ZYNEX INC Q4 FY2023 earnings call

• 2023 was highlighted by record revenue of $184 million, up 17% from the prior year, 11th consecutive quarter of profitability, and 7th straight quarter of record high order numbers.
• Produced $17.8 million in positive cash from operations in 2023, an all-time record.
• In the fourth quarter, placed a $6.2 million allowance on accounts receivables, a nonrecurring adjustment.
• Submitted a 510(k) application to the FDA for the M-Wave Neuromuscular Electrical Stimulation device in the fourth quarter, received FDA clearance in February 2024, expecting launch in next month or 2.
• Focused on filling 800 sales territories, with an average sales rep tenure of 18 months.
• Diversifying revenue stream, with best-selling product NexWave's contribution to orders decreasing from 85% a couple of years ago to 50%, and launching an initiative to promote other products.
• Monitoring division continued development of blood and fluid monitor, laser-based pulse oximeter, etc., with FDA clearance for second-generation blood and fluid volume monitor last year.

Pain Management Division: Full year 2023 device revenue was $58.8 million, a 35% increase from the prior year, and supplies revenue was $125.5 million, a 9% year-over-year increase. Fourth quarter device revenue was $16.3 million, and supplies revenue was $31 million. Monitoring Solutions Division: Pre-revenue, with development of products like blood and fluid monitor, laser-based pulse oximeter, etc. The monitoring division has products in pipeline, including submitting an FDA application for the laser-based pulse oximeter midyear 2024.

• 2024 total revenue expected to be approximately $227 million, representing ~23% growth over 2023, and diluted earnings per share of approximately $0.50.
• First quarter 2024 revenue expected to be ~$47.5 million, ~13% higher than first quarter 2023, with diluted earnings per share of $0.03.
• Expect margins to stay constant or slightly expand, with production group doing well on pricing.

• Regulatory environment risks, including potential delays in FDA clearances for monitoring products.
• Risks related to sales and marketing strategies, such as ensuring sales reps are fully productive and diversifying revenue stream without cannibalizing existing products.
• Operating performance risks, including managing accounts receivables and collections from payers.

Q: On the receivable allowance, is it related to a specific account and effect on devices and supplies?

A: The adjustment is related to slowly collecting receivables, not a specific account, and affects both devices and supplies.

Q: Comment on launching blood volume monitor and submittal for pulse-ox?

A: Focused on noninvasive laser pulse oximetry, expect to submit Nico to FDA mid-2024; blood volume monitor in clinical trials.

Q: Target audience, payer environment, and channels to market for M-Wave?

A: M-Wave is for neuromuscular electrical stimulation, used for reeducating muscles after surgery or sports injuries, billing codes apply, and sales force targets relevant physicians.

Q: Update on strategic alternatives review?

A: Still reviewing potential going private transaction with private equity firms, positive but nothing affirmative to report soon.

Q: Color on 2024 cadence and margins?

A: Expect mid-20% order growth, margins to stay constant or slightly expand.

Q: Contribution of NexWave to 2024 growth and acquisition opportunities?

A: NexWave will still be a significant driver, but diversifying other products; evaluating a handful of acquisition opportunities for complementary products.