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Nevro Corp (NYSE:NVRO)
Q3 2019 Earnings Call
Nov 6, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to the Nevro Third Quarter 2019 Earnings Conference Call. [Operator Instructions] After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]

I'd now like to turn the call over to Juliet Cunningham, Vice President of Investor Relations for Nevro.

Juliet Cunningham -- Vice President, Investor Relations

Thank you, and good afternoon. Joining me today are Keith Grossman, Chairman and CEO; Andrew Galligan, Chief Financial Officer. Keith will review the Company's progress during the third quarter and Andrew will provide detailed financial results and guidance later in the call.

Earlier today, Nevro released its financial results for the third quarter, which ended September 30, 2019. A copy of our earnings release is available on the Company's Investor Relations website. This call is being broadcast live over the Internet to all interested parties and an archived copy of this webcast will be available on our IR website.

Before we begin, I'd like to remind you that management will make forward-looking statements on this call within the meaning of Federal Securities laws. All forward-looking statements, including discussion of operating trends and expectations of future financial performance, as well as full-year 2019 guidance, are based upon current estimates and various assumptions. These statements involve risks and uncertainty that could cause actual results or events to differ materially. Accordingly, you should not place undue reliance on these statements. In addition, we will refer to adjusted EBITDA, which is a non-GAAP measure. Please refer to the GAAP to non-GAAP reconciliation table included with our earnings release.

Please also review our filings with the Securities and Exchange Commission, including our Quarterly report on Form 10-Q, which we expect to file today for a full description of risks and uncertainties. Nevro disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward-looking statements because of new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of today, November 6, 2019.

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

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Thanks Juliet, and good afternoon everyone. Today we reported third quarter 2019 revenue of $100.2 million worldwide, reflecting year-over-year growth of 5% and sequential growth of 7%. We were really encouraged by the fact that patient trials and permanent implants in the US, each grew by 18% compared to the prior-year period.

As we've said, looking at the underlying procedural growth, it is particularly important this year, as year-over-year revenue comparisons are complicated by our decision to end certain high-volume ordering patterns in 2019. If we net out the prior-year stocking and current-year destocking impact of this particular decision, real US sales growth would have otherwise been approximately 17%. Our strong quarterly results are largely attributable to the operating initiatives we began at the end of Q1, and while typically these types of initiatives take several quarters to bear fruit, I've been really impressed by the positive response from our team, as well as our customers.

During our last two quarterly calls, I've spoken in detail about our actions to optimize the productivity of our sales force in terms of overall tone in the market, organizational structure, training, increased visibility and accountability, enhanced support of the sales process, pricing consistency and responsiveness, and overall alignment and focus on key priorities, not the least of which has been driving trial procedures and conversion to permanent implants.

We've raised the visibility of these important metrics throughout the sales force and we continue to measure our progress daily. In addition, as we move into 2020, we're actively prioritizing those market development programs that we believe can move the needle for our customers and sales force, and we've become much more focused, I think in our efforts.

We've recently consolidated the entire commercial team, which includes global sales, marketing, therapy optimization and market access under the leadership of Niamh Pellegrini, our new Chief Commercial Officer. Niamh and team are making great strides to unify all our customer-facing initiatives into a single, well-coordinated effort. Greater across functional alignment across the Company is critically important as we plan and execute on our current and on our future business plans.

Yesterday, we announced the commercial launch of Senza Omnia in the US. This launch was the culmination of months of planning and preparation across the organization. As you might recall, we began to launch preparation process months ago by conducting a very large qualitative and quantitative study of our market to form a greater understanding of relevant market segmentation growth opportunities for the market and specific growth in share drivers for Nevro. While I'm not going to provide a lot of details here on this today, I will say this study yielded some valuable information that has helped to form our Omnia launch strategy.

Importantly, the study results validated our hypothesis that customers really want the ability to customize SCS therapies, using not only HF10, but other available frequencies and waveforms to meet their patients' needs over time. We believe the versatility that Omnia provides will both help grow the SCS market and enable Nevro to capture additional share.

During the third quarter, we began the Omnia launch preparation by conducting extensive field training sessions, followed by very limited market evaluation of the product. By all accounts, we received enthusiastic support and positive feedback from the sites involved in that evaluation. The versatility offered by the Omnia system has resonated with this Group and initial adoption rates for the Omnia system in these accounts has been encouraging.

In addition, we were impressed by the number of physicians who participated in the limited market release that showed significant interest in pairing frequencies with HF10, capabilities I'll touch on in just a moment. As I've mentioned previously, I view the Omnia launch as a larger opportunity to reengage with our current customer base, as well as address a broader segment of our market. The Omnia system was developed based on feedback from the clinical community and resulted in a unique product with significant market interest that we are solely able to provide. In designing the Omnia system, our goal was to develop a product that gives physicians the peace of mind that when they implant the product, they'll have the versatility needed to achieve the best possible outcomes for their patients.

