Good afternoon, and welcome to Nevro's Second Quarter 2020 Conference Call. I'd now like to introduce Juliet Cunningham, Nevro's Vice President of Investor Relations. Please go ahead, Ms. Cunningham..

Good afternoon, and thank you. Welcome to Nevro's Second Quarter 2020 Earnings Conference Call. With me today are Keith Grossman, Chairman, CEO and President; and Rod MacLeod, Chief Financial Officer.

The format of our call today will be a discussion of second quarter trends and business results from Keith, followed by detailed financials from Rod and then we'll open up for questions. Earlier today, Nevro released its financial results for the second quarter, which ended June 30, 2020.

A copy of our earnings press release is available on our Investor Relations website. This call is being broadcast live over the Internet to all interested parties on August 5, 2020, and an archived copy of this webcast will be available on our Investor Relations website.

Before we begin, I'd like to remind everyone that comments made on today's call may include forward-looking statements within the meaning of federal securities laws. Our actual results could differ materially from those expressed or implied as a result of certain risks and uncertainties.

Please refer to our SEC filings, including our Form 10-Q to be filed later today for a detailed presentation of risks. In addition, we'll refer to adjusted EBITDA, which is a non-GAAP measure, that is used to help investors understand Nevro's ongoing business performance.

Please refer to the GAAP to non-GAAP reconciliation table, including in our earnings press release. And now I'd like to hand over to Keith..

number one, the health and safety of our customers, their patients and our employees; number two, the support and coverage of our customers as their clinical case activity begins to ramp during this period; the integrity and readiness of our supply chain; the prudent stewardship of our balance sheet; and finally, the maintenance or improvement of our competitive position and our capabilities in order that we might exit the crisis just the way we came in back in the first quarter with really positive momentum.

And thus far, I think we've achieved these 5 goals, and we'll continue to work hard in the coming weeks and months to further our progress. I'm really grateful of the entire Nevro team for their continued dedication and support of our customers and our patients.

They've shown really impressive resilience, dedication and grit throughout these very difficult last 4 or 5 months. And their dedication to our mission to meet the needs of our patients and the clinicians who treat them has been a source of real inspiration.

Now before I turn this call over to Rod MacLeod, I'd like to say how happy we are to have him join our executive team. He's a great fit with the Nevro culture and he's hit the ground running.

Rod's skill set and experience will help our organization to achieve our goals of profitable growth, business process evolution and value creation for our shareholders.

And I'd also like to, again, acknowledge and thank Andrew Galligan for his many contributions to Nevro over the past decade as well as his invaluable and ongoing help with Rod's transition. We all wish him and his wife the very best in their retirement. With that, I'll pass the call over to Rod..

Thanks, Keith. I'm very happy to join the Nevro team at this pivotal time and look forward to contributing to the company's future success. I'll begin with our worldwide revenue for the 3 months ended June 30, 2020, which was $56.4 million, a 40% decrease compared to $93.6 million in the prior year period.

Second quarter 2020 revenue was negatively impacted by COVID-19 restrictions on elective surgical procedures around the world. U.S. revenue was $51 million, a 35% decrease compared to $78.1 million in the prior year period. Year-over-year U.S.

trial declined by approximately 37% and permanent implants declined by approximately 34% during the second quarter of 2020. International revenue was $5.4 million, a 65% decrease on a constant currency basis compared to $15.5 million in the prior year period.

The decrease in international revenue is primarily due to the impact of COVID-19-related government restrictions on elective procedures implemented in Europe and Australia. As Keith mentioned, we expect the OUS recovery to be more uneven than what we're seeing in the U.S.

Gross profit for the second quarter of 2020 was $35.3 million, a 45% decrease compared to $63.9 million in the prior year period. Gross margin was 62.5% in the second quarter compared to 68.3% in the prior year period.

Compared to the prior year period, the decrease in gross margin in the second quarter was primarily attributable to a onetime charge of approximately $2.5 million related to older generation product that we deemed to be in excess of forecasted demand as well as a lower revenue base.

Operating expenses for the second quarter of 2020 were $70.6 million, a 22% decrease compared to $90.5 million in the prior year period.

