Hi everyone, thank you for being here today. I'm Shagun Singh, Senior Medical Device Analyst at RBC, and I'm very pleased to have the next company here with us, Zynex. Joining us from the company is Dan Moorhead, Chief Financial Officer. By way of background, Zynex is a medical device company that develops, manufactures, and markets pain management and rehabilitation products. It is also looking to expand into patient monitoring with products for hemodynamic monitoring, pulse oximetry, and sepsis monitoring for use in hospitals. The company was founded by the CEO in 1996. It's headquartered in Englewood, Colorado. Dan, thank you so much for being here today. Really appreciate it. Thank you. We appreciate being invited. Great. So, you know, I thought maybe we'll start with some high-level questions just to level set the investors. Can you walk us through the history of the company, how the strategy has evolved over the years, and really brought you to your current financial growth profile where you're delivering double-digit growth, 80% gross margins, and on an underlying basis, mid-teens operating margins ex investments? So maybe a brief history would kick us off. Sure. Yeah, like you mentioned, Thomas Sandgaard founded the company back in the late 1990s. Electrotherapy for pain management, opioid-free pain management, is what's driving a lot of this. You know, we really began to scale the company in the, you know, 2018 timeframe. That's really when we moved to the direct sales model. Prior to that, they'd used a contract sales model, which is pretty common in the industry in DME. But with that strategy, you know, it's really cheap, so it's efficient. You know, you pay commissions, you don't have any fixed costs, but you don't control their time, you don't control growth, and so it makes it really difficult to grow the business and, you know, hit growth objectives. So starting in, you know, it was early 2018 we started hiring direct Zynex-only sales reps, which was a huge investment for us at the time. Over that time we were really successful. So from 2019 to 2021 we were growing orders at 80%+ per year, as we started the initial ramp. Subsequent to that, you know, the last couple of years we've been more in the 20%-40%, which we kind of expected to level off, but having a lot of success still. You know, we continue to expand the sales force. We have about 450 reps in the U.S. right now. Again, that's starting from 0 in 2018, so it's been, it's been quite a ride. As well as we're expanding our product portfolio. Not only do we do the electrotherapy products, but we want sales reps to have a large bag of products when they go visit clinics or go visit doctors. So we do bracing, we do hot-cold, we do cervical traction. So the combination of those things has allowed us to grow the company. From, you know, I think 2017 we did just over $13 million in revenue, and as you know, last year we did, you know, almost $185 million in revenue. The growth has been significant over the last, you know, 7+ years. Yeah, no, that's really helpful color. So in Q4 of last year you did announce that you were evaluating strategic alternatives for the company in order to boost shareholder returns. Can you talk to us about, you know, why you decided this and, you know, also why did you decide to share that information with the street? You know, the process was going to be a, you know, I think it always ends up being a public process. We chose to announce it to get past kind of the whisper and everything else that can happen if you don't do that. So we thought that was the right thing to do. You know, through board evaluation and other things that we were looking at, we, you know, felt the company was undervalued. So we were looking at strategic alternatives to maximize shareholder value. As we've gone through that process, we've talked to, you know, strategic buyers, private equity buyers, all kinds of situations. We're evaluating all types of strategic alternatives, which the process would tell you, and, it's been a really good process. We've learned a lot, about the business, about how other people look at the business. So, you know, we've had some really positive conversations. It's ongoing right now, and so we'll continue to work on that process. But as I think Thomas mentioned on the last call, nothing to announce yet, but we continue to, you know, have positive conversations. Any takeaways from, you know, how others are viewing the business, you know, any highlights there that you could share? You know, I think it's probably more from the divisions, you know, looking at the pain management side, looking at the monitoring side, how they fit together, and how different people look at some of the financial metrics with each of them. Obviously, the monitoring side is pre-revenue, and so we are taking a little bit of a cash hit and an EPS hit on that business to get it developed, which we believe in. And then the monitoring side or the pain management side, which continues, you know, double-digit growth, and increased profitability. So it was just interesting to hear people's feedback on those divisions and kind of how they view them. I think on the Q1 call, you did give an update, with regards to going private. So it sounded like out of all the initiatives, you know, it's likely that going private is more likely. Is that, is that true? And I know there is, no, no certainty in terms of timing, but anything you can share and how you feel about, you know, ending up, you know, as a private company? You know, it's a transaction, so transactions are not done till they're done, and so I don't know that, we don't have anything to report on outside of what we talked about at the Q1 call, but we'll continue to work on the process and see where it goes. Got it. And I guess just last question on this, you know, if nothing comes out of this process, you know, what happens next? And is there a time limit that you have? So, you know, you know, say that it goes through into the second half of 2024 and then you're done with the process. Any timelines there? We don't currently have a timeline. It's kind of an ongoing process, so it's hard to know, you know, a stopping time at this point, but, obviously we'll