Q2 2023 Zynex Inc Earnings Call
[music].
Good day, ladies and gentlemen, and welcome to the IMAX second quarter 2023 earnings conference call.
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 you Quintin cow, calling in from MZ North America. Please go ahead.
Thank you operator, and good afternoon, everyone.
Earlier today <unk> released financial results for the second quarter ended June 30th 2023, a copy of the press release is available on the company's website.
Joining me on today's call are telling me shake, our chairman President and Chief Executive Officer.
Moorhead Chief Financial Officer.
Lusaka.
<unk> operating officer.
Donald Greg President XI and X monitoring solutions.
Before we begin I'd like to remind you that during this conference call will be some people will make projections and forward looking statements.
Regarding future events.
We encourage you to review.
These past and future filings with that as you see it including without limitation. The company's 2022 forms 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.
Factors may include without limitation statements regarding product development product potential regulatory environment sales and marketing strategies capital resources or operating performance.
With that I'll now turn the call over to Thomas.
Thanks, Glenn and good afternoon, everyone. Thank you for joining us today for the second quarter 2023 earnings call.
The second quarter was highlighted by our.
Continued momentum in both our pain management and pain monitoring divisions, leading us to our ninth consecutive quarter of profitability and fifth 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.
Each way could lead to total revenue for the quarter of $45 million.
A 22% increase over the same period in 2022.
And we produced nine cents of earnings per diluted share.
Our sales force continues to increase productivity and grow the market significantly each quarter.
A testament to our great sales force leadership and great products.
Orders increased 51% year over year, and we believe there is considerable runway for us to continue growing all of this into the future.
In addition to the impressive results from our profitable pain management Division CNS or signings monitoring solutions continued to move forward.
In the second quarter, and the development of a blood and fluid monitor.
Laser based public center, we were excited to announce FDA clearance for our second generation blood and fluid volume Marissa.
None and buys a noninvasive and wireless technology targeted to improve patient outcomes with better fluid management and hospital settings.
We continue to collect additional data in clinical trials and then Greg will.
We'll provide further updates on this product and is prepared to smoke remarks.
We have three additional products in the pipeline.
Monitoring products Division.
And laser based pulse oximeter.
The newco and monitor for early detection of sepsis.
So a noninvasive laser based blood.
Total hemoglobin levels he MX.
The monitoring division is pre revenue and we expect to submit an application to the FDA for laser based concept similar in the fourth quarter of this year.
Overall, we made some 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 process progress as a leader in at home prescription strength pain management devices, with a robust and durable business model and high recurring revenue.
Not only and we're proud of making a real dent into the opioid epidemic.
We also continued to execute operationally and strategically diversifying the business with the ramp up of our hospital hospitals monitoring products.
Which represents a large and growing market opportunity.
We expect to see consistent growth and strong financial performance for the second half of 2023, following the double digit growth, we have produced year to year.
We also expect additional catalyst and regulatory milestones in 2023, as we continued to execute a strong pipeline of new products.
Look forward to additional updates in the months to come as we build out our sales force and execute on our growth objectives to improve their quality of life for patients suffering from <unk>.
Debilitating pain or illness, and bring long term value for our shareholders.
With that I will now.
I will turn the call over to you and it looks like our Chief operating officer for a more detailed business update on the pain management Division.
Thank you Tommy.
Pain management Division had another impressive quarter Martin high sequential increase in order volume over the first quarter and a 22% year over year increase in revenue.
The growth.
Phoenix, delivering its consistent and profitable and we believe very significantly brands for continued expansion to reach full market penetration.
We ended the second quarter with approximately 480 sales reps and year to date revenue per rep on in your life basis, that's approximately 390000, an increase of 13% over 2022.
We added a net of approximately 50 sales reps during the first half of year, which decreases the growth in revenue per rep in the near term as those new reps ramp up.
Continue to work to expand our sales force to cover our target at 800 sales territory, but maintaining productivity remains our primary focus.
We're refining our on boarding procedures for new sales reps and have developed improved metrics for evaluating those reps that.
These improved processes.
In fact in increasing our effectiveness and paring back the sales territory.
Theres, some lingering challenges related to the labor market and 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 will continue to evaluate sales reps closely in order to maintain efficiency, while managing our expenses and expect to have well over 500 sales reps by year end.
The strength of our billing team and processes continues to be a key differentiator for <unk>.
All patients regardless of their insurance status.
It's all orders that we received and work directly with patients and their insurers 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 Dan, Greg President XI and expiring Felicia to provide updates.
Okay.
