Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Nevro Corp (NVRO, Financial) reported a positive adjusted EBITDA of $3 million, a significant improvement from a loss of $3.1 million in the same quarter last year.
- The company ended the quarter with over $270 million in cash and investments, providing a strong financial position to fund future growth initiatives.
- Nevro Corp (NVRO) has initiated a strategic review to explore potential partnerships, mergers, or even a sale of the company to accelerate growth and shareholder value.
- The acquisition of Vyrsa Technologies has allowed Nevro Corp (NVRO) to diversify its product portfolio and enter the sacroiliac joint fusion market, which is expected to contribute more meaningfully to growth next year.
- The company is optimistic about the long-term potential of the painful diabetic neuropathy market, which remains underpenetrated at less than 1%, and is focusing on educating physicians and raising patient awareness.
Negative Points
- Worldwide revenue decreased by 4.3% on a reported basis compared to the same quarter last year, indicating a decline in sales.
- US spinal cord stimulation (SCS) trial procedures declined by approximately 9.5%, reflecting ongoing softness in the US SCS market.
- The company revised its full-year 2024 revenue guidance downward to a range of $400 million to $405 million from the previous range of $435 million to $445 million.
- International revenue decreased by 15% as reported, primarily due to negative SCS-related media reports in Australia and healthcare reform in Germany.
- Operating expenses remained high at $92.6 million, although they decreased from $100.1 million in the prior year quarter, indicating ongoing cost management challenges.
Q & A Highlights
Q: Can you provide more details on the strategic review you announced? Are you considering a merger or sale of the company, and what is the timeline for this process?
A: We are exploring all possible options, including partnerships, mergers, or even a sale of the company, to accelerate our diversification strategy and bring more value to our customers. We are in the early stages of this process and have not set a specific timeline. It may ultimately be best for us to remain stand-alone if that brings the most shareholder value.
Q: How is your PDN (Painful Diabetic Neuropathy) business trending, and how much of the full-year guidance revision is due to a lower outlook for PDN?
A: PDN continues to be a growth part of our business. The revised guidance is primarily due to competitive pressures and ongoing softness in the core US SCS market, rather than specific issues with PDN.
Q: Why do you expect 2025 to be better than 2024, given the current market conditions and competitive pressures?
A: We are expanding our territories with associate sales reps who are now ready to take on their own territories, allowing us to go deeper and wider with our portfolio. We are also ramping our SI joint business and expect to see benefits from these changes. Additionally, we anticipate starting the replacement cycle for our IPG batteries, which will contribute to growth.
Q: What is the plan to achieve meaningful cash flow generation, and how far out is it?
A: With the revised revenue guidance, achieving positive cash flow will be delayed. However, we are not far from breaking even, and with a little more revenue, we could reach positive cash flow. We are also leveraging our Costa Rica manufacturing facility to improve efficiencies.
Q: How do you plan to address increased competition outside of hiring more people?
A: We are leveraging our SI joint business to get into competitive accounts and using our clinical data and superior therapy to remind physicians of the benefits of our 10-kilohertz therapy. We are also expanding our product portfolio to bring more value to our customers.
Q: Can you provide an update on the early adopters of the Vyrsa SI joint fusion product?
A: Many early adopters are still setting up their practices and getting their patients through the necessary conservative management treatments. However, we are seeing early success with some physicians growing their business and increasing the number of procedures they perform.
Q: What are the competitive dynamics in the SCS market, and why are competitors gaining share?
A: Competitors with new product launches often see a bump in cases as physicians try the new products. They also benefit from patients needing replacements for older devices. We are addressing this by leveraging our clinical data and expanding our product portfolio to offer more value to our customers.
Q: What does it take to reach EBITDA profitability, and are there efficiencies within the business model that can be leveraged?
A: We need to reach mid-400s in revenue to achieve EBITDA profitability. We are also leveraging our Costa Rica manufacturing facility and focusing on driving growth while limiting expense expansion to improve profitability.
Q: How are you balancing operating expenses between SG&A and R&D, and what new products can we expect?
A: We are expanding territories with existing team members to limit expense expansion. Our R&D pipeline includes a next-generation SCS therapy expected in early 2026 and new products outside of SCS. We are also focusing on our SI joint business and potential new indications for PDN.
Q: How is US pricing for the neuromodulation business, and have you seen any significant changes?
A: Pricing has held pretty well, and we saw an increase in average IPG pricing in Q2. While there are pockets where we need to be more creative, overall pricing remains firm due to the clinical results and technology of our products.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
