Katherine Bock - Senior Director of Corporate Development and IR Rami Elghandour - President and CEO Andrew Galligan - CFO.

Mike Weinstein - JPMorgan David Lewis - Morgan Stanley Danielle Antalffy - Leerink Partners Dave Turkaly - JMP Securities Bob Hopkins - Bank of America Joanne Wuensch - BMO Larry Nicholson - Wells Fargo Brooks West - Piper Jaffray Margaret Kaczor - William Blair Suraj Kalia - Northland Securities.

Good afternoon. My name is Kirk, and I’ll be your conference operator today. At this time I would like to welcome everyone to the Nevro Second Quarter 2016 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. [Operator Instructions] Thank you. Ms.

Katherine Bock, Senior Director of Corporate Development and Investor Relations, you may begin your conference..

Thank you, Kirk. And thank you all for participating on today's call. Joining me are Rami Elghandour, President and Chief Executive Officer and Andrew Galligan, Chief Financial Officer. Earlier today Nevro released financial results for the quarter ended June 30, 2016. A copy of that press release is available on the Company's website.

Before we begin I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Any statements contained in this call that are not statements of historical fact should be deemed to be forward-looking statements.

All forward-looking statements, including, without limitation, or examination of operating trends and our future financial expectations, which includes full-year 2016 guidance, are based upon our current estimates and various assumptions.

These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements.

For a list and description of the risks and uncertainties associated with our business, please see our filings with the Securities and Exchange Commission.

Nevro disclaims any intention or obligation except as required by law to update or revise financial projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 08, 2016.

And with that, I’ll turn the call over to Rami..

Thank you, Katie and thanks everyone for dialing in today. For today's call, I will start with reviewing our second quarter performance and operating highlights, as well as providing additional color on our U.S. launch.

Andrew will follow with a deeper review of the financials and expectations for worldwide revenue, gross margins and operating expenses in 2016, then we'll open up the call for your questions. Nevro's worldwide revenue for the second quarter was $55.4 million, an increase of 385% as reported. U.S.

revenue was $40.6 million and international revenue was $14.8 million, the latter representing an increase of 30% as reported and 33% in constant currency over the same period in the prior year.

Our results underpin strong global adoption trends with HF10 therapy representing approximately 13% share of the worldwide SCS market and greater than 10% share of the U.S. market in our first year of launch in the United States.

We believe HF10 therapy is poised to become the therapy of choice for physician seeking their best treatment for patients suffering from chronic back or leg pain. And with our superior therapy, focused strategy and outstanding team, we are confident in our ability to continue delivering on the promise of HF10 therapy.

Based on the strength and momentum of our U.S. launch and sustained performance in year six of our international commercialization, we have sufficient visibility to raise our global revenue guidance.

We are increasing the full 2016 total revenue guidance to $210 million to $220 million which is an increase of $35 million above our May 9 guidance for the full year. In light of our continued operational success accelerated trajectory of our U.S.

launch and favorable financial market conditions, in June we announced and closed a public financing of $172.5 million in convertible senior notes. Our success as a company has been predicated on operating from a position of strength without financial constraints.

This financing will allow us to continue making long term decisions such as the advanced planning that resulted in our successful U.S. launch, as well as investing in evidence based therapies and driving our pipeline. Our core focus has been and will continue to be delivering superior patient outcomes.

Just last week I had the pleasure of meeting one of our U.S. pivotal study patients who has now been implanted for four years. Her story is representative of many chronic pain patients.

A back injury followed by two surgeries left her an excruciating pain and the pain drugs she was prescribed obscured her cognition and adversely impacted her quality of life. She was very emotional in sharing the positive impact of HF10 therapy on her life over the past four years.

She is now 100% off opioids; has gone back to work and is thoroughly enjoying her grandchildren. The impact HF10 therapy has had on her life is simply why we do what we do.

It is evident that our strategy of focusing on patient outcomes has proven successful both domestically and internationally and with it, we have built the foundation for sustainable success.

HF10 therapy continues to generate excitement in the market from customers and attract talented individuals inspired by our mission of enabling passionate people to transform more lives by delivering breakthrough evidence based therapies.

On the hiring front, we ended the second quarter with 140 hired and trained reps and increase of 27 reps from the previous quarter count of 113 reps.