The Omnia system is unique because it's the only SCS system that offers HF10 in addition to all other available SCS frequencies. In addition, Omnia is capable of pairing frequencies and waveforms together, including with HF10 which has created a quite a lot of customer interest in early feedback since it enables dual mechanisms of action with HF10 and the other SCS frequencies that no other system can offer due to our exclusive ability to provide HF10.

The Omnia system is comprised of three new components. The first is a new program that will make it easy for physicians to offer a wider array of waveforms across the full SCS frequency spectrum either separately or paired together as I've said. The second component of the system includes the redesign and patient remote that is smaller and more intuitive for patients to use and enhances their experience. The new remote supports greater programming capacity, allowing for the flexibility to expand on the HF10 algorithm by giving physicians the ability to provide additional waveforms either independently or paired

Our unique Nevro cloud capabilities will also play an important role in allowing us to track outcomes by patient and by physician practice as the Omnia system provides this greater flexibility and optionality to our customers. The system comes with an updated and upgradable IPG, which is the third component and unlike non-rechargeable systems, the Omnia system is designed to last over 10 years, no matter what stimulation profile is used.

Finally, the Omnia system has conditional full body MRI approval. In addition to the US approval for Omnia, international approvals are expected in Europe during the first half of 2020, with Australia coming sometime in the latter half of the same year.

Based on our market research, our conviction in the long-term potential of our current market of treating lower back and limb pain has increased. We view this as a business. It will be a growth driver for us in the SCS space with plenty of runway ahead of it for the foreseeable future. We're focused on improving our execution and increasing our market share, and this segment remains our greatest near-term opportunity and our highest priority.

Now having said that, we're also continuing to plan for future growth drivers through our investment in our clinical pipeline. And on that front, our PDN or Painful Diabetic Neuropathy study is fully enrolled now and we look forward to presenting preliminary three months data at NANS in January. Unfortunately, we'll just narrowly miss the ability to present the full cohort of patients, because a couple of patients were delayed in getting implanted after being enrolled.

Our principal investigator, Dr. Erika Petersen will still be presenting patient demographics, as well as three-month pain scores, adverse events and other relevant findings for nearly all of the patients in this large cohort. We expect to present the full three months data with p-values within a few months following NANS.

Based on past experience, our expectation is that payers will likely want to see 12 months published data before improving reimbursement. So this will all imply a full commercial launch with specific claims and meaningful revenue impact in 2022. Now we also believe we could see some increase in utilization before that. Remember that there are some PDN patients already treated for limb pain, since some patient are reimbursed today for this primary diagnosis, and depending on the data release, we'd expect that to continue and possibly even grow as awareness of the data increases.

Regarding our upper limb and neck label indication, based on the strength of our data, we appealed the FDA's assertion that a new RCT or Randomized Controlled Trial be conducted. However, that appeal has not been successful thus far. Remember that upper limb pain, including shoulder pain, is included in our current labeling. The patients are being successfully treated with HF10 on these areas now. While we like to expand our label to explicitly include neck, in order to allow payers to more uniformly reimburse SCS therapy for these patients, we're not yet convinced that the market size justifies the cost of an RCT, if that's required. We're continuing to review our options for this indication and we'll keep you apprised.

On the legal front, in our appeal of the summary judgment ruling in the Boston Scientific litigation, we've been notified that the Federal Circuit, which is the court that will rule on the appeal, will hear the case on December 2. Based on that hearing date, we would expect a decision sometime in the first half of 2020, but the exact timing of that decision is, of course, up to the court.

As a reminder, this appeal relates to the summary judgment ruling issued by the Northern District of California in July of '18 in our offense of legal action against Boston Scientific. And in that ruling, the court invalidated certain claims in our system patents, but otherwise left intact the claims in our method patents covering high frequency SCS, thus ensuring that we can maintain exclusivity in the use of high frequency therapy for SCS.

We realize these cases are complicated and understandably there have been occasional mis-perceptions in areas even recently among the investor and analyst community on the actual facts. We would just remind everyone that as a result of the July 18 ruling, we've been able to maintain exclusivity in high frequency SCS and we're confident in our ability to continue to defend our IP both in this instance and in general. This confidence is further supported by our success and our action against another competitor Stimwave in which we successfully obtained a preliminary injunction regarding the use of high- frequency SCS, using patents unaffected by the July 2018 summary judgment ruling.

Stimwave is currently feeling the preliminary injunction ruling. We expect the Federal Circuit to hear that appeal in the second half of 2020.

Now before I conclude, I'd like to take a moment to thank our Nevro team members who've worked so hard to design, develop and launch the Omnia system. The entire Nevro team has done a really great job and we're looking forward to sharing our progress in the market on future calls with you.

