Zynex Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
July 27, 2023

There are 7 speakers on the call.

Operator

Good day, ladies and gentlemen, and welcome to the Zynex Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, today's conference call is being recorded. At this time, I'd like to turn the floor over to Quinn Callanan from MZ North America.

Operator

Please go ahead. Thank you, operator, and good afternoon, everyone. Earlier today, Zynex released financial results for the Q2 ending June 30, 2023. A copy of the press release is available on the company's website. Joining me on today's call are Thomas Sandgaard, Chairman, President Chief Executive Officer Dan Morehead, Chief Financial Officer Annette Luszak, Chief Operating Officer And Donald Greig, President of Zynex Monitoring Solutions.

Operator

Before we begin, I'd like to remind you that during this conference call, the company will make projections forward looking statements regarding future events. We encourage you to review the company's past and future filings with the SEC, including without limitation, the company's 2022 Form 10 ks and subsequent Form 10 Qs, which identify The specific factors that may cause actual results or events to differ materially from those described in these forward looking statements. These factors may include, without limitation, statements regarding product development, product potential, the regulatory environment, sales and marketing strategies, capital resources or operating performance. With that, I'll now turn this call over to Thomas.

Speaker 1

Thanks, Quinn, and good afternoon, everyone. Thank you for joining us today for the Q2 2023 earnings call. The Q2 was highlighted by our continued momentum in both our pain management and pain monitoring divisions, leading us through our 9th consecutive quarter of profitability and 5th straight quarter of record high order numbers. We also once again received the highest number of prescriptions in the company's history, beating our previous record. These records led to total revenue for the quarter of $45,000,000 a 22% increase over the same period in 2022, and we produced $0.09 of earnings per diluted share.

Speaker 1

Our sales force continues to increase productivity and Grow the market significantly each quarter, a testament to a great sales force, leadership and great products. Orders increased 51% year over year, and we believe there's considerable runway for us to continue growing orders into the future. In addition to the impressive results from our profitable pain management division, CMS or SCINEX monitoring solutions Continue to move forward in the Q2 in the development of our blood and fluid monitor and our laser based pulse oximeter. We were excited to announce FDA clearance for our 2nd generation blood and fluid volume monitor, a non invasive and wireless technology targeted to improve patient outcomes with better fluid management in hospital settings. We continue to collect additional data in clinical trials and Don Gregg will provide further updates on this product in his prepared remarks.

Speaker 1

We have 3 additional products in the pipeline in our hospital monitoring products division, a laser based pulse oximeter, the MECO, and monitor for early detection of sepsis and also a non invasive laser based monitor of total hemoglobin levels, the HemaX. The monitoring division is pre revenue and we expect to submit an application to the FDA for our laser based pulse oximeter in the Q4 of this year. Overall, we're making great progress in the patient monitoring division, which we believe will have game changing growth potential for the company. Looking ahead, we're making significant progress as a leader in at home And we're proud of making a real dent into the opioid epidemic, but we also continue to execute operationally and strategically, diversifying the business with the ramp up of our hospital monitoring products, which represent a large and growing market opportunity. We expect to see consistent growth and strong financial performance for the second half of twenty twenty three, following the double digit growth We produce year after year.

Speaker 1

We also expect additional catalyst and regulatory milestones in 2023 as we continue execute in our strong pipeline on new products. We look forward to additional updates in the months to come as we build our sales force and execute on our growth objectives to improve the quality of life of patients suffering from debilitating pain, oiliness and brings long term value for our shareholders. With that, I will now turn the call over to Anna Luxok, our Chief Operating Officer, for a more detailed business update on the Pain Management division.