As we've stated in the past we expect hiring to peak in the second and third quarter and we do not have a limit on the number of reps we will hire against our target of ending 2016 with a minimum of 160 reps in the field. Internationally, we ended the quarter with 57 sales reps trained and in the field and similar to the U.S.

we continue to add field support as needed to drive further adoption of HF10 therapy worldwide. We're excited to announce the acceptance for publication of our two year pivotal study results in the journal neurosurgery.

Neurosurgery is a pre-eminent journal in our space and we are the other two landmark studies in SCS history, North and Kumar were also published. This publication further distinguishes HF10 therapy in terms of superior efficacy unmated durability of outcomes, as well as strength of clinical evidence.

The publication in neurosurgery is also fitting as it further communicates our commitment for continued collaboration with the surgical community and conjunction with our surpass surgical lead launch. We have initiated a stage roll-out of our surgical lead where we are gaining valuable insights.

Clinically, we have demonstrated the ability to deliver HF10 therapy to our surpass lead. From a production standpoint, we need to make improvements in moving to large scale manufacturing and as a result we are now expecting to have a broader launch in the first half of 2017.

Our priority has always is to deliver superior clinical outcomes and ensure we have the robust product. Launching in the first half of 2017 allows us to ensure our production ramp can support the market demand upon launch. On the reimbursement front we had a number of developments in the second quarter.

On a positive front, Aetna and Humana joined Kaiser and CMS in updating their coverage policies to include HF10 therapy. Beginning in late April, however, Cigna and certain Blue Cross Blue Shield regional plans published updated policies designating high frequency as investigational and or experimental.

Let me first state that the decisions by Cigna and Blue Cross are not supported by the available evidence or market adoption of HF10 therapy. The rational for these decisions is unclear, as they are effectively denying patient's access toward clinically superior therapy.

H10 therapy is backed by two year published clinical studies one of which has comparative effectiveness evidence against traditional low frequency stimulation. No other therapy in this space comes close to the quality of evidence supporting HF10 therapy or superiority of clinical effect.

This is precisely the type of evidence commercial payers request and the evidence has further strengthened by market adoption that supports a real world impact of Hf10 therapy.

Further we believe these decisions undermine the very basis of innovation and that they discount comparative effectiveness evidence while reimbursing inferior products simply due to the long-standing use in the market.

While we continue to address these decisions, they do allow us to open a dialogue with commercial payers regarding the superiority and advantages of HF10 therapy. We are confident that this dialogue will overtime be a net positive for Nevro and HF10 therapy.

To that end we have made progress in addressing these decisions and have already overturned Blue Cross of Alabama on a highmark, as well as secured coverage from HCSC which are all Blue's plans that combined represent nine states and includes two of the top ten commercial payers in the United States.

We continue to have a dialogue with Cigna and other regional Blue Cross and Blue Shield plans and are confident in addressing this matter. Our success thus far is underpinned by overwhelming support from individual physicians and medical societies strongly advocating for HF10 therapy.

Further as evidence by our increased revenue guidance, we do not anticipate a meaningful impact from these decisions at this time. Our commitment is to continue to invest in breakthrough therapies through a multi-tiered approach ranging from scientific research to indication expansion.

As part of that commitment at the recent Neuromodulation, the Science Conference on June 28 in San Francisco we presented some of our latest preclinical findings related to the mechanism of action of HF10 therapy.

Professor Steve McMahon of King's College presented results demonstrating that 10 kHz electrical fields could significantly reduce wind-up in pain circuit neurons compared to [cham] [ph].

In addition, our research team presented groundbreaking data demonstrating an increasing frequency dose response on pain circuit neurons shown an initial inhibitory effects starting only at frequencies above 200 hertz.

This result supports the importance of high kilohertz frequency to the superior clinical effects we deliver and further supports our intellectual properties which we successfully defended against Boston Scientific.

Equally important we believe this foundational research could over the long term contribute to our pipeline as an example of the long-term decisions and investments we are making to maintain our position as the innovator in this space.

In closing, we are well positioned for success due to our outstanding team which continues to deliver key results across the business. Reflecting on our first year of U.S. launch, it is incredibly satisfying to see all the hard work and dedication by the Nevro team who has opened so many lives positively impacted by our incredible therapy.

More and more physicians are discovering a power of HF10 therapy and with it the ability to transfer more patient lives and our team is discovering the reward of building a company that allows them to do what they do best every day. Overall I could not be more pleased with our success or more optimistic about our future.

