Q4 2023 Nevro Corp Earnings Call

Operator: Good afternoon, and welcome to Nevro's fourth quarter and full year 2023 earnings call. All lines have been placed on mute to prevent any background noise.

Good afternoon, and welcome to never with fourth quarter and full year 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad if you'd.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you'd like to withdraw your question, press star one again. I would now like to turn the call over to Angie McCabe, Vice President, Investor Relations, and Corporate Communications, Nevro. Please go ahead.

Angie Mccabe: To withdraw your question Press Star one again I would now like to turn the call over to Angie Mccabe, Vice President Investor Relations and corporate communications for an eyebrow. Please go ahead.

Angie Mccabe: Thank you, Regina. Good afternoon, and welcome to Nevro's fourth quarter and full year 2023 earnings conference call. With me today are Kevin Thornall, our CEO and president, and Rod McLeod, our chief financial officer. Before we get started, please note that our earnings release and the supplemental presentation accompanying this call are available on the events and presentation page of the investor section of our website, 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 website shortly after the conclusion of this call. Before we begin, I'd like to remind everyone that comments made on today's call may include forward-looking statements within the meaning of federal securities laws. Results could differ materially from those expressed or implied as a result of certain risks and uncertainties.

Angie Mccabe: Thank you Regina good afternoon, and welcome to <unk> fourth quarter and full year 2023 earnings Conference call with me today are Kevin Thornell, our CEO and President and Rob 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.

Angie Mccabe: Patient page of the investors section of our website at <unk> Dot com.

Angie Mccabe: 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 web site. Shortly after the conclusion of this call before we begin I'd like to remind everyone that comments made on today's call may include forward looking statements within the meaning of federal Securities laws.

Results could differ materially from those expressed or implied as a result of certain risks and uncertainties. Please refer to <unk> SEC filings, including our annual report on Form 10-K for a detailed presentations of risks.

Angie Mccabe: Please refer to Nevro's SEC filings, including our annual report on Form 10-K, 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 Nevro's ongoing business performance. Adjusted EBITDA excludes interest, taxes, non-cash items such as stock-based compensation, depreciation, and amortization, litigation-related expenses and credits, changes in the fair market value of warrants, and other adjustments such as gain from extinguishment of debt and restructuring charges.

Angie Mccabe: <unk> 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 numbers ongoing business performance adjusted EBITDA excludes interest taxes.

Angie Mccabe: Noncash items, such as stock based compensation depreciation and amortization litigation related expenses and credit changes in the fair market value of Warren and other adjustments such as the gain from extinguishment of debt and restructuring charges. Please refer to the financial tables in our earnings press release issued today for a reconciliation.

Angie Mccabe: Please refer to the financial tables in our earnings press release issued today for reconciliations of GAAP to non-GAAP financial measures. I will now turn the call over to Kevin.

Angie Mccabe: Nations of GAAP to non-GAAP financial measures.

Angie Mccabe: I'll now turn the call over to Kevin Kevin.

Kevin Thornall: Thank you, Angie. Good afternoon, everyone, and thank you for joining us today. We're pleased with our fourth-quarter performance and the progress we are making on advancing our core three-pillar strategy. For the fourth quarter of 2023, and as compared with the year-ago period, today we reported worldwide revenue of $116.2 million, an increase of 2% on both a reported and constant currency basis, and ahead of the guidance that we provided on our third-quarter 2023 earnings call. PDN sales grew 29% to nearly $22.4 million. U.S. trails were down just under 1% and, in line with our expectations, a net loss from operations of $11.8 million and adjusted EBITDA of positive $8.4 million, also ahead of our expectations.

Kevin Thornell: Thank you Angie and good afternoon, everyone and thank you for joining US today, we're pleased with our fourth quarter performance and the progress we're making on advancing our core three pillar strategy for the fourth quarter of 2023, and as compared with the year ago period. Today, we reported worldwide revenue of $116 2 million.

Kevin Thornell: An increase of 2% on both a reported and constant currency basis and ahead of the guidance that we provided on our third quarter 2023 earnings call Pds sales grew 29% to nearly $22 4 million U S trials were down just under 1% and in line with our expectations and net loss from.

Kevin Thornell: <unk> of $11 8 million and adjusted EBITDA positive $8 4 million also ahead of our expectations.

Kevin Thornall: For the full year 2023, worldwide revenue was $425.2 million, an increase of 5% on a reported and constant currency basis. Also, in the fourth quarter of 2023, we acquired Versa Technologies, which we are very excited about as it provides us with entry into the very high-growth SACRO, ILIAC, or SI joint fusion market and announced a debt refinancing. Last year, we developed and implemented our strategy to improve our commercial execution and strengthen our foundation so we can deliver stable, consistent performance, achieve long-term profitable growth, enhance stockholder value, and continue to provide best-in-class therapies for patients suffering from chronic pain. On today's call, I'll highlight key items that demonstrate the progress we are making on a number of fronts. Rod will discuss our fourth-quarter results and 2024 guidance for both the full year and for the first quarter. Our strategy consists of three pillars. The first is commercial execution.

Kevin Thornell: For the full year of 2023 worldwide revenue was $425 2 million, an increase of 5% on a reported and constant currency basis.

Kevin Thornell: Also in the fourth quarter of 2023, we acquired <unk> technologies, which we are very excited about as it provides us with entry into the very high growth say grew ilyich or Si joint fusion market.

Kevin Thornell: The debt refinancing.

Kevin Thornell: Last year, we developed and implemented our strategy to improve our commercial execution and strengthen our foundation. So we can deliver stable consistent performance achieve long term profitable growth enhance stockholder value and continue to provide best in class therapies for patients suffering suffering from chronic pain.

Speaker Change: On today's call I will highlight key items that demonstrate the progress we're making on a number of fronts Rod who will discuss our fourth quarter results and 2024 guidance for both the full year and fourth first quarter.

Rod: Our strategy consists of three pillars. The first is commercial execution.

Kevin Thornall: We are laser focused on improving our execution to remove sales barriers, enhance the customer experience, and drive long-term profitable growth. To improve sales productivity, we made some changes to the commercial team's compensation structure and completed our commercial realignment. For example, because healthcare is locally delivered and consumed, we implemented a more geographically focused reporting structure.

Rod: We are laser focused on improving our execution to remove sales barriers enhanced customer experience and drive long term profitable growth.

Rod: Improved sales productivity, we made some changes to the commercial team's comp compensation structure and completed our commercial realignment for example, because health care is locally delivered and consumed we implemented a more geographically focused reporting structure. We also rolled out new incentive based compensation plans at <unk>.

Kevin Thornall: We also rolled out new incentive-based compensation plans that include rewarding sales reps who deliver accelerated growth, as well as incentivizing sales leaders to focus on delivering profitable growth. In addition, our market development team is now focused on increasing awareness of SCS as a treatment therapy beyond painful diabetic neuropathy. As a reminder, there are significant growth opportunities in SCS, including non-surgical back pain and traditional back and leg pain, and we have been at the forefront of driving awareness of new indications and our differentiated technology, as demonstrated by our success in PDN. Importantly, we continue to focus on improving physician engagement and education.

Rod: <unk> rewarding sales reps, who deliver accelerated growth as well as incentivizing sales leaders to focus on delivering profitable growth.

Rod: In addition, our market development team is now focused on increasing awareness of FCS is a treatment therapy beyond painful diabetic neuropathy. As a reminder, there are significant growth opportunities in SCS, including nonsurgical back pain, and traditional back and leg pain and we have been at the forefront of driving awareness of <unk>.

Rod: New indications and our differentiated technology as demonstrated by our success in PD in.

Rod: Importantly, we continued to focus on improving physician engagement and education.

Kevin Thornall: Last year, we completed several large new hire training sessions, conducted our first SI joint lab with advisors, implemented new professional education programs, such as continuum of care courses for pain interventionalists and surgeons, and trained over 100 fellows. The second pillar of our strategy is market penetration through expanded indications, HFxIQ line extensions, a robust R&D pipeline, strong clinical evidence, and targeted additive acquisition. We are seeing increased adoption of HFXIQ since its full market launch last March. HFXIQ represented 53% of our permanent implant procedures in Q4 of 2023, and adoption will continue to grow throughout 2024. Our data proves that, with the HFxIQ system combined with the cell phone app, which sends proactive alerts, physicians' clinical burden is reduced by 40%, and patients get back to pain relief 75% faster than patients who are using a traditional remote.

Rod: Last year, we completed several large new hire training sessions conducted our first Si joint lab with advisors implemented new professional education programs, such as continuum of care courses for pain, Interventional list and surgeons and trained over 100 fellows.

Rod: The second pillar of our strategy is market penetration through expanded indications.

Rod: The IQ line extensions, a robust R&D pipeline strong clinical evidence and targeted additive acquisitions. We are seeing increased adoption of <unk> IQ since its full market launch last March <unk>.

Rod: <unk> IQ represented 53% of our permanent implant procedures in Q4 of 2023 and adoption will continue to grow throughout 2024.

Rod: Our data proves that with the Hs <unk> IQ system combined with the cell phone app, which since proactive alerts physicians clinical burden is reduced by 40% and patients get back to pain relief, 75% faster than patients who are using a traditional remote.

Kevin Thornall: To provide even more patients with access to the benefits of HFxIQ, within the next few months, we expect to launch a solution for roughly half of these patients who do not have an iPhone, including those with an alternative device. In 2023, we will also continue to penetrate the SES market with our expanded indications in the PDN and non-surgical back pain patient population. PDN accounted for 24% of our permanent implant procedures in Q4. Even with our success in PDN, the market remains under-penetrated at nearly 1%. We are focused on further developing this market with our best-in-class technology and superior clinical data, showing that patients treated with 10 kHz therapy experience durable pain relief and significant improvements at 24 months. This is one of our key competitive differentiators because competing devices are purposely designed to cause a tingling sensation to mask pain, which is a common symptom PDN patients already experience. In contrast, our 24-month data shows that PDM patients experience durable pain relief without the use of paresthesia.

To provide even more patients with access to the benefits of Hff's IQ within the next few months, we expect to expect to launch a solution for roughly half of these patients who do not have an iPhone, including those with an alternative device.

Rod: In 2023, we also continued to penetrate the SCS market with our expanded indications and the TD in and nonsurgical back pain patient populations PD.

Rod: <unk> accounted for 24% of our permanent implant procedures in Q4.

Rod: Even with our success in PD and the market remains underpenetrated at nearly 1%. We are focused on further developing this market with our best in class technology and superior clinical data showing that patients treated with 10 kilohertz therapy experienced durable pain relief and significant improvements at 24 months.

Rod: This is one of our key competitive differentiators because competitive devices are purposefully designed to cause a tingling sensation to mask pain, which is a common symptom PD and patients already experience. In contrast, our 24 month data shows that PD in patients experienced durable pain relief without the use.

