electroCore, Inc. (ECOR) Earnings

Management highlights

• Overall Leadership & Transformation - The company completed a major restructuring of its commercial sales organization during Q2 2026 to accelerate sustainable growth and reduce concentration risk, while improving profitability despite near-term investment. - GAAP net loss improved 17% YoY to $3.1 million; adjusted EBITDA loss improved 26% YoY and 25% QoQ to $1.8 million, with $1 million of Q2 spending allocated to growth initiatives. - The company's long-term strategy is to transition from a single-product, single-market business to a multi-catalyst bioelectronic medicine platform. • Sales Organization Changes - Doubled the number of sales regions from 3 to 6, with most leadership roles filled via internal promotion for minimal incremental cost. - Recruited, trained, and added 17 new experienced 1099 sales representatives that now cover 29 VA medical centers (20% of the national VAMC network), opening new accounts and increasing the number of active prescribers. - Revised sales incentive compensation to prioritize sustained account-level growth over end-of-quarter volume, and added a dedicated recruiter focused exclusively on filling underperforming or vacant VA territories. - Updated KPIs to track new patient starts and refill rates at the individual account level, with a target of increasing refill rates by 30% across all regions by end of 2026. - These changes are projected to reduce variable incentive compensation from ~35% of prescription revenue to ~27% by end of 2027, and lower total sales and marketing expense as a percentage of revenue to ~54% by end of 2027. • Channel Expansion - Added dedicated new hires to target Kaiser Permanente outside California (1099 representative) and Department of Defense (DOD) / federal workers' compensation (full-time W2 employee). - Transitioned all federal VA and DOD procurement to Lovell Government Services as the sole federal supply schedule contract holder, a change that will eliminate 3% of G&A transaction fees, simplify ordering, and align with VA contracting requirements. This transition will be completed by the end of August 2026. - Early progress is underway for TACSTM adoption among first responders: a clinical evaluation is scheduled for November 2026 at an annual SWAT training academy, with additional evaluations planned for another state SWAT team, and initial orders already received from domestic law enforcement and U.S. intelligence agencies. - New focus on VA Department of Women's Health opportunities, with board member engagement supporting early initiatives. • R&D Pipeline - 30+ investigator-initiated clinical trials are ongoing across multiple therapeutic areas, with no direct cost to ElectroCore, to expand the clinical evidence base for vagus nerve stimulation. - The company is targeting completion of an FDA submission for an expanded Quell label for chemotherapy-induced peripheral neuropathy (CIPN) by end of 2026, using already completed clinical trial data. - Real-world evidence gathering for GammaCore for PTSD and mild traumatic brain injury is underway in partnership with the Dorn VA Research Institute, to support future label expansion. - Early development has begun on a next-generation closed-loop vagus nerve stimulation device that will capture real-time patient biometrics and does not require manual holding by the user. • Financial Performance - Gross profit increased $1.7 million YoY to $8.2 million, with gross margin dipping slightly from 87.3% to 86.5% due to a higher inventory reserve. - R&D expense increased to $800,000 from $500,000 YoY, driven by new study costs and initial work on TrueVega mobile app enhancements. - Selling, general and administrative expense was $10.1 million, up $700,000 YoY: sales and marketing expense increased $1.4 million to support revenue growth, partially offset by a $700,000 YoY decrease in G&A from non-recurring 2025 bad debt expense and lower professional fees. - Total cash, cash equivalents and marketable securities totaled $10 million as of June 30, 2026, down from $11.6 million at the end of 2025.

Guidance

• Full-year 2026 revenue guidance has been raised to greater than 30% YoY growth over 2025 full-year revenue, up from the prior guidance of approximately 30% growth. • The company reaffirmed its target of achieving positive adjusted EBITDA by the third quarter of 2027, and expects to reach this milestone using existing cash resources without the need for dilutive equity financing, if projected operating leverage is realized. • Gross margin is projected to stay around 85% in the short to medium term. • Management expects revenue growth to accelerate in the second half of 2026, driven by commercial organization changes that will take full effect starting in Q3 2026, and $145,000 of Q2-prescribed orders that will be recognized in Q3 2026 revenue.