I also want to congratulate Andrew on his future retirement, which we announced today as well. Andrew has been a champion of Nevro for more than nine years and he has also been a great support to me personally since I joined the Company almost eight months ago. Andrew has agreed to stay on Board as we initiate a search for his successor. And I'm confident we'll have a smooth transition sometime in 2020.

Andrew is also agreed to be available in a transitional role to help us deliver in a couple of our key initiatives and ensure the process is seamless.

I really appreciate and value Andrew's leadership in the past and throughout this transition.

Finally, I think it's fair to say today that the organization is -- we're getting some real momentum, a bit sooner and a bit more than I originally expected when I arrived last March. I believe I told you after Q1, that my goal was to make sure that our commercial organization was at least in a position to effectively launch an important new product, meaning Omnia by Q4 to be prepared to drive growth in 2020.

Clearly, we've been able to gain much more traction in the market even well in advance of the Omnia launch. As a result, I can tell you there's a lot of excitement growing here and our potential for 2020 and beyond.

So with that, I will turn the call over to Andrew.

Andrew H. Galligan -- Chief Financiacl Officer

Thank you for the kind words, Keith. It's been an honor to be part of Nevro for nearly a decade. I'm proud of all that we've accomplished together. The Nevro team truly changed patients' lives, beginning with the original launch of Senza and now with Omnia, which we believe delivers real innovation to the SCS market yet again.

Now turning to our third quarter results, I'll begin with worldwide revenues for the three months ended September 30, 2019. Third quarter worldwide revenue was $100.2 million compared to $95.6 million in the prior-year period. This was a 5% increase year-over-year and a 7% sequential improvement. US revenue in the third quarter was $84.2 million, a 6% increase from $79.6 million during the prior-year period.

The year-over-year increase in US revenue was primarily driven by SCS procedure growth, which was partially offset only by the impact of earlier high volume product orders. As an update on that topic, we believe that customer destocking was completed during the third quarter, as we anticipated. International revenue was $16 million, roughly flat compared to the same period last year. So on a constant currency basis, international revenue grew by 5%. Similar to what we saw in Q2, European growth in the low-double digit on a constant currency basis, was partially offset by weakness in Australia.

Gross profit for the third quarter of 2019 was $69.9 million, a 4% increase compared to $67.2 million in the prior-year period. As a percentage of revenue, gross margin was 69.8% in the third quarter of 2019 compared to 70.3% in the year ago period. Total operating expenses for the third quarter of 2019 were $85.9 million, an increase of 12% year-over-year compared to $76.5 million in the prior-year period. The year-over-year increase in operating expenses was primarily driven by US sales and marketing personnel costs. Legal expenses associated with patients litigation were $1.9 million for the third quarter of 2019 compared $3.5 million in the prior-year period.

Net loss from operations for the third quarter of 2019 was $16 million compared to a loss of $9.2 million in the prior-year period. Adjusted EBITDA for the third quarter of 2019 was a loss of $2 million compared to a positive $5.2 million in the prior-year period. Adjusted EBITDA excludes interest, taxes, depreciation and amortization, as well as litigation and non-cash stock-based compensation charges.

For GAAP to non-GAAP adjustments, please refer to the reconciliation tables in our earnings press release.

Cash, cash equivalents and short-term investments totaled $232.8 million as of September 30, 2019. Net cash used during the third quarter of 2019 was just $1.2 million and $31.8 million for the nine months ended September 30, 2019.

Turning now to our full-year 2019 guidance. Considering our third quarter results, we currently expect worldwide 2019 revenue to be in the $383 million to $386 million range and gross margin to be in the high 60%s as a percent of revenue. That concludes our prepared remarks.

Operator, please open the line for questions.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from David Lewis with Morgan Stanley. Your line is open.

David R. Lewis -- Morgan Stanley -- Analyst

Good morning, and congratulations on a nice quarter. Keith, I want to focus on a couple of things here. Maybe one on business outlook and the second on Omnia. First, just, the goal here is to get back to implant growth of 15%, 18% the last couple of quarters. If I kind of adjust the 5% US growth rate for stock and you get pretty close to mid-teens, I'm assuming the remainder is price. But I think Keith, the fourth quarter guide, it doesn't really imply that you get back to sort of that mid-teens level as you sort of anniverse this stocking. So just your sense of when this business in the US can get back to mid-teens growth and any dynamics of the fourth quarter you'd like to -- you'd like to call out here, because it looks a little conservative for our taste. Then one quick follow-up on Omnia.

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Okay, well listen, I think we are -- if you look at our procedure volume now, we are already as we've said, in the mid-to-upper teens from a growth rate standpoint. We've, I think, made clear the spread between reported revenues and unit volume, and why that is the case. With regard to Q4 guidance, which I think is the crux of your question, look, we are a couple of quarters, two-and-a-half quarters into a fairly complex turnaround. We're making a lot of change in the organization. We've just introduced a new product, and I will tell you there is some conservatism built into our guidance for, I think, good reason, but conservatism nonetheless.

