Earnings call transcript: Neuraxis sees 39% revenue boost in Q1 2025

Neuraxis Inc. (NRXS) reported a 39% increase in revenue for the first quarter of 2025, reaching $896,000, driven by robust unit sales and strategic product developments. Despite this growth, the company faced a 25% rise in operating losses, totaling $2.3 million. Following the earnings announcement, Neuraxis shares surged by 11%, closing at $2.22, as investors reacted positively to the company’s expanding market reach and product advancements. According to InvestingPro data, the company maintains impressive gross profit margins of 86.52%, though its EBITDA stands at -$7.12 million for the last twelve months.

Key Takeaways

• Neuraxis reported a 39% year-over-year revenue increase in Q1 2025.
• The company’s stock price rose by 11% following the earnings release.
• Operating losses increased by 25%, reaching $2.3 million.
• Significant expansion in insurance coverage, now reaching 51 million lives.
• FDA label expansion for IV Stem Technology to include a broader age range.

Company Performance

Neuraxis demonstrated strong revenue growth in the first quarter of 2025, with sales increasing by 39% compared to the same period last year. This growth was supported by a 46% rise in unit sales. However, the company also reported a 25% increase in operating losses, highlighting ongoing financial challenges. Despite these losses, Neuraxis remains debt-free, with $2 million in cash on hand.

Financial Highlights

• Revenue: $896,000, up 39% year-over-year
• Unit Sales: Increased by 46%
• Gross Margin: 84.4%, down 4 percentage points year-over-year
• Operating Loss: $2.3 million, up 25% year-over-year
• Cash on Hand: $2 million

Market Reaction

Following the earnings announcement, Neuraxis’ stock price increased by 11%, closing at $2.22. This rise reflects positive investor sentiment, likely driven by the company’s strong revenue growth and strategic initiatives, including the expansion of FDA labels and insurance coverage. InvestingPro analysis suggests the stock is slightly undervalued, with analysts setting a target price of $4.75, representing significant upside potential. The company’s revenue is forecast to grow by over 1,300% in the current fiscal year.

Outlook & Guidance

Neuraxis anticipates accelerated revenue growth and aims to achieve cash flow breakeven. The company is focused on expanding insurance policy coverage and preparing for the implementation of a Category One CPT Code in early 2026. Upcoming guidelines publication by the end of May is expected to further support market expansion.

Executive Commentary

CFO Tim Hendricks stated, "We are only in the early innings of our ramp," highlighting the company’s growth potential. CEO Brian Karako added, "The response continues to be stronger than what we even expected," regarding the RED device, underscoring optimism about product performance.

Risks and Challenges

• Increased operating losses may impact long-term financial stability.
• Declining gross margins could indicate rising costs or pricing pressures.
• Legal settlement expenses could affect cash flow.
• Market expansion efforts may face delays in insurance policy adoption.
• Dependence on FDA approvals for product success.

Q&A

During the earnings call, analysts inquired about the timeline for guidelines publication and insurance policy adoption. The company expects guidelines to be published in three weeks, with payers taking 90-120 days to write policy coverage. Initial responses to the RED device’s soft launch were described as promising.

Full transcript - Neuraxis Inc (NRXS) Q1 2025:

Conference Operator: Good day, and thank you for standing by. Welcome to the Neuraxis First Quarter twenty twenty five Results and Update Call. At this time, all participants are in a listen only mode. After the speaker’s presentation, there will be a question and answer session. To ask a question during the session, you’ll need to press 11 on your telephone.

You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. If you wish to ask a question via the webcast, please use the Q and A box available on the webcast link anytime during the conference. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to Ben Chamcyon, Investor Relations.

Please go ahead.

