Nevro Corp.

At this time, I would like to welcome everyone to Nevro Corp's second quarter 2024 earnings conference call and webcast. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to redraw your question, press star one again. I will now turn the conference call over to Angie McCabe, Nevro's Vice President of Investor Relations and Corporate Communications. Ms. McCabe, please go ahead.

Thank you, Mark. Good afternoon and welcome to Nevro's second quarter 2024 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 presentations page of the investor section of our corporate website at nevro.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 Investors section of our corporate website shortly after the conclusion of this call. 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 number of SEC filings, including its annual report on Form 10-K, filed on February 23, 2024, for a detailed presentation 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 our ongoing business performance. Non-GAAP adjusted EBITDA excludes interest, taxes, and non-cash items such as stock-based compensation and depreciation and amortization, as well as litigation-related expenses, restructuring of supplier contract renegotiation charges, and other adjustments. Please refer to the financial tables in our press release issued today for reconciliations of GAAP to non-GAAP reconciliation financial measures. I'll now turn the call over to Kevin. Kevin?

Thank you, Angie, and thank you all for joining us. After the close of market today, we issued our second quarter 2024 financial results. In my remarks today, I'll discuss the key factors that impacted our results and why we are revising our full year 2024 guidance, share why we remain optimistic about our business, and discuss the initiation of our review of strategic opportunities. Rod will then provide details on our second quarter financial results and third quarter and full year 2024 guidance. To begin, our results for the second quarter of 2024 as compared with the second quarter of 2023 were as follows. Worldwide revenue of $104.2 million decreased 4.3% on a reported basis, and U.S. revenue of $90.7 million decreased 2.4%. U.S. spinal cord stimulation, or SCS, trial procedures declined approximately 9.5%. Net loss from operations was $25.1 million compared with $25.6 million last year. And adjusted EBITDA was positive $3 million compared with a loss of $3.1 million in the year-ago quarter, demonstrating that our drive to profitability is having an impact on our income statements. We ended the quarter with over $270 million in cash and investments on our balance sheet, which we're excited to utilize to fund our organic growth initiatives over the coming years. Last year, Nevro's board hired me as CEO to implement a three-pillar strategy of commercial execution, market penetration, and profit progress to address the challenges of softness in the de novo spinal cord stimulation market. We have made progress in many areas, and we recognize that we have more work to do. Nonetheless, our revenue and trialing results in the quarter were impacted by competitive dynamics and continued softness in the US SES market, and this is also why we are revising our full-year 2024 guidance. Importantly, we are taking proactive steps to improve our competitive position positioning, and we have long-term plans to continue to diversify the business beyond SES. The SES market has seen increased competition driven mainly by new product launches over the past year by two of our larger competitors. As we've seen historically, some physicians like to try new products when they are introduced. However, we've found that physicians that use a multitude of products often revert to our patented 10 kilohertz therapy. given our superior clinical data, ease of implantation, and positive outcomes for more than 115,000 patients worldwide. Additionally, while we are confident that we continue to have best-in-class therapy for SCS patients, some healthcare providers also find value partnering with companies that can offer a diverse portfolio of products that treat and diagnose a broader spectrum of their patients. This is one of the reasons why last year we implemented our strategic pillar that includes diversifying our business to adjacent markets. As an example, we acquired a sacroiliac joint fusion or SI joint business late last year to give our customers more tools to treat patients suffering from chronic mechanical back pain. One of the key advantages of this strategy is it gives us the ability to leverage one of our largest and most important assets, our sales force, to drive adoption of and penetration into more therapies with our customers. Despite these factors, we still need to step up our execution to meet our expectations of capturing market share. Last year, we made several changes through our commercial realignment and have more work to do. For example, one of the elements of our commercial execution pillar is building a strong bench on our commercial teams. To further develop a high-performing flexible field team, we have been developing our associate sales reps, or ASRs, and some are now ready to take on their own territories. And by deploying some of these existing team members into newly created territories, our sales team can reach more customers, go deeper with physicians, provide the service our customers expect, and lay the foundation for new product introductions to the market. Also, in our continuous effort to improve commercial execution, we promoted some of our strongest performing field team members into leadership positions. Executing our strategy is paramount to driving long-term profitable growth, and we believe these changes will drive improved performance in the field, and when combined with our expanding product portfolio, will help position us to compete more effectively and win in the market. Turning now to a discussion of the U.S. SES market. The overall opportunity to treat patients who can benefit from SES therapy is significant and continues to be underpenetrated. However, as we've discussed in the past, we continue to see softness in this market today. As we routinely do, we recently conducted comprehensive market analyses, including customer and patient focus groups and surveys. The results show that newer treatment options earlier in the care pathway ahead of SES therapy are gaining traction. We believe these newer therapies are, in some cases, delaying patients from getting SES therapy, as well as competing for our customers' time and operating room schedules. These newer procedures, such as SI joint fusion, offer physicians who treat patients suffering from multiple causes of chronic pain more tools than ever before to treat their patient's pain, and in some cases, their underlying functional etiologies. Chronic pain patients have always progressed through multiple treatment modalities before arriving at the need for SES therapy. And we believe more tools in the hands of our customers, while temporarily