Financial Data and Key Metrics Changes - In Q1 2022, worldwide revenue was $87.8 million, a 1% decrease year-over-year, but flat on a constant currency basis compared to $88.6 million in the prior year [35] - U.S. revenue decreased by 2% to $73.2 million compared to $74.7 million in the prior year, but increased by 11% compared to $65.8 million in Q1 2019 [36] - International revenue was $14.6 million, a 5% increase year-over-year, but a 10% decrease compared to Q1 2019 [37] - Gross profit decreased by 5% to $59.1 million, with gross margin dropping to 67.3% from 70.3% in the prior year [38] - Net loss from operations was $32.8 million, compared to a loss of $22.5 million in the prior year [40] - Cash and short-term investments totaled $323.6 million, a decrease of $38.4 million during Q1 2022 [41] Business Line Data and Key Metrics Changes - Total U.S. permanent implant procedures increased by 2% year-over-year and 14% compared to Q1 2019, while trial procedures increased by 10% year-over-year and 13% compared to Q1 2019 [11] - PDN trials grew 47% sequentially compared to Q4 2021, representing approximately 11% of total U.S. trial volume [12][13] - PDN contributed approximately $6 million in revenue, representing 7% of total permanent implant procedures worldwide [35] Market Data and Key Metrics Changes - The addressable U.S. PDN population coverage increased to approximately 43% from 25% at the end of 2021 due to positive decisions from UnitedHealthcare and Medicare [20] - The NSRBP market is estimated to have approximately 0.5 million patients annually in the U.S. who are not candidates for surgery [25] Company Strategy and Development Direction - The company is focused on expanding its PDN referral territories and hiring additional sales representatives, aiming to have 45 to 50 PDN reps by the end of Q2 [14] - The strategy includes enhancing patient and physician education to drive adoption of SCS therapy for PDN and NSRBP [27][28] - The company plans to leverage its peer-reviewed data and FDA approvals to broaden commercial payer coverage for NSRBP [28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about a durable recovery in the market, with expectations for solid revenue growth in the second half of the year [9][31] - The company anticipates a steady recovery in the SCS market, with guidance for Q2 2022 revenue of approximately $103 million to $106 million [45] - Management highlighted the importance of ongoing investments in PDN and NSRBP as key growth drivers [49] Other Important Information - The company adopted a new accounting standard that increased long-term debt by $34.3 million but is expected to lower interest expenses by approximately $2.3 million per quarter [42][43] - The company is preparing for the launch of a new product platform by the end of the year and has made significant investments in manufacturing capacity in Costa Rica [32] Q&A Session Summary Question: Clarification on full-year revenue guidance and PDN outlook - Management indicated that the slight trimming of core SCS outlook is due to conservatism stemming from the unpredictable COVID environment [54] Question: Trends in U.S. trial procedure mix and drivers for PDN trials - Management noted that PDN trials are expected to continue growing due to increased awareness among referring doctors and effective outreach initiatives [56] Question: Competitive positioning in the PDN segment - Management expressed confidence in their competitive position, citing superior clinical outcomes and the potential for market growth with multiple participants [60] Question: Guidance assumptions regarding reimbursement coverage - Management stated that guidance is not contingent on increases in access or coverage policies, but they will continue to work with payers [63] Question: Confidence in second-half growth and market recovery - Management emphasized that confidence is based on trial activity, market research, and internal models indicating pent-up demand [73] Question: Future spending and breakeven point - Management anticipates breakeven on adjusted EBITDA at approximately $110 million in quarterly sales, with a focus on managing expenses while investing in growth [75] Question: Update on international market performance - Management reported encouraging recovery in Australia and Germany, while the U.K. market remains challenging [84]

1Q 2022 Earnings Presentation M A Y 4 , 2 0 2 2 Dania Forward-Looking Statements In addition to historical information, this presentation contains forward-looking statements reflecting the company's current beliefs and expectations of management made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including: our second quarter and full-year 2022 financial guidance, including our expectations for PDN revenue in 2022; our expectations that the recent positive up ...

