Q1 2020 Earnings Call
[music].
Good afternoon, and welcome to never Eyes first quarter 2020 conference call.
This time, all participants are in English and only my like after the speakers presentation. There will be a question and answer session to ask a question. During the session. You want me depressed star one on your telephone keypad and now I'd like to introduce Juliette Cunningham never as Vice President as investors.
<unk>. Please go ahead and it's kind of.
Oh, Thank you Jennifer.
Afternoon, everyone. Thanks for joining us today with me is keep gross many chairman C.E.O. and President and Andrew Galligan, Chief Financial Officer.
The format of our call today will be a discussion of first quarter trends and business results from Keith.
Would buy detailed financials from Andrew and then we'll open up for question.
Earlier today never released this financial results for the first quarter, which ended March 31st 2020.
A copy of our earnings press release and presentation is available on the company's Investor Relations website.
This call is being broadcast live over the Internet to all interested parties on May 5th 2020, and an archive copy of this web cast will be available on our Investor Relations website.
Before we begin I'd like to remind everyone that comments made on today's call me include forward looking statements within the meaning of federal Securities laws.
Or actual results could differ materially from both expressed or implied.
The result of certain risk and uncertainties. Please refer to R.S.P.C. filings, including our form 10, q. can be filed today.
A detailed presentation of risk.
In addition will refer to adjusted EBITDA, which is a non gap measure.
Please refer to the gap to non gaffe reconciliation table included with our earnings really.
What's that Oh turnover tricky.
Great. Thanks, Juliet and good afternoon, everyone. Thanks for joining us today.
Our first quarter 2020 results reflect really a combination of both the positive momentum it's been building in our business over the last year.
And of course, the rapid spread and impacted cope with 19 around the globe.
I'd like to share our perspective about where a business responding prior to this pandemic.
As well as the dramatic impact pulled it had on our business ending in the month of March.
And our general thinking about where our business. We go from here in 2020, finally, and perhaps most importantly, I'd like to describe the actually we've taken over the last two months.
I'm sure the health and safety of our employees are patients in our customers.
For the first two and a half months of first quarter or business was performing well ahead of our expectations.
February.
Every year U.S. trial growth was 20%.
Permanent employment growth was 29%.
Q1 was the first full quarter of on the a contribution to our results and we were seeing positive customer response and early mark attraction.
In addition, we receive an overwhelmingly positive response from our P.D.F. file data that was person.
<unk>.
<unk>.
We also stopped enrollment in our and this R.B.P. trial following a prescribed interim statistical analysis to determine the study was adequately powered and didn't require additional enrollment.
Clearly our efforts over the past year to focus on the improvement of our commercial execution and also advancing our clinical already pipeline from getting to yield strong and tangible results.
Beginning in March the rapidly expanding recommendations of requirements to delay elective procedures in order to focus healthcare resources on corporate 19 patient care began to have a material impact on our business.
In the last few weeks of March alone, we experienced case cancellations, representing approximately $20 million in revenues worldwide.
Approximately 17 billion within the U.S. and around 3 million international.
As health care systems around the world now begin to implement our plan for a restoration of elective surgical procedures.
Important remember that there are multiple tears of elective surgeries that have been prioritized in terms of timing necessity and patient need <unk>.
<unk> all into the elective, but necessary category, because our patients typically suffered chronic debilitating pain for years most of in fact undergone prior interventional and surgical procedures before they even get yes, yes therapy.
Majority of our patients are on opioids prior to I.C.S. So our therapy is often considered among the last stops in the treatment continuum for these chronic pain conditions and patients undergoing S.D.S. procedures do so in a response you have really critical neat.
Among elective procedures. It's also important remembered the distinction between those that are gone.
Inpatient versus an outpatient setting.
Scf procedures are done on an outpatient basis, so for the roughly half of our cases that are performed in the hospital setting those patients don't require a bed or consumption of other inpatient resources.
We actually think this is a positive facts for us in the hospital setting as they manage their mix of cases during the ramp backups.
But the other roughly half of our case, we just take place in ambulatory surgery Center short <unk>.
We expect them to lead the way in the early recovery for feasible.
We also expect this episode to possibly accelerate the sight of care shift from hospitals H.F.C.S that was already been getting to happen.
We've been working hard to determine how we can best help these patients and the position to care for them to navigate the nascent recovery of I.C.S. treatment volumes.
As prescribed by the recently published Whitehouse guidelines the restoration of electric procedures fall into phase one of the reopening plan in the U.S.
We're analyzing the path forward and supporting our customers according to their priorities.
Such as the safety of their patients on staff.
The prioritization and reactivation up their case backlog and of course generally supporting the recovery of their business.
Throughout this pandemic, we've stayed in close contact with our customers and their patients.
We already had a patient care infrastructure in place with remote patient support teams and we have maintained our connection with both physicians and patients to a proactive engagement program that includes virtual patient support a patient nurturing program to our never a cloud patient management platform.
Position educational seminars with timely topic sent on a regular cadence.
Over the past couple of months on where possible our field of therapy support teams.
Focus on remotely helping existing patients.
Optimize their pain relief and also educating new and perspective patients on S.C.S. therapy.
Through the month of April our patients support team has conducted more than 50000 phone calls with our patients of node approximately 9500 implanted patients have had their therapy optimize remotely during these discussions.
44% of those patients all improvements in their pain.
The collaboration we've had with our customers are patients or employees. During this time as Franklin good nothing short of inspiring.
