Q1 2023 Zynex Inc Earnings Call
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One that rock'n'roll, good afternoon, ladies and gentlemen, and welcome to the XI next first quarter 2023 earnings conference call.
At this time, all participants are in listen only mode.
I'd answer session will follow the formal presentation.
As a reminder, this conference is being recorded I would now like to turn the conference over to Luisa Smith from the Gilmartin group.
Uh huh.
Thank you, Jason and good afternoon, everyone earlier today <unk> released financial results for the first quarter ending March 31st 2023, a copy of the press release is available on the company's website.
With me on today's call are Thomas Vanguard, Chairman, President and Chief Executive Officer.
Dan Moorhead, Chief Financial Officer, and I'll lose thought Chief operating officer, and Donald Greg President My next monitoring solution.
Before we begin I'd like to remind you that during this conference call. The company will make projections and 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-K, 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 the call over to Thomas.
Yeah.
Thank you Luisa and good afternoon, everyone.
Joining us today for the first quarter of 2023 earnings call.
We had another impressive period of growth and we've now been profitable in 26 of the last 27 quarters and we once again hit the highest number of prescriptions in the company's history, beating the records. We previously set in the second.
And fourth quarters of 2022.
Additionally, we were able to increase order numbers over Q4, despite the seasonal reset and deductibles that typical limits growth.
Orders in the beginning of the year.
Total revenue for the quarter was $42 2 million.
At 36% increase over the same period in 2022, and we produced four cents per <unk>.
And earnings per.
Sure.
Our sales force is maintaining the exceptional trends and productivity and expanding our market share significantly each quarter, a testament to both the.
If efficiency and our products efficacy.
Orders increased 61% year over year, and we believe that there is considerable runway for us to continue growing orders into the future.
In the first quarter, we completed the latest in a series of stock buybacks and repurchased $3 $4 million worth of common stock, bringing the total of repurchase in the last year to $30 million.
Yeah.
Yes.
I stated before I believe.
This should be a signal to our shareholders said, we're incredibly confident you know management teams the gross opportunities in both divisions and that we remain committed to creating shareholder value in the near and long term.
In addition to the impressive results from our pain management Division.
<unk> monitoring solutions Division is making excellent strides in the development of our blood and fluid monitor and old laser based pulse oximeter.
Greg will provide further updates in his prepared remarks, and but I'm pleased with the steps the growing team is taking.
To bring those game changing products to market.
Monitoring solutions has grown significantly over the past year and after having acquired Kestrel lapse in December 2021, we've been working diligently.
Clinical data collections and reaching regulatory milestones.
<unk> continues to deliver consistent results and even with the Mezz investments in the monitoring division our pain management business, that's been able to maintain profitability at the bottom line for the combined entity.
Our ability to execute operationally and strategically while diversifying the business into compelling market opportunities is evidenced by the double digit growth we've seen year after year.
I look forward to announcing future future catalysts and growth opportunities throughout 2023, and I'm thrilled with our performance to date.
With that I will now turn the call over to Anna <unk>, Our Chief operating officer for a more detailed business update on the pain management Division.
Thank you Thomas Darknesses pain management Division had another impressive quarter marked by a sequential increase and what are your values over the fourth quarter and a 36% year over year increase in revenue.
The growth that our sales team is delivering its consistent and profitable and we believe there's significant room for continued expansion to reach full market penetration. We ended the first quarter with approximately 460 sales reps and revenue per rep.
Annualized basis was approximately 380000, an increase of 24% over the first quarter of 2022.
Sales Rep productivity remains a primary area of emphasis in our sales organization, our new hires are incorporating into the organization more quickly and the sales management structure. We've implemented is optimizing performance across the board.
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 teams.
We will continue to expand into additional sales territories and expect to have approximately 525 to 550 sales reps by year end to capitalize the growing orders.
Our collections remain strong throughout the quarter and we'd like to reiterate that we have and we will continue to work with all payer types and insurance providers.