Rod: A paresthesia.

Kevin Thornall: Notably, we recently announced the publication of a consensus statement summarizing recommendations based on outcomes from a December 2022 global interdisciplinary panel at the Worldwide Diabetes Virtual Global Summit. The statement, which was published in Diabetes Research and Clinical Practice, recommends SCS therapy and particularly high-frequency 10 kHz SCS to treat refractory PDN symptoms that aren't adequately addressed by first and second line treatment. Enrollment in our PDN Clinical Sensory Study now stands at 98 patients. The study is designed to more objectively prove the sensory improvements that we observed in our Initial Clinical Randomized Clinical Trial, or RCT, and to receive an SES indication beyond pain. We believe that this, along with our 24-month data and differentiation of our innovative therapy, will help us further penetrate the PDN market and achieve our goal of having 10 kHz therapy referenced in additional society guidelines for the treatment of refractory PDN.

Rod: Notably, we recently announced the publication of a consensus statement summarizing recommendations based on outcomes from our December 2022, global inter disciplinary panel at the worldwide diabetes virtual Global Summit. This statement, which was published in diabetes research and clinical practice recommends.

Rod: <unk> therapy, and particularly high frequency 10, kilohertz Ses to treat refractory PD and symptoms that arent adequately addressed by first and second line treatments.

Rod: Enrollment in our PD and clinical sensory study now stands at 98 patients. The study is designed to more objectively prove the sensory improvements that we observed in our initial clinical randomized clinical trial or RCT and to receive an SCS indication beyond pain, we believe that this.

Rod: Along with our 24 months data and differentiation of our innovative therapy will help us further penetrate the PD end market and achieve our goal of having 10 kilohertz therapy reference an additional society guidelines for the treatment of refractory PD in.

Kevin Thornall: Also in January, we announced that Carolyn Health will be publishing a new interventional pain management policy that expands SCS coverage for PDN by nearly 43 million additional lives, bringing total U.S. covered lives to approximately 250 million. We are excited to continue working with physicians to expand awareness and offer this therapy to more patients suffering from PDN. Now, to our first ever acquisition.

Rod: Also in January we announced a Carolyn health will be publishing a new interventional pain management policy that expands SCS coverage for <unk> effective April 14th 2024, as a result, PD and patient coverage will expand by nearly 43 million additional lives, bringing total U S covered lives too.

Rod: Approximately $250 million.

Rod: We are excited to continue working with physicians to expand awareness and offer this therapy to more patients suffering from <unk>.

Rod: Turning now to our first ever acquisition, we're excited about the versa transaction for several reasons.

Kevin Thornall: We're excited about the Versa transaction for several reasons. First, we now have access to a large and fast-growing market. The SI joint market is currently valued at $2 billion in the U.S. alone, and we expect the increasing adoption of minimally invasive surgical procedures in this space to be a growth driver. Second, many physicians who perform SI joint procedures are also performing SCS implant procedures, and we are now able to offer them more options to treat patients suffering from chronic pain.

Rod: We now have access to a large and fast growing market the.

Rod: Si joint market is currently valued at $2 billion in the U S alone and we expect the increasing adoption of minimally invasive surgical procedures in this space to be a growth driver second many physicians, who perform Si joint procedures are also performing SCS implant procedures, and we are now able to offer them more options to <unk>.

Rod: <unk> patients suffering from chronic pain. This has the added benefit of strengthening our relationship with these physicians as many of them are already our customers.

Kevin Thornall: This has the added benefit of strengthening our relationship with these physicians, as many of them are already our customers. Third, we are leveraging our commercial sales force and their current relationships to help drive adoption and growth. It should be noted that when fully trained, we will have the largest SI joint sales force in the market. Finally, it broadens and diversifies our pain portfolio. We estimate that approximately 15 to 30% of patients with chronic lower back pain have pain that originates in the SI joint.

Rod: Third we are leveraging our commercial sales force and their current physician relationships to help drive adoption and growth. It should be noted that when fully trained we will have the largest si joint sales force in the market.

Finally, it broadens and Diversifies, our pain portfolio portfolio, we estimate that approximately 15% to 30% of patients with chronic lower back pain have pain that originates in the Si joint and we now offer options to treat patients with both mechanical and neuropathic pain.

Kevin Thornall: We now offer options to treat patients with both mechanical and neuropathic pain. We also offer one of the most comprehensive portfolios of products in the SI joint space. We are in the process of transitioning Versaproducts to Nevro Naming and Branding. In the interim, the current portfolio is comprised of Nevro V1, Nevro Pro, and Nevro Fit. Nevro V1, an integrated SI joint fusion system with transfixing technology, will be our flagship product as there is no other device like it on the market. It is proven to immediately transfix the SI joint to allow long-term fusion.

Rod: We also offer one of the most comprehensive portfolio of products in the Si joint space. We are in the process of transitioning verse of products to narrow naming and branding in the interim the current portfolios comprised of never Obi Wan <unk> Pro and Deborah fix.

Rod: Nevertheless, <unk> won an integrated Si joint fusion system with Transfixing technology will be our flagship product is there is no other device like it on the market.

Rod: <unk> has proven to immediately transfix, the Si joint to allow long term infusion.

Kevin Thornall: Also, our proprietary instrumentation allows for optimal inter-articular SI joint preparation, which is critical to achieve joint fusion. Finally, Nevro V1 comes with 3D printed bone growth enhancing technology which helps promote bone cell growth and, as a result, fusion. With this full suite of products, we are able to accommodate the different SI joint approaches, available sites of service, and CPT codes to meet the preferences of different physicians and vary in patient needs, ultimately helping to improve the quality of life and health outcomes for patients. In early January, we launched training for our sales reps for all three of our SI joint products and will continue to train both reps and physicians throughout 2024 as we ramp up this business. In addition, our limited market release started this month, and while early, overall physician feedback has been positive so far.

Rod: Also our proprietary instrumentation allows for optimal inter articulate Si joint preparation, which is critical to achieve joint fusion.

Rod: Finally never be one comes with three D printed bone growth enhancing technology, which helps promote bone cell growth and as a result fusion.

Rod: With this full suite of products, we're able to accommodate the different tsai joined approaches available sites of service and CPT codes to meet the preferences of different physicians and varian patient needs ultimately, helping to improve the quality of life and health outcomes for patients and.

Rod: In early January we launched training for our sales reps for all three of our Si joint products and we'll continue to train both reps and physicians throughout 2024 as we ramp up this business. In addition, our limited market release started this month and while early overall physician feedback has been positive so far in.

Kevin Thornall: Importantly, clinicians and medical societies expect that we will continue to generate clinical evidence in the SI joint space, just as we have done in SES, which is important in driving physician adoption and payer coverage. Regarding our R&D pipeline, we continue to work on developing new revenue streams that will leverage our largest asset, our sales force, and expanding into new indications for SES. We won't go into detail here for competitive reasons, but as I previously communicated, one of the reasons why I joined Nevro was because of the impressive pipeline of products. Finally, our third strategic pillar is profit progress. Our goals are to improve efficiencies through streamlined processes, scale our Costa Rica manufacturing facility, and have disciplined expense management. While there is more to do, we are making progress on this front with our leaders and teams across the organization. In January, we implemented a restructuring plan that included laying off 5% of our employees.

Rod: Importantly, collision clinicians and medical societies to expect that we will continue to generate the clinical evidence and the Si joint space just as we have done in SCS, which is important in driving physician adoption and payer coverage.

Rod: Regarding our R&D pipeline, we continue to work on developing new revenue streams that will leverage our largest asset our sales force and expanding into new indications for SCS, we won't go into detail here for competitive reasons, but as I previously communicated one of the reasons why I joined <unk> because of the impressive pipeline of products.

Rod: Finally, our third strategic pillar is profit progress our goals are to improve efficiencies through streamlined processes scale, our Costa Rica manufacturing facility and have disciplined expense management. While there is more to do we are making progress on this front with our leaders and teams across the organization.

Rod: In January we implemented a restructuring which included laying off 5% of our employees. While this was a very difficult decision it was necessary to position <unk> for long term growth and profitability.

Kevin Thornall: While this was a very difficult decision, it was necessary to position Nevro for long-term growth and profitability. Rod will talk about the expected financial impact of the restructuring in his remarks. As I mentioned, we are leveraging our sales force that already calls on physicians that treat pain to drive profitable growth in SI joint. These procedures will require limited post-operative patient follow-up by our commercial team, allowing sales reps to grow revenue without adding patient support team members. We also continue to scale our Costa Rica manufacturing facility, which is supported by world-class manufacturing experts and technology. We will leverage it as we expand the business through new products via R&D and tuck-in acquisition. Before I hand the call over to Rod, I want to make a couple of final comments.

Rod: Rob will talk about the expected financial impact of impact of the restructuring in his remarks.

Rod: As I mentioned, we are leveraging our sales force that already call on physicians that treat pain to drive profitable growth in Si joint These procedures will require limited post operative patient follow up by our commercial team, allowing sales reps to grow revenue without adding patient support team members.

Rod: We also continued to scale, our Costa Rica manufacturing facility, which is supported by world class manufacturing expertise and technology.

Rod: We will leverage it as we expand the business through new products via an R&D and tuck in acquisitions.

Before I hand, the call over to Rod I want to make a couple of final comments first I want to thank our net road team members for their focus on executing our strategy and steadfast commitment to freeing patients from the burden of chronic pain.

Kevin Thornall: First, I want to thank our Nevro team members for their focus on executing our strategy and steadfast commitment to freeing patients from the burden of chronic pain. Second, we recently held our 2024 National Sales Meeting for our U.S.-based commercial team. For many of the participants, this was their first Nevro sales meeting, and team members showed great enthusiasm for our core business, new entry into the SI joint space, and excitement for our future. We are dedicated to our mission and are building on the progress we made in 2023 to stabilize and strengthen our foundation, which will allow us to transform our business through the opportunities that lie ahead. 10 kHz therapy, which is supported by superior clinical data and multiple RCTs across several indications, is enabling us to provide patients greater access to our innovative therapy.

Rod: We recently held our 2024 national sales meeting for our U S based commercial team for many of the participants. This was their first never a sales meeting and team members show great enthusiasm for our core business new entry into the Si joint space and excitement for our future.

Rod: We are dedicated to our mission and are building on the progress we made in 2023 to stabilize and strengthen our foundation, which will allow us to transform our business through the opportunities that lie ahead.

Rod: 10, kilohertz therapy, which is supported by superior clinical data in multiple rct's across several indications is enabling us to provide patients greater access to our innovative therapies.

