NeuroPace, Inc. (NASDAQ:NPCE) Q4 2022 Earnings Call Transcript

Operator: And thank you and one moment for our next question. And our next question comes from Robbie Marcus from JPMorgan. Your line is now open.

Allen Gong: This is Allen on for Robbie. I had a quick one just on the trends you’re seeing in the first quarter. It sounds like you’re seeing some good stability, but just curious to see what you’re seeing so far in first quarter? And also just what that implies for seasonality going from 4Q to 1Q, and then through the balance of the year?

Michael Favet: Yes. What we’ve seen in the start of the first quarter has been consistent with what we’ve been seeing in the last three quarters, meaning that the epilepsy monitoring units have been normalizing over that period of time. No significant COVID-related disruptions in the epilepsy centers through the first couple of months of 2023, which extends what we saw again in the last three quarters of 2022. That puts us in a nice position to be able to focus on the share gains within the epilepsy center to be able to have those come through. And overall, I think, kind of a continuation of where we exited 2022 as we started into the first couple of months of this year.

Allen Gong: Got it. And then when we think about DIXI, it came in a little bit stronger in the fourth quarter. We were thinking for 2023 roughly around a $6 million contribution. Is that still the right way to think about it? And any kind of color on cadence you think about that as being more back-end loaded?

Michael Favet: Yes. The way that I think about the DIXI revenue, the fourth quarter was, I think, a good baseline for where we expect revenue for that business going forward. There’s, I would say, some growth potential. There is growth potential that’s associated with it. But I would think about it as being able to build off of the $1.6 million of revenue that we had in the fourth quarter. There wasn’t anything that was abnormal about the fourth quarter, meaning it wasn’t a stocking quarter, it was a continuation of the work that DIXI was doing when they were distributing directly in the U.S. themselves. Prior to the fourth quarter, we were able to pick that up and continue that. So think about 1.6 as kind of the baseline and then being able to run off of that as we go through 2023.

Operator: And thank you and one moment for our next question. And our next question comes from Larry Biegelsen from Wells Fargo. Your line is now open. Larry, if your line’s on mute, could you please unmute it. One moment please. And our next question comes from Vik Chopra from Wells Fargo. Your line is now open.

Vik Chopra: I’m not sure what happened. This is Vik in for Larry. So a couple of questions for me. About your comments on the gross margins for 2023, but just help us understand how we should think about the cadence for 2023, given the DIXI Medical agreement? And I have a follow-up.

Michael Favet: Rebecca, do you want to cover that?

Rebecca Kuhn: Sure. So we’re looking for or expecting gross margin between 69% and 71% in 2023, some potential for upside based on what we saw in the fourth quarter. DIXI, obviously, has a lower gross margin than our core RNS business and the — our gross margin will be influenced by the revenue mix between DIXI and our core business. We’re not expecting anything unusual there as the year progresses, so really no major fluctuations within that revenue mix.

Vik Chopra: Okay. And then my follow-up, Mike, I got your comments. But could you help us understand at what pace you expect to add new centers going forward in 2023?