Ladies and gentlemen, thank you for standing by. My name is [ Desiree ], and I will be your conference operator today. At this time, I would like to welcome everyone to the Ceribell Q2 2025 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Brian Johnston. You may begin.

Good afternoon, and thank you all for participating in today's call. Joining me from Ceribell are Jane Chao, Co-Founder and Chief Executive Officer; and Scott Blumberg, Chief Financial Officer. Earlier today, Ceribell issued a press release announcing financial results for the quarter ended June 30, 2025. A copy of the press release is available on the Investor Relations section of the company's website. Before we begin, I'd like to remind you that management will make remarks during this call that include forward-looking statements within the meaning of federal securities laws and that these are being made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward- looking statements. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our public filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q filed with the SEC on May 8, 2025. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 5, 2025. Ceribell disclaims any intention or obligation, except as required by law, to update or revise any financial statements projections or forward- looking statements, whether because of new information, future events or otherwise. And with that, I will now turn the call over to Jane.

Thanks, Brian. Good afternoon, and thank you all for joining us on our second quarter 2025 earnings call. Today, I will share key highlights from our second quarter results and review our progress towards our strategic priorities for 2025. Scott will then provide overview of our financial performance and discuss our full year 2025 guidance. I'm pleased to report that the total revenue for the second quarter of 2025 was $21.2 million. This reflects 38% growth over the same period last year. As of June 30, 2025, we had 584 active accounts, which translates to an increase of 26 active accounts during the second quarter. These results demonstrate our team's ability to efficiently launch new accounts and drive revenue growth despite typical seasonal dynamics. As a reminder, we typically see reduced utilization in Q2 and Q3 as ICU census typically decreases in the summer months. Our core commercial strategy continues to be focused on driving account acquisition and increased utilization of the seizure detection system within our existing accounts. As we further expand our market presence, we continue to invest in our commercial infrastructure. We continue to target prospective accounts through our growing and increasingly tenured team of territory managers. We are on track to achieve our target of expanding coverage to 55 territories by the end of this month. While we expect our overall territory count to remain relatively stable in the near term, we will continue to explore opportunistic investments for future growth through 2025 and beyond. Given the nature of our sales cycle, we anticipate that the territory manager additions over the past 12 months will begin to positively impact account acquisition growth in 2026. Meanwhile, we are continuing to invest in our clinical account managers to support launch and utilization and expansion initiatives across our growing…

Thank you, Jane, and good afternoon, everyone. As Jane mentioned, total revenue for the second quarter was $21.2 million, a 38% increase from $15.3 million in the same period of the prior year. The increase was primarily driven by continued commercial expansion, resulting in increased adoption of the Ceribell System across new and existing accounts. Product revenue for the second quarter of 2025 was $15.9 million, representing an increase of 38% from $11.6 million in the second quarter of 2024. Subscription revenue for the second quarter of 2025 was $5.3 million, representing an increase of 41% from $3.7 million in the second quarter of 2024. Gross margin for the second quarter of 2025 was 88% compared to 86% in the prior year period. Total operating expenses for the second quarter of 2025 were $33.6 million, an increase of 56% compared to $21.6 million in the second quarter of 2024. Non-cash stock-based compensation expense was $3.2 million in the second quarter of 2025. The increase in operating expenses was primarily attributable to investments in our commercial organization, increased headcount to support the growth of the business and expenses related to operating as a public company. As a reminder, our investments to expand our sales force have a delayed impact on revenue contribution due to the time required to train reps, acquire customers and launch new accounts. We expect these investments, which were made over the past year and are continuing into Q3 to increase the rate of account acquisition beginning in 2026. Sales and marketing expense decreased $600,000 in Q2 compared to Q1. The sequential decline was driven by expenses related to our annual sales meeting included in Q1 and the timing of headcount and associated compensation expense. General and administrative expense in Q2 increased by $1.4 million relative to the…

Thank you, Scott, and thank you all for your time today. In conclusion, I'm very pleased with our strong second quarter performance, which has positioned us well for continued success through 2025 and beyond. We have substantial growth runway ahead of us as we currently serve only around 3% of the U.S. patients who could benefit from our technology and are building further upon our industry-leading patent-protected platform. The future for Ceribell is brighter than ever, and we thank our employees, our customers and the patients we serve for enabling us to continue our mission to help save lives while delivering substantial value to our stakeholders. Finally, we appreciate your support and continued interest in Ceribell, and we look forward to providing you with updates on our progress in the quarters to come. I will now turn the call over to the operator for any Q&A. Operator?