The favorable second quarter 2020 decrease in operating expenses was primarily due to reduced travel-related expenses, temporary salary reductions and decreases in discretionary expenses during the COVID-19 pandemic as well as the impact of management focus on driving leverage throughout the business over the longer-term that had already been initiated in 2019.

Second quarter 2020 operating expenses included an increase of $1.5 million in our bad debt reserves and legal expenses associated with patent litigation were $2.3 million for the second quarter of 2020 compared to $3.9 million in the prior year period.

We expect that operating expenses will return to a run rate roughly similar to Q1 of this year as revenue recovers. Net loss from operations for the second quarter of 2020 was $35.4 million, a 33% increase compared to a loss of $26.6 million in the prior year period.

Adjusted EBITDA for the second quarter of 2020 was negative $22.1 million, a 98% increase compared to negative $11.1 million in the prior year period. Adjusted EBITDA excludes certain litigation expenses, interest, taxes and noncash items such as stock-based compensation and depreciation and amortization.

Please see our financial tables for GAAP to non-GAAP reconciliations. During the current pandemic and world economic conditions, we continue to focus on cash preservation while balancing the need to reinvest in the recovery process. Cash, cash equivalents and short-term investments totaled $562.3 million as of June 30, 2020.

Net cash increased during the second quarter of 2020 by $314.8 million, primarily as a result of approximately $313.5 million in funds, net of underwriter fees and expenses received from the company's April 2020 public offering of common stock and convertible senior notes.

As a result, total weighted average shares outstanding were 34.0 million for the second quarter of 2020. That concludes our prepared remarks. I'll turn the call back over to Juliet to moderate the Q&A session..

Thank you so much, Rod MacLeod. Appreciate it. I'd like to open the line for questions now, and we'd ask that just in the interest of time, you limit yourself to 1 question and 1 follow-up.

Operator, can you please go ahead?.

[Operator Instructions]. Your first question comes from Larry Biegelsen with Wells Fargo..

Keith, I wanted to ask you two questions on the update you provided on the call. There'll be a lot of questions on the recovery.

But on the pipeline, I just want to confirm that the nonsurgical refractory back pain study has completed enrollment and implants in all patients? And then on PDN, the crossover you talked about, Keith, how do you think that will impact the 12-month result? And what are the implications? Why did you call that out? And I have 1 follow-up question..

Okay. Thanks, Larry. Let me take them in order. On the NSRBP study, yes, where -- patients are all enrolled at this point. We expect there to be around 140 patients to reach the 3-month endpoint sometime later this fall and to be able to present the 3-month data at NANS, as I said. So no real changes there.

On the PDN trial, I think I just wanted to call out the crossover impact because as we look at the presentation of data, it was clear to us that maybe not everybody understood that element of the protocol. So we'll have at 6 months some very clean data between -- comparison data between the treatment arm and the control arm.

At 12 months, the data gets a little bit more complicated, though we'll continue to get a lot more treatment arm data, which will be very useful. This has been a part of the protocol from the beginning, but we thought maybe underappreciated by some. So that was really the only reason to call it out..

That's helpful.

And Keith, on the Medicare fee-for-service hospital outpatient update, you provided for the prior authorizations, I guess the question is, why do you think they're doing it? And what percent of implants could that impact -- fall under that setting? And what do you think the impact could be?.

Yes. Well, I think the -- again, this is a proposed rule, not a final rule. And CMS was clear that they were doing it because of the increased rate of utilization of SCS over the last decade or so and, particularly, over the last 3 or 4 years. So that's the reason they're doing it. At least that's the stated reason.

In terms of the impact on the business, we think around 25% of our business is Medicare in the hospital setting. So again, about 1/2 of our patient treatments in the U.S. are in the hospital and sort of in the range of 1/2 of our patients are Medicare versus private pay.

So you've got about 25% of the patients -- of our patients that are subject to this. And of those, about 1/3 are under Medicare Advantage, and they're already subject to a pre-auth -- prior auth requirement anyway. So by our numbers, this is a new requirement for what amounts to 16%, 18% of our overall cases.

Keep in mind that we have a dedicated in-house group, the Nevro care group, that works with prior auth in private payers and Medicare Advantage payers already.