[PART I—FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis of Nevro Corp [Item 1. Condensed Consolidated Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) This section provides Nevro Corp.'s unaudited condensed consolidated financial statements and accompanying notes for the periods ended March 31, 2022 and 2021 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20March%2031,%202022%20and%20December%2031,%202021) This section presents the condensed consolidated balance sheets as of March 31, 2022, and December 31, 2021 | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :--------- | | Total current assets | $490,379 | $531,204 | $(40,825) | -7.68% | | Total assets | $532,879 | $574,544 | $(41,665) | -7.25% | | Total current liabilities | $70,324 | $82,203 | $(11,879) | -14.45% | | Long-term debt | $185,953 | $151,310 | $34,643 | 22.89% | | Total liabilities | $292,493 | $270,928 | $21,565 | 7.96% | | Total stockholders' equity | $240,386 | $303,616 | $(63,230) | -20.83% | - The decrease in total current assets was primarily driven by a reduction in short-term investments from **$327,300 thousand to $274,200 thousand** and accounts receivable from **$70,500 thousand to $63,100 thousand**[8](index=8&type=chunk) - Long-term debt significantly increased by **22.89%** from December 31, 2021, to March 31, 2022, primarily due to adjustments from the adoption of ASU 2020-06, which reclassified the 2025 Notes wholly as debt[8](index=8&type=chunk)[26](index=26&type=chunk)[72](index=72&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss%20for%20the%20three%20months%20ended%20March%2031,%202022%20and%202021) This section presents the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2022 and 2021 | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | Change (%) | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :--------- | | Revenue | $87,842 | $88,610 | $(768) | -0.87% | | Cost of revenue | $28,750 | $26,316 | $2,434 | 9.25% | | Gross profit | $59,092 | $62,294 | $(3,202) | -5.14% | | Research and development | $12,536 | $11,534 | $1,002 | 8.69% | | Sales, general and administrative | $79,325 | $73,272 | $6,053 | 8.26% | | Loss from operations | $(32,769) | $(22,512) | $(10,257) | 45.56% | | Interest expense | $(1,603) | $(6,547) | $4,944 | -75.52% | | Net loss | $(34,325) | $(29,561) | $(4,764) | 16.12% | | Net loss per share, basic and diluted | $(0.98) | $(0.85) | $(0.13) | 15.29% | - Revenue saw a slight decrease of **0.87%** year-over-year, while cost of revenue increased by **9.25%**, leading to a **5.14%** decrease in gross profit and a reduction in gross margin from **70% to 67%**[10](index=10&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk) - Operating expenses increased significantly, with R&D up **8.69%** and SG&A up **8.26%**, contributing to a **45.56%** increase in loss from operations[10](index=10&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk) - Interest expense decreased substantially by **75.52%** due to the adoption of ASU 2020-06, which eliminated the amortization of debt discounts related to the conversion feature of the 2025 Notes, and the settlement of 2021 Notes[10](index=10&type=chunk)[131](index=131&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20for%20the%20three%20months%20ended%20March%2031,%202022%20and%202021) This section presents the condensed consolidated statements of stockholders' equity for the three months ended March 31, 2022 and 2021 | Metric | December 31, 2021 (in thousands) | Adjustments from ASU 2020-06 (in thousands) | March 31, 2022 (in thousands) | | :-------------------------------- | :------------------------------- | :------------------------------------------ | :---------------------------- | | Additional Paid-In Capital | $928,138 | $(48,340) | $886,451 | | Accumulated Deficit | $(624,193) | $13,995 | $(644,523) | | Total Stockholders' Equity | $303,616 | $(34,345) | $240,386 | - The adoption of ASU 2020-06 on January 1, 2022, significantly impacted stockholders' equity, resulting in a **$48,300 thousand reduction** in additional paid-in capital and a **$14,000 thousand reduction** in the beginning balance of accumulated deficit[13](index=13&type=chunk)[26](index=26&type=chunk) - Stock-based compensation contributed **$13,400 thousand** to additional paid-in capital for the three months ended March 31, 2022[13](index=13&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20three%20months%20ended%20March%2031,%202022%20and%202021) This section presents the condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021 | Cash Flow Activity | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :--------- | | Net cash used in operating activities | $(28,418) | $(6,871) | $(21,547) | 313.59% | | Net cash provided by investing activities | $50,067 | $50,342 | $(275) | -0.55% | | Net cash provided by financing activities | $(6,753) | $(1,470) | $(5,283) | 359.39% | | Net increase (decrease) in cash, cash equivalents and restricted cash | $14,761 | $41,940 | $(27,179) | -64.80% | | Cash, cash equivalents and restricted cash at end of period | $50,077 | $87,143 | $(37,066) | -42.53% | - Net cash used in operating activities increased significantly by **313.59%** year-over-year, primarily due to higher net losses and unfavorable changes in accounts payable, accrued liabilities, and prepaid expenses[17](index=17&type=chunk)[138](index=138&type=chunk) - Cash provided by investing activities remained relatively stable, driven by proceeds from maturities of short-term investments offsetting purchases of new investments[17](index=17&type=chunk)[139](index=139&type=chunk) - Net cash used in financing activities increased substantially, mainly due to higher minimum tax withholdings paid on behalf of employees for net share settlement[17](index=17&type=chunk)[141](index=141&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes accompanying the condensed consolidated financial statements, explaining accounting policies and specific financial items [1. Summary of Significant Accounting Policies](index=7&type=section&id=1.