NeuroPace(US:NPCE)2022-05-14 02:47Financial Data and Key Metrics Changes - NeuroPace generated total revenue of $11.4 million for Q1 2022, compared to $11.2 million in Q1 2021, indicating a slight growth [23] - Initial implant revenue was $8.8 million in Q1 2022, up from $8.1 million in Q1 2021, reflecting an increase in unit sales [23] - Replacement implant revenue decreased to $2.6 million in Q1 2022 from $3.1 million in Q1 2021, with expectations for continued decline due to the transition to a longer-lasting battery model [24][30] - Gross margin for Q1 2022 was 73%, down from 76% in Q1 2021, primarily due to increased indirect labor costs and reduced production volume [25] - Total operating expenses rose to $18 million in Q1 2022 from $12.4 million in the same period of the prior year [26] - Net loss for Q1 2022 was $11.5 million, compared to $8.8 million in Q1 2021 [29] Business Line Data and Key Metrics Changes - The company experienced significant business disruption in January and early February 2022 due to the Omicron variant, but saw a recovery in procedure volumes in March [8][9] - The number of patients coming through epilepsy monitoring units (EMUs) largely returned to 2021 levels in March, although the reduced patient flow in the first half of Q1 is expected to limit RNS System implants in Q2 [10][11] Market Data and Key Metrics Changes - The company anticipates a growing backlog of patients at EMUs due to recent disruptions and the longer-term impacts of the COVID-19 pandemic [11] - The company expects to meet its 2022 revenue guidance of $45 million to $48 million, assuming no further COVID disruptions [30] Company Strategy and Development Direction - NeuroPace is focused on increasing the number of centers implanting the RNS System and enhancing utilization within those centers [12] - The company plans to educate epilepsy specialists outside of Level 4 centers to expand market opportunities [13] - The company is resuming in-person physician education events and increasing marketing efforts to generate demand [14][15] - The NAUTILUS pivotal trial is set to begin mid-year 2022 to support a PMA supplement for expanding indications to include primary generalized epilepsy [15][18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of EMU volumes and the potential for growth in patient implants as the backlog is addressed [39] - The company is making strategic investments in commercial initiatives and field team expansion to drive growth [62] - Management reiterated the importance of controlling growth factors within their influence, independent of EMU patient volumes [84] Other Important Information - The company expects replacement revenue for 2022 to be approximately $6 million, with gross margin anticipated to remain in the mid-70% range [30][31] - The company has purchased components earlier to mitigate potential supply chain risks, but is not currently experiencing supply chain disruptions [59] Q&A Session Summary Question: Can you provide more color on revenue cadence for the year? - Management is pleased with the recovery from Q1 challenges and maintains the $45 million to $48 million guidance, anticipating continued growth in initial implant revenue [36][39] Question: How much of the headwind staffing is in the EMU relative to lower patient volumes due to COVID? - Staffing challenges exacerbated by the Omicron variant impacted the ability to treat patients and schedule procedures [41][42] Question: Are you signaling that Q2 initial implants will be flat or down sequentially? - Management did not provide specific Q2 guidance but indicated that the impact of EMU processes in Q1 would affect the start of Q2 [47][48] Question: Can you remind us how long the NAUTILUS study will take to enroll? - The NAUTILUS study is expected to start enrollment around mid-year 2022, requiring about 100 patients for a one-year follow-up [49][50] Question: How are you thinking about pricing for your devices? - The company is implementing a low single-digit price increase throughout the year, with more impact expected in 2023 [87]