Q2 2024 Zynex Inc Earnings Call
Operator: Good afternoon, ladies and gentlemen, and welcome to the Zynex Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. The question and 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 Quinn Callanan from MZ North America.
Quinn Callanan: Thank you, Operator. Good afternoon, everyone.
Speaker Change: Thank you operator, and good afternoon, everyone earlier today <unk> released financial results for the second quarter ended June 32020 for a copy of the press release is available on the company's website. Joining me on today's call are Thomas Vanguard, Chairman, President and Chief Executive Officer, Dan Moorhead, Chief Financial Officer.
Quinn Callanan: Earlier today, Zynex released financial results for the second quarter and June 30, 2024. A copy of the press release is available on the company's website. Joining me on today's call are Thomas Sandgaard, Chairman, President, and Chief Executive Officer; Dan Moorhead, Chief Financial Officer; and Donald Gregg, President of Zynex Monitoring Solutions. 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.
Speaker Change: Donald Greg President XI and X monitoring solutions.
Quinn Callanan: We encourage you to review the company's past and future filings with the SEC, including, without limitation, the company's 2023 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.
Speaker Change: 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.
Courage, you to review, the company's past and future filings with the SEC, including without limitation. The company's 2023 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.
Quinn Callanan: With that, I'll now turn the call over to Thomas.
Thomas: 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.
Okay.
Thomas Sandgaard: Thank you, Quinn. And good afternoon, everyone.
Thomas: Thank you Quinn.
Thomas: And good afternoon, everyone. Thank you for joining us today for the second quarter 2024 earnings call.
Thomas Sandgaard: Thank you for joining us today for the second quarter 2024 earnings call. First, I want to say that, unfortunately, our Chief Operating Officer, Anna Lucsok, is traveling and couldn't be here today for the call, so I'll speak to the items around operations as well. In the second quarter, we saw continued revenue momentum, up 11% from the prior year and the ninth straight quarter of record high order numbers. While we continue to produce solid revenue growth, the second quarter and the full year 2024 revenue is less than originally anticipated.
Thomas: First I want to say that unfortunately, our chief operating officer, and naloxone is traveling and couldn't be here today for the call. So I'll speak to the items.
Thomas: Around operations as well.
Thomas: In the second quarter, we saw continued revenue momentum up 11% from the prior year and the ninth straight quarter of record high order numbers, while we continued to produce solid revenue growth the second quarter and full year 2020 for revenue is less than originally anticipated.
Thomas Sandgaard: The decrease in our 2024 revenue versus prior estimates is due to a few factors, all of which will put us in a better position for profitable future growth. First, we continue to diversify our product revenue streams. As I mentioned in previous calls, we continue to add additional rehabilitation products to our offering, and the volume of those products as a percentage of all device ordering continues to increase. In the first quarter, we reported that our private labor rehab products made up 25% of all orders, up from the teens in 2022.
Thomas: The decrease in our 2020 full revenue versus prior estimates is due to a few factors all of which long term will put us in a better position for profitable future growth.
Thomas: First we continue to diversify our product revenue streams.
Thomas: Mentioned in previous calls we continue to add additional rehabilitation products to all offering and the volume of those products as a percentage of all of our all device Ora, Inc. Continued to increase.
Thomas: In the first quarter, we reported all private label, we have products made up 25% of all orders up from the teens in 2022.
Thomas Sandgaard: We've seen this grow even more in the second quarter, to a total of 28% of all orders, which turned out to decrease our revenue per order more than expected, as those products generally bring in less per order. We believe this diversification is important to our future growth, stability, and overall valuation of the company. But the revenue and cash of these products are not as high as on our NexWave device since they don't have the recurring supply element, which is recognized over the entire treatment period for the NexWave.
Thomas: We've seen this grow even more in the second quarter to a.
Thomas: Total of 28% of all orders, which turned out to decrease our revenue per order more than expected as those products generally collect less portal.
Thomas:
Thomas: We believe this diversification is important to our future growth and stability on all our overall valuation of the company.
Thomas: But the revenue and cash of these products are not as high as on a next wave device since they don't have the recurring supply element, which is recognized over the entire treatment period for the next wave.
Thomas Sandgaard: The positive is, we can say that profitability, or the gross profit margin, is still right around 80% on those products, so it has not hurt our gross profit margin. Second, as we've discussed previously, we continue to scrutinize our existing sales reps and dismiss reps who aren't performing to our standards. During 2024, we've been pretty aggressive on this front and have decreased our sales force, which will have an effect on near-term revenue
Thomas: Positively.
Thomas: Yes.
Thomas: We can say that profitability to all the gross profit margin is still right around 80% on those products. So it has not hurt our.
Thomas: Gross profit margin.