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines the significant accounting policies used in preparing the interim financial statements, including recent accounting pronouncements - The interim financial statements are unaudited and prepared in accordance with U.S. GAAP, including all normal recurring adjustments necessary for fair presentation[20](index=20&type=chunk) - The Company adopted ASU 2020-06 on January 1, 2022, using the modified retrospective method, which simplifies accounting for convertible instruments by eliminating separate equity components for conversion features and impacts diluted EPS calculation[25](index=25&type=chunk)[26](index=26&type=chunk) Cumulative Effect of ASU 2020-06 Adoption on Balance Sheet (January 1, 2022) | Account | Balance at Dec 31, 2021 (in thousands) | Adjustments Due to ASU 2020-06 (in thousands) | Balance at Jan 1, 2022 (in thousands) | | :---------------------- | :------------------------------------- | :-------------------------------------------- | :------------------------------------ | | Long term debt | $151,310 | $34,345 | $185,655 | | Additional paid-in capital | $928,138 | $(48,340) | $879,798 | | Accumulated deficit | $(624,193) | $13,995 | $(610,198) | [2. Revenue](index=8&type=section&id=2.%20Revenue) This section details the company's revenue breakdown by geography and discusses the contribution of new product indications Revenue by Geography (Three Months Ended March 31) | Geography | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | Change (%) | | :---------- | :------------------ | :------------------ | :-------------------- | :--------- | | United States | $73,214 | $74,737 | $(1,523) | -2.04% | | International | $14,628 | $13,873 | $755 | 5.44% | | Total revenue | $87,842 | $88,610 | $(768) | -0.87% | - The United States accounted for **83%** of total revenue in Q1 2022, a slight decrease from **84%** in Q1 2021[29](index=29&type=chunk) - Revenue from Painful Diabetic Neuropathy (PDN) represented **7%** of worldwide permanent implant procedures, generating approximately **$6,000 thousand** in Q1 2022, following FDA approval in July 2021[29](index=29&type=chunk) [3. Lease Accounting](index=9&type=section&id=3.%20Lease%20Accounting) This section provides information on the company's operating lease arrangements, including terms, discount rates, and maturity schedules - The Company has operating leases for office space, manufacturing facilities, warehouses, R&D facilities, and equipment[30](index=30&type=chunk) Operating Lease Terms and Discount Rates | Metric | March 31, 2022 | December 31, 2021 | | :-------------------------- | :------------- | :---------------- | | Weighted-average remaining lease term | 3.98 years | 4.20 years | | Weighted-average discount rate | 7.0% | 7.0% | Operating Lease Liabilities Maturity (March 31, 2022) | Year | Operating Leases (in thousands) | | :--------- | :------------------------------ | | 2022 (remaining) | $4,345 | | 2023 | $6,019 | | 2024 | $6,201 | | 2025 | $2,849 | | 2026 | $405 | | Thereafter | $1,978 | | Total lease payments | $21,797 | | Less: Interest | $(2,848) | | Present value of lease liabilities | $18,949 | [4. Fair Value Measurements](index=10&type=section&id=4.%20Fair%20Value%20Measurements) This section details the fair value measurements of financial instruments, categorizing them by valuation input levels - Cash equivalents (money market funds) are classified as Level 1, while short-term investments (agency bonds, corporate notes, treasury bonds) are classified as Level 1 or Level 2[32](index=32&type=chunk) Financial Instruments Measured at Fair Value (March 31, 2022) | Asset Type | Level 1 (in thousands) | Level 2 (in thousands) | Total (in thousands) | | :------------------ | :--------------------- | :--------------------- | :------------------- | | Money market funds | $28,796 | — | $28,796 | | Agency bonds | — | $32,514 | $32,514 | | Corporate notes | — | $20,196 | $20,196 | | Treasury bonds | $221,461 | — | $221,461 | | Total assets | $250,257 | $52,710 | $302,967 | - The fair value of the 2.75% convertible senior notes due 2025 was **$204,000 thousand** as of March 31, 2022, classified as Level 2[34](index=34&type=chunk) [5. Balance Sheet Components](index=10&type=section&id=5.%20Balance%20Sheet%20Components) This section provides a detailed breakdown of key balance sheet components, including cash, inventories, property and equipment, and accrued liabilities Cash and Cash Equivalents (in thousands) | Metric | March 31, 2022 | December 31, 2021 | | :---------------------- | :------------- | :---------------- | | Cash and cash equivalents | $49,471 | $34,710 | | Money market funds | $28,796 | $9,562 | Inventories (in thousands) | Category | March 31, 2022 | December 31, 2021 | | :--------------- | :------------- | :---------------- | | Raw materials | $42,079 | $50,160 | | Finished goods | $48,509 | $43,357 | | Total inventories | $90,588 | $93,517 | - Inventory write-downs totaled **$1,100 thousand** for the three months ended March 31, 2022, compared to **$1,500 thousand** for the same period in 2021[39](index=39&type=chunk) Property and Equipment, Net (in thousands) | Category | March 31, 2022 | December 31, 2021 | | :-------------------------- | :------------- | :---------------- | | Total gross property and equipment | $44,987 | $43,319 | | Accumulated depreciation and amortization | $(24,150) | $(22,655) | | Property and equipment, net | $20,837 | $20,664 | Accrued Liabilities (in thousands) | Category | March 31, 2022 | December 31, 2021 | | :-------------------------- | :------------- | :---------------- | | Accrued payroll and related expenses | $26,459 | $30,957 | | Accrued professional fees | $2,785 | $6,547 | | Accrued interest | $2,609 | $1,305 | | Total accrued liabilities | $38,326 | $45,517 | [6. Commitments and Contingencies](index=13&type=section&id=6.%20Commitments%20and%20Contingencies) This section outlines the company's operating lease commitments, warranty obligations, and ongoing legal proceedings, including patent infringement cases - The Company has operating leases for office space in Redwood City, CA (expiring May 2025), warehouse space (extended to May 2025), and a manufacturing facility in Costa Rica (expiring June 2031)[43](index=43&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) Warranty Obligations (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------- | :-------------------------------- | :-------------------------------- | | Beginning balance | $664 | $699 | | Provision for warranty | $715 | $695 | | Utilization | $(927) | $(543) | | Ending balance | $452 | $851 | - A **$20,000 thousand** loss contingency related to the Delaware I patent infringement case with Boston Scientific was accrued as of March 31, 2022, following a jury finding of infringement and willful infringement of one patent[49](index=49&type=chunk)[59](index=59&type=chunk)[63](index=63&type=chunk) - The Company is involved in ongoing patent infringement litigations with Boston Scientific (Delaware II and III), Stimwave (settled with permanent injunction), and Nalu Medical (settled favorably)[56](index=56&type=chunk)[62](index=62&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk) [7. Debt](index=16&type=section&id=7.