And so this is a -- while we don't necessarily think it's a great idea or consistent with the best care for these patients, particularly given the government's focus on opioid-sparing approaches. Nonetheless, it's a relatively minor effect on the business, and we're already set up organizationally to handle this process..

Your next question comes from Robbie Marcus with JPMorgan..

Can you hear me okay?.

We can, Robbie..

Congrats on a much better than expected quarter. You beat out a lot of your peers pretty handily. And the third quarter commentary was definitely better than I think most people were expecting. And great to hear for new inpatients. So I was wondering if you could give us a little bit of what you're seeing on the ground.

How much of the Nevro recovery do you think is share gains in Omnia? How much do you think might be geography? How much is market driven? Just any commentary. And then I'll ask my follow-up as well here. We've got 1 month in the bag for third quarter.

If you could give us any trends you're seeing in July so far that give you confidence in to be flat, that would be great..

Okay. Sorry, Robbie, you really cut out on the end of that. I heard something about third quarter and didn't hear the tail end of it. Okay. Not sure if we lost, Robbie. Let me take a stab at where I think Robbie was going. On the -- on our recovery -- look, I think that's a great question, and I really wish I had an equally great answer.

We don't have a lot of visibility to share for reasons that I've talked about before, our competitors, where that business lives within their business, the materiality of that segment, what they report, don't report, et cetera. It was our sense coming into COVID in Q1 that we were continuing to gain share. The Omnia launch in the U.S.

was really just getting up and going. And we felt fairly certain at that time that we were picking up share. It's our sense and it's just that, anecdotally, that through the course of the pandemic thus far, that despite the negative impact on the overall market, that we think we've continued to pick up share.

We think some of our capabilities in terms of remote interaction with the patients, the Omnia launch, in particular, and other things, have led to that conclusion. But as I said, it really is just sort of a sense on the ground of how things were going during the worst of the pandemic.

And then I think as we reemerge from this, it is certainly our hope and our continued sense that, that trend continues. It really is a feeling of our team on the ground and it's a bit more anecdotal than I would like right now.

We hope to have a little bit more clarity as Q2 information gets out there, gets a little better digested and we get some information that we don't have now. In terms of geography, I don't really think geographical mix played much of a role there.

We're pleased with, I think, the early response to recovery that we've seen in the OUS markets, but it's been very recent and very short term. I think we've seen a beginning of a recovery in the month of July, that's encouraging, but it's early. We're seeing maybe in July internationally, what we began to see in late May and June in the U.S.

In terms of the third quarter, which -- and I'm not sure, I heard all of your question. But I think we're -- I think we're going to probably leave it at the remarks we've given. We're early in the third quarter. We're effectively 1 month in.

What we did want to give is exposure to the fact that, a, we're beginning to see some early recovery outside the U.S. that we didn't see over the course of most of Q2. And that domestically, which, of course, is the majority of our business, that the trend that we saw in the May and June of recovery, that continues.

And so we're continuing to see a very broad response to the Omnia platform, to our remote capabilities that we offer along with the Omnia platform, and to the efforts of our team in the field, which I think have just been terrific. So I think we'll leave it at that for Q3, but we're feeling pretty good about where we are right now..

Your next question comes from David Lewis with Morgan Stanley..

Keith, just a couple for me. The first thing is just your commentary in the back half of the year and, obviously, you're kind of discussing a faster workdown of the trial implant patients, which is maybe sort of pulling some growth out of fourth quarter to third quarter.

I just wonder if you could just talk more granularly in terms of how you're seeing the progression to the end of the year in the fourth quarter? And specifically, a couple of trends that we're hearing from SCS implanters that their new patient flow is probably a little lower than it used to be, but they're prioritizing SCS a little more.

And I'm just sort of wondering how you see these dynamics sort of playing out? And how it may or may not be related to third quarter being a lot better and fourth quarter being more neutral year-on-year? And I just had a quick follow-up after that..

Yes. I think everybody understands how revenue is generated in this business model. We start with a patient who's a lead for pain therapy. They decide to go to a trial and if that trial is successful, they're then a candidate, in most cases, for a permanent implant. And all of that plays out over a period of months and sometimes quarters.

