Good morning, and welcome to the H.C. Wainwright 26th Annual Global Investment Conference. For this session, I have the pleasure of having Mr. Dan Moorhead, CFO of Zynex, here with us for a fireside chat. Welcome to the conference. Thanks, Yi. We appreciate you guys inviting us. Would you like to do a brief introduction of the company first? Sure. Zynex is a medical device company focused in two sectors: pain management and hospital monitoring. We have best-in-class devices. We've treated over a million patients to date, which is crucial during the current opioid crisis. We continue to expand our prescriber network as our sales rep base of just less than 400 people in the United States continues to call on additional prescribers. Long-term, we believe the revenue goal in this division is close to $800 million, so we still have a lot of runway to do based on our current run rate of, you know, our current estimate for 2024 is closer to $200 million. The NexWave, our electrotherapy device, is the flagship device within the pain management division, and creates most of our revenue there, or the majority of the revenue in the division. It uses electrotherapy to reduce pain in patients, and in turn, patients can use less opioids, and which would lessen their addiction risk, over time. I know FDA recently approved a new pain management device called TensWave from Zynex. Can you tell us how TensWave... How different is TensWave from the current lead pain management device, NexWave? The TensWave is just a TENS machine. The NexWave is a multimodality device. So the NexWave has three modes. It has interferential current, which is most used for pain and is 40 times stronger than pain, so it's gonna relieve pain quite a bit better. It also has NMES, or neuromuscular electrical stimulation, which can be used a lot in rehabilitation and recovery. It helps with atrophied muscle, muscles- ... and can be used in conjunction with a patient's rehabilitation- ... to get them there quicker. And then it also has a TENS mode, which would be similar to the TensWave device. So the TensWave device is just simply a TENS mode device. So what patient population will the TensWave device primarily serve? TensWave is really a supplementary product- and it's gonna be for patients that can't get insurance coverage. or their insurance plan doesn't cover a multimodality device. ... like the NexWave, so we still want to get non-opioid pain relief to all patients. so the TensWave is a great option for that. Okay, so within Zynex's current patient base that requires a pain management device, what percentage of them has a insurance plan that exclusively covers TensWave device? It's a really small- ... portion. You're talking less than 10%. Okay. So most of our patients, and insurance plans will cover- ... the NexWave, so they get, you know, the more inclusive device, but in limited cases, a TensWave is what people receive. Okay, so do you expect the TensWave device to make a meaningful contribution to the order growth, starting from the fourth quarter of this year? I don't think it's material. I think, again, I think it's a supplementary product to get non-opioid pain relief in hands of people that don't have a plan that allows for the multimodality NexWave. Okay. So the order growth rate for NexWave was 20% in the second quarter, right? And do you expect the growth rate to remain stable throughout the remainder of 2024? Yeah, I think what we're focused on right now is sales rep productivity. I think we've talked about it in a couple of our earnings calls. We've actually reduced the number of reps- ... sales reps we have, during twenty twenty-four as we focus on that. Even with the reduction in reps, we grew orders 23% in Q1- ... 20% in Q2, and we expect for the rest of the year to remain, you know, somewhere around 20% or just below 20%. I think it's important to note, you know, sales rep productivity was up 26%. ... in Q2 to just under $500,000. And, you know, as a reminder of people that may not listen to all of our calls, we expect reps to do about $1 million a year in business. We think it takes them about three years to build their territory to start doing that $1 million a year of business. The average tenure of our sales force right now is just under 18 months. $500K on our goal of $1,000,000, we're on track there. ... sales rep productivity is definitely the focus. But you can see we're still, even with fewer reps, with the increase in sales rep productivity- ... we've stayed on track with our 20% growth. Okay, so the number of sales rep and their productivity are the primary drive, factors driving the order growth, right? Are there any other factors driving- No, those are the two main ones. Okay. Sales rep productivity, as they continue to build territory ... add new prescribers, grow their orders ... which in turn grows revenue. And then on the other side, we're adding reps. Okay ... to the net count. You should see us get back to that- Okay ... kind of our normal cadence here pretty soon. So how many sales rep do you currently have, and do you expect to add additional sales rep in 2025? We do. We'll continue to add sales reps this year. There'll still be some attrition in twenty twenty-four. So as we're adding reps, we expect the headcount to remain fairly flat for the remainder of 2024. Going into 2025, I think you'd see us get back to our normal growth rates that you've seen in previous years ... where we're adding a net 10 or 15 reps per month. Okay. So what would be the target number by the end of twenty twenty-five? I think it's gonna put you somewhere in the mid to upper four hundreds. Okay. If you just do the math, if we stay flat in the- Mm ... 