Nevro Corp. (NVRO) Q3 2024 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call reveals several negative indicators: declining revenue and trials in the core SCS market, negative adjusted EBITDA, and reduced 2024 revenue guidance. Despite restructuring efforts and a slight cash increase, competitive pressures persist. The Q&A section highlights management's focus on cost-cutting and strategic investments, but lacks clear quantitative guidance and timelines for improvement. The negative sentiment is reinforced by the weak financial performance and cautious market outlook, suggesting a negative stock price movement of -2% to -8% over the next two weeks.

Key Financial Performance

Worldwide Revenue $96.9 million, decreased 6.7% year-over-year due to competitive pressures and ongoing softness in the core U.S. spinal cord stimulation market.

U.S. Revenue $83.9 million, decreased 6.5% year-over-year, primarily due to a decline in U.S. spinal cord stimulation trial procedures.

U.S. Spinal Cord Stimulation Trial Procedures Declined approximately 15.2% year-over-year, mainly due to competitive pressures and commercial execution challenges.

Net Loss from Operations $13.9 million, improved from a loss of $25.6 million in the year-ago quarter, reflecting cost-cutting measures and restructuring efforts.

Adjusted EBITDA Negative $1.8 million, improved from a loss of $5.8 million in the year-ago quarter, due to restructuring actions and focus on expense management.

Cash, Cash Equivalents and Short-term Investments Increased by $3.3 million to $277 million as of September 30, 2024, reflecting benefits from restructuring and strong working capital management.

Gross Profit $64.6 million, decreased 7.1% year-over-year, with a gross margin of 66.7%, slightly down due to capitalized variances and overhead charges.

Operating Expenses $78.5 million, decreased from $95.1 million in the prior year quarter, reflecting restructuring benefits and improved expense management.

Full Year 2024 Revenue Guidance Approximately $400 million to $405 million, representing a 5% to 6% decrease from 2023, impacted by market challenges and reduced DTC marketing spend.

Full Year 2024 Operating Expenses Guidance Approximately $369.1 million, down $20.2 million or 5.2% from 2023, reflecting restructuring efforts and cost management.

Full Year 2024 Adjusted EBITDA Guidance Negative $18 million to negative $16 million, improved from prior guidance of negative $20 million to negative $18 million.

You have reached the limit. Sign up to access full content

Get started

Operating Highlights

HFX AdaptivAI: Received FDA approval and announced limited market release, utilizing AI for personalized pain management, showing 41% faster pain relief compared to previous versions.

Market Expansion in EU: Received regulatory approval for HFX iQ in CE Mark countries, with limited market release starting soon and full launch anticipated in Q1 2025.

Cost Management: Achieved over $30 million in annual run rate expense reductions through restructuring, with a focus on aligning commercial cost structure with revenue.

Sales Territory Changes: Promoted associate sales reps to lead newly created territories, aiming for improved market penetration and customer reach.

DTC Advertising Strategy: Reallocated resources to DTC advertising after recognizing its impact on patient lead generation, with expectations of improved trial activity in late 2025.

Long-term Growth Strategy: Plans to diversify product portfolio and expand into underpenetrated markets, including SI joint fusion and chronic pain management.

You have reached the limit. Sign up to access full content

Get started

Risk or Challenges

Revenue Decline: Worldwide revenue decreased by 6.7% to $96.9 million, with U.S. revenue down 6.5% to $83.9 million, primarily due to competitive pressures and ongoing softness in the U.S. spinal cord stimulation (SCS) market.

SCS Trial Procedures Decline: U.S. SCS trial procedures declined approximately 15.2%, attributed to competitive pressures and reduced direct-to-consumer (DTC) advertising spend.

Regulatory Challenges: International revenue decreased by 7.7%, impacted by negative media reports in Australia and healthcare reform in Germany, causing delays in procedures.

Operational Expenses: Operating expenses decreased to $78.5 million, but the company anticipates a potential increase in expenses in Q4 due to timing of investments and DTC spending.

Market Competition: Increased competition in the SCS market has led to a decline in trialing activity, necessitating a reevaluation of marketing strategies and sales execution.

Supply Chain Issues: The company expects delays in procedures due to supply chain challenges, specifically a shortage of IV bags caused by hurricanes in the Southeast.

Long-term Profitability: The company is focused on achieving sustainable profitability, having cut over $30 million in annual expenses, but faces challenges in aligning commercial efforts with revenue growth.

R&D Spending: R&D spending has decreased significantly, raising concerns about balancing cost-cutting with future innovation and growth.

Sales Force Dynamics: The company is promoting associate sales reps to lead new territories, but there is a ramp-up period expected throughout 2025.

Market Penetration: The company is working to penetrate underdeveloped markets, particularly in pain management, but faces challenges in educating referring physicians and raising patient awareness.

You have reached the limit. Sign up to access full content

Get started

Guidance & Outlook

Sales Territory Changes: Changes to sales territories and reallocating marketing resources to improve competitive positioning and drive market penetration.

DTC Advertising Reinvestment: Reallocating resources to direct-to-consumer advertising to improve patient lead generation and trialing activity.

HFX AdaptivAI Launch: Limited market release of HFX AdaptivAI, which utilizes AI for personalized pain management, expected to improve clinical outcomes and reduce administrative burdens.