keep everybody updated and, and let you know if something happens. Okay, fair enough. You know, with respect to capital allocation, I think, you know, you have been very active on the share repurchase front throughout 2023 and also in Q1. I believe you still have a $15 million, you know, availability left in your $20 million authorization. Just how are you thinking about share repurchases going forward, and capital allocation programs from here? Yeah, I think we have some flexibility. We're profitable, we're cash flow positive, so we have some flexibility there. As you said, we have purchased a lot of shares in the last, I think it's close to $80 million over the last couple of years. So, there's been quite a bit on the buyback side. I would say, you know, with the flexibility, we'll continue the buyback. I think albeit it'll be lower levels than it has been in the past. We have that $15 million left. And so you'll probably see that slow down, but I think you'll still see us active in the buyback market because, you know, we feel it's good for shareholder value as we think, you know, the share price is undervalued. How do you think about M&A? You have been, you know, active in the M&A space previously, and then also divestitures because you said that, you know, a lot of the outsiders are looking at you as two different businesses, and they value it differently. So how do you think about M&A? You know, I think the pulse ox business came through the M&A route, as well as divestitures. I would say on the M&A side you'd look at it from each division. On the pain management side, we've added a lot of new products that we're distributing, you know, bracing, hot-cold, traction. And so it's possible instead of distributing those, we purchase a company that does that to try and capture that margin and take that middleman out. We have a built-in distribution channel with our 450 sales reps, so that's, that's a good fit for us. You know, does it come to M&A or is it just a product distribution? We'll see. It'd have to be a really good fit. But I think if you're looking at M&A on the pain management side, that's where it would be. On the monitoring side, you know, I would, it's possible something comes up that's a really good fit, but I would say right now we have our hands full trying to get the products, the laser-based pulse ox products to FDA submission and clearance. So I think that's where our focus will kind of stay right now. You're still committed to both the segments? Oh, for sure. Yeah, no, it, again, even though you can look at them separately, we have, obviously, the pain management side kind of speaks for itself. It's putting out really good results, double-digit top-line growth and increased profitability. But we really believe in the monitoring products. The laser-based pulse ox products are a game changer, and I think people will start to see that probably over the next, you know, 6-12 months. Got it. I know you recently reported Q1 results, so, you know, perhaps we can talk about that. You know, the results missed by $1 million. I think there was a Change Healthcare cyber attack impact there. Can you just call out the trends that you saw in Q1 and, you know, what was the Change Healthcare impact that you saw? You know, it was really just due to the cyber attack, we weren't able to submit invoices or a lot of the billings online, and some of the payers suspended payments. And so it just slowed down revenue slightly. Again, it was $1 million on, you know, $46 million in revenue. So it was, it was slight. But like we've said, we expect to recapture that over the rest of the year. What about the collections? That was something you called out in Q4 of last year. And I think the expectation was that it was, it, there was a possibility you could get some of that $6.2 million over the course of 2024. Is that something that you've seen come in year to date? Is it your expectation that we may see some of that in 2024? For sure. Yeah, no, we did collect some of it, during the year, and we expect that to continue. Now it's still, you know, probably immaterial as it relates to the overall financial picture, but, we still expect to collect it, and we will continue to pursue it for sure. And how much have you collected to date on that $6.2 million? We'll probably put something out later in the year, but I don't have anything to share today. Got it. And with respect to your guidance, it's for at least $227 million for the full year, including at least $52 million in Q2. Can you walk us through your assumptions behind the guidance that you laid out? Yeah. You know, when we put together the forecast, you're looking at, you know, our revenue comes through a patient base, right, that are getting supplies and being treated on a monthly basis with our products. So when we're building that out, we look at what's coming through in expected supplies or that recurring revenue, and then we have a pretty good feel for order forecasts and what the new orders are going to be. And so when you combine those, we can come up with a pretty good expectation of what revenue should be. And then the $52 and the $227 came from that. But, you know, we have a pretty good look at what we believe revenue is going to be for sure. Got it. So your full year guidance is on an underlying basis. I know you report kind of GAAP numbers, but, you know, it's about 19% and a year-over-year growth. In In the prior two years, you've done about 21% pretty consistently. Should we think of this as conservatism or, you know, it's appropriate because, you know, because of any specific factors that you may want to call out? You know, I wouldn't call it overly conservative. 