Katherine Bock - Senior Director of Corporate Development and IR Rami Elghandour - President and Chief Executive Officer Andrew Galligan - Chief Financial Officer.

Michael Weinstein - JP Morgan Chase & Co.

David Lewis - Morgan Stanley Robert Hopkings - Bank of America Merrill Lynch Danielle Antalffy - Leerink Partners, LLC Dave Troncalli - JMP Securities Joanne Wuensch - BMO Capital Markets Larry Biegelsen - Wells Fargo Securities, LLC Margaret Kaczor - William Blair & Company LLC Jason Mills - Canaccord Genuity Suraj Kalia - Northland Securities.

Good afternoon. My name is Leandra, and I'll be your conference operator today. At this time, I would like to welcome everyone to Nevro First Quarter 2017 Earnings Conference 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, Leandra, 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 and then March 31, 2017. A copy of the press release is available on the Company's website.

Before we begin, I would 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, expectations with regards to future product enhancements and leases, as well as our future financial expectations, which includes full-year 2017 revenue and expects guidance are based upon 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 including our Annual Report on Form 10-K filed on February 23, 2017 and our Quarterly Report on Form 10-Q which we expect to file today.

Nevro disclaims any intention or obligation except as required by law to update or revise any 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, May 8, 2017.

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

Thank you, Katie, and thanks everyone for dialing in today. We've had a strong start of the year in positioning Nevro for near and long-term success.

By expanding access to HF10 therapy to the launch of our Surpass surgical lead, scaling our commercial organization and investing in leveraging our proprietary platform to investigate new clinical applications. That said our U.S. revenue in the first quarter fall short of our expectations.

We believe we've identified the contributing factors which I'll talk about shortly and which we are in the process of addressing. We remain confident in our business and are reiterating our worldwide revenue guidance for the full-year 2017.

Earlier this afternoon, we reported worldwide revenue for the first quarter of $68.4 million, an increase of 64% as reported compared to the same period of the prior year. U.S. revenue for the quarter was $53.1 million, an increase of 80%.

First quarter international revenue was $15.3 million representing an increase of 30% on a constant currency basis. These results were driven by the continued global adoption of HF10 therapy. In the U.S. we saw strong growth from our most recent classes of hires to reach their fourth and fifth quarters in the field.

However, our Q1 results were affected by greater than expected seasonality coupled with growing pains relating to scaling.

Specifically the expansion of our sales management team did not keep pace relative to the rapid growth rates we've experienced We believe this impacted our execution in Q1 particularly with respect to business planning and customer engagement in some of our existing accounts.

We have taken steps to improve execution as we scale our sales organization in order to broaden access the HF10 therapy. Over the past two quarters we've added to our sales management team with our expanded team we are resourced to maintain focused on our existing accounts as we scale.

As always, we are focused on continuous improvement and will continue to strengthen and support our team. Our U.S. sales team has done a tremendous job of driving rapid market adoption and we remain confident in our team and our business both this year as well as over the long-term.

On the hiring front in the U.S, we ended the first quarter with 232 hired and trained reps and net increase of 39 reps from the previous quarter count of 193. We have doubled down on our hiring efforts and are pleased to have been able to invest in the expansion of our U.S. sales force as we work towards covering the broader U.S. market.

This new class of hires positions us for success in 2018 and beyond. Internationally, we have continued to build upon our strong share position in our key markets, underpinning our strengths in Q1 with strong performances in Europe and Australia.

This performance is a credit to our outstanding sales organization which continues to demonstrate the long-term benefits of our therapy. We ended the quarter with 71 international sales reps trained and in the field and we continue to invest in our team as needed to support our growth.

With respect to the launch of our surpassed surgical leads, we are pleased to announce that after receiving approval for the PMA supplement in January, our controlled launch is underway. To date feedback on our surgical lead has been very positive most notably with respect to reproducing the clinically superior outcomes of HF10 therapy.

On the operations front, we believe the designs changed successfully address the yield issues we experienced and we are continuing to ramp inventory to meet demand in the market. From a market perspective, our sales team continues to be busy engaging in the account opening and onboarding process which was a particular area of focus for us in Q1.

We are excited to broaden access to HF10 therapy to the surgeon community and I've been very pleased with our early experience thus far. On the topic of R&D, our product pipeline is progressing in line with our plans. We are working on a number of product enhancements that we believe will strengthen our portfolio and business.

First, we are planning to launch a new smaller profile IPG in the next twelve months. We believe this new product will provide a number of benefits to our patients, customers and business Additionally, we continue to pursue MRI compatibility for our system, enhanced MRI compatibility for our system.

As a reminder, our product currently supports MRI compatibility for the head and extremities for 1.5T and 3T machines which retroactively apply to every patients implanted with Nevro system a significant advantage to our approach.

