Good afternoon. My name is Mika, and I will be your conference operator today. At this time, I would like to welcome everyone to Nevro's First Quarter 2021 Financial Results Conference Call [Operator Instructions]. I would like to hand over the call to Julie Dewey for introductory remarks.

Julie?.

Good afternoon, and welcome to Nevro's first quarter 2021 earnings conference call. We appreciate you joining us. I'm Julie Dewey, Nevro's VP of IR and Corporate Communications. 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 first quarter trends and business results from Keith, followed by detailed financials from Rod, and then we'll open up the call for questions.

Please note, there are also slides available related to our first quarter performance on the Nevro Investor Relations Web site on the Events and Presentations page. Earlier today, Nevro released its financial results for the first quarter ending March 31, 2021.

A copy of our earnings release is available on our Investor Relations section of our website at nevro.com. This call is being broadcast live over the internet to all interested parties on May 5, 2021, and an archived copy of this webcast will be available on our Investor Relations Web site.

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 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. The forward-looking statements in this call speak only as of today, and we undertake no obligation to update or revise any of these statements.

In addition, we will 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 GAAP to non-GAAP reconciliation tables within our earnings release. And now I'll turn the call over to Keith..

one, to generate awareness, and that's with both patients and referring physicians; and two, to expand market access with increased third-party payer coverage.

To ensure we reach these goals, we're investing in a broad commercial launch strategy, including a dedicated PDN field organization to educate those highest volume referring doctors as well as targeted professional education programs and digital as well as various other outreach initiatives to PDN healthcare practitioners and also the patients.

We've already hired almost all of our PDN field team and will begin extensive training this month.

Following FDA approval, this dedicated PDN referral selling organization, along with remote selling resources, we'll be ready to begin calling on doctors that are treating the most PDN patients right now, including primary care physicians, endocrinologists, internal medicine specialists and podiatrists.

We also know, as we've said before, that these diabetes patients take a very active part in their care, and they're highly engaged online. Given this high level of engagement, Nevro is beginning to invest in patient education around PDN.

On the market access front, we've already started approaching payers with the goal of expanding policy coverage to include PDN patients where it doesn't exist today.

Our initial outreach included, contacting the top payer organizations, such as United and Cigna, to provide them with information on our FDA submission and our JAMA Neurology publication.

So far, it seems like the data is going to be compelling for those payers, particularly given this patient population where they just haven't received much traction with other therapeutic options that they're paying for.

We even achieved our first PDN coverage win before our data was even published with a small preferred provider network in the Midwest. While some payers have told us they will require a 12-month data, we expect to have that data by the time we receive FDA approval.

So with this in mind, we expect our commercial coverage to increase over time as additional commercial payers expand coverage throughout 2022. I also want to give you a brief update on our early international PDN activities, which are in the very initial stages.

Similar to the US, our primary international PDN launch goals are to drive education, awareness, and expand access for 10 kHz therapy for patients failing conventional medical management. We've created advisory panels with local diabetes, pain and neurology experts in Australia, Germany and the U.K.

We're piloting new sales resources to drive education and awareness with the primary physicians treating PDN in each country. We're also collaborating with local diabetes, pain and neurology societies to work towards an update to clinical practice guidelines for the treatment of PDN.

Unsurprisingly, there's been some impact from COVID on our ability to execute our plans as quickly as we would like, but we continue to make progress and look forward to providing status updates on these initiatives later in the year.

The clinical evidence, including last month's JAMA Neurology publication, demonstrating the high-frequency spinal cord stimulation provided exceptional relief for PDN patients is beginning to create a lot of excitement in the pain and the diabetes communities.

And we're eager to bring this treatment opportunity to the millions of PDN patients, who are suffering and unable to find relief with currently available pharmacologic options.

At the end of April, we introduced HFX, a comprehensive new brand identity that combines Nevro's innovative high-frequency SCS technologies, advanced therapies and end-to-end patient support.

Today, we're known for our highly differentiating -- differentiated HF10 products, but the value of our technology that our technology provides to patients, to customers is really much greater.

Under this new HFX brand identity, we'll be able to new bring products, services and support together under one cohesive durable framework that supports today's solutions and importantly, some of our planned future offerings, whether those are new products, innovations in wave forms, in frequencies, services, clinical data, or unique forms of patient and customer support.

Our recent Omnia upgrade, known as HFX Connect is in full market release, and we plan to upgrade the majority of our existing U.S. user base by the end of the year. We expect a full market release in Australia later this month with regulatory approval expected in Europe later in the year.

The HFX Connect upgrade enables us to be more responsive to patient needs because now instead of needing to schedule an in-person visit to optimize the patient's therapy, our HFX Coaches can remotely optimize a patient's therapy right when it's needed by the patient.