Really grateful who our entire team for maintaining our unique capabilities during such a trying period for them and for their families.
We spent a great deal time thinking about and modeling various kobe related business scenarios for the remainder of this year.
Internally as part of our planning process.
We're not providing second order or 2020 guidance at this time I'm not going to go into a lot of the details here, but I do want to provide as much transparency into our business outlook as possible.
I Wonder if I could ask anyone who's on the line was not viewed it to make sure and view, we're hearing some some email et cetera.
Our base case expectation is that second quarter will be significantly impacted by covert restrictions on elective procedures with April being the hardest hit month in fact April in April we saw in approximately 85% reduction in our case volume now that declined was even steeper earlier.
In the months and the good news isn't was already beginning to improve in the last part of the motto.
As of the end of April we also began to see clear evidence of cases being rescheduled over the next two or three months.
About 30% of the permanent procedures that were previously postponed or cancelled due to cope with 19 are already being schedule for the next 60 to 90 days.
And our new patient increase increase substantially during this period, which suggests that patients are in fact reengaging.
We expect to see continued sequential improvement this quarter in a month of May and again in June as procedures are restored in the U.S. parts of Europe and Australia.
Now in the third quarter, we also expect to see continued and greater progress towards a business how.
And our current view of the fourth quarter is that it could even approach more normalized <unk> relative to our <unk> expectations.
So not surprisingly we've been closely analyzing not only the pace at which procedures are likely to return, but also which care settings are likely to come back on line first we're tracking by country region and state as restrictions are lifted to ensure that we can support our customers needs.
When the shut down in case volumes began to happen in March we had at that time over 3000 patients who would eat or cancel their schedule permanent implant procedures.
Or had responded positively to it completed at trial.
We're likely to move on to affirmative down flat.
Many more patience than that had either cancelled scheduled trial procedures or they were in our lead management system as perspective.
<unk>.
Getting all of these patients back into the scheduled of our customers represents a high priority for us in the near mid term.
By the way also represents a way we can uniquely help our customers get back on their feet as well.
This backlog of patients with a substantial therapeutic needs combined with our direct access to these patients.
And of course, our customers very keen desire to return to procedural help provide strong tailwinds to our outlook for recovery as I've described it.
Conversely, those potential headwinds to this 2020 case that we can't.
Accurately predict right now include the impact of reduce procedural throughput in both S. season hospital due to new and more restrictive policies that may constrained case capacity.
As well as pace of hospital recoveries themselves since we as I mentioned <unk> expect them to be somewhat slower than A.S.C.'s in their recovery profile.
In addition, we kept yet estimate the potential impact of macro economic conditions in the coming quarter, such as persistent and high unemployment rates.
Or finally, any new eruptions, a covert 19 infection rates that could impact elective procedures throughout the duration of 2020.
And now throughout this brief but very consequential time, our highest priorities as a company have remained one.
Safety of our customers their patients in our employees.
To the support and coverage of our customers in their clinical case activity throughout this period.
Three the integrity in readiness of our supply chain.
For the prudent stewardship of our balance sheet. During this temporary reduction of reduced sales activity.
And five the maintenance of our competitor position and our capabilities in order to exit this crisis. The way we came in with really positive momentum.
Guided by these priorities we implemented the fact of work from home policies in mid March and we curtailed nonessential travel for the shape of our employees.
In addition, we implemented training and skills retention programs for our field sales organization and have attempted to protect both our primary r. and d. programs and clinical trials to enable us to make continued progress even during these work from home restrictions.
We took these actions with the intention or maintaining our highly trained workforce.
Interesting prepared to support our customers return to performing procedures as quickly as possible.
As we discussed last quarter, we were already implementing a number of cost saving measures before covert 19 to reduce our overall operating expenses as part of our long term profitability objectives.
In this new covert 19 environment, we've made a concerted effort to produce expenses even further.
We have differed a number of discretionary expenses out of second quarter and in some cases out of 2020, while keeping our workforce and or highest priority strategic initiatives intact.
Leaders can provide a bit more detail on our operating expense management a few moments.
In terms of future growth driver such as our clinical trial the support expanded use in PDN and also R.M.S.R.B.P. trial.
As well as our key product development initiatives. We continued move these problems are these programs forward as close to our initial plans as possible.
For PDN, we expect little or no delay due to cope with 19 restrictions.
Emus Rvps up to date all of the remaining patients who were randomized to the treatment arm have either been treated or are currently scheduled for implants during the second quarter.
In working with our investigators you get these last patients treated as soon as possible centres reopen and we continue to expect that we'll be able to present three month and S.R.B.P. data at the Indians conference in early 2021, which is in line with our previously announced.
Guidelines.
As part of our strategy. We also moved very quickly to reinforce our balance sheet on liquidity position for near term stability and longer term grows at a combined with a combined secondary equity and senior convertible notes offering of approximately $350 million before fees and expenses.
Following this financing we have around 560 million in cash on our balance sheet now of that we plan to use 172 million to settle our legacy convertible notes when they're due in June next year.
Once we satisfy those notes will have no maturity obligations until 2025.
I'd also highlight several positive developments, which underscore both are competitively positioned SCS products with a unique ability to offer H.M. therapy as well as our commitment to vigorously protect our intellectual property.
<unk> was a settlement of our past patent infringement lawsuit against him way, which resulted in their agreement to permanently cease commercialization of all high frequency spinal cord stimulation products worldwide.
