Perfect. Yep, thanks everyone for coming. We're here today with Nevro's CFO, Rod MacLeod. I am Kallum Titchmarsh, medical device analyst here at Morgan Stanley. Before we get started with the Q&A, just got to jump into the fun disclosures. For important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. So Rod, thanks so much for joining us. Yeah, thanks for having us. Obviously, Kevin can't be here today, unfortunately, but wanted to start off really asking, you know, he's been in the job now, CEO, five months or so, what's changed since he's taken over? Yeah. So, you know, if you've met Kevin, he's got a great energy and he hit the ground running. He had been here two days, and we had our first earnings call, and very soon after that, he went out in the field. He's probably been spending about half his time out in the field, because we really believe that's where answers are to the business. If you spend enough time with your customers and get out in their with your reps, you really understand how your product's being used, what they're thinking about it, and that sort. Kevin also came, and he made some changes right away. He brought in Greg Siller, Chief Commercial Officer. Just as a little background, Kevin, Greg, and I, we all have Stryker in our background. So, Greg just left a 16-year career at Stryker. I knew Greg when I was at Stryker. I didn't know Kevin when I was at Stryker, but I'd heard his name. We'd, you know, crossed paths and had a lot of similar friends and people that we've worked with. But the good news is that we all understand kind of that Stryker sales excellence offense. And so Kevin brought Greg in to basically bring our sales excellence, our commercial performance, up to a new level that he really felt is paramount, especially in this space. Every medical device business, you run a little bit differently, and this is one that really requires and demands sales excellence, especially where we are in our company's history, for us to be able to go to the next level and continue to take market share. So we made that change in the Chief Commercial Officer, and Kevin's a high-energy guy, Greg's a high-energy guy, and Greg came in towards the end of June. He's made a number of changes as well in the sales force. And then Kevin also brought in a new head of HR for us, which one also is very familiar with the type of talent-based offense that Kevin, Greg, and I all ran at Stryker. She was not at, Shauna was not at Stryker, but she'd run a very similar offense at other places. So Kevin's been busy. He's been talking to customers, getting out with our reps, a lot of town hall meetings and getting to know the internal folks at Redwood City. And, you know, he's also been, you know, canvassing the landscape from, like, a new indications, M&A perspective as well. So, he's. Yeah, I think he's getting pulled in a number of different directions right now. Great. That's what we want, right? Yeah, exactly. And we'll get on to the guide, et c, soon. But Q2 performance, just some high-level overview from that. You know, what were the key drivers, and then how are we expecting that to change as we shift into the second half of the year? Yeah. So we delivered a little bit over 4% growth in the quarter. O ne of our competitors, had a, you know, very strong quarter with a new product launch. They saw some improvement from replacement of primary cell devices that they had implanted in years past, and they also saw some pricing improvement. Beyond that, though, our 4%+ growth put us in pretty solidly in second place for the Q2. We believe that we've continued to take share over the last number of quarters and years. Although, you know, admittedly, I think we'd like to see ourselves separate ourselves from the pack more than we have. I think that's part of the whole offense going forward with Kevin and Greg, you know, taking our commercial market excellence to a whole new level. And then, lets see so, two of our other competitors reported. One was a little bit behind us in kind of 3.5%. And then the one that really kind of caused us to pause right before we went into our Q2 earnings call, one of the competitors came out with flat worldwide growth, and they were down about 4% in the U.S. And, you know, this has been a tough market to predict when the recovery is going to happen, what pace that recovery is gonna come at. We certainly haven't gotten it right during the pandemic, you know, as, you know, one thing seemed to roll into the other over the last, into another over the last couple of years. And so that, when that one competitor reported just a few days before our earnings call, that just caused us to hit the pause button just a little bit to say, "You know, maybe we aren't completely ready for that recovery to happen in the market." And so, you know, we were playing around with some guidance on the second half of the year, and between that, you know, that event, and then also we want to give Greg a little bit of room as he's going into the second half of the year to make the changes that he feels like he needs to make. We didn't want him to be, you know, having to do a trade-off between, "I, you know, I