Good day, and thank you for standing by. Welcome to the NeurAxis' Fourth Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and answer-session. [Operator Instructions] Please be advised that today's conference call is being recorded. [Technical Difficulty]

Thank you, good morning, everyone, for joining us for NeurAxis' fourth quarter 2024 financial results and corporate update conference call. Joining us today on today's call is Brian Carrico, CEO of NeurAxis; and Tim Henrichs, CFO of NeurAxis. At the conclusion of today's prepared remarks, we will open the call to questions. If you are listening through the webcast, you can send in a question through the portal utilizing the Ask a Question button or simply e-mailing questions to nrxs@lythampartners.com. If you are dialed into the live call, and would like to ask a question, you can follow the instructions provided by the operator. Today's event is being recorded and will be available for replay through the webcast information provided in the press release. Finally, I'd also like to call your attention to the customary Safe Harbor disclosures regarding forward-looking information. The conference call today will contain certain forward-looking statements, including statements regarding the goals, strategies, beliefs, expectations and further potential operating results of NeurAxis. Although management believes these statements are reasonable based on estimates, assumptions and projections as of today, these statements are not guarantees of future performance. Time-sensitive information may no longer be accurate at the time of any telephonic or webcast replay. Actual results may differ materially as a result of risks, uncertainties and other factors, including, but not limited to the factors set forth in the company's filings with the SEC. NeurAxis undertakes no obligation to update or revise any of these forward-looking statements. With that said, I would like to turn the event over to Brian Carrico, Chief Executive Officer of NeurAxis. Brian, please proceed.

Thank you, Ben. Good morning, and thank you for attending the fourth quarter 2024 earnings call. During today's call, I’ll highlight the continuing accomplishments in our commercialization strategies for IB-Stim, our IBS neuromodulation technology and RED, our product for patients with evacuation disorder. We will recap 2024 and discuss the milestones and growth plans for 2025, as we come off another strong quarter of execution and growth. We continue the commercialization of our market-leading PENFS technology and is closer to the ability to mass scale nationally. Following my remarks, Tim Henrichs, our CFO will review our financial results for the fourth quarter of 2024. First review the recent achievements. As I just mentioned, we are coming-off another strong quarter of growth year-over-year, continuing to increase in covered lives and receiving a new FDA indication. This is in addition to the milestones we mentioned on our last call, which were the Category 1 CPT code, which will become effective January 1 of 2026, and the IB-Stim age expansion from 11 years to 18 years of age to 8 years to 21 years of age, nearly doubling our market opportunity. I’ll speak about these announcements in more detail later in the call. We are continuing to execute on our growth objectives, rooted in the foundation that strong published data will drive insurance expansion leading to sustainable revenues and margins. We laid out these objectives in previous calls, and continue to put the final pieces in place to allow blanket insurance coverage and in turn the scaling of PENFS revenues. In recent months, we've made significant achievements as we advanced and hit milestones, with the goal of cash flow breakeven and profitability. Regarding IB-Stim, we are primarily focused on revenue trajectory and we had significant growth of 40% in Q3 and 43% growth…

Thanks, Brian and let me add my welcome to everyone joining us on the call this morning. These financial results which I'm about to walk through, were included within our press release, which was issued earlier and also provided in more detail in our 10-K, which was also released this morning. I will add some color on key areas of the financial results, as well as an outlook on certain areas. The hard work that our team has put in the last few years, is beginning to bear fruit. The strong momentum that began in the third quarter last year, continued in the fourth quarter and we are even seeing it into the first quarter as Brian previously mentioned. The good news is that we are only in the early innings of our ramp, as we expect the number of covered lives to continue to grow. In addition, we are optimistic with regards to the commercialization of RED. We actually booked our first order in the first quarter of 2025 and expect demand to pick up in the second quarter, through the rest of fiscal year 2025. Given our current cost structure, our goal as a company to reach cash flow breakeven is achievable and a function of our sales volume, given our strong gross margins. Our recent successes in obtaining substantially more insurance coverage keeps us on that path. With that, I'll go through the financial highlights in detail. Revenues in the fourth quarter of 2024 were $761,000, up 43%, compared to $531,000 in the fourth quarter of 2023. Unit sales increased approximately 45% due to growth from patients with undiscounted insurance reimbursement and the company's financial assistance program that provides discounts to patients without insurance. The company has made great strides in recent months in gaining insurance coverage…