Robert Marcus: Our goals remain the same, to execute our strategy and capitalize on meaningful leverage opportunities to drive profitable long-term growth, positive operating cash flow, and increased shareholder value. I'll now turn the call over to Rod for a discussion of our fourth quarter financial results and 2024 guidance. Thanks, Kevin. And good afternoon, everyone.

Rod: Our goals remain the same to execute our strategy and capitalize on meaningful leverage opportunities to drive profitable long term growth.

Rod: Positive operating cash flow and increase shareholder value.

Rod: I'll now turn the call over to Rod for a discussion of our fourth quarter financial results and 2020 for guidance.

Rod: Thanks, Kevin and good afternoon, everyone for the fourth quarter of 2023 as compared with the prior year period.

Robert Marcus: For the fourth quarter of 2023, as compared with the prior year period, Worldwide revenue grew to $116.2 million, an increase of 2% as reported and on a constant currency basis. However, both the current and prior year periods had the same number of selling days. PDN represented 20% of permanent implant procedures worldwide, resulting in approximately $22.4 million in PDN indication sales and growing 29% over a prior year. U.S. revenue grew 2% to $101.5 million. International revenue was $14.7 million, increasing 4% as reported and flat on a constant currency basis. Gross profit increased 8.3% to $81.5 million, and gross margin increased 400 basis points to 70.1%, driven primarily by a shift to higher-margin products, as well as lower scrap-related charges in the current period. Operating expenses decreased 1.4% to $93.3 million, primarily due to reduced spend across the business, offset by $3 million of one-time Versa-related spend.

Rod: Worldwide revenue grew to $116 2 million, an increase of 2% as reported and on a constant currency basis, both the current and prior year periods had the same number of selling days.

Rod: <unk> represented 20% of permanent implant procedures worldwide, resulting in approximately $22 4 million in PD indications sales and growing 29% over prior year.

Rod: U S revenue grew 2% to $101 5 million International revenue was $14 7 million, increasing 4% as reported and flat on a constant currency basis.

Gross profit increased eight 3% to $81 5 million and gross margin increased 400 basis points to 71% driven primarily by a shift to higher margin products as well as well as lower scrap related charges in the current period.

Operating expenses decreased one 4% to $93 3 million, primarily due to reduced spend across the business.

Rod: Offset by $3 million of one time versus the related spend.

Robert Marcus: Excluding the VRSA-related expenses, operating expenses were down 5% versus the prior year. Litigation-related legal expenses were $2.9 million compared with $1.2 million in the fourth quarter of 2022. Cash, cash equivalents, and short-term investments increased $2.5 million from September 30, 2023 to $322.7 million as of December 31, 2023. Cash activities include $47 million in net funds received from our November 2023 debt restructuring offset by $40 million in cash paid for our acquisition of VRSA. As we previously announced, we acquired Versa for $40 million in cash at closing on November 30, 2023, and agreed to pay up to an additional $35 million in cash or stock tied to the achievement of certain development and sales milestones. The transaction was immaterial to our fourth quarter revenue results.

Rod: Excluding the versa related expenses operating expenses finished down 5% versus prior year.

Rod: Litigation related legal expenses were $2 9 million compared with $1 2 million in the fourth quarter of 'twenty two.

Rod: Cash cash equivalents and short term investments increased $2 5 million from <unk> from September 32023 to.

Rod: <unk> $322 7 million as of December 31, 2023.

Rod: Cash activities include $47 million and net funds received from our November 2023 debt restructuring.

Rod: Offset by $40 million in cash paid for our acquisition of versa.

Rod: As we previously announced we acquired <unk> for $40 million in cash at closing on November 32023, and agreed to pay up to an additional $35 million in cash or stock.

Rod: I'd to the achievement of certain development and sales milestones the.

Rod: The transaction was immaterial to our fourth quarter revenue results as.

Robert Marcus: As Kevin commented in his remarks, we believe that physicians will begin treating patients in need as we train them on the procedure over the next few months. We continue to expect the transaction to be accretive to both revenue and adjusted EBITDA this year. The first half of the year will focus on training physicians and Nevro commercial field personnel, while the second half of the year will begin to reflect increasing revenue traction. As a reminder, for 2024, we expect revenue contribution from SI Joint to be immaterial to the overall year. Also, on November 30, 2023, we announced the restructuring of a majority of our debt, pushing the maturity out to 2029 through a six-year, $200 million term loan credit facility. The proceeds were used to repurchase the majority of our 2025 convertible notes, as well as for working capital and other general corporate purposes.

Rod: As Kevin commented in his remarks, we believe that physicians will begin treating patients in need as we train them on the procedure over the next few months, we continue to expect the transaction to be accretive to both revenue and adjusted EBITDA. This year the.

Rod: The first half of the year, we'll focus on training physicians and narrow commercial field personnel, while the second half of the year will begin to reflect increasing revenue traction as a reminder for 2024, we expect revenue contribution from Si joint.

Rod: To be immaterial to the overall year.

Rod: Also on November 32023, we announced the restructuring of the majority of our debt pushing the maturity out to 2029 through a six year $200 million term loan credit facility. The proceeds were used to repurchase the majority of our 2025 convertible notes as well as for working capital and other general corporate per.

Rod: <unk>.

Robert Marcus: Turning now to a discussion of our 2024 full year and first quarter guidance. For the full year 2024, we expect worldwide revenue of approximately $435 to $445 million, representing an increase of 2% to 5% over full year 2023 on a reported and cost-of-currency basis. As a reminder, our major competitors have all reported their most recent quarterly results, and it appears that the SES market grew in the low to mid-single-digit range, excluding what we believe is primarily replacement activity by one of our competitors. We expect gross margin to be approximately flat, with 2023 gross margin of 68%. Our Costa Rica manufacturing facility continues to produce excellent results with low labor and material costs for manufactured products.

Rod: Turning now to a discussion of our 2020 for full year and first quarter guidance.

For the full year 2024, we expect worldwide revenue of approximately $435 million to $445 million.

Rod: Renting an increase of 2% to 5% of our full year 2023 on a reported and constant currency basis.

Rod: As a reminder, our major competitors have all reported their most recent quarterly results and it appears that the SCS market grew in the low to mid single digit range. Excluding what we believe is primarily replacement activity by one of our competitors.

Rod: We expect gross margin to be approximately flat with 2023 gross margin of 68% our Costa Rica manufacturing facility continues to produce excellent results on low labor and material costs for manufactured products.

Robert Marcus: However, higher than initially projected inventory levels and higher omnium mix will delay the full margin expansion impact for a few quarters. We're excited about the cost improvements Costa Rica can deliver, and we continue to project longer-term gross margins in the mid-70s, assuming pricing holds at current levels. We expect operating expenses to be in the range of $390 million to $392 million and largely flat compared with 2023. Our 2024 operating expense guidance includes ongoing litigation expenses and investments to drive growth in our PDN and our SI Joint Fusion product portfolio. We expect adjusted EBITDA to be negative $8 million to negative $14 million.

Rod: However, higher than initially projected inventory levels and higher Omnia mix will delay the full margin expansion impact a few quarters. We're excited about the cost improvements Costa Rica can deliver and we continue to project longer term gross margins in the mid seventies, assuming pricing holds at current levels.

Rod: We expect operating expenses to be in the range of $390 million to $392 million and largely flat compared with 2023 or 2020 for operating expense guidance includes ongoing litigation expenses and invest to drive growth in our PDL and our Si joint fusion product portfolios.

Rod: We expect adjusted EBITDA to be negative $8 million to negative $14 million. This includes a $14 million to $15 million benefit from our restructuring, which we announced and implemented in January 2024, which we expect will be largely offset by normal operating expenses, including inflation.

Robert Marcus: This includes the $14 to $15 million benefit from our restructuring, which we announced and implemented in January 2024, which we expect will be largely offset by normal operating expenses, including inflation, merit increases, and other acquisition-related expenses. To help with your modeling, we expect normal seasonality with Q1 sales to be our lowest quarter, down approximately 16% from Q4 2023. We are projecting the remainder of the year to play out in historical fashion, where Q2 demonstrates a pickup from Q1, Q3 is flat to downish sequentially from Q2, and then we finish with a strong Q4. These revenue results with slightly stronger second half growth also reflect what Kevin mentioned earlier regarding our efforts to improve our commercial execution. Similarly, operating expenses will follow our typical seasonality, where Q1 is our largest spending quarter due to events such as our national sales meeting, the NANS conference, and SI joint training for customers in our field.

Rod: Merit increases and other acquisition related expenses.

Rod: To help with your modeling, we expect normal seasonality with Q1 sales.

Rod: B R to be our lowest quarter down approximately 16% from Q4 2023, we're projecting the remainder of the year to play out in historical fashion, where Q2 demonstrates the pick up from Q1 Q3 is flat to down sequentially from Q2, and then we finished with a strong Q4.

Rod: These revenue results was slightly stronger second half growth also reflect what Kevin mentioned earlier regarding our efforts to improve our commercial execution.

Rod: Similarly, operating expenses will follow our typical seasonality, where Q1 is our largest spend quarter due to events such as our national sales meeting the NAND conference, an Si joint training for customers and our field team.

Robert Marcus: For the first quarter of 2024, we expect the following: worldwide revenue of approximately $97 to $99 million, representing an increase of 1 to 3% over the first quarter of 2023 on a reported and cost-of-currency basis. Operating expenses of approximately $105 million, which include higher than normal spend related to restructuring costs and SI joint training, and adjusted EBITDA of approximately negative $15 million to negative $16 million. Adjusted EBITDA will exclude a five to six million dollar restructuring charge related to the January layoff.

Rod: For the first quarter of 2024, we expect the following.

Rod: Worldwide revenue of approximately 97% to $99 million, representing an increase of 1% to 3% over the first quarter of 'twenty three on a reported and constant currency basis.

Rod: Operating expenses of approximately $105 million, which include higher than normal spend related to restructuring costs and Si joint training.

Rod: And adjusted EBITDA to be approximately negative $15 million to negative $16 million.

Rod: Adjusted EBITDA will exclude a $5 million to $6 million restructuring charge related to the January layoffs.

Operator: As we previously communicated, beginning in the first quarter of 2024, we will no longer provide a breakdown of our PDN indication sales. In closing, we made significant changes in 2023 to strengthen our foundation and further position our business for long-term profitable growth, and we know that we have more work to do. We are excited about the opportunities ahead of us and remain committed to executing our strategy to deliver enhanced stockholder value. Regina will now open the call to questions. At this time, if you'd like to ask a question, press star 1 on your telephone keypad.

Rod: As we previously communicated beginning in the first quarter of 2024, we will no longer provide a breakout of our PGN indication sales.

Rod: In closing we made significant changes in 2023 to strengthen our foundation and further position our business for long term profitable growth and we know that we have more work to do we are excited about the opportunities ahead of us and we remain committed to executing our strategy to deliver enhanced stockholder value.