can, I can hit the quarter, but it's not the right long-term move for the business." So we want to give him a little bit of that, a little bit of that room to maneuver, as we went into the second half of the year. Got you. And on that guidance cut, a bit steeper, I would say, than the street was expecting. Maybe just talk us through the moving parts here and how we can get comfortable with the full year guide now. Yeah, so, you know, we're not going to provide any mid-quarter updates to Q3 or to the year at this point. But I think it's really just, you know, what I said before. We continue to perform well from a trialing perspective. PDN continues to drive a lot of growth. We did a little bit over $19 million in Q2, and that was up from $11 million in Q1, and that continues to drive really solid growth. Our core back and leg market is a little softer than we'd like. And then it was about, you know, where we are at the end of Q2. You know, we saw where that one competitor came in right before our call, that just was a little bit softer than what we thought for the overall market. And then once again, it was to give Greg a little bit of room here in the second half. But, yeah, we brought our guidance down for the year and, you know, it's our job to go out. We're, you know, we say that we're Missouri, the Show Me State, right now, although we're based in California. But, we just, we got to go put up some numbers and, you know, show what we can do and separate ourselves from the pack. Absolutely. And I wanted to push a bit more into that sales force realignment. Talk us through what you're doing here and maybe some numbers you can give us around what you're changing. Yeah. So one of the big areas and what's kind of interesting with Kevin, Greg, and I, being that we have a common background of Stryker, there's some variations of the plays that we have run before that we can kind of pull out of the proverbial playbook. But one of the things that we're doing is we're big believers in driving autonomy, accountability, and responsibility to as close to the customer as you can get. Whereas in the past, we might have made decisions at headquarters about how we should go attack certain markets, now what we're doing is we're giving a lot of that autonomy to the local level, and they're functioning more as a team, and they're being driven by the local leadership as opposed to headquarters. So to put a little bit of a finer point on that, in the past, you might have had a team of 10 folks made up of reps, PDN reps, therapy consultants, associate sales reps, coaches, and they might have reported to three or four different people. Now, we're having them all report into the local leadership because they're really in a much better place to determine a good strategy to go attack that market than, you know, having three or four different people weighing in, weighing in on that. We're also aligning them incentive comp-wise into more of a team win effort, and we're giving a lot of that accountability there. So this is actually something that a number of folks in our sales have been asking for for a while, and so they're pretty excited about it, and they're very engaged in this. And generally, if you empower people and give them the right tools and ability to go really, you know, for lack of a better term, be athletes out in the field, that generally, p eople generally respond to that, and that ends pretty well. Great. And what about timelines? How far are we through the realignment process? So we actually made most of the changes. We had some open territories that had taken a little bit longer to fill. We've got. We've worked our way through the majority of those. So we really have the people in place right now. It generally takes. When you put a new rep into a territory, it generally takes about six to nine months for them to be dangerous or really effective and comfortable and, you know, building the relationships and ability to, you know, really go out and compete on a day-to-day basis. And so we're into that phase. So that'll, you know, for some of those folks, it'll take us six to nine months. But the changes of realigning the geographies to local leadership and that reporting and putting a little bit of an incentive comp alignment around that, all of that's been done. Okay, so that should tie into, like, a kind of clear track out to 2024, right? I mean, that six to nine months. Yeah. I mean, for them to get up to speed, and we're not providing any guidance on 2024 at this point, but, you know, for them to get up to speed, that's about the right time frame. Okay, got you. And I know we've been speaking quite a bit about M&A. I know it's more of a focal topic now than perhaps it was before at Nevro. So just curious what your thoughts are on the market at the moment, which type of assets, you know, you have your eyes on. Obviously, no specific names, but Yeah. So, it's a good question. Actually, you know, if I were to roll back the tape, I think Keith spoke quite a bit about M&A while he was in the CEO position. We've always been looking at targets and would love to diversify our portfolio a bit. I think what's changed maybe