Expansion of SCS Indications: Plans to grow the business through expanded spinal cord stimulation indications and next-generation therapies.

SI Joint Fusion Business: Anticipating meaningful contributions from the SI joint fusion business beginning next year.

Regulatory Approvals: Received regulatory approval for HFX iQ in CE Mark countries, with a full market release expected in Q1 2025.

Strategic Options Exploration: Ongoing exploration of strategic options to accelerate growth and diversify the product portfolio.

2024 Revenue Guidance: Maintaining full year 2024 worldwide revenue guidance of approximately $400 million to $405 million, representing a 5% to 6% decrease from 2023.

2024 Gross Margin Guidance: Expecting full year gross margin to be approximately 66% to 68%, excluding a $6 million supplier charge.

2024 Operating Expenses Guidance: Projected full year 2024 operating expenses to be approximately $369.1 million, down 5.2% from 2023.

2024 Adjusted EBITDA Guidance: Raising full year 2024 adjusted EBITDA guidance to a range of negative $18 million to negative $16 million.

2025 Outlook: Expecting benefits from changes to the commercial team, increased DTC advertising, and growth in the SI joint fusion business.

You have reached the limit. Sign up to access full content

Get started

Shareholder Return Plan

Shareholder Return Plan: Nevro Corp has implemented a restructuring plan that has resulted in over $30 million in annual run rate expenses being cut from their cost structure. This is part of their strategy to achieve sustainable profitability and deliver shareholder value. Additionally, they are exploring strategic options to accelerate growth and diversify their product portfolio, which is aimed at enhancing shareholder returns.

Cash Position: As of September 30, 2024, Nevro's cash, cash equivalents, and short-term investments increased to $277 million, reflecting strong working capital management and the benefits from their restructuring efforts.

Adjusted EBITDA Guidance: Nevro raised its full year 2024 adjusted EBITDA guidance to a range of negative $18 million to negative $16 million, indicating improved financial performance.

You have reached the limit. Sign up to access full content

Get started

Key Q&A

Q:Can you provide a big picture outlook for the core SCS business given the declining trials?

A:We are focused on creating clinical data for both PDN and nonsurgical back pain. The SCS market is traditionally volatile, but we are seeing a return of trials as we increase our direct-to-consumer (DTC) spend.

Q:What are your plans to capture the impact of AdaptivAI in a way that generates publications?

A:We are looking at real-world data to bring new points out and will continue to focus on clinical trials to provide important data.

Q:Can you elaborate on the U.S. trials being down 15% and the pressures you're facing?

A:The decline is due to competition, SCS market execution, and the impact of reduced DTC spending. We are optimistic about reversing this trend.

Q:How do you balance cost-cutting initiatives with future innovation in R&D?

A:We protect investments that drive future growth and focus on projects with a clear ROI. Some clinical spending was reduced, but we are still focused on innovation.

Q:What gives you confidence that you haven't cut too far into muscle with your cost reductions?

A:We believe we made thoughtful decisions and focused on areas that will have a bigger impact on revenue and profit.

Q:Can you provide insight into the integration of Vyrsa and its performance?

A:The integration is progressing well, and we are training physicians to perform procedures with the new technology.

Q:What is the expected impact of DTC spending on trial trends?

A:We expect trial trends to improve as we ramp up DTC spending, but it will take time for the effects to be seen.

Q:How do you expect to grow revenues in 2025 despite headcount cuts?

A:We believe we can grow revenues through increased efficiency and technology, such as AdaptivAI, which allows us to manage more patients with fewer resources.

Q:What is the percentage of HFX10 systems versus other waveforms?

A:Approximately 68% of our mix is iQ product, with over 95% of patients using HF10 therapy.

Q:How replicable are the improvements seen with AdaptivAI as you roll it out to more patients?

A:We are confident that the improvements will be replicable across a broader patient base, as we have seen positive results in early patients.

Q:Review of Unclear Management Responses

A:Management avoided providing specific quantitative details on the impact of DTC spending and the exact percentage of revenue growth expected in 2025. Additionally, there was vague language regarding the integration of Vyrsa and its performance, lacking specific metrics or timelines.

You have reached the limit. Sign up to access full content

Get started

Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

NVRO Transcript

Nevro Corp. (NVRO) Q3 2024 Earnings Call Transcript

Unknown11-12

Nevro Corp. (NVRO) Q2 2024 Earnings Call Transcript

Unknown8-7

Despite some positive elements like cost savings and cash reserves, the overall sentiment is negative. Financial performance is declining with reduced revenue and increased competition. The guidance has been lowered, and management's responses in the Q&A lacked clarity, raising concerns about future prospects. While there are potential strategic options for shareholder returns, the uncertainty and financial challenges overshadow potential positives.

Nevro Corp. (NVRO) Q1 2024 Earnings Call Transcript

Neutral5-8

Nevro Corp. (NVRO) Q4 2023 Earnings Call Transcript

Neutral2-22

NVRO Report

Frequently Asked Questions

Where does this earnings call transcript come from?

All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.

How soon is the transcript available after the earnings call ends?

Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.

Is the transcript edited or altered in any way?

No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.

Why do some answers appear as “Unclear” or “Inaudible”?

When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.

Who creates the AI Summary and Key Q&A highlights shown above the transcript?

They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.