Nevro Announces Second Quarter 2020 Financial Results

REDWOOD CITY, Calif., Aug. 5, 2020 /PRNewswire/ -- Nevro Corp. (NYSE: NVRO), a global medical device company that is providing innovative, evidence-based solutions for the treatment of chronic pain, today announced its financial results for the second quarter ended June 30, 2020.

Worldwide revenue for the second quarter of 2020 was $56.4 million, a 40% decrease from $93.6 million in the prior year period. Second quarter 2020 revenue was negatively impacted by COVID-19 restrictions on elective surgical procedures around the world. U.S. revenue in the second quarter of 2020 was $51.0 million, a decrease of 35% compared to $78.1 million in the prior year period. Year-over-year, U.S. trials declined by approximately 37% and permanent implants declined by approximately 34% during the second quarter of 2020 due to the COVID-19 pandemic. International revenue was $5.4 million, a 65% decrease on a constant currency basis, compared to $15.5 million in the prior year period.

"While the COVID-19 global pandemic took a severe toll on our business in the second quarter of 2020, we are encouraged by the signs of recovery we are seeing in procedure volumes, particularly in the U.S.," said D. Keith Grossman, Chairman, CEO and President of Nevro. "April was the most impacted month during the second quarter with a reduction of approximately 85% in U.S. case volume, when elective surgical procedures were restricted globally. Since then, we have seen sequential improvements in both May and June that have exceeded our expectations. In the month of June, daily U.S. trial and permanent procedure volumes were approximately equal to the prior year period, and we have seen continued improvement in the month of July. As expected, international volumes during the second quarter were deeply impacted and slower to recover. Despite encouraging signs of early recovery in the U.S., we remain cautious about the visibility and predictability of our environment through the end of 2020. We are monitoring new pandemic developments closely and will continue to work alongside our physician customers to serve patients who desperately need our therapy to relieve their debilitating chronic pain."

Gross profit for the second quarter of 2020 was $35.3 million, a 45% decrease compared to $63.9 million in the prior year period. Gross margin was 62.5% in the second quarter compared to 68.3% in the prior year period. Compared to the prior year period, the decrease in gross margin in the second quarter of 2020 was primarily attributable to a one-time charge of approximately $2.5 million related to older generation product that was deemed to be in excess of forecasted demand, as well as the impact of lower revenue.

Operating expenses for the second quarter of 2020 were $70.6 million, a 22% decrease compared to $90.5 million in the prior year period. Expenses included an increase in our reserves for bad debt of $1.5 million. The year-over-year decrease in operating expenses was primarily related to reduced travel-related expenses, temporary salary reductions and active expense management during the COVID-19 pandemic. Legal expenses associated with patent litigation were $2.3 million for the second quarter of 2020, compared to $3.9 million in the prior year period.

Net loss from operations for the second quarter of 2020 was $35.4 million, a 33% increase compared to a loss of $26.6 million in the prior year period. Adjusted EBITDA for the second quarter of 2020 was negative $22.1 million, a 98% increase compared to negative $11.1 million in the prior year period. Adjusted EBITDA excludes certain litigation expenses, interest, taxes and non-cash items such as stock-based compensation and depreciation and amortization. Please see our financial tables for GAAP to Non-GAAP reconciliations.

Cash, cash equivalents and short-term investments totaled $562.3 million as of June 30, 2020. Net cash increased during the second quarter of 2020 by $314.8 million, primarily as a result of approximately $313.5 million in funds, net of underwriter fees and expenses, received from the Company's April 2020 public offerings of common stock and convertible senior notes.

Webcast and Conference Call Information
Management will host a conference call today at 1:30 pm PT/ 4:30 pm ET. Investors interested in listening to the call may do so by dialing (833) 968-2321 in the U.S. or +1 (778) 560-2840 internationally, using Conference ID: 8783575. In addition, a live webcast, as well as an archived recording, will be available on the "Investors" section of the Company's website at: www.nevro.com.

About Nevro
Headquartered in Redwood City, California, Nevro is a global medical device company focused on providing innovative products that improve the quality of life of patients suffering from debilitating chronic pain. Nevro has developed and commercialized the Senza spinal cord stimulation (SCS) system, an evidence-based, non-pharmacologic neuromodulation platform for the treatment of chronic pain. HF10 therapy has demonstrated the ability to reduce or eliminate opioids in >=65% of patients across six peer-reviewed clinical studies. The Senza(®) System, Senza II(TM) System, and the Senza(®) Omnia(TM) System are the only SCS systems that deliver Nevro's proprietary HF10(®) therapy. Senza, Senza II, Senza Omnia, HF10, Nevro and the Nevro logo are trademarks of Nevro Corp.