We have and we will continue to demonstrate that the strength of Nevro is not only our therapy but our theme and culture. I am confident we will maintain our track record of execution and continue to embrace the opportunities ahead allowing us to further bolster our competitive advantage.

And with that, I would like to turn it over to Andrew Galligan our CFO for a more detailed review of our financials and guidance.

Andrew?.

Thank you, Rami. Revenue for the three months ended June 30, 2016 was $55.4 million, an increase of 385% year-over-year on a reported basis. This increase was primarily due to the launch of HF10 therapy in the United States. U.S. revenue was $40.6 million in the second quarter, the fourth full quarter of our U.S. commercial launch.

International revenue was up 30%, to $14.8 million from $11.4 million during the same period of the prior year. This represents constant currency growth of 33%. Going forward on this call, all revenue growth rates will be stated on a constant currency basis.

Europe has 20% year-over-year growth for the quarter and Australia had growth of 63% compared to the prior year quarter. In addition to ongoing product update about half of the growth in Australia was attributable to pricing uplift. We were able to capitalize on our superior clinical evidence to increase the reimbursement for HF 10 therapy.

Absent the Australia price uplift overall international growth would have been in the region of 25%. As mentioned on previous earnings calls due to contracts such as capitation and increasing market share in international markets we expected our international growth to moderate.

We have seen this in the first and second quarters of 2016 and continue to expect moderation of international growth rates in the future. In addition due to seasonality and the summer months we’re expecting a sequential decrease in international revenue in Q3.

Gross profit for the second quarter of 2016 was $36.6 million or 66% gross margin as compared to $5.9 million or 52% gross margin in the same period of the prior year. Gross margins increase year-over-year partly as a result of decreasing impact foreign currency rates on our margins. With the expansion of U.S.

revenue the currency impact on total margins is less significant to our results. Additionally, in the second quarter of the prior year we recorded charges of $1.3 million related to the write down of inventory while similar charges this quarter were far less and therefore had a much smaller impact on margins.

Partly as a result as an uplift in reimbursement rates in Australia we have additionally seen an net increase in selling prices in the past year and have separately seen a decrease in per unit cost as we drive down our component cost and further leverage our manufacturing overhead.

As we continue to grow revenue we additionally expect to expand margins by improving efficiency and further leveraging our manufacturing overhead. Operating expenses for the second quarter of 2016 were $42.5 million, an increase of 69% compared to the second quarter of 2015.

The increase in operating expenses was primarily driven by increased headcount and related personnel costs. Net loss from operations for the period was $5.9 million compared to $19.2 million for the second quarter of 2015.

In June we announced and closed a public offering of $172.5 million in convertible senior notes which include $22.5 million of notes issued upon the exercise of the over-allotment option. We used approximately $21.6 million of these funds to pay off our then existing term debt originally drawn in 2014.

At the end of the second quarter of 2016, we had $290.5 million cash, cash equivalents and short-term investments Turning to our outlook, we are increasing our revenue guidance for 2016.

We are updating our worldwide revenue guidance for the fiscal year 2016 to be in the range of $210 million to $220 million, up from our previous worldwide revenue guidance which was in the range of $175 million to $185 million.

We’re still projecting productivity in the range of $1.3 million to $1.5 million per rep but have shortened our expectation of reaching that metric to 12 to 15 months. In the near term, productivity continues to be positively impacted by the uptake of early adopter accounts. Over time we expect productivity to be in line with our current guidance.

For gross margins in 2016, we expect to end the year at approximately 66% absent any material write downs of inventory as we continue our rapid production expansion.. With regard to our operating expenses for 2016, we now expect quarterly operating expenses to trend upward to a total of approximately $180 million to $185 million for the year.

As we’ve mentioned previously, as the revenue ramp increases we incur additional OpEx spend. As Rami outlined, we also plan to continue hiring experienced sales representatives to support the rollout of HF10 therapy with a minimum of 160 reps in the field by the end of 2016. Now back to you Rami.

Thanks Andrew. So that will conclude our prepared remarks for today. Operator, please open up the call for the questions..

[Operator Instructions] And your first question comes from the line of Mike Weinstein from JPMorgan. Your line is open..

Thank you. Congratulations, guys. On the quarter, guys, [indiscernible] and a great update. If we think back to the U.S. launch and look at the numbers this quarter, really two things have happened. One, you've captured now more than 11% of the U.S. market. And two, the market has really accelerated.

