Yahoo Finance Nevro Corp (NVRO) Q1 2024 Earnings Call Transcript Highlights: A Detailed Review of Financial ...
Revenue: Q1 2024 worldwide revenue was $101.9 million, a 5.8% increase year-over-year.
Net Loss from Operations: Approximately $35.8 million.
Adjusted EBITDA: Negative $9.6 million for Q1 2024.
Gross Margin: Increased by 310 basis points to 70.2%.
Full Year Revenue Guidance: Projected at $435 to $445 million.
Adjusted EBITDA Guidance: Updated to a range of negative $5 million to positive $2 million for 2024.
Operating Expenses: Increased to $107.4 million in Q1 2024 from $100.9 million in the prior year period.
Cash, Cash Equivalents, and Short-term Investments: $281.5 million as of March 31, 2024.
Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Nevro Corp reported first quarter revenue and adjusted EBITDA that exceeded the guidance provided in the previous quarter.
The company announced a revenue increase of 5.8% on a reported basis and 5.6% on a constant currency basis, driven by a product mix shift to the newest generation SCS platform, HFXIQ.
Nevro Corp is taking additional restructuring steps to advance its strategy and accelerate the path to profitability, including raising the 2024 adjusted EBITDA guidance to a range of negative $5 million to positive $2 million.
The company has successfully integrated its newly acquired SI joint fusion business and commenced the limited market release of SI joint products, expanding its market penetration.
Nevro Corp continues to invest in R&D to develop and commercialize innovative treatment therapies for chronic pain, maintaining a strong focus on driving technological advancements and market leadership.
Negative Points
US trials were down approximately 5.1% compared with the year-ago period, attributed to overall softness in US SCS trialing activity and the impact of physician attendance at SI joint fusion training sessions.
The company reported a net loss from operations of approximately $35.8 million and an adjusted EBITDA of negative $9.6 million for the first quarter.
There are ongoing challenges with scaling the SI joint business, including the need for extensive training for physicians and sales reps, which can temporarily reduce trial activities.
Nevro Corp's reliance on the successful ramp-up of new sales reps and the adoption of new products like the SI joint fusion devices to meet full-year revenue projections introduces elements of uncertainty.
The company faces intense competition in the spinal cord stimulation market and needs to continuously innovate and differentiate its offerings to maintain and grow its market share.
Q & A Highlights
Q: Given the guidance for Q2, it implies a significant acceleration in sales and EBITDA in the second half of the year. Can you discuss what gives you confidence in these projections, particularly regarding revenue and EBITDA? A: Kevin Thornal, President and CEO of Nevro Corp, explained that the expected ramp-up in the latter half of the year is due to the seasonal nature of the business, with Q4 typically being the strongest. Additionally, the SI joint business is anticipated to provide tailwinds, and the sales force expansion from late 2023 is expected to fully ramp up, contributing to the growth. He also mentioned that patients who have previously used Nevro devices are likely to seek replacements, further supporting the revenue growth.
Q: Can you provide more details on the additional restructuring steps you are taking? Do you expect these to cause further disruptions this year? A: Roderick MacLeod, CFO of Nevro Corp, stated that the restructuring is aimed at increasing focus on key projects and strategies without causing significant disruptions. The restructuring efforts are expected to save about $25 million this year and more than $30 million annually, enhancing the company's focus on strategic priorities.
Q: Regarding the SI joint business, how much of its impact is included in the guidance, and can you elaborate on the expected contributions from this segment? A: Kevin Thornal clarified that while the SI joint business is anticipated to contribute to growth, it remains a non-material part of the business for 2024. He emphasized that no specific revenue figures like $20 million were officially released, and the focus is on scaling the business, including training physicians and ensuring product availability.
Q: Can you discuss the expected gross margin trends, particularly why there is an anticipated decline despite a strong Q1 performance? A: Roderick MacLeod addressed this by noting that the transition from contract manufacturing to in-house production in Costa Rica will cause some temporary cost variances that will impact gross margins in the second half of the year. However, the long-term outlook remains positive due to lower labor and material costs in Costa Rica.
Q: Could you provide insights into the health of the spinal cord stimulation market and Nevro's position within it? A: Kevin Thornal remarked that the market saw mixed results from different companies in Q1, with Nevro being one of the few that experienced growth. He reaffirmed the guidance for the year, which includes all expected sales activities and the gradual impact of the SI joint business.
Q: What are the plans for training related to the SI joint business, and how might this impact operations? A: Kevin Thornal explained that the training for the SI joint procedures is expected to cause minimal disruptions, mostly taking physicians out of their practices for a day or two. This training is crucial for the adoption of Nevro's SI joint solutions and is factored into the company's operational plans for the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