I don't think there's anything about where we're headed in the Q -- in Q4 that's markedly different from where we are today from a trending standpoint. But this is still a fairly young turnaround, and I think we'd love to get another quarter or so under our belt before we catch up fully, if that makes sense.

David R. Lewis -- Morgan Stanley -- Analyst

Okay, that's very helpful, Keith. If I think about Omnia, it's fundamentally different system. The difference is obviously programming complexity. How big of a change is that going to be for sales and clinicians? So if we think about full commercial launch, how long do you think [Indecipherable] full commercial launch? How long does it take to train the reps and what has been that early physician feedback as it relates to getting used to the programmer? Thanks so much.

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Yeah. The programmer is, I think, one of the most attractive parts of the system and one that has garnered probably most positive reaction. It's very intuitive. It's very simple. It very clearly lays out what the programming options are between frequencies either separately or paired. And I think it's safe to say the sales organization and the clinical community so far have been extremely excited about the layout and the capabilities of the programmer.

From a training standpoint, I'd say we're probably about halfway done and we will be completely done by the end of this week, at least with the first tranche of the training. Now that will be an ongoing thing for us, but I think that our sales force is trained and competent to deploy the Omnia and all of the programming associated with Omnia. They are, I think, extremely excited about this capability. And I think that excitement is coming mostly from the excitement they're hearing from their customers.

David R. Lewis -- Morgan Stanley -- Analyst

Okay, thanks so much.

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Yes.

Operator

Your next question comes from Danielle Antalffy with SVB Leerink. Your line is open.

Danielle Antalffy -- Leerink Partners -- Analyst

Hey, good afternoon guys. Thanks so much for taking the question. Keith, I was wondering if you could give a little bit more color on what is factored into the guidance from a trial growth rate? And if this is a good leading indicator to how -- not asking you to give 2020 guidance, but how we should be thinking about the potential for 2020 growth in this mid-to-high teens range.

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Yeah. Well, obviously we're coming into fourth quarter. We've just changed our guidance and we've been pretty granular in some of the input we've given you on procedural rate. So I understand the question that, that begs. I think we just aren't in a position to give anything, even kind of tiptoeing into 2020 guidance at this point. I will say, I don't -- look, I think the growth that we've been able to create in procedure volumes and trial, and frankly, it seems pretty impaired now that we've actually captured share for a couple of quarters in a row. I don't think there anything about that, that is unique to the timeframe or temporary. I think it's one that we would expect to continue. In fact, I would say that we're probably still in early to-mid innings of kind of rehabilitating our commercial structure and effectiveness.

So I think, look, we're really bullish about going forward, but it's early and we still have some things to learn here in Q4 and in the initial Omnia launch. But we don't have any expectations that would necessarily change in any dramatic fashion going forward, we're encouraged.

Danielle Antalffy -- Leerink Partners -- Analyst

Okay, that's totally fair. Just one quick follow-up, if I could. As you look at the competitive environment, what you're seeing from a market growth perspective, I mean it sounds like, obviously you guys are growing faster than the market. Do you feel like the market has reached a point of stability and is on its way back toward sustainable growth going forward and benefiting from what seems to be long tailwinds from the opioid crisis etc.? Thanks so much.

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Yeah. Well, stabilization, I think -- yeah, it feels that way. Not everybody has reported, of course. We have one more participant competitor that will report in a week or two. So we'll have a better view then. But certainly it seems like it has stabilized. All of our interesting technology about the business, and frankly, all of the research we've been doing continues to point to a lot of future growth in the business, a lot of unpenetrated and untapped market potential. In the core -- in the core patient population, not in even considering future indications, so look, I think as we get into another round of new product introductions, I suspect we'll see some new product activity coming from our competitors throughout 2020 as well.

Everything we see, it continues to be favorable in terms of long-term growth trends. Now we're going to have to get through that and see it just like everybody else. But it does seem to have stabilized and there are some things that are pretty encouraging, I think as we move into 2020 and beyond.

Danielle Antalffy -- Leerink Partners -- Analyst

Thank you.

Operator

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

Larry Biegelsen -- Wells Fargo -- Analyst

Good afternoon. Thanks for taking the question and congrats Keith on another good quarter.

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Thanks Larry.

Larry Biegelsen -- Wells Fargo -- Analyst

A quick one on Omnia -- one on Omnia, one on kind of pipeline, if you will. So first on Omnia, you talked about, Keith, expecting this to impact your growth. When do you think we could start to see an impact? Could we see it as early as Q4? And I don't think you've talked about the pricing strategy. Is this going to be priced at a premium? And then I had a follow-up.

