Good afternoon, ladies and gentlemen. Welcome to today's CVRx Q2 2025 Earnings Call. [Operator Instructions] Also, today's call is being recorded. [Operator Instructions] Now at this time, I'd like to turn things over to Mr. Mike Vallie with ICR. Mr. Vallie, please go ahead, sir.

Good afternoon. Thank you for joining us today for CVRx's Second Quarter 2025 Earnings Conference Call. Joining me on today's call are the company's President and Chief Executive Officer, Kevin Hykes; and Chief Financial Officer, Jared Oasheim. The remarks today will contain forward-looking statements, including statements about financial guidance. These statements are based on plans and expectations as of today, which may change over time. In addition, actual results could differ materially due to a number of risks and uncertainties, including those identified in the earnings release issued prior to this call and in the company's SEC filings. I would now like to turn the call over to CVRx's President and Chief Executive Officer, Kevin Hykes.

Thanks, Mike. Good afternoon, and thank you for joining us for our second quarter earnings call. We delivered total revenue of $13.6 million in the second quarter, a 15% increase over the same quarter last year. U.S. Heart Failure revenue was $12.2 million. We ended the quarter with 240 active implanting centers in the United States, up from 227 at the end of Q1 2025 and 189 at the end of Q2 2024. We also expanded to 47 U.S. sales territories, up from 45 at the end of Q1. Our sales force transformation is proceeding according to plan. We are largely through the necessary transitions in the sales team that we initiated in Q4 and turnover is returning to normal. Importantly, we have aggressively hired since January to fill the open roles with strong talent. While we are enthusiastic about the team in the field, they are still early in their tenure with more than 35% of territory managers hired since January 1. In addition, over half of our area sales directors have joined in the last 12 months, and all of them bring a significant level of management experience to this team. Overall, the quality of the talent that we've attracted has been exceptional, and these new reps and sales leaders are developing their expertise in our technology and clinical data and becoming increasingly comfortable in their regions and territories. As we near the end of the sales force transformation and as turnover returns to normal, we are shifting our focus from hiring to further optimizing our onboarding and training as we seek to increase the productivity of these new territory managers. We expect territory expansion to resume as territory managers hired early this year become increasingly productive. In parallel, we're seeing encouraging results from our refined approach to…

Thank you, Kevin. Let me walk through our second quarter financial results. Revenue was $13.6 million for the 3 months ended June 30, 2025, an increase of $1.8 million or 15% over the prior year period. Revenue generated in the U.S. was $12.2 million for the 3 months ended June 30, 2025, an increase of $1.6 million or 15% over the prior year period. Heart failure revenue in the U.S. totaled $12.1 million and $10.5 million for the 3 months ended June 30, 2025 and 2024, respectively. Heart failure revenue units in the U.S. totaled 387 and 339 for the 3 months ended June 30, 2025 and 2024, respectively. The increases were primarily driven by continued growth in the U.S. heart failure business as a result of the expansion into new sales territories, new accounts and increased physician and patient awareness of Barostim. As of June 30, 2025, the company had a total of 240 active implanting centers in the U.S. as compared to 227 as of March 31, 2025. Active implanting centers are customers that have completed at least 1 commercial heart failure implant in the last 12 months. The number of sales territories in the U.S. increased by 2 to a total of 47 during the 3 months ended June 30, 2025. Revenue generated in Europe was $1.3 million for the 3 months ended June 30, 2025, an increase of $0.2 million or 19% over the prior year period. Total revenue units in Europe decreased to 61 for the 3 months ended June 30, 2025, compared to 63 in the prior year period. The number of sales territories in Europe remained consistent at 5 for the 3 months ended June 30, 2025. Gross profit was $11.5 million for the 3 months ended June 30, 2025, an increase of…

Thank you, Jared. Looking ahead, I'm confident about the direction of our business and the momentum that we are building. Our sales force stabilization efforts are paying off. Our strategic focus on sustainable Barostim programs is gaining traction and we're making solid progress on clinical evidence, therapy awareness and reimbursement. With strong fundamentals and a remarkably predictable and effective therapy, we're steadily moving towards making Barostim a standard of care for the treatment of heart failure. Before we open the line for questions, I'm excited to announce that Brent Binkowski was appointed to our newly created Chief Operating Officer role and will be joining CVRx in August. He will be responsible for research and development, operations, regulatory affairs and quality of CVRx. Brent brings over 20 years of leadership experience in medical devices with expertise in implantable devices covering interventional cardiology, radiology and urology. His experience building world-class teams and scaling businesses will be of great value to the company. Now I'd like to open the line for questions. Operator?

