[Management View]
NeuroPace reported record revenue of $23.5 million for Q2 2025, a 22% YoY increase driven by strong RNS system sales and broader prescriber engagement. Gross margin improved to 77.1%, supported by higher RNS volumes and manufacturing efficiencies. The company raised its full-year revenue guidance to $94-$98 million and gross margin guidance to 75%-76%. Strategic priorities include scaling the RNS system, advancing clinical trials, and developing next-generation AI-powered tools.

[Outlook]
Management remains optimistic about achieving cash flow breakeven by 2027, supported by improved debt terms and strong gross margins. The company plans to submit a PMA supplement for the NAUTILIST trial in 2025 and aims to launch its first AI-powered workflow tool as part of its next-generation RNS platform. The divestiture of Dixie Medical is expected to complete by 2026, further shifting the revenue mix toward higher-margin RNS products.

[Financial Performance]
Revenue grew 22% YoY to $23.5 million, exceeding expectations. Gross margin improved to 77.1% from 73.4% YoY, driven by favorable product mix and higher RNS average selling prices. Operating expenses grew 13%, demonstrating leverage against revenue growth. Free cash flow improved to negative $2.3 million from negative $4 million YoY. The company ended the quarter with $62.1 million in cash and short-term investments.

[Q&A Highlights]
Question 1: Can you elaborate on your FDA submission strategy for the NAUTILIST trial? Are you targeting a broad indication approval or a segmented approach?
Answer: NeuroPace plans to pursue an indication across the entire study population, citing statistically significant secondary endpoints that demonstrate clinical benefit for all patients. The company remains confident in the totality of the data.

Question 2: Gross margin came in higher than expected. Can you discuss the outlook for the second half and its impact on cash flow breakeven?
Answer: Management attributed strong gross margin performance to absorption, contracting, and pricing improvements. While guidance implies a potential deceleration, this reflects conservatism. The divestiture of Dixie Medical is expected to push gross margins toward 80% over time, aiding cash flow breakeven by 2027.

Question 3: How are implant volumes shifting with Project CARE and existing adept centers?
Answer: Project CARE contributed significantly to implant growth, with increasing engagement from community centers. Existing adept centers also showed strong implant volumes, indicating a balanced contribution from both segments.

Question 4: Has the preliminary NAUTILIST data impacted commercial momentum or focal epilepsy growth?
Answer: Management reported no negative impact, emphasizing the strength of the NAUTILIST data, particularly in secondary endpoints like seizure reduction and seizure-free days. Investigators have expressed enthusiasm for the clinical meaningfulness of the results.

Question 5: What is the timeline for pediatric market submission and approval?
Answer: NeuroPace plans to submit for pediatric indication approval in the second half of 2025, citing significant unmet needs and strong interest from pediatric epileptologists.

Question 6: How long does it take for a community center to ramp up implant volumes under Project CARE?
Answer: The ramp-up varies by center readiness. Some centers are ready immediately, while others require infrastructure or personnel adjustments. A third segment focuses on programming rather than implants, partnering with level four centers for surgical procedures.

Question 7: Can you provide updates on therapeutic partnerships and their materiality?
Answer: NeuroPace has signed agreements with UCB and extended its collaboration with Report Therapeutics. While not yet material, these partnerships leverage NeuroPace's unique dataset of 22 million recorded events, positioning the company as a leader in neurophysiology data.

[Sentiment Analysis]
Analysts expressed optimism about NeuroPace's strategic execution, particularly its ability to scale RNS system sales and leverage clinical data for regulatory and commercial success. Management maintained a confident tone, emphasizing strong operational discipline and growth potential.

[Quarterly Comparison]
| Metric | Q2 2025 | Q2 2024 | YoY Change |
|-------------------------|-----------------|-----------------|------------|
| Revenue | $23.5M | $19.3M | +22% |
| Gross Margin | 77.1% | 73.4% | +3.7% |
| Operating Expenses | $25M | $20.4M | +13% |
| Free Cash Flow | -$2.3M | -$4M | +$1.7M |
| Net Loss | -$8.7M | -$7.5M | -$1.2M |

[Risks and Concerns]
1. Regulatory uncertainty: FDA feedback on the NAUTILIST trial could impact approval timelines.
2. Revenue mix transition: The divestiture of Dixie Medical may create short-term revenue volatility.
3. Execution risks: Scaling Project CARE and launching next-generation AI tools require operational precision.

[Final Takeaway]
NeuroPace delivered a strong quarter, marked by record revenue, improved gross margins, and strategic guidance updates. The company is well-positioned to capitalize on its RNS system's growth, clinical trial advancements, and AI-driven innovation. While risks remain, particularly in regulatory and revenue mix transitions, management's confidence and operational discipline suggest a promising trajectory for long-term growth and profitability.