What that means is we have a lot of visibility to revenue over the -- over 6 months forward based on trial activity, but it also means when you go through this rather unique period where trials get shut down for a period of time, that you've got 2 things going on at the same time.

You've got some pent-up backlog demand that you're hoping that you'll get back or at least most of it. But you also have this gap in new organic trial activity. So you have to refill that trial pipeline and that refilling, that gap, plays out over a period of, as I said, weeks and months or even longer. It's a new way to look at the business.

We've never gone through this experiment where we've just interrupted the flow for entirely for a couple of months, so we're probably learning as we go. But where we are right now as -- and we have a lot of visibility on these patients, when their cases are scheduled, et cetera.

We believe between those that have taken place in July and those that are scheduled for the balance of the year that most of those -- again, absent some new and unforeseen broadscale COVID spike, most of those will be recaptured in Q3.

So we balance that against the trial activity, where we had a near complete blackout there for part of the second quarter and the activity we've seen organically beginning to start again in June and July.

And we look at Q3, and we come up with a comment -- with a prospect that drove the commentary today, which is we think Q3 will actually be in a year-over-year positive situation, driven some by the organic trial activity we've seen in June and July that will drive some permanent implant activity in Q3, but probably more by the backlog cases that we think are coming in much more quickly than we had originally modeled, which is a very good sign, by the way.

What that means is Q4 is more dependent upon the organic trial activity of the prior weeks and months. And again, so you're making up for that tough time you had in second quarter, and then you're looking at a trial funnel that you're attempting to refill.

So a little bit less visibility to Q4, but nonetheless, we think Q4 will do very well under those circumstances. But because of the lower impact of the -- or from the backlog cases, we're thinking it's somewhere kind of in the neighborhood of flat year-over-year.

Then as we come into 2021; '21 will, of course, depend entirely on our success in generating new trial activity between now and the end of the year as we think backlog cases will play a really a de minimis role in 2021.

Does that help, David?.

It does, Keith. I think it's very, very clear. And then just a quick follow-up, maybe for Rod. I'm just thinking about your commentary on OpEx recovery. It still sounds like you've got a shot at getting to EBITDA breakeven by the end of the year.

I just sort of wonder, as you think about coming out of COVID, how are you thinking about sort of profitability heading into the forward year when you think about NSRBP? And then I sort of consider the crossover update on PDN to be positive in terms of the ability to commercialize that product may be faster.

So when I think about the pipeline drivers in '21, can you get to EBITDA profitable in the fourth quarter? And can you sustain that momentum in the forward year given some of the investments?.

Okay. Let me jump in with part of that, so I'll let Rod talk a little bit about kind of expenses and how we see operating expenses come back up. In terms of profitability, David, it's a good question. We don't have guidance in place for the rest of the year and certainly not for next year.

But I think, look, generally speaking, we would expect the productivity of our sales level going forward to be comparable to whatever we thought it was going to be before. So while there's always puts and takes on the operating expenses and projects that you decide can go away and others that get added based on big tectonic shifts like this.

In general, if we thought we were going to be productive from an earnings standpoint at a certain revenue run rate before, we probably continue to feel that way. So I think it really will depend on revenue and when we see it getting back to comparable levels and getting back into a growth mode.

I don't expect that we'll guide you to different expectations on the bottom line on a like-for-like revenue basis.

You want to talk a little bit about operating expenses?.

On operating expenses, as we mentioned, we finished Q2 at $70 million, and we do anticipate that as business continues to ramp-up in the second half here, we do expect those to return to kind of normal sort of levels like we saw in Q1..

Your next question comes from Margaret Kaczor with William Blair..

I wanted to follow-up a little bit on PDN and NSRBP in a variety of ways. So I don't know if you were able to host any virtual education sessions at this point. Given that lull in April, if you were able to take advantage of that dead time to just start creating that market and maybe lay that groundwork.

And as we think about 2021, I know it's very early and we haven't even seen the data, but what's the time frame of launch? Is it going to be kind of slow and steady, limited trial, and then kind of ramp more broadly? Or walk us through the strategies there..

Okay. Well, of course, the timing will depend on our -- in large part, I think, well, on the continued readout of the data, of course. But on our discussions with the FDA. So we're in the midst of those right now.