Thomas: Second as we've discussed previously we continue to scrutinize, our existing sales reps and discharging reps, who are performing to our standards. During 2024, we've been pretty aggressive on this front and have decreased our salesforce, which will have an effect on near term revenue growth.
Thomas Sandgaard: It's in our best interest to exit underperformers and add sales reps who will be more productive long term. Lastly, at Zynex, we continue to make changes to our operations. We've seen extraordinary growth from $13 million in revenue in 2016 to $184 million in 2023. During that period, our average annual revenue growth was 47%.
Thomas: It's our it's in our best interest to exit Underperformers and add sales reps, who will be more productive long term.
Thomas: Lastly.
Speaker Change: <unk>, we continue to make changes to our operations, we've seen extraordinary growth from $13 million in revenue in 2000 $16 million to $184 million in 2023.
Thomas: That period, our average annual revenue growth was 47%.
Thomas Sandgaard: As we grow, we continue to refine our processes, and our practices, which helped us grow revenue to now around $200 million, may not be optimal as we grow to $400 million and then $800 million subsequently. We're constantly tackling questions of maintaining profitable growth at scale while maintaining a strong culture of compliance and optimizing our process. Even with the changes, we were able to drive 20% autogrowth in the period compared to the second quarter of 2023 with 10% fewer reps, which reaffirms our confidence in our core sales reps and their productivity. Revenue per rep on an annualized basis in the second quarter was approximately $485,000, an increase of 26% over 2023.
Thomas: As we grow we continue to refine our processes and our practices, which helped us grow revenue $10 around $200 million may not be ought to be optimal as we grow to $400 million and then 800 million subsequently.
Thomas: We constantly tackling questions on maintaining profitable growth at scale, while maintaining a strong culture of compliance and optimizing our processes.
Thomas: Even with the changes we were able to drive 20% order growth in the period compared to the second quarter in 2023, with 10% fewer reps, which reaffirms our confidence in our core sales reps and their productivity.
Thomas: Revenue per rep on an annual annualized basis in the second quarter was approximately 485000.
Thomas: Lease of 26% or 2023.
Thomas Sandgaard: As our team continues to mature, we expect to drive sales efficiency higher, further reassuring you about our performance. We continue to refine our sales force to maximize productivity and related profitability. In the future, we believe sales for productivity is a relevant KPI for accessing our pain management business at our current scale. Maintaining profitable growth is paramount, and we will drive future additions to the sales team. While we retain a focus on progressing to our long-term goal of 800 sales territories with a million dollars in revenue potential per territory, we recognize that our standard for all webs is high, and productivity will not be sacrificed.
Thomas: And so our team continues to mature we expect to drive sales efficiency higher further reassuring about outperformance.
Thomas: We continue to refine our sales force to maximize productivity and related profitability.
Thomas: In the future, we believe sales rep productivity as a relevant kpis for accessing our pain management business.
Thomas: At our current scale.
Thomas: Maintaining profitable growth is paramount and we will drive future additions to the sales team.
Thomas: While we retain our focus on progressing to our long term goal of 800 sales.
Speaker Change: Sales territories with a million dollars in revenue potential per territory. We've recognized said I will stand up for all web is high.
Speaker Change: And productivity would not be sacrificed.
Thomas Sandgaard: While we are pleased to see the company continue to grow and diversify its revenue, profitability, and cash flow, we recognize that this quarter's growth will not match our prior guidance. We believe this is a minor recalibration which was necessary due to our rapid growth, and this sets us up for additional growth and profitability in the coming years. We believe that with a diversified revenue stream, institutional quality policies and procedures, and a lean and efficient sales team, Zynex is poised to capitalize on the long-term opportunity presented by the 800 sales territories we've discussed in the past.
While we are pleased to see the company continue to grow and diversify its revenue profitability and cash flow. We recognize that this quarter's flows from not Metro project guidance. We believe this is a mine of Recalibration operation.
Speaker Change: Which was necessary due to our rapid growth and this sets us up for additional growth and profitability in the coming years.
Speaker Change: We believe that with a diversified revenue stream.
Speaker Change: Situtions quality policies and procedures and a lean and efficient sales team <unk> is poised to capitalize on the long term opportunity presented by the 800 sales territories, we've discussed in the past.
Thomas Sandgaard: With all this in mind, we now expect 2024 net revenue to increase approximately 9% total compared to 2023 to 200 million and diluted earnings per share of at least 20 cents a share. We have also reached some important milestones and seen significant progress in our monitoring division. I'll now ask Don Gregg, President of Zynex Monitoring Solutions, to provide updates on that business division. Thank you, Thomas.
Speaker Change: With all this in mind, we now expect 2024 net revenue to increase approximately 9% total compared to 2023 to 200 million and diluted earnings per share of at least 20 cents a share.
Speaker Change: We have also reached some important milestones and see significant progress in our monitoring division.
