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NPCE, Neuropace Inc.

Medical Devices & Equipment consumer brand UnprofitableDistress / turnaround

We are a medical device company focused on transforming the lives of people living with epilepsy by reducing or eliminating the occurrence of debilitating seizures.

Our novel and differentiated RNS System is the first and only commercially available, brain-responsive neuromodulation system that delivers personalized, real-time treatment at the seizure source.

Our RNS System is also the only commercially available device that records continuous brain activity data and allows clinicians to monitor patients not only in person, but also remotely, providing them the data they need to make more informed treatment decisions, thus optimizing patient care.

Latest annual: FY2025 10-K

NPCE · Neuropace Inc.

The business

What it sells, where the money comes from, the kind of company it is.

Revenue · FY2025

$100M

+25.1% YoY · 19% 5-yr CAGR

Vital signs · TTM, with 5-yr average

Revenue $100M 5-yr avg $67M

Gross margin 78% 5-yr avg 74%

Operating margin −16.8% 5-yr avg −45.4%

ROIC −23% 5-yr avg −30%

Owner-earnings margin −10% 5-yr avg −40%

Free cash flow margin −10% 5-yr avg −40%

The business in brief

read the 10-K →

What this business is and what moves its needle, from its own SEC filings.

Situation: Unprofitable. No sustained operating profit across the record; an earnings multiple has nothing to rest on. What the record does show is revenue, the gross-margin trajectory, and the burn against the cash on hand. Distress / turnaround. Thin interest coverage, or operating cash burned against real debt, across the record. The balance sheet carries this situation; the debt schedule sets the clock.
What moves the needle: Operating margin has run around −42% through the cycle on a 74% gross margin, the operating line in the red even at its best — so the lever is whether the spending below the gross line can come down enough to clear a profit: revenue growth against the cost curve, and the cash runway until it does. Inventory runs near 17% of sales, so how fast it turns back into cash — and the risk of writing it down when demand softens — sits alongside the margin. Read this kind of business on the installed base and what follows it. On its own account, the filing leans hardest on pricing power & competition, set against the numbers in what the filing emphasizes, below.
Is it a good business?: Return on capital has rarely cleared the cost of capital (median −32%, above 15% in 0 of 5 years). Owner earnings, the cash-based check, have been thin too. This is price-taker territory, where the balance sheet and the cycle matter more than any multiple; the rest is in the 10-K.

Every line is arithmetic on the company's filings, shown in full in the sections below.

The record

Ten years of arithmetic, read across the cycle.