Rod: Regina will now open the call for questions.

Regina: At this time I would like to ask a question press star one on your telephone keypad. We ask that you. Please limit your questions. Our first question will come from the line of Cowen <unk> with Morgan Stanley. Please go ahead.

Operator: We ask that you please submit your question from 2. Our first question will come from the line of Callum Titchmarsh with Morgan Stanley. Please go ahead.

Operator: Thank you very much for taking the question. I just wanted to dig into the 2024 guidance a bit more if possible. The guidance for between 2% to 5% top-line growth. I know you've historically called out the SES market growing around 6% to 9% historically. You've obviously got some stuff to comp from 23.

Cowen: Thanks, very much for taking the question just wanted to dig into the 2020 full guidance a bit more if possible.

Cowen: So between two 5% topline growth I know, you've historically codell, the SCS market growing around 6% to 9% historically.

Cowen: You've obviously got some soft comps from 'twenty three.

Operator: The Salesforce restructuring is now in place too. It would be helpful if you could help us to reconcile that guidance in relation to the broader market. Is this just being conservative, or is there something else?

Speaker Change: <unk> restructuring is now in place to just be helpful. If you could help us to reconcile that guidance in relation to the broader market is this just being conservative or is there something else, we should be considering yes. Thanks a lot.

Operator: Yeah, thanks for the question, Kellem. You know, really, if you look at the last few quarters of our competitors, and now this is this is a quarter where we already have all of our three competitors, public companies, making their announcements, you know, they are flat to down in maybe some of the US markets there, we believe will outperform some of our competitors in the space, given our ramp-up of a new sales force, as well as the excitement around new products and the indication So that gives us a little bit of a pause as we're looking for the year and don't want to get out in front of our skis and think that the market's going to be already back to that six to 9%. So right now, with the market looking to be in mid-low to mid single-digit growth, we felt this was good guidance for us to start off the year. I've got you.

Speaker Change: Yes, thanks for the question column.

Speaker Change: If you look at the last few quarters of our competitors and now. This is this is a quarter, where we already have all of our three competitors public company make their announcements.

Speaker Change: Flat to down and maybe some of the U S markets. There. We believe we will outperform some of our competitors in this space given our.

Speaker Change: Ram up a new sales force as well as the excitement around new products and the indication growth with PD and and nonsurgical back pain. So that gives us a little bit of a pause as we're looking for the year and don't want to get out in front of our skis and think that the market is going to be already overnight back to that 6% to 9%. So.

Speaker Change: Right now with the market looking to be.

Speaker Change: Low to mid single digit growth.

Speaker Change: We felt this was a good guidance for us to start off the year.

Operator: And just one more follow-up, if that's okay. On PDN, obviously, no indication of specific guidance as expected, but just eyeballing the street. I think the estimate here is just under 30% growth year over year. How do you feel about that number, you know, given the tougher comps that will come into play?

Speaker Change: Got you and just one more follow up if that's okay.

Speaker Change: <unk>.

Speaker Change: No indication specific guidance as expected, but just eyeballing. The street I think the estimate here is just on the 30% growth year over year, how do you feel about that number given the tougher comps that will come into play.

Operator: I think we saw kind of around that level in 2023 to 2024. Just curious how we should be thinking about a setup here for the rest of the year in the absence of guidance? Yeah, Calimer, we're not, as we said, we're not gonna be providing guidance or breaking out PDN going forward. You know, as we've said in the past, the right way to look at the market is from an overall SCS perspective. And all of our competitors are in PDN now, they've posted, they've been in it for a couple of quarters. The last couple of quarters have been in that kind of flattish to maybe, you know, low single-digit growth.

Speaker Change: We saw kind of around that level in 2020 free Q4, just curious how we should be thinking about the setup here for the rest of the year in absence of the guide thanks a lot.

Speaker Change: California, we're not as we said, we're not going to be providing guidance are breaking out PD and going forward.

Speaker Change: We said in the past right, we really think the right way to look at the market is from an overall SCS perspective, and all of our competitors are in PD and now they've posted they've been in it for a couple of quarters.

Speaker Change: The last couple of quarters have been in that kind of flattish to maybe low single digit growth and and the way Kevin just outlined our overall SCS growth for this year I think it's the right way to think about it.

Operator: And, and, you know, the way Kevin just outlined our overall SCS growth for this year, I think is the right way to think about it. Your next question comes from the line of Larry Biegelsen with Wells Fargo. Please go ahead. Hi, this is Nathan Trey back on for Larry.

Speaker Change: Your next question comes from the line of Larry <unk> with Wells Fargo. Please go ahead.

Nate: Hi, this is Nate.

Nate: And trade back on for Larry.

Operator: Just a question on, So the market for SI fusion devices seems to be crowded. How do you plan to differentiate Versa? And, you know, Nevro built its reputation on clinical data. I guess what's the plan to develop data from Versa? Yeah, you know, obviously, it's a crowded space, but it's also a fast growing space. And, you know, we looked at a lot of different companies as we were evaluating getting into the space. And almost all of them, you know, some of the small little private companies were growing double digits.

Nate: Just a question of numbers so.

Nate: So the market for outside fusion devices seems to be crowded.

Nate: Do you plan to differentiate versa.

Larry: Nevertheless, built its reputation on clinical data I guess, what's the plan to develop data from versa. Thanks.

Speaker Change: Yes, obviously, it's a crowded space, but also its a fast growing space and we looked at a lot of different companies as we are evaluating getting into the space and almost all of them. Some of the small little private companies were growing double digits. That's the way it gave us confidence that this was a fast moving space and in addressing a clinical need for patients.

Operator: That's what gave us confidence that this was a fast-moving space and that it was addressing a clinical need for patients. You know, the reason why we acquired Versa is that they had all the products that you could utilize for this category, all three, an allograft, a screw, as well as a transfixion device, and so that gave us confidence that it was the right company to go after. Additionally, as I mentioned, we have by far the largest SI joint sales force now in the market, especially once we get them all trained, which will take some time. So we feel that, you know, in combination with the relationships we have with the SCS implanting physicians and our reps' relationships with those physicians, they will be able to utilize those relationships to be able to get off to a fast start once they're trained. Okay, thanks for that.

Speaker Change: The reason why we acquired versus they had all the products that you could utilize for this category of all three and allograft, a screw as well as the Transfixion device and so that gave us confidence that it was the right.

Speaker Change: A company to go after and Additionally, as I mentioned, we have by far the largest Si joint sales force now in the market, especially once we get them all trained that which will take some time. So we feel that in combination with the relationships, we have with the Ses implanting physicians and our reps relationships with those.

Speaker Change: Physicians that we'll be able to Utah.

Speaker Change: Utilize those relationships to be able to get off to a fast start once they are trained.

Speaker Change: Okay. Thanks for that and for my follow up.

Operator: And for my follow up, what are your expectations for a new SES competition in 24? And, I guess, how does that influence your ability to take share in the year? Yeah, as a reminder, you know, we're the only high-frequency 10 kilohertz therapy out there, and everybody else that's coming into the market is all low frequency with a few different bells and whistles competing against each other. And just listening to commentary from those other companies, you know, we believe that the target that they're going after is physicians that are still believers in the low frequency technology. So we'll continue steadfast and following our clinical superiority and our clinical studies that we have out there to differentiate us from the competition. And so, while we never want to look away from any competitor, we believe that our guidance incorporates having those two new players in the market. Your next question comes from the line of Shagun Singh with RBC Capital. Please go ahead. Great! Thank you so much.

Speaker Change: What are your expectations for new SCS competition in 'twenty, four and I guess, how does that influence your ability to take share in the year. Thanks.

Speaker Change: As a reminder, we're the only high frequency 10, kilohertz therapy out there and everybody else is coming into the market, they're all low frequency with a few different bells and whistles competing against each other and is listening from commentary from those other those.

Speaker Change: Other companies, we believe that the target that theyre going after as physicians that are still believers in the low frequency technology. So we will continue steadfast in following our clinical superiority in our clinical studies that we have out there to differentiate us from the competition and so while we never want to look away from any competitor.

Speaker Change: We believe that our guidance incorporates having those two new players in the market.

Jargon, Zhang: Your next question comes from the line of Jargon, Zhang with RBC capital. Please go ahead.

Great. Thank you so much Kevin I was wondering if you could talk a little bit about your key priorities and goals for 2024.

Operator: Kevin, I was wondering if you could talk a little bit about your key priorities and goals for 2024. You know, when we can expect Nevro to kind of get back into the share-take position because, you know, it seems like your 24-month outlook doesn't reflect that. And then lastly, I was just wondering if there are any updates on acquisitions and how you're thinking about further filling the bag. Thank you for taking the time to answer my question. Of course, of course.

Jargon, Zhang: When we can expect everyone to kind of get back into the share take position because it seems like 'twenty four outlook doesn't reflect that and then lastly, I was just wondering are there any updates on acquisitions and how youre thinking about filling the bag. Thank you for taking the questions.

Speaker Change: Of course of course, yes.

Speaker Change: <unk> said last year I came onboard and of April and Greg Sylar, Our Chief commercial officer came on in the summer and we looked at.

Operator: Yeah, you know, as we said last year, I came on board at the end of April, and Greg Filler, our chief commercial officer, came on in the summer. And we looked at the realignment of the sales force and the talent that we had in certain positions, and really started to make some of those changes. And as a result, as you know, it takes six to nine months for some of these new reps to get up to speed.

Speaker Change: Realignment of the sales force and the talent that we had in certain positions and really started to make some of those changes and as a result as you know it takes six to nine months for some of these reps to get up to speed. We had some of the largest sales training classes in the history of the company in the third and fourth quarter. So yes, we expect that now.

Speaker Change: They are starting to hit their stride, a little bit as we get into probably Q2 and Q through this year and then obviously, we threw in a new acquisition to them to learn all at the same time, while we know that longer term. This is going to be a great market will take us some time to get them up to speed.

Operator: We had some of the largest sales training classes in the history of the company in the third and fourth quarter. So yeah, we expect that now they're starting to hit their stride a little bit as we get into probably Q2 and Q3 this year. And then, obviously, we threw in a new acquisition for them to learn all at the same time. While we know that, longer term, this is going to be a great market, it will take us some time to get them up to speed. But we do, we do like our chances of competing head to head with our competitors with the new sales reps we have out in the field. And the second question, as far as how long it may take them to get up to speed, like we said, nine months would be hitting most of those at the Q2 mark.

Speaker Change: But we do we do like our chances and competing head to head with our competitors with the new sales reps, we have out in the field.

Speaker Change: And the second question.

Speaker Change: As far as.

Speaker Change: How long it may take them to get up to speed and like we said nine months would be hitting most of those at the Q2 Mark.