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Yeah. We didn't model anything, we didn't contemplate any meaningful impact in our guidance from Omnia in Q4. Keep in mind that -- we-- you know the patient treatment algorithm, Larry, as well as anyone. As we introduce the product, patients have to be scheduled for trials. Those trials have to be successful. They then have to be approved and scheduled for permanent implants, so that process takes a little bit of time. There is and there will be some activity, I think that was held waiting for the Omnia. So I think we will see probably some activity related to Omnia. It's hard to really quantify that I think until we get into Q1 and 2020. So we didn't include it in our modeling.

From a pricing standpoint, typically, that's the way we and others in the market have maintained and managed pricing, is by product lifecycle management. There will be a little bit of that from us. Obviously, I'm not going to get into specifics on pricing. I will tell you in the past, we've had some experience with really going after price as a primary endpoint. You've heard me talk about that before. That is not the case here. So, certainly, we think it's a product that justifies a premium. I think in many cases, that's exactly what will happen.

Our priority here is growth and our priority is growth in the market, and growth by market share. And a second priority would be pricing, but definitely in that order. So that's -- I hope that helps a little bit.

Larry Biegelsen -- Wells Fargo -- Analyst

That helps a lot. Thanks. And then for my follow-up, Keith, I wanted to get your updated thoughts on the external devices. There are a couple in the market, one from a competitive standpoint, what are you seeing? And second, I think you've talked about these being complementary to the fully implantable devices. So what's your latest thinking on wanting to have something like this technology internal at Nevro? Thanks for taking the questions.

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Well, look, I don't think our thinking has changed dramatically. I think the external pulse generator concept, external [Indecipherable] one, is an interesting one. I think it has a place. I think there is a -- probably a portion of patients that might not otherwise get therapy, maybe because of intimidation with an implantable form factor in the IPG. So I do think that it has a place. I think it's not a mainstream replacement for a traditional IPG kind of product construct, but I think it could be a market expander.

So I don't know that our view has changed that much. We're interested in watching it and seeing what's happening. In terms of whether or not it has a role in the Nevro product catalog either, I assume you mean either through some sort of business development or internal product development, that's something we are looking at and we will continue to look at along with a number of concepts. We're watching very carefully and we may at some point in the future, choose to participate and if we get to at that point, we'll certainly let people know.

Larry Biegelsen -- Wells Fargo -- Analyst

Thanks for taking the questions.

Operator

Your next question comes from Robbie Marcus with J.P. Morgan. Your line is open. Robbie [Speech Overlap].

Robbie Marcus -- J.P. Morgan -- Analyst

Congrats on a nice quarter.

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Yeah, thanks Rob.

Robbie Marcus -- J.P. Morgan -- Analyst

Hi, congrats on a good quarter. Sorry, I was just jumping between calls tonight. I was hoping you can talk about what you've seen at the doctor level to substantially improve the traction you've had this year? I understand clearly, there is new management. We're having new sales put in place, but what do you think has been the app, the underlying driver for the improvement in growth? Is it just hitting the ground in a more concerted effort, is there a different message out there? What do you think is really driving the uptick here?

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Yeah. Well, I guess I'll start the answer to that question the same way I did, I think in the call last quarter, which is what's more remarkable is not -- it's not the growth we're seeing now. I think what's more remarkable is that we stop seeing it at some point. Depending on where you have our market share and I think most estimates are somewhere between 15% and 19% share kind of in the mid-to-upper teens. If you look at our product, if you look at our data, if you look at the market adoption in the first two-and-a-half -- maybe three years. And then the rather sudden cessation of that growth, that is -- really the question is, why did we stop growing and I've been very clear, but I thought the reasons were mostly in kind of the self-inflicted execution bucket. And that in their fixing that we could reengineer sales growth that frankly should never have stopped and market share captured in my mind, probably should not have stopped anywhere near this early.

So, I think that's what we're seeing, not some unique new phenomenon with customers, but a continuation of what probably should have continued in the first place over the last year-and-a-half or so. So I think what a lot of what you're seeing is a lot of really good and improved blocking and tackling, and I've listed the categories of some of those things in my remarks. So I won't recover them. But I think we have a lot left to do in that category as well. I think that's -- to me anyway that's encouraging.

I think the early response to the changes we've made have been gratifying. But I think we have a lot left to do and I'm encouraged by the likely impact of the things that we'll continue doing. And added to that, of course, will be things like Omnia which aren't even in the execution bucket. So that's maybe kind of a high-level answer to your question, but I hope it gets there.

Operator

Your next question comes from Bob Hopkins...

Robbie Marcus -- J.P. Morgan -- Analyst

And then just to follow-up on that, I was wondering if you could, maybe just -- as you look across the competitive landscape, clearly Omnia is going to have a big impact over the course of 2020. But is there anything competitively that gives you pause or you think that we should be aware of?