[Operator Instructions] We go first this afternoon to John Young of Canaccord.

I just want to go over the narrowed guidance maybe. And just -- maybe you could walk us through how the narrowed guidance contemplates the ramp of 35% of the new territory managers that are new that you highlighted in the call commentary.

Yes, I appreciate the question, John. Yes. I mean with narrowing the top end to be $55 million to $57 million, it really only moves the midpoint by about $500,000. It's not too dissimilar to our approach in prior years, where we start to bring that range of $3 million down to a range of $2 million as we go from Q2 to Q3. And it really just does come back to how quickly we're getting this new team up to speed and getting them productive. We continue to believe we have the right team and strategy in place and now it's simply focusing on getting those reps up that productivity curve as quickly as possible.

And Jared, maybe as a follow-up to there for that one. The commentary you guys gave on Tier 3 and 4 accounts where you have this clinical champion and an admin support as well. How do you guys measure that? I understand Tier 1 and Tier 2, you guys have a lot of data for targeting and all that too. But for these Tier 3 and 4 accounts that have this characteristic, does the rep need to go in and find them out for themselves? And could this further slow the commercial process?

Yes. I appreciate that question, too, John. No, it is not something that we put on to the reps themselves. It's all data that we're tracking internally and providing to the reps as part of that playbook that we've talked about. So since Kevin joined, we talked about implementing these go-to-market playbooks that we're giving to these reps. And in there, it includes all the data on heart failure diagnosis, number of CardioMEMS procedures done, MitraClips, WATCHMAN, all of that data to help rank the accounts between Tiers 1, 2, 3 and 4. And it's based on that data that we're giving them a guide as to which accounts we want them to open but it also helps them understand which accounts may be more receptive to our therapy than others.

We go next now to Robbie Marcus of JPMorgan.

This is actually Rohin on for Robbie. I just want to follow up on the prior question regarding the sales force reorg and kind of the progress that you've made in the second quarter and what's contemplated for the balance of the year, obviously, bringing the midpoint down off of a conservative range. Just want to get a sense first like how you're thinking about the ramp and the cadence and what sort of assumptions you're making around improvement?

Yes. I can maybe touch on the guidance piece, and then maybe Kevin can talk a little bit more about the sales force updates, Rohin. So within the guidance, we're still assuming that we're going to be able to activate more territories on a quarterly basis. So in Q2, we activated 2 new territories going from 45 to 47. We are anticipating with the reps that we hired in the first half of the year that we can start to get back on track to adding 3 territories per quarter. And then also within there starting to see productivity within our accounts start to ramp up as we go into Q3 and Q4. A large part of that guidance and the range that exists, the top end assumes that we're going to see more of those reps get productive and maybe at a higher level. And the lower end assumes that maybe you see a couple of those reps get productive and maybe at not quite the same level. But it really just comes down to all of these new people that we brought on board, how quickly we can get them up to speed and productive in the back half of the year.

Yes. Rohin, it's Kevin here. I'll take the second part of the question. So I would say the terminations have returned to normal through the course of the second quarter. The hiring continues as that obviously is -- it follows the terminations, but that is also close to being complete as well. So we would expect our rate of turnover to be very close to sort of typical industry averages, 10% to 20% on an annual basis as we go through the back half of the year. So we're pleased, again, thrilled with the talent we've been able to attract that has continued unabated. And we're starting to see the first of those hires back in early 2025, begin to contribute to the revenue line. And so we'll be watching closely as we get into the back half of the year. Obviously, there's a lot of time and energy spent onboarding that new talent and getting them as productive as possible, as quickly as possible.

Got it. And I had a follow-up on gross margin. Based on our estimates, you came a little bit ahead in the quarter at 84.3%. Just want to understand why you chose to keep the guidance consistent? Is there anything that implies kind of a decline from here in the back half? Just things to keep in mind as we model that.