The second occur just after the end of the quarter, we prevailed in the long running appeal on our offensive litigation against Boston scientific in the Northern District of California.
In that case, the federal circuit reversed the district courts, Indefiniteness Rollings reinstating Nevros asserted system patterns and also upheld our method patents for delivering SCS therapy at high frequencies. Both of these outcomes reinforce the strength of Nevros intellectual property portfolio.
In addition, omnia, which is the only FCS platform. They can offer high frequency plus lower frequencies and paired wave forms received earlier than expected approval in Australia during the quarter and we currently wait a C.E. mark approval in Europe, which we hope happens in the near term.
Well, we can't get predict the depth or duration of this rapidly changing pandemic, we remain confident in some very important and foundational facts regarding our long term opportunity.
Number one the very underpenetrated nature of our patient population and the size of our potential market.
Number two the long term potential for S.C.S. therapy to play a much greater role in the care of those patients.
Number three the differentiation and superior effectiveness of R.H.F. 10 therapy.
For our ability to capture more significant STS market share overtime than we currently possess.
And five significant to the future growth drivers in our business such as that PDN opportunity I discussed.
In short we believe that are underlying business fundamentals remain intact and that insight has guided how we respond to this crisis from the very beginning.
I believe we position or visitor weather the storm, both organizationally and financially.
And finally I'd like to one more time, thank the entire never routine for stepping up and banding together to serve the needs of our patients our customers are shareholders value and even their own families. During a time of uncertainty that for most just has no precedent.
I've been really inspired by our team spirit determination their creativity and especially the hard work.
I also want to think our customers for their diligent and selfless focus on their patients in the midst of what we know it's been both personal and professional chaos.
And finally, I want to think our existing in our new investors for continuing to support and value our path as an enterprise.
Without altering the call over to Andrew to go through the two one financials.
<unk>.
Oh begin with our worldwide revenue.
Centered March 31st Twentytwenty, which was 87.5 million, hey, 6% increase compared to 82.1 million prior year period.
This whole slightly higher than our Preannounce revenue rain, Charles 86.42 86.9 million.
First quarter Twentytwenty revenue was negatively impacted by a rapid deceleration in March 2022 to cope it 19 shelter in place policies and restrictions on the elected surgical procedures around the world.
U.S. revenue was 75.3 million, a 14% increase compared to 65.8 million prior year period.
You're over your U.S. trial growth, 170% permanent incline, Croats was 12% during the first quarter of 2020.
<unk> totaling approximately 17 million were cancelled due to coach at 19 during the first quarter 2020.
International revenue was 12.2, Melugin, 826% decrease satisfy recorded.
23% decrease on a constant currency basis.
Compared to 16.3 million in the prior year period.
The decrease in international revenue was primarily due to the impact of coated 19 related government.
Mint restrictions on the electric procedures implemented in Europe, and Australia during the ladder half of the first quarter.
International cases, totaling approximately 3 million for utensil cute coach at 19 during the first quarter 2020.
Gross profit for the first quarter of 2020 was 60.5 million.
14 per cent increase compared to 53.2 million in the prior year period.
Gross margin was 69.2% in the first quarter compared to 64.8% in the prior here period.
This increase was primarily due to the infantry relate to charge at 3.6 million recorded in the three months ended March 31st 2019.
<unk>.
Oh Crazy inexpensive for the first quarter of Twentytwenty work 83.6 million.
Hey, 12% decrease compared to 95.5 million in prior year period.
The year over year decrease in operating expenses was primarily related to higher costs associated with shareholder activism and the management change in the prior year period.
Legal expenses associated with buttons litigation work 2.1 again for the first quarter of 2020 compared to 1.3 million independent of your period.
And this kind of courage environment, we're focused on cash preservation.
Keep discussed.
He had actively reduced expensive thing cute poor of 2019 to start paving the way for achieving operating leverage in 2020.
Given the coated I'm dead that corner further reducing our operating expenses, including short term salary of reductions across the organization.
Cooking travel spooning hiring and firing lower priority strategic project out of cute too and in some cases and to 2021.
Repeats reduction we currently expect to see cute too operating expenses.
Hi, 70 million range, which is a significant decrease post sequentially and year over year.
Net loss from operations for the first quarter Twentytwenty was 23.1 million.
45% improvement compared to a lot so 42.3 million prior year period.
Adjusted EBITDA for the first quarter of 2021 negative to 11 million.
2% improvement as compared to negative 28.7 million in the prior year period.
Adjusted EBITDA exclude circle education expenses and press tap said, the non cash items, such as dark thanks compensation depreciation and amortization.
Please see the gap to non Guy reconciliation table in our presley's available on our website.
Cash cash equivalence on short term investments totalled 247.5 million as of March 31st Twentytwenty.
Ness cash increase during the first quarter 2020 by 9.7 metal again.
Let's keep mentioned in April we issue convertible notes and concurrently completed and underwritten public offering a common stock.
Resulting in cash proceeds that 313.5 million NASA underwriting thieves hedging costs and puffing expenses.
They expect to use approximately 172.5 million to please proceed to repay our legacy convertible notes, which will mature June 2021.
Once we start despite the 2021 notes, we will have no maturity obligations until 2025.
Cash cash equivalence and short term investments after this financing total approximately 560 million.
We are confident that our balance sheet additions well above the current environment and longer term gross.