On the clinical research front building on early evidence suggesting that painful diabetic neuropathies can be effectively treated with HF10 therapy. We are initiating a larger randomized, controlled trial to generate level one evidence in support of this patient population.

We view this as a potentially meaningful opportunity and are excited to again lead the field in pursuing the evidence needed to advance patient care.

While the SCS market is increasingly competitively driven by studies that focus on product feature differentiation, we continue to commit resources to expand and enhance patient care through meaningful clinical evidence and new indications. As you recall, promising early preliminary results were presented at the 2017 NANS meeting in January.

Stay tune for an update on our progress with this initiative with respect to study design and timelines. In terms of reimbursement, we have positive news to report. Blue Cross, Blue Shield has updated their evidence review on SCS and concluded that high frequency SCS results in a meaningful improvement in that health outcomes.

This is a reflection of the strength of our clinical evidence base as well as the efforts of our market access team. With this update, Blue Cross is one of the largest policy makers in U.S., now considers HF10 therapy to be a technology that can benefit patients and that is therefore appropriate for regional plans to reimburse for the technology.

As you may recall, a small number of Blue Cross regional plans did not cover HF10 therapy. We have already heard from some of those plans that they plan on adopting the updated policy starting June 1 and we are working to ensure the small number of remaining regional plans do so as quickly as possible.

We are pleased that HF10 therapy and the clinical evidence-based supporting it have been validated by another independent agency and that it is covered by all major commercial payers in U.S. providing more patients access to this clinically superior therapy.

In closing I remain excited about the impact of HF10 therapy on the patients we serve and the physicians we support. It is clear we have reinvigorated the SCS market and I remain confident in our ability to establish a global leadership position in the space. Our team has built a strong foundation over the last two years.

In this short time, we have continued to grow internationally establish the substantial U.S. business and scale their organization in a way that means teams are entrepreneurial culture and values.

Additionally we have worked towards delivering on the promise of neuromodulation by investing in meaningful new indications, which we believe will continue to set us apart in the field. We will lead by delivering a superior therapy that truly makes a difference in patients' lives across a range of meaningful indications.

I know the talented Nevro team is up to the challenge of building on the great foundation we have established and reaching new highs. And with that, I'd like to turn the call over to Andrew Galligan, our CFO for a more detailed review of our financials.

Andrew?.

Thank you, Rami. Revenue for the three months ended March 31, 2017 was $68.4 million, an increase of 64% year-over-year on a reported basis. This increase was primarily due to the continued global adoption of HF10 therapy. U.S. revenue in the first quarter was $53.1 million, up 80% from 29.5% during the same of period of prior year.

Back in February, we forecasted that on a sequential basis, our U.S. revenue for the first quarter would be more in line with the fourth quarter 2015. However, as Rami noted our U.S. revenue for the quarter came in below our expectation. International revenue was up 26%, $15.3 million or $12.2 million during the same period at the prior year.

This represents a constant currency growth rate of 30% both Europe and Australia did well in the quarter. As we've previously stated we believe that the international market is subject to capitation constraints, which will result in moderation of our international growth rates over time.

Gross profit for the first quarter of 2017 was $46.4 million or 68 % gross margin as compared to $26 million or 62% gross margin in the same period of the prior year. Gross margins increased year-over-year primarily due to fundamental cost improvements.

Sequentially gross margins were down slightly due to an additional $1 million write-down of inventory, but did not conform to our product requirements. After that margins would have been in line with the fourth quarter. Operating expenses for the first quarter of 2017 were $59.4 million, an increase of 70% compared to the first quarter of 2016.

The increase in operating expenses was primarily driven by scaling the organization for the increasing size of our business. Legal expense in connection with the Boston Scientific litigation was $2.4 million for the quarter. Net loss from operations for the period was $13.1 million compared to $9 million for the first quarter of 2016.

At the end of the first quarter of 2017 we had $264.1 million in cash, cash equivalents and short-term investment. Turning to our outlook, we are reiterating our worldwide revenue guidance for 2017.

We continue to anticipate worldwide revenue for 2017 to be in the range of $310 million to $320 million as we've announced back in February and expect productivity in the range of an average of $1.3 million to $1.5 million per rep after 12 to 15 months.

For gross margin from 2016, we still expect to the end the year as approximately 70% with progress towards this number during the year excluding any material write-downs of inventory.

With regard to our operating expenses for 2017, we now expect to end the year as approximately $230 million to $240 million in operating expenses, excluding litigation expense. This is a $5 million increase over our previous guidance in February due in part to our plan to continue to scale our sales force. And back to you Rami..

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

[Operator Instructions] Your first question comes from the line of Mike Weinstein from JP Morgan. Your line is open..