I'll now ask Don Drake precedent.
Donald Gregg: Our signings monitoring solutions to provide updates on that business division.
Donald Gregg: Thank you Thomas it's an exciting time to work on the <unk> monitoring solutions Division as we are closing on major milestones to commercialize our nikko pulse oximeter.
Donald Gregg: It's an exciting time to work in Zynex's Monitoring Solutions Division as we are closing on major milestones to commercialize our NECO pulse oximeter. The NECO Pulse Oximeter Verification Clinical Study began this week at a leading university.
Donald Gregg: The Nico pulse Oximeter verification clinical study began this week at a leading university.
Donald Gregg: It's focused on pulse oximetry, and we are continuing to achieve our program milestones. To support the study and the market launch of NECO, we have now manufactured pre-production NECO devices at our facility and achieved major supply chain readiness. For those new to Zynex, Zynex Monitoring has a product pipeline of four new hospital monitoring products that we believe will be disruptive, including our CM series blood and fluid monitor, our Neco laser pulse oximeter, and the Hemox total hemoglobin monitor.
Donald Gregg: It's focused on pulse oximetry, and we are continuing to achieve our program milestones.
Donald Gregg: To support this study and the market launch of Nico we have now manufactured preproduction Nico devices in our facility and achieved major supply chain readiness.
Donald Gregg: For those new design X XI and X monitoring has a product pipeline of four new hospital monitoring products that we believe will be disruptive.
Donald Gregg: C M series blood and fluid monitor our nikko laser pulse oximeter and the he marks total hemoglobin monitors.
Donald Gregg: Lastly, our sepsis monitor, which builds on all of those three previous technologies to produce a first-of-its-kind, real-time sepsis risk detection monitor. Laser pulse oximetry represents the most immediate opportunity in our monitoring division with our planned submission to the FDA for NECO at the end of this year, entering a multi-billion dollar established market. NECO's laser oximetry technology provides blood test level accuracy in a non-invasive form factor that we believe will show the market how inaccurate current non-invasive LED technology currently is and solves many of the challenges with pigmentation bias. As you may recall, the FDA clearance process for pulse oximeters consists of two phases. The first step is calibration, and the second is verification of that calibration.
Donald Gregg: Lastly, our sepsis monitor which builds on all of those three previous technologies to produce the first of its kind real time subsys risk detection monitor.
Donald Gregg: Laser pulse oximetry represents the most immediate opportunity and our monitoring division with our planned submission to the FDA for Niko at the end of this year that enters a multibillion dollar established market Nico.
Donald Gregg: Nikos laser oximetry technology provides blood test level accuracy.
Donald Gregg: In a noninvasive form factor that we believe will show the market how inaccurate current noninvasive led technology currently is and solve many of the challenges with pigmentation bias.
Donald Gregg: As you may recall, the FDA clearance process for pulse oximeter.
Donald Gregg: Consists of two phases.
Donald Gregg: The first is calibration and the second is verification of that calibration.
Donald Gregg: This verification study is intended to prove the efficacy of our NECO product to the previously completed calibration and is the final stage before FDA submittal, and then clearance. We've also completed our first pre-production milestone to manufacture initial units with the updated NECO design following our acquisition of Kestrel Labs. We've filed many patents in 2024 and will continue to file even more through the end of this year. Zynex originally purchased the NECO and HEMOX laser oximetry technologies from Kestrel.
This verification study is intended to prove the efficacy of our nikko product to the previously completed calibration and its the final stage before F D a submit them.
Donald Gregg: And then clearance. We've also completed our first preproduction milestone to manufacture initial units with the updated Nico design following our acquisition of Kestrel labs.
Donald Gregg: We have filed many patents in 2024, and we will continue to file even more through the end of this year <unk> originally purchased the Nico and <unk> laser oximetry technology from Kestrel.
Donald Gregg: We have made several technical and design for manufacturing enhancements to produce the current market-ready NECO product. The current FDA process is designed to verify that the changes we made are consistent with the device's original design, and that the claims we make about the device capabilities are safe and effective, to ensure NECO meets the FDA's strict standards. We have performed several rounds of comprehensive bench testing to simulate pulsatile blood flow similar to humans prior to the verification study.
Donald Gregg: We have made several technical and design for manufacturing enhancements to produce the current market ready Nico product.
Donald Gregg: The current FDA process is designed to verify that the changes we made are consistent with the devices original design.
Donald Gregg: And that the claims we make about the device capabilities are safe and effective.
Donald Gregg: To ensure Nico meets the FDA strict standards.
Donald Gregg: We have performed several rounds of comprehensive comprehensive bench testing.
Donald Gregg: Simulate pulsatile blood flow similar to humans prior to the verification study with Nikko consistently performing well and our bench testing we have been confident in the success of our verification study as it concludes in early Q4.