Thank you Anna the patient monitoring market is estimated at about $3 7 billion, we have products that will be brought to market with truly game changing technologies.
Our entrance into monitoring as a long term strategic investment and 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 <unk> 1600 food monitor on June 16th.
Clearance of the <unk> 1600 isn't a central.
Milestone toward our goal of providing perioperative fluid monitoring and it 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.
We're sponsoring multiple clinical studies on our technology engaging with medical advisors and key opinion leaders to system product and clinical development within our blood and fluid monitoring product line.
In addition, our noninvasive co oximeter line of products, including Nico.
He marks continues progressing positively we expect to submit our mutual product to the FDA in Q4 of 2023.
We recently received trademarks for both Nico and he marks and continue to meet important milestones necessary to bring those products to market.
Next is monitoring division is consistently executing toward introducing.
<unk> and 'twenty 'twenty four we will continue sharing important clinical trial results as they are published and look forward to updating the investment community on completing other milestones.
I will now turn the call over to Dan Moorhead, Chief Financial Officer for a more in depth look at the financial performance for the quarter.
Thanks, Don.
Please refer to our press release issued earlier today for a summary of our financial results for the second quarter of 2023.
After commenting on our financial results Thomas will review our guidance for the remainder of 2023.
Yeah.
Orders grew 51% year over year, the highest number of orders in company history for the fifth consecutive quarter net revenue grew 22% to $45 million from $36 8 million in 2022, primarily related to the growth in device orders.
Device revenue increased 45% to $13 7 million compared to $9 5 million in the second quarter last year.
Supplies revenue increased 15% year over year to $31 2 million from $27 3 million in the second quarter of last year.
Gross profit in the second quarter increased to $35 7 million or 79% of revenue as compared to $29 5 million in 2022.
Sales and marketing expenses were $21 $6 million in the second quarter of 2023 compared to $16 3 million 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&A expenses were $11 4 million in the second quarter of 2023 compared to $8 8 million last year.
Approximately 15% of the increase is related to investments in our monitoring solutions division and related head count.
Launch our new products.
The remainder is primarily for back office head count related to the order growth.
Tax expense as a percentage was 18% effective rate for the quarter due to other income of $1 7 million, which was not taxable.
Net income was $3 4 million and produced nine cents per diluted share in the second quarter of 2023 compared to $3 3 million or eight cents per diluted share in 2022.
Adjusted EBITDA for the three months ended June 32023 was $4 million as compared to $5 5 million in the quarter ended last year.
During the second quarter, we completed a $60 million convertible debt offering which added approximately $48 million in cash to the balance sheet net of offering costs and previous that was which was retired.
We ended the quarter with $58 $7 million in cash and working capital of $93 5 million.
Cash flows from operations for the six months.
2023 increased 70% year over year to $2 7 million.
In the second quarter, we continued our stock buyback and repurchased $6 1 million of common stock, bringing the total repurchases in the past 15 months to $36 1 million.
As we've stated before we believe this to be a signal to our shareholders that we're 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.
With that I'll turn it back over to Thomas.
Thank you Dan.
We've had a strong start to the third quarter in terms of autos.
And we expect to post our sixth consecutive record quarter.
With the continued growth in orders in the third quarter of 2023, we expect total revenue in the range of 49 to 51 billion, which is approximately 20% greater than the third quarter of 2022.
And diluted earnings per share.
Oh for eight to 10 cents.
Okay.
As for our 'twenty to 'twenty three outlook, we are reiterating our initial guidance and expect total revenues to be in the range of 180 to 200 million representing growth of approximately 20% over 2022 and diluted earnings per share.
Between 40 and 50 cents.
With that operator, please open the call up to questions.
Ladies and gentlemen at this time well begin the question and answer session.
To ask a question you May press star and one using a touchtone telephone.
To withdraw your question you May press Star two if.
If you are using a speaker phone would you ask that you. Please pick up the handset prior depressing the numbers to ensure the best sound quality.
Once again that is star then one to join the question queue.
Pause momentarily to assemble the roster.
Our first question today comes from Jeffrey Cohen from Ladenburg Thalmann. Please go ahead with your question.
Hi, Thomas therein, and Donald how are you.
Yes.
Good how are you.
Good just a couple of quick ones did you call out the the spot number now and our sales reps I did here of the 500 buyer to be able but what's current.
We're having a little trouble hearing you, Jeff I don't know, what's going on with the phone, but you've talked about sales reps am I.
Could you repeat that.
The current number of sales reps.
Current number of sales reps.
489.
