Q4 2024 Zynex Inc Earnings Call
Speaker Change: Good afternoon, ladies and gentlemen, and welcome to the Yi Zynex 4th quarter, 2024 earnings conference call. At this time, all participants are in listen only mode.
Speaker Change: A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would not like to turn the conference over to Brian Prenervu, Investor Relations for Zynex.
Brian Prenneville: Thank you, operator, and good afternoon, everyone. Earlier today, Zynex released financial results from the fourth quarter and year ended, December 31, 2024. A copy of the press release is available on the company's website.
Joining me today?
Speaker Change: On the call are Thomas Sandgaard, Chairman, President, Chief Executive Officer, Dan Moorhead, Chief Financial Officer, Anna Lucsok, Chief Operating Officer, Donald Gregg, President of Synex Monitoring Solutions,
Speaker Change: Form 10K and subsequent Form 10Qs, which identify the specific factors that may cause actual results or events to differ materially than those described in these forward-looking statements.
Speaker Change: 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.
and many more. Thank you. Thank you.
Speaker Change: Thanks, Brian , and good afternoon everyone. Thank you for joining us today for the fourth quarter and full year 2024 earnings call.
Speaker Change: 2024 was a successful year for Sinex as we continue to grow revenue and dry craftability.
Speaker Change: We have made strides in diversifying our revenue streams with the addition of several new products.
Some internally developed and some manufactured.
and I had a private...
Speaker Change: Private Labor Products, primarily in the areas of brazing, cold and compression products, all a perfect fit for our sales forces, cold points, in pain and rehab.
Speaker Change: We have also expanded the focus of our sales force to additional new prescribers, opinions we have products such as national change of workers comp and the VA.
Speaker Change: In a moment, Donald Gregg will provide an update for our patient monitoring business and the FDA submission of our post-doc simulator.
Speaker Change: In late 2024, we received positive test results from our NECO pulse examiner in multiple trials done at Duke University and at the University of California in San Francisco.
Speaker Change: Human trial completion is an essential step prior to our fight and case of mission to the FDA.
Speaker Change: compared to how the current LEDBs, post-soximate or exhibit, especially for skin with darker pigmentation.
Speaker Change: The old LED technology leads to inaccurate or inconsistent readings during clinical or critical times for a patient, which has been widely criticized in the media and politically.
Speaker Change: We believe that our laser-based system is a superior technology and has the opportunity to meaningfully impact patient outcomes.
Speaker Change: I would like Donald Gregg to provide more details on the status momentarily.
Speaker Change: We were recently notified by trachea that there were temporarily suspending payments to Synex related to the review of prior claims.
Speaker Change: We have a meeting with them here in early April to get it all sorted out but cannot at this point provide an estimate on when it will all be resolved. Anna will provide more details to her during her discussion of operations. Thanks.
Speaker Change: Given the trade case of substantial source of reimbursement revenue, we currently have limited visibility in our revenue protection for 2025.
Speaker Change: And we have taken the most conservative approach to nodding to revenue in the later part of 2024, where some of those bills were submitted to try care, yet not paid. And in this current quarter forecast, and therefore the corresponding lower revenue numbers.
As part of a normal prudent cost containment measure,
Speaker Change: Short term, while we accelerate sales to other sales channels, we continue to make adjustments to the corporate and sales cost structure to ensure we have optimized our structure and expense profile.
Speaker Change: and a set to continue our long-term growth and profitability. And again, Anna would cover this in more detail.
[inaudible]
Speaker Change: We remain very optimistic about the future of Sinex, the improvement we have made in analytics, celebrations over the past many years for sure significant benefits in the long term.
Speaker Change: As we continue to diversify the product mix and revenue stream, we believe it can actually better capture the 800 million of identified sales opportunities within our 800 designated sales territories.
Speaker Change: In the patient monitoring business, we're just before FDA submission and once cleared, that should generate revenue in a very well established multi-billion dollar sales segment.
or the past 29 years inception.
Speaker Change: Our growth has certainly not been in a straight line as long-term shareholders with certainly acknowledge. And the key for us is to keep focused on the long vision of growth and diversification and stay firm, regardless of short-term disruptions.
We trust that shareholders aren't bought to this trade as he.
a recent challenges in 2024 war.
Speaker Change: Not only introduce a new product that so far have collected less than expected, however we see clear signs of improvement here in early 2025.
Speaker Change: Our Salesforce and staff has been restructured and we are made changes to sales management.
These improvements are already beginning to take effect.