a little bit is I think we've gotten quite a bit more focused on what we really want to do and what we believe we need to do, and I think this is the right strategy, is we need to drop something into our bag that our reps can call on the same call point, so we can leverage our sales force. That is our largest line item on our P&L. All in, we have about 500 people out in the field, so the more that we can leverage that group of people makes a lot of sense, from a growth perspective, from a P&L leverage, from a cash flow leverage. And, you know, one of the things that people have asked us, and they said: Well, gosh, you're talking a lot about customer or commercial excellence, sales force excellence. Do you get that right before you do the M&A? But we actually think if we find the right target, we're ready to pull the trigger on it, and that actually can accentuate or actually, you know, accelerate the sales force excellence. Because when you give reps another opportunity to go into a doctor and say, "Hey, doc, check this out. We just got this. It's really cool." You know, perhaps train them on another procedure that actually a lot of times it creates a halo effect around your other products you have in your bag. So that, that, that portfolio diversification and, and, you know, as we continue to seek, like, new indications and that sort, it's gonna be a significant part of our offense going forward. Absolutely. And, and maybe pivoting towards the core SCS market now, be good to get your high-level thoughts on, on where your share is at the moment, how that market's growing, and maybe some of the key headwinds you're seeing and, and how that's perhaps changed over. Sure. So all in, we're in the high teens from a market share perspective, you know, maybe as high as 20%. We've continued to take share over the last number of years, although in some quarters or some periods, I would say that taking share maybe wasn't at the degree of separation from our competitors that we'd really like to, or that we would expect out of ourselves. And so that's something that we absolutely want to accelerate as we go forward. Historically, we've thought of the market as growing, kind of. You know, if you look at 2010-2018, that market historically grew kind of in that high single digits, 6%-9% sort of range. We don't see any reason why we can't get back to that at some point, although we've certainly proven that our ability to predict that recovery, the timing of it, the slope of that recovery, has been really, really challenging over the last couple of years for the obvious reasons. But we're you know, for us, it's really not to go to a sports analogy, but it's about the scoreboard at the end of the day, and we have to be putting up more points than our opponents. You can make all the arguments for how hard you've played or you did this really well or that really well. It's really about what's on the scoreboard at the end of the day. And I think we're driving a lot of our mindset, our culture, much more in that direction, that not only does it have to be a win, but we are really expecting out of ourselves that, you know, we'll start to separate ourselves from the pack more so over the next, you know, couple of quarters and years. The growth of competitors has been a bit patchy, some growing faster than others, some a bit slower. Why do you think that is at the moment? Well, Q2 was a really interesting quarter. One of our competitors had a phenomenal quarter. They launched a new product in Q1, and it was a rechargeable, their first rechargeable, maybe ever or in a long time. I can't. I'm not completely certain of all their history. So we think they received a, you know, fair number of replacements, and they also got some pricing. We think it's probably more of a, you know, a couple of quarter event as opposed to a real sustainable change. But they put up some pretty strong numbers. And then, in general, you know, if you look back to Q1, we kind of led the pack with 11% worldwide constant currency growth in Q1. That put us ahead of the pack. I think we led in Q4. We generally tend to think of ourselves that we're gonna, you know, we're gonna lead the pack from a growth perspective. You know, you jump back to Q2, and one of our competitors was flat, like I mentioned, down 4% in the U.S., and another was low single digits, you know, kind of 3.5%. So I do like our chances in terms of our ability to take share. And as we go execute and kind of drive some of the cultural changes and organizational changes that we're talking about, I kind of like our chances. Great. A lot of the physicians we're speaking with, they seem to flag the biggest hurdle, as to being like the patient willingness to have the implant, an SCS implant. How do you overcome that? Yeah. So, one, I think that's getting better. During the pandemic, we primarily treat chronic debilitating pain patients, and a lot of our pain patients do have comorbidities. And if you know ran down the list during the pandemic of things you don't wanna have and catch COVID, it was a lot of those comorbidities. And I think our patient group was more impacted than your kind of average group