19%-21% is, you know, the math ends up being what the math ends up being. But, you know, I think how we see it is, you know, we continue to see, you know, we had over 20% revenue or order growth in Q1. We expect that for the full year. That should translate into, you know, approximately 20% revenue growth for the full year. You know, I think we're really focused on the sales force, productivity of the sales force, and, you know, continuing to grow that. You know, we've talked in the past about wanting to get sales reps to approximately $1 million on average across the entire sales force. Obviously, we have sales reps that are doing that now and well beyond that now. But to get that across the 450 people just takes some time. As we continue to do that, you know, I think you'll see those results come in. Can you walk us through some of the specific initiatives you have in place in order to drive that productivity improvement? Because that seems to be a very critical driver of growth. For sure. You know, the biggest one is that we think it takes a rep three years to build out their territory. Generally, we hire people with less medical experience, so it does take them some time to build their territory. We think it takes them, like I said, about three years to get to that $1 million mark. Right now, you know, revenue per rep is about $400,000, a little over $400,000, but the average tenure of our reps is about 18 months. So we're generally on track there. It really takes time for them to visit clinics, you know, demo the product so that clinicians, doctors are prescribing the product. And that just takes time to build those relationships and build that trust so that they can start sending in prescriptions. So it's that part is just a time-based thing. The other thing we did, I think that we've talked about before, is we changed our management structure a little bit on the sales side. We have regional sales directors that sit over the entire sales force, but we took our best salespeople and put them into management roles. It's almost this player-coach type of relationship where our best sales reps are training the sales reps on the ground because they have the best experience of, you know, how to get past the gatekeeper, how to get in to talk to doctors, how to get past objections and those types of things. And so since we've done that, we've had really good success. Last year we had 43% order growth, and a lot of that would be attributable to, you know, that new sales structure and, you know, that, that formula. And what’s factored into your guidance for 2024 for productivity improvements? You know, ending rep count will dictate that, right? It's just, it ends up being just division. But I think you're looking at probably 20% on the rep side, so approaching $500K. Got it. That's really helpful. And as we think about the long-term growth trajectory for the company, I guess for pain management alone, should we think about you as a +20% growth company or roughly in that ballpark? Yeah, I think so. I think that's how we look at it. And as we build long-term models based on sales rep productivity growth, sales rep number growth, that's kind of how we look at it as well. Obviously, you know, there's variability in how many people you can hire and how many people stick. Like we've said, we are being really critical of existing reps, and if they're not hitting their numbers, we exit them quickly. You know, that doesn't really affect the top line that much because usually they're fairly low producers, but it really helps profitability a lot. And that's where you're seeing some of that increase in the EPS projection for 2024 of $0.50 versus, you know, we did $0.27 last year. You know, we had the write-off in Q4, so more on a pro forma basis, we would have been in probably the $0.43-$0.44 range. but it's still, then you're looking at a, you know, a 15% increase in EPS, and that's a number that I think we're pretty confident we can, we can hit and, and possibly beat. You know, just, I guess, a couple of follow-ups on the EPS side. So you mentioned at least $0.50 in EPS. You know, the ZMI side or the pain management side, if I just take that, you know, it's about $0.80, which is double year-over-year. And correct me if I'm wrong. Is this all productivity improvements? Like what else is going on that is driving, you know, just a doubling of EPS on your pain management side? I don't think it's quite double. I think if you adjusted for the write-off last year, it would be. I think we went from, it's going from mid-50s to 80. It's still a significant increase. I think 2023 was affected by a few things. You know, we were still coming out of the really high inflationary period. And so we saw costs increase pretty significantly in 2022 and 2023 related to that. We had a little bit of backup. You know, there was a labor shortage that we had trouble hiring in 2021 and 2022, and some of that kind of hit it, hit 2023. And so 2023 may have took a little bigger hit on that than it should have. But generally, focusing on rep productivity is one of the big drivers that's going to drive that from, you know, $0.27 or in the mid-50s to that $0.80 range. With respect to your operating margins, you know, I think on an underlying basis, somewhere around 16% based on our model, for the full year. How should we think about the trajectory of, of that over the next couple of years? You know, when do you hit like +20%? You also have the investments on the monitoring side. So when do that break? When does that break even? So, operating margins, are we the 16%? Was that for ZMI or is that consolidated? Yeah, that, that is for ZMI, the underlying. Yeah, for ZMI. So I think consolidated we should be kind of low double digits this year since we were single digits last year. But you should see the operating margins on the ZMI side approaching 20% for sure. And that should continue. On the monitoring side, you know, we're still looking at FDA submission in Q4 for the laser-based pulse oximeter. And I think we got to get a little closer to that before we can start talking about a break-even point. Okay, fair enough. You know, just moving on to patient monitoring, it's a massive TAM out there. Can you walk us through, you know, the products that you have specifically, NiCO and HemoOx on the pulse oximetry side? And what exactly is differentiated? How will you compete with big players such as Medtronic and Masimo? What's the secret sauce there? It's a much better product. So you're talking about a pulse oximeter that uses LED lights, which are, you know, don't penetrate the skin as well, especially people with darker skin. Our laser-based system is much more accurate and much closer to the gold standard, which would be an invasive blood draw. It does it all