Donald Gregg: With NECO consistently performing well in our bench testing, we are confident in the success of our verification study as it concludes in early Q4. In summary, NECO is now undergoing the final phase of manufacturing transfer, FDA clinical trials, and commercialization readiness prior to FDA submittal and clearance. We continue to close on clinical, operational, and commercialization milestones to meet market demand after we achieve FDA clearance. I will now turn the call over to Dan Moorhead, Chief Financial Officer, for a more in-depth look at the quarter's financial performance.
Donald Gregg: In summary, Nico is now undergoing the final phase of manufacturing transfer F.
Donald Gregg: FDA clinical trials and commercialization readiness prior to FDA submit on clearance, we continue to close on clinical operational and commercialization milestones to meet market demand. After we achieve FDA clearance I will now turn the call over to Dan Moorhead, Chief Financial Officer for a more.
Daniel J. Moorhead: In depth look at the quarter's financial performance.
Daniel J. Moorhead: Thanks, Don.
Daniel J. Moorhead: Please refer to our press release issued earlier today for a summary of our financial results for the second quarter of 2024. After commenting on our financial results, Thomas will review our guidance for 2024. In the second quarter, orders increased 20% year over year to the highest number of orders in the company's history for the ninth consecutive quarter.
Please refer to our press release issued earlier today for a summary of our financial results for the second quarter 2024.
Daniel J. Moorhead: After commenting on our financial results Thomas will review our guidance for 2024.
Daniel J. Moorhead: In the second quarter orders increased 20% year over year to the highest number of orders in the company's history for the ninth consecutive quarter.
Daniel J. Moorhead: Net revenue was $49.9 million compared to $45 million in the second quarter of 2023. Device revenue was $15.9 million compared to $13.7 million in the second quarter of last year. Supplies revenue was $34 million, up from $31.2 million in the second quarter of last year. Gross profit in the second quarter was $39.9 million, or 80% of revenue, as compared to $35.7 million or 79% of revenue in 2023. Sales and marketing expenses were $23.2 million in the second quarter of 2024, compared to $21.6 million in the same period in 2023.
Speaker Change: Net revenue was $49 9 million compared to $45 million in the second quarter of 2023.
Speaker Change: Device revenue was $15 9 million compared to $13 7 million in the second quarter of last year.
Speaker Change: Supplies revenue was $34 million up from $31 2 million in the second quarter of last year.
Speaker Change: Gross profit in the second quarter was $39 9 million or 80% of revenue.
Speaker Change: As compared to $35 7 million or <unk>, 79% of revenue in 2023.
Speaker Change: Sales and marketing expenses were $23 $2 million in the second quarter of 2024 compared to $21 6 million in the same period in 2023.
Daniel J. Moorhead: G&A expenses were $14.5 million in the second quarter of 2024, compared to $11.4 million last year. Net income was $1.2 million and produced $0.04 per diluted share in the second quarter of 2024, compared to net income of $3.4 million or $0.09 per diluted share in 2023. Adjusted EBITDA for the three months ended June 30, 2024 was $3.5 million compared to $4 million in the same quarter last year. We ended the second quarter with $30.9 million of cash and cash equivalents on the balance sheet and working capital of $55.9 million.
Speaker Change: G&A expenses were $14 5 million in the second quarter of 2024 compared to $11 $4 million last year.
Speaker Change: Yeah.
Speaker Change: Net income was $1 2 million and produced four cents per diluted share in the second quarter of 2024 compared to net income of $3 4 million or <unk> <unk> per diluted share in 2023.
Speaker Change: Adjusted EBITDA for the three months ended June 32024 was $3 5 million compared to $4 million in the same quarter last year.
Speaker Change: We ended the second quarter with $30 9 million of cash and cash equivalents on the balance sheet and working capital of $55 9 million cash flows from operations in the six months ended June 32024 increased 20% year over year to $3 2 million.
Daniel J. Moorhead: Cash flows from operations for the six months ended June 30, 2024, increased 20% year over year to $3.2 million. In the second quarter, we continued our stock buyback and repurchased $2.2 million of common stock. And over the last 24 months, we've purchased $70 million. We continue to balance. Balance Deploying Cash Generated Between Investing in Our Business and Returning Cash to Shareholders. We believe both offer attractive return profiles. The continuing buyback reflects our belief in the management team, the growth opportunities for both divisions, and that we remain committed to creating shareholder value in the near and long term.
Speaker Change: In the second quarter, we continued our stock buyback and repurchased $2 2 million of common stock and over the last 24 months, we've purchased $70 million.
Speaker Change: We continue balance to balance deploying cash generated between investing in our business and returning cash to shareholders. We believe both offer attractive return profiles.
Speaker Change: The continuing buyback reflects our belief in the management team the growth opportunities for both divisions.