Of detailed in earnings we previously returns 2020 guidance. We also believe two to the uncertain scope consideration at the time done that and the timing of global economic recovery.
Reliably estimate <unk> impact to code at 19 or operations and financial results at this time.
We expect to provide update on future earnings calls.
<unk>.
That concludes our prepared marks and chat now we'd like to open the line for question.
Okay. Here first question comes from the line.
Larry Bake Austin.
Hi, good afternoon. Thanks for taking the question can you hear me okay.
Hi, Larry Gotcha, Okay. Good Hey, <unk>. So <unk> would you be willing to provide some color on what you're seeing in hospitals in H.C. per day restart procedures are you willing to disclose what kind of the year or the or you know decline exiting April it sounds like it got better see the button and lastly, keep deep still expect to be.
Down here every year in Q3 thinks that particular question.
Yeah, I think we've probably provided all of the granularity that we really can't at this point on April I think we I think we've given a fair amount of of detail there.
I think we're I think we're actually pretty encouraged by the level activity and energy, we're seeing right now among both S.C.'s and even hospitals.
I can tell you that despite the startling number that you heard about April as as we think about where we are into two were actually.
We actually find ourselves a little bit ahead at this early point of what we have what we formulated as our base case for this this pandemic hasn't started so I think we're I think we're feeling cautiously optimistic at this really early stage about how things are starting to turn back with regarding.
Third quarter I think the gist of our commentary Larry was was just to say that we're on our way back.
To restoring the business to health so that obviously implies that it's down from where we would have expected to be but certainly better than to to I think that's probably about is a about as details. We can get since we don't have gotten someplace, maybe we can try to cure that was a little bit more.
Well after.
After the corners, we think about Q. free.
That's great.
Thanks for taking the question.
Okay.
Your next question comes from the line of Joanne went show and your line is open.
Good afternoon, and thank you very much for all the information you were able to provide a couple of question.
Q specifically one of the things have been talking with management teams about is what's called silver linings, which is what are you learning or seeing today that you got a positive.
Benefit your business 12 months from now.
Well look I think there have been I think there have been a number of them you I don't think you'd go through things like this as an organization or or as an individual without seeing and identifying those things and hopefully learning from them I think a couple that that the jump out one is the.
The presents that we have always had with directly with our patients our ability to know who the patients are how they're doing what programs are set to how they've changed and continued in order to continue to optimize their care.
Has been a huge help to not only aspect to our customers. During this time and I think it's going to prove to be a really meaningful tool in getting things back up to speed because we're not blind to these patients are.
We know who's been treated we know who was supposed to be treated who's been trial, but waiting for implants, who was in the pipeline to be trials, we have them on our database.
And I think we can be a very very good resource and we already are to our customers in helping them to get their business back up to speed.
With the patients who are going to be receiving our technology. So.
That has been a silver lining we've always thought that was a competitive advantage and something that was helpful to our business on our customers, but I think in this.
Frame, it's been particularly so.
I also think the silver lining as we've learned an awful lot about how to manage patients, whether they're commercial or <unk> or in clinical trials remotely.
And having to be in front of them and once again I think our our information infrastructure is very helpful. There.
But I think we've I think we've covered a lot of ground in that area that will be helpful. For us as we think about as we think about efficiencies in the way, we interact with customers and even in our operating expenses to do so over over future quarters of the years those are probably too that the jumped to mind.
Thank you I'll leave it there.
Okay.
Joined next question comes from the line as Bob Hopkins.
Airline is open.
Thank you very much.
Good afternoon.
So keep two things I'd love to hear your your thoughts on in in the first is the notion that you put out there that.
There may be throughput issues.
Surgery centres I'm, just curious you know.
In your mind.
And then the second question I would have it's just.
Appreciate you.
You are common on fourth quarter and the potential to approach normal.
There's a lot of uncertainties, but it you know it it's I love to hear the comment.
From my down 80 per cent plus months to potentially approaching normal by the end of the year.
Yeah.
There's a lot of ground to cover their so I'm just curious how much of that is your assumption that you're kind of redoing procedures that were canceled earlier.
Returning to true underlying normal demand. Thank you.
Okay. Thanks, Bob.
Well I'll take them in order so on the on the throughput issue I think we probably would expect to see if we're going to see capacity or or patient throughput.
Restrictions were we probably think we'll see them in a hospital setting up more so than A.S.C.'s, but we could see them to some extent in both settings of care.
Question I think was about A.S.C.'s I think were less likely to see them there, but if we do it will probably be more around facilities and they're either their inability to get a full staff.
Back on site, there unwillingness to congregate a whole step back in the facility.
Or or procedures, they put in place, which limits the number of patients that can be in that S.C. facility at any given time, those or maybe a couple of examples where there are cases per day or per week might be therefore somewhat restricted now I don't expect to see that in every case and we also expect to see some of these S.C.'s work.
Longer ships multiple chefs doing cases on weekends et cetera to make up for that so we just frankly have no idea what the net impact will be.
Among all these puts and takes on on throughput, but that's sort of how we're thinking about it.
In terms of Q. for look we're we're trying to provide I guess a description of our current base case for the shape of recovery for this business, it's not very precise it certainly isn't guidance and and it for sure could change.
The underlying sentiment about queue for reflects.
Our belief that absent somebody some of the <unk> they headwinds that we can't predict that I went through.
Absent those tailwinds it reflects our our optimism that given the given that the backlog that we had the backlog we can identify by patients. We can work back end that there is a certain amount of catch up.