%20Debt) This section details the company's debt instruments, including the 2021 and 2025 Notes, and the impact of ASU 2020-06 on their accounting - The 2021 Notes matured on June 1, 2021, and were settled by paying **$172,500 thousand** in principal and issuing **682,912 shares** of common stock[67](index=67&type=chunk) - The 2025 Notes, with an aggregate principal of **$189,800 thousand** and a **2.75%** interest rate, are convertible into common stock at an initial conversion price of **$105.00** per share[69](index=69&type=chunk)[70](index=70&type=chunk) - The adoption of ASU 2020-06 on January 1, 2022, resulted in accounting for the 2025 Notes wholly as debt, reversing the previous separation into liability and equity components, and reducing the effective interest rate from **10.2% to 3.5%**[72](index=72&type=chunk)[74](index=74&type=chunk) Net Carrying Amount of 2025 Notes Liability Component (in thousands) | Metric | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | Principal | $189,750 | $189,750 | | Unamortized discount | — | $(35,079) | | Unamortized issuance cost | $(3,797) | $(3,361) | | Net carrying amount | $185,953 | $151,310 | Interest Expense Related to 2021 and 2025 Notes (in thousands) | Category | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Contractual interest expense | $1,305 | $2,059 | | Amortization of debt discount | — | $4,006 | | Amortization of debt issuance costs | $298 | $481 | | Total interest expense | $1,603 | $6,546 | [8. Net Loss Per Share](index=18&type=section&id=8.%20Net%20Loss%20Per%20Share) This section presents the calculation of net loss per share and identifies potentially dilutive securities excluded due to the net loss position Net Loss Per Share (Three Months Ended March 31) | Metric | 2022 | 2021 | | :------------------------------------ | :--- | :--- | | Net loss, basic and diluted (in thousands) | $(34,325) | $(29,561) | | Weighted average shares (in thousands) | 35,074 | 34,634 | | Net loss per share, basic and diluted | $(0.98) | $(0.85) | - Due to the Company's net loss position, diluted net loss per common share is the same as basic net loss per common share for all periods presented, as potentially dilutive securities would be anti-dilutive[78](index=78&type=chunk) Potentially Dilutive Securities Excluded from EPS (March 31) | Security Type | 2022 (shares) | 2021 (shares) | | :--------------------------------------- | :------------ | :------------ | | Unreleased restricted stock | 1,691,713 | 1,186,059 | | Options to purchase common stock | 688,762 | 775,956 | | Convertible senior notes | 1,807,141 | 3,597,174 | | Warrants related to convertible senior notes | 1,807,141 | 3,597,174 | | Total | 5,994,757 | 9,156,363 | [9. Employee Benefit Plans](index=19&type=section&id=9.%20Employee%20Benefit%20Plans) This section describes the company's employee benefit plans, including the 401(k) plan and the Employee Stock Purchase Plan (ESPP) - The Company's 401(k) plan includes matching contributions, with an expense of **$2,300 thousand** for Q1 2022, up from **$2,200 thousand** in Q1 2021[80](index=80&type=chunk) - The Employee Stock Purchase Plan (ESPP) allows eligible employees to purchase shares at a discount, with **1,567,514 shares** available for future purchase as of March 31, 2022[81](index=81&type=chunk)[82](index=82&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Nevro Corp.'s financial condition, operational results, and key factors impacting performance, including liquidity and capital resources [Special note regarding forward-looking statements](index=19&type=section&id=Special%20note%20regarding%20forward-looking%20statements) This section cautions that the report contains forward-looking statements subject to risks and uncertainties, with no obligation to update - The report contains forward-looking statements subject to risks and uncertainties, and actual results may differ materially from those discussed[84](index=84&type=chunk) - The Company undertakes no obligation to update forward-looking statements, except as required by law[85](index=85&type=chunk) [Overview](index=20&type=section&id=Overview) This section introduces Nevro Corp. as a medical device company focused on chronic pain treatment, highlighting its key products and strategic initiatives - Nevro Corp. is a global medical device company focused on chronic pain treatment, commercializing the Senza® spinal cord stimulation (SCS) system with proprietary paresthesia-free 10 kHz Therapy[86](index=86&type=chunk) - The 10 kHz Therapy has received FDA approval for back and leg pain, painful diabetic neuropathy (PDN) in July 2021, and expanded labeling for non-surgical refractory back pain (NSRBP) in January 2022[86](index=86&type=chunk)[87](index=87&type=chunk) Quarterly Revenue Trends (in millions) | Quarter | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | | :-------- | :------ | :------ | :------ | :------ | :------ | :------ | :------ | :------ | :------ | | U.S. sales | $75.3 | $51.0 | $90.9 | $94.6 | $74.7 | $85.0 | $78.1 | $88.4 | $73.2 | | International sales | $12.2 | $5.4 | $17.5 | $15.1 | $13.9 | $17.3 | $15.2 | $14.3 | $14.6 | | Total sales revenue | $87.5 | $56.4 | $108.5 | $109.7 | $88.6 | $102.3 | $93.2 | $102.8 | $87.8 | - The Company has an accumulated deficit of **$644,500 thousand** as of March 31, 2022, and plans significant investments in U.S. commercial infrastructure (including a PDN sales organization) and R&D[89](index=89&type=chunk) - Nevro is vertically integrating assembly of IPGs and peripherals in a Costa Rica facility, expected to be completed by mid-2022, to mitigate reliance on third-party manufacturers and improve gross margins[90](index=90&type=chunk) [Important Factors Affecting our Results of Operations](index=21&type=section&id=Important%20Factors%20Affecting%20our%20Results%20of%20Operations) This section discusses key