Leave this to be a key differentiator between <unk> and some other competitors in the market as practitioners are able to prescribe our product to all patients in pain not just the small cohort under specific insurance plan.
We process all orders that we receive and work directly with patients and their insurers to process coverage in each case.
I look forward to another profitable year for the pain management Division and updating you all on our market expansion in future calls.
I'll now ask Don Grad, President XI next monitoring solutions to provide updates related to that business Division.
Thank you Anna.
My next monitoring solutions is developing a strategic product portfolio and pipeline to address the nearly $4 billion market in the patient monitoring space. Our initial products will cover hemodynamic monitoring subsurface monitoring and laser based pulse oximetry.
Thomas mentioned previously previously our team has grown significantly in the last year and we're invested substantially in the division as we make progress towards clinical and regulatory milestones of the two product lines. We are actively developing the see them 1600 blood and fluid monitor is going to be the first in our go to market strategy as is.
The furthest along in its regulatory pathway. The hemodynamic monitor is a noninvasive wireless blood and fluid monitor to be used in a hospital setting the previous generation device to see them 1500 has already received clearance from the FDA and we've added wireless capability to the <unk> <unk> hundred.
The <unk> hundred was submitted to the FDA and we are anticipating further details from the agency as we are currently engaged in an interactive review with them. As a reminder, <unk> is not contemplating any revenue from the monitoring division and its guidance for 2023. Additionally.
Additionally in development are the Nico or also known as the noninvasive co oximeter and the he marks pulse oximeter, both noninvasive laser technologies, we believe that this innovative technology will replace the less accurate OLED based legacy devices that are currently used today, we are on <unk>.
Frac for an eco submission to the FDA in Q4, 2023 and actively running clinical trials. In addition to engineering and development advancements within the Division. We're also involved in planning the rolling polishing numerous clinical trials too.
To include hundreds of subjects across the country we've.
We've seen encouraging results on product efficacy, thus far and remain confident with the market opportunity for the disruptive technology as.
As we published further data we will advise the investment community via press releases and on future quarterly calls I am excited to be a part of what should be a notable inflection point in the monitoring division over the next 18 to 24 months and look forward to leveraging our innovative technology in the market.
I'll now turn the call over to Dan Moorhead, Chief Financial Officer for a more in depth look at the financial performance for the quarter.
Yes.
Thanks, Don.
Please refer to our press release issued earlier today for a summary of our financial results for the first quarter of 2023.
After commenting on the financial results Thomas who will review our guidance for 2023.
Orders grew 61% year over year, and net revenue grew 36% to $42 $2 million from $31 1 million in 2022.
Device revenue increased 78% to $11 9 million compared to $6 7 million in the first quarter last year.
Supplies revenue increased 24% year over year to $30 2 million from $24 4 million.
And gross margin was 78% in the first quarter.
Sales and marketing expenses were $21 $2 million in the first quarter of 2023 compared to $14 4 million in the same period in 2022.
G&A expenses were $11 4 million in the first quarter of 2023 compared to $7 8 million last year.
Ultimately, 20% of the increase in G&A is related to investments in our monitoring solutions division and related head count to launch our new products.
The remainder is primarily for back office head count related to order growth.
Tax expense as a percentage was a 2% effective rate for the quarter due to other income of $1 4 million.
Net income grew 14% year over year to $1 $6 million and produce four cents per diluted share in the first quarter of 2023.
We ended the quarter was $16 $8 million in cash cash flow from operations in the quarter increased 10% year over year to $1 9 million.
I'll now turn the call back over to Tom.
Thank you Dan.
We grew orders in the fourth quarter of last year by 48% year over year.
It increased to <unk> 60.
61% in the first quarter of the year.
Here in the beginning of the second quarter, we've already had a strong start in terms of orders and expect to post.
Fifth consecutive record quarter.
With the continued growth in orders in the second quarter of 2023.
We expect total revenue.
