Q4 2023 Earnings Summary
- Nevro's unique high-frequency 10-kilohertz therapy differentiates it from competitors, giving the company a competitive advantage as new competitors with low-frequency devices enter the market. This differentiation is expected to help Nevro maintain and potentially grow its market share.
- The acquisition of Vyrsa Technologies positions Nevro to enter the large and fast-growing SI joint fusion market, estimated at $2 billion in the U.S. They plan to leverage their existing relationships and their extensive salesforce, which will become the largest SI joint salesforce once fully trained, to drive growth in this market. ,
- The salesforce restructuring and realignment, with new sales reps coming up to speed, is expected to enhance commercial execution. Nevro anticipates these sales reps will hit their stride by Q2 and Q3 of 2024, contributing to improved performance and growth in the second half of the year. ,
- Nevro's 2024 revenue growth guidance of 2% to 5% falls below the historical SCS market growth rates of 6% to 9%, indicating potential market share loss or lower growth expectations due to competition or execution challenges.
- The company's dependence on new sales reps reaching full productivity to drive back-end loaded growth adds execution risk, especially considering previous instances where back-end loaded guidance did not materialize as expected.
- Despite implementing cost-cutting measures like a 5% workforce reduction, Nevro expects operating expenses to remain flat in 2024 due to inflation, merit increases, and acquisition-related expenses, which may limit profitability improvements and cash flow generation.
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2024 Guidance and Market Growth
Q: Why is 2024 guidance lower than historical market growth?
A: Nevro guided for 2% to 5% topline growth in 2024, which is lower than the historical SCS market growth of 6% to 9%. The company is cautious due to competitors being flat to down in some U.S. markets. They believe they'll outperform competitors with a new salesforce and new products but recognize the market currently grows at low to mid-single digits. -
Impact of New Competition
Q: How will new SCS competitors in 2024 affect your market share?
A: Nevro remains confident in its unique high-frequency 10-kilohertz therapy, while new competitors offer low-frequency devices. They believe these entrants target physicians preferring low-frequency technology. Nevro focuses on clinical superiority and has accounted for new competitors in its guidance. -
Vyrsa Revenue Guidance
Q: What is included in the 2024 guidance for Vyrsa revenue?
A: Vyrsa is in early stages with revenue currently not material. Nevro is transitioning from a distributor to a direct sales model, which will take time. They're not providing specific revenue figures for Vyrsa at this time. -
Salesforce Realignment and Market Share
Q: When will Nevro return to gaining market share?
A: After realigning the salesforce and making talent changes, Nevro expects their reps to hit their stride by Q2/Q3 2024. Training takes 6 to 9 months, and they believe the new sales reps will compete effectively as they become fully trained. -
Expense Management and OpEx Guidance
Q: Why is OpEx guidance higher despite headcount reduction?
A: Despite a 5% headcount reduction, operating expenses are expected to remain roughly flat due to merit increases, inflation, and investments in Vyrsa training. Q4 expenses are seasonally low; Q1 OpEx is anticipated to be around $105 million, including restructuring charges. -
PDN Growth and Adoption
Q: Can you provide metrics on PDN adoption and physician engagement?
A: PDN penetration is currently under 1%, indicating early adoption stages. Nevro is building relationships with referring physicians, who are seeing positive results and gaining confidence in referring patients. -
SCS Market Growth Potential
Q: What needs to happen to revive SCS market growth to high single digits?
A: Nevro focuses on increasing salesforce effectiveness to take market share. They believe opportunities with new indications like nonsurgical back pain and PDN can help the overall SCS market recover and grow. -
New Revenue Streams and Indications
Q: Are new revenue streams still pain-related, and what's the timing?
A: Nevro is developing projects leveraging their salesforce, staying close to core expertise. They aim to offer products aligning with their focus on clinical superiority. Timing details were not specified. -
Strategic Direction and Board Changes
Q: Will the strategy change with the new board member?
A: Nevro's strategy remains unchanged despite board changes. They've welcomed a new board member experienced in acquisitions and investments. They believe there's strong alignment to stay the course. -
Pricing Outlook
Q: How should we think about pricing in 2024 with the iQ launch?
A: As the product mix shifts toward the iQ device, average selling prices are expected to be flat to slightly up. This modest increase is incorporated into Nevro's guidance.
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