Nevro (NVRO) Q3 Earnings Top Estimates, FY23 Revenue View Up
Nevro Corp. NVRO reported a loss per share of 65 cents for the third quarter of 2023, against the year-ago quarter’s earnings per share (EPS) of $2.22. However, the loss per share was narrower than the Zacks Consensus Estimate of a loss of 77 cents.
Revenues in Detail
Nevro registered worldwide revenues of $103.9 million in the third quarter, up 3.4% year over year on a reported basis. The figure topped the Zacks Consensus Estimate by 7.8%.
At constant exchange rate (CER), revenues were up 3% year over year.
Painful Diabetic Neuropathy (PDN) indication sales represented approximately $20.8 million (20%) of worldwide permanent implant procedures and increased 56% year over year.
Quarterly Highlights
In the quarter under review, international revenues were $14.1 million, down 1.4% year over year on a reported basis and 6% at CER. This figure compares to our third-quarter projection of $13.3 million.
U.S. revenues for the quarter totaled $89.8 million, up 4.3% year over year. This figure compares to our third-quarter projection of $82.2 million.
Total U.S. permanent implant procedures increased 7%, while U.S. trial procedures increased 4%. U.S. PDN trial procedures, representing approximately 24% of total U.S. trial volume, jumped 41% from the prior-year quarter.
Nevro Corp. Price, Consensus and EPS Surprise
Nevro Corp. price-consensus-eps-surprise-chart | Nevro Corp. Quote
Margin Trend
In the quarter under review, Nevro’s gross profit rose 0.3% to $69.5 million. However, the gross margin contracted 205 basis points to 66.9%.
We had projected 67.7% of gross margin for the third quarter.
Sales, general & administrative expenses increased 3.8% to $81.2 million. Research and development expenses decreased 0.8% year over year to $13.9 million. Total adjusted operating expenses of $95.1 million increased 3.1% year over year.
The total adjusted operating loss in the reported quarter totaled $25.6 million compared with a total adjusted operating loss of $22.9 million in the year-ago quarter.
Financial Position
Nevro exited the third quarter of 2023 with cash and cash equivalents and short-term investments of $320.3 million compared with $329.9 million at the end of the second quarter. Long-term debt at the end of third-quarter 2023 was $187.8 million compared with $187.5 million at the second-quarter end.
As of Sep 30, 2023, 36,869,962 shares were issued and 36,187,046 shares were outstanding.
Cumulative net cash used in operating activities at the end of third-quarter 2023 was $49.9 million compared with cumulative net cash provided by operating activities of $38.1 million a year ago.
Guidance
Nevro has provided its financial outlook for the fourth quarter and raised its financial outlook for 2023.
For the fourth quarter, Nevro expects its worldwide revenues to be in the range of $108 million-$110 million, reflecting a decline of 4-6% year over year at CER. The Zacks Consensus Estimate is pegged at $110.9 million.
The company now expects its 2023 worldwide revenues in the range of $417 million-$419 million, reflecting growth of 3% from the comparable figure of 2022 both on a reported basis and at CER. This is up from the prior outlook of $410 million-$415 million, reflecting growth of 1-2% from the comparable figure of 2022 both on a reported basis and at CER. The Zacks Consensus Estimate is pegged at $412.4 million.
Our Take
Nevro exited the third quarter of 2023 with better-than-expected results and a solid improvement in overall top-line results. The company’s robust domestic revenues were also impressive. An uptick in total U.S. permanent implant procedures and U.S. trial procedures was promising. The improvement in U.S. PDN trial procedures was also encouraging.
During the quarter, Nevro announced favorable 24-month data from the SENZA PDN Randomized Controlled Trial. The data, published in Diabetes Research and Clinical Practice, demonstrated the long-term efficacy of high-frequency 10 kHz spinal cord stimulation to treat refractory PDN.
On the earnings call, management confirmed that the HFX iQ and its ability to deliver personalized pain relief continue to receive positive feedback. These look promising for the stock.
On the flip side, dismal bottom-line performances and international revenues were disappointing. The sustained operating loss incurred by Nevro also raises our apprehension. The contraction of the gross margin also does not bode well.
Zacks Rank and Key Picks
Nevro currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories ABT, DexCom, Inc. DXCM and Integer Holdings Corporation ITGR.
Abbott, carrying a Zacks Rank of 2 (Buy), reported third-quarter 2023 adjusted EPS of $1.14, beating the Zacks Consensus Estimate by 3.6%. Revenues of $10.14 billion outpaced the consensus mark by 3.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 6.8%.
DexCom reported third-quarter 2023 adjusted EPS of 50 cents, beating the Zacks Consensus Estimate by 47.1%. Revenues of $975 million surpassed the Zacks Consensus Estimate by 4%. It currently carries a Zacks Rank #2.
DexCom has a long-term estimated growth rate of 33.6%. DXCM’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 36.4%.
Integer Holdings reported third-quarter 2023 adjusted EPS of $1.27, beating the Zacks Consensus Estimate by 20.9%. Revenues of $404.7 million surpassed the Zacks Consensus Estimate by 8.7%. It currently carries a Zacks Rank #2.
Integer Holdings has a long-term estimated growth rate of 15.8%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 11.9%.
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