The record, 2020–2025

realized figures from each filing · older years to the left

2020’20	2021’21	2022’22	2023’23	2024’24	2025’25	TTMTTMMar 2026
							Income statement
$41M	$45M	$46M	$65M	$80M	$100M	$100M	RevenueRevenue
74%	74%	71%	74%	74%	77%	78%	Gross marginGross mgn
67%	86%	113%	83%	71%	19%	20%	SG&A / revenueSG&A/rev
38%	40%	48%	32%	30%	28%	28%	R&D / revenueR&D/rev
($13M)	($24M)	($41M)	($27M)	($22M)	($16M)	($17M)	Operating incomeOp. inc.
−31.7%	−52.5%	−89.6%	−41.5%	−27.1%	−16.3%	−16.8%	Operating marginOp. mgn
($24M)	($36M)	($47M)	($33M)	($27M)	($21M)	($22M)	Net incomeNet inc.
							Cash flow & returns
($22M)	($25M)	($37M)	($20M)	($18M)	($11M)	($9M)	Operating cash flowOp. cash
$312K	$296K	$267K	$172K	$207K	$238K	$249K	DepreciationDeprec.
$978K	$7M	$2M	$4M	($1M)	($868K)	$1M	Working capital & otherWC & other
$62K	$384K	$603K	$173K	$306K	$332K	$412K	CapexCapex
0.2%	0.8%	1.3%	0.3%	0.4%	0.3%	0.4%	Capex / revenueCapex/rev
($22M)	($25M)	($37M)	($20M)	($18M)	($11M)	($10M)	Owner earningsOwner earn.
−52.7%	−55.0%	−81.6%	−30.4%	−22.7%	−11.2%	−9.7%	Owner earnings marginOE mgn
($22M)	($25M)	($37M)	($20M)	($18M)	($11M)	($10M)	Free cash flowFCF
−52.7%	−55.2%	−82.3%	−30.4%	−22.8%	−11.3%	−9.9%	Free cash flow marginFCF mgn
—	-18%	-40%	-36%	-32%	-23%	-23%	ROICROIC
—	-49%	-135%	-160%	-339%	-113%	-149%	Return on equityROE
—	−49%	−135%	−160%	−339%	−113%	−149%	Retained to equityRetained/eq
							Balance sheet
$38M	$116M	$77M	$66M	$53M	$61M	$54M	Cash & investmentsCash+inv
$8M	$7M	$7M	$12M	$13M	$15M	$15M	ReceivablesReceiv.
$7M	$8M	$10M	$11M	$13M	$17M	$17M	InventoryInvent.
$949K	$1M	$2M	$2M	$3M	$2M	$5M	Accounts payablePayables
$14M	$14M	$15M	$21M	$23M	$29M	$27M	Operating working capitalOper. WC
$55M	$133M	$98M	$93M	$81M	$94M	$87M	Current assetsCur. assets
$10M	$9M	$11M	$16M	$15M	$18M	$16M	Current liabilitiesCur. liab.
5.7×	14.3×	8.9×	5.7×	5.4×	5.3×	5.4×	Current ratioCurr. ratio
$56M	$134M	$114M	$108M	$95M	$106M	$99M	Total assetsAssets
$53M	$50M	$53M	$57M	$60M	$59M	$59M	Total debtDebt
$15M	($66M)	($24M)	($10M)	$7M	($2M)	$5M	Net debt / (cash)Net debt
-1.1×	-3.2×	-5.4×	-3.2×	-2.5×	-2.2×	-2.5×	Interest coverageInt. cov.
($148M)	$74M	$35M	$21M	$8M	$19M	$14M	Shareholders’ equityEquity
3.4%	9.5%	18.3%	14.6%	12.9%	11.1%	10.8%	Stock comp / revenueSBC/rev
							Per share
204K	16.6M	24.6M	25.9M	29.1M	32.7M	33.7M	Shares out (diluted)Shares
$201.59	$2.72	$1.85	$2.53	$2.74	$3.06	$2.95	Revenue / shareRev/sh
$-118.97	$-2.17	$-1.91	$-1.27	$-0.93	$-0.66	$-0.64	EPS (diluted)EPS
$-106.19	$-1.50	$-1.51	$-0.77	$-0.62	$-0.34	$-0.29	Owner earnings / shareOE/sh
$-106.19	$-1.50	$-1.52	$-0.77	$-0.63	$-0.35	$-0.29	Free cash flow / shareFCF/sh
$0.30	$0.02	$0.02	$0.01	$0.01	$0.01	$0.01	Cap. spending / shareCapex/sh
$-724.43	$4.43	$1.41	$0.80	$0.28	$0.58	$0.43	Book value / shareBVPS

The diluted share count moved ×81.39 into 2021 — shares issued, not a split the totals corroborate — and the per-share figures carry the counts as filed.

The diluted share count moved ×1.48 into 2022 — shares issued, not a split the totals corroborate — and the per-share figures carry the counts as filed.

Per-share growththe realized rate an owner's share compounded

	5-yr	5-yr
Revenue / share	−56.7%/yr	−56.7%/yr
Capital spending / share	−49.3%/yr	−49.3%/yr

The record, charted

FY2020–2025

Each measure over its full record; the current point and the worst year marked.