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Well, there is always lots of little things that give me pause. I always -- look, I give all of my competitors a huge benefit of the doubt and they are good companies with good products and good people. And so, I assume they'll respond in some ways as we predicted, maybe even a few that we haven't, and they will make a good run of it as they always do. So -- but there is no one single thing I think out there that gives me pause in terms of what we expect from competitors in 2020. I think it would be more of the -- I think it would probably be more of the same.

Operator

Your next question comes from Bob Hopkins with BoA. Your line is open.

Bob Hopkins -- Bank of America Merrill Lynch -- Analyst

Great, thank you. Congrats on a great quarter. Keith, just wanted to ask a couple of quick follow-ups. Just on Omnia, just to be clear, last quarter you said that you might expect a decent-sized impact within the first couple of quarters. I don't think I'm hearing anything differently from you, but I -- just to be clear, is that still the case, no change in the way you're framing the timeline for when you could see this start to contribute relative to what you said last quarter?

D. Keith Grossman -- President, Chief Executive Officer and Chairman

You're talking about Omnia specifically, Bob, right?

Bob Hopkins -- Bank of America Merrill Lynch -- Analyst

Yeah, exactly, yeah.

D. Keith Grossman -- President, Chief Executive Officer and Chairman

No, no change in our thinking.

Bob Hopkins -- Bank of America Merrill Lynch -- Analyst

Okay. And then just wondering if you could give us latest updated thoughts on the diabetic neuropathy opportunity, because I know this -- that you've been kind of looking into. So what are your sort of latest thoughts on sizing the incremental opportunity for Nevro and how should we think about the potential impact next year?

Andrew H. Galligan -- Chief Financiacl Officer

Yeah. Well, we'll -- if it's relevant, we'll talk about that in the framework of our guidance for 2020 [Phonetic]. But as I indicated in my remarks today, I think the impact next year may be relatively small compared to other things we're doing. It also may be hard to discern until we're after the fact, and we try to figure out where these patients actually came from. I would expect some impact next year, but I'm not ready to try to quantify it at this point. In terms of -- I guess in terms of the market size. I don't think we have anything new for you on a quarter-over-quarter basis from last quarter. We will be a little bit more granular in 2020 with our thinking on PDN with regard to market size, segmentation, launch. But a lot of that will be informed by the data that comes out of the trial, which is still being put together.

What we do know and what we've said before, as you'll probably recall, is that there are -- we think in the US alone, about 4 million patients who are being medically managed for severe pain due to diabetic neuropathy and roughly half of those are failing in that treatment. And [Indecipherable] is pretty clear on that point that there are about 50% of patients who are managing the traditional fashion, who have -- who continue to have intractable and severe pain, implying a potential market of about $2 million. I have no doubt that we'll see some, hence that further segmentation that come out of the data from our trial. But right now, that looks to be sort of the pond in which this therapy would be fishing to get outcomes in patients who need it.

Bob Hopkins -- Bank of America Merrill Lynch -- Analyst

Okay, thank you. And just if I could sneak in maybe one more. Was there anything particular in Q3 that drove the uptick relative to the trends that we're seeing in Q2, or was it really just more a continuation of the process that you put in place when you started?

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Yeah, no. I don't think it's -- I mean, if you look at our growth rates and kind of where we exited Q1 and early Q2, what we talked about for the totality of Q2 and where we are now for Q3, it seems to me to be a continuation of the trend and there wasn't anything episodic remarkable in Q3 that was different from Q2, other than just the continuation of some of the refinement that we've been putting in place in the business.

Bob Hopkins -- Bank of America Merrill Lynch -- Analyst

Terrific. Thanks so much.

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Okay. Thanks, Bob.

Operator

Next question comes from Jason Mills with Canaccord Genuity. Your line is open.

Jason Mills -- Canaccord Genuity -- Analyst

Thank you. Thanks for taking the questions. Congrats on another good quarter. Could you -- I know in the quarter -- several quarters before you started, the Company stopped giving numbers of sales reps. But clearly, you highlighted the proficiency with which you've been instituting blocking and tackling measures to improve. Could you talk about the composition of the sales force should things that you've done? Have you changed the size, have you made it smaller, more efficient? Have you made it larger and more broad from a comprehensive coverage standpoint? What do you want to talk about with respect to your sales force and some of the specifics that -- specific measures, you've taken to have such success early?

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Yeah. Well, I think if you look at the size, the total footprint of our field operation in the US, and if you look at the end of Q1, so I started at the end of March and there were a fair number of headcount additions in the sales group, put in place in the second half of '18 and in the first quarter of '19. Since March, since the end of first quarter, we haven't grown the US field operation. I think the -- in fact, I think the total footprint may be just slightly smaller. The makeup of the field operation is slightly different, in terms of maybe a few more technical consultants who are largely responsible for managing patient programming and care after the implant and maybe a slightly smaller footprint of sales territories. That's a trend through things like natural attrition that at the very least that will probably continue. I don't think at this point, we anticipate any meaningful change by the way, in the US field footprint through 2020, as we sit here today.