Yes, not much of a story here, Rohin. So I think we've been consistently in that 83% to 84% range. I think we beat in the second quarter by a little bit, probably do more to price than to cost. But as we continue to produce more and more units, we could see that cost number come down as well. I don't think we moved to the number enough in the second quarter to adjust the full year guide of the 83% to 84%. But still feeling pretty good about being able to continue similar numbers in Q3 and Q4.

We go next now to Matthew O'Brien of Piper Sandler.

This is Samantha on for Matt. I guess, yes, we want to continue the conversation on the sales force and kind of the adjustments and how they're trending. I know you mentioned that the first hires begin to contribute to the revenue line. Was that more of a Q2? Or is that more recently in July? And how quickly do you anticipate the rest can get up to productivity as well?

Yes, sure. Thank you. I appreciate the question. So I think we've pretty consistently said it takes between 6 and 12 months for a territory manager to get up to speed. Those that have a background in cardiovascular medicine or heart failure do so more quickly. Those that have a background in program building, new therapy introductions, get up to speed more quickly. And those that inherit a territory that has a quality mix of accounts are able, again, to contribute more quickly. Conversely, those that have none of those 3 things are going to take closer to 12 months to begin to contribute. So I think we're starting to see the first of those well-positioned reps with highly relevant backgrounds, start to contribute here in the tail end of the second quarter. We'd expect them to sort of continue in the back half of the year as we ramp up as some of the other new hires who have less experience or who have more work to do in a territory that doesn't have the same quality of accounts, it will take them longer, as you can imagine.

And we had just one more on operating expenses, specifically SG&A. I think that came in just a little bit higher than we were modeling for the quarter. How should we think about that line item for the rest of the year as we're modeling out there?

Yes. Thanks for the question, Sam. So that came in a bit higher than what we saw in the second quarter, but Q2 is typically where we see the highest level of SG&A just based on onetime events, whether it's marketing events that are going on during that time period or other spend. So we would anticipate that number to be coming down and is reflected as such in our guidance for the full year.

We'll go next now to Brandon Vazquez of William Blair.

On the -- one of the sales reps first, as you look at that cohort specifically that are maybe less than 12 months on job, I know you guys have talked about this a little bit, but maybe spend a minute just talking about how that cohort's productivity has ramped recently. Is it in line with your expectations? Is there anything either surprising to the positive or the negative as those new reps are reengaging in some of the territories that maybe had a little bit of noise through this period.

Sure, Brandon. Thanks. I'll take that. I would say it is progressing as difficult as it is to predict specifically how fast a given rep will get up to speed in a given territory. I think we're pleased with what we're seeing. We would not have expected much contribution for any of those reps hired since January at this point, so we're pleased to see some early sort of green shoots from some of them. But I think that's really the work in the back half of the year is getting them as many of them up to speed as we can regardless of their backgrounds or the territories that they're sitting in. We've added resources and focus to our sales training effort and broadened our curriculum. So lots of time shifting from hiring really to now training and onboarding and accelerating productivity.

Okay. And then maybe on the reimbursement side, a lot of good updates in between now and last quarter with the proposed rates from CMS. But maybe you guys can spend a minute just talking about going deeper into what denial rates are like, what part of the process can be difficult now with a temporary code. And then what part of it specifically you think can get a lot easier now in January when you get a Category I code. You've seen this before in the medical device world. So just curious how you guys are viewing it today and how it might improve starting in January.

Yes. Thank you. So a couple of different ways to answer that. I think today, as a category 3 therapy, we see 100% denials as would anyone with the Category III code. We have also mentioned though, we have done a very effective job in appealing those denials, and we believe we're doing better than average across the various payer segments in securing ultimately approval for our therapy. So we're happy with where we are. On January 1, the Category III code goes away and becomes a Category I code. And there's 2 important elements to that. The first is that the payer's ability to automatically deny coverage because of an experimental status, the Category III status. That goes away, and they're forced to use a human being to review each and every prior authorization and deny it on the basis of medical necessity as evaluated by a human. And so that makes it much more obviously, complex and expensive for them to do and requires that level of intervention. So as you've seen with other therapies, perhaps, we believe that while there will certainly still be prior authorizations required, the rate of approvals, the speed of the approvals and the predictability of approval will improve, we think, significantly as of the first of the year. The second piece is that the formalization of physician payment, which up until now has been negotiated on a payer-by-payer basis. That's another significant step forward. And we're pleased with where we landed 11 work RVUs is exactly where we thought we would land given the SBS survey. So we're pleased that physicians who are -- for the subset of physicians who are paid for those procedures based on RVUs they now have consistent, predictable payment, which is not something we could always say up until now, but you can't often say with the Category III. So two really important steps forward in January.