Speaker Change: Rod and then I think you also asked about what other acquisitions, we might be thinking about to fill the bag.

Speaker Change: Yeah.

Speaker Change: And Kevin can comment on this as well.

Speaker Change: I think with everything Kevin just outlined we've got a lot of.

Operator: I think you also asked about what other acquisitions we might be thinking about to fill the bag. Yeah, and Kevin can comment on this as well, but you know, we I think with everything Kevin just outlined, we put a lot of effort and energy into training our sales force and, vice versa, getting the physicians in the field trained. And, you know, maybe we'll get a couple of quarters under our belts, and we can talk a little more about what some other future opportunities might be. Your next question comes from the line of Adam Mader with Piper Sandler. Please go ahead. Hi, good afternoon. Thank you for taking the questions. Two quick ones from me.

Speaker Change: Effort and energy go into training our sales force on versus.

Speaker Change: Getting the physicians in the field trained and.

Speaker Change: Maybe let us get a couple of quarters under our belt and we can talk a little more about.

Speaker Change: What some other future opportunities might be.

Speaker Change: Your next question comes from the line of Adam Maeder with Piper Sandler. Please go ahead.

Adam Maeder: Hi, good afternoon, and thank you for taking the questions. Two quick ones from me I wanted to ask about pricing in 2024, and how we should think about that with the continued launch of IQ and <unk>.

Adam Maeder: Maybe just flesh out what's assumed in the guidance for price and then the second question I feel like I have to ask about the new revenue streams comment Kevin.

Adam Maeder: And new indications for SCS, I know youre, not going to say a ton here, but.

Operator: I wanted to ask about pricing in 2024 and how we should think about that with the continued launch of IQ and maybe just flesh out what's assumed in the guidance for price. And then the second question, I feel like I have to ask about the new revenue streams comment, Kevin, and new indications for SCS. And I know you're not going to say a ton here, but is it fair to assume that this is still, in some way, shape, or form? Is it still pain-related, or is it something else?

Adam Maeder: Is it fair to assume that this is still in some way shape or form still pain related or is it something else and.

Adam Maeder: And how do we think about timing there is this potentially 24 event or 2025. Thank you.

Speaker Change: Yes, I'll take the second one first and then turn it over to Rod Yeah on the on.

Speaker Change: On the new product development, you got that right. We are working with our R&D teams.

Speaker Change: I joined the company I saw some of the places that they were going and as we've talked about we said we want to leverage our largest asset that we have in the organization, which is our over 500 person sales organization.

Operator: And how do we think about timing there? Is this potentially a 24-hour event or 22? Thank you. Yeah, I'll take the second one first and then turn it over to Rod.

Speaker Change: We will stay really close to home and make sure that it.

Operator: Yeah, on the new product development, you caught that right, you know, we're working with our R&D teams. When I joined the company, I saw some of the places that they were going. And as we've talked about, we said, we want to leverage our largest asset that we have in the organization, which is our over 500 person sales organization. And we will stay really close to home and make sure that it or that they are products that can leverage those call points. And that sort of education and what our reps do extremely well, which is sell on clinical superiority and great customer-centric, sort of, you know, mindset and the DNA that we have were those Nevro loyalists who love working with us, like what we bring to the table there. So we'll stay close to home and won't do anything crazy that would dilute our sales channel. And then Rob will take the first one.

Speaker Change: They are products that can leverage those call points and those sort of education and what are what our reps do extremely well, which is sell on clinical superiority and great customer centric.

Speaker Change: Mindset and the DNA that we have where those narrowed loyalists, who love working with us like what we bring to the table. There. So we will stay close close to home and won't do anything crazy that would dilute our.

Speaker Change: Our sales channel and then Rob ill take the first one yes, hi, Adam.

Rob Mcleod: Pricing the way to think about it is if you think about the average selling price of one of our implantable devices.

Rob Mcleod: As as that mix continues to shift towards Ikea, we should overall see that average price go up a little bit so from a modeling perspective flat to slightly up is probably a pretty reasonable assumption.

Operator: Yeah, hi, I'm on pricing. The way to think about it is if you think about the average selling price of one of our implantable devices, as that mix continues to shift towards IQ, we should overall see that average price go up a little bit. So, you know, from a modeling perspective, flat to slightly up is probably a pretty reasonable assumption. Your next question comes from the line of Joanne Wench with Citi. Please go ahead. Good afternoon. This is actually Anthony on for Joanne.

Rob Mcleod: Your next question comes from the line of Joanne Wuensch with Citi. Please go ahead.

Rob Mcleod: Good afternoon. This is actually Anthony on for Joanne Thanks for taking my questions.

Anthony: First on the sensors studying I know, it's pretty early but.

Anthony: But I guess just thinking broadly is this opportunity more about.

Anthony: Getting additional patients in terms of <unk>.

Anthony: Indication, maybe patients arent experiencing chronic pain, but have.

Operator: Thanks for taking our questions. First, on the dispenser study, I know it's pretty early, but I guess, just thinking broadly, is this opportunity more about getting additional patients? Bolstering the evidence that you do have so you can maybe get some more payers under your belt and get into guidelines. Then I just had a follow-up. Yeah, it's both, Anthony. So number one is this will be the first indication that's outside of pain. So having that sensory indication will be new, and we'll be the first to market, and it will likely be more difficult for others to sort of tag on to that one, because there are a lot of things that we're looking into that will come out of that clinical study. So it's more than just a typical, "Did you feel better?"

Anthony: Neurologic related sensory issues or is it more about just bolstering.

Anthony: Bolstering the evidence that you have so you can maybe get some more payers under your belt and get into guidelines and I just had a follow up.

Yes, it's both Anthony So number one is this will be the first indication that's outside of pain. So having that century indication will be new and we'll be first to market and likely more difficult for others to sort of tag onto that one because there's a lot of things that we're looking into that will come out of that clinical study.

Anthony: So it's more than just a typical did you feel better and what was your responder rate were going to act should be showing biopsies and other clinical <unk>.

Operator: And what was your responder rate? We're going to actually be showing biopsies and other clinical benefits of the technology. And then, for sure, you know, right now, as you know, we have just a plethora of information and clinical study evidence for 10 kilohertz on pain. But we've only had one specifically on PDM, that's a large RCT study. And this will allow us to have a second, really large study showing significant differences between us and low frequency. And we believe that gives us an opportunity to have to be in additional guidelines and make it maybe strengthen the guidelines in which we're in. You know, most societies typically require more than just one RCT prior to them, really recommending strongly in their guidelines. And so this will give us a better chance of doing that, in addition with payers as well. And did you have a follow-up?

Anthony: Benefits of the technology and then the second is for sure right now as you know we have just a plethora of information and clinical study evidence for 10 kilohertz on on pain, but we've only had one for specifically on PD and Thats a large RCT study and this will allow us to have a second really large study showing some.

Anthony: Differences between us and low frequency and we believe that gives us an opportunity to have to be into additional guidelines and make and maybe strengthening the guidelines in which we're in.

Anthony: Look at most of the societies, they typically require more than just one RCT prior to them really recommending.

Anthony: Broadly in their guidelines and so this will give us a better chance of doing that and in addition, with payers as well.

Anthony: And you had a follow up yes.

Yes, just sort of in the same vein I know you just announced Caroline I think it was in January of 43 million lives.

Anthony: Are there any other really big or substantial wins, Alaska on the payer side either for a PDR MSRP peer or is it just more sort of smaller insurance carriers at this point.

Operator: Yeah, just sort of in the same vein, I know you just announced Carilon, I think it was in January, 43 million lives. Are there any other really big or substantial wins left on the payer side, either for PDN or NSRBP, or is it just more sort of smaller insurance carriers? Yeah, you know, it's so diluted there, right?

Anthony: Yes.

Anthony: So diluted there theres a lot of different local payer decisions, there's obviously, the Medicare decisions and all of that as well.

Anthony: I'm really proud of our team our team is the one that put together the clinical evidence that got the PD an indication in the first place and it was our clinical evidence that was utilized to be able to gain those.

Operator: There are a lot of different local payer decisions. There are, you know, obviously, Medicare decisions and all that as well. I'm really proud of our team.

Anthony: All of the Medicare reimbursement for <unk>, which we're now fully covered on so we still have a few that we'd like to take down but don't forget we have a team of people that are here to help our customers through the price the process of prior authorization and also how you look at denials and getting those over.

Operator: Our team is the one that put together the clinical evidence that got the PDN indication in the first place. And it was our clinical evidence that was utilized to be able to gain all of the Medicare reimbursement for PDN, which we're now fully covered on. So we still have a few that we'd like to take down.

Operator: But don't forget, you know, we have a team of people that are here to help our customers through the price, the process of prior authorization, and also how you look at denials and get those overturned. We have a really high success rate. And so what that does, once we gain those new coverages, it just allows us to go through the process much quicker and with a lot less friction in the system.

Anthony: <unk>, we have a really high success rate and so what that does once we gain that those new coverages. This allows us to go through the process much quicker and with a lot less friction in the system. So we're going to continue to do that and leverage all of our clinical evidence. So there'll be a few more to come here in the future as well.

Anthony: Your next question comes from the line of Anthony Petrone with Mizuho Group. Please go ahead.

Operator: So we're going to continue to do that and leverage all of our clinical evidence. So there will be a few more to come here in the future as well. Your next question comes from the line of Anthony Petrone with Mizzou Hope Group. Please go ahead. Anthony, you might be on mute.

Anthony Petrone: Anthony you might be on mute.

Anthony Petrone: Okay.

Anthony Petrone: Our next question will come from the line of Richard <unk> with <unk>. Please go ahead.

Anthony Petrone: Hi, Thanks for taking the questions.

Operator: Our next question will come from Richard Newitor with Truist, please go ahead. All right, thanks for taking the questions. Maybe just to start on Versa, I'm curious, as you begin the commercialization here, do you expect your initial users to be physicians that are already performing outside joint fusion?

Richard: Maybe just to start the versa I'm curious.

Richard: As you.

Richard: You begin the commercialization here do you expect your initial users.

Richard: B.

Richard: The physicians that are already performing Si joint fusion or are you planning on focusing initially on building practices kind of from the ground up.

Operator: Or are you planning on focusing initially on building practices kind of from the ground up? Yeah, obviously, you know, patients are in all of those different locations. But I think, you know, the smart play here is to leverage the relationships that we have that are already Nevro loyalists that are also interested in or already doing the procedure. And so, you know, as we look at the limited scale-up of what we're doing with trays and all of the manufacturing and training and everything else, the first place we're starting is with those people that are closest to us and our team. Also, those that have maybe been involved in clinical studies with Nevro in the past, people that we have a good relationship with. We'll start there, but then continue to expand because, you know, this is, we believe, a really good device for patients to experience. And so we don't want to hold back and just go to one part of the market.