of patients out there. And I think the further we get away from the pandemic, I mean, nobody wants to stop talking about the pandemic more than we do. But I think the further we get away from that, the further we get away from the staffing shortages, I think we're gonna get back into a little bit more of a new norm. And the other thing that's important to note is that SCS is at the complete end of the continuum of care for these patients. So most of them have gone through years of chronic pain, but they've also gone through physical therapy, injections, RF ablation, you know, and the list is long, and then at the end of it is SCS. Well, for people that disengaged from the healthcare algorithm or continuum of care during the pandemic, some of them might have been on the, you know, the one inch line to getting an SCS procedure. But when they reengaged with their physicians, a lot of them went back and they were started over again on physical therapy or an injection or one of those, you know, other therapies. And so it's gonna take some of those folks a little bit while to work through that and then get back to the kind of the SCS readiness phase. Got it. And you mentioned briefly staffing shortages. Is it an issue, do you think? Whereabouts are we now with that? A year, a little over a year ago in Q2, it was pretty acute. I think a lot of people felt it in the second half of last year still. I little by little, it got better. We've seen some of our metrics, like our trial-to-perm conversion curve. We've largely gotten most of the way back to where we were, before those staffing shortages really impacted that in Q2 of last year. So, you know, knock, knock on wood, but it seems like that's not as big of an issue. I'm certainly not hearing as much about that in the field as I did a year ago. That's for certain. Okay, got it. And we're getting a few questions on closed-loop SCS. How do you view that technology? I know Medtronic received CE approval for Inceptiv pretty recently. You know, what are your thoughts on closed-loop? Yeah. So, you know, Saluda is out there marketing their closed-loop. They're still, I don't think they're showing up from a business and a volume perspective in a super material way. You know, you know, if you've heard us talk about this before, this won't be anything new, but closed-loop was a great solution about eight years ago. It's a solution for low-frequency paresthesia therapy. And you, t he good news is, for us, is we took paresthesia out of the equation when we came onto the scene with high frequency. We don't have to wake a patient up and map paresthesia. They don't even experience paresthesia with our high-frequency therapy. Our therapy works completely different than the low-frequency paresthesia-based therapy. If you're operating in low-frequency paresthesia-based therapy, one of the biggest problems is the migration lead. If it gets too close, the spinal cord gets jolted. If it migrates too far away, you fall out of the therapeutic window. This is basically dialing the amps, which causes the paresthesia up and down, depending on where that is. And, you know, maybe this will resonate with some folks, but asking us why don't we have closed loop is kind of equivalent of saying, "Hey, Elon Musk, why don't you have a gas tank on your car?" He's got an electric car, he doesn't need one. And it's kind of a moot point for us. But we're still trying to figure 'cause we keep getting asked it, and it's a fair question, but it really is, i t's kind of a moot point for us, our technology, our therapy, and the way our product works. Got it. Moving on to PDN, obviously, big opportunity here. A couple of competitors in the space now without clinical data. How are we viewing the market at the moment? So another good question. So we received FDA approval in July of 2021. We did about $6-ish million in the first six months in 2021. We did $48 million last year in PDN revenue, and then we've said that we're still largely on track to deliver the guidance we put out earlier in the year, which was in the $70-$80 million range. And Medtronic and Abbott, they also received FDA approval over the last, you know, year and a half, 20 months or so. So first of all, it's really hard to tell how much penetration they're actually getting because it's the same CPT code, same device, same implanting physician. So there's nothing out there that we can look at and be like, "Hey, that was a PDN patient for them versus back and leg." Anecdotally, though, we don't hear a whole lot, and we're in a lot of the same accounts with them, 'cause a lot of these accounts are splitter accounts, where they might be using two or three different devices. We'd obviously love to grab, you know, more of our lion's share of those, but, a nd I think we will. But, we don't actually hear a lot from them on the PDN, and we think, we believe, and I think the science would say, our product, our technology is absolutely differentiated in core, back, and leg. Well, we're even more differentiated in the PDN space, and part of that is most of these patients with painful diabetic neuropathy, they've got tingling and numbness in their