Ben Chamcyon, Investor Relations, Neuraxis: Thank you, and good morning, Thank you for joining us for Niraxa’s First Quarter twenty twenty five Financial Results and Corporate Update Conference Call. Joining us on today’s call is Brian Karako, CEO of Neuraxis and Tim Hendricks, CFO of Neuraxis. At the conclusion of today’s prepared remarks, we will open the call for questions. If you are listening via the webcast, you can send in questions through the portal or you can simply email me at neuraxslistenpartners dot com. If you’re dialed into the live event, you can press star and one one button.

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 Niraxxis. 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. Niraxis 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 Karako, Chief Executive Officer of Niraxis. Brian, please proceed.

Brian Karako, Chief Executive Officer, Neuraxis: Thank you, Ben. Good morning, and thank you for attending the first quarter twenty twenty-twenty five earnings call. During today’s call, I will highlight the continued execution in our commercialization strategies for IV stim, our neuromodulation technology and red, our products 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 twenty twenty five. 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 one CPT code, which will become effective 01/01/2026 and claiming the remaining policy coverage needed to give access to the children who need IV stem. 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 PE and FS revenues. In recent months, we’ve made significant achievements as we advance and hit milestones aiming for cash flow breakeven and profitability. Regarding IV stem, we are primarily focused on revenue trajectory and we had significant growth of 40% in Q3 of twenty twenty four, ’40 ’3 percent growth in Q4 of twenty twenty four and thirty nine percent in q one of twenty twenty five. We continue to see only the very beginnings of new insurance policy coverage taking effect.

As such, I’m excited to share with you that the momentum has continued into q two. I now want to focus on and highlight the catalyst for what we expect to be continued revenue growth in the coming quarters. In the perfect world that we have been working toward in our near, children’s hospitals could access blanket insurance policy coverage and utilize a category one CPT code. For mass scaling and exponential growth, there are two critical components. First, the patient needs to be covered by insurance.

And second, the physician needs to be compensated for their time in the form of RVUs or relative value units, which happens with a category one CPT code. We continue to move closer to this full picture being in place. As mentioned earlier, the category one CPT code has been awarded by the American Medical Association CPT panel and will become effective this coming January 1. Regarding insurance policy coverage, we went from 4,000,000 covered lives just over a year ago to 51 about 51,000,000 covered lives today. So what does it take to earn the remaining payers?

As we all know, the scientific community has accepted our flagship technology, but stronger revenues have been hindered by a lack of written insurance policy coverage. The most important recognition any medical technology can receive is independent guidelines by the academic society because this is an independent review of the literature and a grade is assigned, which the payer generally accept as a standard. We announced previously that a systematic review by the academic society NASS again was released, showing our technology has the highest grade certainty level and largest magnitude effect. NASS again is the North American Society for Pediatric Gastroenterology Hepatology Nutrition, and they are the Academic Society for Pediatric Gastroenterology, where our technology resides. This systematic review is in abstract form now, but we believe this information is the work being used to publish guidelines in the coming weeks.

We are told by the largest payers that this publication is needed for policy coverage, so we are eagerly waiting for this publication to get to the payers. Sticking with insurance policy coverage. I want to go into detail about the most important aspect of our growth. As we have stated consistently, policy coverage is the key to exponential revenue growth. Again, we have had this indication long enough that the academic society and the physicians within the society who treat these patients at the 260 children’s hospitals in The United States have been aware and are supportive, but the insurance policy coverage and cat one CPT code are imperative for seamless treatment.

We also stated that once the insurance policy coverage is written and in place, the children’s hospitals that were not already utilizing IV stem take about one hundred and twenty days to get the technology loaded, their processes in place, and begin ordering. With all of that said, our total covered lives today stand at about 51,000,000. Additionally, as expected, we have countless payers currently in the review process. Regarding children’s hospitals, many have been ordering for years, but for a variety of reasons, we have not received early insurance policy coverage in those geographic regions. Once insurance policy coverage is written in these areas, the children’s hospitals are expected to increase revenue very quickly because the product is already in their system, therefore not needing the one hundred and twenty days to get set up.