Thank you. And let's start if we can with the commentary just on the quarter. As you are aware you came in generally in line with our expectations in the Street, but Street was a bit more optimistic and you commented that. U.S. business didn't do as well as you are hoping this quarter.

So could you just spend a minute on why that was the case? And then second could you share with us your thoughts going forward, obviously you're still incredibly bullish based on the rep hires that you continue to do. Certainly no one was even close to taking to it higher end of the 39 reps this quarter.

So what's driving that thought process? How much of a challenge is it to keep adding reps at the rate you've been adding over the last 12 months and then will go from there? Thanks..

Great. Thanks Mike for the question. So I think let me start by saying the fundamentals in our business haven't changed. We remain very confident in our business both in the near and long-term, but as I discussed there were some operational things that we have to work through.

So let me maybe build on that a little bit to provide a little bit more context. Sales management are core to execution I think we can all agree that management and leadership matters and we were shorthanded with respect to our sales management team, which I think was also further magnified by our increased hiring of late.

New reps that we add for the Company certainly need support in terms of building their territories, but established territories as well need support with respect of adding additional targets, continuing to open accounts, bringing on clinical support and integrating that clinical support.

Additionally, sales management plays a pretty critical role in customer engagement there in the field every week and that layer of engagement with our customers is critical to our near and long-term success.

As a result that absence of management really puts a lot of undue burden on the field and I think certainly we saw that impact execution this past quarter.

Our existing sales management team frankly did an admirable job when considering the hiring that they were able to produce as well as managing the overall scale of the business that grew very rapidly.

And we've really been working to address this particular challenge in the last two quarter and in fact we've nearly doubled our sales management team over that time period. So we've got a great sales team, we remain very confident in our business; we don't see or believe that anything is fundamentally changed.

But we have to make sure that our team is well supported in their endeavors and I think we feel very good about where we are in terms of addressing this challenge at this point in time..

Yes. So let me ask the - if I listen to just the commentary just on sales management, part of it is that you've gone through this last year the second wave of hiring as I think about it. You added 25 to 28 reps in 2Q, 3Q, 4Q, now you've added 39 reps.

Is part of the challenge getting all these new reps that you've hired in more you're recutting territories getting the territory settled and is part of it just getting these new reps who are new to SCS of the productivity curve?.

That's a great insightful question Mike. This really doesn't have anything to do per se with cutting territories.

I think we've talked about in the past that our territories are pretty down and where we felt like we weren't going to be able to expand coverage in a timely fashion we have been adding to our sales team, but this doesn't have to do with the overall just number of hires if you will.

The number of folks that each individual manager have to cover on top of hiring and top of customer engagement just ballooned to levels that were just supposed to manage. We didn't see this coming.

I think effectively you have a couple different choices when you're faced with the situation want us to try to do both in parallel which is meaning fill in your management team as you continue to hire or to take a pause in terms of hiring and then fill in the management team and put in the hiring afterwards.

We certainly chose to do the former and I think that's the reflection of the strength of the managers that we did have in place, but I think eventually that caused us in this particular quarter and the execution wasn't up to the level that we have come to expect and it's principally in view and my belief that just came down to having people that were stretched to thing to be able to deliver on everything that we needed to deliver..

Okay. Last couple questions. So if we think about the Paddle lead launch, let's call it a baseball game.

Are you still in the first inning of that launches? Is that the right way to think about it in terms of us seeing a benefit from them?.

Yes. I think we're just - just early first inning I would say, I mean we spent a lot of time as you know opening accounts those are a longer term type of accounts to open because these are more than in hospitals, primarily than in hospitals, so we're very early and very encouraged by the feedback that we've received.

As I mentioned, I think our sales team is doing a great job of executing on this particular launch, but we still have a long way to go here and a lot of opportunity ahead of us..

Understood. The second last question is one of the questions have read pass is that St. Jude had a very good quarters. If you look at the sequential performance Boston's U.S. SCS business I think was down about 16% sequentially, but still a bit better than what industry was modeling. The St.

Jude business grew by our numbers, about 7.5% sequentially, that obviously they're reflecting some benefit from the DRG stimulation, but on the pain stem business in/and last had a good quarter.

Is there any sense in your view that momentum has shipped? Is just anything in your and to be competitive issue recognizing that Senza was trying to get out in front of your Paddle lead launch as well?.

I think it's hard for us to comment on how their particular business is going. I think as you mentioned there's a lot that was added to that portfolio which makes it a little bit harder for us to comment. I think we saw the pure portfolio Boston demonstrates the typical seasonality that you would expect to see in Q1, so it's hard to comment.

I think generally speaking my comment on competition is that it's intensifying. I think there's a reaction to our increasing success and the execution of our sales team and we see all sorts of things that whether it's bulking or pricing or dissipative marketing or all sorts of different tactics employed in different areas of the country.

