Zynex, Inc. (NASDAQ:ZYXI) Q2 2022 Results Conference Call July 28, 2022 4:15 PM ET Company Participants Louisa Smith - Investor Relations-Gilmartin Group Thomas Sandgaard - Chairman, President and Chief Executive Officer Dan Moorhead - Chief Financial Officer Anna Lucsok - Chief Operating Officer Don Gregg - Vice President of Zynex Monitoring Solutions Conference Call Participants Simran Kaur - Piper Sandler Jeffrey Cohen - Ladenburg Thalmann Marc Wiesenberger - B. Riley Securities Yi Chen - H.C. Wainwright ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-38804 Zynex, Inc. (Exact name of registrant as specified in its charter) NEVADA 90-0275169 (State or other jur ...

Table of Contents WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-38804 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Zynex, Inc. (Exact name of registrant as specified in its charter) NEVADA 90-0275169 (State or other ju ...

Part I [Business](index=4&type=section&id=Item%201.%20Business) Zynex, Inc. designs and markets electrotherapy medical devices for pain management and rehabilitation, with a focus on expanding sales and diversifying product offerings History and Subsidiaries - Zynex, Inc. was founded in 1996 and operates primarily through its wholly-owned subsidiary, **Zynex Medical, Inc. (ZMI)**, which accounts for substantially all consolidated revenue[14](index=14&type=chunk)[17](index=17&type=chunk) - In December 2021, the Company acquired **Kestrel Labs, Inc.**, a noninvasive patient monitoring technology company. Kestrel's products are not yet FDA-cleared and are managed under the **Zynex Monitoring Solutions (ZMS)** subsidiary[15](index=15&type=chunk) - Zynex Monitoring Solutions (ZMS) has developed the **CM-1500 fluid monitoring system** (FDA cleared in Feb 2020) and filed a 510K for its next-generation wireless system, the **CM-1600**, in December 2021. ZMS has not generated any revenue to date[16](index=16&type=chunk)[23](index=23&type=chunk) Sales and Growth Strategies - The company's primary growth strategy is expanding its direct sales force, which grew to approximately **400 field sales representatives** by the end of 2021, with a goal of reaching **500-600** by the end of 2022[29](index=29&type=chunk) - Zynex is diversifying its revenue streams by adding complementary products to its sales channel, including hot/cold therapy, cervical traction, knee braces, and a full catalog of physical therapy products[31](index=31&type=chunk) - A significant portion of revenue is recurring, derived from the monthly sale of consumable supplies like electrodes and batteries to existing patients[34](index=34&type=chunk) Products Zynex Product Portfolio Overview | Category | Product Name | Description | | :--- | :--- | :--- | | **Zynex Medical (ZMI)** | NexWave | Dual channel, multi-modality IFC, TENS, NMES device for pain management | | | NeuroMove | EMG-triggered electrical stimulation for stroke/SCI rehabilitation | | | InWave | Electrical stimulation for female urinary incontinence | | **Distributed Products** | Various | Includes cervical traction, hot/cold therapy, LSO back braces, and knee braces | | **Zynex Monitoring (ZMS)** | CM-1500 / CM-1600 | Noninvasive fluid monitoring systems. CM-1500 is FDA cleared; CM-1600 is pending | | | NiCO / HemeOx | Laser-based noninvasive oximeters (acquired from Kestrel, not yet FDA cleared) | Markets - ZMI primarily competes in the U.S. home electrotherapy market for pain management, estimated to be approximately **$500 million annually**[52](index=52&type=chunk) - The company positions its electrotherapy products as a non-pharmacological alternative to opioids for treating chronic and acute pain, capitalizing on the national focus on the opioid epidemic[52](index=52&type=chunk) - ZMS is focused on the non-invasive patient-monitoring market with its fluid monitoring, sepsis monitor, and pulse oximetry products, but has not yet generated revenue or identified specific competitors[54](index=54&type=chunk) Government Regulation - All ZMI products are classified as **Class II medical devices** by the FDA and require 510(k) market clearance. Key products like NexWave, NeuroMove, and InWave have received this clearance[63](index=63&type=chunk) - The company is pursuing international expansion and is in the process of applying for **CE Marking** for several electrotherapy devices and the CM-1500 fluid monitor to market them in the European Union[64](index=64&type=chunk) - Zynex has received **ISO 13485:2016 certification**, which is crucial for international expansion as it demonstrates compliance with international quality management standards for medical devices[66](index=66&type=chunk) Human Capital - As of December 31, 2021, Zynex employed **774 full-time employees**, with approximately **400** of them being direct sales representatives[71](index=71&type=chunk) - The company's human capital strategy focuses on attracting and retaining talent through competitive pay, training and development programs (including tuition reimbursement), and health and wellness initiatives[72](index=72&type=chunk)[75](index=75&type=chunk) [Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from third-party payer dependence, supply chain vulnerabilities, competition, regulatory challenges, and reliance on key personnel Risks Related to Our Business - The business is highly dependent on reimbursement from third-party payers. Changes in their policies, delays in payment, or refund requests could significantly impact revenue and cash flow[79](index=79&type=chunk) - There is a concentration of credit risk, with one third-party payer accounting for **22% of accounts receivable** at year-end 2021 and another accounting for **26%** at year-end 2020[83](index=83&type=chunk) - The company faces risks from reliance on third-party manufacturers and sole suppliers, particularly for **semiconductor chips**, which are experiencing a global shortage. This could lead to production delays and increased costs[94](index=94&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk) - The company's success is significantly dependent on its founder and CEO, **Thomas Sandgaard**, who beneficially owns approximately **38%** of the outstanding stock. The loss of his services could have a material adverse effect[104](index=104&type=chunk) Risks Relating to Our Common Stock - Significant stock sales by CEO **Thomas Sandgaard** could adversely affect the market price of the common stock[130](index=130&type=chunk) - Future capital needs may require issuing additional equity, which could result in dilution for existing shareholders[131](index=131&type=chunk) [Properties](index=24&type=section&id=Item%202.