Richard: Obviously patients are at all of those different locations, but I think the smart play here is to leverage the relationships that we have that are already narrow loyalists that are also interested in or already doing the procedure.

Richard: And so as we look at the limited to scale up of what we're doing with trades in all of the manufacturing and training and everything else. The first place. We're starting are with those people that are the closest to us and our team.

Also those that have maybe been involved in clinical studies with <unk> in the past people that we have a good relationship with we will start there, but then continue to expand because this is we believe a really good device for patients to experience and so we don't want to hold back and just go to one area of the market, but we have to make sure.

Operator: But we have to make sure that we do it in a way that is safe and effective for the physicians to learn not only the procedure, but some of them will need to learn all of our different tools and things that need to go through. And also for us reps to feel confident standing in the operating theater and helping those physicians through their first three or four or five cases to get them comfortable. Got it, thanks.

Richard: We do it in a cadence that was safe and effective for the physicians to learn not only the procedure, but also some of them will need to learn are all of our different tools and things that need to go through and also our sales reps to feel confident standing in the operating theatre and helping those physicians through the first three or four or five cases to get them comfortable.

Speaker Change: Got it thanks and Ken.

Speaker Change: Kevin you've obviously been very thoughtful so.

Speaker Change: As far as <unk> been guiding and execution is clearly incredibly important so congratulations.

Operator: And you know, Kevin, you've obviously been very thoughtful so far, as you've been guiding, and execution is clearly incredibly important. So, you know, congratulations so far on the success of that. I'm just curious, as we think of your first kind of full-year outlook, I think, you know, if we think about the different buckets of, you know, market growth, share gain potential, and those are just a few... baked in conservatism?

Speaker Change: Congratulations so far on the success on that I'm just curious as we think of your is your first kind of full year outlook I think if we if we think about the different buckets.

Speaker Change: Market growth share gain potential DDI differentiation and maybe even overage for versus are you tell me what the buckets are but where do you feel most confident there.

Speaker Change: You've baked in conservatism or where would you expect to see.

Operator: Or where would you expect to see, you know, potential, you know, overage relative to the guide if it were to come? Where are you most confident? Yeah, thanks for the question there. And then for the kudos, we still have a long way to go. You know, what I'm most confident in is our team.

Speaker Change: Potential overage relative to the guide if it works account where are you most confident in that.

Speaker Change: Yes. Thanks for the question there and then for the Kudos as also we still have a long way to go you know what I'm most confident in is our team.

Operator: We've spent six months of the last year, both people that have been here for many, many years, including decades on some, as well as new people coming on board. I feel really good about the energy and passion and what we've done to realign ourselves for ourselves and add new talent there. That's what I'm probably the most proud about.

We've spent six months of the last year, both with people that have been here for many many years, including decades on some as well as new people coming onboard.

I feel really good about the energy and passion and what we've done to realign our sales force and adding the new talent there that's what I'm, probably the most proud about however, obviously.

Operator: However, obviously, you know, there's headwinds and tailwinds that come and go, and I always like to have more opportunities in different revenue streams to do that. And I feel that, you know, the Versa acquisition with three different products, the three indications that we now have on SES gives us the chance to maybe counteract any of those headwinds with some good tailwinds as well. So right now, it's too early to tell

Speaker Change: There's headwinds and <unk> that come and go and.

Speaker Change: I always like to have more opportunities in different revenue streams to do that and I feel that the <unk> acquisition with three of our products.

Speaker Change: The three indications that we now have on the SCS because it gives us a chance to maybe counteract any of those headwinds.

Speaker Change: With some good tailwind as well so right now it's too early to tell.

Operator: But I really like where our team is sort of coming out of the national sales meeting. We've got our global sales meeting coming up here next week, and I think we'll exit that one also feeling good about heading into the year with our team. Our next question comes from the line of Brandon Vazquez with William Blear. Please go ahead.

But I really like where our team is sort of coming out of the national sales meeting and we've got our global sales meeting coming up here next week and I think we'll exit that would also feeling good about heading into the year with our team.

Speaker Change: Our next question comes from the line of Brandon Vazquez with William Blair. Please go ahead.

Operator: Hi everyone, thanks for taking the questions. Maybe first one on the PDN side, are there any metrics that you can give us on PDN, maybe like referrals, number of referring physicians, or same store growth kind of figures, or just trying to understand like where you are on the adoption curve and especially how durable this can be with the physicians today? Yeah, you know, the stat we're showing right now is that we're still under 1% penetration. I mean, we're in the missionary selling phase. And I described that as, you know, we're building believers that they didn't learn this in their schooling, right?

Brandon Vazquez: Hi, everyone. Thanks for taking the questions maybe first one on the PDL side are there any metrics that you can give us on PD and maybe like recurring number of referring physicians.

Brandon Vazquez: Same store growth kind of figures. So just trying to understand like where you are in the in terms of the adoption curve and especially.

Brandon Vazquez: How durable this can be with with the physicians today.

Brandon Vazquez: Yes.

This that we're showing right now is that we're still under 1% penetration I mean, we are in the missionary selling phase and I describe that as we're building believers that they didn't learn this in their schooling right and so this is something new for those.

Operator: And so this is something new for those endocrinologists or the podiatrists or any of the other referring physicians. And so in some of those territories, you know, there may be one or two big endocrinologist groups that are providing a lot of that growth in a city. And then there's another city where there are 10 different podiatrists that are referring one patient each month to the surrounding areas. So it's kind of hard to do a blanket statement. But we do feel that, you know, we're going to continue the efforts of missionary selling and going out there and showing the clinical superiority of our technology versus any of the others that have the indication but none of the clinical evidence to prove that. So I'd say we're so early into this that right now, we're taking anybody that's those first movers that say, you know what? I have put my first three or four patients through, And so now I'm highly confident in referring these patients.

Brandon Vazquez: Endocrinologist or the podiatrists or any of the other referring physicians and so in some of those territories. There may be one or two big endocrinologist groups that that's providing a lot of that growth in a city and then there is another city, where there's 10 different podiatrists that are referring one patient each month to the surrounding physicians.

Brandon Vazquez: So it's kind of hard to do a blanket statement, but we do feel that we're going to continue the efforts of missionary selling and going out there and showing the clinical superiority of our technology versus any of the others that had the indication, but none of the clinical evidence to prove that so I'd say, we're so early into this.

Brandon Vazquez: Right now.

Brandon Vazquez: We're taking anybody this those first movers that say you know what I have put my first three or four patients through they've come back with unbelievable results and so now I'm highly confident in and referring these patients again go back to the comments in the prepared remarks, we've had not only great clinical evidence, but also now.

Operator: You know, again, go back to the comments and the prepared remarks. We've had not only great clinical evidence, but also now consensus statements and people coming out showing the great results from PDN. So I think we still have a long way to go, and we're excited about helping that patient population. Okay, and maybe one last one for me.

Brandon Vazquez: Census statements and people coming out showing the great results from.

Brandon Vazquez: PD and so I think we still have a long way to go and we're excited about helping that patient population.

Brandon Vazquez: Yes.

Brandon Vazquez: Okay, and maybe one last one from me Kevin you've been in the seat coming up in the year soon.

Operator: Kevin, you've been in the seat for coming up on a year soon. You know, you've been looking at this core SES market. What do you think needs to happen here now that you've had a little more experience with it to get it from this flat to down to that maybe closer to the high single digit range?

Kevin Thornell: <unk> been looking at this core SCS market, what do you think needs to happen here now that you've had a little more experience with it to get it from this flat to down to that maybe closer to the high single digit range. It seems to be one of the markets that still hasnt seemed to recover post COVID-19. So curious what your thoughts are as you gain more experience. Thanks.

Operator: It seems to be one of the markets that still hasn't seemed to have recovered post-COVID. So, curious what your thoughts are as you gain more experience. Thanks. Yeah, look, you know, we have to control what we can control. And the one thing that we know we can do is increase our effectiveness in the sales force. That's why it's one of the top three pillars.

Speaker Change: Yes look we have to control what we can control and the one thing that we know we can do is our increase are.

Speaker Change: Our effectiveness and the sales force Thats why its one of the top three pillars and we feel great about the teams that we have coming into this year, where they are and regardless of what the market growth is it's our job to go out and take share and I always say, we have a moral obligation to do so because of our superior clinical evidence, it's our job to win to get patients that we believed in.

Operator: And we feel great about the teams that we have coming into this year where they are. And, you know, regardless of what the market growth is, it's our job to go out and take share. And I always say, you know, we have a moral obligation to do so because of our superior clinical evidence. It's our job to win, to get patients that we believe implanted with the product that is better for them. Now, it's obviously the.

Speaker Change: Planted with the product that is better for them now it's obviously.

Speaker Change: Doctors opinion on what they want to put through but we obviously are confident in our technology from a market growth standpoint don't forget the core SCS market also includes nonsurgical back pain, and we believe PD in and also new indications that we're continuing to work on from our clinical evidence standpoint, So we believe that.

Operator: Doctors' opinion on what they want to put through, but we obviously are confident in our technology. From a market growth standpoint, you know, don't forget the core SES market also includes non-surgical back pain, and we believe PDN, and also new indications that we're continuing to work on from our clinical evidence standpoint. So we believe that, you know, the entire SES market has an opportunity to not only recover but also to experience growth in the future. To predict that would be impossible, but I like our chances now with a diversified product portfolio, including now our entry into the SI joint, regardless of what the core back and leg market does. We have a lot of other growth drivers that have led us to the 2 to 5 percent guidance growth for 2024. Your next question comes from the line of Bill Polbonik with Kennecore Genuity. Please go ahead. Bill, you might be on mute.

Speaker Change: The entire SCS market has opportunity to not only recover but also to experience growth in the future to predict that would be impossible, but.

Speaker Change: Like our chances now with a diversified product portfolio, including the and now our entry into the Si joint.

Speaker Change: Regardless of what the core backend leg market does we have a lot of other growth drivers that have led us to the 2% to 5% guidance growth for 2024.

Speaker Change: Your next question comes from the line of Bill <unk> with Canaccord Genuity. Please go ahead.

Bill: Bill on mute.

Bill: Hey, good evening. Thanks for taking my question. The first question is.

Bill: And maybe I heard this wrong did you say you think versa will contribute $2 million in 2024.

Bill: And then what do you think just total growth I guess, we think of the U S. O U S split for the global business.

Operator: Good evening, thanks for taking my question. The first question is, and maybe I heard this wrong, did you say you think that VRSA will contribute $2 million in 2024? And then, what do you think just total growth will be like as we think of the US-O-US split for the global business? Like, how are you thinking about that? And then I have a...