I don't know that I would hang my hat on that. I think for us it's we've got a lot that going for us in a very positive direction and I think we will continue to execute at a high level going forward.

Understood. Thank you..

Thanks Mike..

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

Good afternoon.

Rami I just want to pick up on some of those last points, so I guess the first thing you're talking a lot about middle management on this call, but as I just think about the business Rami, it feels like and perhaps you're talking about the sales leadership, but how much this is just you don't have enough reps? It feels like in the earliest part of 2016 you may have been under rep for an investment perspective.

I noticed you've added in the last two quarters more reps than you added in the prior three quarters.

So a lot of focus on management just sort of wondering is this just about not having enough reps to grow at the rate you can grow at?.

I think David that sort of the underlying reason why we got - successfully we're expecting flat revenue in Q1, right is because we haven't hired enough folks earlier on that we should have - where we would have expect it that kind of continue to grow sequentially.

So that sort of the underlying basis, but that's not really the reason why we had this challenge in Q1, right. It is particularly related to this management challenge that I discussed.

So in a sense you can address your question specifically it would be both, right that we were under staff in the reps department and we had this issue as well and that would be - that would argue why we came in both lower than and we guide at this one close place, is that makes sense?.

Okay. That's very helpful. Couple quick ones here, revenues throughout this quarter was down year-on-year and I guess it just some that may seem surprising a lot of the fact that I want to hit and you have more reps. So that would suppress revenue per rep, but then you have Paddle lead, a little bit of contribution from ULN post-NAND.

So could you just walk us through that the driving force there between things that are helping revenue per rep and things are working against it?.

Sure. Yes I think you hit me on the head, David. I think there are some things that are working towards in terms of new data. I think the Paddle will could potentially help, but again we're very, very early innings there.

But I think the reality is we continue to talk about that that we expect our productivity to be in the range that we described and I think there was a whole host of different reasons why that was overshooting at the beginning so the mix of reps that's changed over time to more non-SCS reps, which I think puts some weight on that and I think if you can imagine that our mix from a quarter-to-quarter basis, my shift as well in terms of number of reps versus clinicals and that's sort of can weigh on it as well.

So there's all source of different puts and takes on that, but overall the core message is still the same though. We have expected productivity in this range. We don't have data to suggest that it will be out of this range and the fact that we're beating it was had a lot to do probably would be early launch days than anything else..

Okay, one last question for me is just two parts. One we talked a lot about the sales related dynamics, but you also mentioned seasonality.

I sort of come back to that is that selling days classic SCS first quarter to first quarter dynamics or is that the timing of NANS this year and then related to that maybe for Andrew, just second quarter expectations just so we can levels that expectations.

Is a way to think about the second quarter similar rates of revenue on a percentage basis in the second quarter of 2017 like we saw in the second quarter 2016 24-ish percent which should be sort of in that mid 70s range for the second quarter and I'll jump back in queue? Thanks so much..

Well let me hit the guidance up front. We don't want to actually give quarterly guidance, and so not really prepared to go there at the moment.

So what I will say background is if you remember back to we had a perturbation in Australia in Q3 and it takes a quarter or two in this industry before you can turn anything around, because you have this whole reestablishing files and the delay between trial and the actual implant which was the focus of the revenue.

So I mean I would say this is going to turn around overnight. So it will have an impact on the second quarter..

In there's a seasonality, Rami anything specific about seasonality you wanted to call out..

I think nothing specific David, primarily it's the Q4 to Q1 right, so we talked about this in the past and Q4 positions both for move up - spend more doing permanent implants, which also kind of robs from doing additional trials in the fourth quarter, which generally carries over into the first quarter. I think that's primarily.

I'm sure have some fact as well as being on the margin so, but that's kind of what you would expand and I think has Mike mentioned earlier that's likely with the self-announcement..

Thank you very much..

Thanks David..

Your next question comes from the line of Bob Hopkins from Merrill Lynch. Your line is open..

Hi, thanks.

Can you hear me okay?.

Yes..

Hi, Bob.

Hey great, good afternoon.

So when I look at then numbers for the U.S., it seems like sort of the simplest way of saying this is that the market was very healthy in the first quarter, but your market share in the first quarter was pretty flat relative to the fourth quarter and that's sort of the first time that's happened since the launch and I guess we're trying to understand why share was flat sequentially, because again the market seemed very healthy.

So I guess my question is just to be super specific on the issues that you're calling out in terms of the scaling issues? Was turnover in the rep or support base or was this really just a matter of scale? Just trying to understand kind of a little bit more what happened because on again in the face of it so it seems like some competitors launching products and that that hurt your ability to take share?.

Yes, thanks for the question Bob, I think in terms of turnover that that's sort of - that was on different in this particular quarter. So I think we've talked about that in the past, but there was nothing there in particular that drove, yes I think your assessment is right I think they just really came down to us to our execution.

