Nevro Corp (NYSE:NVRO) Q2 2020 Earnings Conference Call August 5, 2020 4:30 PM ET Company Participants Juliet Cunningham - VP, IR Keith Grossman - Chairman, CEO & President Roderick MacLeod - CFO Conference Call Participants Lawrence Biegelsen - Wells Fargo Securities Robert Marcus - JPMorgan Chase & Co. David Lewis - Morgan Stanley Margaret Kaczor - William Blair & Company Robert Hopkins - Bank of America Merrill Lynch Joanne Wuensch - Citigroup Danielle Antalffy - SVB Leerink Kaila Krum - Truist Securitie ...

[PART I—FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This section provides Nevro Corp.'s financial statements, management's discussion, market risk disclosures, and controls and procedures [Item 1. Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) Nevro Corp.'s unaudited condensed consolidated financial statements for Q2 2020 and year-to-date are presented, detailing balance sheets, operations, cash flows, and notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2020, total assets increased to **$753.2 million**, driven by cash and investments, with liabilities and equity also rising Condensed Consolidated Balance Sheets (in thousands) | | June 30, 2020 (in thousands) | December 31, 2019 (in thousands) | | :--- | :--- | :--- | | **Total Current Assets** | $716,937 | $422,052 | | **Total Assets** | $753,172 | $469,645 | | **Total Current Liabilities** | $220,768 | $70,611 | | **Total Liabilities** | $378,744 | $253,293 | | **Total Stockholders' Equity** | $374,428 | $216,352 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Q2 2020 revenue decreased to **$56.4 million**, resulting in a **$41.1 million** net loss, with six-month revenue also declining to **$143.9 million** Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands) | Metric (in thousands) | Q2 2020 | Q2 2019 | Six Months 2020 | Six Months 2019 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $56,390 | $93,571 | $143,857 | $175,719 | | **Gross Profit** | $35,250 | $63,943 | $95,797 | $117,152 | | **Loss from Operations** | $(35,361) | $(26,560) | $(58,428) | $(68,814) | | **Net Loss** | $(41,063) | $(28,021) | $(65,951) | $(72,097) | | **Net Loss Per Share** | $(1.21) | $(0.91) | $(2.00) | $(2.36) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2020, operating cash use improved to **$22.0 million**, investing cash use increased, and financing cash provided surged to **$341.0 million** Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | **Net cash used in operating activities** | $(22,004) | $(33,377) | | **Net cash provided by (used in) investing activities** | $(107,626) | $37,222 | | **Net cash provided by financing activities** | $341,005 | $7,695 | | **Net increase (decrease) in cash** | $211,142 | $11,546 | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, COVID-19 impact, debt instruments, lease accounting, fair value measurements, and updates on legal proceedings, especially with Boston Scientific - The company has a history of net losses, incurring a net loss of **$66.0 million** and using **$22.0 million** in cash from operations in the first six months of 2020[19](index=19&type=chunk) - The COVID-19 pandemic has negatively impacted operations and revenues by decreasing the number of Senza system procedures performed, as many elective surgeries were suspended or canceled[23](index=23&type=chunk)[24](index=24&type=chunk) - In April 2020, the company issued **$189.8 million** in 2.75% convertible senior notes due 2025 and completed a public offering of common stock, raising net proceeds of approximately **$183.6 million** and **$147.1 million**, respectively[19](index=19&type=chunk)[123](index=123&type=chunk) - The company is involved in multiple patent infringement lawsuits with Boston Scientific. A recent Federal Circuit ruling vacated a lower court's judgment of invalidity on some of Nevro's patents, reinstating the claims[107](index=107&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, highlighting significant Q2 and H1 2020 revenue decline due to COVID-19, withdrawal of 2020 guidance, and strengthened liquidity [Overview and COVID-19 Impact](index=25&type=section&id=Overview%20and%20COVID-19%20Impact) Nevro, a medical device company, experienced negative COVID-19 impact on Senza SCS procedures and revenue, leading to the withdrawal of 2020 annual guidance - The COVID-19 outbreak has negatively impacted operations and revenues by decreasing the number of Senza systems procedures performed, as healthcare organizations prioritized COVID-19 treatment and suspended elective procedures[145](index=145&type=chunk)[146](index=146&type=chunk) - The company has withdrawn its previously announced annual guidance for 2020 due to the continued uncertainties resulting from the COVID-19 pandemic[148](index=148&type=chunk) - In April 2020, the company raised approximately **$183.7 million** from an offering of convertible senior notes due 2025 and **$147.2 million** from a public offering of common stock[143](index=143&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Q2 2020 revenue decreased **40%** to **$56.4 million** due to COVID-19, with gross margin falling to **63%** and operating expenses decreasing Results of Operations - Q2 (in thousands) | Metric (in thousands) | Q2 2020 | Q2 2019 | % Change | | :--- | :--- | :--- | :--- | | **Revenue** | $56,390 | $93,571 | -40% | | U.S. Revenue | $51,000 | $78,100 | -35% | | International Revenue | $5,400 | $15,500 | -65% | | **Gross Profit** | $35,250 | $63,943 | -45% | | **Gross Margin** | 63% | 68% | -5 p.p. | Results of Operations - Six Months (in thousands) | Metric (in thousands) | Six Months 2020 | Six Months 2019 | % Change | | :--- | :--- | :--- | :--- | | **Revenue** | $143,857 | $175,719 | -18% | | U.S. Revenue | $126,300 | $143,900 | -12% | | International Revenue | $17,500 | $31,800 | -45% | | **Gross Profit** | $95,797 | $117,152 | -18% | | **Gross Margin** | 67% | 67% | 0 p.p. | - The decrease in revenue for both the three and six-month periods was a result of a worldwide decline in procedure volume due to the COVID-19 pandemic[175](index=175&type=chunk)[184](index=184&type=chunk) - Sales, General and Administrative (SG&A) expense decreased by **$15.4 million** (**20%**) in Q2 2020 compared to Q2 2019, primarily due to lower personnel costs, travel, and healthcare professional-related expenses[178](index=178&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2020, Nevro held **$562.3 million** in cash and