Now this is because Omnia, powered by HFX Connect, as both more pre-populated programs than any other IPG and the programs with the highest likelihood for success. These programs are based on our proprietary therapy algorithms, which were informed by therapy outcomes data from over 70,000 patients stored in our HFX Cloud.

Complementary to these pre-populated programs are patient dedicated HFX Coaches, who not only work with patients directly to optimize their therapy remotely, but also follow a proactive patient outreach plan also informed by data in HFX Cloud.

This is so much more than just another app, where patients can answer questions and send them off to someone. This is a dedicated team of 70 to 80 professionals assigned to each patient, who are in touch with that patient on a regular basis, answering questions and optimizing care and drawing on the immense knowledge base of our HFX Cloud data.

Importantly, all of these changes are also going to make our sales team much more efficient over time and will be a critical part of the efficiency with which we scale over the next few years. The FDA also approved our new trial stimulator and is currently being evaluated in a limited market release.

The new trial device is designed to provide improvements in patient comfort through a smaller, more contoured cable-free system that allows patients to focus more on their pain relief and less on the device itself.

The new trial stimulator also comes with increased programming versatility, so patients can evaluate our proprietary 10 kHz therapy as well as a broad range of other wave forms prior to receiving permanent implant. I'd like to also highlight that we published our first ESG report in the first quarter, which is available now on our website.

We recognize the growing importance of broader corporate responsibility to many of our stakeholders.

And while we're still early in that ESG journey, we believe our commitment in these areas will inspire our entire network team to continue acting as responsible corporate citizens and strengthen our trust with our investors and various other stakeholders.

And we look forward to continuing to expand our ESG initiatives in the years to come and helping thousands of patients every year. In closing, I believe we're really well set up for the remainder of '21 and beyond, and we remain very bullish on the longer-term growth drivers for our business.

We're uniquely positioned in a still underpenetrated SCS market that should continue to grow for years to come, with a market share position, we think, should still grow over time.

We've started to see incremental improvement in our business and promising signs of patient volume will continue to increase as COVID subsides and patients seek care and make their way back to SCS therapy as the year progresses.

Our PDN launch preparations are on track, and we continue to develop the nonsurgical portion of our market using NSRBP data. Our recent approvals of the Omnia upgrade powered by HFX Connect and the new trial stimulator will provide momentum throughout the year.

And we're continuing to manage expenses and drive operating leverage without eroding our teams or our core capabilities to drive growth and leveraging the income statement, of course, remains a top priority for us in the coming years.

And lastly, I want to once again express my appreciation to the entire Nevro team for their efforts in the first quarter as they continue to navigate the impacts of COVID while moving the company forward. And with that, I'll pass the call over to Rod to provide further details on our first quarter results and our guidance..

Thanks, Keith, and good afternoon. I'll begin with our worldwide revenue for the first quarter of 2021, which was $88.6 million, a 1% increase as reported and flat constant currency compared to $87.5 million in the prior year period.

As a reminder, this quarter included 1 less selling day, than Q1 2020 and the same number of selling days as Q1 of 2019. Gross profit for the first quarter of 2021 was $62.3 million, an increase of 3% compared to $60.5 million in the prior year period and an increase of 17% compared to $53.2 million in the first quarter of 2019.

The increase in gross profit was driven primarily by increased revenue as well as a reduction in the overall cost of products sold. Gross margin in the first quarter was 70.3%, compared to 69.2% in the prior year period and 64.8% in the first quarter of 2019.

Operating expenses for the first quarter of 2021 were $84.8 million, a 1% increase compared to $83.6 million in the prior year period and down from $95.5 million in the first quarter of 2019.

The year-over-year increase in operating expenses was primarily related to patent litigation related expenses, personnel costs and PDN marketing and selling related activities, and these were partially offset by a decrease in clinical trial expenses related to the PDN and NSRBP studies, reduced travel and media expenses as well as management's continued initiatives to drive leverage throughout the business.

Legal expenses associated with patent litigation were $5.9 million for the first quarter of 2021, compared to $2.1 million in the prior year period. We continue our ongoing patent cases in the district of Delaware and at the patent office relating to spinal cord stimulation technologies.

While these disputes are unrelated to our core high-frequency therapy IP, protecting these innovations remain an important objective.

We are anticipating an October 2021 trial to present our case regarding Boston Scientific's infringement of our IP directed to 1,200 hertz paresthesia-free therapy as well as other related IP and to present our defenses with regards to Boston Scientific's older claims against us for patents and trade secrets unrelated to high-frequency SCS.

Net loss from operations for the first quarter of 2021 was $22.5 million, a 2% improvement compared to a loss of $23.1 million in the prior year period and a 47% improvement compared to a loss of $42.3 million in the first quarter of 2019.