Speaker Change: Are you thinking about that than ever.

Speaker Change: Expense question.

Speaker Change: Okay. Good.

Speaker Change: Good job getting into <unk> as always bill.

Speaker Change: The first one no I did not say $2 million in 2024.

Speaker Change: I just commented that for our overall guidance for all in net ROE, We said, 2% to 5% is our is our guidance range that we put out there which includes which includes everything.

Operator: Expense question. Okay. Good job getting in three, as always, Bill.

Operator: On the first one, no, I did not say 2 million in 2024. I just commented that for our overall guidance for all in, Nevro, we said 2 to 5% is our guidance range that we put out there, which includes everything. As far as the global breakout, we think that we have some opportunities. We really feel good about our leadership and our international teams and our opportunities.

Speaker Change: As far as the global breakout we think we have some opportunities we really feel good about our leadership in our international teams and our opportunities now that <unk>.

Speaker Change: International markets. There is still a lot of pent up demand and a lot of.

Speaker Change: Hospital staffing shortages that still we are going on and believe it or not in 2023 and likely a little bit into 2024, but we believe our international team has a good opportunity next year.

Operator: Now that in international markets, there is still a lot of pent-up demand and a lot of hospital staffing shortages that will still be going on, believe it or not, in 2023 and likely a little bit into 2024, but we believe our international team has a good opportunity next year. In so doing, we also believe that our U.S. team is much better off now than we were back in the summer or back when I joined. And so we feel confident that our teams are ready for 2024 and probably will have equal growth spread globally. Okay. And then on expense management, I mean, listen. The fourth quarter, excluding that one-time charge for the deal, was $90 million, right? You're annualizing at 360.

Speaker Change: So doing we also believe that our U S team is much better off now than we were back in the summer or back when I when I joined and so we feel confident that our that our teams are ready for 2024, and probably equal growth spread globally.

Speaker Change: Okay and then on.

Speaker Change: Expense management, I mean listen the fourth quarter was excluding that one time charge for the deal is $90 million right Youre Annualizing at 360, you are taking a 5% head count reduction.

Speaker Change: But you are guiding opex much higher I'm, just trying to kind of understand what the puts and takes are.

Operator: You're taking a 5% headcount reduction, but you're guiding OPEX much higher. I'm just trying to kind of understand what the puts and takes are, especially the commentary also on the gross margin at 68 when you just put up a 71. I mean, it seems like from an expense standpoint, that's a real low bar, unless I'm missing something.

Speaker Change: Especially the commentary also on the gross margin at 68, when you just put up a 71.

Speaker Change: It seems like from an expense standpoint.

Speaker Change: You mean.

Speaker Change: That's a real low bar unless I'm missing something.

Speaker Change: So couple of things. Good question Bill first of all margins were 71.

Speaker Change: 71 for Q4.

Operator: Yeah, so a couple things. Good question, Bill. First of all, margins were 70.1, not 71 for Q4. Also, remember the seasonality of our spend. So Q4 is actually one of our lower operating expense quarters. So that's not necessarily the best one to take for annualizing.

Speaker Change: Also remember the seasonality of our spend so Q4 is actually one of our lower operating expense quarter. So that's not necessarily the best one to take for to annualize for Q1, we're anticipating it'll be close to $105 million there are some.

Operator: For Q1, we're anticipating it'll be close to $105 million. There are some restructuring charges in there that are running through operating expenses that are driving that up a little bit. But if you remember last year, we did a little bit over $100 million in operating expenses in Q1 as well. So yeah, we do have the impact of the 5% layoff that will be benefiting from throughout the year in our P&L, but there's also the traditional merit increases and inflationary pressures. We do have to invest in VRSA this year to train reps and physicians. So all of those, as we said, will largely offset the layoffs, the benefits that we receive from that, and will basically lead us to a roughly flattish operating expense on what's a 2-5% guided top-line growth.

Speaker Change: <unk> charges in there that we that are running through operating expenses that are that are driving that up a little bit but.

Speaker Change: If you remember last year, we did a little bit over $100 million in operating expenses.

Speaker Change: In Q1 as well so.

Speaker Change: Yeah, we do we do have the impact of the 5% lay off that will be.

Speaker Change: We'll be benefiting from throughout the year.

Speaker Change: In our in our P&L, but there is also the traditional merit increases inflationary pressures.

Speaker Change: We do have to invest in versus.

Speaker Change: This year to train reps and physicians.

Speaker Change: So all of those kind of.

Speaker Change: As we said will largely offset.

Speaker Change: The the <unk>.

Speaker Change: Lay off the benefits we received from that and we will basically lead us to a roughly flattish.

Speaker Change: Operating expense on what's at 2% to 5%.

Speaker Change: Guided top line growth.

Operator: Your next question comes from the line of Anthony Petrone with Mizzou Group. Please go ahead. Thanks and apologies; I'm popping between calls, so sorry about that. I actually want to go to just looking at broader market conditions as an ancillary to spinal cord stim, meaning spine procedures look like they've actually rebounded here based on some of the competitor results you have seen pull through from failed back and leg surgery. You know, we're seeing Spine come back.

Speaker Change: Your next question comes from the line of Anthony <unk> with Mizuho Group. Please go ahead.

Alright, Thanks, and apologies I am hopping between calls so sorry about that actually want to go to just looking at broader market conditions as an ancillary to spinal cord stem, meaning spine procedures looked like they've actually rebounded here based on some of the competitor results than you have in the past seen pull through.

Speaker Change: From sales back and leg surgeries were seeing spine comeback should we still be thinking about that let's say is nine to 12 months out that could be a driver is that the right way to think about that and a quick follow up maybe for Kevin would be it looks like after the close here you have a new board member.

Operator: Should we still be thinking about that, let's say, as, you know, 9 to 12 months out, that could be a driver? Is that the right way to think about that? And a quick follow-up question, maybe for Kevin, would be, it looks like after the close here, you have a new board member, you know, so maybe talk about, you know, just high-level strategy as the board shifts here a little bit. Do you think we have a strategy that's largely intact with Tuck & Acquisitions and a refocus on the core, or could we expect a slight deviation? Thanks. Yeah, thanks, Anthony. No problem. So, in market conditions, you know, the spine sometimes can be a good analog, and then sometimes it's not, right?

Speaker Change: So maybe talk about just high level strategy as the board shifts here a little bit do you think we have a strategy that's largely intact with tuck in acquisitions and a refocus on the core or could we expect a slight deviation. Thanks again.

Speaker Change: Yes, Thanks, Anthony and no problem.

Speaker Change: So yes market conditions spine, sometimes can be a good analog and then sometimes it's not right. We do we do know that there are a lot of different procedures that patients need to go through before they can get to a spinal cord stimulation approval for implantation and as a reminder, if you jump off that journey, you don't get to <unk>.

Operator: We do, we know that there are a lot of different procedures that patients need to go through before they can get spinal cord stimulation approval for implementation. And as a reminder, if you jump off that journey, you don't get to start where you left off; you have to go back and sort of go through that conservative care before you get there. So that says a lot about that lagging.

Speaker Change: Start where you left off you have to go back to go and sort of go through that conservative care before you get there. So that says a lot about that lagging I don't know if nine to 12 months is the right number there, but we are we do like some of the trends that we're seeing in other procedural growth and rebound.

Operator: I don't know if nine to 12 months is the right number there, but we are, you know, we do like some of the trends that we're seeing and other procedural growth and rebound that we're hearing from sort of markets that are sort of peripheral, or peripherally close to us. But it will take the time for those patients to sort of go through that continuum of care before they get to the spinal cord stimulation implant. One of those is obviously mechanical back pain as well before you treat neuropathic back pain, which is what led us to get into the SI joint procedure market.

Speaker Change: We're hearing from sort of markets that are sort of peripheral peripheral Lee close to us, but it will take the time for those patients to sort of go through that continuum of care before they get to spinal cord stimulation implant. One of those is obviously mechanical back pain as well before you treat neuropathic back pain, which is what led us to get into the Si joint procedure market.

Operator: That's, you know, like I said, 15 to 30% of patients will experience both mechanical as well as neuropathic pain. So that gives us a chance to maybe grab some of these patients a little bit earlier in their continuum of care. And as far as far as the close relationship with the board, yeah, you know, we routinely work with our shareholders, it's something that we do; we talk to them after all of our calls. We're excited to have Kurt on our board, as we mentioned in the announcement. As we mentioned in the announcement, he's local, down the street here for us. And he's got extensive experience in acquisitions and financial acumen, and he's also worked on the other side and as an investor as well.

Speaker Change: Like I said, 15% to 30% of patients will experience, both mechanical as well as neuropathic pain. So that gives us a chance to maybe grab some of these patients a little bit earlier in their continuum of care.

Speaker Change: And then as far as as far as the close as well with the board yet we routinely work with our shareholders is something that we do we talk to them. After all of our calls we're.

Speaker Change: We're excited to have Kurt on our board as we mentioned in the announcement.

Speaker Change: As local down the street here for us and he's got extensive experience in.

Speaker Change: Acquisitions financial acumen and he has also worked on the other side and as an investor as well. So we believe he is going to be helpful for us and so right now we believe we have good alignment.

Operator: So we believe he's going to be helpful to us. And so right now, we believe we have good alignment and a good cooperative agreement with our shareholders and the change in our board. I do want to make sure that through this, it gives us an opportunity to say thank you to one of our board members that will be leaving the board in the summertime. Frank, he has been instrumental to our growth and instrumental in taking us public, taking us through a lot of variations that we've had in the business. And we wanted to thank him for his time. And he's been a long-standing board member, and he's been with the company for a really long time. So we do not believe that our strategy will change.

Speaker Change: And a good cooperative with proppant have agreement with our with our shareholder and the change in our board I do want to make sure that through this it gives us opportunity to say thank you to one of our board members that will be outgoing towards the opening periods. This summer with Frank He will be leaving our board in the summer.

Speaker Change: Time.

Speaker Change: He has been instrumental to our growth and instrumental for taking us public for taking us through a lot of variations that we've had through the business.

Speaker Change: And we wanted to thank him for his time.

Speaker Change: And it's been a long standing it's been a long standing board member and he's been with the company for a really long time. So we do not believe that our strategy will change and we have good supported board members with a plethora of experience.

Operator: And we have good support board members with a plethora of experience, both in medical devices and financial acumen. So we believe we will stay the course here. Thank you for watching. Your next question comes from the line of Suraj Kalia with Oppenheimer.

Speaker Change: Both in medical devices and financial acumen. So we believe we will stay the course here.

Speaker Change: Going forward.

Speaker Change: Your next question comes from the line of Suraj Kalia with Oppenheimer. Please go ahead.