delaying the application of SES in some cases, will continue to bring more patients into the care of pain management specialists and will ultimately expand the market for SES therapy. We've seen this happen in other specialties and interventional markets. This increase in therapeutic options benefit both patients and the physicians we currently serve and is one of the primary reasons why we are diversifying our product portfolio to include treatment therapies earlier in the care continuum. Our acquisition of Versa Technologies, which gave us entry into the SI joint space, is one example of this. Another strategic response to this trend that we have discussed previously lies in our solid R&D pipelines. It not only includes our next generation of high-frequency SES therapies, one of which we anticipate launching in early 2026 backed by strong clinical evidence, but also new devices and treatments that address additional causes of chronic pain. Nevro is more than just an SES company today. Our vision is to free patients from the burden of chronic pain, and we are working towards becoming a more comprehensive pain management company. While the opportunities for rapid SES growth are currently slower than historic norms, the opportunities within the pain treatment space are more numerous than ever. As more procedures become less invasive, we believe that physicians who treat patients for chronic pain will continue to grow their practice and have the ability to treat a multitude of different pain conditions. We also believe that many patients who undergo these alternative therapies will ultimately continue the journey along the care pathway all the way through to SES therapy. However, we believe that by diversifying our business, we can better position, we'll be better positioned as a unique resource to our customers and that can drive sustainable growth, profitability, and value creation. Taking these competitive and market dynamics into account, we remain very optimistic about our business over the longer term, given the multiple catalysts that we believe can contribute to our top-line growth. As part of our plan to become a more comprehensive pain management company and drive market penetration of very large and underserved markets over the next few years, we are working on growing our business through expanded SES indications next-generation SES therapy, and alternative therapies that are earlier in the care continuum. And as we continue to ramp our SI joint fusion business, we expect it to contribute more meaningfully to our growth next year. The painful diabetic neuropathy market, which Nevro created, remains underpenetrated at less than 1%. We continue to focus on this business by educating referring physicians and raising patient awareness benefits of SES as treatment therapy for these patients, and sharing strong clinical evidence of greater than 90% pain responder rates at two years and neurological improvement in the majority of subjects. We recently presented our four-year follow-up with continued robust long-term outcomes. In addition, as we announced last quarter, due to enrollment progressing more quickly than expected in the census sensory RCT, we reached the pre-planned interim analysis and positive enrollment to allow the currently all randomized cohort to progress to the primary endpoint. This may allow earlier than initially anticipated publication. followed by potential review and specific inclusion of Nevro's proprietary 10 kilohertz SES therapy into evidence-based guidelines, such as those published by the American Diabetes Association. We anticipate a readout from the interim analysis in early 2025. Also, as we discussed on our first quarter 2024 earnings call, our SCF devices have rechargeable batteries with a very long functional life, yet they will eventually need to be replaced, as has been the case with our competitors for decades. We believe many of our patients will want to continue using our best-in-class and clinically proven high-frequency therapy. and XS are newer AI-enabled HFX IQ system, which uses real-time patient data to enable on-demand therapy adjustments and proactive care within 48 hours. As a reminder, we began treating a significant number of patients commercially in late 2015. which means patients implanted with our IPG during that time are now nearing the natural life of their IPG battery, and many of those patients, in consultation with their doctors, will choose to replace their device with a new one. As I previously mentioned, our longer-term goal is to become the leading provider of treatment options with the most diversified, differentiated, and innovative product portfolio in the pain management space. By achieving this goal, we believe we can create the type of scale, growth, operating leverage, and sustainability to unlock the kind of shareholder value that our board and management team are intent on creating. But we feel an urgency to respond to this evolving market environment and to create value for our shareholders. So, to enable and accelerate this strategy, our board of directors and management team have begun a process to explore all possible strategic options that might be available to us. We have retained advisors, and over the next several months, we will more aggressively explore broader options alongside our current standalone path that may help us accelerate the achievement of our goals. These opportunities may include, but are not limited to, partnerships, mergers, or even a sale of the company. We have not set a timetable for the conclusion of this process, and we can't say for certain that this process will result in our entering into or completing any transaction at all, or that any transaction we identify will be a better option than our current standalone strategy. In the meantime, we remain laser focused on executing our initiatives. Over the past year, we have made significant progress on our three-pillar strategy. We continue to focus on improving our commercial execution, which is still ongoing. We acquired an SI joint company that allowed us to expand into an adjacent pain market that is earlier in the care continuum. We aligned our cost structure more closely with the size of our business, and we strengthened our balance sheet through our November 2023 debt refinancings. Before I turn over the call to Rod, I want to make very clear to our customers, patients, and employees that we are in a strong financial position with over $270 million in cash and investments on our balance sheet. We remain confident in the long-term health and growth of our markets, our ability to compete and win in those markets, and our ability to bring additional innovative products to our customers who treat patients suffering from chronic pain. our more than 400-person customer-facing teams remains dedicated to partnering with our physicians to provide exceptional patient care. I'll now turn the call over to Rod for a discussion of our second quarter financial results and guidance. Rod?