Jason Mills -- Canaccord Genuity -- Analyst

That's helpful, Keith. Thanks. And then, as it relates to your account base and Omnia coming on board, which should help you penetrate deeper, but also open new accounts, could you talk about your trial and permanent implant growth these last two quarters? And within that construct, what you've seen in terms of say same-store sales versus new store, or new account growth to drive those numbers? And what you would expect to drive in terms of specifically new store sales growth vis-a-vis Omnia and your sales force, becoming more effective going out and hunting in 2020? Would you expect to see a material increase in the number of accounts that are buying Nevro SCS?

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Now, it's actually a really good question, Jason. And I would love to give you a lot of detail around that. It's hard to do, I think from a competitive standpoint. I will tell you that, retrospectively, so looking back over this year so far, I think it is pretty clear that much of the growth, not all of it, but probably a disproportionate amount of growth we're now seeing, is coming from same-store sales, certainly not all of it, and I don't want to break it down. But I think we're doing a much better job of developing our business, developing -- helping our doctors grow their therapeutic practice and developing our market share within those practices, probably more so than new customers.

We have a very specific strategy in mind and a mix in mind, as we launch Omnia. And we have a very specific market segmentation and targeting and marching orders that we've given our sales organization. But I'm going to stop short of describing that in detail for obvious reasons. But we do see the opportunities framed very much as you frame them, as being specific to doctors who are your current customers or future customers, which ones and down to the specific account names, in terms of the roadmaps we've given to our sales organization. So -- but I'm not going to, as you might understand, I'm not going to go into details what those are.

Jason Mills -- Canaccord Genuity -- Analyst

Yeah, I can understand that. Maybe I'll just ask one follow-up and get back in queue. What -- was that level of detail, with respect to -- down to the account name, using your words, do you feel that level of detail was [Indecipherable] in Nevro before you joined, to the extent that you could capitalize on it, or is that relatively new? Thank you.

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Well, I -- look, I think the rigor around that practice and many others around the support and management direction and training of our sales organization, is all relatively new. Some of it was being done directionally and then in bits and pieces and maybe a little bit inconsistently. The vast majority of what we're really doing and I'm emphasizing right now, was probably not being done, maybe in some cases at all, but certainly in other cases, maybe not effectively, uniformly, consistently or in any kind of a focused or prioritized way. So, I think it's safe to say that, that initiative and many others in terms of their impact are probably relatively new.

Jason Mills -- Canaccord Genuity -- Analyst

Thank you. Congrats again.

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Thanks.

Operator

Your next question comes from Matt Taylor from UBS. Your line is open.

Matt Taylor -- UBS -- Analyst

Hi, thanks for taking the question. So I just want to be clear. I know you said before that you thought most of the improvement was really due to fixing a lot of the self-inflicted wounds. But do you think there has been a positive change in the market as well? Are there things out there that you can point to, that would suggest that?

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Well, I think the -- I mean, I can tell you that anecdotally from our interaction with customers and more than anecdotally through our market research, and that's been kind of honestly, an ongoing effort for the last eight months, there is a -- there is an awful lot of enthusiasm about where the market could go, should go and where our customers desire it to go. So I don't think there's any of shortage of belief in the market, belief in its potential or interest in growing it.

As for the actual results, I think you have the same data. Honestly, we do, and it's still not complete for Q3. And so I know that the effort has been how do we reconcile these two things. You've been grappling with it as we have been. We see a little bit of a -- I think it's safe to say, we see a little bit of a stabilization and the beginning of reversal in this quarter, and we'll see if that's true in Q4 and into 2020. But I think it looks and feels that way to our team. And we've got one more competitor to announce. I think maybe that competitor may have a year-over-year comparable challenge that they'll have to deal with. So I suspect we won't start to see a lot of growth -- revenue growth, market impact until Q4, probably into 2020. But it feels good to our team right now.

Matt Taylor -- UBS -- Analyst

Okay and then just on the Omnia launch, I was hoping you could just help frame the shape of the ramp there. You talked about the limited launch and officially announcing it. So is it full systems go or you are going to see more of a ramp-up period into next year and maybe compared to prior launches or something like that to give us a sense for how it can go?

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Yeah. I think it's -- no, I think it's full systems go. I think we've got a little bit of our launch training and planning to complete through the end of this week, but I think it's -- if you look at our direction to our sales organization, our preparation for launch, how we're launching our inventory everything else, it's gone from zero to 100 [Phonetic] here. So where we are in full launch mode between now and the next couple of weeks and certainly thereafter.

Matt Taylor -- UBS -- Analyst

Okay. Thank you.

Operator

Your next question comes from David Turkaly with JMP Securities. Your line is open.