Non-GAAP adjusted EBITDA for the first quarter of 2021 was negative $6.6 million compared to negative $11 million in the prior year period and negative $28.7 million in the first quarter of 2019.

Non-GAAP 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 the GAAP to non-GAAP reconciliations.

We continue to focus on cash preservation, while balancing the need to reinvest in the recovery process and our new growth drivers in PDN and NSRBP. Cash, cash equivalents and short-term investments totaled $576 million as of March 31, 2021. This represents a decrease during the first quarter of 2021 of $11.5 million.

Please note that we plan to use approximately $172.5 million of our cash on hand to settle our convertible notes that mature on June 1, 2021. Now turning to 2021 guidance. It's important to note that we will be using non-GAAP financial measures to describe our outlook for the business.

Non-GAAP adjusted EBITDA excludes certain litigation expenses, interest, taxes and noncash items such as stock-based compensation and depreciation and amortization. Please see the financial tables in our press release issued today for GAAP to non-GAAP reconciliations.

As a reminder, due to the impact of the COVID pandemic on our operations and financial results, we are providing second quarter revenue and non-GAAP adjusted EBITDA guidance today.

We do not plan to provide quarterly guidance once the impact from COVID subsides as vaccine availability improves, and patients begin to again seek elective care at typical levels.

As Keith mentioned earlier, we saw incremental improvement during the first quarter as the impact of COVID began to decrease during the quarter and vaccine availability increased. We expect second quarter of 2021 worldwide revenue of approximately $104 million to $106 million.

This updated guidance represents 84% to 88% growth over prior year and 11% to 13% growth compared to Q2 of 2019. This range assumes decreasing COVID headwinds and more normalized case scheduling and elective procedure level beginning in the second quarter of 2021.

The company expects second quarter of 2021 non-GAAP adjusted EBITDA to be approximately negative $2 million to negative $4 million. Our updated full year guidance provided today is highly sensitive to the company's COVID recovery assumptions, which include an ongoing and steady recovery in the U.S.

and key international geographies, leading to more normalized case scheduling and elective procedure levels beginning in the second quarter of 2021 and continuing for the remainder of the year.

This guidance also assumes the impact from COVID-19 will diminish, with each sequential quarter this year, as the vaccine availability improves and patients begin to again seek elective care at typical levels.

Of course, if the vaccine rollout takes longer, recovery is delayed, or patient willingness to seek treatment is slower than anticipated, or alternatively, if recovery is faster, or there's a larger recapture of pent-up demand than anticipated, then any or all of these factors could quickly and easily impact our guidance range.

With that in mind, we now expect worldwide revenue for full year 2021 of approximately $440 million to $450 million. This is updated from our previous range of $430 million to $450 million. This updated guidance represents 22% to 24% growth over prior year and 13% to 15% growth compared to 2019.

This range also assumes FDA approval of PDN at the beginning of the third quarter of 2021 and a mid- single-digit million-dollar revenue contribution from PDN in 2021, with the majority of that generated in the fourth quarter.

We have also updated our full year 2021 non-GAAP adjusted EBITDA to be in the range of $5 million to $15 million, and that's from our previous range of $0 to $15 million. And significantly ahead of last year's non-GAAP adjusted EBITDA loss of $3.9 million.

For the full year, we continue to expect gross margins to be approximately 69% and operating expenses to be approximately $370 million, including litigation expenses and approximately $22 million of investment to support a successful PDN launch and market development.

We believe that this investment will not only drive some early revenue contribution from PDN in the third and fourth quarters of 2021, but more importantly, positions us with a solid run rate of patient referrals and trials as we enter 2022.

In closing, we made good progress in the first quarter and remain on track to drive growth and scale profitably in our core business. We are in a great position strategically with best-in-class SCS technologies, share gain momentum, future growth opportunities in PDN and NSRBP superior clinical data and a strong commercial organization.

We continue to advance our operating margin expansion efforts with many of the changes we're investing in this year. Such as our integration of manufacturing, early development of the PDN market and the Omnia upgrades that facilitate greater commercial productivity, expected to provide continued improvement in our financial leverage as we grow.

That concludes our prepared remarks, and I'll turn the call back over to Julie to moderate the Q&A session..

Thanks, Rod. Before we start the Q&A session, we'd like to ask that you please limit yourself to one question and one short follow-up. Operator, would you please give us the Q&A instructions..

[Operator Instructions] Your first question comes from the line of Bob Hopkins from Bank of America..

I have a short-term and a long-term oriented question, and so I'll just list them both upfront. On the short-term side, just curious, what are you seeing currently from a trialing perspective? And also in your Q2 guidance, wondering how much of the backlog you assume converts in the second quarter, that was kind of my short-term question.