Operator: Please go ahead. Good afternoon, Kevin, Rod, can you hear me all right? Yeah. Perfect. Hey, Kevin, I know your one year anniversary is coming up, and I was curious if you could just frame a couple of things for us.

Suraj Kalia: Good afternoon, Kevin Roger can you hear me all right.

Suraj Kalia: Yes, yes perfect.

Suraj Kalia: Perfect.

Suraj Kalia: Kevin I know your one year anniversary is coming up and I was curious if you could just frame a couple of things for us.

Operator: So Kevin, as you've looked at the business, our recollection is that roughly about a third of the traditional SES for Nevro was from NSRB. Has that changed? Because I sensed a shift in the tone on the call more so towards traditional opportunities versus PDN. So if we could just characterize where NSRPP is today, that would be great. And the second question, Kevin, if I could, our field checks have told us that Verso did roughly around 780 million in 23 and was on track for doing 15 in 24.

Suraj Kalia: So Kevin as you look to the business. Our recollection is roughly about a third of the traditional SCS for Neville was from MSR BP has that changed because I sense shifting the tone.

Suraj Kalia: On the call more so towards traditional opportunities versus PGN cyclical just characterize where <unk> is today that would be great and the second question, Kevin If I could our field checks have told us that verso did roughly around $78 million in 'twenty three and was on track for doing 15 in 2000.

Operator: Correct me if I'm wrong so that we can slice or dice it in terms of FY 24. Thanks for taking my question. Yeah, the first one, no, I think we have a lot of opportunities for, you know, the core markets, which we say back and leg, as well as non-surgical back pain and PDN. And so, you know, we take all comers; there are patients that probably experience both of those at the same time. For instance, you might have back and leg pain and also be suffering from painful diabetic neuropathy at the same time.

Kevin: Four correct me if I'm wrong, so that we can.

Kevin: Slice and dice it in terms of FY 'twenty four guide thanks for taking my questions.

Kevin: Yes, the first one.

Kevin: I think we have a lot of opportunities for the core markets, which we say backend leg as well as a non surgical back pain and PD and so we take all comers there are patients that probably experienced both of those at the same time for instance, you might had back and leg pain and also be suffering from painful diabetic neuropathy.

Kevin: <unk> at the same time, so no we believe that the market still has a big opportunity nonsurgical back pain is still the largest opportunity that we have and then fell back surgery would be second and then PD and just because it is still early in the game would be the third so not really a lot of change there other than that.

Operator: So no, we believe that, you know, the market still has a big opportunity; non-surgical back pain is still the largest opportunity that we have, and then falling back surgery would be second, and then PDN, just because it's still early in the game, would be third. So not really a lot of change there, other than the fact that you're seeing really tremendous growth in the PDN space because we're coming from, you know, the brand new start of that. As far as the field checks are concerned, you know, we're not commenting on anything there.

Kevin: <unk>.

Kevin: Youre seeing a really tremendous growth in the <unk> space, because we're coming from.

Kevin: The brand new start up.

Kevin: That.

Kevin: As far as.

Kevin: The field checks, we're not commenting anything on there one of the thing I will add is just we are moving from a primarily distributor model to a direct model and so it will take us time to make sure that we have our direct sales force trained and up to speed as well as scale that organization from.

Operator: You know, one thing I will add is just, you know, we are moving from a primarily distributor model to a direct model. And so, you know, it will take us time to make sure that we have our direct salesforce trained and up to speed, as well as scale that organization from, you know, an operational perspective from both manufacturing and for some of the trades that are needed to perform the procedure. Your next question comes from the line of Mike Bullock with Wolf Research. Please go ahead. Good afternoon.

No.

Kevin: And operational perspective from both manufacturing and for some of the trades that are needed to perform the procedure.

Kevin: Your next question comes from the line of Michael <unk> with Wolfe Research. Please go ahead.

Michael: Hey, good afternoon. Thank you I'll, just ask again on versa sort of look at it.

Operator: Thank you. I'll just ask again on versus. So look, I understand that you don't want to say a number about what's built into the 24 guide. I can appreciate that. I suspect on calls like this, moving forward, we'll be asking what the number is, at least to get a level set. Maybe I'll ask it for a third time here at the end of the queue. Can you can you can you comment about what's considered in the 2024 guidance for Versa revenue? And if not, just, I guess.

Michael: It sounds like you don't want to say a number about what's built into the 'twenty four guide I can appreciate that.

Michael: On calls like this before who will be asking what the number is at least.

Michael: Get a level set so.

Michael: Maybe I'll ask it for a third time here at the end of the queue.

Michael: Can you can you.

Michael: Can you comment about what is considered in the 2024 guidance for versa revenue and if not just.

Speaker Change: I guess.

Speaker Change: Making formerly making it known it will probably be asking every quarter on calls like this until you give it to us or at least frame. It. So thanks for taking the question.

Operator: Formally making a note, and we'll probably be asking every quarter on calls like this until you give it to us, or at least frame it. So thanks for taking the question. Yeah, I completely appreciate the desire to want to know where we are right now. And don't forget, we're still early, and this was a really small company with some really great technology that we're excited about in our market checks. And due diligence showed that we think we have a differentiated device in the V1 device, which is the flagship one.

Speaker Change: Yes, I completely appreciate the desire to want to know where we are right now and don't forget we're still early in this was a really small company with some really great technology that we're excited about in our market checks and due diligence showed that we think we have a differentiated device and they would be one.

Device, which is the flagship one so we did that and I just mentioned, we're going from distributor to direct and so that takes some time to ramp up the organization. It's so not material right now.

Operator: So we did that, and I just mentioned we're going from distributor to direct, and so that takes some time. You have to ramp up the organization. It's so non-material right now that it's just not the right time to start breaking that out.

Speaker Change: It's just not the right time to start breaking that out but we can appreciate that that'll be something that will be desired and into the future.

Operator: But we can appreciate that that'll be something that will be desired into the future. Our next question will come from the line of Robbie Marcus with J.P. Morgan. Please go ahead.

Our next.

Speaker Change: Question will come from the line of Robbie Marcus with Jpmorgan. Please go ahead.

Operator: Oh, great. Thanks for taking the time to answer the question. Congratulations on a good quarter, um, Maybe, you know, I won't ask for Versa, but maybe as you help us understand the assumed ramp in sales growth in the second half of the year, you know, Nevro's had several guides that were back and loaded, some like in 2022, uh... worked out others, didn't you know, so I think investors want to help understand the drivers there you talked about, Salesforce restructuring, you know Is it? SalesForce is revamping and selling more SES. I think it's organic and inorganic, and I understand immaterial, but the guide's a few percentage points, so even $4 million.

Speaker Change: Okay.

Robbie Marcus: Thanks for taking the question congrats on a good quarter.

Speaker Change: Hi.

Speaker Change: Maybe.

Speaker Change: No.

Speaker Change: I want to ask for versa, but maybe as you help us understand the assumed ramp in sales growth in the second half of the year.

Speaker Change: <unk> had several guides that were backend loaded some like in 2022.

Speaker Change: Worked out others did and so I think investors want to help understand the drivers there you talked about.

Speaker Change: The sales force restructuring.

Speaker Change: We were under the impression versa was also about $7 million on track to do about 15 to 16 this year.

Speaker Change: Is that really where its coming from is it.

Speaker Change: Salesforce <unk>.

Speaker Change: Revamped and.

Speaker Change: Selling more SCS I think org.

Speaker Change: Organic and inorganic and I understand immaterial, but the guide the guide to a few percentage points, so even $4 million.

Operator: So maybe help us understand exactly where it's coming from and get confidence in the back half. Yeah, there's really, it's really all the above. I mean, as we mentioned, I think in the past, you know, the hard part was we did have PDN as a new indication and non-surgical back pain. But it was a prediction of a little bit more of a market recovery that all boats would rise with the rising tide a little bit there on top of, you know, the foundation that Keith, prior to me, had set up to professionalize the organization, and we have the opportunity to jump And that had been done here by the Nevro team prior.

Speaker Change: It's a percent so maybe help us understand exactly where it's coming from we get confidence in the back half ramp. Thanks.

Speaker Change: Yes, there is really its really all the above I mean, as we as we mentioned I think in the past the hard part was we did have PD in as a new indication and nonsurgical back pain.

Speaker Change: But it was a prediction of a little bit more of a market recovery that all boats would rise with the rising tide, a little bit there on top of the foundation that.

Speaker Change: Keith prior to me that it set up to professionalize the organization and we have the opportunity to jump off all the hard work that he's done and it had been done here by the narrow team prior but at the same time. We did we did have some we didn't call. It restructuring realignment of the sales force and also some.

Operator: But at the same time, you know, we did have some, we didn't call it restructuring, realignment of the sales force, and also some turnover that we caused by bringing in some sort of sales talent in a couple of spots across the organization, which does take them time to get up to speed, right. So that's a little bit of why it's back in loaded. The other part is just seasonality. I mean, look at all four of us in this space. Q4 is always much bigger than a Q1 or a Q2. And it's just seasonality with people's copays and everything else that happened. So that's just natural seasonality has been there for decades in this space.

Speaker Change: Turnover that we caused by upping some are sort of the sales talent and a couple of spots across the organization, which does take some time to get up to speed right. So that's a little bit of wide spike and loaded. The other part is just seasonality I mean, you look at all four of US in this space Q4 is always much bigger than a Q1 or Q2 and it's just seasonality.

Speaker Change: Already with peoples co pays and everything else that happened. So that's just natural seasonality has been there for decades in this space and then lastly, yes, I mean, its not material right now in our business going from really small to well, yes, we're expecting that to do better every single quarter as we move forward and so we have a new device.

Operator: And then lastly, yeah, I mean, it's non-material right now in our business going from really small to well, yeah, we're expected to do better every single quarter as we move forward. And so, you know, we have a new device, a new market that we're in, three new devices and new markets that we're in. And so I think that that helps justify a little bit of the back end of the year, specifically since we need to train so many of our reps out there. Training 20 reps is a lot different than training over, you know, four or 500 to be experts on this device.

Speaker Change: A new market that we're in three new devices in our new markets that ran in so I think that that helps justify a little bit of the back end.

Speaker Change: Of the year.

Speaker Change: Specifically since we need to train so many of our our reps out there training 20 reps is a lot different than training over four or 500 to be experts in this device. So it will take us some time to do that.

Operator: So it'll take us some time to do that. Ladies and gentlemen, that does conclude today's call. We thank you all for joining, and you may now disconnect.

Speaker Change: Ladies and gentlemen that does conclude today's call. We thank you all for joining and you may now disconnect.

Speaker Change: Please wait the conference will begin shortly.

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Speaker Change: Yeah.

Operator: Please wait. The conference will begin shortly. Please wait. The conference will begin shortly. Thank you.

Speaker Change: Okay.

Speaker Change: Okay.