David Turkaly -- JMP Securities -- Analyst

Thanks and congrats. For the folks that have the earlier versions of the product, can they upgrade and are you assuming that some of them will? And secondly, for Omnia, if you were to swap a competitor, can Omnia work with the leads as they currently are?

D. Keith Grossman -- President, Chief Executive Officer and Chairman

So there is no difference in terms of how the leads interface with our own IPG or how they -- or how the new leads -- how the Omnia leads, because the adjusting leads might have -- might have worked with a competitive design. So none of that has changed. In terms of backward compatibility, I think what we've said is that the Omnia product is upgradable and that implies at any future innovation we bring to market that is specific in the areas of frequency or waveform, innovation, other software, firmware features that we would -- that we would make sure that the Omnia is upgradable.

David Turkaly -- JMP Securities -- Analyst

And I guess, just a quick follow-up. Are you assuming that any of that happens, do you think -- will there be customers that you think will come in and maybe docs or their patients, say, hey, I'd like the frequency pairing or the new features that this device has? Thanks.

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Yeah. I mean, we can -- certainly if you're asking whether or not they can use the new programming features to backward programming, say a Senza II patient, then the answer to that is yes, that is -- that is a capability we will have now. So for example, a patient wouldn't have to contemplate being ex-planted and then reimplanted with an Omnia if they felt like -- the doctor felt like they needed that functionality. And that's something that we felt that was important to our customers and a feature that we wanted to make sure was available.

David Turkaly -- JMP Securities -- Analyst

Thank you.

Operator

And your last question comes from Margaret Kaczor with William Blair. Your line is open.

Anna Nussbaum -- William Blair -- Analyst

Hi guys, this is Anna Nussbaum for Margaret. Thanks for taking my question. I just wanted to ask one question on the bottom line. Keith, since you've joined the organization, how do you view incremental opportunities for leverage going forward? I realize that you will be launching Omnia into next year, but could we see incremental leverage on the sales and marketing line, particularly given you won't be hiring new reps next year.

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Yeah. So I think that will be probably more clear -- we will make it more clear in our 2020 guidance. My objective really was to sort of stabilize where we were coming in from a spending standpoint, really understand it, understand the growth sensitivity to some of the investments we were already making and learn the organization, and frankly to get a feel for what growth I thought was really possible in this market and for this Company before we begin to even look at expenses. I think the two things that have really contributed heavily to our operating expenses have been our field sales organization and our clinical trial activity, especially those areas that have really grown. And I think there is every expectation -- I'll stop short of guiding for 2020, but I think we have every expectation that 2020 will be a year in which we demonstrate a lot of leverage. I think certainly it's safe to say more than you've seen from us in the past. So -- but more to come on that.

Anna Nussbaum -- William Blair -- Analyst

Okay, got it. That's helpful. And then it seems like international stabilized a bit in the quarter, and on a constant currency basis, you were up. In event of stabilization and trend, how do you view growth in this segment going forward and is Australia getting better?

D. Keith Grossman -- President, Chief Executive Officer and Chairman

So I think we'll -- growth going forward we'll contemplate, I think during our guidance. I think that there is room for growth. I think actually the European market for as long as we've been in that market and as mature as that market is, I think we continue to do reasonably well there. I think our expectations would always be for improvement. The Australian market, obviously, has been a troubled one for us over this last year. I think we still got work to do there, but I think we believe that's work that's doable. So, as we come into 2020, I think certainly it would be our expectation that our -- our position there in Australia and our growth there would stabilize and we get back to a growth mode. But I think we'll probably be a little bit more direct on that point, when we give guidance for next year.

Anna Nussbaum -- William Blair -- Analyst

Okay, great. appreciate it.

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Yeah.

Operator

These are all the questions we have for today. I turn the call back to Keith Grossman for closing remarks.

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Okay, great. Thank you everyone for joining us. Appreciate your time. I know we're right in the throes of lots of earnings announcements. So I appreciate your joining us for this call. We'll look forward to updating you after the next quarter.

Operator

[Operator Closing Remarks]

Duration: 51 minutes

Call participants:

Juliet Cunningham -- Vice President, Investor Relations

D. Keith Grossman -- President, Chief Executive Officer and Chairman

Andrew H. Galligan -- Chief Financiacl Officer

David R. Lewis -- Morgan Stanley -- Analyst

Danielle Antalffy -- Leerink Partners -- Analyst

Larry Biegelsen -- Wells Fargo -- Analyst

Robbie Marcus -- J.P. Morgan -- Analyst

Bob Hopkins -- Bank of America Merrill Lynch -- Analyst

Jason Mills -- Canaccord Genuity -- Analyst

Matt Taylor -- UBS -- Analyst

David Turkaly -- JMP Securities -- Analyst

Anna Nussbaum -- William Blair -- Analyst

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