Based on what we know, as we sit here today, we still believe, we'll be in a position to file with the FDA in time to expect an approval and prepare for a launch in the second half of 2021. So I think between now and then, it really will be more preparing for market launch.

I think we said maybe last quarter that around the end of the year or early next year, we'd probably begin to talk to you a little bit more about launch details, tactics, market development, that kind of thing. But really, the timing hasn't changed much on that.

And if it does, it will be probably primarily driven by expectations of the FDA from a submission standpoint because those discussions are still ongoing.

Margaret, does that answer your question?.

Yes. So it sounds like maybe it's a little bit early to assume you guys are doing too much work outside of just preparing for the submission. And I'm going to repeat it back to you just to make sure.

And then maybe you'll start to fix those up as you go into the first half of next year?.

Well, we're doing actually a ton of work internally on preparing for market entry. It's just nothing that we're ready to talk about publicly yet..

Okay. Got it. No, that's helpful. And then just as a follow-up, as you guys think about strategies going into this year, where you started, what have you changed? What have you kind of maybe pulled back on spend on versus maybe accelerated spend on? Just broadly speaking, again, going into 2021 plus strategically..

Yes. Well, I think we've made some prioritization changes in our product development roadmap and so in our product pipeline. We have what we believe are certain advantages in our patient treatment infrastructure, some of those are product-centric, some of those are not.

In terms of our ability to attract and interact with our patients and our customers remotely, I would say that generally speaking, there are things that we can do to expand that profile and we're working on those things now and we've prioritized those a bit more aggressively. More to come on that in the next couple of quarters.

But that's something that we expect to be talking to you about probably in the first half of '21 or so. I think we've gotten much more proficient at virtual interaction with our customers from a training standpoint. Because we've had to, like so many companies.

We had the advantage of having data on 55,000 to 65,000 patients to be able to talk to our customers about the ability to interact with those patients throughout the pandemic and that's an area where we've continued to expand and develop.

And I would say, probably aside from that, the PDN area is one that we continue -- where we continue to grow in our enthusiasm.

And so we've spent a bit more time, maybe than I even would have thought a couple of quarters ago, in preparing for that market opportunity, and that will play a larger role in how we think about a number of our go-to-market initiatives. And again, we'll have more to say on that in the next couple of quarters..

Your next question comes from Bob Hopkins with Bank of America..

Keith, first question for me is, are all of your U.S. centers that were kind of active at the end of 2019 are actively kind of implanting or trialing now? And as a sort of a follow-on to that, to the degree you're sending -- and I'm specifically focused on U.S.

centers, and to degree that you're seeing variability, and I assume you are, across the U.S., what are kind of the main drivers of that variability? And does it give you a roadmap for getting slower centers back on as you work your way into the back half of this year?.

Yes. I don't have the current data point in front of me. I think the last version of that particular data I saw at the end of the quarter. But at that time, if we looked at the centers in the U.S. that were active pre-COVID in the first quarter, of those centers, I think we were generating activity in a very high percentage.

I think it was greater than -- if memory serves, I think it was greater than 90% of those centers had come back into activity. So we're not seeing big chunks of our customer base that remain dormant or inactive. So I think this is a pretty broadly shared recovery. Obviously, there are some areas that have recovered more robustly than others.

I think it depends on very, very local and specific circumstances. But it also clearly is tied to local COVID activity and response to infection activity. For example, we saw in the -- I believe it was in the last week or so of July, we saw a little bit of a decline in case volumes in areas like Texas and California.

But interestingly, they were -- just as we saw in June in Texas, they were rescheduled. So this seems to be kind of the pattern that we're going through right now that we see temporary blips, that we don't see many cases being just canceled and put in indefinite suspension like we did back in April.

There's more of a let's push it out a couple of weeks kind of mentality. So we're -- and that's, as you might expect, extremely difficult to forecast. But I would say from area-area, there's not a lot of variability that I could easily explain aside from local COVID conditions on the ground..

Okay. So that's helpful. So as a follow-up to that, it sounds like Q4 will be a true reflection of underlying demand because you're saying you work through the majority of the backlog and reschedule procedures by that time.