We've been pretty deep on this and looked that it a bunch of different ways and also really came down to being stretched a bit thin and not you know pushing and getting the type of close that we typically expect that the end of any given quarter.

Just didn't happen based on our prior experience and I think a lot of that is just being under-resourced to make it happen..

It didn't seem like the competitors are doing anything different in the quarter. They did have a couple new products obviously to launch, but I'm just curious on the competitive front we really don't think there's anything different happening in this quarter..

No, I think every quarter we see a new different attempts from the competition to be honest so there clearly were we've really disrupted this market and yes having some new products in the market I'm sure on the margin gets a little bit more share a voice maybe you got a little bit file here and there, but you know we don't really view that again we want very deep and we certainly consider that as a possibility, but now truthfully we don't really see that as a driving factor in this particular quarter.

Again on the margin there have some - I think similar to for example the Paddle launch right, I'm sure on the margin we spent a lot of time opening accounts on Paddle and those things on the margin might have some impact but overriding it was really execution or and then something we feel pretty confident..

Okay. And then lastly on a positive note, I mean in this first quarter it looked like the U.S. market actually accelerated a little bit and is now growing close to 20%. Obviously a year and a half ago this mark was fairly growing and now it's growing it's one of the best growth markets in all of MedTech. So as you guys look forward to this U.S.

market in the in the trends that are driving the acceleration in growth. How sustainable do you think this high-teens market growth is if we kind of hit at inflection point in terms of you know awareness and data, new products I mean is this high teens market growth sustainable you think..

Yes, I mean we are confident and a double-digit growth rate for some time given I think our confidence in our ability to continue to take share and grow the market. I think that you know sort of the extra boost to that top end perhaps it's being driven as you said by some new products that our competitors can talk about.

In our experience internationally is that those kind of get a bounce and then kind of fade because a lot of the follow-up through on those products is just not as good as our product right.

So I don't know that I am comfortable saying that I think this is going to be a 20% growth rate going forward but I am confident in a double-digit growth rate, because I can attest to what I believe will be able to contribute to it on a go forward basis..

Great. Thanks very much for taking the questions..

Thanks Bob..

Your next question comes from the line of Danielle Antalffy from Leerink Partners, your line is open..

Good afternoon, guys. Thanks so much for taking the question.

Rami I was hoping you could give a little bit more color into I am sorry to harp on that, but into the issues permanent execution perspective in the quarter? Just wondering did it had more to do with impact from getting new centers onboard or existing users using the last and I guess the follow-up there would be what gives you guys confidence that if it is the existing users using west so that's not suggestive of a longer-term trend here maybe they did from trialing and now they're going back with these before or what have you..

Sure. Thanks for the question Danielle. So I think as I mentioned in the script, our newer classes of hiring are actually ramping up quite well, so this was more of an established business challenge. Again, there is some expected level of seasonality that we would have thought we would see and I think we certainly saw that.

I think what we're saying is that that changes there was greater than just simply the seasonality. I think the reason we're confident in addressing it is that this isn't simply trials that were early on and went away. I think this was a little bit of share shifting within accounts to a greater degree than we would have expected.

You have to remember that a lot of our accounts were not necessarily be only person in there and I think to the extent that we haven't been as present in those accounts and I think has organized that we've been in the past and we're going to see some impact to our business.

So that's the reason why we're confident in addressing this, we think that obviously with the updates both to our management team as well as our overall sales team where we'll be in better position to continue to grow in those accounts we have in the past..

Okay. That's helpful. I know you guys don't want to necessarily give the metric fair amount of trials from an implant ratio perspective, but just curious if there's been any change on the types of metrics from your….

We are comparable saying that that national average has fell where it's been - there has been no change there..

Okay. Great. Thanks so much guys..

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

Thanks.

And then just as it relates to the management - the sales management, did you guys commented all that I may have missed it, but like how many folks you have and then sort of as you look at the under-staffed issue I mean where you talking about five to 10 individuals and they already hired now, so we feel good going forward just any other color you could give there?.

Sure. Thanks, Troncalli. Obviously we didn't give out a model where we give out how many regions we have, but I will say it was a significant number.

I've said we've doubled it and yes we are at this point fully staffed, so we're just playing catch up over the last two quarters and I asked that we made a strategic decision to parallel have that with sales hiring.

And I think the net results, obviously again were disappointed, but will take where we are because I think it positions us for the future..

And then if any change that you noticed in the pricing or anything else from the quarter just to I guess take that off to table as well has a potential concern for folks?.

Sorry the question was related to pricing?.

Yes..

