Good day, and thank you for standing by. Welcome to the NeurAxis First Quarter 2025 Results and Update Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Ben Shamsian, Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Thank you for joining us for NeurAxis' First Quarter 2025 Financial Results and Corporate Update Conference Call. Joining us 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'll open the call for questions. If you are listening via the webcast, you can send in questions through the portal or you can simply e-mail me at NeurAxis, NRXS@lythampartners.com. [Operator Instructions]. Today's event is being recorded and will be available for replay through the webcast information provided in the press release. Finally, I'd 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 future potential operating results of NeurAxis. Although management believes these statements are reasonable and 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 now 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 first quarter 2025 earnings call. During today's call, I will highlight the continued execution in our commercialization strategies for IB-Stim, our neuromodulation technology and RED, our product for patients with evacuation disorder. We will recap Q1 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 inch closer to the ability to scale nationally. Following my remarks, Tim Henrichs, our CFO, will review our financial results for the first quarter of 2025. Let's first review the recent achievements. As I just mentioned, we are coming off another quarter of growth year-over-year, marking the third consecutive quarter of double-digit growth. As I mentioned on our last call, we are laser-focused on the new Cat I CPT code, which will become effective January 1, 2026, and claiming the remaining policy coverage needed to give access to the children who need IB-Stim. I will speak about these announcements in more detail later in the call. We are continuing to execute at a high level 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 advance and hit milestones, aiming for cash flow breakeven and profitability. Regarding IB-Stim, we are primarily focused on revenue trajectory, and we had significant growth of 40% in Q3 of 2024, 43% growth in Q4 of 2024 and 39% in Q1 of 2025. We continue to see…

Thank you, Brian, and let me add my welcome to everyone joining us on this call. These financial results were included within our press release, which was issued earlier and were also provided in more detail within our 10-Q. 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. We are continuing our strong momentum, which began in the third quarter of 2024. This momentum has continued here into the second quarter of 2025. The good news is we are only in the early innings of our ramp as we expect the number of covered lives to continue to grow and our Cat I CPT code goes effective on January 1, 2026. In addition, we are optimistic with regards to the commercialization of RED with our soft launch in Q1 '25, as Brian mentioned moments ago. Given our current cost structure, our goal as a company to reach cash flow breakeven is achievable with the issuance of the guidelines expected in the near future, the Cat I CPT billing code going effective on January 1, and the significant increase in covered lives from a year ago, we expect our sales volume to continue to grow as we have demonstrated in the last three quarters. The continuation of our track record of that sales growth, strong gross margins and operating expense cost management will allow us to achieve that cash flow breakeven. With that, I will go through some financial highlights in greater detail. Revenue in the first quarter of 2025 was $896,000, up 39% compared to $647,000 in the first quarter of 2024. Unit sales increased approximately 46% due to growth from…

Thanks, Tim. To summarize, while we have recently achieved several critical milestones, we are still in the early innings of what we expect to be substantial top and bottom line growth over the coming quarters. Our disciplined execution of the commercialization strategy is starting to deliver tangible results quarter-after-quarter as evidenced by the accelerating growth in these past three quarters. We are also strengthening the foundation for future expansion highlighted by the receipt of our Category I CPT code and the broadened 510(k) clearance. With that, operator, we'd be happy to take any questions.

[Operator Instructions]

Okay. We have some questions that were sent to us by investors. First, let's speak about the guidelines. When do you expect them? And can you talk about the timeline of receiving the guidelines until we see strong orders stemming from those?

Yeah, Ben. As we've discussed, the two things we do not control the timing of the guidelines and the writing of the policy covered by payers. It was announced at a conference last weekend in San Diego that Dr. Miranda and I attended that the guidelines are expected to be published by the end of this month. So that would tell you in the next three weeks. From there, orders will increase based on the policy coverage expected from those guidelines, which we're cautiously optimistic won't take too long. The reason these guidelines are so impactful is because they are independent. They are by the academic society and their access have zero control over what they say and when they're published. And of course, they've taken much longer than anyone expected. But it was announced last week at a podium presentation that they will be published in the month of May. And from there, the guidelines will be sent to the payers that we've been in communication with. Many of the payers previously, the large wood crosses have taken somewhere in the neighborhood of 90 to 120 days to write policy coverage. There's no guarantee that the bigger payers will do it that quickly. But we're cautiously optimistic that they'll do it relatively the same timeframe.

