NeurAxis, Inc. (NRXS) Earnings

Management highlights

Core Strategic Priorities - Maintain two overarching priorities: 1) securing remaining commercial and Medicaid insurance coverage for PENFS, and 2) maximizing execution in already covered markets while building infrastructure to scale as additional coverage comes online - Q2 confirmed Q1 2026 learnings from the Category 1 CPT code launch, allowing management to make disciplined, focused strategic decisions Payer and Insurance Coverage Progress - Neuraxis already has coverage for over 100 million covered lives, and achieved meaningful engagement progress with two of the largest remaining payers that lack existing medical policy coverage; management is cautiously optimistic additional coverage will be secured in H2 2026 or early 2027 - Progress was driven by an elevated multi-channel market access strategy: direct engagement with payer medical policy teams, adding the Category 1 CPT code to state Medicaid fee schedules, KOL and academic society advocacy, guidance from former payer executives, and expansion of the internal prior authorization team - Most states have not yet added the new CPT code to their 2026 Medicaid fee schedules, creating implementation (not clinical adoption) delays for program launches in these states - Created a new full-time VP of Healthcare Economics and Policy role to focus exclusively on upstream payer initiatives, with the existing VP of Market Access shifting focus to downstream execution Key Operational KPIs (Year-to-Date through Q2 2026) - Year-to-date average selling price: $1,003 (up 30% YoY) - Internal prior authorization approval rate: 31% (up from 12% YoY) - Number of ordering accounts: 88 (up 16% YoY) - Average revenue per ordering account: $40,000 (up 68% YoY) Commercialization Updates - Shifted to an in-depth, focused execution model, prioritizing resource deployment to markets with existing strong coverage rather than broad expansion into underserved markets - Aligned commercial organization to address the three core drivers of high-utilization accounts: strong payer coverage across most of the provider's payer mix, a dedicated physician champion, and allocated clinic workflow capacity; the team directly addresses gaps at each underperforming account - Made multiple key commercial hires in Q2: full-time VP of Sales, VP of Marketing, digital marketing expert, medical science liaison, and a PhD psychologist as Strategic Clinical Adoption Director to drive earlier adoption - Adopted a more targeted regional sales rep model for covered states, with increased in-person visit frequency to drive utilization, and increased sales training rigor - Launched a focused initiative targeting integrative health programs within pediatric gastroenterology, a common referral channel that aligns with PENFS' non-pharmaceutical model - Rolling out a strategic market initiative to coordinate all commercial, clinical, marketing, and reimbursement resources in targeted covered states to build local market intensity VA Medical Center Expansion - Secured a federal supply schedule contract to access the VA system, which serves 7 million annual patients, with ~3% affected by functional dyspepsia - Early VA activity (with limited initial coverage) already generated multiple orders and reorders, confirming demand; management has approved a plan to deploy 10 1099 independent VA-focused sales reps covering 10 territories, who will be trained and in the field by September 15, 2026 - The VA represents a separate second growth platform that does not depend on commercial payer coverage, with a large unmet need and alignment with non-pharmaceutical treatment preferences - For the non-VA adult market, management notes broad commercial coverage will require completion of an ongoing randomized controlled trial; near-term commercial focus remains on pediatric hospitals and the VA

Guidance

- Management expects the positive mix shift toward higher-margin full-reimbursement procedures to continue, driving further gross margin expansion in future quarters as additional payer coverage is secured - Management expects to exceed 200 million covered lives by the end of 2027 - Cash burn is expected to increase in H2 2026, as management invests in additional sales, marketing, clinical, and market access personnel to accelerate revenue growth in covered markets; this short-term increase in burn is expected to drive higher revenue growth that will reduce burn back to current levels in 2027 - Management expects sequential revenue growth to accelerate, with more noticeable growth starting in Q4 2026, driven by saturation of existing covered markets and new coverage wins - Additional large payer coverage wins are expected to have a cumulative effect: each additional win pushes more hospitals over the 70% payer coverage threshold required for hospitals to commit dedicated clinic capacity, unlocking much faster growth