Speaker Change: and puts us in a good position to deal with the temporary suspension, payment suspension from take care while we focus on growing in other areas. Fortunately, we are in an industry where our potential chord points for our Salesforce is nearly endless.
Speaker Change: We are still confident that our non-invasive approach with at-home pain management devices have real growth opportunities to provide non-opioid relief to patients.
Speaker Change: We remain focused on ramping our Hospital Monitoring Division, which represents a large and growing market opportunity for the better mass trap than our competitors in the pulse-excometer market.
Speaker Change: I'll now turn the call over to Anna Lucsok to provide a more detailed update on the operations and the status with the trachea, Anna.
Anna Lucsok: Thank you, Thomas. As Thomas mentioned, we were notified by track air of a temporary suspension of payments if they complete their review.
Anna Lucsok: from a reimbursement perspective, Track Air is one of our largest insurers. We're currently working through the re-instatement process and have a meeting with Defense Health Agency to present our appeal in early April , but worst case, it could take as long as 12 months to complete.
Anna Lucsok: Um, TriCare represents between 20 to 25% of our revenues, so this is a significant reduction in revenue if the suspension were to be upheld. I think it is important to note a few things relative to this news.
Anna Lucsok: We completed an audit with Track Air as recently as 2022. In this audit, we made all of the necessary adjustments to billing practices that were outlined and we haven't heard anything further since that time [inaudible]
Anna Lucsok: We have demonstrated that we fully comply with those adjustments and have a good cause for eventually continued business as usual with try care.
Anna Lucsok: During this temporary suspension, we remain in network with track care and are expected to continue processing you and existing claims for treatment for track care patients. In fact, track care has said that they want current and new patients to continue receiving care through this process for our contract.
Anna Lucsok: If or when the reimbursement begins again, try care would be responsible for paying all of the claims that have been processed during that temporary hold, which would show significant increased revenue once received.
Anna Lucsok: Moving on to operations. We're also restructuring our organization and staff levels, which will decrease overall staff by 15% and primarily affects employees in our corporate office, along with other expense reductions made during the second half of 2024 and Q1 2025.
Anna Lucsok: will result in annual savings of approximately 35 million. This is a normal and good business practice that all companies constantly undergo.
Anna Lucsok: In 2024, Trent the sales force to ensure we have the right reps in place to put us in the best position moving forward
Anna Lucsok: As of December 31st, we had a sales force of approximately 330 people, as compared to the beginning of 2024, where we had approximately 475 people.
Anna Lucsok: Progress takes time, but we have seen positive trends. Revenue increased 4% in 2024, and
Anna Lucsok: The total number of wraps was down, but the revenue per wrapping freeze 22% to 490,000 on average in 2024.
Anna Lucsok: I'll now turn the call over to Dahan Gregg to provide a more detailed update on the patient monitoring business.
Don Gregg: Thank you, Anna. I want to provide an update on the progress of our NECO pull-slack
Don Gregg: Although our FDA submission has been delayed into 2025, we are closing on major milestones to commercialize the NECO pull-tack submitter.
Don Gregg: Nico Verification, Human Trials, completed in 4th quarter of 2024 at Duke University with positive results as planned.
Don Gregg: Zynex's Niko Pulse Oximeter utilizes precise laser technology to measure blood oxygenation levels directly as opposed to current LED pulse oximeter products, which only estimate oxygenation
Don Gregg: LED pulse-like centers have been shown to mismeasure oxygen levels in several populations, most prominently in individuals with darker skin pigmentation.
Don Gregg: We presented a poster of our study from the University of California, San Francisco Hipoxia Lab at Anesthesiology 2024 in the fourth quarter.
Don Gregg: four NECO Pulse Accimeters and two different commercially available LED-based Pulse Accimeters were used on each participant. Conclusions from the study showed the NECO Pulse Accimeter did not demonstrate a bias for dark pigmented participants compared to lightly pigmented participants.
Don Gregg: By comparison, conventional LED-based pulsoximeters in the present study read falsely higher on darkly pigmented participants, specifically at lower oxygen saturation levels.
Don Gregg: There have been published studies starting in the 1980s that detail how these inaccuracies were associated with disparities in care.
Don Gregg: Completed human trials were one of the last major milestones to complete prior to the FDA 5-10-K submission
Don Gregg: In late 2024 and into 2025, Nikos have been undergoing third party regulatory ISO testing for compliance to safety and electrical standards.
