Nevro Corp.

Good afternoon and welcome to Nevro's fourth quarter and full year 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you'd like to withdraw your question, press star one again. I would now like to turn the call over to Angie McCabe, Vice President, Investor Relations, and Corporate Communications for Nevro. Please go ahead.

Thank you, Regina. Good afternoon, and welcome to Nevro's fourth quarter and full year 2023 earnings conference call. With me today are Kevin Thornell, our CEO and President, and Rod McLeod, our Chief Financial Officer. Before we get started, please note that our earnings release and the supplemental presentation accompanying this call are available on the events and presentation page of the investor section of our website at nevros.com. Also, this call is being broadcast live over the internet to all interested parties, and an archived copy of this webcast will be available in the investor section of our website shortly after the conclusion of this call. Before we begin, I'd like to remind everyone that comments made on today's call may include forward-looking statements within the meaning of federal securities laws. Results could differ materially from those expressed or implied as a result of certain risks and uncertainties. Please refer to NEVRO's SEC filings, including our annual report on Form 10-K, for detailed presentations of risks. The forward-looking statements in this call speak only as of today, and the company undertakes no obligation to update or revise any of these statements. In addition, management will refer to adjusted EBITDA, a non-GAAP measure used to help investors understand Nevera's ongoing business performance. Adjusted EBITDA excludes interest, taxes, non-cash items such as stock-based compensation, depreciation and amortization, litigation-related expenses and credits, changes in the fair market value of warrants, and other adjustments such as gain from extinguishment of debt and restructuring charges. Please refer to the financial tables in our earnings press release issued today for reconciliations of GAAP to non-GAAP financial measures. I will now turn the call over to Kevin. Kevin?