We'll go next now to Frank Takkinen of Lake Street Capital Markets.

Great. I'll also start in the reimbursement world. Related to the OPPS, I assume you will put forth comments related to a Level 6 code, but maybe take us a little bit deeper into what that may consist of? And if there's anything in addition you may be asking for in the comment period?

Sure. Thanks, Frank. I'll take that. So we were very pleased for the first time to be starting this process in the new tech APC 1580, we think that's a recognition by CMS that we do not belong in Level 5. So we were pleased to see that. We were also pleased that CMS, again, for the second year solicited comments on the value of a Level 6 code. And so we think those are both positive signals. We're going to run the exact same playbook this year that we have in the past, even if we're starting in a better place, we're soliciting comments from physicians, administrators, stakeholders on Capitol Hill in support of this Level 6 code. The same 5 companies are fighting for it this year that fought for it last year. And so while there's some slim chance that they would, in fact, grant that code this year, we're very comfortable staying in 1580, and there's no reason we can't stay in that 150 new tech for a number of years going forward.

Got it. That's helpful. And then maybe one on kind of Tier 1/2 versus Tier 3/4, I assume you're not going to go in too much detail on composition of additions. But any kind of broad strokes you can provide, like the majority were Tier 1/2 or majority were Tier 3/4. And then any kind of characteristics of expected launch trajectory of those 2 buckets, which may scale quicker?

Yes. Frank, like you said, I'm not going to go into the weeds on exact percentages, but what we can say is our go-to-market strategy and our targeting approach is working. We are seeing a higher percentage of the account adds in Q2 in that Tier 1 and Tier 2 bucket as compared to what we saw in Q1. So I think the team is listening, they're understanding the whys behind it. And part of that is driven by the utilization we're seeing in those accounts because we are seeing higher utilization, more implants, more revenue in Tier 1 and Tier 2 accounts than the others. So I think their understanding that it's not just something that we're kind of making up as we go, but that it actually delivers real results. And I think as a result of that, we're seeing more of those accounts get added each quarter.

We'll go next now to Chase Knickerbocker of Craig-Hallum.

Kevin, I just want to start on the Level 6 code as well. So you had said kind of a slim chance they do it this year. Can you kind of speak to kind of the feedback that you've heard? You just kind of take that commentary from the OPPS and that's kind of what underlies that kind of slim chance assumption? And then maybe just longer term, if you do stay in the new tech APC, do you get a sense of what kind of CMS is thinking there? Because typically, that is a temporary code, right? And is it something where you think you can kind of stay in that for a number of years, like you said? Or do you think, ultimately, they still will kind of do the Level 6 code, just your overall thoughts there on the OPPS?

Sure. So let me -- I guess, -- on the first question, we've consulted a fair number of experts, as you can imagine. There are instances we understand in the past where CMS has made a change over the course of the comment period. We're an example of that last year when they moved us from the proposed Level 5 back into 1580. So it happens, but we're not certain that this will be the year for that. We'd like to think so, and we're not going to give up. Conversely, there is very few, there was not a single instance our experts could find of a company going the other way. So we think the risk of being demoted back to Level 5 is quite low or would be unexpected. So that's the best information we've got. In terms of what CMS is thinking, we also know there's no statutory limit to how long you can stay in 1580, it's probably driven by how much data they think they need to gather in that specialized data collection mode before they can assign a different category or create a new one as we're requesting. So hard to tell where their heads are at, but not surprising. And again, we'd be just fine staying in 1580 for another few years as we continue to build procedure volume. And as our data again, gets better and better, and that's the justification for the Level 6.

Got it. And then just on center ads. Could you share the gross number? I guess kind of what I'm trying to get at is kind of you outperformed a little bit on some of the expectations you set last quarter as far as center ads. Is that kind of fewer accounts that sunsetted, fewer accounts in which you saw attrition? Or was that just an increase in kind of gross adds that you saw in Q2?

