After inking a deal worth up to $75 million to acquire joint pain devicemaker Vyrsa Technologies late last year, Nevro now appears to be trying to lessen the impact of those costs on its bottom line. The neurostim developer laid out plans this week to lay off a total of 63 workers, comprising about 5% of its workforce.
Most of the affected positions will be cut from “internally facing roles,” rather than those working with customers in the field, according to the company’s announcement. They’ll span Nevro’s corporate, operations and sales and marketing divisions, and the layoffs are expected to be largely complete by the end of the first quarter of this year.
Nevro estimated that the job cuts will add between $14 million and $15 million to its 2024 earnings, though it noted that those gains will be “largely offset” by expected increases in its operating expenses throughout the year.
Those added expenses, in turn, will come almost entirely from acquisition-related costs; Nevro estimated that without the costs of buying Vyrsa, its 2024 operating expenses will stay approximately flat compared to last year’s spending, though the layoffs themselves will add restructuring charges of between $5 million and $6 million to the company’s first-quarter expenses.
“This restructuring supports our strategy and allows us to focus our investments to further position Nevro for long-term growth and profitability,” CEO Kevin Thornal said in this week’s announcement. “This was a difficult decision that impacts some of our team members who have been committed to our mission. We appreciate their dedication and contributions to Nevro.”
He continued, “As we look ahead, we remain focused on bringing innovative products to market, working closely with physicians treating patients living with chronic pain and creating value for all our stakeholders.”
Nevro announced that it had sealed the deal to buy Vyrsa in late November. Under the terms of their agreement, Nevro paid $40 million up front, while also offering up to $35 million more as Vyrsa’s technologies reach certain sales and development milestones.
Though Nevro expressed excitement at the time over the prospect of adding Vyrsa’s devices—which offer a minimally invasive treatment option for chronic sacroiliac joint pain—to its portfolio, some investors had a different reaction.
About a week after the acquisition announcement, Engaged Capital increased its stake in Nevro to 6%, according to an early December SEC filing, as Bloomberg reported that the activist investor was hoping to be able to influence the company to focus on improving profitability, rather than chasing down more acquisitions.
That move came after Nevro slashed its revenue forecasts for the year: After kicking off 2023 with an eye toward growing revenues by between 10% and 12% for the year, by the time it published a third-quarter earnings report in November, it was predicting year-over-year growth of just 3%. According to preliminary full-year results released alongside the layoff news, the company slightly one-upped that final forecast, clocking 5% growth to reach $425 million in total revenue.
Engaged Capital’s intervention also reflects a steep drop-off in the company’s stock price. Over the course of 2023, Nevro saw its shares lose more than half their value—from the year’s high point of about $40 in the winter and early spring, down to a low of less than $15 per share in late October. So far this year, Nevro’s stock has been hovering around the $20 point, ticking slightly up as the preliminary results were announced Tuesday, before dipping back down in the days since.