The second part of the seamless treatment for patients along with policy coverage is the category one CPT code. As everyone now knows, we have achieved the company’s most important milestone to date in the form of a category one CPT code, which will allow for more seamless billing and reimbursement. This is a permanent billing code that will become effective on January 1. The reason this code is so critical is that it brings a permanent code, making it much easier for revenue cycle teams to build a procedure. It will bring a permanent reimbursement amount, and it will provide RVUs, which is how most physicians productivity is measured.

One could argue that physicians in a children’s hospital are currently treating patients for free because there is no RVU, which will no longer be the case come January 1. I want to move to the FDA milestones. Moving to FDA expansion, we have expanded our IV stem label to include a patient population beyond the current eleven to eighteen years of age to eight to twenty one years of age significantly increasing the number of children we can treat. Regarding red or the rectal expulsion device, our point of care device that identifies patients with pelvic floor dysfunction and provides immediate actionable retest results in patients with chronic constipation. We received FDA clearance on that technology on December 6 and are in the middle of a soft launch phase.

As we look into 2025, we have submitted to the FDA for an expanded FDA indication for functional dyspepsia in children eight to 21 years of age. This is critical because it would nearly double our market opportunity. Additionally, this indication will rely on the same category one CPT code, the same insurance policy coverage, the same children’s hospital call point, the same pediatric gastroenterologist position, and we’ll utilize the same w two sales force. Now I would like to focus on how our efforts translate to revenue growth and why we continue to be bullish on significant revenue growth as we move closer to national insurance coverage in the effective date for the category one CPT code. We are beginning to see many of the achievements reflected in the numbers.

In the first quarter alone, three hundred patients were treated through full purchase order or patient assistance programs, an annualized rate of twelve hundred patients. While this marks important growth, it still represents just point two percent of the six hundred thousand severely affected children in The United States suffering from IBS who are in urgent need of IV stem. Additionally, we had one hundred and thirty patients via the patient assistance program who did not utilize the program, which would have taken our treated patients to four hundred and thirteen for the quarter. I wanna highlight the sustained and increasing demand for IV Stem. While our revenue growth has accelerated in recent quarters, the facts remain that we are still treating a minuscule portion of the addressable market because national policy coverage in the cap one have yet to be put in place.

The positive change we do see here is largely due to accounts getting more comfortable with billing and coding. Physicians seeing the academic society guidelines abstract stating PE and FS has the highest rate of evidence and only the very slightest insurance policy coverage taking effect. On average, selling prices for patients receiving IV stim through financial assistance or our patient assistance program are about 65% below our list price. The insurance barrier is causing us to leave significant dollars on the table. As insurance coverage increases across the country, the percentage of sales through full price purchase orders will also increase.

This is why our number one priority continues to be written insurance policy coverage as we now know the cat one code will be effective on January 1. The point of action is clear. We believe that strong peer reviewed publications and key society support from the likes of NASSIGAN and the American Academy of Pediatrics results successful coverage from insurance companies, which results in strong revenues. Our internal prior authorization team continues to grow and be successful as it reduces the workload for clinical staff, which allows greater access for pediatric patients and ultimately assisting in acquiring a permanent billing code. We believe that in time, most accounts will move their prior authorizations to the Neuraxis team as we see more and more added each quarter.

We expect revenue growth to accelerate meaningfully as we move toward our goal of cash flow breakeven based on two catalysts, the continued gain of policy coverage from the carriers for IV stem along with the category one CPT code. As mentioned earlier in the call, we received FDA clearance for red for adult patients on 12/06/2024. I want to talk a little bit more about red. The rectal is the default expulsion device product, which we believe to be a great opportunity for neuraxis. We now have FDA clearance, which allows us to soft launch the technology.