And I think that really does benefit us over the next to to six months.
Ah, but you're right on top of that we have to restart the trial to perform.
A patient flow engine and that will take us a couple of quarters to start back up so we're going to be doing both of those things concurrently again I don't know exactly what that means for the queue for specifically other than directional leave we think that that.
Q for should start to feel a bit more normalized if not completely so.
Great. Thank you.
Okay.
Next question comes from the line as David Lewis Sorry, Your line is okay.
Great. Thank you a good afternoon, everyone keep just a couple of questions on recovery that a quick follow up so I. Appreciate this comprehend the fourth quarter, maybe I'll take us back to sort of what you're seeing and and April may on two topics. The first <unk> you talked about these 3000 patients to have a sort of in the final I'm kind of curious you sit here looking at.
Late April and May what percent of the activity, which disrupt qualitative commentaries really coming from sort of this core 3000 patients you're trying to get rescheduled for getting as trials converted to term for sort of new lead generation you know to know though.
What kind of curious how that mixes looking to kind of get back to this funnel concept of the phone all kind of refilling here in the intermediate term and then.
Keith and second question. There on recovery is just E.S.T. mix that kind of think of it at 60 per cent <unk>, where do you think that mixed goes in kind of a post post coven world for for your business and then one book follow up.
Yeah, So again I'll take them in order on the on the per cent of activity. We're seeing now that's coming out about backlog I I don't have a specific number to give you a day, but it is a a significant share I will tell you that and it's very early but I was a little surprised by how much of the schedule.
Activity that we're seeing now is not coming.
Out of the <unk> backlog I I realize that doesn't help you a lot without a percentage, but I would have assumed the vast majority of it to be at this early point patients coming directly out of the backlog and that hasn't necessarily I've been the case, so I I think that's actually encouraging.
From an S.C. mix standpoint, I actually that the S.C. mix has historically not been quite as high as you. Just said I think it's been a little bit you know closer to 50, maybe even a little bit under with hospitals, making up the balance at least for permanent implants.
We're seeing S.C. volume begin to tick up maybe to approach somewhere between historical rates and the rate that you mentioned at 60 per cent.
And I think some of that will be durable look some of it is just they're coming back faster.
That's a phenomenon I think we'll see over the next quarter or two I think some of it will be a a durable shift in case volume that will move towards S.C. This was a trend that was beginning anyway.
And an A.S.C.'s were gradually growing on hospital volume I think this will I think this will a turbo boost that a bit over the next quarters in years.
Okay very helpful and then keep just.
Impressed with the adjusted even done number given cyclicality in the sell off in the back half of March he doesn't even to number was actually pretty pretty defensible.
Discretionary spending and core investment spending you know to keep programs.
Any changes.
Thing happened on a a timeline perspective investment perspective, you their clinical a commercial related to those too.
I spent opportunities will be great to hear and then anything else that you've had to sort of karabakh on that is sort of more.
Packs of growth rate of the X. 24 months, that's worth discussing would be it'll be helpful. Thanks, So much.
Yeah, I I think from a from a clinical trials standpoint, I don't know that there any it'd be a any changes associated with the pandemic environment really much effect the cost of finishing those trials in fact, maybe not much at all and and hopefully as.
We send our remarks [noise].
They don't really affect pace, finishing those trials and reading out on data as well.
In terms of just spending in general.
With regard to Q1 as as I think Andrew said in his commentary we had already begun last year in into early Q1, beginning to to rationalize our operating expenses a bit and bring them back in line with a with our longer term objectives, we had a extra.
In a little bit of that throughout the year, but we had picked up pace a little bit and shoot for an early Q1. So I think that helped us in the queue. One results. The the operating expense number that Andrew mentioned reflects a number of things some of them or passive frankly, when when sales.
When sales decline that much that quickly and people have to stay home. There are obviously things that decline without a management activity or oversight.
And some of them are active and some of them are decisions, we made to postpone those things that were less important.
To do things that we could do later later, but none of those things affect key priorities. So none of those things affect for example, the next generation product platform, none of those changes affect PDN or at S.R.B.P.
And they certainly don't affect our commercial engine in our ability for that engine to start up and and rubbed back up pretty quickly.
When we need to Oh that was our objectives the momentum we tear it into the quarter allowed us to to do it that way with some confidence and I think certainly the you know beefing up our balance sheet a bit gave us the competence to be able to approach it that way as well maybe not quite as much detail just like Dave, but but I hope that help.
<unk>.
Oh very helpful. Thank you.
Your next question comes from the line at the <unk>.
Airline is open.
His his David Ruskin I'm for Kayla, Thanks for taking our questions you guys, probably look all around the high level, you know shift toward the outpatient special setting as where if you could provide some <unk> what you're thinking about the potential for any increase propensity for patients to choose an S.U.S. implant how much was you know performance.
Outpatient fancy studying for cases, otherwise would potentially done a traditional spinal implants.
Any any type of color around the impacts in common accelerating F.D.S. procedures moving up.
Pardon.
Traditional spinal procedures.
Well I can only tell you that anecdotally, we've heard a little bit of that feedback from our customer base and that is that in general.
This environment is likely to increase the move toward less invasive procedures to maybe change.
The algorithm of treatment options for patients in the way, they're presented to the patients and particularly if it's driven by sight of care. As you mentioned procedures that can be done less invasively on an outpatient basis and maybe in an A.S.C.