So if we -- and I realize this is a big assumption, but if we make the assumption that COVID is under much better control in the United States by the fourth quarter, what would be the variables that would prevent kind of a more normalized growth rate in the fourth quarter versus the flat that you're not guiding to, but talking about today?.

Yes, I think that's pretty straightforward. It really is just -- the revenue in Q4 will be a function of the trial activity in Q2 and Q3. So we have a relatively predictable curve of conversion from -- of patients from trials to implants.

When you take that curve and you just lop a couple of months out of it, then you spend the next couple of months after that refilling the pipeline, you have an impact that you're certain to see over the next couple of quarters. It's like steering the proverbial ocean liners. It's hard to change it overnight.

So even if our activity continues to be very robust coming out of Q3 and Q4, we still have that fact pattern in our history at that point of kind of a big gap in Q2. That's going to kind of continue to roll through that conversion curve. So that really would be the only thing, Bob, that I would focus you on..

Our next question comes from Joanne Wuensch with Citibank..

I actually have two.

You're well into the Omnia launch and I'd be curious if you could give us anything quantitative or qualitative on how that's been received? And what you think is happening in the competitive landscape in response to that? And then my second question is along the similar lines, which is, can you just sort of give us a big picture view of where the sales force is today and tempo and how they're preparing in this recovery?.

Sure. So I'll take them in order. So the -- I think the response to the Omnia launch has been very good. And as I mentioned in my remarks, we've now just launched Omnia in Europe and Australia, following approvals there, respectively. I think the Omnia launch is doing as well as we could have hoped on a relative basis.

Obviously, the COVID interruption aside, we felt extremely good about what Omnia was doing in the U.S. in the first quarter coming into COVID. And again, from a relative standpoint, we think we continue to do well with Omnia. The response has been very good.

We measure the response on Omnia based upon adoption initially by our current customers and that adoption has been very strong. So if we look at the percent of our utilization that's coming from Omnia, I would say we're probably on to maybe slightly ahead of the curve that we had in our projections when we launched Omnia, late last year.

And I think it's playing a role in the share that we have in the splitter accounts. And again, those are accounts that use both Nevro and at least one other suppliers' products. So I think Omnia, that's -- those are sort of general comments, but I think we're very pleased with the Omnia launch, adjusted for COVID, of course.

From a sales force standpoint, I just couldn't be more pleased with the response from our sales organization. We kept them extremely busy during the worst of the pandemic. We never really shut down. We did have cases that continued and our field team continued to cover those cases.

They shifted gears very quickly to reach out to all of our existing patients to begin optimizing therapy more aggressively, capturing results, feeding that back to their customers.

They've transitioned to helping our customers refill their trial funnel very actively and employ some of the tactics that we employed for some of you who remember back in the spring of 2019 when we were attempting to refill the trial funnel as well. And so they're doing a terrific job.

I think that they've acquitted themselves very well relative to our competitors. I think our customers really appreciate that, and I just couldn't be more pleased with the way they've handled themselves and our business through this whole episode. You asked one other question, and that was competitive response.

I think the competitors' response to Omnia has been largely as we described last quarter. We saw right around the first of the year just before NANS, one of our competitors acquired a new waveform, and they've been actively promoting that waveform as well.

We haven't seen a dramatic effect on the market or share as a result of that, but we know that they're very active. Our other competitors have had minor product improvement kind of introductions that are good to see, but haven't necessarily changed the overall dynamic between us as competitors..

And your next question comes from Danielle with Leerink..

Just a quick question on the recovery and then I have a follow-up on Omnia. So on the recovery, do you have any sense, Keith, of whether patients are "Getting lost or dropping out," so of this canceled or deferred procedures, do you assume any of those do sort of fall out of the system for whatever reason? That's my first question.

And then I'll follow-up with Omnia after..

Yes. I think it's about what we assume maybe a little bit better. So we assume that through that interruption, you -- internally, that we would see some of those patients go away. I don't think you can go through something like that without -- and think that you're going to capture -- recapture 100% of the patients that were in your funnel before.

But I think our recapture rate has been at or better than what we assumed. And as I mentioned, it certainly has been quicker. What we've seen, particularly in the U.S. market is that our doctors and our centers, both hospitals and ASCs, have been very, very motivated to reenergize this therapy in their practice and in their site.