Okay, Okay, perfect I got it and I guess Donald's could you talk about commercial plans for the back half of the year for the <unk> hundred and also talk about the clinical work that you're doing on few marks and the anticipated filing for a fee.
For our hemoglobin please.
Sure. So on the VM 16 Hunter just been cleared.
By the FDA, we have been focused on ensuring that we have milestones.
Specific we.
Proves the clinical effect with efficacy of the products.
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, there's a focus specifically to ensure that we're doing the proper due diligence with key opinion leaders.
And physicians to ensure the hour.
Our focus on a 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 completed a hypoxia study.
And we have two additional.
Clinical trials that we have to do for FDA submission.
First part is we have to do a calibration.
The nickel product and then we have to do.
Verification validation against that calibration of the effectiveness of the device and so those are scheduled they're starting to hear very shortly.
Rguest and they will continue throughout the third and fourth quarters.
With a couple of different institutions.
Okay got it takes for a for that and Dan Real briefly you talked about the 36.1 of share repurchases. The last 15 months and in the press release. The is that the fourth one that's opened the fourth 10 launch or is that this is just one that's are open now.
It includes everything through 630 so.
And those four or five players that that'll be the first one yeah. So one once we have completed that if we completed.
That will run that up to $40 million, so probably episodes of $6 1 million.
Okay. So that's the approved 10 million share repurchase program of the company's common stock in the press you wish I got it.
I think that those are for us that's a great quarter. Thanks for taking our questions.
Thank you.
Yes.
And our next question comes from <unk> Chen from H C. Wainwright. Please go ahead with your question.
Oh, Hey, this is <unk> on behalf of each and congrats on all the excellent progress.
I just wanted 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 sinful salesforce to be around 500 reps is that right.
Yeah, we think it will be over 500, yes.
Okay. It 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.
Okay.
So I think you know I think the catalyst that Don spoke of obviously the submission of the Nico products continued work on the <unk> hundred and related products.
And then on the pain management side, obviously, continuing to add sales reps, which will drive you know revenue from not only a new rep basis, but continued increases in productivity as well. So those are the main catalysts, we're looking out for the remainder of the year as of right now.
Excellent thank you and would.
Would you be able to comment on.
The other hospital monitoring products beyond the pulse oximeter and the fourth quarters.
I believe you outsource to others in the pipeline.
If I'm not wrong so.
Are you able to comment on them now.
Sure an hour Nico line.
<unk>, which is our noninvasive clock similar.
He MX 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.
Have a finger stick that they would like to not be an invasive procedure they'd like it to be noninvasive. He marks will provide that with a noninvasive reading.
Hum.
In addition to that also I'm not technology between our CMS fluid monitoring line as well as the need.
<unk> Nikko <unk>.
Line of products when you think about combining those.
You have an opportunity to go after subsys and so we have been working on Subsys monitoring.
To reinvent how you will detect sepsis early and often and accurately.
Gotcha. Thank you so much and congrats again.
Thank you.
And ladies and gentlemen at this.
We do have a follow up from Jeffrey Cohen from Ladenburg Thalmann Hi.
Jeffrey Please go ahead with your follow up.
Hey, Thanks for taking the questions so to morph from Russia, Firstly anything on a physical therapy for Q2 or back half of Q3 worth mentioning.
Okay.
I can say that one more time, Jeff sorry, I don't know what the issue is and must be my phone to any P. T news any physical therapy updates.
Okay.
Yeah.
[laughter].
Hum.
Are you asking if there's any updates with <unk>.
Regarding physical therapy, Oh, yes.
Well.
Yes.
We have we have one product. That's typically described in that area. We are not focusing on that right now that would be the new move device for stroke rehab.
A device that we developed ourselves.
But that's that's.
A very minimal amount of Oh, so that's in the physical therapy space food.
Not really that active right now.
Okay got it and then lastly.
I guess, Dan any comment it sounded like you called out 15% of G&A for a C. M. S would you expect that to be a consistent percentage for the back half of the year.
Yeah, no it's it.
It should be similar to that.
On our normal track I think we talked about going from about $8 million last year to about 12. This year 12 to 13. So it's we're on track with that for sure.
Okay perfect that tells you for us thanks again.
And ladies and gentlemen, at this time and notch and showing no additional questions I'd like to turn the floor back over to the management team for any closing remarks.
Well, 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 it.
Coming investor events.
We appreciate your time and interest in signings.
Okay.
Okay.
And ladies and gentlemen, with that we'll be concluding today's conference call and presentation. Thank you for joining you may now disconnect your lines.