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NEVRO CORP (NVRO)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 revenue was $101.9M (+5.8% YoY) and exceeded the company’s prior Q1 guide of $97–$99M; adjusted EBITDA loss of $9.6M was materially better than prior guidance of a $15–$16M loss .
  • Gross margin expanded to 70.2% (+310 bps YoY) on higher-margin mix and Costa Rica manufacturing; U.S. trials were down ~5.1% YoY, in line with expectations .
  • Management reaffirmed FY24 revenue guidance at $435–$445M and raised FY24 adjusted EBITDA guidance to -$5M to +$2M (from -$14M to -$8M); Q2 revenue guided to $106–$108M, adjusted EBITDA to -$3.5M to -$2.5M .
  • Strategic catalysts: ramp of HFX iQ (58% of Q1 permanent implants vs 53% in Q4), progress in SI joint (“Nevro1”) physician training (>220 trained; contribution immaterial near term), and >$25M 2024 savings from restructurings .
  • Liquidity remains strong with $281.5M cash, equivalents, and short-term investments as of March 31, 2024; decrease driven by seasonal cash outflows, a $9.8M milestone payment, and $4.4M restructuring cash payments .

What Went Well and What Went Wrong

What Went Well

  • HFX iQ adoption accelerated: “HFX iQ represented 58% of our total permanent implants in the first quarter, a 5% increase from the fourth quarter of 2023” .
  • Margin execution: Gross margin improved to 70.2% (+310 bps YoY) “driven primarily by a shift to higher margin products sourced out of the… Costa Rica manufacturing facility” .
  • Profit trajectory and guidance: “Based on our first quarter performance… we are raising our adjusted EBITDA guidance to a range of a loss of $5 million to positive $2 million and reaffirming our revenue guidance of $435 million to $445 million” .

What Went Wrong

  • U.S. trials down: “U.S. trial procedures decreased 5.1%” YoY, reflecting broader softness in trialing and physician training time away from practices .
  • Operating expense headwinds: Q1 OpEx rose to $107.4M, including restructuring ($5.5M) and acquisition-related items ($3.5M contingent consideration, $0.7M amortization), though excluding these, OpEx fell 3.3% YoY .
  • Near-term gross margin cadence: Despite Q1 strength, management expects 2024 GM approximately flat with 2023 (68%) due to COGS variances during the manufacturing transition; broader margin expansion expected beyond 2024 .

Financial Results

MetricQ1 2023Q4 2023Q1 2024
Revenue ($USD Millions)$96.327 $116.176 $101.899
Gross Profit ($USD Millions)$64.624 $81.477 $71.528
Gross Margin (%)67.1% 70.1% 70.2%
Net Income (Loss) ($USD Millions)$(35.029) $(8.981) $(25.409)
Net Loss per Share (Basic & Diluted)$(0.98) $(0.25) $(0.70)
Adjusted EBITDA ($USD Millions)$(17.141) $8.366 $(9.596)
Regional Revenue ($USD Millions)Q1 2023Q4 2023Q1 2024
U.S.$82.3 $101.5 $87.0
International$14.0 $14.7 $14.9
KPIsQ1 2023Q4 2023Q1 2024
U.S. Trial Procedures YoY Changen/a~-1% -5.1%
U.S. Permanent Implants YoYFlat note (vs Q1’23 baseline) +3% vs Q4’22 ~Flat vs Q1’23
HFX iQ Mix of Permanent Implantsn/a53% 58%
Operating Expenses ($USD Millions)$100.947 $93.264 $107.362
Litigation-related Expenses ($USD Millions)$3.754 $2.941 $2.801

Note: “n/a” indicates metric not disclosed for that period in the cited documents.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2024$435–$445M $435–$445M Maintained
Adjusted EBITDAFY 2024-$14M to -$8M -$5M to +$2M Raised
RevenueQ2 2024n/a$106–$108M New
Adjusted EBITDAQ2 2024n/a-$3.5M to -$2.5M New
Restructuring ChargesQ2 2024n/a$4M–$5M New (cost item)
Operating ExpensesFY 2024$390–$392M (flat YoY) ~$390M (flat YoY) Maintained (updated phrasing)
Gross Margin (%)FY 2024~68% (flat vs 2023) ~68% (flat vs 2023) Maintained