Speaker 2

Thank you, Thomas. Dynex's pain management division had another impressive quarter marked by sequential increase in order volumes over the Q1 and a 22% year over year increase in revenues. The growth that our sales team is delivering is consistent and profitable, and we believe there is significant room for continued expansion to reach full market penetration. We ended the Q2 with approximately 480 sales reps and year to date revenue per rep on an annualized basis was approximately $390,000 an increase of 13 sent over 2022. We added a net of approximately 50 sales reps during the first half of the year, which decreases the growth in revenue per rep in the near term as those new reps ramp up.

Speaker 2

We continue to work to expand our sales force to cover our target of 800 sales territories, but maintaining productivity remains our primary focus. We Our onboarding procedures for new sales reps and have developed improved metrics for evaluating those reps fit. These improved processes have had the effect in increasing our effectiveness in pairing reps to sales territories. There are some lingering challenges related to the labor market, but we believe these to be improving over time and we will remain committed to recruiting and retaining a high quality sales and corporate team. We'll continue to evaluate sales reps closely in order to maintain efficiency while managing our expenses and expect to hit well over 500 sales reps by year end.

Speaker 2

The strength of our billing team and processes continue to be a key differentiator for Xynex as our I look forward to another profitable year for the Pay Management division and updating you all on our market expansions in future calls. I'll now ask Don Gregg, President of Zymex Monitoring Solutions to provide updates related to the Q1 results.

Speaker 3

Thank you, Anna. The patient monitoring market is estimated at about $3,700,000,000 We have products that will be brought to market with truly game changing technologies. Our entrance into monitoring is a long term strategic investment in the company's future and will diversify the customer base, Product set and use cases for the company's solutions. We received FDA approval for our wireless CM-sixteen hundred Fluid Monitor on June 16. Clearance of the CM1600 is an essential Milestone toward our goal of providing perioperative fluid monitoring that will provide clinicians the ability to assess the significance of changes in a patient's fluid volume, their status and balance for timely clinical management.

Speaker 3

We are sponsoring multiple clinical within our blood and fluid monitoring product line. In addition, our non invasive co oximeter line of products, including neko and Hemox continues progressing positively. We expect to submit our meco product to the FDA in Q4 of 2023. We recently received trademarks for both Neko and Hemox and continue to meet important milestones necessary to bring those products to market. Zynex's monitoring division is consistently executing toward introducing Our products in 2024, we will continue sharing important clinical trial results as they are published and look forward to updating the investment community on completing other milestones.

Speaker 3

I will now turn the call over to Dan Moorhead, Chief Financial Officer, for a more in-depth look at financial performance for the quarter.

Speaker 4

Thanks, Don. Please refer to our press release issued earlier today for a summary of our financial results for the Q2 of 2023. After commenting on our financial results, Thomas will review our guidance for the remainder of 2023. Orders grew 51% year over year, The highest number of orders in company history for the 5th consecutive quarter. Net revenue grew 22% to $45,000,000 from $36,800,000 in 2022, primarily related to the growth in device orders.

Speaker 4

Device revenue increased 45% to $13,700,000 compared to $9,500,000 in the Q2 last year. Supplies revenue increased 15% year over year to $31,200,000 from $27,300,000 in the Q2 of last year. Gross profit in the Q2 increased to $35,700,000 or 79% of revenue as compared to $29,500,000 in 20.22. Sales and marketing expenses were $21,600,000 in the Q2 of 2023 compared to $16,300,000 in the same period in 2022, primarily due to increased headcount of our sales force and increased commission and incentive pay related to order growth. G and A expenses were $11,400,000 in the Q2 of 2023 compared to $8,800,000 last year.

Speaker 4

Approximately 15% of the increase is related to investments in our Monitoring Solutions division and related headcount to launch our new products. The remainder is primarily for back office headcount related to the order growth. Tax expense as a percentage was 18 percent effective rate for the quarter due to other income of $1,700,000 which was not taxable. Net income was 3 $4,000,000 and produced $0.09 per diluted share in the Q2 of 2023 compared to $3,300,000 or $0.08 per diluted share in 2022. Adjusted EBITDA for the 3 months ended June 30, 2023 was 4,000,000 as compared to $5,500,000 in the quarter ended last year.