external and internal factors influencing the company's operational results, including market conditions, regulatory approvals, and strategic investments - The COVID-19 pandemic continues to negatively impact operations and revenues due to unpredictable demand for elective procedures, facility closures, and patient hesitancy, with the global SCS therapy market decreasing by **5% to 10%** in 2021[91](index=91&type=chunk)[92](index=92&type=chunk) - Success depends on physician awareness and acceptance of Senza products, including the latest Senza Omnia and the newly approved PDN and NSRBP indications, requiring significant marketing and sales force investment[97](index=97&type=chunk)[98](index=98&type=chunk) - Reimbursement and coverage decisions by third-party payors are critical; while Medicare covers chronic back/leg pain, coverage for PDN and NSRBP is more limited, though UnitedHealthcare and Noridian (Medicare MAC) have begun to cover PDN[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk) - Maintaining high inventory levels for complex products and lengthy manufacturing lead times expose the Company to risks of obsolescence and impairment charges, totaling **$1,100 thousand** in Q1 2022[103](index=103&type=chunk) - Ongoing investment in R&D and clinical trials (e.g., SENZA-PDN, SENZA-NSRBP studies) is crucial for expanding indications, product enhancements, and demonstrating efficacy, safety, and cost-effectiveness[104](index=104&type=chunk) - Significant investment is being made in building a U.S. sales organization, including a dedicated PDN referral sales force, which is a lengthy process requiring recruitment and training[105](index=105&type=chunk) - Access to hospital facilities requires lengthy purchasing contract negotiations with hospitals or Group Purchasing Organizations (GPOs), and in Europe, competitive bidding processes[106](index=106&type=chunk) [Critical Accounting Policies, Significant Judgments and Use of Estimates](index=24&type=section&id=Critical%20Accounting%20Policies,%20Significant%20Judgments%20and%20Use%20of%20Estimates) This section discusses the critical accounting policies, significant judgments, and estimates used in preparing the financial statements - The financial statements are prepared using U.S. GAAP, requiring management to make estimates and judgments that affect reported amounts[107](index=107&type=chunk) - The Company adopted ASU 2020-06 on January 1, 2022, which simplifies accounting for convertible instruments[107](index=107&type=chunk) - No other significant material changes to critical accounting policies were made during the three months ended March 31, 2022[108](index=108&type=chunk) [Components of Results of Operations](index=24&type=section&id=Components%20of%20Results%20of%20Operations) This section breaks down the various components contributing to the company's results of operations, including revenue, cost of revenue, and operating expenses - Revenue is primarily generated from sales to hospitals and outpatient medical facilities through a direct sales force, recognized at the point of implantation or shipment for volume discounts[109](index=109&type=chunk)[110](index=110&type=chunk) - Revenue fluctuates quarterly due to selling price variations, geographical mix, foreign currency exchange rates, and industry seasonality (lower in Q1/Q3, higher in Q4)[111](index=111&type=chunk)[112](index=112&type=chunk) - Cost of revenue includes component acquisition, manufacturing overhead, royalties, scrap, inventory impairment, and distribution costs, impacting gross margin which is also affected by average sales price and manufacturing cost reduction[113](index=113&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk) - Operating expenses comprise R&D (personnel, product design, clinical trials) and SG&A (sales/marketing personnel, commissions, administrative, legal, marketing, travel), with personnel costs being the most significant component[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) - Interest income is from investments, while interest expense is from outstanding debt and amortization of debt discount/issuance costs[121](index=121&type=chunk) - Other income (expense), net, primarily consists of foreign currency transaction gains and losses[122](index=122&type=chunk) - Provision for income taxes includes foreign and state income taxes, with a full valuation allowance maintained for U.S. deferred tax assets due to net operating losses[123](index=123&type=chunk) - Allowance for doubtful accounts is estimated based on historical bad debt experience, customer creditworthiness, and economic trends[124](index=124&type=chunk) [Consolidated Results of Operations](index=26&type=section&id=Consolidated%20Results%20of%20Operations) This section presents a detailed analysis of the company's consolidated financial performance, including revenue, gross profit, operating expenses, and net loss Revenue, Cost of Revenue, Gross Profit and Gross Margin (Three Months Ended March 31) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | Change (%) | | :---------------- | :------------------ | :------------------ | :-------------------- | :--------- | | Revenue | $87,842 | $88,610 | $(768) | -0.87% | | Cost of revenue | $28,750 | $26,316 | $2,434 | 9.25% | | Gross profit | $59,092 | $62,294 | $(3,202) | -5.14% | | Gross margin | 67% | 70% | -3% | | - The decrease in gross margin was primarily due to increased costs of manufactured product components and costs associated with establishing the manufacturing facility in Costa Rica[126](index=126&type=chunk) Operating Expenses (Three Months Ended March 31) | Operating Expense | 2022 (in thousands) | % of Total Revenue | 2021 (in thousands) | % of Total Revenue | Change (in thousands) | | :------------------------ | :------------------ | :----------------- | :------------------ | :----------------- | :-------------------- | | Research and development | $12,536 | 14% | $11,534 | 13% | $1,002 | | Sales, general and administrative | $79,325 | 90% | $73,272 | 83% | $6,053 | | Total operating expenses | $91,861 | 105% | $84,806 | 96% | $7,055 | - R&D expense increased by **$1.0 million** (9%) due to higher personnel costs, while SG&A expense increased by **$6.1 million** (8%) driven by personnel costs, travel, PDN referral sales force, and software costs, partially offset by decreased legal expenses[127](index=127&type=chunk)[128](index=128&type=chunk) Interest