Thank you, Angie. Good afternoon, everyone, and thank you for joining us today. We're pleased with our fourth quarter performance and the progress we are making on advancing our core three pillar strategy. For the fourth quarter of 2023, and as compared with the year ago period, today we reported Worldwide revenue of $116.2 million, an increase of 2% on both a reported and constant currency basis, and ahead of the guidance that we provided on our third quarter 2023 earnings call. PDN sales grew 29% to nearly $22.4 million. U.S. trials were down just under 1% and in line with our expectations. a net loss from operations of $11.8 million and adjusted EBITDA of positive $8.4 million, also ahead of our expectations. For the full year of 2023, worldwide revenue was $425.2 million, an increase of 5% on a reported and constant currency basis. Also in the fourth quarter of 2023, we acquired Versa Technologies, which we are very excited about as it provides us with entry into the very high growth Sacro Iliac or SI joint fusion market and announced a debt refinancing. Last year, we developed and implemented our strategy to improve our commercial execution and strengthen our foundation so we can deliver stable, consistent performance, achieve long-term profitable growth, enhance stockholder value, and continue to provide best-in-class therapies for patients suffering from chronic pain. On today's call, I'll highlight key items that demonstrate the progress we are making on a number of fronts. Rod will discuss our fourth quarter results and 2024 guidance for both the full year and for first quarter. Our strategy consists of three pillars. The first is commercial execution. We are laser focused on improving our execution to remove sales barriers, enhance customer experience, and drive long-term profitable growth. To improve sales productivity, we made some changes to the commercial team's compensation structure and completed our commercial realignment. For example, because healthcare is locally delivered and consumed, we implemented a more geographically focused reporting structure. We also rolled out new incentive-based compensation plans that include rewarding sales reps who deliver accelerated growth, as well as incentivizing sales leaders to focus on delivering profitable growth. In addition, our market development team is now focused on increasing awareness of SCS as a treatment therapy beyond painful diabetic neuropathy. As a reminder, there are significant growth opportunities in SCS, including non-surgical back pain and traditional back and leg pain, and we have been at the forefront of driving awareness of new indications, and our differentiated technology is demonstrated by our success in PDN. Importantly, we continue to focus on improving physician engagement and education. Last year we completed several large new hire training sessions, conducted our first SI joint lab with advisors, implemented new professional education programs such as continuum of care courses for pain interventionalists and surgeons, and trained over 100 fellows. The second pillar of our strategy is market penetration through expanded indications HFX IQ line extensions, a robust R&D pipeline, strong clinical evidence, and targeted additive acquisitions. We are seeing increased adoption of HFX IQ since its full market launch last March. HFX IQ represented 53% of our permanent implant procedures in Q4 of 2023, and adoption will continue to grow throughout 2024. Our data proves that with the HFX IQ system combined with the cell phone app, which sends proactive alerts, physicians' clinical burden is reduced by 40% and patients get back to pain relief 75% faster than patients who are using a traditional remote. To provide even more patients with access to the benefits of HFXIQ, within the next few months, we expect to launch a solution for roughly half of these patients who do not have an iPhone, including those with an alternative device. In 2023, we also continue to penetrate the SES market with our expanded indications in the PDN and non-surgical back pain patient populations. PDN accounted for 24% of our permanent implant procedures in Q4. Even with our success in PDN, the market remains under-penetrated at nearly 1%. We are focused on further developing this market with our best-in-class technology and superior clinical data, showing that patients treated with 10 kHz therapy experienced durable pain relief and significant improvements at 24 months. This is one of our key competitive differentiators because competitive devices are purposely designed to cause a tingling sensation to mask pain, which is a common symptom PDN patients already experience. In contrast, our 24-month data shows that PDN patients experience durable pain relief without the use of paresthesia. Notably, we recently announced the publication of a consensus statement summarizing recommendations based on outcomes from a December 2022 global interdisciplinary panel at the Worldwide Diabetes Virtual Global Summit. The statement, which was published in Diabetes Research and Clinical Practice, recommends SES therapy and particularly high-frequency 10 kilohertz SES to treat refractory PDN symptoms that aren't adequately addressed by first and second line treatments. Enrollment in our PDN clinical sensory study now stands at 98 patients. The study is designed to more objectively prove the sensory improvements that we observed in our initial clinical randomized clinical trial, or RCT, and to receive an SES indication beyond pain. We believe that this, along with our 24-month data and differentiation of our innovative therapy, will help us further penetrate the PDN market and achieve our goal of having 10 kilohertz therapy reference and additional society guidelines for the treatment of refractory PDN. Also in January, we announced that Carolin Health will be publishing a new interventional pain management policy that expands SDS coverage for PDN effective April 14, 2024. As a result, PDN patient coverage will expand by nearly 43 million additional lives, bringing total U.S. covered lives to approximately 250 million. We are excited to continue working with physicians to expand awareness and offer this therapy to more patients suffering from PDN. Turning now to our first-ever acquisition, we are excited about the Versa transaction for several reasons. First, we now have access to a large and fast-growing market. The SI joint market is currently valued at $2 billion in the U.S. alone, and we expect the increasing adoption of minimally invasive surgical procedures in this space to be a growth driver. Second, many physicians who perform SI joint procedures are also performing SCS implant procedures, and we are now able to offer them more options to treat patients suffering from chronic pain. This has the added benefit of strengthening our relationship with these physicians, as many of them are already our customers. Third, we are leveraging our commercial sales force and their current position relationships to help drive adoption and growth. It should be noted that when fully trained, we will have the largest SI joint sales force in the market. Finally, it broadens and diversifies our pain portfolio. We estimate that approximately 15% to 30% of patients with chronic lower back pain have pain that originates in the SI joint, and we now offer options to treat patients with both mechanical and neuropathic pain. We also offer one of the most comprehensive portfolio of products in the SI joint space. We are in the process of transitioning Versa products to Nevronaming and Branding. In the interim, the current portfolio is comprised of Nevro V1, Nevro Pro, and Nevro Fix. Nevro V1, an integrated SI joint fusion system with transfixing technology, will be our flagship product as there is no other device like it on the market. Nevro V1 is proven to immediately transfix the SI joint to allow long-term fusion. Also, our proprietary instrumentation allows for optimal intraarticular SI joint preparation, which is critical to achieve joint fusion. Finally, Nevro V1 comes with 3D printed bone growth enhancing technology, which helps promote bone cell growth and, as a result, fusion. With this full suite of products, we are able to accommodate the different SI joint approaches, available sites of service, and CPT codes to meet the preferences of different physicians, and varying patient needs, ultimately helping to improve the quality of life and health outcomes for patients. In early January, we launched training for our sales reps for all three of our SI joint products, and we'll continue to train both reps and physicians throughout 2024 as we ramp up this business. In addition, our limited market release started this month, and while early, overall physician feedback has been positive so far. Importantly, clinicians and medical societies expect that we will continue to generate the clinical evidence in the SI joint space, just as we have done in SES, which is important in driving physician adoption and payer coverage. Regarding our R&D pipeline, we continue to work on developing new revenue streams that will leverage our largest asset, our sales force, and expanding into new indications for SES. We won't go into detail here for competitive reasons, but as I previously communicated, one of the reasons why I joined Nevro was because of the impressive pipeline of products. Finally, our third strategic pillar is profit progress. Our goals are to improve efficiencies through streamlined processes, scale our Costa Rica manufacturing facility, and have disciplined expense management. While there is more to do, we are making progress on this front with our leaders and teams across the organization. In January, we implemented a restructuring, which included laying off 5% of our employees. While this was a very difficult decision, it was necessary to position Nevro for long-term growth and profitability. Rod will talk about the expected financial impact of the restructuring in his remarks. As I mentioned, we are leveraging our self-force that already call in physicians that treat pain to drive profitable growth in SI joint. These procedures will require limited post-operative patient follow-up by our commercial team, allowing sales reps to grow revenue without adding patient support team members. We also continue to scale our Costa Rica manufacturing facility, which is supported by world-class manufacturing experts in technology. We will leverage it as we expand the business through new products via R&D and tuck-in acquisitions. Before I hand the call over to Rod, I want to make a couple of final comments. First, I want to thank our Nevro team members for their focus on executing our strategy and steadfast commitment to freeing patients from the burden of chronic pain. Second, we recently held our 2024 national sales meeting for our U.S.-based commercial team. For many of the participants, this was their first Nevro sales meeting, and team members showed great enthusiasm for our core business, new entry into the SI joint space, and excitement for our future. We are dedicated to our mission and are building on the progress we made in 2023 to stabilize and strengthen our foundation, which will allow us to transform our business through the opportunities that lie ahead. 10 kilohertz therapy, which is supported by superior clinical data and multiple RCTs across several indications, is enabling us to provide patients greater access to our innovative therapies. Our goals remain the same. to execute our strategy and capitalize on meaningful leverage opportunities to drive profitable long-term growth, positive operating cash flow, and increase shareholder value. I'll now turn the call over to Rod for a discussion of our fourth quarter financial results in 2024 guidance.