To learn more about Nevro, connect with us on LinkedIn, Twitter, Facebook and Instagram.

Forward-Looking Statements
In addition to historical information, this press release contains forward-looking statements reflecting the Company's current beliefs and expectations of management made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including: our statements regarding early signs of recovery in elective procedures; and statements regarding our financial condition and expected effects of the COVID-19 pandemic on our business. These forward-looking statements are based upon information that is currently available to us or our current expectations, speak only as of the date hereof, and are subject to numerous risks and uncertainties, including our ability to successfully commercialize our products; our ability to manufacture our products to meet demand; the level and availability of third-party payor reimbursement for our products; our ability to effectively manage our anticipated growth and the costs and expenses of operating our business; our ability to protect our intellectual property rights and proprietary technologies; our ability to operate our business without infringing the intellectual property rights and proprietary technology of third parties; competition in our industry; additional capital and credit availability; our ability to attract and retain qualified personnel; and product liability claims. These factors, together with those that are described in greater detail in our Annual Report on Form 10-K filed on February 25, 2020, as well as any reports that we may file with the Securities and Exchange Commission in the future, may cause our actual results, performance or achievements to differ materially and adversely from those anticipated or implied by our forward-looking statements. We expressly disclaim any obligation, except as required by law, or undertaking to update or revise any such forward-looking statements. Nevro's operating results for the second quarter ended June 30, 2020 are not necessarily indicative of our operating results for any future periods.

Investor Relations:
Juliet Cunningham
Vice President, Investor Relations
+1 650-433-3247
ir@nevro.com

                                                                            
            
              Nevro Corp.


                                                                
       
       Consolidated Statements of Operations and Comprehensive Loss


                                                                  
       
           (in thousands, except share and per share data)




                                                                            
            
              Three Months Ended                               
         
            Six Months Ended


                                                                                 
            
              June 30,                                    
         
            June 30,



                                                                             2020                                        2019                            2020                                 2019



                                                                                     
            (unaudited)                                            
       (unaudited)



            Revenue                                                                  $
            56,390                                  $
         93,571                               $
        143,857      $
         175,719



            Cost of revenue                                                                    21,140                                         29,628                                      48,060              58,567




            Gross profit                                                                       35,250                                         63,943                                      95,797             117,152



            Operating expenses:



            Research and development                                                           10,444                                         14,930                                      22,656              29,065



            Sales, general and administrative                                                  60,167                                         75,573                                     131,569             156,901




            Total operating expenses                                                           70,611                                         90,503                                     154,225             185,966




            Loss from operations                                                             (35,361)                                      (26,560)                                   (58,428)           (68,814)



            Other income (expense):



            Interest income (expense), net                                                    (5,368)                                       (1,221)                                    (6,930)            (2,360)



            Other income (expense), net                                                         (290)                                           118                                       (243)              (225)




            Loss before income taxes                                                         (41,019)                                      (27,663)                                   (65,601)           (71,399)



            Provision for income taxes                                                             44                                            358                                         350                 698




            Net loss                                                                         (41,063)                                      (28,021)                                   (65,951)           (72,097)



            Changes in foreign currency translation adjustment                                    361                                          (377)                                      (468)              (101)



            Changes in unrealized gains (losses) on short-term                                    440                                            195                                         225                 440
    investments




            Net change in other comprehensive loss                                                801                                          (182)                                      (243)                339




            Comprehensive Loss                                                     $
            (40,262)                               $
         (28,203)                             $
        (66,194)    $
         (71,758)




            Net loss per share, basic and diluted                                    $
            (1.21)                                 $
         (0.91)                               $
        (2.00)      $
         (2.36)




            Weighted average shares used to compute                                        33,988,082                                     30,677,567                                  32,913,947          30,521,463


               net loss per share, basic and diluted


                                                                            
            
                Nevro Corp.