As opposed to mourn base of impatient alternatives.
My sense is that that's that input reflects a trend that will probably be real I don't know Ah I can't speak to the magnitude or the timing it makes sense to us. It's obviously been a general trend in device related therapies for a long time and I think the speculation that this would increase.
Is probably has merit and I think that it's likely that we'll see the result of that to some extent in in our therapy as well.
Alright, thanks that let's help on the second one for me just you know around kind of the visibility buys them into Q2 to three I guess the rest of the guarantee you guys have some some internal metrics such as the number of cloud and and I've done. Some some trialing. So I'm just wondering kind of what you're you're visibility toward the second half the year and what your comments really isn't that given the kind of internal.
<unk>.
<unk>.
Yeah.
Well.
If we look at our our revenue forecasting models, they're they're heavily influenced in a normal scenario by the relationship and timing of trials and the conversion of those trials. The percentage those trials that are that are favorable or responders and then the pace at which those trials convert.
Two terms I think in this case.
I don't know that we've ever been well I'm sure that we haven't ever been through a scenario, where everything just simply shuts off for some period of time in your found you find yourself starting it back up [noise]. So it's it's a complete interaction interruption to our normal forecasting methodology.
Would have the obvious impact on on our precision as a result, but the way. We look at this is now kind of two full for the next couple of quarters one.
What rate and pace can we begin to start that trial engine back up so that it's an accurate forecasting tool and predictor of our business and then layered on top of that 1% and at what pace will. These you know say warehouse patients. These patients that are on hold and waiting will they come back into.
To the treatment flow.
We've done a lot of research with our customers over this last six to eight weeks trying to understand how they're thinking about that and what might happen.
And and have factored all that into some of our modeling and and that's sort of what leading us to our our our base case you of how this might recover over the next two quarters.
<unk>.
[noise]. Your next question comes from the line of Robbie Marcus Robbie Your line is open.
Oh, great and thanks for all that helpful color.
I want to circle back to comment you made that 30 per cent the patients that had differed or cancel procedure. So I have schedule for next 60 90 days, what do you think happen to the other 70 per cent do you think there are lost.
Found something else, which is tough to imagine given how severe they are or do you think there's still just waiting for the virus to die down.
Because it it seemed like.
You know, it's still a lot of patients.
Committed that still aren't back in the system yeah.
Actually I was pretty encouraged by that number I thought given given the time frame that were in two already have 30% of those patients on the on surgical calendars was.
Was pretty darn good so maybe just sharing a different perspective from from from inside is is helpful as well.
I don't think they're lost I think that this is this is really early and we have in many cases doctors practices in A.S.C.'s and even hospitals are either have just been open for these procedures over the last week or two or they're just opening over the next week or two.
<unk>.
So I think the outreach to patient the interaction between nevro into patient in the office and trying to get them back on the calendar and understand scheduling capacity in that kind of thing is very very early which is why I think we thought the 30 per cent number which actually quite quite large I don't think there's any reason to think of the 70 that these patients are lost.
This is not a lifestyle a procedure, it's it's not a life priorities might change over time.
Due to the Cobin 19 experience I think me her patients that have been really severe pain for a long time that pain is unlikely to adjust gone away.
And the her patients that typically have already explored most if not all of their other alternatives now that doesn't mean, we get 100 per cent of these patients that.
But yeah, but our expectation as we get the vast majority of them back and I think we'd be kind of disappointed if we didn't get you know three horse to 80% of these patients. Some you know maybe better.
Over the next over the next few quarters or more.
Yeah.
Great I guess, it's a all relative.
Maybe just a one follow up.
You you were right in the ticket.
Launch, but some of your peers were also launching products as well you touched on this have been the script.
Yeah.
Actually if we try and think of a silver lining been good for your sales force to help educate doctor is while they've had some downtime versus there.
If you could just help us understand.
To keep the launch alive during these tough times.
She had it.
Yeah, we we actually made a we made a a decision I think early on in terms of how we were how we were going to face our customers. During this time and what we were going to try and get done with them.
Or not and we made an early decision that there were lots of ways that we could add value to our customers through education through helping to manage their patients giving them feedback on how their patients were doing preparing to reschedule cases et cetera part of that decision. Though it was also that we were going to pull back a bit.
From product specific detailing.
We actually saw in some cases competitors continue on with product messaging product training.
Yeah product detailing that kind of thing and I think in some cases are you was that it was not being met well by the market and that's sort of validated our our priorities now we're we're stepping back into that enforce over these next days and weeks certainly may will represent.
Complete transition month force in that area, but I think it was the right decision to make I think I think in terms of their relationship we have with our customers and what they were going through.
I don't think it was a a month or two period in which they really wanted to sit down and spend a lot of time talking about features and benefits.
And and so our temp was the kind of <unk> and spend time with them, giving information that was up some value. There's there's nothing about what's happened in the last month or two either from our product standpoint, or the competitive positioning standpoint that I think.
Changes the order of competitors, while the while the caution black was out I think everybody's got a kind of come out pretty much where we went in from a product standpoint.
Your next question comes from the line day care Kelly.
Sorry airline is open.
Oh, great. Thanks, I know, it's early in the Ami alone.
Curious you made the comment on the paired wave forms and I guess I'd love to know anything anecdotally or or you know how popular they are and and what what do you expect from that as as that launch continues.
[noise] Oh, Thanks, I think there.