feet. They've got, you know, the feet feel on, you know, on fire or icy. And so why would you want to go off for a therapy where you're actually putting paresthesia over something where you're already getting that tingling? We kind of wonder how well that's gonna play out. So, we still think we're getting the lion's share of the PDN patients. We think our product is, like I said, even more differentiated. And the referring Physicians, the primary care Physicians, The Endocrinologists, The Podiatrists, they anecdotally seem like they care a lot about the data and the science behind it. It seems like they do refer their patients to the high frequency, which we're the only ones out there with, with the high frequency. Got you. On the clinical data, saw quite recently the 24-month durability results? Maybe talk a bit about that and any other plans in the future for some clinical studies? Yeah. So, our results continue to be really incredible. Our responder rates are strong, and they're even stronger than our core back and leg results. So this group of patients is responding very well to the therapy. And one of the things that we've spoken about in the past, in our initial clinical study, about two-thirds of the patients received sensory restoration or sensory improvement. And what if you think about a person that can't feel their feet, they can't ambulate, they can't drive a car, they can't feel the foot and the gas, the brake and the gas pedals. They can't exercise if they can't walk. They can't feel if they receive a, you know, it's part. If your foot's in space and you can't feel it, you don't know if you're stepping on something uneven, where you, that's how you break your ankle or you cut yourself, and that can later turn into an infection. So, the fact that we've been able to provide sensory improvement there is really, really cool. And so we've launched a new study with that as an endpoint, and we have, I think, close to 30 patients enrolled in that. We'll continue to enroll them through the end of the year and probably into next year a little bit, and then we'll be producing the results over the next couple of years. Great. On the international business, I think about 15% of revenues in Q2, roughly? That's. I think we're a little higher than that. Okay. But that's about right. Yeah. And so, I guess, you know, which regions are you seeing good traction in? Which regions do you see a large opportunity in? So the lion's share of PDN has been in the U.S. We've gotten a little bit of traction internationally, but it's really been in the U.S. where we've really seen some really great traction there. Okay, and the core market? So the core market is been a little bit soft this year for us. And once again, this kind a goes to the notion that we believe that the implanting physicians kind of unequivocally see our product as being very differentiated amongst the PDN patients. And I think correspondingly, with a bunch of these being splitter accounts, the lion's share of those PDN patients come to us, and some of those core back and leg patients that historically may have come to us, I think they've doled out to some of our competitors. But you know, I think the challenge goes to our sales force. Like, we have some really, really strong, incredible reps that have in some markets not too far from here that probably have 75%-80% market share, and they're finding a way to protect all their back and leg business and also developing a PDN practice as well. Great. So a couple of minutes left. Two more questions. One, I know it's not the most relevant for your business, but GLP-1s. Curious, you know, how you're thinking about that phenomenon at the moment in the market. Yeah. So, you know, that's obviously helping people with weight reduction. That really doesn't fundamentally treat either pain or the numbness, lack of ability to feel your feet. So, as of right now, and we've evaluated, we've kicked the question around internally a lot, we don't, we don't see it as being something that affects our therapy in any way, shape, or form, just because it's really not fundamentally treating what our therapy treats. Got you. Final question, you know, what's something that you're surprised more investors don't ask you about that you think is important for the Nevro story? You know, probably, and they ask about it- But they ask about it, but I think everybody always underestimates culture and how important culture is. I think the changes that we're making in terms of driving more of that local decision-making, driving that engagement, that accountability, that responsibility, that winner's attitude, and that we're not gonna tolerate a non-winning attitude. And those are really easy things to say and talk about, and everybody talks about culture, but people that get it really well, it makes a really big difference. And I. We do get a lot of questions on it, but I think that understanding of if you can execute on culture just how much that can change your whole market, your whole competitive strategy. Got you. Lovely. Well, thank you so much, everyone, for joining. Thank you, Rod. Appreciate your time. Well, thank you. Take care. All right.