We don't know Medtronic's numbers yet for the quarter, but the overall numbers so far suggest a market growing mid-teens, versus a market that was growing more mid-single digits before you guys launched. I was hoping you could spend a minute talking about the market acceleration and just your own view on it, number one.

And then two, obviously, we are seeing much more rapid ramp then we were all expecting just a few quarters ago, and talk about any constraints you're running against in trying to meet demand and to get the product in front of as many customers, as many physicians as want it. Thanks..

Thanks Mike, I really appreciate that.

So in terms of the market acceleration, I would say I think going back we've always hoped and believed that we’re not only directly impacting the market in terms of offering this new therapy but we’re also spurring our competition to really invest more and more in the space and I think we’re seeing that affect just in the United States but globally impact.

So I think that’s an overall very positive thing for the market, it’s positive for physicians, it’s positive for patients and we do feel like that trend will likely sustain for some time.

In terms of constraints on adoption, I would say we're just continuing to execute our commercial strategy, we're continuing to have a very controlled roll-out of HF10 therapy and so we’re not feeling any particular outside constraints but we feel very good about our ability to continue to execute against our plan..

Rami, can you talk now, just give us a little bit of anecdotal experience on customers that might have started using the product six months ago, nine months ago, and kind of what their usage rates look like. I'm really looking for where your share is on customers over time, and how that's migrating upwards..

Sure Mike. Just as a function of our focused approach and you can see it partly as well from just the size of our sales force, we tend to have higher share in the accounts that we’re in. And that account, the conversion time if you will if that’s kind of the root of your question varies, right.

There are accounts that certainly convert very quickly, fully and by fully I mean for back or leg pain very rapidly and there are others that do take kind of 6 to 12 month sort of time horizon. But I think we haven't - we’re continuing to feel very good about the adoption.

I think it’s reflected in the updated guidance that Andrew provided on productivity, that we still have early adopters that are driving our conversions very rapidly and we hope to continue to see that for some time, but we’ll certainly keep that updated with respect to our productivity guidance..

Rami, I was hoping you could spend just a minute on something you raised during your prepared remarks. You were talking about one of the studies that showed the effect of higher frequencies and how the benefit didn't start to materialize in one study until you got to 2000 hertz and higher.

Can you spend another minimum that, because there's been questions about the accelerate trial and the significance or lack thereof in that trial, I tend to fall into the lack thereof of some significance.

Could you just spend a minute on that in terms of what your research has shown in terms of higher frequencies, where you do see the benefit and whether at 1200 hertz, which is whisper or a higher frequency, where you might see the benefit, and whether it's just about frequency or are there other factors that play into the equation? Thanks..

Sure, thanks Mike. Great question. So we do believe that the high kilohertz frequency is essential for the sort of superior clinical outcomes that we deliver, but the frequency also, alone, in the often sense that you also have to apply it in the right location. You have to have the right program and algorithms, et cetera.

And so, those are actually two separate points. We do fundamentally believe and our research continues to support the thesis, the high frequency and high kilohertz frequency very specifically is required for the clinical effect.

Now even with that, even if we were, as I’ve said in the past, provide our exact device to one of our competitors, they would also have to know the know-how in and applying the therapy consistently and that points to sort of the question that you’re getting at, which can someone else like a Boston Scientific replicate our clinical results with their accelerated study, and the question is we don’t know because it's unclear to us what level of know-how around the programmability and application of HF10 - of high-frequency stimulation they had going into that study..

Thanks Mike..

Your next question comes from the line of David Lewis from Morgan Stanley. Your line is open..

Good afternoon. Nice quarter doesn't quite do it, but I'll say it as well, nice quarter. Couple of quick questions here. Rami, clearly you are taking a lot of share, but I think the interesting thing is, the distribution of those share gains against incumbents has been a bit polarized.

The one that's doing the best against Senza has a disproportionate paddle-lead share and primary cell exposure.

I guess if you think about the first half 2017, is that a commercial launch for paddle leads or do you think of that more as a soft launch, and how are you performing against primary cell in the U.S.?.

Let me take that primary sell question first, but there’s a reason why the U.S. market shifted to 90% plus rechargeables. From our perspective, the primary cell’s just another technology feature in a long list of technology features and sort of the old world of spinal cord stimulation.