Between 43, five and $45 5 million, which is approximately 21% greater than the second.
Quarter of 2022.
And we expect to see earnings per share between three and seven cents.
As for all of 2023 outlook, we are reiterating our initial guidance.
And expect total revenue to be in the range of $180 million to $200 million representing growth of approximately 21% or 2022 and earnings per share of approximately 40 to 50.
Okay.
With that operator, please open the call up for questions.
We will now begin the question and answer session.
Ask a question you May press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at.
At this time, we'll pause momentarily to assemble our roster.
Our first question comes from Jeffrey Cohen from Ladenburg Thalmann. Please go ahead.
Oh, Hi, Thomas Stan and then Donald how are you.
Great.
Awesome.
The number like that.
Yeah, that's right. So congrats on the quarter looks very strong just a couple of questions from Aaron I guess firstly.
You're still feeling pretty optimistic on 60, and 100 and timeline to approval. We still are hopeful about back half will be here.
For cancer.
This is Don.
We are definitely feeling confident because as I mentioned, we're in the interactive review with the FDA. So it's been a bit of a back and forth.
We in those discussions.
Have.
I had an opportunity to ensure that the FDA feels comfortable with the device and the technology.
And so I'll reiterate our plans at this point are the same.
Yes.
Got it Okay. That's helpful, maybe hypothesize with us how you're thinking about commercial strategies.
Direct non direct from a commercial standpoint.
Into next year.
Yeah. So I think we mentioned before that we would have a.
Direct and indirect sales team, we will grow that slowly as we.
Enter the market this is a.
Brand, new market, essentially and which require some market development. So we have some placement of devices that we will need to do and certainly prove out the technology.
To clinicians et cetera as we.
Get closer to our products on the Nico Noninvasive co oximeter, that's a fairly defined market and so our strategy there is slightly different and so as.
As I had mentioned previously we will be submitting to the FDA later in the year on that device and we're actively in running.
Running clinical trials here.
Between now and the back half of the year.
Okay and.
Shimon.
I also get filed.
So this year.
That will not be submitted later this year, but we are working on the technology. So the laser technology applies to both the pulse or the clock scimitar.
And to him up and he marks will bring.
Technology and parameters to the market.
Meaning that Youll have total hemoglobin and other parameters like that with <unk>.
Okay got it.
I guess a question for Ann as far as the <unk>.
The salesforce in growth it sounds like it will be linear throughout the year.
Kind of on par with Q1 or is your bullish coming through earlier or later.
The growth will be in line with our Q1 will continue to.
Grow our orders throughout the year.
Yeah.
And the number of central those reps will be fairly linear Jeff.
Okay got it and then lastly, congrats on the buybacks at $8.82 on average what's the share count.
<unk> 37.44 is that diluted currently and the buybacks had concluded with none to open today.
We arent yet diluted for the well diluted outstanding was 37 four.
Other figure will be in the press release as well the actual number of shares and in the queue.
Yes, we do not currently have a buyback that is open right now.
Okay got it I think that does for us thanks for taking the questions.
Yes.
The next question comes from Adam Ader from Piper Sandler. Please go ahead.
They are kind of hitting the head count target. Thanks.
Tom.
Okay.
Yes, so there's there's not a lot of changes in the hiring market hiring market is.
Proving as we're seeing it but.
So we can't speak with confidence in how the remainder of the year is going to go.
We are a lot quicker with exiting.
Under performers.
Innovation.
And we will continue focusing on that trial the ear.
Okay. So nothing I guess as it relates to Q1 it wasn't theres no issue with attrition of of reps. It was maybe you just hired a little bit.
More slowly than expected is that a fair conclusion.
So timing a little bit too Adam some people will start right. After the end of the quarter end.
Throughout the year, obviously at quarter cutoffs, it can be a little misleading at times, but we've seen a pretty good hiring cadence had a pretty good group come in in April as well. So I think we're pretty comfortable with the numbers and we gave a range.