And then on the longer-term on PDN, just curious how big a sales force you've ended up hiring? You mentioned that it's pretty much completely done.

And then when we could maybe hear something from some of the payers in terms of coverage wins?.

Bob, I think let me take part of the first question and then ask Rod to talk about the backlog, a contribution to Q2. From a trialing standpoint, I would say trialing has done better. In fact, if you look at, say, the month of March, on a per day basis, it was the best March we've ever had as a company in both trials and perms.

It's still not quite where we would want it, and it's clear that it is still impacted by the environment to some extent, and it's probably going to continue to be a little bit uneven. So it's not where we would like it to be, Bob, but it's getting a lot closer. And we expect that to continue to improve.

I think I mentioned some of the early indicators that we follow, like and not the least of which, including patient engagement with some of our efforts online are all pretty positive right now. So we think that bodes well for trialing activity over the coming months and quarter. I'll come back on the PDN sales force.

And maybe, Rod, you can talk a little bit about backlog..

Bob, as we mentioned in the call, we saw improvement in Q1 on the cancellation of the perms as it relates to Q4 and we've continued to see that the cancellations get better.

So the team has done a great job of going after those customers that canceled and as of right now, we have a few hundred that are in our backlog that we'll be chasing down through the end of the year. I don't have a great sense on how many of those we'll recapture this quarter.

But we will be tracking them down throughout the remainder of the year, and the team's done a really solid job of being able to follow those customers through the pipeline..

And Bob, on the PDN question. So I think we mentioned in prior calls that our initial field presence for this referral selling organization was going to be between 30 and 40 people strong. And that's, by the way, exactly what it will be coming out of the gates. And we said in our remarks, already hired nearly all of those people.

Our existing field organization, which is far, far larger than that. We'll also be very involved in PDN. So the PDN sales organization, to which we've referred, is going to be specifically calling on referring doctors. There's lots of other things we'll be doing in the field that will be driven by our existing field organization.

But anyway, in short, we've hired basically the number that we said we would hire to launch the referral sales force..

And on the insurance side?.

When we'll be able to hear from payers..

So your question was, when are we going to hear more from payers?.

When could we possibly hear some news flow from the payers? I know you've approached them now. But just curious, how long it might take to convert? And just to try to set some expectations around that..

I think it's going to be kind of a steady drumbeat. I think some of these payers make decisions on an annual basis, and that annual data is different for every payer. Some make them real-time as they get evidence, and they simply change their policy.

Some are driven by a larger committee kind of structure, others are driven by the decision of a medical director. So I would think you'll probably start hearing from us once we have the 12-month data and we're actively talking to people post the ADA meeting about the 12-month data.

I would think on a regular quarterly basis, we'll be able to give you some news on payer reaction and response and decisions. So I think probably as early as our Q3 call, Q4 call and then certainly all throughout '22, we'll be able to speak to some of those decisions..

Our next question comes from the line of Robbie Marcus from JPMorgan..

Maybe one on pain and one on SCS in traditional pain and one on PDN. Maybe starting with PDN, Keith, how should we think about just sort of what percentage of payers you can get on board? I know some areas, sometimes you can go really fast and some it can drag out over two, three, four years.

So maybe just to help set expectations, where do you think you can end 2021 as a percentage of covered lives and what's a reasonable expectation, maybe exiting 2022?.

That's hard to say. I think until we get a little bit more experience under our belt presenting the 12-month data to these payers, Robbie, to be honest. We feel like that we come out with the gates with somewhere around 1/4, 25%, maybe 30% of total covered lives -- of PDN covered lives coming out of the gate with coverage in place.

Given the size of this market, I think that gives us ample room to begin developing this market. So I don't view it as a limitation in terms of our expectations and what we've talked to you about. The pace at which we get to 50%, 75%, a little bit tough to predict right now.

We certainly think we'll -- based on the meetings we've had that we're going to be able to drive positive coverage decisions. As we get further into the year, we're going to have submission and publication of economic outcomes data. That will help as well.

So I think it will be higher by the end of the year because I do think we'll get a handful of rapid decisions. And then I think once we've been out there for 6 months with the 12-month data and once we get the economic outcomes data published, I think we'll have even more luck in 2022. But a little difficult to give you percentages..

And maybe just turning back to the US market and Omnia. You have a really great offering. You mentioned on the call, you have the most offerings or waveforms within the package versus the competition. I'd love to get your sense of what's going on, on the ground right now.

We hear across the rest of med tech that there just hasn't been a lot of trialing of new devices the past year. Unfortunately, that kind of coincided right with the big launch of Omnia last year, right, as COVID was hitting.