Segment performance

Total Q2 2026 net revenue was $9.5 million, an increase of 28% year-over-year (YoY). 1. GammaCore (VA prescription): Revenue grew 11% YoY, contributing roughly $6.9 million of total revenue (approximately 73% of total Q2 revenue). As of Q2 2026, 16,400 VA patients have received the GammaCore device, representing 2.7% penetration of the addressable VA headache market. 2. Quell Product Line (primarily Quell Fibromyalgia prescription for the VA): Q2 revenue was $1.3 million, growing 700% YoY and 30% sequentially quarter-over-quarter (QoQ). Cumulative Quell revenue since the May 2025 NeuroMetrics acquisition is $4 million, with 95% coming from VA sales of Quell Fibromyalgia. This segment contributes approximately 14% of total Q2 2026 revenue. Quell 2.0, the OTC version, is currently out of production and its relaunch is delayed by FDA inspection-related corrective actions. 3. TrueVega (direct-to-consumer OTC wellness brand): Q2 revenue grew 27% YoY to $1.3 million, contributing approximately 14% of total Q2 2026 revenue.

Risks & headwinds

• Rising digital advertising competition in the OTC wellness space has increased customer acquisition costs for TrueVega: the number of competitors bidding on TrueVega's branded search terms increased 60% from 5 in H1 2025 to 8 in H1 2026, increasing direct cost per click by ~30% and reducing media efficiency ratio to 1.91. • Revenue concentration risk: the top 15 VA accounts generated 54% of Q2 2026 VA revenue, so operational issues at a single large facility can impact quarterly results (a Q2 staffing backlog at one facility pushed $145,000 in revenue to Q3 2026). • The FDA issued a 483 observation letter following a May 2026 inspection of the company's Rockaway, New Jersey facility related to patient complaint documentation for the former NeuroMetrics subsidiary. While the company has submitted corrective action plans, these actions have delayed the planned relaunch of the OTC Quell 2.0 product. • Transitioning to Lovell Government Services for federal contracting will slightly extend the company's accounts receivable cycle, as Lovell pays after receiving payment from the VA/DOD, though management does not expect this change to be material.

Analyst Q&A

• Q: How does the new 1099 sales force structure impact second half sales and marketing spending, and what is the status of the CIPN FDA submission timeline? /

  A: New 1099 representatives are paid only commission based on revenue, so they add no fixed cost to the business, only variable cost tied to performance. The expansion of regional sales leadership had minimal incremental cost as most roles were filled via internal promotion. The CIPN clinical study was already completed when NeuroMetrics was acquired, so no new clinical work is required. The team is currently organizing the existing data for FDA submission, which is on track to be completed before the end of 2026 for a Quell label expansion.

• Q: GammaCore revenue was down 4% sequentially this quarter – how much is due to commercial restructuring versus underlying demand, and what needs to happen to hit the 30%+ full-year growth target? /

  A: The sequential dip is largely explained by temporary factors, including a shift to shorter one-year prescriptions instead of multi-year prescriptions at some facilities to align with VA fiscal budgets, and the Q2 prosthetics staffing backlog at one large facility that pushed revenue to Q3. The sequential decline also reflects a deliberate strategic shift to focus on building a pipeline of new patients in addition to maintaining refills, rather than just short-term revenue growth. Management expects the benefits of the Q2 sales restructuring – including new territories, new talent, and updated incentives – to drive accelerating growth starting in Q3, alongside new growth from non-VA federal channels like DOD and first responders.

• Q: What benefits does the transition to Lovell Government Services provide for the business and its federal customers? /

  A: The transition aligns ElectroCore with VA requirements that a percentage of contracts go to service-disabled veteran-owned entities, and Lovell is an expert in federal procurement that provides existing infrastructure like electronic ordering platforms and a government web store that ElectroCore could not support efficiently on its own. Economically, the structure means that Lovell absorbs 3% transaction credit card fees and mandatory contract rebates that ElectroCore previously paid, while ElectroCore nets the same revenue per order as it did when selling direct. The only minor downside is a small extension of accounts receivable days, but Lovell has a strong track record of consistent on-time payment so this is not expected to be material.

• Q: What is driving the increased confidence behind the guidance upgrade to greater than 30% full-year growth, and which segment will contribute the most upside? /

  A: Management cites upside from all three core segments, but the increased confidence comes primarily from early tangible results from new non-VA initiatives that were just launched in Q2. The company has already received initial orders from military treatment facilities, domestic SWAT teams, and U.S. intelligence agencies, demonstrating that new channels are starting to generate revenue beyond just planning. For VA, growth will come from a combination of expansion into new facilities, deeper utilization of both GammaCore and Quell at existing sites, and reduced concentration risk from spreading revenue across more accounts.