So I think they're proving to be popular I think one first of all let me put something into two categories I think there.
Repaired waveform capability of Bosnia.
Is proving to be a very interesting and attract capability and message to our existing and to new customers and so I think it's already been really important to has played a very large role in the early traction omnia has gotten and some of the results. We were seeing in late two four and the first couple of months Q1.
In terms of how patients are actually being treated we expected this to take a little bit of time, given the certainty we had that the early adoption a bomb you would be among our existing customers and our existing customers skew to those customers who have a heavy belief in high frequency as a standalone.
Syrupy.
So we knew that over time the use of paired wave forms you use of lower frequencies stand alone are combined would increase over time, but I think as we as we sit here today, we look out over our our very early patient population I think it's something in the range of 10 to 15 per cent of our patients are.
Already using particularly paired wave forms with high frequency on other lower frequencies and I think that's you know probably right about where we thought it would be at this point in time.
Great. Thanks for that and just one other point of clarification that that that d. stocking the net do stocking that you.
<unk>, that's that's over now correct.
<unk>.
Over for the current year.
Remember when you're carrying prior here, you're comparing Princeton first quarter in first quarter 19, we've had starting so.
<unk> comparable basis, it still has an impact on the numbers, but it's.
In the current period, there's no <unk>, okay. So that's correct.
Great. Thanks.
[noise] doing next question comes from the line as Matt Taylor.
That your line is open.
Hi, there's that three young format. Thanks for taking all questions.
Maybe since the first one was wondering to you can provide some or just general high level of thoughts on the macro impact from employment, it's kind of wondering how economically sensitive the typical never or S.C.S. patrons are maybe you can help us understand.
<unk> age dynamics or insurance mix.
Okay.
There's there's little I think we can do to really give guidance yet on macro economic impact unemployment impact et cetera, We don't really know what that's going to be like as we recover here, yes, what we're seeing throughout the immediate response to cope it is going to be a durable kind of unemployment picture.
That's one very downside case, or whether or not it's going to rebound and whether rebound sharply or or something other than that so it's hard to tell while also tell you that as a commercial company. We weren't we didn't live through the last recession as a commercial companies. So we don't really have a.
A a comparison.
The refer back to from the last recession.
In general, though I will tell you that.
A lot of our patients.
Or Medicare and most of those patients have secondary insurance to cover their co pay exposure.
Certainly some good portion of our patients or private pay as well and that's one of the reasons. We oftentimes here very strong queue for when people have exhausted their their co pay and their economic share of a procedure is is reduced during that quarter. So what does all that mean.
People generally feel they have less disposable income or if they don't have insurance I.
I would think that the disposable income portion would affect us, but affect us less than some given the nature of these patients.
The quality of life that they have and and the number of things they've already tried and their desire to to do something about this pain.
So what did have an impact probably would it be as as much as as some maybe even most procedures I would say from an elected standpoint, probably not.
I think where we have understand less well is just unemployment or or a lack of access to adequate coverage.
If that was really broad and deep I would expect that to have some impact.
Of course, but I, there's there's just no way to know and try and speculate on what it would be in different scenarios. So I'm afraid that answer is terribly unhelpful to you in terms of detail, but there's not much else. We can do to to model that I've just yet.
Oh, no I thought it was a pretty helpful definitely.
Interesting, how you're thinking about understanding.
Fluid situation.
But I guess, maybe for my borrow a this wonder no no international in geography. The thank you mentioned some of the other areas have but I started to show signs of recovery certain countries in Europe, Australia.
So maybe you can talk about where you're staying there and those are read throughs to to the U.S. in terms of the pace of recovery.
Well you know I think it really really depends on on the country and so I think we're going to see a very different shape and pace of recovery in each market I think in general it's our it's our suspicion that our international market.
Maybe a little bit slower to come back.
Then the U.S. market Gibbon, just some of the differences in the structure of delivery of health care and delivery of this procedure.
Economic incentives et cetera.
But but certainly we do believe they'll come back, albeit maybe a little different pace within the international market, we think they'll come back at very different.
Rates, we think that you know the Germans German market in the U.K. market are likely to look different.
And the pace in which they come back due to policy decisions due to the level to which they were affected by the pandemic to begin with and obviously, we don't give country by country detail or guidance, but hopefully that helps a little bit.
Great. Thank you.
Yeah.
Mm.
[noise]. Your next question comes from the line of Soroush call yet sorry. Your line is open.
Good afternoon Keys can you give me all right.
I can summarize thank you.
Perfect.
Keith Forgive me just jumping in between Colds in case, you already talked about this this 70% of the cases postpone that now rescheduled for the next 60 to 90 days Keith.
70%.
How do those juxtapose with.
Anticipation of areas that opening.
But then the next six keep the nineties or are they already scheduled per se in areas that open just come up to get some additional cover in terms of the the the confidence level in terms of these actually being materialize and since we could just tie it into the 3000 patients that's it.
You're referring to 30% of the 2000 or forgive me I couldn't connect the dots on those too.
Okay.
Oh no. It's it's a good question <unk>. So these patients are being rescheduled primarily in states that are already open for elective surgery business. Although in some cases are being rescheduled in states that have announced an opening date for elective procedures that hasn't happened because most of those dates.
I've been announced or coming up here very soon.
Among the 50 states there or about 38 that were nominally open for elective procedures at the end of April.
As we sit here today that number is gone to about 43 and.
And there remains about six or seven states that haven't commented it all on on when they're going to reopen for electric procedures now.