Don Gregg: At this point, we anticipate FDA submission in the next 30 to 60 days.
Don Gregg: Following that completion based on historical submissions approval takes approximately six months which would mean a potential fourth quarter 2025 clearance barring any uncertainty of FDA review resources.
Don Gregg: Also, in December of 2024, we announced our membership in the Open Oxymetry Project, a non-profit oximetry partnership of research organizations and industries created to improve the safety and precision of full-fleximeters in all populations.
Don Gregg: Zynex is pushing to be a key industry partner to all clinicians and show how the Niko Pulsar
Don Gregg: Technology inherently solves the current market challenges, especially spent skin pigmentation bias, while bringing new precision medicine forward in the field of pulse asymmetry.
Don Gregg: In summary, we've achieved major milestones in Q4 of 2024 on Neco Commercial Development, Clinical Verification, and we are very close to FDA-510K submission.
Don Gregg: 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.
Thanks, Tom.
Don Gregg: Please refer to our press release issued earlier today for a summary of our financial results for the fourth quarter and year-end of December 31, 2024.
Don Gregg: Net revenue was $46 million, compared to $47.3 million in the fourth quarter of 2023.
Don Gregg: The vice revenue was 14.8 million compared to 16.3 million in the fourth quarter of last year.
Don Gregg: Supply's revenue was 31.2 million, up from 31 million in the fourth quarter of last year.
Don Gregg: The device revenue was lower during the quarter due to some product mixed shift to lower price products such as braces and other products that have lower price points than the next wave
Don Gregg: Gross Profit in the fourth quarter was 36 million or 78% of revenue as compared to 37 million also 78% of revenue in 2023.
Don Gregg: Sales and marketing expenses were 19.3 million dollars in the fourth quarter of 2024, compared to 21.7 million in the same period in 2023.
Don Gregg: The primary contributor to the decrease in sales and marketing expenses was our head count reduction of roughly 140 sales team members.
Don Gregg: GNA expenses were 17.3 million in the fourth quarter of 2024, compared to 13 million last year largely due to ZMS increased expenses and professional fees.
Don Gregg: That loss was $615,000 or two cents per share in the fourth quarter of 2024 compared to net income of 1.2 million or four cents per share in Q4 of 23.
Don Gregg: Adjusted EBITDA for the three months, ended December 31, 2024, was 584,000, as compared to 9.9 million in the quarter-ended December 31, 2023.
Don Gregg: Cash close from operations were 2.4 million Q4 and 12.7 million for the full year.
Don Gregg: The cash flow in the quarter and year increased our cash on the balance sheet to $39.6 million up 5% from Q3's balance of $37.6 million.
Working Capital was 58.3 million as of December 31st.
Thomas Sandgaard: With that, I'll now turn the call back over to Thomas.
Yeah, thank you, Dan.
Thomas Sandgaard: The beginning of 2025 was certainly not as smooth as we had hoped but we are optimistic about the long-term prospects of the company and the opportunities we have going forward. That still has not changed.
Thomas Sandgaard: Because of the uncertainty surrounding payments here, short term, from Traikera, we will not be providing full 2025 annual guidance yet, given the lack of visibility surrounding the temporary payments of suspension.
Thomas Sandgaard: We are obviously still in network with TriCare and continue to accept new prescriptions for the instructions.
Thomas Sandgaard: When we learn more information throughout the year, we'll be better able to communicate expectations and update everyone.
[inaudible]
Thomas Sandgaard: At this stage, we anticipate the first quarter this year revenue of approximately $30 million. We will likely have a net loss in the first quarter ranging between 9 and 10 million as a result of not all restructuring having taken effect yet.
Thomas Sandgaard: Throughout this year, we will look to make adjustments to the cost structures as needed.
Thomas Sandgaard: Fundamentally, with or without try cares appear, we still have a rock solid business that will continue to grow towards revenues of $800 million plus in the pain management division.
Thomas Sandgaard: Our diversification into the patient monitoring area is set to start adding revenue late this year and next year pending FTA clearance.
Thomas Sandgaard: We are incredibly proud of the growth that we have consistently demonstrated over the past several years.
just 10 years ago.
Our revenues were nearly 20 times lower than now.
Thomas Sandgaard: And in the meantime, we've been able to buy back over $80 million worth of stock in the open market and we had a cash balance of 40 million at the end of 2024. Well, 10 years ago, we were scraping the bottom while bank account daily to pay our bills.
Looking forward.
Thomas Sandgaard: We believe we have additional customers and revenue streams I can try further growth.
