margin is a fair baseline for 2026; Becker agreed, with the caveat of any residual DIXI sales.
* Frank Takkinen, Lake Street: Inquired about NAUTILUS data and off-label use, as well as the drivers of growth. Becker said business performance showed "nothing unusual in the quarter" related to off-label use and described growth as a combination of market expansion and market share gains.
* Ross Osborn, Cantor Fitzgerald: Asked about IGE label and pediatric data requirements. Becker confirmed submission for the entire NAUTILUS study population and described the real-world evidence approach for pediatrics, emphasizing protocol alignment rather than new data generation.
* Paige Chamberlain, Wolfe Research: Probed Project CARE expansion targets and progress. Becker stated, "Our plans for CARE for this year are very much on track," and clarified that the company is "still in the early days of the penetration of that group."

SENTIMENT ANALYSIS

* Analysts raised questions about Q4 guidance, DIXI wind-down, margin durability, and the pace of indication expansion, reflecting a neutral to slightly positive sentiment, with repeated congratulations on quarterly performance. There was some focus on reconciling guidance with current momentum and on quantifying market expansion initiatives.
* Management maintained a positive and confident tone throughout, especially in prepared remarks, using phrases such as "we remain confident" and "we are proud of this achievement." During Q&A, responses remained consistent and transparent, with some caution regarding guidance and timelines. The tone was more upbeat and assured compared to the previous quarter, reflecting strengthened conviction following record results.
* Compared to the previous quarter, management's tone was more assertive on growth targets, while analysts maintained a similar mix of cautious inquiry and recognition of execution.

QUARTER-OVER-QUARTER COMPARISON

* The current quarter saw a substantial increase in revenue growth rate (30% year-over-year) compared to the previous quarter's 22% growth. Total revenue and RNS revenue both reached new highs, with greater operating leverage evidenced by positive adjusted EBITDA for the first time.
* Guidance was raised for both revenue and gross margin, compared to the previous quarter's incremental increases. The DIXI wind-down timeline was reaffirmed, with more explicit expectations for minimal DIXI contribution after 2025.
* Management's confidence was elevated, emphasizing the scalability of the business, the approaching PMA submission for NAUTILUS, and the convergence of AI, data, and clinical maturity.
* Analysts' questions continued to center on growth sustainability, margin trajectory, and the impact of new indications, showing little change in tone from the prior quarter.

RISKS AND CONCERNS

* Management flagged the longer-than-expected timeline for the pediatric indication, stating, "timing for submission will extend beyond 2025."
* The exit from DIXI sales presents a revenue mix shift, but management underscored minimal inventory risk due to contractual arrangements for sell-back.
* Analysts questioned the sustainability of growth as DIXI revenue phases out, and sought clarity on market expansion progress and the timing of new indication approvals.

FINAL TAKEAWAY

NeuroPace management conveyed that Q3 2025 marked a pivotal quarter with record revenue, strong RNS growth, and the achievement of positive adjusted EBITDA. The company increased its full year revenue and gross margin guidance, reaffirmed the wind-down of DIXI sales by year-end, and highlighted advancing regulatory milestones for NAUTILUS and pediatric indications. Management stressed the expanding recognition of RNS's differentiated technology and its positioning for sustained 20%+ growth in the core business, supported by strong execution, data-driven innovation, and a robust balance sheet.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/npce/earnings/transcripts]

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