0001528287-26-000022
SEC filingMixed Q1 with revenue dip from DIXI Medical termination offset by RNS System implant growth and gross margin expansion to 81.8%, though operating losses widened amid ongoing investments.
Revenue declined 2% year-over-year to $22.1 million, primarily due to the termination of the Distribution Agreement with DIXI Medical, which ended sales through December 2025. This was partially offset by an increase in RNS System units sold from higher initial implants and replacements, as procedure volumes and mix drive fluctuations. The shift away from DIXI stabilizes the revenue base toward higher-margin core epilepsy treatments, positioning gross margins for sustained leverage as fixed manufacturing costs spread over growing domestic volumes.
Gross profit increased 4.1% to $18.0 million, expanding the margin to 81.8% from prior levels. This reflects the exit of lower-margin DIXI distribution revenue combined with fixed overhead absorption—including quality assurance, testing, procurement, and facilities—over steady RNS production. Management notes current infrastructure supports significant production ramps, with per-unit costs poised to decline further on higher volumes, enhancing long-term profitability as core demand grows.
Operating loss expanded 8.2% to -$5.6M from -$5.1M, with operating margin at -25.2%, as the revenue decline outpaced gross profit gains. Net loss reached -$6.7M from -$6.6M, though diluted EPS improved 4.8% to -$0.20. These dynamics stem from sustained investments in operations, including clinical trials for expanded indications, amid revenue normalization post-DIXI. Management anticipates R&D expenses rising to support new products and studies, balancing growth initiatives against near-term loss pressures.
Net cash used in operating activities improved to -$5.9 million from -$7.5 million, aided by working capital efficiencies, yielding free cash flow of -$6.0 million. This moderation supports ongoing investments while maintaining liquidity for strategic priorities.
Capital expenditures rose to $117K from $37K, directed toward property and equipment to expand underutilized manufacturing capacity. With infrastructure ready for volume growth and fixed costs dilutable on higher RNS implants, this positions NeuroPace to capitalize on procedure demand and potential label expansions through 2028.