[Operator Instructions] Our first question comes from the line of Travis Steed with Bank of America.

Congrats on the good quarter and the guide raise. Maybe just to start on the question. I'd love to kind of get kind of an update on some of the momentum in the business and what you're seeing on account adds and the awareness of Ceribell out there and utilization, kind of double-digit utilization growth, again, kind of sustainability around that and some of the new reps that you've hired and territory managers that you've hired, sustainability of the ramp on those adds.

Travis, I can take that. Yes, we're seeing good momentum on all fronts. As a reminder, we -- most of the commercial investments we've made over the past year, especially on the territory manager side, given the sales cycle, we don't expect to drive tangible growth in the account base until next year. Of course, internally, we're tracking along on the underlying metrics around the stages of pipeline and the number of customers we touched and how those progressed through the pre-PO stages, and it's going quite well. So we continue to have confidence that that's going to bear fruits. As far as usage goes, our CAMs continue to make an impact. As we've talked about over the past number of calls, we do see lower seasonal usage in Q2 and Q3 relative to Q4 and Q1, but the outcome this quarter was well in line with what we expected.

And then I just wanted to follow up on the gross margin. It looks like you're kind of getting back to your old run rate in 2026, kind of where you were before all the tariff stuff. How much of that is kind of the mitigation versus the rates being better? And could there even be potential upside to that over time?

It's both. Our strategy of diversifying our supply chain in Vietnam, both is to mitigate the macroeconomic and trade risk with being reliant on a single country. But beyond that, the current narrative of tariff rates coming out of Vietnam appears to be lower than what we're paying even during this break from China. And we'll continue to make decisions on our production jurisdiction based on what we learn along the way. But as you mentioned, we are continuing to make improvements in underlying cost structure, both in our China and Vietnam manufacturing sites. And a portion of that is included in our guide to be in the mid-80% range next year.

Our next question comes from the line of Robbie Marcus with JPMorgan.

Congrats on a good quarter as well. Maybe for me, can you remind us of what seasonality is like with respect to EEG? And just speak to some of the trends you saw on utilization at your hospitals, think about any color on new or existing accounts?

Typically, we see a reduced seasonal usage in Q2 and Q3 relative to Q4 and Q1. That aligns pretty well with the macro level data that we get from various sources around what ICU census is. So we believe that that's a direct cause. We've seen it over this year, and we've seen it in the past years as well. And so we've appropriately prepared for it. What we look at internally, and Jane can speak more to this, is some of the initiatives that our CAMs are undertaking to drive usage, and those are -- have been very effective.

Yes. And to add to what Scott said, many of the usage initiatives we are driving is in many ways independent of the seasonality. As we mentioned before, we continue to focus on very specific patient population with strong guideline support and help hospitals to protocolize those workflows. And also in this rapid changing macroenvironment, we are also partnering more with administrators to help both the care team as well as administrators to see the health economic benefits using their own data. So all these initiatives we have started a few quarters back, we start to see very measurable and quantitative impacts.

And then maybe on expenses, you had pretty good expense control in the quarter, particularly on selling expense. Maybe speak to some of the undertakings of the company, how you're deploying the sales force and how you're thinking about expenses for the rest of the year?

We don't provide specific OpEx guidance. But our investment philosophy hasn't changed, which is we're deploying the capital raised in our oversubscribed IPO to drive future growth, both in the R&D engine and commercial expansion. As Jane mentioned in her prepared remarks, we are on the territory manager side approaching the end of our planned expansion of territories and plan to hold relatively consistent there. But we will continue to invest in the CAM side of the business, which will grow relatively in line with the growth of the account base. We're also looking at other areas to invest opportunistically to drive future growth.

Next question comes from the line of Brandon Vazquez with William Blair.

Congrats on a nice quarter. I wanted to ask first on utilization. As the account base keeps growing, curious if you could talk a little bit about segmentations of utilization growth and how they grow over time. Is this simply a matter if you kind of look at tenure of accounts, do they kind of linearly grow in utilization? Or is there something else that you see in the data set that makes some accounts drive utilization more than others? Just trying to get an understanding of what kind of underlying trends there look like when you look at the accounts segmented by utilization.

