Nevro(US:NVRO)2023-04-25 16:00Financial Performance - Total revenue for Q1 2023 was $96.3 million, a decrease of 7.5% compared to Q4 2022's revenue of $104.2 million[68] - U.S. sales for Q1 2023 were $82.3 million, down from $99.8 million in Q4 2022, representing a decline of 17.6%[68] - International sales for Q1 2023 were $14.0 million, a slight decrease from $14.1 million in Q4 2022[68] - Revenue increased to $96.3 million for the three months ended March 31, 2023, up 10% from $87.8 million in the same period of 2022[115] - Gross profit rose to $64.6 million, a 9% increase from $59.1 million year-over-year, with a consistent gross margin of 67%[116] - R&D expenses increased by 18% to $14.8 million, primarily due to a rise in personnel costs[117] - SG&A expenses grew by 9% to $86.2 million, driven by higher travel and personnel costs[118] - Interest income surged to $3.3 million, up from $0.1 million, reflecting higher average investment return rates[119] - Net cash used in operating activities was $29.3 million for the three months ended March 31, 2023, compared to $28.4 million for the same period in 2022, reflecting a slight increase in cash outflow[127] - The company recorded net losses of $35.0 million in Q1 2023, with inventory increasing by $14.3 million and accounts payable decreasing by $4.0 million[128] - Investing activities included net purchases of short-term investments totaling $22.1 million in Q1 2023, compared to net proceeds of $51.7 million from short-term investments in Q1 2022[129] - Cash used in financing activities was $2.3 million in Q1 2023, primarily due to tax withholdings, down from $7.3 million in Q1 2022[130] Market and Product Development - The global spinal cord stimulation (SCS) market is estimated to be approximately $2.3 billion, with the company aiming to expand its market share through superior 10 kHz Therapy[66] - The company received FDA approval for 10 kHz Therapy for chronic intractable pain of the lower limbs in July 2021 and for non-surgical back pain in January 2022, enhancing its product offerings[81][82] - The company plans to continue significant investments in U.S. commercial infrastructure and R&D to support future regulatory submissions and product expansions[70] - The SENZA-PDN study is one of the largest RCTs in spinal cord stimulation with 216 randomized patients, evaluating the efficacy of 10 kHz Therapy for PDN[94] - The company launched its latest generation SCS system, HFX iQ™, in the fourth quarter of 2022, with a full market launch in the first quarter of 2023[93] - The company is investing in R&D to expand into new indications and improve product outcomes, with ongoing clinical trials for PDN and NSBP[93] Challenges and Risks - The COVID-19 pandemic has negatively impacted the demand for elective procedures, with the global SCS therapy market estimated to have decreased by approximately 5% to 10% in 2021[72] - The company faces challenges from macroeconomic conditions, including inflation, supply chain issues, and lower consumer confidence, which may affect elective procedure demand[78] - The company has faced challenges with negative coverage decisions from private insurers, which may impair revenue growth[90] - The company continues to work on expanding payor coverage for its 10 kHz Therapy for PDN and NSBP, a process that may take years and could be costly[91] - Market risks related to interest rates, market prices, and foreign currency exchange have not changed materially since December 31, 2022[138] Financial Obligations and Investments - The company has an accumulated deficit of $642.2 million as of March 31, 2023, primarily due to investments in the development of Senza products and 10 kHz Therapy[70] - The company has minimum annual purchase commitments of $12.8 million for the remainder of 2023 and $19.8 million for each year from 2024 to 2026[135] - Contractual obligations include interest payments of $5.2 million due for the remainder of 2023 and 2024, with total payments of $192.4 million due in 2025[136] - The company plans to vertically integrate manufacturing capabilities at a facility in Costa Rica, with lease obligations of approximately $3.9 million over the term[134] - The company is committed to pay $2.9 million in the next year under a service agreement[135] Coverage and Reimbursement - The company has favorable National Coverage Determination (NCD) and reimbursement by Medicare for chronic back and leg pain, but local MACs can establish their own policies for newer indications like PDN and NSBP[84] - As of the third quarter of 2022, approximately 54% of the addressable US PDN population is covered under a formal policy for PDN, representing about 43.5 million commercially-insured covered lives[87] - Effective January 10, 2023, BCBS New Jersey updated their medical policy to explicitly cover PDN, representing approximately 3.7 million covered lives[89] Manufacturing and Supply Chain - The company is vertically integrating the assembly of its products to mitigate reliance on third-party manufacturers, with a facility in Costa Rica operational since mid-2022[71] - The impact of the COVID-19 pandemic continues to affect operations, alongside costs related to product commercialization and R&D activities[127]