and Tax Items (Three Months Ended March 31) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | | :------------------------ | :------------------ | :------------------ | :-------------------- | | Interest income | $143 | $297 | $(154) | | Interest expense | $(1,603) | $(6,547) | $4,944 | | Other income (expense), net | $85 | $(457) | $542 | | Provision for income taxes | $181 | $342 | $(161) | - Interest expense decreased significantly due to the adoption of ASU 2020-06 and the settlement of the 2021 Notes[131](index=131&type=chunk) [Liquidity, Capital Resources and Plan of Operations](index=27&type=section&id=Liquidity,%20Capital%20Resources%20and%20Plan%20of%20Operations) This section assesses the company's liquidity, capital resources, and future operational plans, including anticipated expenditures and funding strategies - As of March 31, 2022, the Company had **$323,600 thousand** in cash, cash equivalents, and short-term investments, expected to fund operations for at least the next 12 months[134](index=134&type=chunk) - Future expenditures are anticipated for commercial infrastructure, sales force, R&D for product development and clinical trials, and ongoing intellectual property lawsuits[134](index=134&type=chunk) - The Company may seek additional funds through equity or debt financings, with capital requirements dependent on factors like COVID-19 impact, commercialization costs, R&D, IP litigation, and market acceptance[135](index=135&type=chunk) Cash Flow Summary (Three Months Ended March 31) | Cash Flow Activity | 2022 (in thousands) | 2021 (in thousands) | | :-------------------------------- | :------------------ | :------------------ | | Net cash used in operating activities | $(28,418) | $(6,871) | | Net cash provided by investing activities | $50,067 | $50,342 | | Net cash provided by financing activities | $(6,753) | $(1,470) | | Net decrease in cash, cash equivalents and restricted cash | $14,761 | $41,940 | - Net cash used in operating activities increased significantly due to net losses and changes in working capital, while investing activities provided cash from short-term investment maturities[138](index=138&type=chunk)[139](index=139&type=chunk) [Contractual Obligations and Commitments](index=29&type=section&id=Contractual%20Obligations%20and%20Commitments) This section outlines the company's significant contractual obligations and commitments, including operating leases and purchase agreements - Operating lease obligations include principal offices (Redwood City, CA, expiring May 2025), warehouse space (extended to May 2025), and a manufacturing facility in Costa Rica (expiring June 2031)[142](index=142&type=chunk)[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk) Contractual Obligations as of March 31, 2022 (in millions) | Obligation Type | Remainder of 2022 | 2023-2025 | 2025 (Principal & Interest) | | :------------------------ | :---------------- | :-------- | :-------------------------- | | Minimum annual purchase commitments | $8.9 | $18.4 | | | Service agreement | $2.5 | $2.5 | | | License agreement | | $0.2 | | | 2025 Notes (Interest) | $5.2 | $5.2 | | | 2025 Notes (Principal & Interest) | | | $192.4 | [Off-Balance Sheet Arrangements](index=29&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of any off-balance sheet arrangements as of March 31, 2022 - As of March 31, 2022, the Company did not have any relationships with unconsolidated organizations or financial partnerships for off-balance sheet arrangements[149](index=149&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section confirms no material changes in market risk exposures related to interest rates, market prices, and foreign currency exchange since December 31, 2021 - Market risk exposures related to interest rates, market prices, and foreign currency exchange have not materially changed since December 31, 2021[150](index=150&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of disclosure controls and procedures and reports on changes in internal control over financial reporting - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2022[152](index=152&type=chunk) - There were no material changes in internal control over financial reporting during the period covered by this Quarterly Report[153](index=153&type=chunk) [PART II—OTHER INFORMATION](index=29&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) This section provides additional information not covered in Part I, including legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference detailed legal proceedings information from Note 6 of the Condensed Consolidated Financial Statements - Legal proceedings information is incorporated by reference from Note 6, Commitments and Contingencies, of the Condensed Consolidated Financial Statements[155](index=155&type=chunk) [Item 1A. Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) This section advises readers to consider risk factors from the Annual Report on Form 10-K, which could materially affect business and financial results - Readers should carefully consider the risk factors outlined in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021[156](index=156&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports no unregistered sales of equity securities or use of proceeds for the period - There were no unregistered sales of equity securities during the period[157](index=157&type=chunk) - There was no use of proceeds to report for the period[158](index=158&type=chunk) [Item 3. Defaults Upon Senior Securities](index=30&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section indicates no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[159](index=159&type=chunk) [Item 4. Mine Safety Disclosures](index=30&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the registrant - Mine safety disclosures are not applicable to the registrant[160](index=160&type=chunk) [Item 5. Other Information](index=30&type=section&id=Item%205.%20Other%20Information) This section indicates that no other information is reported - No other information is reported[161](index=161&type=chunk) [Item 6. Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including organizational documents, debt instruments, and certifications - The exhibits include the Amended and Restated Certificate of Incorporation and Bylaws, various Indentures and Forms of Convertible Senior Notes, and certifications from the CEO and CFO[162](index=162&type=chunk)[165](index=165&type=chunk) - XBRL Instance Document, Taxonomy Extension Schema, Calculation, Definition, and Label Linkbase Documents are also filed as exhibits[165](index=165&type=chunk) [SIGNATURES](index=34&type=section&id=SIGNATURES) This section contains the required signatures of the principal executive and financial officers, certifying the report - The report is signed by D. Keith Grossman, Chief Executive Officer, and Roderick H. MacLeod, Chief Financial Officer, on May 4, 2022[168](index=168&type=chunk)