non-invasively. So, you know, you're really competing on a much better product. The NiCO product itself will identify the four types of hemoglobin, and identify a patient's blood oxygen saturation. The LED systems do an estimate on that. On the NiCO side, it's hemoglobin, red blood cell count, and just a better analysis for clinicians to make decisions on patients. Got it. You know, with respect to timelines, you did say submission for NiCO in, in Q4 of this year, and then HemoOx, I think you're still planning for FDA submission in 2025. How do you think about the ramp of these products once they are launched? You know, let's take year one post-launch and year two. Like how, how should we think about the ramp? What are your plans? You know, from a revenue perspective, it's still a little cloudy just because it's so far out. But I think, you know, as we get closer to the end of the year, it's going to be a strategy that we'll have an indirect and direct sales force. So we'll have a direct sales force in-house. Indirectly, we'll have distributor agreements as well as OEM partnerships to help with that. And then in the process, as we, you know, go through this FDA submission and all the clinical trials, that's when we're working on KOLs as well. So you have the KOLs on your side that are experts in the field that are helping kind of get the word out on the product as well. So we have a couple different channels to do that. You know, the combination of that with the kind of the known facts about the LED-based systems out there, we think gives us a good path towards, you know, commercialization and, and getting revenue. You know, there's probably a little bit in 2025, like we've talked about, it's probably an immaterial amount. But we think there's a, a ramp starting probably, a more significant ramp probably in 2026, at least from a P&L perspective. Understood. Are there risks that the product may not be approved? What, what are the risks here that you're talking about? We think it's pretty low. It's a, you know, we've been in conversation with the FDA on this, and so we've done Q-Submission submissions. We've talked to them about clinical trial design and did confirm that, you know, it's just a straightforward 510(k). So we're pretty comfortable with the submission and clearance of the device. So that, that's not the risk on it, we don't believe. That, that's really helpful. With respect to sepsis monitoring, you know, it's a $685 million market. You know, I think you've previously indicated that the FDA submission is probably 12-24 months away. But I think you said that back in October and you reiterated that recently. So can you help me with the timing for the sepsis monitoring? How should we think about the FDA submission timeline? You know, it's a little further out. I would hate to give too much, but I think, I think we're looking at, you're looking at a couple years out. There's still some work to be done there. It leverages some of the other technology we have. But like I said, we do have our hands full to a degree with the laser-based pulse ox products and getting those to market. That's really the priority right now. We are working sepsis and the fluid monitor, which is FDA approved, in the background as well. And like we've talked about on that, that one's a little bit of a slow grower, new protocol for doctors, but should improve patient care as it relates to fluid management, and make it a little more proactive than what they're currently doing now. So, again, I think those are probably a little further out. But the technology is really good, and we have really high expectations for them. What's factored in your 2024 guidance on the flow monitoring side? Like you said, you do have approval. You know, you know, what's your plan to market it more aggressively? It's really going to be a lot more clinical studies and work with KOLs in 2024. We have nothing in our revenue, in the revenue and forecast, we have nothing. So, we've taken a really conservative approach to it, and don't want to get ahead of our skis. So, you know, that doesn't factor into our 2024 revenue guidance at all. You know, with respect to fluid monitoring, is that a different sales team or a different call point? You know, how are you approaching that, you know, that particular segment? No, it'll be part of the monitoring side. So that's. It's all in the patient monitoring side. So that should be the same group that's working on the other monitoring products. I got it. I know we have just over a minute left. Dan, I was curious to know, you know, what are your key strategic priorities for the company in the near, medium, and longer term? Anything you'd like to add there? Yeah, on the pain management side, I'd say, again, it's execution on, rep growth, rep productivity growth, diversifying products, diversifying revenue streams, and obviously continuing to grow the line top line at 20%+. And again, I think you'll see, more of it flow to the bottom line now, with the rep productivity that we're looking at. And then on the monitoring side, that one's pretty easy. You know, getting the pulse ox products to FDA submission, FDA clearance, are near, hopefully more near-term than long-term. And then in the background, obviously we have sepsis and the fluid monitor working as well. You know, if you look at, you know, just where the stock is, you know, what do you think is most underappreciated about your story at the moment? Again, we think we have this pretty dynamic small company that has, you know, a division that has really solid operating results, the pain management side. And then you have the kind of the R&D side or the new product side that has a lot of potential. And when you look at them together, I think people look at it and don't give credence to both of them at the same time. Pain management is really growing significantly, is really profitable, and there's a lot of potential in monitoring. And monitoring is weighing down EPS on the combined entity a little bit. And so, not sure we're getting credit for the monitoring side like we should. We think there's a lot of potential there. Got it. I think we are over time, but Dan, thank you so much for being here. We appreciate it. Okay, thanks for having us.