Speaker Change: And that we remain committed to creating shareholder value in the near and long term.
Daniel J. Moorhead: Before turning the call back to Thomas, I wanted to point out a couple of things. ZMI, or our pain management division, on a stand-alone basis, year-to-date through June 30th, operating income is up 10%, and for the full year, we are forecasting it to grow closer to 20%. So, excluding our increased investment in ZMS, profitability is progressing in pain management, even with the lower number of reps and the product mix changes. Our prior year financials had $3.1 million in income related to derivative gains in the P&L, which is inflating prior year profitability a bit.
Speaker Change: Before turning the call back to Thomas I wanted to point out a couple of items.
Speaker Change: CMI or our pain management division on a standalone basis year to date through June 30th operating income is up 10%.
Speaker Change: And for the full year, we're forecasting it to grow closer to 20%.
Speaker Change: So excluding our increased investment in Vms profitability.
Speaker Change: <unk> is progressing in pain management, even with the lower number of reps and the product mix changes.
Speaker Change: Our prior year financials had $3 1 million and income related to derivative gains in the P&L.
Speaker Change: Which are inflating prior year profitability a bit so when comparing year over year data, it's important to consider that.
Daniel J. Moorhead: So when comparing year over year data, it's important to consider that. Also, I just wanted to reiterate cash from operations on a consolidated basis was up 20% during the first half of 2024 compared to 2023. With that, I'll now turn it back to Thomas.
Speaker Change: Also I just wanted to reiterate cash from operations on a consolidated basis is up 20% during the first half of 2024 compared to 2023.
Speaker Change: With that I'll now turn it back to Thomas.
Speaker Change: Dan.
Thomas Sandgaard: We've had a strong start to the third quarter, and with continued growth in orders and revenue recognition in the third quarter of 2024, we expect total revenue of $50 million, which is slightly above revenue in the third quarter of 2023, and we expect to see diluted earnings per share of $0.05. As for our 2024 outlook, we expect total revenue to be approximately $200 million, representing growth of approximately 9% over 2023 and diluted earnings per share of approximately 26%.
Thomas: We've had a strong start to the third quarter and was continued growth in orders and revenue recognition in the third quarter of 2024, we expect total revenue of $50 million, which is slightly above revenue in the third quarter of 2023, and we expect to see diluted earnings per share of <unk>.
Thomas: As far our 2024 outlook, we expect total revenue to be approximately $200 million.
Thomas: Presenting growth of approximately 9% over 2020 and diluted earnings per share of approximately <unk> 20.
Thomas Sandgaard: We are very proud of the growth that we have consistently demonstrated over the past several years. Top line revenue has produced a high level of profitability and free cash flow, which has allowed us to expand our sales force, launch a new business line to diversify our revenue streams, and continue repurchasing our shares. The business we have created and the profitability we are able to generate allows us a high degree of flexibility to allocate capital in several ways. For example, we have the ability to continue investing in our business and return cash to shareholders simultaneously. We believe both these avenues will produce substantial shareholder value. And with that, operator, please open the call to questions.
Thomas: We're very proud of the growth that we have consistently demonstrated over the past several years.
Thomas: Top line revenue is produced high level of profitability and free cash flow, which has allowed us to expand our sales force launch of new business lines to diversify our revenue streams and continue re purchasing our shares.
Thomas: The business, we have created and the profitability, we were able to generate allows us a high degree of flexibility to allocate capital in several ways. We have the ability to continue investing in our business and return cash to shareholders simultaneously.
Thomas: We believe both of these avenues will produce substantial shareholder value.
Speaker Change: And with that operator, please open the call up for questions.
Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press the star followed by the number on your touchtone phone. You will hear a prompt that your hand has been raised. Questions will be taken in the order received. Should you wish to cancel your request, please press the star followed by the tick. If you are using a speakerphone, please lift the handset before pressing anything. Your first question is from Shagun Singh from RBC. Please ask your question.
Speaker Change: Alright. Thank.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session and you have a question. Please press the star followed by the one on your Touchtone phone.
pritchard: You'll hear a prompt pritchard who's asking great questions will be taken in the order received should you wish to cancel your request. Please press the star followed by the tail.
Thomas: Using a speaker phone please lift the handset before pressing anarchy.
Speaker Change: Your first question is from chicken Zheng from RBC. Please ask your question.
Unknown Executive: Hi, this is Avion from Shagun. Thanks for taking my question. So first, talking about order growth, you guys mentioned you had 20% year-over-year order growth with your rehabilitation products making up 28% of total orders versus 25% in Q1. Can you comment on the order growth specifically for your flagship product, NexWave? I'm just trying to make sense of the large guidance reduction while your order growth seems to keep breaking records every quarter.
Yi Chen: Hi, This is all beyond she didnt. Thanks for taking my question.