Speaker 4

During the Q2, we completed a $60,000,000 Convertible debt offering, which added approximately $48,000,000 in cash to the balance sheet, net of offering costs and previous debt which was retired. We ended the quarter with $58,700,000 in cash and working capital of $93,500,000 Cash flows from operations for the 6 months of 2023 increased 70% year over year to $2,700,000 In the Q2, we continued our stock buyback and repurchased $6,100,000 of common stock, bringing the total repurchases in the past 15 months to $36,100,000 As we've stated before, We believe this to be a signal to our shareholders that we are incredibly confident in our management teams, the growth opportunities for both divisions and that we remain committed to creating shareholder value in the near and long term.

Operator

With that, I'll turn it

Speaker 4

back over to Thomas.

Speaker 1

Thank you, Dan. We've had a strong start to the Q3 in terms of orders and expect to post Our 6th consecutive record quarter. With the continued growth in orders in the Q3 of We expect total revenue in the range of $49,000,000 to $51,000,000 which is approximately 20% greater than Q3 of 2022 and diluted earnings per share of $0.08 to 0 point And expect total revenues to be in the range of $180,000,000 to $200,000,000 representing growth of approximately 20% over 20.20 And diluted earnings per share between $0.40 $0.50 With that, operator, please open the call up to questions.

Operator

Ladies and gentlemen, at this time, we'll begin the question and answer session. Our first question today comes from Jeffrey Cohen from Ladenburg Thalmann. Please go ahead with your question.

Speaker 5

Hi, Thomas, Dan and Arnold, how are

Speaker 4

you? Good. How are you?

Speaker 5

Good. Just a couple of quick ones. Anna, did You call out the spot number now on our sales reps. I did hear the 500 by Adevir, but what's current?

Speaker 4

We're having a little trouble hearing you, Jeff. I don't know what's going on with the phone, but you talked about sales reps. I think could you repeat that?

Speaker 5

Yes. The current number of sales reps?

Operator

Current number of sales reps? 489.

Speaker 2

489, yes.

Speaker 5

Okay. Perfect. I got it. And I guess, Donald, could you talk about commercial plans for the back half of the year for the 1600 and also talk about The clinical work that you're doing on hemox and the anticipated filing for hemoglobin, please?

Speaker 3

Sure. So on the CM-sixteen hundred that's been cleared by the FDA, we have been focused on Ensuring that we have milestones that specifically prove the clinical Efficacy of the product. And we are engaged in several clinical trials. We have that in multiple hospitals and organizations. We will continue to complete those trials and update you as we go throughout the year.

Speaker 3

There's a focus specifically to ensure that we're doing the proper due diligence with key opinion leaders and physicians, to ensure the, our focus on perioperative fluid balance and management. Let me talk a little bit about NICO. We have Three types of clinical trials that we have to do on NICO. We've completed a hypoxia study, and we have 2 additional Clinical trials that we have to do for FDA submission. The first part is we have to do a calibration of the, Nikko product.

Speaker 3

And then we have to do a verification validation against that calibration And so those are scheduled, they're starting here very shortly, in August and they will continue throughout the 3rd and 4th quarters with a couple of different institutions.

Speaker 5

Okay, got it. Thanks for that. And Dan, real briefly, you talked about the $36,100,000 of share repurchases the last 15 months and In the press release, the is that the 4th one that's open, the 4th 10 lot or is that the 5th one that's open now?

Speaker 4

That includes everything through 6:30. So, those 4 or 5 plans.

Speaker 1

That will be the 4th one. So once we have completed that, if we completed that, that will then add up to 40,000,000 So far, we have $36,100,000

Speaker 5

Okay. So that's the approved $10,000,000 share repurchase program of the company's common stock in the press release. I got it. I think that does it for us. That's a great quarter.