investments, boosted by **$313.3 million** from April 2020 offerings, ensuring liquidity for 12 months - As of June 30, 2020, the company had cash, cash equivalents, and short-term investments of **$562.3 million**[193](index=193&type=chunk) - In April 2020, the company raised a total of **$313.3 million** in net proceeds from concurrent offerings of common stock and convertible senior notes due 2025[193](index=193&type=chunk) - Net cash used in operating activities for the first six months of 2020 was **$22.0 million**, an improvement from **$33.4 million** in the same period of 2019[198](index=198&type=chunk) - Management expects that current cash reserves will be sufficient to fund operations for at least the next 12 months[193](index=193&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rates, foreign currency exchange, and convertible notes, with interest rate risk on short-term investments considered insignificant - The company's primary market risk exposures are interest rate sensitivity, foreign currency exchange fluctuations, and market risk associated with its convertible senior notes[208](index=208&type=chunk)[211](index=211&type=chunk)[213](index=213&type=chunk) - Exposure to interest rate risk is considered not significant because investments are primarily short-term in duration[210](index=210&type=chunk) - A portion of revenue and operating expenses are denominated in foreign currencies, subjecting the company to transaction gains and losses from exchange rate fluctuations. A hypothetical **10%** change in exchange rates would have an immaterial impact on net loss[211](index=211&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2020, with no material changes to internal control over financial reporting - Based on an evaluation as of June 30, 2020, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level[215](index=215&type=chunk) - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[216](index=216&type=chunk) [PART II—OTHER INFORMATION](index=37&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) This section details ongoing legal proceedings, significant risk factors, and information regarding unregistered sales of equity securities [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) This section details ongoing patent infringement lawsuits with Boston Scientific, a settlement with Stimwave, and a new lawsuit against Nalu Medical - Nevro is engaged in ongoing patent infringement litigation with Boston Scientific. In April 2020, the U.S. Court of Appeals for the Federal Circuit vacated a lower court's judgment of invalidity, reinstating Nevro's asserted system claims[218](index=218&type=chunk)[220](index=220&type=chunk) - Boston Scientific has also filed two lawsuits against Nevro in Delaware, alleging patent infringement, trade secret misappropriation, and tortious interference. These cases have been partially stayed and consolidated, with a trial scheduled for October 2021[221](index=221&type=chunk)[222](index=222&type=chunk) - In February 2020, Nevro and Stimwave Technologies settled a lawsuit, with Stimwave agreeing to a permanent injunction to cease commercialization of all high-frequency spinal cord stimulation systems worldwide[223](index=223&type=chunk) - Nevro filed a new lawsuit for patent infringement against Nalu Medical, Inc. in February 2020[224](index=224&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks including COVID-19 impact, market acceptance of HF10 therapy, intense competition, supply chain reliance, product liability, IP litigation, financial losses, and regulatory oversight - The COVID-19 pandemic has harmed and may continue to harm the business by decreasing the number of Senza system procedures, as elective surgeries are suspended or cancelled[227](index=227&type=chunk) - The company faces significant competition from large, well-established medical device companies like Medtronic, Boston Scientific, and Abbott Laboratories, which have substantially greater resources[240](index=240&type=chunk)[243](index=243&type=chunk) - The company is involved in expensive and time-consuming lawsuits to protect its intellectual property, which could result in the diversion of significant resources and hinder growth[235](index=235&type=chunk) - Dependence on third-party, and in some cases sole-source, suppliers for critical components makes the company vulnerable to supply shortages, price fluctuations, and manufacturing problems[271](index=271&type=chunk)[276](index=276&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=70&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - There were no unregistered sales of equity securities in the period[399](index=399&type=chunk)

Nevro Corp (NYSE:NVRO) Q1 2020 Earnings Conference Call May 5, 2020 4:30 PM ET Company Participants Juliet Cunningham - Vice President of Investor Relations Keith Grossman - Chairman, CEO & President Andrew Galligan - Chief Financial Officer Conference Call Participants Larry Biegelsen - Wells Fargo Securities Joanne Wuensch - Citigroup Robert Hopkins - Bank of America Merrill Lynch David Lewis - Morgan Stanley David Rescott - SunTrust Robinson Humphrey Robert Marcus - JPMorgan Chase & Co. David Turkaly - J ...

Nevro First Quarter 2020 Earnings Presentation May 5, 2020 1 IIIIIII nevro Forward-Looking Statements In addition to historical information, this press release contains forward-looking statements reflecting the current beliefs and expectations of management made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including the Company's expectations for the return of SCS procedural volumes. These forward-looking statements are based upon information that is curren ...

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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 year ended December 31, 2019 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 Identificat ...

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, 2019 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) (State or other jurisdiction of incorporation or organization) Delaware 56-2568057 ( ...

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 June 30, 2019 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) (State or other jurisdiction of incorporation or organization) Delaware 56-2568057 (I.R.S ...

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 March 31, 2019 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. ...

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