Thomas Sandgaard: The business we have created and the profitability we are able to generate allows us to have a high degree of flexibility to allocate capital in several ways and deal with temporary difficult situations like this.
Thomas Sandgaard: We have shown the ability to adjust to market, customer and reimbursement changes, and continue to invest in our business and return cash to shareholders.
With that, operator, please welcome the call up for questions.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchstone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two.
Thomas Sandgaard: If you are using a speaker phone, please make sure you lift your handset before pressing any keys
Speaker Change: Your first question comes from the line of Jeffrey Cohen from Lennonberg, please go
Well, thanks for taking our questions.
Jeffrey Cohen: Just a couple from Aaron, so would you talk about the stock reductions of 15% or 15% could you give us a sense of what was accomplished in the fourth quarter and then also give us a sense of how that will affect your two op-x lines, both the sales line and the GNA line.
Yeah, I would...
Jeffrey Cohen: You know, I would say the, we probably did, if you're looking at 30, the
Jeffrey Cohen: But you wouldn't see all of it because obviously you're looking at run rates and those types of things so they were a lot of those were implemented in the second half and then the remaining pieces were done in Q1 with some of that come in laden Q1 so you know as if you're looking at [inaudible]
Jeffrey Cohen: You know, sales expenses and those types of things as far as run rate
Jeffrey Cohen: Q4 sales, we just posted 19.3 million, I think that number is definitely coming down and for the past few quarters, as you know, so it's
It's probably down on.
Um, um...
Speaker Change: you know a million and a half to two million on the run rate going forward and then GNA you're going to see about the same thing down a couple million dollars a quarter based on what we did in Q4 and those will actually continue to come down in Q2 a little bit as well. Like I said a lot of those changes were put in at the end or middle to end of Q1.
Speaker Change: Yep, so I guess I'm 30 on an annual basis for 2025. Does it hit both the sales and marketing as well as the GNA? The same percentage or is it going to be more heavily weighted on the sales and marketing line?
Speaker Change: No, it'd be more on the GNA because the GNA is a smaller number, too, so it's going to be a bigger number out of the smaller number. Sales was already decreasing based on, you know, the trimming that Anna talked about and those types of things. So I think as a percentage, it's going to be more on the GNA line but both are going to be decreasing by, you know, like I said, run rate, you know, you're looking at close to it. [inaudible]
2 million compared to what we did in Q4.
Speaker Change: Got it. Okay. And then secondly, maybe for Thomas or for Dahan. Could you hypothesize with us a little bit about?
Speaker Change: Nuccox and the commercial path to market that you're anticipating are you hypothesizing?
Speaker Change: going direct yourselves with a commercial organization where you have partners or different setups for different channels.
Speaker Change: So, this is Dahan. We have a strategy that actually leverages all three of those as you look at penetrating the market as we would get clearance and potentially in Q4.
Speaker Change: 2026 certainly would be the year of ramp for that. We have been in discussions with potential partners, not just distribution partners, but partners that would potentially take the
Speaker Change: and put it in their sales bag. We have had discussions.
Speaker Change: through what it would look like as part of a direct sales force, where we would start with the particular hospitals and IDNs.
and then, third of all, we have...
Speaker Change: looked at an indirect sales force of potential 1099 of organizations that sell both capital and disposable equipment and that's and so we're poised to be ready to pull the trigger when we have clearance and
covered the entire plan with Thomas and our executive leaders.
Speaker Change: Okay, perfect. Good, those are for us. Thanks for taking our questions.
Speaker Change: Your next question comes from the line of Shagans saying from RBC, your line is now open.
Speaker Change: Good afternoon, this is Avi Alper Shadun. I have a few questions. First, what was the nature of the 2022 audit by TriCare related to billing practices? And I guess why didn't you have any visibility to TriCare ahead of time before this happened?
Speaker Change: The type of adjustments that were suggested during the audit were also fairly standard so nothing major was identified or adjusted.
Okay, could you...
Okay. I guess it's helpful.
Speaker Change: Why don't you have, you only gave Q1 sales guidance, not 2025 obviously, but why don't you have the visibility into sales, you have still 75% of your business or so, that is being reimbursed. Could there be a domino effect? What conversations are you having with other payers?
and many more. Thank you. Thank you.
Speaker Change: No, there's really no connection here. This is totally isolated. We do obviously internally have some numbers that are if try care.
End up never paying us anything, or if-
Speaker Change: They don't stop picking up payments until the end of the year.