375 range this year- Mm ... and then we're adding 10 or 15 a month next year. I think that's gonna put us in the upper four hundreds. Okay, got it. Are there any competition in the market of prescription pain management device? We don't see a lot of- Mm-hmm ... competition, especially people that come in with the range of products that we have, and the ability to take all insurance types. Mm. So, I would say insurance or competition is pretty low on the list of kind of barriers at this point. It's really us reaching out and getting those new clinics. Mm. Got it. Switching to the hospital monitoring segment. So I know Zynex is planning to submit a 510(k) application for the NiCO laser-based pulse oximeter in the fourth quarter, correct? Yes. Okay. So, how is it differentiated from the current pulse oximeters on the market? You know, it's night and day. Our device, the NiCO device, uses laser light sources to identify the four different types of hemoglobin. Mm ... and it can do that at any saturation, any oxygen saturation- Mm ... and with any skin pigmentation. The current LED systems provide an SpO2 reading, which is an estimate of oxygen saturation- Mm ... and are even less accurate- Mm ... when there's darker skin pigmentation. Mm, mm. And so we're pretty excited to get this product out. We, you know, we purchased the technology back in 2021, and have been working on getting it commercially ready. And we expect, like you said, to submit it to the FDA in Q4- Mm-hmm ... and looking forward to subsequent clearance by the FDA. Mm ... and commercialization of the product. Okay. Do you have a rough estimate timeframe for FDA's review and potential approval? You know, it's, it's hard to put a strict timeline on it, but I think we're estimating- Mm ... sometime in mid-2025. Okay ... it should be cleared by the FDA. Okay. And you will be able to launch quickly after approval? We believe so. Mm-hmm. And so the plan is to start commercialization efforts. So, you know, during 2025, in the first half of 2025- Mm ... we'll begin our commercialization efforts- ... so that we're ready- Okay ... anticipating the clearance in the middle of the year. I don't know that there's material revenue in 2025- Mm ... but, it should start growing- Mm ... you know, in 2026- Okay ... and beyond pretty significantly. How large is this pulse oximeter market in the U.S.? It's very large. Okay. So it's about $1 billion in the U.S., and it's about $2.5 billion dollars- Mm ... worldwide. Okay. And it's a very established market, with some very established players in it, but the technology they're using is all the LED-based systems. Okay. So, at this point, would you be able to comment on the potential sales trajectory of NiCO oximeter and how and whether the, you know, the level of revenue could exceed sales from NexWave? You know, I don't know that we're ready to talk about- Mm ... sales trajectory and revenue trajectory yet, and we haven't made any of those numbers public. I think the focus is clearly getting it submitted to the FDA, getting it cleared by the FDA, and then we move into commercialization. There'll be, you know, partnerships and other things going along with an internal sales force. Mm ... so there's a lot to do there. Mm. But it's... You know, I don't know that we're ready to give a forecast quite yet. Okay, okay. And I know Zynex also has a HemoOx, a total hemoglobin monitor, right? So what's the development timeline for that monitor? So HemoOx is another really good product that could eliminate a lot of blood lab work, and do a lot of that non-invasively, 'cause what the lasers can do. That is built on the same platform as NiCO. So once NiCO is cleared by the FDA, you'll see rapid development of HemoOx. Mm-hmm. Mm-hmm. And so hopefully that is a... You know, it's probably an early 2026 thing. Mm ... where we get into submission to the FDA in 2026. Okay, got it. I know FDA has already approved two models of the blood and fluid monitor from Zynex. So what is the current development status, and what's the commercialization approach you know we should look forward to? The blood and fluid monitor is a really good product- Mm ... and will improve patient care and patient outcomes. Mm-hmm. It is a new protocol that, you know, isn't currently being used, so there's still some work to do with gathering clinical data, working with KOLs, and so, you know, commercialization, you're probably looking at late 2025 or early 2026, and again, I think what we've always said is we think that's a little bit of a slow grower, like we said. Mm. Again, the technology's really good, and we think it has a lot of long-term potential. Mm-hmm. But that one's a little further out. I'd say near-term, we're much more focused on the laser-based pulse oximetry. Mm ... products, due to the large market- Mm ... due to the huge advantage we have in technology, and just all the things that product can do, for clinicians. Okay. Are there any patents covering the pain management devices as well as the monitoring devices? There are. So on the monitoring side, we have patent protection of, you know, NiCO, HemoOx, the fluid monitor, that we continue to work on. And so those all have good protection. On the pain management side, we don't have patent protection. You