Zynex, Inc.

Good afternoon and welcome to the XINEX 2021 first quarter 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 then one on your telephone keypad. To withdraw your question, please press star then two. 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 end December 31, 2020, as well as Forms 10-Q and 8-K 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 2021 First Quarter Earnings Call. First of all, I'm excited to announce 140% year-over-year order growth as our sales force continue to gain traction. Our first quarter revenue of 24.1 million was an increase of 58% compared to the same quarter last year. We continue to see good order flow as the economy returns to normal. As I mentioned, the first quarter orders came in 140% higher than the first quarter of last year. and 15% sequentially compared to the fourth quarter of last year. As a comparison, previous first quarters had a sequential growth in the 4% to 8% range as part of the seasonality that is in our industry, and we'll touch more on that. And we were able to double that prior average as an indication that things are really picking up. The continued strength in order speaks volumes to the relationships our sales force has with many prescribers and the need for them to prescribe non-opioid, non-addictive prescription strength solutions for their patients in pain. As a reminder, the majority of cash and revenue related to an order comes in over the year or two following the receipt of an 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. During the first quarter, we focused on the productivity of our sales reps and also trimmed our sales for slightly below our year-end total of just over 500 sales reps. We still expect to have 600 sales reps by year-end. Many of these hires will be in the second half of 2021. The addition of a net of 100 sales reps compares to a net of 300 we added in the second half of 2020. The additional Salesforce growth is now happening at a much slower pace, which will directly help our bottom line, obviously. I also want to mention that our operations continue without issues, and our supply chain remains uninterrupted. It is 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 being placed with our vendors on top of the in-house materials. During 2020 and here early this year, we've taken a more conservative position in response to COVID and any possible supply chain issues, which again resulted in increased inventory of approximately up towards 3 million in excess of our normal levels. We should be back to normal inventory levels during the second half of 2021. As announced earlier this month, due to our growth, we're moving into a new corporate headquarter. The new building is just down the street from the existing headquarters, and we'll expand the footprint from approximately 86,000 square feet in this building to, starting Monday morning, being in 110,000 square feet with the right for further expansion within the building. The new building, combined with our production facility gives us an approximate 161,000 square feet under lease, and the facilities are now conveniently just a few miles apart. 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 for pain management, our Neuromove device for stroke rehabilitation, and the N-Wave for incontinence treatments are examples of products that 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 the huge unmet potential for our blood volume monitor. Earlier this month, we hired Don and Greg as vice president of sales and operations for our monitoring solutions division, where we have the non-invasive blood volume monitor, Don will be leading our sales, marketing, clinical research, and engineering efforts. With Don's background, I'm confident we'll soon have our technology become standard of care for early detection of internal bleeding in surgical and post-recovery situations, as well as being used to detect blood loss during surgery. While the CM1500 is already in full production, The next generation, CM1600, is well underway, and we hope to apply for FDA clearance for that model soon. Don brings a wealth of experience to Cynics. He previously held leadership roles at Smith Medical's Vice President and General Manager of Infusion Systems, and at Medtronic, Senior Director of Product Marketing and Business Development of Health Informatics and Monitoring. Don also successfully built a direct sales force, launched and commercialized infusion products, remote patient monitoring, and clinical decision support software applications. As a result of innovating new products, executing sales plans, and creating strategic distribution and partnerships agreements, he grew each of these businesses by double digits. As most of you probably already know, we managed to get FDA's clearance on our CM1500 monitor about a year ago and also recently obtained three patents on the blood volume monitor. The CM1500 is a non-invasive monitor intended to monitor patient's 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 bleedings today are common and difficult to detect up 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. I should also mention that I recently filed a patent application for early detection of sepsis, a new technology we will soon begin prototyping. We continue to see solid preliminary results from a clinical study at Wake Forest, and are preparing to commence more studies on the device shortly. We're seeing interest in purchasing the device from hospitals that have devices on demo, and our engineering team is well underway with building prototypes of the next generation CM1600 that, again, will be even easier to use in surgical settings. I will now turn the call over to Dan Moorhead, our CFO.

Thanks, Thomas. First, I'll review our 2021 first quarter results. Orders grew 140% year over year and net revenue grew 58% to $24.1 million from $15.2 million in 2020. Device revenue increased 85% to $6.4 million compared to $3.4 million last year. Supplies revenue increased 51% year over year to $17.8 million from $11.8 million. Gross margins were 76% in the first quarter of 2021. As we mentioned previously, we transitioned our production and warehouse to a new facility in Q1. This will greatly enhance our efficiency, but in the short term, we'll put some pressure on gross margins. Sales and marketing expenses increased 148% year over year, as our sales force grew by 121% year over year. G&A expense grew 45% year over year. Much of the increase was related to increased headcounts in our reimbursement and patient support functions related to our order growth. First quarter had a net loss of $700,000, or two cents per share. Adjusted EBITDA, which is a standard EBITDA calculation plus an exclusion of non-cash stock-based compensation and severance and other income and expense, and is reconciled in our press release with a loss of $400,000 in the first quarter of 2021. On the balance sheet, as of March 31st, our cash balance is $33.4 million, which is down from year end, but much of this is related to the increased inventory, which will level out during the second half of 2021. Our working capital was $51.5 million at March 31st. With that, I'll now turn the call back over to Thomas.