So, while there’s some kind of touting of improved battery technology, et cetera, that are claimed to be driving kind of the return of primary cells with one of our competitors, the reality is to the extent that they are targeting the use of those devices with newer waveforms that consume more and more energy, it seems like there are those things might net out and it might be more of a wash.

So we do believe that the market shifted to rechargeables for a reason, that there is some economic perspective. Rechargeables are generally more favorable. And certainly, from a patient perspective and saving patients from unnecessary repeat surgeries, there’s a patient advantage there as well.

So, I think we feel good about our ability to compete there on the primary cell side. As far as the paddle, I think before that this is for the 2017 event for us anyhow with the way the timing looked. But we feel good about our ability to launch it next year and we will certainly update you on more details as we get closer to that..

And then related to that, Rami, maybe this is what Mike was trying to get at a little bit is, look, you have 10% to 12% market share, but if you do it in adjusted math and say, look, you are not covering the entire U.S.

in terms of account perspective, you're not in the paddle lead market, doesn't it sort of apply that your adjusted share of the accounts that you are interfacing with today could be a number that is in excess of 30% already?.

I’m not going to comment on the 30% number correctly, David, but I think certainly, in the accounts that we’re in we have, obviously, higher share than that, higher share than the overall 10% to 13% market share. How high that is, we’re not going to get into that on this call..

Okay. Just two guidance questions, Rami, and I'll jump back in. One for you and then one for Andrew. For you, Rami, thinking about this quarter, you grew reps 25% sequentially and you still delivered revenue per rep in excess of 15% while growing reps and growing revenue per rep pretty quickly.

Is there any reason to believe revenue per rep would go down or would not grow in the second half of the year? And then for Andrew, my favorite question here on margins, so 66% by year end, once again, any reason to believe margins shouldn't tick up into the back half of the year, and now when I think about how you've cut the burn rate this quarter, how are you thinking about profitability in light of kind of narrow launch in the balance sheet strength? Thanks..

Well, so where to start? I think the - obvious one to start at is at the very bottom profitability. What we really want to communicate to people is that we are and are going to continue to be driven by the investment needs of our business. We think we have incredible growth ramp ahead of us.

And so, we will always be putting investment opportunities ahead of the drive to profitability, so I just want to dodge there.

With regards to margins, I think we’ve been trying to explain more recently that our margins do take more of a step function, and I think you're just seeing a nice step up in margins, but they tend to be more step function increases than linear increases as margins go up, which is why we’re predicting I think a period of stability before they increase again.

And the revenue, productivity is nearer term that probably I think going to be more stable but we are trying to tell people that over time, we’re going to move out of the quick early adopters into the kind of middle majority, more conservative doctor, where we would expect probably a slowdown in how long it takes them to ramp up, less so in the actual dollar project productivity per rep.

I think that’s probably more stable than the timing of how quickly a rep can get to that number, which I think has more instability about it..

Great, thank you very much..

[Operator Instructions] Your next question comes from the line of Danielle Antalffy from Leerink Partners. Your line is open..

Congrats yet again on an awesome quarter. I just wanted to follow up on guidance. Could you give us some color on what the different levers are? Obviously, you're not giving a maximum number on salesforce reps, but would love to know how you are thinking about what's included in the newly-raised guidance range.

It sounds like you are not assuming any -- you are assuming stable rep productivity, so that's helpful. But any of the levers driving guidance towards the low or high end would be helpful..

Yes, so really it’s, all about hiring reps and hiring quality reps. I mean, we’ve always said that the quality is really, really important. Our rep and every - in this industry, everybody’s reps become fully integrated into the doctors practice. They don’t just drop product off and leaves.

So, how good the rep is really critically important to how well you do in the marketplace. And that’s the bigger issue in this industry than, I think, any other medical device industry.

So really, the pacing item for us is hiring those quality field personnel and we continue to put a huge amount of effort into finding the right people and are continuing to do so..

And so, Andrew, is it safe to assume that the 160 reps as sort of stable productivity versus what we have seen is what gets you to the midpoint of the guidance range, is that how we should be thinking about it? And if you hire more, you'll come in at the higher end, if you hire less, you will come in at the low end?.

Danielle the best way to think about it, as we’ve said you got to take our productivity and the number of people that we’ve announced we’ve had over periods of time and sort of build that waterfall to kind of get at what this should look like I think kind of using mid points of numbers is probably not the best way to do it.