Thanks, Tim. To sum this up as many critical milestones, as we have recently seen come to fruition, we are still very early of what we see as strong top and bottom-line growth over the next few quarters. The consistent execution of our commercialization strategy is beginning to bear early fruit, as we see from the growth acceleration in the last two quarters. We are also achieving milestones that will enable continued growth as I spoke to the Category 1 code, increased insurance coverage and the expansion of our 510(k) clearances. Furthermore, we remain excited about our opportunity with RED, which we have just recently soft launched and has the potential to drive significant revenues in the coming quarters. With that, operator, we'd be happy to take any questions.

[Operator Instructions]

Great. We have some questions that have been sent to us by investors. Brian, can you talk about the significance of receiving the Category 1 code and the 510(k) extensions?

Well, I'll speak to the Category 1 code. Look, we've been -- this is something we've been working on for 5 years or 6 years or 7 years. It is extremely difficult to get a Category 1 code due to the utilization requirements and the data requirements, which speak to the accomplishments in those two areas. It is hard to explain the significance of the Category 1 code to the audience, especially if you're not familiar with the med-tech space and RVUs. If you are familiar with RVUs, you understand that physicians, especially 95% of our physicians that we work with are pediatric gastroenterologists employed by the children's hospitals and their measuring stick on a daily, weekly, monthly, annual basis are RVUs. And so to be able to receive RVUs for a procedure, in a sense, that's their currency. So to do a IB-Stim without an RVU, as I mentioned in the call, is essentially donating their time. So that's the first aspect of the CPT code, is that these physicians will be recognized for their time and it will actually -- it goes towards their annual goal. So I think that speaks for the obvious. Number two, most Medicaid and many commercial insurance companies don't recognize the Category 3 code, which we have now, which makes the prior authorizations very difficult. The Category 3 code, also means that the children's hospitals have to build what's called a charge bundle, which is very time-consuming and between that and the prior authorization difficulty, there is a reason that the revenues are where they are today. So that will streamline the prior authorizations. It will make it much easier for the chief revenue officer and the billing teams at the children's hospital. And it brings significant credibility to the payers, when you have a Category 1 CPT code. And there are other angles to the Cat 1 code, but it's -- that's the first part. The 510(k) extension, look, there are a lot of kids that are 8, 9, 10, 19, 20 and 21 that are equally sick, as the 11 to 18 years of age. So we went from 11 to 18 to 8 to 21. So itis about a 75% increase, 80%, 85% increase in total addressable market. And we've seen just since this age expansion, I don't know exactly what percentage of the increased revenue it is, but we've significant feedback from the physicians that they are very appreciative of the age expansion and they are utilizing this in full force. And we expect that to expand and continue to be utilized.

Okay. We have a question for you, Tim. Can you talk about the variability of the gross margins and how to think about gross margins on a go-forward basis?

Sure. So our reported gross margins are in the mid to high 80s. When we sell an IB-Stim device to a patient that's covered by insurance, our gross margins are higher than that. However, the reason that you see the gross margins in the high, mid-to-high 80s, is because of our financial assistance program, which we are very excited about and it continues to grow. One of our guiding principles is that we want to make sure that we treat all patients and in many cases patients do not have insurance coverage, or they have inadequate insurance coverage. And so they will come to us seeking treatment. And we want to make sure that they receive that treatment. So what we will do is we will discount based on income levels of the patients. And Brian previously mentioned in the call today, on average in financial assistance, we discount up to 65% off our list price, $1,195. But even at that discount, our gross margins are pretty healthy because you can see as a blend throughout the whole company, we are in the mid to high 80s. And what that is going to translate in the future, in particular when the Cat 1 CPT code takes hold, we obviously expect covered lives to increase, insurance coverage to increase and it will then take our patients out of inadequate, or no insurance coverage into insurance coverage, allowing the higher full reimbursement price to be charged. And we fully expect that our gross margins when we move into 2026 and beyond will increase as a result of that transition from the CPT 1 -- CPT Category 1 code.