So I'd love to get a sense of where you are in terms of educating your doctors about Omnia and the option, and how it compares? And how much is done? How much still has to come and what you're kind of seeing on the ground in terms of Omnia versus the competitive offerings right now?.

Well, I mean, we're really pleased with the Omnia contribution. I mean, we were very explicit about that strategy when we came to market with Omnia and what we expected of it. And I think we've been really pleased with the results. Omnia makes up between -- somewhere between 70% and 80% of our total utilization right now as a company.

It's been broadly adopted by our customers. And despite the fact that the market was depressed over this last 12 to 14 months, we're certain that we gained share during that period of time, which is the second-best way to measure our progress is on a relative basis. And we feel like the market has sort of voted with its feet in that regard.

So I think Omnia will continue to do well. Remember when we brought it to market. One of the promises of that platform was that it was upgradable and that we would upgrade it. Not just for patients going forward, but for patients that already had the device.

And this ability now to load 35 programs that are algorithmically populated by the doctor and the rep. And then the use of our HFX Coaches to optimize care and move between these programs remotely. That's an upgrade, and that's a big one. And that was kind of the first fulfilled promise of the platform from its introduction.

I think that will make a big difference over the next year. So I think the system is doing exactly what we planned.

It is meant to carry the message to the market that we still are the only provider of the most proven form of SCS therapy in high-frequency, the best workflow in the -- or and yet we offer the flexibility to do everything else for those patients who need it. And I think it's a pretty compelling message.

It's one that can't be replicated by our competitors. And I think it's -- I think it will give us legs here for some time to come..

Our next question comes from the line of Kaila Krum from Truist Securities..

So just first, I mean, you had a good quarter, it's still early in the year. I just would love to understand sort of the makeup of the guidance increase. Is it primarily just bullishness kind of in the core business? Are you getting more excited about PDN with the market development work? Just any additional color there would be helpful..

Well, I'll take a pass with that and Rod can fill in some color, if you'd like. But I think it's a combination of things. It is, I think, reflects a bullishness in our market position, and how we're positioned right now and our ability to continue capturing market share in our major markets.

I think it reflects a very detailed view of the pace at which we think trials will pick back up, the timing in which we think patients and doctors will more aggressively reengage with the therapy, the rate at which we will recapture canceled cases from last year.

And at least some sense that -- of when kind of a more higher level in the background, pent-up demand will begin to come back into the therapy. It also includes, as Rod pointed out, some contribution from PDN in the second half of the year, primarily fourth quarter.

So it's a combination of a lot of things, Kaila, but it's a pretty detailed -- represents a pretty detailed view of what we think the drivers will be for the last 3 quarters of this year. But without question, the biggest single assumption is the resolution of the COVID impact over this market.

And our assumptions around when patients really begin to reengage with elective care and return for procedures like SCS on a more robust rate..

And then just on PDN. You mentioned that you achieved your first PDN coverage win before the data was even published with a small preferred provider.

What sort of resonated with that provider? Just kind of curious how that conversation went, and what prompted that coverage and when?.

Well, it was still a database decision on the part of this payer. This was an example of a smaller commercial payer that has a fair amount of flexibility in the way they make these coverage decisions, as I mentioned a few moments ago. And they looked at the data that had been presented at the various society meeting.

So they looked at the data despite the fact that it hadn't yet been published in JAMA. And they made their decision primarily on that data and also on their recognition of what they weren't able to do for these patients today.

So just a good example of a small payer that has a lot of flexibility to look at the data and said, this makes sense, and they made a decision..

Next question comes from the line of Cecilia Furlong from Morgan Stanley..

I guess I wanted to kind of turn back to the PDN data, but just really Postman's analysis and data published, what you've been hearing from physicians just as they think about their current refractory PDN patients, just the patient profile best addressed most likely to drive benefit from FDA?.

I mean I think it continues to be pretty consistent and pretty positive. I mean, after all, the publication in JAMA was really -- was just a validation and some elaboration on data that had already been presented.

So it was great validation and good confirmation of what we're seeing in this trial, but it was, by and large, the data that our clinicians had already seen. We don't yet have the ability to spend a lot of time with referring doctors. So I think that would be off-label promotion.

So I can't really give you a detailed sense of how or whether it's changed the view of referring doctors. But I can tell you among the pain community, the response has been extremely positive.

And I think the -- if you think about our customers and how they're going to respond to this, I think it varies from -- we'll see, and we'll see what the referring doctors do, but we know that these patients are going to do well.

Two, on the other end of the spectrum, doctors that are planning increases in capacity that are planning outreach programs and that are planning to make this a centerpiece of their practice.