Okay. Tim, we have a question for you. Can you talk about how you see your operating expenses in the near- and medium-term going forward?

Sure. There's actually two answers to that question. Now just to review our current state, excluding the legal settlements in the first quarter here of '25, our operating expense dollars were relatively flat from the first quarter a year ago, while our revenue was up 39%. So we have spent wisely as we have high-caliber team members that have grown the top line and increased our research and development and marketing expenses, while we self-funded those expenditures by obtaining cost reductions in other areas such as insurance and professional services without sacrificing quality. Solid performance and execution from the team. Then from a percentage standpoint, our operating expenses as a percent of sales, excluding the legal settlement, is down for the third consecutive quarter, demonstrating that we are leveraging our fixed costs and not adding expenses anywhere near the rate of sales growth. So in the near- and medium-term, I expect two things. First, that our operating expense dollars will likely increase as I believe we'll need to invest in our sales and marketing teams going forward to meet the upcoming demand we expect from the guidelines, the Cat I CPT code and then increased insurance coverage. Second, I expect our operating expenses as a percent of sales to continue to decrease as we've seen in the last three quarters as our top line and gross profit will outpace any increases in operating expenses.

Okay. We have a question regarding RED. Can you provide some more color on what you've learned so far and how you're thinking about it going forward?

Yeah. So we continue in the soft launch stage and the response continues to be stronger than what we expected. The uptick in revenue in accounts beginning the utilization has been slower. These adult GI practices are large. They have Committees, Boards, CEOs, and that takes time. Many of those committees were canceled in March and early April because of spring breaks and moved back a month. This is no different than a value analysis team or committee in a hospital. So the response, again, we went to Digestive Disease Week last week, which is the largest global GI conference in the world. And again, the response was excellent. There is a significant need for this technology and the fact that it already has a Category I CPT code and strong national reimbursement eliminates that hurdle. So this is about ultimately commercial execution. We're slightly changing physician practice habits and practice flow, but not -- this is not a long procedure, so that doesn't appear to be a real hurdle. So we're excited about this. The response is really strong.

Okay. Tim, we have a question for you regarding the legal settlement. Can you provide some color in terms of the scope and sort of what -- if we're done with the expenses that was?

Sure. This legal settlement goes back to 2019 -- and we've actually provided disclosures in our 10-Q. And so I recommend that investors read that as well. Having said that, to answer the question, what we agreed to do is to settle the case for $750,000, which will be paid in equal monthly installments beginning in January of '26 and continuing through the end of December '26. Ultimately, we look at this as a positive for the company. This lawsuit has been out there for a while. It gets us behind us. It prevents any further risk of legal fees, potential litigation and the continuance of it. It's just best to put this behind us since it's been out there for so long. We believe we've negotiated a reasonable settlement in our case with payment terms and the company and the management team is looking forward to moving on and getting this behind us.

Ben, I'll add to that. This happened in 2015 and '16. So the risk of anything like this happening again, the statute of limitations have passed. The lawsuits filed in 2019, as Tim mentioned, but this ultimately boils down to how much would it cost us to go to trial, and this was at or below, and then we have no risk and no time spent. We believe that our position, we felt like we would win, but it wasn't worth the time, energy and money over the next 18 to 24 months versus putting this behind us and the answer that the Board and the executive team decided was to end it and not to affect our cash flow in 2025.

Okay. Operator, can you queue for questions.

[Operator Instructions] I'm not showing any phone questions at this time.

Okay. Well, thank you all very much for being with us today. We look forward to communicating with you again soon. We do expect some announcements in the coming 3 and 4 weeks, and we'll communicate those through press releases. Everyone, have a nice week. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.