So I would build a waterfall how many reps we’ve had at the end of each of the last couple of quarter you have our updated sort of productivity guidance and that should lead you to figure out where we might land depending on how hiring might trend for the rest of the year..

Your next question comes from the line of Dave Turkaly from JMP Securities. Your line is open..

Thank you that was close. Rami, I guess would love to get an update sort of on your thoughts. What percent, just broadly speaking, of your revenues in the U.S.

do you think are market expansion?.

For that question Dave I don’t know if I can give you a specific number but we certainly in our ability to both treat the back and leg pain patients certainly gives us kind of the ability to both treat the existing patient population as well as to offer a therapy to patients who previously may not have an option.

But I would say maybe the best way to answer your question is our, the numbers we’ve given previously in terms of our splint between back, leg they are fairly consistent today from what we’ve previously announced..

That's great. And congrats on your ability to overturn some of the investigational language. I'm just curious given some of those guys that are out there, I know there's a process. Are they receptive, and it seems kind of interesting that it's primarily one insurance Company with different regional offices.

But, you know, have any of them said that, hey, we are not really opening this up, we just issued it, or are they all pretty willing to hear you out and look at the data and have that discussion? Thank you very much..

Thanks Dave. Obviously it’s a mixture. There are some it’s been a very linear conversation and others that it takes multiple knocks on the door to try to get a conversation.

So I think there is kind of a spectrum but again we feel very confident in our ability to deal with it and further we feel confident that overall with our evidenced base this will be a net positive over the longer period of time..

Your next question comes from the line of Bob Hopkins from Bank of America. Your line is open..

Well thanks and can you hear me okay..

Yes hi Bob..

Okay great, good afternoon. Thanks for taking the question, and again, congrats on a terrific quarter. I was just wondering if you might be able to provide a little more detail on the strength in the quarter.

Just anything that you think is noteworthy that happened over the course of the quarter that has allowed you to produce these results that were so much better than what people expected.

If you had to narrow it down to the thing that may be drove it higher than people were looking for, was it really that ability to hire more reps than you originally assumed? Everybody has been constructive on this launch, but it's just done a lot better than we thought.

And it's sort of a missing piece here your ability to attract such high quality reps to the Company post-launch..

Well frankly really our success on the commercial side really comes down to just our ability to continue to hire great reps and to get that right on the first shot and I think we’ve obviously we’ve been put a lot of effort towards that and I think we’ve done fairly well so far and that’s really fueled by our success and anytime we’ve been asked you know and maybe I should have said it earlier.

Again the only constraint really in our ability to continue to be successful is our ability to continue to find those very best reps because we’re not going to compromise on talent.

So I would attribute it to certainly that and look we’ve become just kind of better over time, we get better every day here and whether it’s our marketing programs or training or just across the board everything that supports our reps in doing what they do best every day. We continue to get better and better out there.

I think it’s certainly all coming together to create the sort of effect that you seeing.

Maybe one other trailing thought would be that I think certainly launching if you’re a rep Nevro launching today it is certainly in lot of respects easier than it was a year ago and that the market there is just a generally much higher market awareness activity, there is a lot more clinicians who’ve been champions of this therapy they are starting to influence their peers so I would say kind of the atmosphere if you will for fostering success in the sales force has certainly gotten better and better over time as gone on.

So those are sort of at least extremely cautiousness some of the things that come to mind those are helping..

Yes, I would add one to that and that if you think about the current industry a lot of the doctors who have operated in the industry were used to telling their patients that you only had a 50-50 chance of this therapy working for you.

Turn that around to a doctor who can now say to a patient, you know, an 80% to 90% of this therapy working I mean has engendered an enthusiasm in the doctor because he feel like he something that really can benefit his patients. So I think there is an enthusiasm amongst the doctors that we’re dealing with in the field that has helped us a lot..

Your next question comes from the line of Joanne Wuensch from BMO. Your line is open..

I don't have quite the right words to say how nice this quarter was, but good job. Couple questions. What is the pushback that you are getting from physicians when you go to market? Because when we do our physician surveys, they love this product..

Well that’s a good question Joanne. Look, as we’ve talked about and I think Andrew touched on it really well earlier.

There is a certain stickiness if you will for the smart (ph) just given the level of relationship that gets developed between a sales force and the practice, they really do a lot for that practice and it’s hard to kind of allow someone in there that’s new and develop that trust. And I think that’s not really directly what they express to you.