Yes. We look at our utilization, I would say, in 3 dimensions in growth. The first one is departmental penetration or expansion. In many of our accounts, we are still not in all the departments and all the departments would include all the ICUs, emergency department as well as the floor. So in many of these accounts, we'll be intentionally driving departmental expansion. The second dimension is physician training. So in many of the departments we are already in, we have not been able to always train 100% of the providers on the bed side, partially driven by the natural turnover and also it's driven by -- it's very challenging to train the night shifts or the weekend shifts. So we have specific initiatives internally to address that. The third dimension, as I mentioned earlier, is really focused on specific population and supporting the nursing and physician team to think about driving protocolization. So these are overall the 3 dimensions, I would say, they apply to majority of our customers because most of our customers have ICU and ED, have the different physician provider groups as well as the different patient population.

Okay. And then, Jane, maybe I think you guys are kind of still early days in this, and kind of a limited launch in the pediatric side. Talk a little bit about what -- even if it's just anecdotal at this point, any updates there, how things are going and how that may progress from kind of a limited launch into a little bit of a broader launch in the coming quarters or year?

Yes. Since our FDA clearance in April, we started, we call it the pilot or limited market release of the pediatric. We are actually making progress on multiple fronts. As I mentioned in the last call, the 2 areas, one is in the children's hospital, and we have now penetrated the majority of the children's hospital. The other is the pediatric population in the emergency department. So the initiatives we are making progress and driving are, for example, doing QI, quality insurance, projects with key opinion leaders to show the prevalence of seizure in the pediatric, in the ED context because this population just never had EEG in the emergency department before. So we can see how many seizures could be potentially missed and also in parallel, work out what's the right workflow for this population, different departments. And meanwhile, all this exercise also help us to truly understand deeper of the patient needs here as well as the dynamics in this specific segment. And all this would enable us to maximize our go-to-market plan as we launch the product formally down the road.

Next question comes from the line of Joshua Jennings with TD Cowen.

I was hoping to start on the pipeline. Jane, it's great to hear that the early buzz is being generated by the delirium indication. And I was hoping to just review just the economic value proposition as you see it rolling out? And is it going to be driven by decreased length of stay, decreased kind of workup costs in terms of pinning down delirium. But if in the future, once approved, if a hospital adopts the Ceribell technology and utilizes the point-of-care EEG to make a delirium diagnosis, I mean, how much cost savings could we see and maybe compare the economic value proposition to the Ceribell EEG solution?

Yes. Thank you, Josh. We see a lot of parallel in terms of health economics benefit between delirium and seizure since we are not launching delirium yet, so we probably won't be able to provide super specific health economics benefit as we do on seizure. However, at a high level, one angle is what you already mentioned, since most of all these patients are under DRG -- most of these patients for inpatient under DRG, which means the revenue is relatively fixed. So reducing length of stay will be a major value driver. There are plenty of clinical evidence has shown that when patients have delirium, the ICU or the hospital length of stay is significantly higher. So we expect that when you have a more objective continuous measurement that help physicians to optimize the management of delirium, we could potentially see a signal there as we did in seizure. And also similar to seizure, we received the breakthrough on delirium as well, and there could be association of NTAP and breakthrough, which we commonly see. And of course, there's always uncertainty there. So overall, we see a lot of parallel, and this is what we will be focusing on in generating more clinical evidence as well as health economics evidence when we launch new indications.

And then I was hoping to just better understand the pricing strategy and what the experience was in the first half of this year? And any help just thinking through headband pricing and Clarity pricing for second half '25 and going into 2026. Any change from trend in '24? Congrats on the nice 2Q.

Thanks, Josh. The headband pricing has been relatively consistent year-over-year. We've continued to opportunistically look at price increases where appropriate, but we also want to be judicious with those and appreciate that a lot of hospitals are under economic strain right now. We have been able to effectively increase the rate of Clarity, the Clarity ASP over time, and a lot of that is attributable to driving more recorders through the subscriptions.

Our next question comes from the line of Bill Plovanic with Canaccord Genuity.

Just on the -- just to start off with costs for Scott. Just on the ongoing legal, you mentioned that your G&A was a little elevated in Q2 because you're prepping for all of this. How should we think about the incremental cost over the next couple of years for legal? And then just on the delirium, I think, how do we think about the -- as you come to market with this product, how do we just think about -- is there a certain like -- I guess, with status epilepticus, there's a certain pathway, a guideline on how to treat those patients already in place. Is there something similar with delirium that there's a specific pathway of how to treat them or it just changes the -- what the -- how they're going to treat them if they know they have delirium?

On the cost of legal, we do expect an ongoing cost associated with the action. Of course, that will depend on the response and how long that lasts. But what I'll say to guide you is the amount of increase that we saw relative to normal in Q2 should about reflect what we're going to see in the coming quarters of '25 and '26.