Red is a self inflating balloon that is an easy to use office based point of care, interrectal function test that identify patients with chronic constipation due to pelvic floor dyssynergia and who are unlikely to improve with increased lack of abuse. The current treatment involves much trial and error by the physician as to which treatment will work and red will allow the physician to streamline the diagnosis and choose the best treatment option after the first visit, which is a win for the patient. Because the technology already has a category one CPT billing code assigned to the procedure and strong national reimbursement, we believe that providers will be able to bring this clinically beneficial technology to their practice immediately. As we continue the soft launch, we will learn much more about revenue expectations in the coming months. In summary, we’re pleased with continued and consistent execution of building the foundation of strong data and academic society support.

Nothing happens as fast as we want, but we are inching much closer to the final insurance policy coverages and effectiveness of the cat one code, which we believe will set the stage for seamless patient treatment and result significant growth and profitability. I will now turn the call over to Tim, our CFO, to discuss the financials. Tim?

Tim Hendricks, Chief Financial Officer, Neuraxis: 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 twenty twenty four. This momentum has continued here into the second quarter of twenty twenty five. 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 capital and CPT code goes effective on January first of twenty twenty six. In addition, we are optimistic with regards to the commercialization of RED with our soft launch in Q1 twenty five, 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 one 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 twenty twenty five was $896,000 up 39% compared to $647,000 in the first quarter of twenty twenty four. Unit sales increased approximately 46% due to growth from patients with full insurance reimbursement coverage and the company’s financial assistance program that provides discounts to patients without insurance coverage.

The company has made great strides in recent months in gaining insurance coverage and recent results are indicative of that success. As Brian mentioned, the strong momentum has continued in the second quarter of twenty twenty five, which we expect to be our fourth consecutive quarter of revenue growth year over year. As mentioned before, we remain highly focused on expanding our insurance coverage. Despite the inherent lag from insurance coverage device orders, which we have spoken about before, recent performance indicates strong demand and acceptance on the part of healthcare providers and patients for our product. Gross margin in the first quarter of twenty twenty five was 84.4% compared to 88.4% in the fourth quarter of ’twenty four.

Although we saw an increase in sales volume, the 400 basis point decrease year over year was due to a higher growth rate of the company’s discounted financial assistance patients over the full reimbursement patients and higher device manufacturing and shipping costs. We expect our gross margin to recover into next year because when the category one CPT code becomes effective on January 1, the devices currently sold at a discount will eventually transition to full reimbursement revenue upon insurance coverage, which will boost both our future revenues and gross margin. Total operating expenses in the first quarter of twenty twenty five were $3,100,000 an increase of 27% compared to the first quarter of twenty twenty four, primarily due to the settlement of a lawsuit. Excluding the one time legal settlement charge, the company’s operating expenses would have remained relatively flat compared to the first quarter of twenty twenty four. Selling expenses in the first quarter of twenty twenty five were $134,000 a 68% increase to $80,000 in the first quarter of twenty twenty four due to higher sales volume and temporary commission structure to facilitate growth and adoption in new states.

Research and development expenses in the first quarter of twenty twenty five were $61,000 compared to only $66,000 in the first quarter of twenty twenty four. The increase is due to higher spending on a medical research study and costs to develop the RED device that we eventually soft launch in the first quarter. General and administrative expenses of 2,900,000 in the first quarter of twenty twenty five were 23% higher than the $2,300,000 in the first quarter of twenty twenty four. The increase was due to one, the settlement of a lawsuit, two, expenses related to the introduction of an annual short term and long term incentive plan that did not exist in the first quarter of twenty four, ’3, higher advertising costs to expand market awareness. And four, third party costs incurred to enhance the company’s internal control environment, partly offset by a one time hiring grant in 2024 and lower third party professional service costs as our new hires have absorbed the work internally.