Speaker Change: So first talking about order growth you guys mentioned, you have 20% year over year order growth with your rehabilitation products, making up 28% of total orders.
<unk>, 25% in Q1 can you comment on the order growth specifically to your flagship product of next wave I'm, just trying to make sense of the.
Thomas Sandgaard: Yeah, the growth on the NexWave device still continues; it's just growing faster on the other products. It's not like there is declining order growth on the NexWave.
Speaker Change: The large guidance reduction.
Speaker Change: While your order growth seems to keep breaking records every quarter.
Speaker Change: Yes. He did the gross on the next wave device still continues its just growing fast on the on the other products, it's not like a declining order growth on the on the next slide.
Unknown Executive: Okay, got it. And how should we think about the cadence, the second half in terms of operating expenses? Just any, like, P&L color you can give would be really helpful.
Speaker Change: Okay got it and how should we think about the cadence second half in terms of.
Speaker Change:
Speaker Change: Operating expenses and <unk>.
Speaker Change: Just any like P&L color you can give would.
Speaker Change: It would be really helpful.
Unknown Executive: Yeah, we obviously gave guidance on the updated guidance on revenue. We might see a slight increase in other products as part of that mix, but that's now reflected in the updated revenue guidance.
Speaker Change: Yes.
Speaker Change: You gave guidance on the updated guidance on on the revenue.
Speaker Change: We might see a slight increase in other products as part of that mix, but that's no good.
Speaker Change: The updated revenue guidance.
Unknown Executive: And we'll probably, for not too long, obtain a balance that is not going to tilt everything. So we expect that to be fairly consistent going forward. On the expense items, we obviously will see the level as a percent of revenue on G&A probably remain fairly constant.
Speaker Change: And we'd probably.
Speaker Change: So not too long.
Speaker Change: Obtain a balance that is is not going to tilt.
Speaker Change: Everything so we expect that to be fairly consistent going forward.
Speaker Change: On the expense items.
Speaker Change: We obviously will see the the level as a percent of revenue on G&A, probably remained fairly constant than might be able to add more to that.
Speaker Change: We should as a percentage of revenue we should see.
Speaker Change: Over the next several quarters.
Speaker Change: Our sales and marketing expenses decreased.
Speaker Change: As a percentage of revenue and thus return.
Speaker Change: And more and more to the bottom line and give us a decent decent earnings per share long term.
Unknown Executive: Yeah, I think that's a little more color, I think.
Speaker Change: Yes, I think that's a little more color I think on.
Speaker Change: On the G&A side, you will see it.
Speaker Change: It's going to stay a little flattish from a percent of revenue. It will go up slightly just remember we had some pretty significant vms expenses in the second half.
Speaker Change: As we do the clinical studies and other things to get ready for FDA submission in Q4.
Speaker Change: But as Thomas mentioned on the sales side I think youll see some.
Thomas: Some decreases in that run rate.
Thomas: When we lowered the number of reps you see a little bit in the quarter. It happens and you get more in the following quarters. So.
Speaker Change: I think those are going to drop in Q2 was about 47%, you'll probably be in the lower <unk> maybe.
Speaker Change: <unk> 42, 43% in Q3, and then drop closer to 40% in Q4.
Unknown Executive: That's super helpful. Thank you. And is there any update on the strategic alternatives front? That's my last question. Thank you. There are no materials that we can that we should announce.
Speaker Change: That's super helpful. Thank you and is there any update on the.
Speaker Change: Strategic alternatives.
Speaker Change: My last question. Thank you.
Unknown Executive: There's nothing material that we should announce at this point in time. It's still progressing, which would be considered positive, but there's nothing material that we can disclose at this point in time.
Speaker Change: Nothing material that we can.
Speaker Change: That we should announce at this point in time, it's still progressing.
Speaker Change: So what would be considered a positive, but there's just nothing material that.
Speaker Change: We can disclose at this point.
Operator: Thank you. Your next question is from Jeffrey Cohen from Leidenberg-Coleman. Please ask your question.
Speaker Change: Thank you. Our next question is from Jeffrey Cohen from Ladenburg Thalmann. Please ask your question.
Jeffrey Scott Cohen: Well, good afternoon. Thanks for taking our questions. Just a couple from our end. I guess firstly, though I may have missed it, the number of commercial folks now in the base business and how they might look for the back half of the year.
Jeffrey Scott Cohen: Well good afternoon. Thanks for taking our questions just a couple from Arrow I guess, firstly I may have missed it.
Speaker Change: Number of commercial folks.
Speaker Change: All in the base business and.
Speaker Change: How that might look for the back half of the year.