And on the delirium treatment, it is true that it's different from seizure management, in that seizure management focused on very clear first-line, second-line treatment, and that's mostly medication. Delirium doesn't have a single medication and that's proven to be effective or recommended by the guidelines, especially in the hypo delirium patient population. However, that being said, there's clear treatment pathways that the societies has developed a clear guideline and that involves in looking into potential medication, especially sedatives that can cause delirium, therefore, to eliminate certain medication from the patient or finding other root cause, potentially infection and other underlying unbalanced iron level. So those can be different root cause for delirium. It's critical to identify those root cause and that can help delirium management. Another factor of delirium is that these patients often stay ICU for days or even weeks. And it's a disease state that can wax and wane and evolve over time. So often when physicians put patients in one treatment path, it's very hard for physicians to know -- it could be hard for physicians to know whether or not they are on the right path. And this is where we received some of the feedback from the key opinion leaders at ADS that objective and the continuous monitoring device can help the physician not only to more accurately and potentially detect delirium early, but to know that whether or not they're on the right path in managing these patients.

Next question comes from the line of Jeffrey Cohen with Ladenburg Thalmann.

I guess, firstly, could you delve into the neonate indication a little bit? Could you talk a little bit more about the pilot and number of patients and number of centers that you would anticipate to run through this, and as far as timing, when we may see some initial data?

Yes. We don't disclose specific patient population or specific sites, but the pilot is still, I would say, relatively small. We are not talking about hundreds of sites. We're talking about probably single double -- low double-digits. And the reason is that for the pilot, we're really trying to achieve, one, to further validate the ease of use and signal quality of our FDA-cleared hardware, which is both the recorder as well as the headcap. And B, probably more importantly, it's, again, understand specific patient needs here in this very unique patient population and also the specific dynamics workflow in the NICU. So all this would inform us when we developed our -- when we are developing our go- to-market plan. As we mentioned in the last earnings call, we will be sharing FDA clearance or approval when they come or other strategic regulatory milestones. So at the moment, we do not have those milestones to share, but we are -- what we can share is everything is on track related to our pipeline according to our internal milestone and some of them are even ahead of schedule.

And then secondly, could you talk a little bit about the shift on the manufacturing to Vietnam? You did mention this could occur by the end of Q3. Is that going to be a sole shift in its entirety? Or do you expect to have 2 facilities running? And then just clarify for us, would that be separating both Clarity as well as the headbands?

We expect to maintain our current suppliers in China as well. The Vietnam facility is really to derisk the single country supplier as well as to be able to change our manufacturing jurisdiction in order to take advantage of the different trade policies we see. So I would consider it an added line. As it relates to manufacturing, we do a lot of the manufacturing related to the headbands internationally in China, Vietnam with final assembly and inspection here in the U.S. and the recorders have always been and will continue to be manufactured here in the U.S.

Next question comes from the line of Marie Thibault with BTIG.

Congrats on a nice quarter. I wanted to ask here, I think I heard in the prepared remarks that there would be opportunistic investments for the territory count. What are some of the drivers that would determine whether you make those investments?

It's part of our core strategy and how we operate is we always run pilots. So usually, before we invest extensively in any initiative or function, we would have a rather proven pilot. So we have multiple commercial pilot ongoing. And as we see strong signals, and that's when we will pull the trigger to take those opportunities.

Okay. So strong signals from within a region or specific territory. Okay. Very helpful, Jane. And then what are you hearing anecdotally so far? What are your sales folks seeing in the field from the competition given their recent launch?

Yes. We created the point-of-care EEG category. So there has been competition pretty much since day 1 we launched the product. With our success growing, we see more emerging players and more activities. However, we see the competition activity not really impacting our commercial performance, as you could see from our Q2 performance and that we have high confidence to raise our 2025 guidance. The reason is that we fundamentally believe that our product is significantly superior than what's available from the competition. It's highly validated by hundreds of thousands of patients and our clinical evidence. The fact that we have a FedRAMP, which is one of the highest cybersecurity certification that any company can get, it really differentiates us as our customers paying more attention to cybersecurity now. So overall, we remain highly confident that we will be the dominant -- remain the dominant category leader.

That concludes the question-and-answer session. I would like to turn the call back over to Jane Chao for closing remarks.

Well, thank you, everyone, for your time. We are very pleased with our strong Q2 performance, and we look forward to sharing more progress down the road. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.