Share count

33Mpeak FY2025

ROIC

−23%low FY2022

Gross margin

77%low FY2022

Owner earnings vs. net income

Owner earningsNet income

The accountant's number, and the cash an owner can take; the gap is the tell.

($11M)owner earningsvs.($21M)net incomelow FY2022

Owner-earnings bridge

FY2021–FY2025cash-flow statement, SEC EDGAR →

Net income is the accountant's number; owner earnings is the cash an owner could take out. The walk between them, off the cash-flow statement, and whether the gap is widening or holding.

In fiscal 2025 the business earned ($11M) of owner earnings, the operating cash left after the $238K it takes just to hold its position. It put $94K more into growth; free cash flow, after that spending, was ($11M).

	FY2025	FY2024	FY2023	FY2022	FY2021
Reported net income	($21M)	($27M)	($33M)	($47M)	($36M)
Depreciation & amortizationnon-cash charge added back	+$238K	+$207K	+$172K	+$267K	+$296K
Stock-based compensationreal costnon-cash, but a real cost	+$11M	+$10M	+$10M	+$8M	+$4M
Working capital & othertiming of cash in and out, other non-cash items	−$868K	−$1M	+$4M	+$2M	+$7M
Cash from operations	($11M)	($18M)	($20M)	($37M)	($25M)
Maintenance capital expenditurethe spending needed just to hold position and volume	−$238K	−$207K	−$173K	−$267K	−$296K
Owner earnings	($11M)	($18M)	($20M)	($37M)	($25M)
Growth capital expenditurediscretionary; spent to get bigger, not to stand still	−$94K	−$99K	—	−$336K	−$88K
Free cash flow	($11M)	($18M)	($20M)	($37M)	($25M)
Owner-earnings marginowner earnings ÷ revenue	-11%	-23%	-30%	-82%	-55%

Owner earnings is the cash an owner could pull out without starving the business: operating cash less the maintenance capital it must spend to hold its position (here about $238K, roughly its depreciation, the rate its assets wear out). The other $94K of its capital spending is growth it chose, not upkeep it owed; charged only with the maintenance it must do, the business earns well more than the year's free cash flow shows. The cash-flow statement also adds stock comp back as non-cash, but it is a real cost paid in shares; counted as the expense it is (less $11M), owner earnings is nearer ($22M).

Maintenance capex is estimated as depreciation where a growing business invests above it; free cash flow is the figure the scorecard's free-cash margin reads.

III

Quality & stewardship

Returns, the balance sheet, capital allocation, and pay.

Owner’s Scorecard

FY2025 10-K · source on SEC EDGAR →

Will it survive?

Can it pay its interest? -2.2×

Does not cover its interest

Operating income ($16M) ÷ interest expense $7M

What this means
A full year of operating profit didn't cover the interest bill. This is the zombie zone: the business depends on refinancing, asset sales, or forbearance to service its debt.
How heavy is the debt, net of cash? +$2M

Net cash

Cash $22M + ST investments $39M − debt $59M

What this means
Cash and short-term investments exceed every dollar of debt by $2M, on net the company owes nothing, and can act from strength when others can't. Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.
How long is cash tied up? 289d

Long (60+ days)

DSO 54 + DIO 271 − DPO 36 days

What this means
Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash.

Is it a good business?

Return on invested capital -32%

Below average through the cycle

5-yr median, range -40%–-18%; -23% latest = NOPAT ($13M) ÷ invested capital $56M

Industry peers: median -22%

What this means
The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; a return below the cost of capital (~8%) erodes value as a business grows rather than building it — the test Buffett weighs most. The headline is the median of the last 5 years (it ran -23% most recently), so one peak or trough year doesn't set the verdict. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.
Owner-earnings margin -53%

Consumes cash through the cycle

6-yr median margin, range -82%–-11%; latest ($11M) = operating cash ($11M) − maintenance capex $238K

Industry peers: median -38%

What this means
What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's -11% of revenue this year, a -53% median across 6 years. Treating stock comp as the real expense it is (less $11M of SBC) leaves ($22M).
Are earnings backed by cash? ($11M)

Loss, and burning cash

Net income ($21M) · cash from operations ($11M)

What this means
The company reported a net loss, so a conversion ratio isn't meaningful. What matters then is whether operations still threw off cash, here, they did not.