Financial Performance & Guidance - Worldwide revenue for Q4 2021 was $102.8 million, a decrease of 6% year-over-year, and a 10% decrease compared to Q4 2019[5] - U S revenue for Q4 2021 was $88.4 million, a decrease of 7% year-over-year, and a 10% decrease compared to Q4 2019[5] - Full-year 2021 worldwide revenue reached $386.9 million, a 7% increase year-over-year, but a 1% decrease compared to full-year 2019[5] - The company projects full-year 2022 revenue to be between $415 million and $430 million, which includes $25 million to $30 million from PDN revenue[16] - Non-GAAP Adjusted EBITDA for full-year 2022 is projected to be negative $8 million to negative $18 million[16] Strategic Initiatives & Market Position - The company received FDA approval for 10 kHz Therapy for Non-Surgical Refractory Back Pain (NSRBP)[6] - The company believes it is the only SCS company ahead of annual revenue compared to 2019, as of December 2021[10] - Launch initiatives for Painful Diabetic Neuropathy (PDN) are driving awareness, with PDN trials representing approximately 7% of total US trial volume in Q4 2021[6] - UnitedHealthcare's coverage decision for 10 kHz Therapy for PDN is expected to increase patient access[6] - Approximately 35% of PDN patients are covered as of March 1, 2022, following UnitedHealthcare's expansion[40] Market Opportunity - The total addressable U S lower back & leg market is estimated at $17.9 billion annually, with approximately 8% penetration[23] - The annual total addressable market for PDN is estimated to be ~$3.5-5.0 billion[30]

Financial Data and Key Metrics Changes - Nevro reported worldwide revenue of $102.8 million for Q4 2021, a 6% decrease compared to $109.7 million in the prior year period and a 10% decrease compared to Q4 2019 [56] - U.S. revenue for Q4 2021 was $88.4 million, down 7% from $94.6 million in the prior year and down 10% from $97.9 million in Q4 2019 [57] - International revenue was $14.3 million, a decrease of 5% as reported and 4% on a constant currency basis compared to $15.1 million in the prior year [58] - Gross profit for Q4 2021 was $69.1 million, a decrease of 11% from $78.0 million in the prior year [59] - Net loss from operations for Q4 2021 was $26.2 million, compared to a loss of $0.9 million in the prior year [65] Business Line Data and Key Metrics Changes - Total U.S. permanent implant procedures decreased by 5% in Q4 compared to the prior year, while trial procedures increased by 3% [14] - Worldwide PDN revenue in Q4 was approximately $4 million, with PDN trials growing 93% sequentially compared to Q3 [26] Market Data and Key Metrics Changes - The U.S. SCS market was estimated to be down about 4% year-over-year, while Nevro's U.S. revenues were roughly equal to the full-year 2019 [20] - The company noted that patient reluctance to reengage and healthcare facility restrictions impacted procedure volumes [18] Company Strategy and Development Direction - Nevro is focused on expanding its PDN launch, which is the only FDA-approved high-frequency paresthesia-free therapy for patients with painful diabetic neuropathy [24] - The company plans to expand its PDN referral sales team by around 50% during 2022 to enhance market penetration [35] - Nevro aims to leverage its differentiated high-frequency therapy to capture market share in underpenetrated segments [54] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism that the worst of the COVID impact may be behind the company, with signs of recovery in procedure volumes [21] - The company anticipates a gradual recovery in the SCS market, with expectations for solid growth in the second half of 2022 [17] - Management highlighted the importance of ongoing investments in PDN and NSRBP to drive future growth [66] Other Important Information - The company reported a decrease in cash, cash equivalents, and short-term investments to $362 million as of December 31, 2021, primarily due to cash used in operations [67] - Nevro received FDA approval for its PMA supplement to treat non-surgical refractory back pain, marking a significant milestone for the company [51] Q&A Session Summary Question: Guidance and Core Business Growth - Analyst inquired about the guidance and growth expectations for the core business excluding PDN contributions, and whether significant reimbursement wins are needed to achieve the projected PDN revenue [89] - Management indicated that the guidance reflects conservatism due to lack of visibility but expects growth rates to improve in the latter half of the year [90][92] Question: Q1 Guidance and Omicron Impact - Another analyst asked for clarification on the Q1 guidance and the impact of Omicron on trial rates and cancellations [95] - Management explained that the guidance is based on trial performance and the expectation of recovering some of the canceled cases [96][98] Question: PDN Indication and Market Access - An analyst questioned how the company benefits from the PDN indication now that FDA approvals are based on smaller studies and payers are granting broad coverage [104] - Management responded that they expect more approvals and are making strong cases to payers based on data superiority [110] Question: Backlog and Core Business Impact - An analyst asked about the backlog due to Omicron and whether the PDN launch would have a halo effect on the core back and leg business [116] - Management expressed confidence in recapturing a significant number of patients affected by cancellations and noted early signs of a positive impact from the PDN launch on the core business [118][120]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2021 or ☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number: 001-36715 NEVRO CORP. (Exact name of registrant as specified in its charter) Delaware 56-2568057 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Iden ...