Segment performance

Neuraxis operates as a single-segment medical device company focused on its PENFS (IV STEM) product for functional gastrointestinal disorders, so no separate product segment financials are reported. Overall Q2 FY2026 revenue was $1.928 million, representing 116% year-over-year growth compared to $894,000 in Q2 FY2025. Year-to-date (through Q2) 2026 revenue was $3.6 million, up 98% from $1.8 million in the same period 2025. IB STEM unit deliveries increased 60% year-over-year in Q2 2026 and 48% year-over-year year-to-date. Gross margin expanded 230 basis points year-over-year to 85.9% in Q2 2026, and 210 basis points year-over-year to 86.1% year-to-date, driven by a mix shift away from discounted financial assistance programs to higher-margin full-reimbursement covered procedures. Average selling price increased 28% year-over-year to $992 per device in Q2 2026, and 30% year-over-year to $1,003 per device year-to-date. Total operating expenses were $3.8 million in Q2 2026, up 53% from $2.5 million in Q2 2025; selling expenses rose 61% to $862,000, R&D expenses rose 138% to $274,000, and general administrative expenses rose 46% to $2.6 million. Operating loss was $2.1 million in Q2 2026, 24% higher than the $1.7 million operating loss in Q2 2025. Cash on hand as of June 30, 2026 was $8.3 million, with average quarterly cash burn of ~$1.1 million year-to-date 2026, down from $1.5 million average quarterly burn in 2025.

Risks & headwinds

- The timing of additional payer coverage wins remains uncertain, and lack of sufficient coverage continues to limit utilization even in markets with partial coverage - Revenue may fluctuate month-to-month as coverage rollout progresses - A going concern statement remains in place until Neuraxis achieves cash flow break-even, which is dependent on hitting projected revenue growth from new coverage wins - Liquidity is dependent on maintaining sufficient cash on hand, and the company has not drawn on its at-the-market facility since May 2026 - While early results are positive, the VA expansion is in very early stages, and the level of revenue contribution from this new channel is still unproven

Analyst Q&A

• Q: An analyst asks for more detail on progress with the two large unnamed payers, how growth will accelerate sequentially in the back half of 2026, and how performance differs between accounts with high vs low coverage. /

  A: Management's confidence comes from direct conversations with payer decision makers who indicated they see PENFS as a appropriate covered service. Growth will come from three sources: saturating existing covered markets, new coverage wins, and the new VA channel. Management declines to share per-account performance numbers for now, noting large variation in hospital size, and plans to add penetration rate KPIs to future reports once the analysis is complete.

• Q: An analyst asks if 200 million covered lives by 2027 is a reasonable expectation, what percentage of covered lives hospitals need to see before committing programs, what R&D spend will look like going forward for adult trials, and whether new indications will be pursued. /

  A: Management expects to exceed 200 million covered lives by end of 2027, and hospitals require ~70% coverage across their payer mix to launch full PENFS programs, so each new large payer adds cumulative growth. R&D spend for the ongoing adult functional dyspepsia trial will remain modest, as it is an investigator-initiated trial with only device and partial coordinator costs covered by Neuraxis. The company has ongoing low-resource trials for cyclic vomiting syndrome and other adult indications, but near-term focus remains entirely on scaling existing indications.

• Q: An analyst asks about the VA sales model and performance expectations for the 10 newly deployed 1099 VA reps. /

  A: Management confirms the 1099 model uses commission-only compensation, a long-successful standard model for VA medtech sales that leverages experienced reps with existing VA relationships. Management declines to disclose specific sales per rep expectations now, and plans to share results and outlook on the VA opportunity on a future earnings call.

• Q: An analyst asks when operating leverage and profitability will materialize, if free cash flow break-even is still expected this year, and how operating expense growth aligns with revenue growth. /

  A: Management prioritizes driving revenue growth over near-term profitability, and plans to continue investing in covered markets to unlock scale. Year-to-date revenue growth of 98% already outpaces operating expense growth of 25%, demonstrating existing operating leverage. Cash burn will tick up in H2 2026 from recent hires and market access investments, but these investments are expected to drive revenue growth that will bring burn back down in 2027. One or two large new coverage wins would create a substantial revenue jump that would rapidly move the company toward profitability.