Yes, Chase, I can take that one. We're not going to get into the weeds on the gross adds and churn, but I can say it's a combination of both, right? As we said, we expect to add a high single-digit to low double-digit number of accounts on a quarterly basis. It's assuming that we are going to continue to sunset some of those dabbler accounts while bringing on some of these accounts that we think have higher potential in the long run. So I think as we look at the Q2 results, it's a little bit over performance on ads and maybe not sunsetting as many as we originally thought going into the quarter. But it's going to continue to be choppy as we go quarter-to- quarter. So just because we saw plus 13% in Q2, we may not see that in Q3.

Just high single digits is still the right way to think about it kind of from here, Jared.

Yes, yes, in that range of 8 to 12, 8 to 13, pretty reasonable.

We'll go next to now to Ross Osborn of Cantor Fitzgerald.

So starting off, and if I heard your prepared remarks correctly, it sounds like you're seeing some traction with lower tiered centers acting as a referral center. Would you spend some more time here walking through the dynamic and what you can do from an awareness standpoint to more patients to the funnel and implantation?

Sure. Thanks, Ross. This is Kevin. I'll take that one. So yes, what we were trying to point out -- what we've learned a lot over the last year as we've implemented this go-to-market strategy, which obviously starts with targeting. And so what we're finding, these are imperfect tools at best. And what we know is that there are actually some Tier 3s and 4s who may not have had the chance to use CardioMEMS in the past because of payer issues or potentially reimbursement or other kind of local factors. And we don't want to necessarily walk away from them without understanding the facts on the ground. So in some cases, we're finding there are really good centers with really good heart failure volume that have a clinical champion and/ or an administrative champion. And in those cases, it's worth considering opening a program there. And so I guess what we're saying is it's not as black and white as we perhaps thought initially, we're still leaning heavily towards the 1s and 2s, but there are some Level 3s and 4s that are, in fact, satellites, to your question of larger flagship accounts. And what we find in some cases is the flagship account says, "Hey, this is a very bureaucratic center, why don't you go to our sister institution, get the program started, demonstrate success, and you will make it a lot easier for us to bring you then into the flagship." And so those satellite centers in our scheme show up as 3s and 4s, but again, may have a lot of value and maybe a faster way to get into a great, big university center, for example, then kind of a full frontal approach. So that's leading to some of these insights. And again, focusing on the 1s and 2s, but understanding if there's pragmatic ways to get to the 1s and 2s through the 3s and 4s, it's worth it.

Understood. Makes sense. And then looking to next year, when you have a more tenured sales force and improved reimbursement environment, what is any headwinds or challenges do you need to overcome that wouldn't allow us to see a material inflection adoption in your top line?

Sure. Thank you. Yes. So I would say obviously, the reimbursement friction we think will be reduced materially. But we're seeing great coverage now across the various MACs. We think we'll get much stronger coverage from the commercial side and the Medicare Advantage team folks. The headwinds associated with changing the way medicine is practiced, will not change. Again, that's kind of a long-term war of attrition. The 3 barriers we've identified consistently are reimbursement, awareness and evidence. Reimbursement is going to get better, certainly. Awareness is getting better, as we mentioned, we did over 100 programs focused on the affiliated craft providers. We think that's a key leverage point for heart failure. And number three, the evidence that we'll continue to generate, both in terms of smaller investigator-initiated studies, multicenter studies, perhaps a randomized controlled trial, that's another critical barrier. So there will always be friction, but we think the reimbursement piece will help us significantly. And as we grow awareness, we'll bring that barrier down as well, in addition to the evidence work we're doing already. So lots of work to do. But again, it's a war of attrition as you wear down these various adoption barriers that you find in the market.

Thank you. And ladies and gentlemen, this does conclude our question-and-answer session for today. I would now like to turn the call back over to Kevin Hykes for any closing comments.

Thank you, operator, and thanks again to everyone for joining us for our second quarter earnings call. We appreciate your ongoing support and look forward to updating you on our progress on our next call. Thanks.

Thank you, Mr. Hykes. Thank you, Mr. Oasheim. Again, ladies and gentlemen, that will conclude the CVRx Q2 2025 earnings call. Again, thanks so much for joining us, everyone. We wish you all a great rest of your day. Goodbye.