Yes. I think we - again, we've seen that on the margin, pricing, bulking. There are certainly - our competitors on any market are kind of taking a variety of steps to combat us, so we definitely do see that, but I'm not sure we can say that this is kind of like a national strategy or national kind of wave that we're up against it.

Certainly there's pockets of when we're dealing with it..

Thanks a lot..

Thanks..

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

Thank you for taking the question. Just shift to the conversation a little bit, we saw a slowdown in the international sales in the fourth quarter and we've been sort of thinking about market or markets would slow for some time. And then here we go and rebound in the first quarter to 32% growth organic or X effects.

Can you comment on what the rebound is or if there was anything in particular that helped the first quarter out outside the United States?.

Yes. Sure. So I think interestingly in the fourth quarter we talked about first time that we actually saw a bit of a slowdown because the counts just running out of budget. And I think that probably lowered the Q4 international revenue which we talked about.

I think what's really has happened when you look at the numbers is that there was a rebound in those accounts in the first quarter as we try to catch up with the patients that they had been treated in the fourth quarter, so that's one element of what happened.

And the other is as I mentioned earlier, we have that perturbation in Australia in the third quarter and we said it would take a couple of quarters for it to turn around in Australia frankly is back on track. So you have those combined in the first quarter because I think they gave us a pretty strong first quarter.

And then the caution there is I think in the first quarter in Europe that's a one quarter bump and now they're going to go back to kind of a more subdued growth rate and again Australia is kind of back on track.

So I think there were two elements of why this quarter in particular was a little higher internationally that really don't continue for the rest of the year..

Okay. And then one of the things that you've been spending more time in meetings talking about our other applications of the SCS technology and clearly there's still a lot more to go and back in leg, but can you sort of discuss some of the timelines for neck, shoulder, peripheral neuropathy? Thank you..

Thanks Joanne. Yes, like - I think you highlighted that well, we're very excited about the potential to expand to a number of new applications and unfortunately I think as I mentioned before, we're still sorting through a lot of different things like regulatory strategy and clinical timelines.

So I think we'll reserve updating specific timelines with respect to those indications as we have more clarity around some of the road ahead of us in those fronts. We are excited about this in next particular study that will be launching soon with respect to diabetic neuropathy and I will certainly update you and we have more information there..

Thank you..

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

Hey guys thanks for taking the question. One of the pipeline, one of the competition, MRI safe timing, I mean I'm sorry if you mentioned it, but the full body, I did hear it timings. And I was just curious on upper linen neck, you showed good data NANS.

But that was not one of the pivotal trials, you mentioned earlier, why no plan to do a pivotal trial there, I thought you said you really need that to drive reimbursement and I had one follow-up. Thanks..

Sure, Larry. Yes, so we didn't mention a specific timeline with respect to MRI. I mention one with respect to the smaller profile IPG. With MRI I talked about that previously that we're evaluating from a regulatory perspective and from a testing perspective, what our approach looks like.

We're gaining - increasing information and confidence in that program. But we want to make sure that we have further clarity before we comment on the timeline.

With respect to ULN, we have won three different studies on that particular indication and I think we're evaluating our regulatory and health economic perspective on that - based on that clinical set while assessing if and what type of further studies are needed.

I think also we want to prioritize - while we have a lot of resources to do important clinical work, ultimately everything is limited and so we want to prioritize running larger. We want to prioritize the studies that we want to potentially more meaningful indication and that's why you see the diabetic neuropathy study taking center stage here..

Thank you. Does that on the competition - the multipart question, so given your success obviously the competition is it's counter detailing you and so of couple of issues it would be helpful I think to hear you address. One is the explant issue, which is real or not, he's in the market anecdotally.

And I just wanted to hear your perspective and the other is related to the question that I asked in the last call about the options that the competition is offering in.

For example first, the data may not be as strong as your data, but some positions like the optionality of tonic and burst that you mentioned on the last call me Rami that you have something you can address that you just need to communicate that better.

So I'm wondering if you could help on this call maybe talk a little bit about more how you're trying to avoid being seen is kind of one size fits all? So apologize for the multipart question, but if you need to be repeatedly of that I'm happy to. Thanks Rami..

Thanks very much Larry. Both relevant questions, so let's address the explant point first. I think this is where if you heard my reference earlier to deceptive marketing I believe this for very frankly could squarely there.

So we have one of our competitors and I which is Abbott seems you're pushing the narrative that primary cell devices are somehow better for patients than rechargeable. I think there's - let me first state that I believe this is a disservice to patients and physicians and frankly in our view raises the issue of patient safety.

There's a reason why the U.S. market in the Australian market have long shifted to rechargeable devices into patient benefits and improved safety around with fewer surgical interventions. The only markets that really operate, but primary cells are that way due to cost constraints particularly in Europe.

So this is push for primary cells is really largely a deceptive marketing effort by shown selective data that purports to support the position that primary cell batteries have lower explant rates them rechargeable systems.