How is the cash used?

Where do the earnings go? —

No surplus to allocate

What this means
The business didn't generate positive Owner Earnings this year, so any distributions came from the balance sheet or borrowing, not from operations.
Investing or harvesting? 1.39×

Expanding

Capex $332K ÷ depreciation $238K

What this means
Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.

Graham’s defensive tests · 2 of 5 met

Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.

Adequate size Miss

Revenue ≥ $2B · $100M

What this means
Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.
Strong liquidity Pass

Current ratio ≥ 2× · 5.28×

What this means
Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.
Conservative debt Pass

Debt ≤ working capital · $59M vs $76M WC

What this means
Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.
Earnings stability Miss

A profit every year (6-yr record) · 6 loss years

What this means
Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.
Dividend record Miss

Uninterrupted dividends · none paid

What this means
An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.
Earnings growth —

Earnings +33% over the record · —

What this means
Earnings were negative early in the record, a growth rate isn't meaningful.
Moderate price —

P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price

What this means
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are $-0.80/share (latest year $-0.63), the averaged base the calculator's gate runs on, and book value is $0.56/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.

Durability & moat, 2020–2025

Whether the record’s returns held, and what the capital reinvested earned.

Profitable years 0 of 6

What this means
Lost money in 6 year(s), look at what happened there before trusting the average.
Return on capital ≥ 15% 0 of 5 yrs

What this means
A moat shows up as a high return on invested capital that holds year after year, not one good vintage.
Operating margin −58% → −28% (3-yr avg ends)

What this means
Through the cycle the operating margin widened — about −58% early to −28% lately, median −42% — pricing power intact or improving.
Reinvestment, incremental ROIC returns capital

What this means
The capital base barely grew: this business returns cash through dividends and buybacks rather than reinvesting. Judge it on the cash returned, not on compounding.
Worst year 2022 · −89.6% op. margin

What this means
Operations went underwater in 2022, understand why before trusting the good years.

Does AI threaten the moat?

Low contestability

The moat is physical, regulated or balance-sheet-funded, the kind AI cuts costs within but does not contest.

In its own filing Named as a competitive risk

Its FY2025 10-K names artificial intelligence as a competitive threat.

“If we cannot use AI/ML or that use is restricted, our business may be less efficient, or we may be at a competitive disadvantage.”

AI is unlikely to contest a moat that is physical, regulated or balance-sheet-funded; here it reads more as a cost tool than a threat, and the company is using it that way.

Read from the filing's own risk factors, paired with the industry's structure under its SIC code; the durability is read above, the price below.

All figures as filed; the source filing is linked above.

Current Position

as of the latest quarter, Mar 31, 2026

Can the business pay what it owes this year, off the freshest balance sheet: the quality of the assets, the debt actually coming due, and what a low ratio means here.

Current assets$87M

Cash & short-term investments$54M
Receivables$15M
Inventory$17M
Other current assets$2M

Current liabilities$16M

Accounts payable$5M
Other current liabilities$12M

Current ratio5.38×all current assets ÷ what's due · Graham looked for 2×

Quick ratio4.35×stricter: inventory excluded

Cash ratio3.34×strictest: cash alone against what's due

Working capital$71Mthe cushion left after near-term bills

Cash runway5.5 yrsthe business is consuming cash; this is how long the cash on hand lasts at that rate

Revenue, latest quarter vs. a year ago−2.0%the freshest read on whether the business is still growing

Current ratio, recent quarters6.4× → 5.4×

Deeper floors

Tangible book value$14Mequity stripped of goodwill & intangibles

Net current asset value$3MGraham's net-net: current assets less all liabilities

Debt incl. operating leases$70M$11M of it operating leases

Deferred revenue$126Kcustomer cash collected before delivery; operating float

From the company's latest filing.

