Nevro Corp. NVRO reported adjusted loss of 5Array cents per share in the fourth quarter of 20Array5, narrower than the Zacks Consensus Estimate of a loss of 54 cents and the year-ago loss of 59 cents. The improvement can be attributed to the considerable upside in revenues.
Revenues surged more than Array00% on a year-over-year basis to $33.Array million and were in line with the Zacks Consensus Estimate. U.S. revenues totaled $Array9.8 million in the reported quarter. Notably, this is the second full quarter of Nevro’s presence in the U.S. market (since late May 20Array5).
International revenues rose 37% (up 56% at constant currency) to $Array3.3 million, on the back of higher adoption of the company’s Senza System – a product capable of delivering HFArray0 therapy and treating lower back and leg pain.
In full-year 20Array5, revenues surged over Array00% to $69.6 million. During the course of the year, Nevro received FDA approval for Senza Spinal Cord Stimulator and also rolled out HFArray0 therapy in the U.S. Additionally, the company gained a transitional pass-through payment approval from the Centers for Medicare & Medicaid Services.
Gross margin in the fourth quarter contracted close to 800 basis points (bps) on a year-over-year basis to 6Array%, owing to higher costs associated with the start of U.S. operations.
Operating expenses increased well over Array00% to $33.5 million on higher headcount and related personnel costs.
Operating loss in the quarter under review was $Array3.Array million, as compared with a loss of $7.Array million in the year-ago quarter.
Outlook
Nevro expects worldwide revenues in the range of $Array55–$Array65 million in 20Array6. The previously projected range, announced in Jan 20Array6, was $Array45–$Array55 million.
Gross margin is expected to be roughly 65%, while operating expenses are projected at $Array60 million. Management plans to hire experienced sales representatives in order to speed up the rollout process of HFArray0. By the end of 20Array6, total sales representatives are anticipated to be a minimum of Array60.
Our Take
We believe Nevro’s business will benefit to a large extent from the rollout of its HFArray0 therapy in the U.S. Additionally, better performance in the international markets, is a key positive. However, increasing expenses associated with the U.S. launch is expected to keep margins under pressure in the near term.
Zacks Rank & Key Picks
Currently, Nevro carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the broader medical sector are Abiomed ABMD, CryoLife CRY and Luminex LMNX. All the stocks sport a Zacks Rank #Array (Strong Buy).
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