Thomas Sandgaard: We are sitting just below 400 right now. I think we entered Q2 with about 450, so we've had a reduction there. We still continue to hire reps while we prune the existing sales force. In the long term, we're going to see a significant improvement in terms of sales productivity as a result of that. Throughout the rest of the year, we'll continue to hire, but we'll have some attrition still. So, conservatively, let's just say it's going to remain flat. And we expect to continue to grow, if not at the end of Q4, then early next year. And we're still shooting to fill up all the 800 territories we have mapped out.
Speaker Change: We are sitting just below 400, right now I think.
Speaker Change: We entered Q2 with about 450.
Speaker Change: So we've had a reduction that we will still continue to hire reps, while we we've pruned a D.
Speaker Change: If the existing.
Speaker Change: Salesforce are.
Speaker Change: Long term, we are going to see a significant improvement in terms of sales for <unk>.
Speaker Change: Productivity as a result of that throughout the rest of the year.
Speaker Change: We will continue to hire but we will have some attrition still so conservatively lets just say its going to remain flat.
And we expect to continue to grow if not at the end of Q4 other than the early next year and we're still shooting to to fill up all the 800 territories, we have mapped up.
Donald Gregg: Okay, got it. And I know it's a bit early, but any commentary specific to NECO, as far as 25 and the commercial launch, whether it be on your efforts or others?
Speaker Change: Okay got it and I know, it's a bit early but any commentary specific to.
Speaker Change: Nico.
Speaker Change: <unk> 25 in India commercial launch whether it be on your absolute you or others.
Donald Gregg: Yeah, so on the NECO front, you know, it's a 2025 revenue play. We are expecting to submit to FDA in Q4. We're expecting a round of additional information requests from them, and so clearance would be potentially late Q1, possibly Q2. And we would be cleared to commercialize at that point. We've been working on a pipeline of KOLs, working very closely with investigator-initiated research plans for follow-on clinical studies for additional claims in 2025, and the back half of 2025 is when we would expect potential revenue from NECO.
Speaker Change: Yeah, so on the Nico front.
Speaker Change: It's a 2025 revenue play.
Speaker Change: We are.
Speaker Change: We are expecting to submit to FDA and Q4.
We're expecting a round of additional information request from them and so clearance would be potentially late Q1, possibly Q2.
Speaker Change: And we would be.
Speaker Change: Cleared two commercialized at that point.
Speaker Change: We've been working on pipeline of Kols, we've been.
Speaker Change: Working very closely with our investigator initiated research plans.
Speaker Change: For fall on clinical studies for additional claims in 2025.
Speaker Change: And the back half of 2025 is when we would expect potential revenue from Nico.
Donald Gregg: Okay, but the commercial efforts at this point in time will be your undertaking, as far as we know.
Okay.
Speaker Change: The commercial efforts at this point in time will be.
Speaker Change: You're undertaking as far as we know.
Donald Gregg: So we've been working on a few fronts, both an indirect and a direct sales force. The target market for this is hospitals, and a few other sites in addition to that. I've also been working on plans for strategic partnerships, which I could probably provide some more color on that later in Q4, Q1 of 2025.
Speaker Change: So we've been working on a few fronts, both in indirect and direct sales force.
Speaker Change: The target market for this is hospitals.
Speaker Change: And a few other sites in addition to that.
Speaker Change: I've also been working on plans for strategic partnerships, which I could probably provide some more color on that later in Q4.
Speaker Change: Q1 of 2025.
Unknown Executive: Okay, so stay tuned, stay tuned. Okay, perfect. And then, um...
Okay, So stay tuned.
Speaker Change: Stay tuned.
Speaker Change: Okay, perfect and then.
Thomas Sandgaard: I think we got the guidance and we got the Q4. Any seasonality to speak of or any big picture macroeconomic trends to speak of from Q2 for the back half of the year that we should be aware of?
Speaker Change: I think we got the guidance and we go through Q4, any any seasonality to speak of or any big.
Speaker Change: Big picture macroeconomic trends to speak of from Q2 to the back half of the year that we should be aware of.
Thomas Sandgaard: The industry we are in, I'm speaking about the pain management business, is still the same as it has been for many decades. We don't see any price pressure as such.
Speaker Change: The industry we are in.
Speaker Change: Yes.
Speaker Change: I'm speaking to the pain management business.
Speaker Change: The same as it has been for many decades.
Speaker Change:
Speaker Change: We don't see any price pressure.
Speaker Change: As such.
Thomas Sandgaard: And it's still just the same case-by-case and day-by-day battle by prescription on making sure we get paid by the 3,000 insurance companies that we are working with. The prescription patterns from the prescribing physicians are the same as they have pretty much always been. And again, our sales force is becoming more productive.
Speaker Change: And it's still just the same case by case and day by day Battle.
Speaker Change: By a prescription on making sure we get paid.
Speaker Change: The 3000 insurance companies that we are working with.
Speaker Change: A prescription patterns from the.
Speaker Change: Prescribing physicians is the same as it is pretty much always been.
