Zynex, Inc.

Good afternoon and welcome to the Zynex fourth quarter and full year 2020 earnings call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your telephone keypad. To withdraw your question, you may press simply one. Certain statements in this release are forward-looking and as such are subject to numerous risks and uncertainties. Actual results may vary significantly from the results expressed or implied in such statements. Risk factors that could cause actual results to materially differ from forward-looking statements are described in our filings with the Securities and Exchange Commission, including the risk factors section of our annual report on Form 10-K for the year ended December 31, 2020, as well as forms 10Q, 8K, and 8KA, press releases, and the company's website. Please note this event is being recorded. I would now like to turn the conference over to Thomas Sandgaard, founder, chairman, and chief executive officer. Please go ahead.

Good afternoon. My name is Thomas Sandgaard, president and CEO of Sinex. Welcome to our 2020 fourth quarter and full year earnings call. I'm excited to announce yet another quarter of revenue growth and positive net income. Our fourth quarter revenue of 25.6 million increased 81% compared to the same quarter last year. It was also the highest quarterly revenue in the history of the company. It was our 18th straight quarter with positive net income and fully diluted earnings per share was 5 cents. Adjusted EBITDA for the fourth quarter was 3.4 million as we continue to invest in growing our sales force. We continue to see good order flow as we push through obstacles related to COVID-19 pandemic. Fourth quarter orders came in 117% higher than the fourth quarter of last year and 45% sequentially compared to Q3. For the full year, orders grew 96% compared to 2019, a solid result in the middle of a pandemic. The continued strength in orders and growth of those orders speaks volumes to the relationships that our sales force has with many prescribers and the need for them to prescribe non-opioid, non-addictive prescriptions, strength solutions for the patients in pain. As selling gets back to normal later in 2021, we see an upside in sales order growth as the over 300 sales reps we added net during 2020, they haven't been able to get access to many of the clinics in the territories due to COVID restrictions. As a reminder, the majority of cash and revenue related to an order comes in over the year following the receipt of the order as the patient uses the device and related supplies, which should lead to expanding revenue and profitability in the second half of 2021 and beyond. In Q4, we continued to aggressively add sales reps and exceeded 500 total reps by the end of the fourth quarter. Our recruiting efforts continue to be supported by a surge in candidates due to increased unemployment rates related to COVID-19. We expect these new hires to provide significant productivity increases in 2021 and beyond. We expect to have over 600 sales reps by year end. I should also mention that our operations continue without any issues and our supply chain remains uninterrupted. It's our practice to keep several months of finished products on the shelf, have four months of components on hand for internal assembly, and 12 to 18 months of orders placed with our vendors on top of the in-house materials. During 2020, we took an even more conservative approach in response to COVID-19. and any possible supply chain issues, which resulted in an increased inventory of approximately 3 million higher than our normal levels. We should be back to a more normal inventory level when we get through Q2 and Q3. The opioid epidemic continues to be a serious issue in this country, and we are increasingly working to get patients off opioids and for physicians to use our prescription strength technology as the first line of defense when treating pain. Currently, the devastating impact has reached the level where tens of thousands die yearly due to opioid abuse. We continue to develop more tools to make physicians aware of our technology that literally has no side effects. Our products for pain management and rehabilitation still stand out as some of the best products in the industry, The NexWave pain management, our NeuroMove device for stroke rehabilitation, and InWave for incontinence treatment puts us in a very strong product position in the rehabilitation markets. We continue to see great potential in both our product divisions. Our existing revenue-generating area for pain management, as well as a huge unmet potential for a blood volume monitor. As most of you probably already know, we managed to get the FDA clearance for our CM1500 blood and fluid monitor nearly a year ago. The CM1500 is a non-invasive monitor intended to monitor patients' fluid balance in hospitals and surgical centers. We expect to initially target ORs and surgeries that typically display substantial blood loss, as well as recovery rooms and ICUs where internal bleeding today are common and difficult to detect. until the point where serious complications occur. We believe this product will lead to safer surgeries, fewer complications, and less mortality, one of the biggest unmet needs in hospitals today. We're still recruiting to add more personnel to this division. We're seeing good, solid preliminary results from a clinical study at Wake Forest, and we're preparing to commence more studies on the device shortly. We are seeing interest in purchasing the device from hospitals that now have the device on demo. And our engineering team are well underway with building prototypes of our next generation CM1600 device that will be easier to use in certain settings. Recently, I filed a patent application for a technology that is somewhat similar in nature but will be used for noninvasively early detecting sepsis Another huge unmet problem in hospitals today. I will now turn the call over to Dan Moorhead, our CFO.

Thanks, Thomas. First, I'll review our 2020 fourth quarter results. Orders grew 117% year over year, and net revenue grew 81% to $25.6 million from $14.2 million in 2019. Device revenue increased 118% to $8.2 million compared to $3.8 million last year. Supplies revenue increased 67% year-over-year to $17.4 million from $10.4 million. Gross margins were 78% in the fourth quarter. Sales and marketing expenses increased 156% year-over-year as we continued to aggressively grow our sales force, and G&A expense grew 91% year-over-year. Much of the increase was related to increased headcount in our reimbursement and patient support functions related to our order growth. Fourth quarter net income was $1.8 million, or 5 cents per diluted share. Adjusted EBITDA, which is a standard EBITDA calculation, plus an exclusion of non-cash, stock-based compensation, and other income expense, and is reconciled in our press release, was $3.4 million in the fourth quarter of 2020. I'll now review the 2020 full-year results. Orders grew 96% year-over-year, which increased net revenue 76% to $80.1 million from $45.5 million in 2019. Device revenue increased 99% to $21.3 million compared to $10.7 million last year. Supplies revenue increased 69% year-over-year to $58.9 million from $34.8 million. Gross margins were 78%. Sales and marketing expenses increased 130% year-over-year, and G&A expense grew 71% year-over-year. 2020 net income was $9.1 million, or $0.26 per diluted share, compared to net income of $9.5 million, or $0.28 per diluted share in 2019. Adjusted EBITDA increased 13% to $13.7 million in 2020. On the balance sheet, as of December 31, 2020, Our cash balance was $39.2 million, up from $14 million at year end. As many of you know, we completed an equity transaction during July, which added $25 million to the balance sheet. Cash was down slightly from Q3 as we increased our inventory to protect against any supply chain issues. Our working capital grew 205% to $52.9 million at December 31st, compared to $17.4 million as of December 31st, 2019. With that, I'll turn the call back over to Thomas.