Management, ownership & pay

read the proxy →

From the proxy: how much of the business the people running it own, and how they are paid.

Insider ownership19.2%
The stake all directors and executive officers hold together, per the 2026 proxy: skin in the game, the first thing Munger reads.
Stock-based compensation$11M
The slice of the business handed to employees in shares this year, 11% of revenue. Buffett's oldest accounting fight: this is compensation, compensation is an expense, real whether or not the headline earnings admit it. One trap: the cash-flow statement adds SBC back, so the operating cash, and the owner earnings drawn from it, are flattered by exactly this amount; counted as the cost it is, what an owner keeps is lower.

Inverting the record

Invert: instead of why Neuropace Inc. is a good business, the question is what would make owning it a mistake, and whether those marks are in the record. Disconfirming tests across 2020–2025.

None of the 3 tests turned up a mark; each came back clean. A clean panel says only that these particular ways of being wrong are not written into the record.

Each test came back clean

Is it less profitable than it was?
Did debt outgrow the business?
Did receivables and inventory outpace sales?

Each test is read from the filings and is noisy alone; a flag can mark a cyclical trough or a year of heavy investment as easily as a problem. The filing says which.

Peers, Medical Devices & Equipment

The same industry, side by side on owner economics. Each figure is a through-cycle median, so a peak or trough year can’t distort it; the group median at the foot is the line to read each against.

Company	Revenue	Gross margin	Op. margin	ROIC	Owner earn. margin
LMATLeMaitre Vascular Inc.	$250M	68%	21.6%	12%	16%
KIDSOrthoPediatrics Corp.	$236M	74%	-16.9%	-7%	-24%
CERSCerus Corporation	$234M	58%	-40.9%	-43%	-31%
SIBNSI-BONE Inc.	$201M	88%	-36.2%	-21%	-38%
BBNXBeta Bionics Inc.	$100M	55%	-71.5%	-22%	-76%
NPCENeuropace Inc.	$100M	74%	-36.6%	-32%	-42%
CBLLCeriBell Inc.	$89M	87%	-65.6%	-34%	-56%
DCTHDelcath Systems Inc.	$85M	81%	-690.0%	-127%	-640%
Group median	—	74%	-38.7%	-27%	-40%

The price

What a price has to assume.

What the price implies

reverse-DCF

Neuropace Inc. is profitable, but owner earnings are negative this year because capital spending currently outruns operating cash, a build-out, so the owner-earnings reverse-DCF has no positive base to grow. We read the price from both ends instead: type a price to see the steady-state profitability it demands, then set the mature margin you would believe and weigh the two against each other. Nothing leaves your browser unless you enter it in your notebook.

Today’s price $

The assumptions Required return 9% Years to get there 10 Revenue growth 0%

Revenue, delivered20%/yr’20→’25

Mature owner-earnings margin 15%

Enter a price to run it.

Owner earnings it must reach—

Margin the price demands—

Owner-earnings margin today−10%

Two reads of one future. From your price: the owner earnings the company must reach, valued at a mature multiple and discounted back at your rate, expressed as the margin it implies on revenue grown at your rate. From your belief: the mature margin you would credit, set on the dial above. When the margin the price demands runs above the one you would believe, you are paying for a future taken on faith. For a deep cyclical at a trough, normalized through-cycle earnings are the better lens; this mode is for the genuinely unprofitable, and for the profitable business whose capital spending currently outruns its cash.

Weigh NPCE against another business →

Cite: Owner Scorecard, "Neuropace Inc. (NPCE), the owner's record," https://ownerscorecard.com/c/NPCE, data as of 2026-07-09.

Manual order: ← NPB its page in the Manual NPK →

Industry order: ← NNOX the Medical Devices & Equipment chapter NSPR →