Speaker Change: And again, our sales force is becoming more productive in terms of seasonality.
Thomas Sandgaard: In terms of seasonality, it's usual on the order side. We see prescribers typically go on vacation in January and, to some degree, February. So we always have lower orders there.
Speaker Change: It's the usual on the auto side we.
We see the prescribers typically go on vacation in January to some degree February. So we always have low order set but again, we compare year over year. So.
Thomas Sandgaard: But again, we compare year over year, so we'll see decent percentage growth regardless of that. We see a little bit of summer vacation too, and obviously, Thanksgiving and Christmas are a little weak order-wise. But else, that's the same seasonality as we've always seen. We see more or less the same seasonality in terms of cash collections. So we always tend to be very conservative in terms of how we report revenue in the first quarter, and then it accelerates throughout the year, mainly driven by the deductibles that commercial insurances impose on patients.
Speaker Change: See decent percentage growth regardless.
Speaker Change: Of that we see a little bit somewhat vacation too and obviously Thanksgiving and Christmas is a little weaker order wise, but that's.
Speaker Change: That's the same seasonality as we have always seen we see more or less the same seasonality in terms of cash collection. So we always tend to be very conservative in terms of how we report revenue in the first quarter and then accelerates throughout the year, mainly driven by.
Speaker Change: The deductible.
Speaker Change: <unk> insurance is imposed on patients. So the prescribers have the ability to go on vacation during that period, and let us provide us like us to take the hit for the deductibles.
Thomas Sandgaard: So the prescribers have the ability to go on vacation during that period and let other providers like us take the hit for the deductibles, while a lot of our revenue is recurring. So if we get a prescription in November, we'll still be billing for it typically in January, February, March, et cetera, and incur less cash collections right there as a result of the deductibles. Okay, guys.
So a lot of our revenue is recurring so if we get a <unk>.
Speaker Change: Prescription in November will still be billing forward typically in in January February March et cetera, and incur less cash collections right.
Speaker Change: As a result of that.
Speaker Change: The deductibles so that stays the same seasonality that we've seen for many decades.
Unknown Executive: Okay, got it. That does it for us. Thanks for taking our questions. Thank you. Your next question is from
Speaker Change: Okay got it that dose across thanks for taking our questions.
Operator: Thank you. Your next question is from Yi Chen from H.C. Wainwright.
Speaker Change: Thank you. Our next question is from <unk> <unk> from H C. Wainwright. Please ask your question.
Operator: Please ask your question. You there, Yi? Hello Yi Chen, your line is now open. Please ask your question.
Speaker Change: Yes.
Speaker Change: Hello <unk> your line is now open.
Speaker Change: Ask your question.
Speaker Change: Hello Hello.
<unk> <unk>: Thank you for taking my question could you give us an update on the ball and monitor and whether it could potentially generate any revenues in 2025.
Donald Gregg: Hi Yi Chen, it's Don Gregg. We have been working on this. As you know, I think our strategy is we've achieved FDA clearance on the CM1600. We're working on the next version of that device to be a full blood and fluid monitor to specifically measure, you know, fluid responsiveness to the human body.
<unk> <unk>: Hi, Ken It's Dan Greg.
Speaker Change: We have been working on this as you know I think our strategy is we've achieved.
Speaker Change: FDA clearance on the same <unk> hundred we're working on the next version of that device to be a full blood and fluid monitor.
Speaker Change: To.
Speaker Change: Specifically.
Speaker Change: Perform on fluid responsiveness to.
Speaker Change: The human body. This is this is not a revenue play specifically for 2024.
Donald Gregg: This is not a revenue play specifically for 2024 or 2025 at this point. Our focus for revenue is on the NECO product. At this point, it is the most mature in our product line, and part of a $2.5 billion market that's a highly established market.
Speaker Change: Or 2025 at this point our focus for revenue is on the Nico product at this point. It is the most mature and our product line and Nico has.
Speaker Change:
Speaker Change: Part of a $2 5 billion dollar market, that's a highly established market.
Speaker Change: Got it thank you.
Speaker Change: Youre welcome.
Operator: There are no further questions at this time. Please proceed.
There are no further questions at this time. Please proceed.
Unknown Executive: Yes, thank you for joining us today. We're 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 Zynex. Have a great day.
Speaker Change: Yes. Thank you for joining US today, we are pleased with our performance this quarter and the consistent growth our team is delivering.
Speaker Change: We look forward to leveraging that momentum throughout the rest of the year and speaking to you at the upcoming investor events.
Speaker Change: We appreciate your time and interest in <unk> have a great day.
Operator: Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining in my All This Connector line.
Speaker Change: Thank you ladies and gentlemen, the conference has now ended thank you all for joining you may all disconnect your lines.
Speaker Change: Okay.
Speaker Change: Okay.