8-K: Zynex Reports Fourth Quarter and Full Year 2024 Financial Results; Announces Restructuring

Zynex reports a 4% increase in full-year 2024 net revenue to $192.4 million but announces a 15% staff reduction due to payment suspensions from Tricare.

Summary

• Zynex reported its financial and operational results for the fourth quarter and full year ended December 31, 2024.
• Full year 2024 orders increased 16% year-over-year.
• Full year 2024 net revenue increased 4% to $192.4 million.
• Full year 2024 net income was $3.0 million, with diluted EPS of $0.09.
• Full year 2024 cash flow from operations was $12.7 million.
• The company received FDA clearance for its new TensWave device.
• Fourth quarter revenue was $46.0 million, compared to $47.3 million in the prior year quarter.
• The company is restructuring its staff by approximately 15% due to a temporary payment suspension from Tricare, which represents approximately 20-25% of annual revenue.
• This staff reduction, along with other expense reductions, will result in annual savings of approximately $35 million.
• The company expects Q1 2025 net revenue of at least $30 million and a loss per share of ($0.30) or better.
• Zynex completed the NiCO laser pulse oximeter human clinical trial at Duke University with positive results.

Sentiment

Score: 4

Explanation: The report presents mixed signals. While revenue increased for the full year, profitability declined, and a significant staff reduction is planned due to payment issues with a major payer. The future outlook is uncertain, leading to a negative sentiment.

Positives

• Full year 2024 orders increased 16% year-over-year.
• Gross profit in the year ended December 31, 2024, was $152.9 million, or 80% of revenue, as compared to $146.0 million or 79% of revenue, in 2023.
• Zynex received FDA clearance for its new TensWave device.
• The NiCO laser pulse oximeter human clinical trial at Duke University had positive results.
• The company has been able to buy back over $80 million worth of shares on the open market, directly increasing shareholder value.

Negatives

• Fourth quarter revenue was less than expected due to slower payments from certain payers and a temporary payment suspension from Tricare.
• Tricare's payment suspension impacts approximately 20-25% of Zynex's annual revenue.
• The company is implementing a 15% staff reduction to align with current revenue.
• Net loss for the three months ended December 31, 2024, totaled ($0.6) million, or ($0.02) per basic and diluted share, as compared to net income of $1.2 million, or $0.04 per basic and diluted share, in the quarter ended December 31, 2023.
• Adjusted EBITDA for the three months ended December 31, 2024, was $0.6 million, as compared to $9.9 million in the quarter ended December 31, 2023.
• Net income for the year ended December 31, 2024, totaled $3.0 million, or $0.09 per basic and diluted share, as compared to net income of $9.7 million, or $0.27 per basic and diluted share, in 2023.
• Adjusted EBITDA for the year ended December 31, 2024, was $10.9 million, as compared to $22.3 million in the year ended December 31, 2023.

Risks

• The temporary payment suspension from Tricare poses a significant risk to revenue.
• The company faces uncertainty regarding the timing of resolution with Tricare.
• The company's Q1 2025 guidance includes an expected loss per share of ($0.30).
• The company's success depends on the acceptance of new and existing products by doctors and hospitals.
• Zynex faces competition from larger companies with greater financial resources.
• The company is dependent on reimbursement for its products from health insurance companies.
• Zynex is dependent on fourth party manufacturers to produce products on time and to specifications.

Future Outlook

The Company expects Q1 2025 net revenue of at least $30 million and a loss per share of ($0.30) or better, with quarterly revenues expected to increase throughout the year with typical seasonality.

Management Comments

• In the fourth quarter of 2024 we continued our steady growth in orders and delivered another year of revenue growth and profitability, said Thomas Sandgaard, President and CEO of Zynex.
• We generated $12.7 million of positive cash flow from operations and $10.9 million of Adjusted EBITDA in 2024.
• Our fourth quarter revenue was less than expected.
• We are decreasing our overall staff by approximately 15%, which primarily affects employees in our corporate departments.
• We are confident that long-term, our pain management business is still solid with significant growth potential.
• We continue to accelerate our payer expansion and expect it to offset some of the near-term revenue challenges.
• Over the long term we believe we will remain a leader of holistic, non-invasive approaches to pain management and patient monitoring and continue to pursue additional lines of revenue that improve patient outcomes and overall health, concluded Sandgaard.

Industry Context

Zynex operates in the medical device industry, specifically focusing on pain management, rehabilitation, and patient monitoring. The company's focus on non-invasive solutions aligns with a broader trend towards less invasive medical treatments. The development of the NiCO laser pulse oximeter addresses concerns about the accuracy of traditional LED-based pulse oximeters, particularly in patients with darker skin pigmentation, which is a growing area of focus in healthcare.

Comparison to Industry Standards

• Comparing Zynex's performance to industry peers requires considering companies with similar product portfolios and market focus.
• Companies like DJO Global and NeuroMetrix operate in related areas of pain management and rehabilitation.
• Zynex's gross profit margin of 80% for the year ended December 31, 2024, is relatively strong compared to the medical device industry average.
• However, the decrease in net income and adjusted EBITDA compared to the previous year raises concerns about profitability and operational efficiency.
• The temporary payment suspension from Tricare highlights the risks associated with dependence on specific payers, a common challenge in the healthcare industry.

Stakeholder Impact

• Shareholders will be impacted by the decrease in net income and adjusted EBITDA.
• Employees are affected by the 15% staff reduction.
• Patients may be affected by the temporary payment suspension from Tricare, although Zynex states they continue to support existing and new patients.
• Suppliers and creditors may be impacted by the company's cost-cutting measures.

Next Steps

• Zynex will meet with Tricare in April to discuss the payment suspension.
• The company will continue to accelerate payer expansion to offset near-term revenue challenges.
• The company will focus on reducing expenses to improve profitability.
• The company will continue to pursue additional lines of revenue that improve patient outcomes and overall health.

Key Dates