I think there are very few doctors who've seen this data and say, no, I don't think this is going to be a meaningful part of our SCS practice, and we don't plan to pay attention to this. So I think it's been very positive, but also very consistent with what we've seen since the first data release..

And then just turning to PDN, the ex U.S. opportunity you mentioned, just as you think longer term, how do you view the SCS opportunity in this patient population just versus your currently addressed patient populations? And just really from a reimbursement challenge standpoint as well..

I guess I'm not sure I understand the details of the question. I mean from a -- certainly, the coverage decisions are critical, and we've talked quite a lot, Cecilia, about what we're planning to do there, just a few moments ago with Bob.

We talked about percent that are covered out of the gates, and what we plan to do to increase that number over the next 18 months. In terms of its contribution to our business, we haven't given any long-term forecast.

I mean to imagine that you're sitting here at the end of 5 years, and that the PDN could be a very, very significant minority portion of our overall revenue is a reasonable one, I think. So we expect it to be a meaningful contributor. We're treating it that way. We're hearing from our customers that, that's a reasonable expectation.

We know the patient demand is out there. So I think we're treating this like it's going to be a very significant part of our business over the next 5 years..

Our next question comes from the line of Larry Biegelsen from Wells Fargo..

This is Kevin on for Larry. One financial question and just one quick product question. So on the guidance, Q2 looked a little bit better than we expected. And my question is, as you think about the back half, should investors expect more normalized seasonality on the top line. So pre-COVID, you had Q2 and Q3 generally roughly equivalent.

So would you expect Q3 to be notably higher than Q2 in 2021 given the recovery of underlying demand? Or should we expect typical seasonality beyond this -- beyond in the second half as you recoup the backlog in Q2?.

We're assuming that as COVID recovery continues, that we will see sequential improvement quarter after quarter. So you're right. Usually, Q2 and Q3 are about the same in a lot of businesses. We are anticipating that we will see some improvement going from Q2 to Q3 and then Q3 to Q4.

The one thing that I would probably caution just a bit is that July does tend to be seasonally impacted as well due to vacations, and we would anticipate that to happen this year as well. But yes, we are anticipating a stronger Q3 and then a stronger Q4..

And then, Keith, you recently announced the rebrand with HFX.

How have you been messaging this shift to clinicians, the benefits, and how it works within their workflow? And should we expect any new products associated with the HFX platform in the coming months and years?.

Well, I think a part of this was born of a reassessment of our -- of what we do well and what we could do better in positioning our value proposition with our customers. And I think customers well understand the high-frequency treatment and the data.

I think what we've not done quite as good a job of in the past is really articulating the full value proposition from front to end in terms of how we deal with patients, how we program our devices, the value of the data in this cloud, the ability to more algorithmically program our patients in ways where we know they're going to get better outcomes.

Some of the things we're doing with human intervention with these patients, the investment we've made and continuously upgrading their outcomes. And so I think the rebranding just makes that a little bit easier. It also makes it easier for us as we think about products that might come down the road for this therapy to be more than just HF10.

Currently, Omnia is much more than that now. But if you think about our range of protection and frequencies, we certainly think that we have the capability to be more than an HF10 therapy deliver in the future. And we have a lot of other new products coming over the next few years as well.

In terms of those new products, this new Omnia upgrade HFX Connect is a pretty big deal. And that is really what's resonating, I think, with our users more than more than a branding issue is the ability to pair with a new capability and a new product in the patient remote for this upgrade.

The trial stimulator is another new product that's in limited release now and that will be in full market release sometime in the coming few months. And certainly, there's a lot more coming behind that. Though we think we're pretty well armed and equipped to manage our expectations for the rest of this year..

Our next question comes from the line of Matt Taylor from UBS..

Wanted to ask one on the sales force. Have you made any changes to the core SCS sales force? And you mentioned 30 to 40 for PDN.

How do you think about the productivity of those folks in the first year or couple of years of the PDN launch relative to the legacy SCS sales force?.

Yes, I think our selling effort continues to just get better and better and more and more effective. And I mean in terms of people, capabilities, training, but also in terms of productivity. It's important to note that we have -- we actually still have -- I believe, we have fewer sales territories in the U.S.

today than we did in the second half of 2018. That number has actually come down over the last 2 years, and the productivity per sales territory has gone up.

We've moved more of what they do to our field technical consultants and now increasingly to this body of HFX Coaches that can be done over the phone and freed them up to grow much larger territories. We've invested heavily in training.

We've made a fair amount of changes in the team over the last couple of years, and I'm really excited with the team that we have in place now. So I think both in terms of numbers and just qualitatively, the output of this team has improved a great deal.

In terms of expectations over time, look, we're not going to -- I mean we're not going to quadruple the business and still have the same number of territories. But we're going to get more productive and more efficient as we scale. So the dollars per territory, I expect to get better and better from here.