Down spend an activity or two different things so but the point is most of our states do have the green like and so they're beginning to reschedule patients there rescheduling those patients over a long period of time based on when they think they're really going to be up and running uncertainty about getting their staff onboard rescheduling.
Other kinds of cases.
Et cetera. So we would normally think that a group of patients. This size would take a month not not weeks to work back into the pipeline. So I don't I don't think that's very surprising to us and yes. These patients that are going to be that are being rescheduled I would say the vast majority of them probably come out of those.
3000 patients that we're waiting for their perm, but a lot of these a lot of these cases that are being scheduled are trials as well and some of those are patients that we're waiting that were already scheduled for trial before before we were shut down in early March or who were just on the.
Lead list and hadn't yet even schedule the trial. So it's a mix of those patients coming back off that 3000 list for terms and those coming off of the larger list for trials.
Got it at my final question one of the things that we ask.
Companies and we are hearing at least it's something to the surface is pricing power moving for a number of companies are telling us rocks like we were putting into its the four percentage in a speed increases the dynamics at changing I'd love to get your thoughts on what you see pricing power.
<unk> 18 months.
And more specifically.
Get a given the financial devastation says cost of hospitals as P.N.L.
Things Bundlings <unk>, you know the context of S.C.S. that some of your competitors are going to employ how do you see the dynamics changing especially the hospitals. Thank you for taking my question.
Yeah.
But again good question I I.
So.
I don't know that we anticipate a meaningful change in price and now we we certainly got our our eyes on the horizon here in our ears to the ground. So we're we're we're watching that situation carefully we haven't yet a seen any signs of pricing pressure from the marketplace.
Or irrational pricing decisions.
Among our competitors in general I don't know that we think that.
Price is a very effective tool for moving market share around in this particular market you keep in mind that this is a pretty well reimbursed procedure reimbursement doesn't go down because of <unk> and if anything I would say.
Procedures that are well reimbursed that provide.
Reasonable financial outcomes for Senators are are those that they would love to see back on the on the surgical calendar. So.
I don't think any of that translates to some uniquely different pricing.
Environment for us and that is that is kind of ours suspicion going yeah now.
Certainly there could be some impact on on payment terms.
During a recover appeared we certainly factor that into our modeling and and and something that we think we could see.
Or here over time, but but not on a broad basis, it'll be more on a customer to customer basis.
There was a little bit of pricing differential between A.S.C.'s and hospitals as shifts as a procedure volume shift A.S.C.'s.
We expect that to have a very small, but probably discernible impact on average selling price is over time I would say over the next couple of years.
But as far as we don't see anything obvious other than that right now that that would emerge from this from a a price pressure standpoint finally on bumbling.
Bumbling is is one of those things that everybody always worries about we certainly do worry about it.
It's not that it's not been terribly effective than most in most sites. This is a this is a product area, where there are definite preferences doctors in senators have preferences on the product and the companies they liked to work with and the power of the bundle and the.
Billable bundle for that matter.
To include these products in just hasn't been that compelling so far so we'll have our eyes open for that I don't know that we think that say that's a tactic that has compelled much in the way of market share up to this point.
Thank you.
Yeah.
Your next question comes from the line of Danielle and telepathy.
Danielle Your line is open.
Thank you so much. Thank you guys for it for taking the question. Thanks, so much for the level of detail you you were able to provide.
Okay.
I learned how to think about the retail up there for a final where I guess just in general and pain patients are sort of sidelined right now they're likely being managed medically.
Sad to say probably on it will be light in a lot of cases are are you hearing Oh chatter.
About a concern that that patients might want to sir medication, Oh, we're doing okay and just.
<unk> did not come back to the Doctor and get a procedure or.
I guess I guess at a high level My question is.
For all channels that more specifically to the backlog of patients that they're being managed magically bye for now waiting for procedures like.
Wow.
Yeah.
I you look I think there's you you can't disrupt the market. This deeply in this quickly without there being some leakage and demand. So there there may not be no rational reason why a patient who was in line and demanding this kind of therapy to to not be back in line. When we re emerge and yet I do expect it to happen here and there.
I think that's I think that's it would be surprising if that didn't happen I don't know that I think it's a broad trend.
Again, I keep referring back to this but it just the nature of the patient to find themselves at this point in their in their therapy continuum are pretty needy patient who have exhausted other options. So I think most of 'em, who would have been referred will be where for now it may take some time it takes them.
Time to get this whole engine really back up and running again.
I do think it takes US you know at least a couple of quarters to really be back to the point, where we're seeing the kind of and it could take longer Danielle, but I think to get back to the point, where we're seeing the kind of referral pattern that kind of trialing volume et cetera, I think that I think it will take a little bit of time, but I don't know that I see certainly.
Any permanent.
Change and referral activity and I don't know that I see a meaningful amount of leakage out of those patients who might have otherwise been at that point 10 weighted.
Okay. That's perfect. That's it for me think some act.
Okay.
That concludes the question and answer session I'll now trying to call back over to Keith Kreisman for closing remarks.
Okay. Thank you again, everyone for joining us I know that it's been a an uncertain and tumultuous time to say the least so we really appreciate your interest in your continued interested in what we're doing and as we're all wants to say these days I I wish you all good health and stay well and if we can answer.
Any questions privately please let us know thank you.
This does can clay today's conference call. Thank you for your participation you may now disconnect.
[noise].