Market Overview and Growth Potential - The Spinal Cord Stimulation (SCS) market has strong growth fundamentals despite being impacted by COVID-19 [5] - The global SCS market is estimated at $2.3 billion annually [11], with the US market accounting for $1.8 billion and the international market for $0.5 billion [12] - The total addressable U.S Lower Back & Leg market is $17.9 billion annually, with approximately 8% penetration [14] - The Non-Surgical Refractory Back Pain (NSRBP) market represents a $11.4 billion opportunity, with only ~5% penetration [17, 61] Nevro's Position and Strategy - Nevro is positioned to outperform in the SCS market with its unique 10 kHz Therapy [3, 67] - Nevro's SCS market share has been growing since 2015, reaching an estimated 18-20% [24] - U.S permanent procedures were up +4%, while total market SCS perms were down -8% [24] - The company is focused on expanding into Painful Diabetic Neuropathy (PDN) and NSRBP markets [6] Painful Diabetic Neuropathy (PDN) Opportunity - The annual Total Addressable Market (TAM) for PDN is estimated at $3.5-5.0 billion [37] - Approximately 20% of diagnosed Patients With Diabetes (PWD) have PDN, with 45% refractory to Conventional Medical Management (CMM) [37] - 86% of patients on 10 kHz Therapy had substantial, durable pain relief through 12 months, compared to 0% of patients on CMM alone [47] - Preliminary worldwide PDN revenue reached ~$4.0 million in Q4 2021 [57] Operational Efficiency and Financial Outlook - Excluding all litigation-related and PDN expenses, YTD Q3 2021 operating expenses would be less than YTD Q3 2019 by almost $35 million, or 13% [64] - Gross margin expansion to mid-70s% is expected over the next 3-5 years [65] - An investment of $21 million by the end of 2022 in Costa Rica manufacturing operations [65]

Q3 2021 Financial Performance - Worldwide revenue reached $93.2 million, a decrease of 14% year-over-year and 7% compared to Q3 2019[5] - U S revenue was $78.1 million, also down 14% year-over-year and 7% from Q3 2019[5] - International revenue amounted to $15.2 million, a 14% decrease as reported or 16% decrease in constant currency compared to the previous year, and a 5% decrease as reported or 12% decrease in constant currency compared to Q3 2019[5] - Gross margin was 69 3%, a decrease of 0 8% year-over-year and 0 5% compared to Q3 2019[5] - Operating expenses totaled $91.1 million, a 14% increase year-over-year and 6% increase compared to Q3 2019, excluding a $20 million patent litigation judgement[5] - Adjusted EBITDA was negative $6 0 million, a 144% decrease year-over-year and 201% decrease compared to Q3 2019[5] Q4 2021 Guidance - Revenue is projected to be between $94 million and $98 million, representing an 11% to 14% decrease compared to Q4 2020, and a 14% to 18% decrease compared to Q4 2019[16] - Non-GAAP adjusted EBITDA is expected to be negative $10 million to negative $13 million[16] Peripheral Neuropathy (PDN) Opportunity - The annual total addressable market (TAM) for PDN is estimated to be approximately $3 5 billion to $5 0 billion[23] - Nevro is the only company with a specific on-label indication from the FDA for treating PDN[27] Non-Surgical Refractory Back Pain (NSRBP) Opportunity - The total addressable market for NSRBP is $7 5 billion, with current market penetration at only 4%, representing a $300 million market[29, 30]

Nevro Corp. (NYSE:NVRO) Q3 2021 Earnings Conference Call November 8, 2021 4:30 PM ET Company Participants Julie Dewey - Vice President-Investor Relations and Corporate Communications Keith Grossman - Chairman, Chief Executive Officer and President Rod MacLeod - Chief Financial Officer Conference Call Participants Joanne Wuensch - Citi Chris Pasquale - Guggenheim Tom Hopkins - Bank of America Robbie Marcus - JPMorgan Matt Taylor - UBS Daniel Antalffy - SVB Leerink David Rescott - Truist Security Suraj Kalia ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-36715 Nevro Corp. (Exact name of registrant as specified in its charter) Delaware 56-2568057 (State or other jurisdiction of incorporation or organization) ( ...