And this HFX Connect upgrade, by the way, is one element of how we do that. So I think we're not fully optimized, but I think we all feel really good about our sales organization and what they're able to deliver now..

Let me just have a follow-up. I just wanted to circle back to some of the recent trends. I think you mentioned in response to last question, that you had the best March in terms of trials but still not where you want it to be.

Could you comment on April as that things continue to improve? And where do you want it to be? I guess, what was the goal you were hoping for? And is it just a matter of time and COVID improvement that gets you there?.

Well, on the latter question, yes, absolutely. April was okay, I mentioned in my remarks that recovery over the course of the year, what we expect of the recovery environment. I also said it wouldn't be smooth or linear.

April was an example where in the first half, I think we were all -- and this wasn't just a Nevro issue, by the way, this was a segment issue. We were all a little surprised at how so many of our doctors when they had the first opportunity in the year over spring break to take their families and go somewhere, they did.

And so there were a lot of empty offices in the first half of April, and the second half of April looked far different. But that affects the month, of course. So there's little things like that are hard to predict. This is a really difficult environment to forecast and project that came out and all of Rod's disclaimer language around our guidance.

It's just tough to know exactly what the shape of this recovery is going to look like, and how people are going to respond, how doctors are going to respond. We think it's easier to project over the course of the next nine months than it is over the course of the next six days or three weeks. But hopefully, that color helps.

I think we're going to continue to see trials grow, but it's not going to be quite as easy to predict on a short-term basis as maybe it has in past years..

Our next question comes from the line of Danielle Antalffy from SVB Leerink..

Keith, I know this is probably a little bit of a difficult question to answer, but the question is about what you're seeing in the overall market from a competitive perspective, market share and also market growth perspective in the quarter. We do have now three out of the four major players that have reported leading on a force, of course.

But any color you can give? You've talked about wanting to gain share and feels like you're in a position to gain share in the US. You're under indexed.

So any sense of what happened from a share perspective quarter-to-quarter and maybe year-over-year? And how much share gain might be reflected in your guidance or even qualitatively, anything you can say about that?.

It's a hard question, not because we're unwilling to be transparent on share, but just the share of data itself is not very transparent. We do the best we can, looking at what competitors do say about their SCS segment. Some aren't very granular. They talk about neuromodulation or they talk about pain.

And these are segments depending on the competitor that involve other products and other franchises. Sometimes they will give you, and some of our other analyst information and follow-up calls and those end up in notes.

So we read all those very carefully, and we try to triangulate with some of the -- our own tracking that we do internally, and we use one or two third party sources that are using reimbursement data, among other things, and those are probably the most granular. And while not perfect, we think probably the most reliable.

And it is those sources that we use when we talk about share, but we kind of triangulate the other sources as a sniff test. In the first quarter, we think our -- based on what we've seen today, we think our share continue to grow over Q4 as it's been growing for the last two years. It will move around. So we'll get a market share report for March.

And then a month later, we'll be all the way in May and the March numbers will get adjusted up or down. So they're not perfect, and they do move around a little bit. But in general, if you look out over the last 5 to 9 quarters, it's been a pretty steady March from 14% share or so in the U.S.

to between 20% and 21% share at the end of the first quarter in our view. Now in terms of market growth, you heard our guidance for the rest of this year. Part of that guidance is an assumption that we certainly hope to pick up another point or 2 of market share over the course of '21. We think that some of that's already happened.

In the first quarter, but you can probably sort of back into what that means for overall market growth, in at least in our models this year.

Danielle, does that help a bit?.

No, that was excellent. And I have one quick follow-up, a more specific question as we think about the guidance for the year. And I know you guys don't necessarily break out in the guidance, US versus international. But just wondering, Rod, maybe this is for you. Just to be thinking international has also had a pretty meaningful COVID impact.

I know it's a much lower piece of the business.

But is that -- could that potentially sort of outpace the US market as we've moved through the year from a recovery perspective, just given how meaningfully international has remained impacted or am I wrong about that?.

I think I'd answer that in two ways. One, we're probably modeling a slightly quicker recovery, US versus international as we're looking out over the remainder of the year. But then secondly, what I'd say is our mix between U.S.

and international while it might change a little bit from month-to-month or quarter-to-quarter, I think, in general, we're going to be at a similar sort of mix throughout the remainder of the year as what we've seen over the last couple of quarters..

Your next question comes from the line of Bill Plovanic from Canaccord..

Just first on Omnia Connect HFX as you launch that, do you kind of view that and sell that as a premium product? Should we see any increased contribution there on pricing? Then I have a follow-up..