Speaker 5

Thanks for taking our questions.

Speaker 4

Thank you.

Operator

And our next question comes from Yi Chen from H. C. Wainwright. Please go ahead with your

Speaker 6

Hey, this is Chetan on behalf of Yuchan. Congrats on all the excellent progress. I just want to make sure I got it right during your prepared remarks. Did you indicate that by the end of the year, You would like your sales force to be around 500 reps. Is that right?

Speaker 4

Yes, we think we'll be over 500, yes.

Speaker 6

Okay, sounds good. And also during the prepared remarks, you touched upon More key catalysts to be followed during the second half of this year. Could you maybe provide some color on some of the important catalysts that we should know across your portfolio. Thank you.

Speaker 4

So I think the catalyst that Don spoke of, obviously, the submission of the Neko product, Continued work on the CM1600 and related products. And then on the pain management Obviously continuing to add sales reps, which will drive revenue from not only a new rep basis, but continued increases in productivity as well. So Those are the main catalysts we're looking at for the remainder of the year as of right now.

Speaker 6

Excellent. Thank you. And would you be able to comment on the other hospital monitoring products Beyond the pulse oximeter in the Q4, I believe you have 2 others in the pipeline, if I'm not wrong. So Are you able to comment on them now?

Speaker 3

Sure. On our Neko line, which is our non invasive co oximeter. The Hemox product will provide total hemoglobin and specifically that's important in several different clinical settings, hospitals, clinics and several others because Particularly, for example, when you provide, when you give blood, they have a finger stick that they would like to not be an invasive Procedure, they'd like to be non invasive. Hemox will provide that with a non invasive reading. In addition to that, also on that technology between our Centimeters fluid monitoring line as well as the Nikko line of products, when you think about combining those, you have an opportunity to go after sepsis.

Speaker 3

So we have been working on sepsis monitoring to reinvent how you will detect sepsis early And often and accurately.

Speaker 6

Got you. Thank you so much and congrats again.

Speaker 3

Thank you.

Operator

And ladies and gentlemen, at this we do have a follow-up from Jeffrey Cohen from Ladenburg Thalmann. Jeffrey, please go ahead with your follow-up.

Speaker 5

Hey, thanks again for taking the question. So 2 more from us. Firstly, anything on physical therapy for Q2 or back half of Q3 worth mentioning?

Speaker 4

Say that one more time, Jeff. Sorry, I don't know what the issue is.

Speaker 5

It must be my phone. Any, PT news? Any physical therapy updates?

Speaker 1

Are you asking if there's any updates regarding physical therapy or?

Speaker 5

Yes.

Speaker 1

We have one product that's typically described in that area. We are not focusing on that right now. That would be the Neuromove device for stroke rehab, A device that we have developed ourselves, but that's a very minimal amount of our orders. So In the physical therapy space, we're not really that active right now.

Speaker 5

Okay, got it. And then lastly, I guess, Dan, any comment, it sounded like you called out 15% of G and A for ZMS. Would you expect that to be a consistent percentage for the back half of the year?

Speaker 4

Yes. No, it's it should be similar to that. We're on our normal track. I think we talked about going from about $8,000,000 last year to about $12,000,000 this year $12,000,000 to $13,000,000 So, it's we're on track with that for sure.

Speaker 5

Okay, perfect. That does it for us. Thanks again.

Operator

And ladies and gentlemen, at this time and showing no additional questions, I'd like to turn the floor back over to the management team for any closing remarks.

Speaker 1

Yes, thank you for joining us today. We are pleased with our performance this quarter and the consistent growth our team is delivering. We look forward to leveraging that momentum throughout the rest of the year and speaking to you at upcoming investor events. We appreciate your time and interest in SYNNEX. Have a great day.

Operator

And ladies and gentlemen, with that, we'll be concluding today's conference

Powered by Quartr
Earnings Conference Call
Zynex Q2 2023
00:00 / 00:00