Earnings Call Themes & Trends

TopicQ3 2023 (Previous Mentions)Q4 2023 (Previous Mentions)Q1 2024 (Current Period)Trend
HFX iQ adoption & pricingiQ ~43% of implants; ramping; legacy pricing pressure iQ 53%; ASP uplift; Android solution planned iQ 58%; Android access solution launched; continued mix shift Positive mix/pricing tailwind
PDN market development24-month RCT data; underpenetrated market; payer progress Coverage expansion (Carelon 43M lives); continued evidence generation; pausing sensory study enrollment for interim analysis 24-month data published; sensory study paused for analysis; PDN sales “in line” qualitatively Steady build; evidence-led
SI joint (Vyrsa) integrationAnnounced intent to add products; training groundwork Acquisition closed; limited release; largest SI salesforce planned >220 physicians trained; FDA 510(k) for Nevro1; immaterial 2024 contribution Early ramp; door-opener
Manufacturing & marginsCosta Rica ramp; pricing/mix confluence pressures GM 70.1% on mix; 2024 GM ~68%; mid-70s LT target GM 70.2%; expect flat FY GM due to COGS variances; mid-70s longer term Near-term flat; LT expansion
Commercial executionRealignment & training; comp changes Larger training classes; sales meeting momentum Newer reps ramping; continued training cadence (SI joint) Improving cadence

Management Commentary

  • “Worldwide revenue and adjusted EBITDA both came in ahead of our expectations.” — Kevin Thornal, CEO .
  • “We are raising our adjusted EBITDA guidance to a range of a loss of $5 million to positive $2 million and reaffirming our revenue guidance of $435 million to $445 million.” — Kevin Thornal .
  • “Gross margin increased 310 basis points to 70.2%, driven primarily by a shift to higher margin products… manufactured in our Costa Rica facility.” — Rod MacLeod, CFO .
  • “We added more training sessions… Year-to-date, more than 220 physicians participated in our SI joint training sessions.” — Kevin Thornal .
  • “We are laser-focused on managing our expenses… and identified areas and key initiatives that we believe will drive growth and profitability.” — Kevin Thornal .

Q&A Highlights

  • Back-half ramp and guidance confidence: Seasonality, SI joint tailwind, newer reps ramping; replacements included but still small; full-year guide maintains conservatism after Q1 beat .
  • Restructuring savings: ~$25M in 2024; >$30M annualized; management does not expect disruption from additional steps .
  • Gross margin cadence: Despite Q1 strength, second-half COGS variances expected during transition from contract manufacturing; 2025+ margin expansion expected if pricing holds .
  • SI joint revenue contribution: Immateral in 2024; training and tray availability gating near-term volumes; used as access lever for competitive SCS accounts .
  • Trialing cadence and training impact: Physician training sessions can modestly depress trials near-term; cadence to normalize as training bolus fades .

Estimates Context

  • Wall Street consensus via S&P Global (Capital IQ) was unavailable for NVRO at time of retrieval; comparisons below use company guidance as a proxy.
  • Actual Q1 vs Company Guidance: Revenue $101.9M vs $97–$99M guided; Adjusted EBITDA -$9.6M vs -$15M to -$16M guided; EPS loss $(0.70) vs no EPS guidance provided .
  • Implication: Street EBITDA forecasts likely moved higher post-quarter given raised FY24 adjusted EBITDA guidance and better-than-expected Q1 profitability trajectory .
MetricQ1 2024 ActualQ1 2024 Company Guidance (Feb 21, 2024)
Revenue ($USD Millions)$101.899 $97–$99
Adjusted EBITDA ($USD Millions)$(9.596) $(15) to $(16)
Net Loss per Share ($)$(0.70) n/a

Key Takeaways for Investors

  • Mix-led and manufacturing-driven margin progress is tangible (70.2% GM), but 2024 GM is guided flat at ~68% due to transition-related COGS variances; margin expansion story resumes 2025+ as Costa Rica-sourced volumes scale .
  • HFX iQ adoption is a clear ASP tailwind (58% mix in Q1 vs 53% in Q4), aided by newly launched solution for non‑iPhone users; expect continued mix shift and pricing uplift through 2024 .
  • SI joint (“Nevro1”) is an early-stage access lever: >220 physicians trained; revenue immaterial in 2024 but strategically valuable for competitive account entry and cross-sell into SCS .
  • Cost actions are flowing through: ~$25M 2024 savings and >$30M annualized from January/May restructurings underpin raised adjusted EBITDA guidance to -$5M to +$2M .
  • Trial softness (-5.1% YoY) reflects market/training dynamics; management retains FY revenue guide ($435–$445M) and expects typical seasonality with stronger back half and largest Q4 .
  • Liquidity is solid ($281.5M cash + ST investments); Q1 cash decline was seasonal and included milestone and restructuring payments—no immediate balance sheet stress signal .
  • Near-term trading: Positive setup on profitability trajectory and raised EBITDA guide; watch Q2 training cadence and second-half COGS variances for margin prints. Medium term: thesis hinges on HFX iQ mix/pricing, PDN evidence/guidelines, and SI joint ramp contributing to durable growth and margin expansion .