Zynex, Inc.

Good afternoon, ladies and gentlemen, and welcome to DesignX 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. Please go ahead.

Thank you, operator. Good afternoon, everyone. Earlier today, Zynex released financial results for the second quarter end of June 30th, 2024. A copy of the press release is available on the company's website. Joining me on today's call are Thomas Sangard, Chairman, President, and Chief Executive Officer, Dan Morehead, 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. 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. With that, I'll now turn the call over to Thomas.

Thank you, Corinne, and good afternoon, everyone. 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 Luxorg, 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. The decrease in our 2024 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. 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 overall device ordering continue to increase. In the first quarter, we reported our private label rehab products made up 25% of all orders Up from the teens in 2022, 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 collect 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 NextWave device, since they don't have the recurring supply element, which is recognized over the entire treatment period for the NextWave. Positively, 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 discharging 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 growth. It's in our best interest to exit underperformers and add sales reps who will be more productive long-term. Lastly, At Sinex, 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. Over that period, our average annual revenue growth was 47%. 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 processes. 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. Revenue per rep on an annualized basis in the second quarter was approximately 485,000, with a decrease of 26% over 2023. 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 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 reps is high and productivity will not be sacrificed. 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, Sinex is poised to capitalize on the long-term opportunity presented by the 800 sales territories we've discussed in the past. 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 see significant progress in our monitoring division. I'll now ask Don Gregg, President of Xynex Monitoring Solutions, to provide updates on that business division.