They may come up with a different objection name your technical feature but underlying that it’s generally that sort of comfort level that we need to win over time and for some physicians it takes longer than others but we’ve obviously demonstrated we can overcome those if we have the right people and with the strength of our product having us..

And then as a second question, this is a modeling moment. If you have U.S.

sales quarter over quarter are down, which makes sense, in the U.S., are you thinking it is going to be the same type of thing because of seasonality, or are you so early in your launch, you should plow through that?.

That’s actually a very good point. The U.S. market is not as seasonal as the international market. Internationally people take August off and parts of July so there is sequentially there is very definitely a decline and we don’t have growth rates that can overcome that dramatic decline and last year we also had a sequential fall in revenue. In the U.S.

I think it exhibits itself more in a softer sequential increase if you look at the various companies’ revenues and I think med devices in general. So it’s no necessarily that Q3 is lower than Q2 it just the growth isn’t as robust in Q3 as compared to a Q2. So we will probably exit that I think I would think a slowdown in growth rates in Q3..

Your next question comes from the line of Larry Nicholson from Wells Fargo. Your line is open..

Hi, good afternoon guys, thanks for taking the question. I guess I have to also congratulate you on a great quarter. Let me start with one area we got a lot of questions on when we initiated coverage earlier this quarter. New indication expansion new indications, upcoming clinical data.

Rami, maybe you could walk us through where you are in some of these new indications you are pursuing. I know you have chronic neck and upper-limb and extremity studies on clinicaltrials.gov. I understand you're pursuing abdominal and pelvic pain, and maybe doing more, collecting more data in pre-surgical back pain.

Could you give us an update on the status and when we might see some clinical data?.

Thanks, Larry. I think we mentioned both Andrew and I that we are investing in indication expansion for this therapy. We believe particularly given some of our experience internationally that there is definite merit behind that investment. At this time, we haven’t really gone through when those results might read out.

Obviously, the upper limb and neck studies ahead of the others, but we'll certainly keep everyone posted when we have podium time secured and are ready to have some of these results revealed especially some of these other earlier studies you mentioned begin to mature.

I think it's also just important to remind everyone that while you listed - everything you listed is accurate. They're in various stages of development. So some things are purely feasibility and we're trying to get a signal and also figure out how to design it appropriately larger study while others are further along.

So there is still definitely a lot of work to do there, but we are excited about the platform potential to technology..

Great. Then just two quick ones for me. The 24-month data, I think we saw at NANS, is there 36-month data coming from the pivotal U.S.

trial? And then, just lastly, Rami, if you could just talk about the issues with the production of the paddle lead, and if that had - it has any impact at all on the second-half guidance, which was obviously quite strong, but I'm just curious if you think that has any impact at all by pushing that launch out to the first half of 2017.

Thanks for taking the questions, guys..

Thanks, Larry. So let me take that one first that's one easy. I think the guidance speaks for itself. We certainly take everything into account when we issue guidance we're fairly thoughtful in the guidance that we issue, so I think I left that stand on its own. As far as the paddle, look this is the reason you do.

These stage roll out because you always run something and we've talked about this a lot. We make long-term decisions here and we want to make sure that when we launch something, it's robust.

And the biggest thing we've learned is that the clinical efficacy is maintained with the paddle which is frankly the most important thing making some of these other tweaks just to be able to kind produce that are large enough quantity to meet demand and is fairly straight forward and we feel pretty comfortable about our ability to be done on a go-forward basis.

With respect to the data you'll recall Larry that in the history the space when you look at back or leg pain prior to Nevro's arrival, there had only been two studies with greater than 12 months data, those are two 24 months studies North and Kumar study. And we now have two studies that go after 24 months.

So that's really I think the upper limit of studies in the pain field for a number of different reasons. So we're pretty proud of the fact that we have two of the four 24 months studies in the history of the space and we're very confident that data set and health supports our therapy going forward..

Your next question comes from the line of Brooks West from Piper Jaffray. Your line is open..

Thanks for taking the questions. Rami, I want to circle back to the salesforce discussion.

Can you talk about the available pool of reps that you are looking at in terms of hiring in your confidence that you have a robust pool of good candidates? I am curious, are you seeing a slowdown, maybe in Neurostim, or are you pulling more from spine? Just some of the dynamics there would be helpful..