No, that's part of our Omnia offering. So it's an upgrade that we'll be offering to existing Omnia customers, which I think is a terrific opportunity for customers and their patients and kind of reinforcing of the number of value propositions for them. Keep in mind that these are the things that allow us to sell at a premium today.

Some of those market share numbers I mentioned they're all in dollars. And if you look at it in units, we have even more upside in units. In other words, our market share would be lower in units than in dollars. We do sell at a premium price to our competitors. And these are some of the reasons why.

What it doesn't do is carry with, let's say, a price increase for Omnia or for that matter, a special price just to upgrade the patient to HFX Connect..

And then just -- we really haven't talked about the NSRBP coverage with the three month data out there and any of the discussions you had or if you've seen any impact kind of on the business and better penetration into that segment of the market that we have that three month data out there..

Bill, I think probably not meaningful, no. A lot of discussion is getting a lot of attention. And I think there's a lot of debate about what this means for patient selection it's getting some discussion among the surgical community, et cetera. But I think everybody wants to see more than three months of data, which is what we have right now.

So I think this will be a little bit more -- we've always said that this will be kind of a gradual -- kind of a piece of background driving overall market growth and a shift from failed back surgery syndrome patients a little bit more towards virgin back patients and something that would transition over time and be more of a sector effect in addition to just a Nevro effect, and we still believe that, but I think the first thing we need to do is get out there with six and 12 months data before it begins to move the needle at least very much..

Next question comes from the line of Adam Maeder from Piper Sandler..

Maybe just two for me. First on PDN, we have the ADA meeting coming up. I think that's late June. That's obviously a big meeting in the diabetes community. I think you mentioned 12-months data at that meeting.

How do we think about the format or the airtime that, that data will be given? Is that a late-breaking clinical trial? And then I'm curious if you have other activities or things planned from a Nevro standpoint? Just trying to get a better sense for what the presence will look like at that meeting. And then I have a follow-up..

We'll certainly have a presence at that meeting. As you know, that's a very large meeting focused on a lot of other themes other than PDN, and that probably would rank in the minds of most attendees higher than PDN. It's also a very competitive meeting in terms of getting anything accepted for publication. This is not just a paper poster presentation.

This is a presentation. I don't recall. Adam, I'm sorry, either the day or the format, I think it's somewhere between a 10- and 15-minute podium presentation, the ADA is virtual this year. There are a few meetings that are going physical this summer. ADA is not one of them. So this will be a virtual meeting. We will be -- we are sponsored.

We will be at the meeting virtually, of course. And our assumption is this data set will come before FDA approval. So we still will have some inability to really promote, but we expect this data set to get a lot of attention to get some press as well. And then as soon as we have FDA approval, we'll begin to make a lot more hay with it.

Not sure that helps you as much as you would like, but that's what we know right now about ADA..

And then just on the follow-up, I think there's been one or two questions on product pipeline. And so I'll add third to that. So obviously, the US SCS market has moved to a rechargable category, which makes sense to me.

But the question is, would you consider at some point, developing a primary cell device just as a supplemental option to have in the bag for accounts? I'm just curious to get your reaction to that.

And if you think HF10 could be potentially offered in a primary cell IPG?.

We haven't discussed any plans right now to go to a primary cell form factor. Two things, HF10 is unique in its ability to offer patients not only a great quality of life without having to deal with paresthesia and all the downside that come with that, but also exceptional pain relief. And the ability to optimize it over time.

So there are so many advantages, but there is a cost you pay for all those advantages, and it is power consumption. So we like the ability to recharge the battery. It allows us to do more for the patient.

So that's number one, going to a primary cell device with high-frequency therapy would be not impossible, but difficult in an acceptable form factor for the patient. I would say the other thing is we think there's a little bit of a tide from payers, and primary cell is swimming against it a bit.

Currently, payers are, I think, at least in some cases, beginning to wake up to the fact that they pay the same amount -- they reimburse the same amount for a procedure that puts in a device that by design will have to be replaced in a year, 1.5 years, 2 years.

As they do for the implementation of a device, it will last something greater than 10 years, we're still figuring that out. But we know it's 10 years or more. It's just not quite as good a deal for the payers.

And I think we have seen a bit, and I think we're going to continue to see some pushback and eventually, potentially even some differentiation between rechargeable and primary cell devices. So I'm just not sure generally that we think it's the right care for most patients. It's suitable for some.

But for most patients, we think a rechargeable device is simply better care and better value..

There are no further questions at this time. I would now like to turn the conference back to Mr. Grossman for closing remarks..

Well, thanks, everyone. I know this is a very busy earnings week. So we appreciate you spending the last hour with us. We know you'll let us know if you have questions. Otherwise, we look forward to updating you next quarter..

This concludes today's conference call. Thank you for participating. You may now disconnect..