The $525 to $5 50, but we think thats very cheap.
Okay. Okay perfect. That's helpful color I appreciate that.
Hum.
And then I guess for the follow up I wanted to ask about.
Nico.
If I heard correctly Q4 'twenty three.
FTA submission.
Anything.
You guys can share at this point.
Terms of the clinical performance or learnings from the clinical studies that you've run.
How do we think about.
Likelihood of approval or any potential clinical risk in that.
One follow up thanks.
Sure. This is Don ill take that question.
We have been running.
And studies.
And those are internal studies at this point in time.
We have a clinical study that starting here in may at a clinical trial site.
And the pulse oximetry market, there's an FDA guidance document that.
Pretty clearly outlines that you've got to run certain human studies on your.
Hypoxia and calibration and verification and so we're we're starting all of those the performance of the device is significant lead.
More accurate at this point than what we were expecting.
We are seeing.
Ranges of accuracy higher than legacy devices that you see on the market today based on led technology and so we believe that.
Our submission is definitely on track for Q4, we're trying to hit the earlier part of Q4 at this point in time, but certainly given guidance that it's going to be submitted to the FDA in the Q4 timeframe.
That's great color Dan. Thank you for that and then maybe just one last one for me and I'll jump back in queue.
It relates to just see.
The guidance range the full year EPS guidance was hoping you could just bridge us a little bit.
To that range.
It looks like it implies a little bit of a healthy ramp in the back half of the year to kind of get to the.
The bottom of the midpoint, so just broad strokes Dan. It can you just talk through kind of the cadence of spend and I guess.
Any color on.
The top line cadence as well thanks, so much for taking the questions and congrats again on the start to the year.
Yes.
I think again.
Top line, we're tracking and orders have been strong 51%, we expect that to continue.
On the spend I think.
It will continue to grow obviously on the sales and marketing line as we grow the sales rep.
Territory managers and.
Other pieces there.
Commissions and other things that are variable based on number of orders and then on the G&A side most of that is going to be around the dms side.
But the ramp is going to be similar to what it was last year last year.
The majority well over the majority was in the second half of the year and that will continue this year. So I think the <unk> we did in Q1.
I think consensus for Q2, three and four are similar with your with.
With the numbers you guys have out there and that that gives us and it's right there.
Thanks, so much for the color.
Our next question comes from E. Chen from H C. Wainwright. Please go ahead.
Yeah.
Thank you for taking my questions.
Hi.
Could you comment on whether you observed that the productivity of the sales team increased proportionally to the increase in orders.
Okay.
So we said you know increase in sales rep productivity was up about 24%.
Orders were up 61% you just got to remember orders, we'll recognize revenue over a period of no. We generally say six to nine months, so theres always going to be a lag there. So.
We were pleased with the.
The revenue.
Increased obviously in the order increase but the revenue, obviously means where we're turning that into cash and growing the topline.
Okay.
Yeah.
Could you discuss.
What are the key factors.
Sure.
Successful launch trajectory for the fluid monitor.
Yes. This is Don again, I think that for us adoption in the market by key clinical opinion leaders is very important.
Way that our technology works is quite different.
Other monitors in that space at this point in time.
Significantly.
Products in that area are somewhat.
Would call more invasive or minimally invasive and ours as is.
Certainly based on noninvasive technology.
We will ensure that we.
Communicate effectively.
Key opinion leaders, we have been doing that throughout the development and have many of them.
On board with Us to understand the technology. We also run a number of clinical trials in several different ways.
To demonstrate and exercise the effectiveness of the device and so that is a key entry as I mentioned previously on the call that this is a new market that requires a lot of market development and adoption of this.
Technology is very important from a clinical standpoint.
Okay. Thank you.
This.
A question and answer session I would like to turn the conference back over to Thomas Vanguard for any closing remarks.
Yes, thank you for joining us today we.
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 to speaking to you at upcoming Investor events.
We appreciate your time and interest in <unk> have a great day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yeah.
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