On November 6, 2019 Nevro Corp. (NYSE: NVRO), a global medical device company that is providing innovative, evidence-based solutions for the treatment of chronic pain, reported financial results for the third quarter ended September 30, 2019 (Press release, Nevro, NOV 6, 2019, View Source [SID1234550515]).
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Senza Omnia is the first and only spinal cord stimulation (SCS) system designed to deliver Nevro’s proprietary HF10 therapy and all SCS frequencies between 2 and 10,000 Hz.
Senza Omnia is the first and only spinal cord stimulation (SCS) system designed to deliver Nevro’s proprietary HF10 therapy and all SCS frequencies between 2 and 10,000 Hz.
Revenue for the third quarter of 2019 was $100.2 million, a 5% increase compared to $95.6 million during the prior year period. U.S. revenue for the third quarter of 2019 was $84.2 million, a 6% increase compared to $79.6 million in the prior year period. The year-over-year increase in U.S. revenue was primarily driven by SCS procedure growth which was partially offset by the impact of the Company’s previously announced decision to alter its practice regarding certain high-volume product orders. International revenue was $16.0 million compared to $16.0 million in the prior year period. While flat on an as-reported basis, this represents a 5% increase on a constant currency basis.
"Our strong third quarter 2019 financial results demonstrate our continued improvement in commercial focus and execution across the organization. In the U.S., we saw an 18% year-over-year increase in both patient trial procedures and permanent implant procedures," said D. Keith Grossman, Chairman, CEO and President. "Yesterday we announced the commercial launch of our groundbreaking Senza Omnia system, the only SCS system that offers HF10 therapy in addition to all other SCS frequencies, as well as frequency pairing with HF10. We’re excited by the early customer feedback we’ve received, and we believe this new product introduction, along with our ongoing operational initiatives, positions us for continued growth in 2020 and beyond."
Gross profit for the third quarter of 2019 was $69.9 million, a 4% increase compared to $67.2 million in the prior year period. Gross margin was 69.8% in the third quarter of 2019 compared to 70.3% in the prior year period.
Operating expenses for the third quarter of 2019 were $85.9 million, a 12% increase compared to $76.5 million in the prior year period. The year-over-year increase in operating expenses was primarily driven by U.S. sales and marketing personnel costs. Legal expenses associated with patent litigation were $1.9 million for the third quarter of 2019, compared to $3.5 million in the prior year period.
Net loss from operations for the third quarter of 2019 was $16.0 million, compared to a loss of $9.2 million in the prior year period. Adjusted EBITDA for the third quarter of 2019 was a loss of $2.0 million, compared to a positive $5.2 million in the prior year period. Adjusted EBITDA excludes certain litigation expenses, interest, taxes and non-cash items such as stock-based compensation and depreciation and amortization. Please see below for GAAP to Non-GAAP reconciliations.
Cash, cash equivalents and short-term investments totaled $232.8 million as of September 30, 2019. Net cash used during the third quarter of 2019 was $1.2 million and $31.8 million for the nine months ended September 30, 2019.
Full Year 2019 Financial Guidance
Following the Company’s third quarter 2019 financial results, Nevro management is increasing its financial guidance for 2019 worldwide revenue from $368-$374 million to $383-$386 million. Gross margin is expected to be in the 68-70% range as a percentage of revenue.
CFO Retirement and Transition Plan
The Company also announced that Andrew Galligan has decided to retire after nearly a decade with Nevro. Mr. Galligan will remain Chief Financial Officer (CFO) through the appointment of a successor. Mr. Galligan will serve in a transitional role for some period of time thereafter. Nevro is initiating a search to identify the Company’s next CFO.
"Andrew has played a very significant role in Nevro’s growth as he oversaw the Company’s evolution from its early days as a small private company," Grossman continued. "Since my arrival in March of 2019, Andrew has not only been an exceptional leader, but on a personal level he has been an invaluable partner to me. I want to thank Andrew for his many contributions and I look forward to continuing to benefit from his perspective in the coming months."
Webcast and Conference Call Information
Management will host a conference call today beginning at 1:30 p.m. PT / 4:30 p.m. ET. Investors interested in listening to the conference call may do so by dialing (833) 286-5807 in the U.S. or (647) 689-4452 internationally, using Conference ID: 4787437. In addition, a live webcast will be available on the "Investors" section of the Company’s website at www.nevro.com, as well as an archived recording.