                                                                         
        
               Consolidated Balance Sheets


                                                                       
      
         (in thousands, except share and per share data)




                                                                                                                       June 30,               December 31,


                                                                                                                           2020                        2019



                                                                                                               (unaudited)



        
                Assets



        Current assets



        Cash and cash equivalents                                                                                              $
        276,515                $
         65,373



        Short-term investments                                                                                                       285,825                      172,429



        Accounts receivable, net                                                                                                      56,660                       82,833



        Inventories, net                                                                                                              91,849                       91,579



        Prepaid expenses and other current assets                                                                                      6,088                        9,838




        Total current assets                                                                                                         716,937                      422,052



        Property and equipment, net                                                                                                   11,436                       11,766



        Operating lease assets                                                                                                        19,867                       21,533



        Other assets                                                                                                                   3,976                       13,338



        Restricted cash                                                                                                                  956                          956




        Total assets                                                                                                           $
        753,172               $
         469,645




        
                Liabilities and stockholders' equity



        Current liabilities



        Accounts payable                                                                                                        $
        18,657                $
         16,048



        Short-term debt                                                                                                              164,465



        Accrued liabilities and other                                                                                                 37,646                       54,563




        Total current liabilities                                                                                                    220,768                       70,611



        Long-term debt                                                                                                               137,345                      160,300



        Long-term operating lease liabilities                                                                                         18,634                       20,445



        Other long-term liabilities                                                                                                    1,997                        1,937




        Total liabilities                                                                                                            378,744                      253,293



        Stockholders' equity



        Common stock, $0.001 par value, 290,000,000 shares authorized                                                                     34                           32
      
        34,274,490 and 31,544,361 shares issued and outstanding at
       
        June 30, 2020 and December 31, 2019, respectively



        Additional paid-in capital                                                                                                   850,669                      626,401



        Accumulated other comprehensive loss                                                                                           (556)                       (313)



        Accumulated deficit                                                                                                        (475,719)                   (409,768)




        Total stockholders' equity                                                                                                   374,428                      216,352




        Total liabilities and stockholders' equity                                                                             $
        753,172               $
         469,645


                                                                                                                             
              
                Nevro Corp.


                                                                                                                
              
                GAAP to Adjusted EBITDA Reconciliation


                                                                                                                             
              
                (unaudited)


                                                                                                                            
              
                (in thousands)





              The following table presents a reconciliation of GAAP net loss, as prepared in accordance with U.S.
    Generally Accepted Accounting Principles ("GAAP"), to Adjusted EBITDA, a non-GAAP financial measure.





              
                Reconciliation of actual results:

    ---



                                                                                                                               Three Months Ended                                              Six Months Ended


                                                                                                            
              
                June 30,                                 
          
                June 30,



                                                                                                             2020                                          2019                                         2020              2019



                                                                                                                 
              (unaudited)                                   
          (unaudited)



              GAAP Net loss                                                                                        $
              (41,063)                                      $
          (28,021)                  $
     (65,951)    $
     (72,097)



              Non-GAAP Adjustments:



              Interest (income) expense, net                                                                                      5,368                                                  1,221                         6,930           2,360



              Provision for income taxes                                                                                             44                                                    358                           350             698



              Depreciation and amortization                                                                                       1,224                                                  1,150                         2,561           2,275



              Stock-based compensation expense                                                                                   10,083                                                  9,721                        18,571          20,123



              Litigation related expenses                                                                                         2,294                                                  4,455                         4,456           6,801




              Adjusted EBITDA                                                                                      $
              (22,050)                                      $
          (11,116)                  $
     (33,083)    $
     (39,840)






              Management uses certain non-GAAP financial measures, most specifically Adjusted EBITDA, as a supplement to
    GAAP financial measures to further evaluate the Company's operating performance period over period, analyze
    the underlying business trends, assess performance relative to competitors and establish operational objectives.





              Management believes it is important to provide investors with the same non-GAAP metrics it uses to evaluate the
    performance and underlying trends of the Company's business operations to facilitate comparisons to its historical
    operating results and evaluate the effectiveness of its operating strategies. Disclosure of these non-GAAP financial
    measures also facilitates comparisons of the Company's underlying operating performance with other companies
    in the industry that also supplement their GAAP results with non-GAAP financial measures.





              EBITDA is a non-GAAP financial measure, which is calculated by adding interest income and expense, net;
    provision for income taxes; and depreciation and amortization to net income.  In calculating Adjusted EBITDA,
    the Company further adjusts for the following items:





              Stock-based compensation expense - The Company excludes non-cash costs related to the Company's stock-
    based plans, which include stock options, restricted stock units and performance-based restricted stock units as
    these expenses do not require cash settlement from the Company.





              Litigation related expenses - The Company excludes legal and professional fees associated with certain legal
    matters which management considers not related to the underlying operating performance of the business.





              Full year guidance excludes the impact of foreign currency fluctuations.





              The non-GAAP financial measure should not be considered in isolation from, or as a replacement for, the most
    directly comparable GAAP financial measures, as it is not prepared in accordance with U.S. GAAP.

View original content to download multimedia:http://www.prnewswire.com/news-releases/nevro-announces-second-quarter-2020-financial-results-301106939.html

SOURCE Nevro Corp.