In a recent study that was shown in fact HF10 therapy have the lower to explant rate even though it was a study that was supported by Abbott.

And I think the reality is given the increasing we reported a high proportion of primary cells that this particular company notes of having they will likely be on a path to have larger explant because the reality is that those devices have a relatively high explant rate to rechargeables in a pretty short period of time.

I think the kind of rep is up, this sort of marketing I believe isn't good for the industry, it's not good for the space, I think it's continues to draw attention to something that actually frankly plagues the rest of the industry a heck of the lot more than it hits us.

I think clearly when you have a therapy that works 80% of the time and two-years competing against therapies that work in the case of the St. Jude burst 39% of the time in three months. And in case a traditional stem in the 50% range after two years. One of those is going to have a lot worse explant rate than the others you guys can do the math.

So I think this was a misguided attempt by you know a competitor and ultimately I think we have a lot of great things to talk about. So we generally tend to focus on talking about our products and companies that don't have a lot of great. Thank thought - with respect to the options again I think the same data is relevant.

Our product works in a clinically superior way traditional SCS therapy. We do have a ways for optimize that therapy and as I talk about on the prior call.

There are we know we have to do a better job of communicating that and I think better than that we have to do a better job of explaining to the market and to our customers that the level of investment and that we make in patient care and follow-up which is unparalleled in the space.

I think a lot of our competitors have taken to borrowing or replicating our messaging but no other company actually commit the resources or as the product to follow-up through on delivering the best possible patient outcomes that population.

So I think we have certainly some work we can continue to do from a marketing perspective, but I feel pretty strongly that we're offering the very best product for patients in the market and will continue to do that and be successful as a result because..

Thanks for taking the questions..

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

Hi, good afternoon, guys. First question for me is on the sales force I think you can probably have the largest sales force in the industry at this point. You mentioned being fully staffed on the sales management, side but you guys continue to expect a higher throughout the year. And then in terms of the reps those are bringing on today.

How do they differ maybe from the original reps that were maybe more SCS focused where maybe if learned something about the culture of the reps or hiring practices that could actually work out in your favor long-term..

Thanks Margaret. So first of all we do not have the largest sales force in the space at least not yet, I think obviously, we expect to continue to grow and hope to grow into that position, but we're not there yet.

I think what we talked about in the past is that we want to hire the best fit for a particular market and either due to available talent or non-compete, so other factors that may or may not always be somebody with prior SCS experience.

I think what we've also found is that our sales team that don't have the sales experience of ramp have done fairly well, they are just on a delayed cadence that's where the 12 to 15 months comes in relative to our SCS trained reps. So we feel pretty good about that.

We've obviously shifted the mix and some of that was early, but some of that was playing out and so for….

And then in terms of the neurosurgeon accounts, the surgical lead accounts, how many of those - if you guys can share have you guys gotten into, maybe how many hospitals have you guys gone into and gotten positive back opinions verses maybe the number that you're still waiting on or targeting, and how does this compare the original HF10 launch?.

So we don't get into the whole level of detail with respect to accounts. I can just say that it was - it certainly a core focus and I think I mentioned in the past that this was fairly regional in the certain areas of the country where this is more prominent than others, so we are going to keep plugging away.

I think the important thing to take into consideration here is, this is not like a relaunch in a sense that we are starting from ground zero.

Obviously, got a fair amount of coverage around the country and so this becomes optionality in terms of when you're adding additional accounts, now you can service a part of the market that we penetrate easily service, but we are effectively constrained by people right, so just having this doesn't necessarily just wind up creating instant Greenfield that just gives us long range ability to continue to grow on certain territories..

Got it. And then maybe one more on the smaller profile IPG, have you guys file that with the FDA and is it going to impact the life of the device at all? Thank you..

No comments on the first. And you can actually technically comment on the second with the FDA the term, but the intent is no that it should not impact the life of the product, but that certainly is where labeling comes in, so we are hopeful..

Got it. Thanks..

Thanks Margaret..

Your next question comes from the line of Jason Mills from Canaccord Genuity. Your line is open..

Rami thanks for adding me to the call.

Can you hear me okay?.

Yes..

Hey, Jason..

Andrew, again thanks for adding me to the call. So couple questions on the sales force. Maybe one other follow-up. So as David mentioned earlier in the call, your addition to the sales force for the last two quarters, you said the only addition you have over the previous three, almost four.

I'm just wondering, given the complexion of your sales rep hires changed marginally, and you've also talked a lot about of sales management on this call, I'm wondering if the ramp algorithm, if you will, from sort of the initial hire to 100% productivity, I'm wondering that algorithm has changed.

You've seen any major fluctuations in the past quarter rep and average rep from zero to - is way to 100% productivity?.