know, electrotherapy is an older technology. The barrier to entry on the electrotherapy side is really gonna be, in one, the sales force. Mm. You have to have a large sales force calling on clinics, 'cause it's really important to gain clinics' trust and doctors' trust that we're gonna take care of their patients, and trying to do that through cold calls just doesn't work. And so you have to have that sales force. Mm ... and that's quite an investment, to get that sales force out there. The other thing is reimbursement. Reimbursement from commercial payers and other types of payers is complicated. Mm. You know, we've been perfecting it over the last twenty-five years, and we do 80% gross margin, so we're collecting pretty well on orders. A lot of people don't have that expertise, so the barrier to entry on the electrotherapy side is really sales reps and reimbursement, not as much in the IP. Okay. So by the way, for your monitoring devices, you plan to have a separate sales force from the sales reps for the pain management device? Well, they are two very separate call points, and so the divisions operate very independently. Okay. So we'll have sales force. We'll have some OEM partnerships and other distributorship agreements will go along with the launch of NiCO in twenty twenty-five. Okay, got it. So I know Zynex operations has been profitable. How do you plan to deploy your cash besides share buyback? You know, I think we continue to do a little bit of the same. Okay. So, you know, I think we're still profitable, we're cash flow positive. We'll continue to invest in the monitoring products. Mm-hmm. I think that is top of mind at this point. Free cash flow, we're generally generating, you know, $10-$20 million a year in operating cash flows. We don't have a lot of capital requirements. Mm-hmm ... so most of that ends up being free cash flow. Mm-hmm. And so I think you're gonna end up seeing, you know, cash balances building a little bit. We wanna make sure we have flexibility when we're launching these products, to make sure we can take advantage of any situations we need to, and then from that, if there's additional cash flow that we believe is excess, that could be used for buyback. You know, we've bought back over $80 million in shares over the last three years. Mm-hmm. And that's been effective for us, and so you'll continue to see some of that. Mm-hmm. But right now, I think we're focused on using cash. Mm-hmm ... to launch the new products- Mm-hmm ... because we're pretty excited to get those out there. Okay. Got it. So could you give us a brief overview of the potential, you know, upcoming catalysts within the next twelve to eighteen months? Yeah, I think on pain management, you're going to see execution. Like we talked about, you're gonna see the sales force start to grow again. We wanna see the new products. We've talked about the rehabilitation products that we distribute. It's grown to close to 10% of our revenue. We wanna see that continue to grow, diversify our revenue base, and continue to show really good profit and really good cash flow. Mm-hmm ... from the pain management division, because that's what's driving our investments in the monitoring side. And on the monitoring side, there's a lot going on over the next- Mm ... you know, 12-24 months with FDA submission of NiCO, approval of NiCO, hopefully commercialization, and then you have all the other products that are in the background. You have HemoOx that will be launched, you know, once we get clearance of NiCO, and then, we're also working on the blood and fluid monitor in the background. And then we have an early detection of sepsis device as well, that is being worked in the background as well. So there's really four game-changing products within the monitoring solutions division, so that's you kind of have your R&D division, which is the monitoring side, which we think has really high potential, and we really believe is undervalued at this point. And then you have the pain management side, which is really generating high EBITDA margins, high profitability, and growing. You know, generally. Mm ... you know, we've been growing revenue. You know, in 2016, we were coming off $13 million in revenue, and this year- Mm ... we're showing $200 million. Mm-hmm. You know, rapid growth. Mm ... in that space. Okay, great. So, lastly, in your view, what is the key takeaway message for investors, and why investors should pay attention to Zynex now? Again, I think if you look at the market potential, we're looking at the pain management side, which has market potential of upwards of $1 billion. You're looking at the monitoring side, which is a multi-billion-dollar market. If you look at our valuation, our profitability, our current growth, you know, we believe it's an excellent time to own Zynex, for sure. Mm. You know, if you just look from a valuation perspective, it's pretty night and day or black and white of the valuation disparity between what we're producing and the valuation that we currently have. Mm-hmm. So, you know, as we grow these products, you know, I think a lot of people are looking at the company as a combined company. If you look at the two segments and really separate them and look at what they're producing, I think it gives you a better view of what we're doing long term- Mm-hmm ... and the potential of the company. Got it. Okay, great. Thank you very much- Yep ... for looking forward to it. We appreciate it. Yeah. Again, we appreciate you-