Okay. We have another question sent to us. Brian, what are some of the early learnings from the RED in the commercial mode that you are in now?

Great question. We had done some market feedback, significant market feedback before we -- when we considered licensing this technology from the University of Michigan and some of the key points were and reasons we licensed this were, it had a Category 1 CPT code, it has a Medicare reimbursement, it's reimbursed by commercial insurance already. And we knew there was an unmet need, since the soft launch -- look we just launched this and I’d just tell you the feedback has been what we expected. I think from an -- if we underestimated anything, it is the size of the practices and they have boards and they have practice administrators and CEOs and there's a process, although most are private and not academic. There is still a process to get through. But the feedback I think from a positive standpoint has been the numbers and the feedback we're getting are the usage expectation from the physicians is higher than what we thought it would be. So look, the physicians are excited. The commercial force is very, very happy, very excited. The conferences are going well. We are excited. Look, Q2 will be telling. We'll see how Q2 goes in Q3 and Q4. But we're bullish that these are meaningful revenues for us.

Okay. A question for you, Tim. Given the expected cost structure, what level of revenue do you need to achieve breakeven?

So at our current run rate, our current cash burn run rate is about $6 million annually. And if you take that and then translate into revenues depending on when we breakeven right, in the not-too-distant future, those breakeven revenues will be in that $10 million to $12 million range.

Okay. Thank you. A product question, where are your products manufactured and what is your exposure to any potential tariffs?

That is a phone call I have in 30 minutes. But 95% of our technology is sourced and manufactured here in the United States. And I believe the one component we get from overseas is with a country that has no tariffs either way. And I don't believe there is a planned tariff either way. So minimal to 0. And again, I have that call in 30 minutes to discuss that. But as of right now it doesn't appear that we'll be affected.

Okay. Thank you. What is the development time-line for a second-generation IB-Stim device and how will that differ from the current version?

We're working on Generation 2 and sometime in 2026 we expect to have that. It will have, I would tell you a different look, a more modern look. We haven't finalized this. I mean, the one question we get or call sometimes is patients don't feel the device, which is a good thing and they think it's not working. So we're looking at putting some type of infrared light that blinks once every 60 seconds to show that it is working. But there's -- and there are some other things we are working on in the background that are really going to advance and should improve outcomes in children. And we should be able to predict who responds and who doesn't around heart rate variability and autonomic dysfunction, but in vagal insufficiency. But these are things we are working on and would be part of a -- potentially this next device and would be part -- potentially part of the next version. But these are all things that are in the future. We have a lot of ideas. We are in the research phase of different things. We're in the development phase of Version 2, but the device we have works outstanding. We have virtually no complaints. So yeah, I hope that answers the question.

Okay. We have another question for you, Brian. What is the response after a three-week or four-week course of IB-Stim treatment and what percentage of patients come back for additional treatment courses?

That's a good question. We've got good data right now at 6 and at 12 months. We have a 7 center multicenter, about 300 patient registry that was published last year. It had good data, statistically significant data. We don't have -- the physician feedback is pretty straightforward, the roughly 70% of patients -- this is anecdotal, this is not the data. But if somebody wants to schedule a separate call with Dr. Miranda to go into the data, we'd be happy to do that. But roughly 70% of patients have significant long-term relief. That is the feedback from physicians. You obviously have non-responders and you obviously have patients that have some response. But this is not something that once someone has four-weeks of treatment that next month you need -- or two months from now you need four weeks of treatment again. This results are sustained. And we've got multiple studies and we've got 16 studies now on this, including two placebo-controlled trials. We’ve done 10 or 11 different types of studies. And this all goes into the fact that was part of why we had such strong support from the American Academy of Pediatrics and they submitted the Category 1 CPT code application alongside us. But the data are really strong and the longevity of the treatment is sustainable and statistically significant.

[Operator Instructions] This does conclude today's Q&A session. I would like to go ahead and turn the call back over for closing remarks. Please go ahead.

No, I would just like to say thank you to everyone for joining us today. We appreciate the questions and we look forward to communications with you again very soon via press release. And obviously we'll have quarter one results out in the coming weeks and quarter 1 call in May and we’ll announce that. So thank you again. Have a great rest of your Thursday.

Thank you all for joining today's conference call. You may now disconnect.