And patients have actually been pretty aggressive about wanting to get back on schedule for this particular therapy, which sort of reinforces our view that these are not your typical elective patients.

These are patients that really require some sort of therapeutic intervention, and they're very determined and motivated to seek and can get that therapeutic intervention. And so I think all of those have played together and we've lost maybe the same to fewer of these patients than we might have thought..

Okay. That's great.

And then, on Omnia, I'm just curious if you could give -- and I know COVID confuses this or clouds this a bit, but where you're seeing the most success with Omnia? Is it in switching competitive accounts or driving higher volume at existing higher Nevro share? I guess, I should say, at existing Nevro users, any color you can give there..

That's a hard one coming out of COVID, and we've just launched it outside the U.S. So I think it's -- one thing we can clearly evaluate is the success we've had in -- when I say competitive accounts, I really mean accounts that we share with competitors. So I do believe that we've seen a share impact from Omnia.

In terms of overall utilization in any given customer, it's hard to see through the fog of COVID to really answer that question. So maybe give us another quarter to answer that more clearly..

And the last question that we have time for today comes from Kaila Krum with Truist Securities..

So you guys have put in a lot of sort of cost-saving initiatives early on during the pandemic.

So I mean, first, at this point, have any of those initiatives been lifted? Or what do you need to see in order to return those investments to historical levels going forward?.

Yes, I think it's really -- it's a line-by-line management evaluation. We did put in place salary reductions early on, those were reinstated at the beginning of Q3. Other than that, I think everything we're doing, we're sort of following the revenue recovery and looking at reinstating certain plans kind of one at a time.

So I think Rod gave a little bit of guidance on what to expect for operating expenses. I think we'll continue to find some efficiencies.

And I would remind you, Kaila, of what we said coming into the year, which was we felt like as -- when we gave our original guidance, we felt like we could continue to bring operating expenses down as a percent of sales and even down, to some extent, on an absolute basis despite the growth that we were projecting.

So a lot of what we were doing already continues in the background. The things that we cut specifically for COVID, some of them were active, some of them were passive. An example of the latter would just be travel expenses.

And an example of the former would be hiring freezes and not hiring new people until we know where the business is going, et cetera. So it's hard to give you one categorical answer to that question. We're really looking at these one at a time. But we've got a lot of confidence in where the business is going long term.

We've got balance sheet capacity, so we're not going to hold off on an expense, it's part of our long-term growth objectives..

Great. That makes sense. And then just something we've been hearing a lot more about is just telehealth. Telehealth Is here to stay. So I'm curious just how you're strategizing around that.

I guess, are you finding that pain patients are just as easily diagnosed by telehealth? Or how could this sort of shift impact your business and the referral channel?.

Yes. It's a great question. I think, look, from our standpoint, telehealth really comes into what we do in two ways. One is, maybe as it's tied to our direct-to-patient or direct-to-consumer initiatives.

And what we were doing there would be described as telehealth anyway in terms of capturing those patients, qualifying them and then helping them find a clinician where they would seek care. The other way it comes into our own business model is in managing the patients once they've received a trial and/or a permanent implant.

And that's an area where we've made a big investment over a long period of time, and where we've actually increased the utility of that capability more recently as we've done, and this was pre-COVID. We were already targeting to do more and more of our patient follow-up telephonically anyway.

I think the more important part of your question is whether or not our customers will continue to use telemedicine in a way that makes it easier for patients to be seen, to be assessed and to even be treated. I suspect we will.

I can't quantify that for you, but I think our customers are like lots of other specialties where they've jumped into and embraced telemedicine pretty aggressively and pretty quickly, and I think they see the benefits. And I think our patients do too.

So my sense is we'll see a longer-term impact from telemedicine that will increase capacity on the part of our doctors' office practice and otherwise. But I think it's going to take a little time to really size that up..

And with that, I turn the call back to presenters for any closing remarks..

Okay. Thank you, everyone, again, for joining us on the heels of another rather extraordinary quarter, and we'll look forward to talking to you, again, at the end of the following quarter. Thanks..

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