I'm proud to take that Jason. So we are still predicting the 12 to 15 months and we've said that the non-SCS people are on the higher end of that range and then as our mix has moved towards more SCS people on average that productivity ramp will be a little bit later than it has been in the initial launch where it was mostly a SCS people.

So I think there is some motivations there, but frankly at this stage we have no data to suggest that it's any different than our guidance at the moment which is 12 to 15 months, $1.3 million to $1.5 million, which is moving around in that range..

Okay, that's helpful.

And ultimately, based on what you've seen thus far with the non-SCS reps, I know you commented earlier this year, I don't know if it was an Investor Meeting or somewhere else, that you saw some SCS reps sort of lose focus, maybe in the fourth quarter, and you had to do some rep turnover, wondering the non-SCS rep, whether you're seeing those reps or hiring folks that are perhaps a bit hungrier, that are used to a bit more competitive landscape, whether be in orthopedics or spine, a little more competitive areas? And whether or not that sort of - you have some optimism as it relates to how they'll climb the curve and integrate within the sales force?.

So I think SCS has historically been a very competitive industry. I mean then Abbott, and St. Jude, Medtronic and Boston were always fiercely competitive. I don't think there's any difference in rest of ability to deal with competition between the non-SCS and the SCS.

It's just the non-SCS people come in and they need about a quarter to familiarize themselves with the industry. But from there the real ability I think is about the same as the SCS people is just we go we go for athletes of our kind of knowledge..

All right. Okay, that's helpful. I appreciate that. And to earlier question on pricing, you haven't seen any - you've seen pockets of pricing and bundling competition.

I'm wondering if you could comment on your pricing, whether or not these activities on the part of your competitors has caused anything notable in terms of your pricing on average across the country to find notable? I know it's difficult thing to do, let's say anything north 5% or so an average over the course of the last 12 months as it relates to your product?.

Jason, we find actually our pricing has been pretty stable and the 23,000 to 25,000 average over the nation, I mean they are obviously different since regionally in that pricing, but it all averages us 23 to 25..

Perfect. Last question for me. We've talked to a few folks in different parts of the country. Maybe characterize them as sort of medium volume versus the high-volume? And in certain geographies, high-value account to do a lot of HF10 therapy, and then five miles away, medium volume accounts haven't had whenever rep calling them.

Wondering is that sort of, obviously, that's an example being under rep, but how do you think about the complexion companies of your account base at this point in time, where you move only in the surprisingly, but downstream to a lower volume accounts is the number of reps in your ability to cover the industry to expand or how should we think about the complexion of your counsel the next 12 to 24 months? Thanks for taking the question..

Sure.

Yes, so let me clarify we don't actually target purely on volume and in fact some of our best accounts and best customers are lower or medium volume accounts that because if we have an account that is patient focused and buys into the therapy and the technology they can meaningfully grow that business by and really help a lot more patients by leveraging our platform.

So the size of a particular account isn't really the primary driver for adoption, it's just maybe happenstance in a particular areas where you look that. We were still under service and I think that is just a function of the fact that there's still lot more opportunity to go after.

There's still a lot of places for us to go and it is really purely a function of having our feet on the street and as you can see, we are working hard to address that but certainly trying to do that and in a way that we're structured have the same sort of control that we had at the beginning of our launch..

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

Good afternoon everyone. Thanks for taking my question. Rami most of my questions have been answered, while I'll just take two one.

Can you give us the status of explants and the reason I ask is just trying to understand how you'll manage the patients implanted with Senza, obviously there is a desire for solid growth, but then you have to balance the outcomes in these patients also somewhat and not all comers are going to get Senza.

What I'm trying to understand is how do you all train your reps you know to go out in the field and basically provide this balance so that we don't get poor outcomes once and as implanted? Thank you for taking my questions..

So I think this is not something that is unique to us. All SCS companies have a long-term follow-up component to their business. I think the difference between us and everyone else is that one our therapy is more effective and more durable has been proven and clinical studies. So that naturally provides a huge benefit in this particular component.

But I think two we have built and the support team that - and teams of folks that don't exist in other companies whose responsibility is to help with longer-term follow-up and I think the combination of those two things being more effective in severe therapy coupled with dedicated resources to address this particular challenge in SCS as what's a lot us to be successful I think when you look at our international success where we continue to grow and now you're seven of our commercialization.

Are there perturbations based on competitive stuff like the sort of messaging and any given quarter. Yes, absolutely but over the long-term I think we've demonstrated that our model and our therapy can list and I think that test of time and that's what we look forward to proving here over the long-term to us as well..

Thanks..

And there are no further questions at this time. I will turn the call back over to the presenters..

Thanks Leandra and thanks everyone 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..

This concludes today's conference call. You may now disconnect..