Excluding the one time legal settlement charge, general and administrative expenses would have decreased 4% year over year. We anticipate that in the near term, we will be able to leverage our operating expenses levels to deliver strong top line growth. Operating loss for the first quarter of twenty five was 2,300,000.0, an increase of 25% compared to a $1,800,000 loss in the first quarter of twenty twenty four. Excluding the one time legal settlement charge, the company’s operating loss would have improved 9% compared to Q1 of twenty four. Our net loss in the first quarter was $2,300,000 an increase of 8% compared to $2,100,000 in the first quarter of twenty four.

Excluding the one time legal settlement charge, the company’s net loss would have improved 22% over Q1 of twenty four. From a liquidity standpoint, our cash on hand as of March thirty one of twenty five was $2,000,000 Cash used in operations in Q1 of ’twenty five was $271,000 higher than in Q1 of ’twenty four, primarily due to a decrease in the company’s payables. And we also have no long term debt. And with that, let me turn the call back over to Brian.

Brian Karako, Chief Executive Officer, Neuraxis: Thanks, Tim. To summarize, while we have recently achieved several critical milestones, we’re 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 one CPT code and the broadened five ten ks clearance. With that, operator, we’d be happy to take any questions.

Ben Chamcyon, Investor Relations, Neuraxis: 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?

Brian Karako, Chief Executive Officer, Neuraxis: Yeah, Ben, as we’ve discussed, the two things we do not control are 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 doctor Miranda and I attended. 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 were cost cautiously optimistic won’t take too long.

The reason these guidelines are so impactful is because they are independent. Are by the academic society and their access has zero control over what they say. And when they’re published. And of course, they’ve taken much longer than anyone expected. But we, you know, 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. You know, many of the payers previously, the large Blue Crosses have taken somewhere in the neighborhood of ninety one hundred to one hundred and twenty days to write policy coverage. There’s no guarantee that the bigger payers will do it that quickly. But, you know, we’re cautiously optimistic that that we’ll do it relatively the same time frame.

Ben Chamcyon, Investor Relations, Neuraxis: 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?

Tim Hendricks, Chief Financial Officer, Neuraxis: 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

Conference Operator: from

Tim Hendricks, Chief Financial Officer, Neuraxis: 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

Brian Karako, Chief Executive Officer, Neuraxis: of sales growth. So in

Tim Hendricks, Chief Financial Officer, Neuraxis: 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 cap one 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.

Ben Chamcyon, Investor Relations, Neuraxis: Okay, thank you. Brian, 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 that going forward?

Brian Karako, Chief Executive Officer, Neuraxis: Yeah. So we continue in the soft launch stage, and the response continues to be stronger than what we even what we expected. The uptick, in revenue is, in accounts beginning to utilization has been slower. The prod, you know, 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’s a there is a significant need for this technology.

And the fact that it already has a category one 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, that doesn’t appear to be a real hurdle. No, we’re excited about this. The response is really strong.

Ben Chamcyon, Investor Relations, Neuraxis: 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 were Sure.

Tim Hendricks, Chief Financial Officer, Neuraxis: 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 twenty six and continuing through the December ’26. Ultimately, we

Brian Karako, Chief Executive Officer, Neuraxis: look at this

Tim Hendricks, Chief Financial Officer, Neuraxis: 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 it behind us.

Brian Karako, Chief Executive Officer, Neuraxis: Ben, I’ll add to that. This happened in 02/1516. So the risk of anything like this happening again, the statutes of limitations have passed. The lawsuits filed in 2019 as Tim mentioned, but this ultimately boiled down to how much would it cost us to go to trial. And this was at or boil, 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 eighteen to twenty four 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.

Ben Chamcyon, Investor Relations, Neuraxis: Okay, operator, can you queue for questions?

Conference Operator: Again, if you’d like to ask a question at this time, please press 11 on your touch tone phone. I’m not showing any phone questions at this time.

Brian Karako, Chief Executive Officer, Neuraxis: 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 three and four weeks, and we’ll communicate those through press releases. Everyone have a nice week.

Thank you.

Conference Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.

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