Speaker Change: We're pretty confident that at some point throughout the year, we'll eventually get through this conversation with them and basically prove that hey, we did everything you asked for what's your problem. It's been very unclear exactly what it is they're looking for.
Speaker Change: So, and because TriK is such a big part of our revenue, we, um,
We obviously
Speaker Change: The difference in the guidance we'll give is many tens of millions dollars, if not more than 50 million dollars.
Speaker Change: So therefore we would like to have a little more clarity in our dialogue please.
Speaker Change: We try care before we get to revenue guidance. What we are doing is to make sure in a worst case scenario, let's keep doing what we always should be doing. Make sure we trim expenses and restruct the organization to be able to handle even worst case scenarios.
Bye-bye.
Speaker Change: Great. And the last question is, what's your plan to present at this April meeting with Trycare? Have they told you any details on what they are requesting anything or do you have, I guess, data to show them to
Speaker Change: Whatever the help, help them figure it out, whatever it is that they exactly need from you.
Quinn Callanan: Anna Lucsok, Quinn Callanan, Donald Gregg, Quinn Callanan, Donald Gregg, Quinn Callanan,
Speaker Change: Yeah, they gave us some big guidance on what they're looking for. It's still very unclear what exactly their problem is, but
Speaker Change: We have lots of data to present to them on specifically regarding policies that we're following. We will be referring back to the 2022 audit and the findings of that audit and adjustments.
Speaker Change: There were some directions we received during the audit that we'll be highlighting in that presentation That's mainly going to be our focus [inaudible]
Thank you.
Speaker Change: Your last question comes from the line of Yi Chen from HC Wainwright, please go ahead.
Yi Chen: Thank you for taking my questions. Could you comment on what specific factors that triggered to try here to start reviewing that?
Yi Chen: your project claims, and is it a typical practice that during the review process pairs what temporarily suspend things?
Yi Chen: We were unclear on specific triggers at this point because they haven't communicated clearly what the issue is.
Yi Chen: As far as these type of reviews, I mean post-painment reviews among payers are very common. We undergo multiple audits or post-painment reviews from several different payers on the monthly basis. Payment suspension is somewhat common. It's not the usual practice, but it happens with other payers as well.
Speaker Change: So, are you worried that the other players could potentially follow, track you and start with viewing claims and suspend payments to you?
Speaker Change: All the time. And these things happen with small insurance companies, large insurance carriers.
Speaker Change: We are taking this very conservative approach, but these guys all operate very independently. There's really no connection. And this is the government peer.
Speaker Change: It's not in the private sector, so it's already there, pretty big disconnect.
Okay.
Speaker Change: And just trying to clarify, did you mention that this kind of process could potentially take up to 12 months to resolve?
Speaker Change: That's what the letter says. Yes, the letter from Defense Health Agency stated this is a temporary payment suspension and it could be up to 12 months.
Speaker Change: But we are given an opportunity to present an appeal within 30 days which we have a meeting scheduled in the beginning of April and we'll know more after that meeting.
Speaker Change: and yet they have the nerve to demand that we still treat and sense of lies to existing patients and keep accepting new patients and treat them on a scent like we all
Accept the
Don't send us payment in the meantime.
Very nice, but ...
That's a reality for at least for now.
Speaker Change: There's the claims made to try to cover a specific territory in the country, or it's across the country.
They're national, they're across the country right now.
Speaker Change: Actually, one of their letters had had an interesting statement in it that one of their very very valued providers and they really appreciate working with us.
Jeffrey Cohen, Unknown Executive,
Please see the complete disclaimer at https://sites.google.com
Speaker Change: Obviously a pretty big deal for what we do for all those patients
Oh, great. Thank you for taking my question.
and many more. Thank you. Thank you.
Speaker Change: There are no further questions at this time. I'd like to turn the call over to Thomas Sandgaard for closing your marks. Sir, please go ahead.
Thomas Sandgaard: Yeah, thank you for joining us today. Although disappointing, we're still overall long-term pleased with our performance and were things ahead. And last year, obviously, we ended up with a decent financial result. And the consistent growth that our team is still delivering.
Thomas Sandgaard: We look forward to leveraging our momentum and the changes we are making to the organization and the direction of our sales force throughout 2025 and we look forward to speaking to you
Thomas Sandgaard: I appreciate your time and interest in Cynex and have a great day.
[inaudible]
Thomas Sandgaard: This concludes today's conference call. Thank you very much for your participation. You may now disconnect.