I think consistent with what we said in the past we continue to track reps from variety of different places so certainly competitive reps.

Reps who have been in the field and left and now are excited to come back purely because of our therapy or reps in adjacent field, so they maybe in pain but not in stem or the maybe [in implantable] but not in pain.

But they have some - at least some knowledge of something that's important to being successful in this space and overall certainly reps who demonstrated an exceptional track record of success. There are company culture and our focus on patient outcomes and clinical outcome.

So actually not a lot has changed there I would say if anything certainly our continued success has helped us attract more and more reps that may have been more conservative initially in joining a company at the beginning of a launch.

So I think that's what's aided our ability to continue to attract and hire exceptional talent a year out now into the launch..

Great. And then, maybe just a practical question on coding.

In the situations where you have physicians with patients that are covered by some of these payers who have deemed it investigational, just curious, the way that they actually code these cases, does it actually show up that they are using high-frequency therapy, and therefore are at risk of being turned down? Or is it actually fairly difficult for the payers to detect what device is being used case-by-case, and are you really seeing any detrimental effect from the payers that don't have positive coverage?.

Yes obviously, we don't have visibility into how each individual practice bill, so I'm sure there's a - no variety out there, it's hard for me to comment on. What I will say is, at this point, we haven't seen much of an effect and I think, again, it's reflective of our view of the business in the back half of the year..

Your next question comes from the line of from Margaret Kaczor from William Blair. Your line is open..

Good afternoon everyone. So, maybe first question for me.

Seems like the market is clearly expanding, but with some of the head-to-head data, are you seeing some of the patients come back on the market that were maybe non-responders from other competitive devices, or are they all new to SCS, and is that maybe an opportunity that is sustainable or not?.

Sure, great question, Margaret. Yes, there is definitely a percentage of patients treated that had prior SCS. And this space has been around for very long time and it has a pretty healthy procedure volume, so I'm not sure that that opportunity to help some of those patients is practically limited.

I'm sure it's actually technically limited, but not practically limited in the foreseeable future here. But overwhelmingly, our patients are generally de novo patients anyhow, on both accounts, we certainly feel like there is enough patients out there that we can help continue fuel our growth..

Okay. And then from a competitive standpoint, I'm sure you guys are well aware that one of the competitors launched a full MRI-compatible system, and has really talked about some nice growth with that product.

If you can maybe take a minute to explain that MRI compatibility with Senza, as well as some of our checks indicating that it's important to physicians..

Sure, yes. We do agree that MRI is an important feature for patients. And certainly, our product has what we believe is competitive MRI labeling at this point, and it is one of our goals to continue to expand that labeling.

Having said that, we do believe that MRI falls in the bucket of technology features versus real efficacy, if you will, the job, the reason that these products get used is to provide pain relief in that dimension, in that category, we frankly stand alone.

So, we haven’t seen MRI necessarily be a notable objection in our experience thus far, but it certainly does exist and something we’ll continue to work towards curing in the future..

Your next question comes from the line of Suraj Kalia from Northland Securities. Your line is open..

Good afternoon everyone. Congrats on the nice quarter. So, Rami, just one question from my side. Most of them have been asked.

Did you mention the average number of accounts covered per rep? And a subpart to that is, what do you think is the optimal number of accounts per rep that should be covered?.

Thanks Suraj. We have not mentioned the average number of accounts per rep, and the latter question, maybe optimum number is really hard to determine because it largely depends on the geographic area that you cover and the volumes that happen to be in the area.

So frankly, for some reps, the optimal number maybe one, because they’re - and it might be several, if they’re in a more densely packed area where the procedure volume is spread out over a larger number of physicians. So that’s really kind of difficult question to answer.

And I think it also frankly speaks to the level of detail that we get into and that we really make sure that we’re optimally guiding and designing our strategies and approaches on a territory by territory basis..

And that’s why we point to $1.3 million to $1.5 million. We look to productivity, really, in the amount of patients as the same from the amount of accounts and then the amount of accounts you need for that level of patients varies widely..

Gentlemen, thank you for taking my questions..

We have no further questions in queue at this time. I’ll turn the call back over to the presenters..

So thank you, once again, for joining the call today. We sincerely appreciate your continued interest in Nevro and look forward to our next progress update. Have a great day..

Thank you..

This does conclude today's conference call. You may now disconnect..