%20Properties) Zynex leases all its properties, including a new 110,754 square foot corporate headquarters and a 50,488 square foot warehouse - In April 2021, the company signed a sublease for a new corporate headquarters in Englewood, CO, spanning approximately **110,754 square feet** with a term through April 2028[136](index=136&type=chunk) - The company also leases a warehouse and production facility of approximately **50,488 square feet**, with the lease running through June 2026[136](index=136&type=chunk) [Legal Proceedings](index=24&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently a party to any material pending legal proceedings - As of the report date, Zynex is not a party to any material pending legal proceedings[138](index=138&type=chunk) Part II [Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=24&type=section&id=Item%205.%20Market%20For%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Zynex's common stock trades on Nasdaq under 'ZYXI', with the company declaring special cash and stock dividends in Q4 2021 - The company's common stock trades on The Nasdaq Capital Market under the ticker symbol **"ZYXI"**[141](index=141&type=chunk) - In Q4 2021, the Board declared a one-time special cash dividend of **$0.10 per share** and a **10% stock dividend**, which were paid and issued in January 2022[144](index=144&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2021, Zynex achieved significant revenue and net income growth, driven by increased device orders and an expanded sales force Highlights - ZMI achieved **89% order growth**, **63% revenue growth**, and **88% net income growth** in 2021 compared to 2020[151](index=151&type=chunk) - Acquired Kestrel Labs, Inc. on December 22, 2021, for approximately **$30.5 million**, consisting of **$16.1 million in cash** and **$14.4 million in Zynex common stock**[157](index=157&type=chunk) - Filed for FDA approval of the **CM-1600**, a laser-based fluid monitoring system[157](index=157&type=chunk) Results of Operations Consolidated Statement of Operations Summary (in thousands) | Metric | 2021 (in thousands) | 2020 (in thousands) | $ Change (in thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | **Total Net Revenue** | **$130,301** | **$80,122** | **$50,179** | **62.6%** | | Device Revenue | $36,613 | $21,269 | $15,344 | 72.1% | | Supplies Revenue | $93,688 | $58,853 | $34,835 | 59.2% | | **Income from Operations** | **$22,366** | **$10,249** | **$12,117** | **118.2%** | | **Net Income** | **$17,103** | **$9,074** | **$8,029** | **88.5%** | | Diluted EPS | $0.44 | $0.24 | $0.20 | 83.3% | - The **63% increase in net revenue** was primarily driven by an **89% growth in device orders**, which expanded the customer base and increased sales of consumable supplies[163](index=163&type=chunk) - Operating expenses as a percentage of revenue decreased from **87% in 2020 to 83% in 2021**, reflecting improved operational leverage despite absolute increases in costs[158](index=158&type=chunk) Financial Condition, Liquidity and Capital Resources Key Financial Position and Cash Flow Data (in millions) | Metric | Dec 31, 2021 (in millions) | Dec 31, 2020 (in millions) | | :--- | :--- | :--- | | Cash | $42.6 | $39.2 | | Accounts Receivable, net | $28.6 | $13.8 | | Working Capital | $59.8 | $52.9 | | Net Cash from Operations | $6.9 | $0.8 | - To finance the Kestrel acquisition, the company entered into a credit facility with Bank of America, including a **$16.0 million fixed-rate term loan** and a **$4.0 million line of credit**[176](index=176&type=chunk) - Net cash from financing activities was **$13.1 million in 2021**, primarily from the new debt, offset by **$2.7 million in treasury stock purchases**. This compares to **$25.3 million in 2020**, which was driven by a **$25.2 million equity offering**[181](index=181&type=chunk)[182](index=182&type=chunk) Critical Accounting Policies - Revenue recognition is a critical policy, involving significant estimates of variable consideration from third-party payers. The company uses a portfolio approach based on historical collection rates to determine the transaction price[190](index=190&type=chunk)[197](index=197&type=chunk) - The accounting for business combinations, such as the Kestrel acquisition, requires management to make significant estimates regarding the fair value of acquired assets, assumed liabilities, and contingent consideration[203](index=203&type=chunk) - Contingent consideration liabilities are classified as **Level 3 fair value measurements** and are estimated using a Monte Carlo simulation, reflecting unobservable inputs[205](index=205&type=chunk) [Financial Statements and Supplementary Data](index=34&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for 2021 and 2020, with the auditor's report highlighting critical audit matters Key Financial Data (in thousands) | Metric | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | **Balance Sheet** | | | | Total Assets | $133,274 | $72,175 | | Total Liabilities | $59,349 | $15,320 | | Total Stockholders' Equity | $73,925 | $56,855 | | **Income Statement** | | | | Total Net Revenue | $130,301 | $80,122 | | Net Income | $17,103 | $9,074 | | **Cash Flow** | | | | Net Cash from Operations | $6,949 | $818 | - The independent auditor's report highlights two critical audit matters: 1) Estimation of transaction price and variable consideration for revenue recognition, and 2) Valuation of intangible assets and contingent consideration related to the Kestrel business combination[244](index=244&type=chunk)[245](index=245&type=chunk)[249](index=249&type=chunk) - The acquisition of Kestrel Labs on December 22, 2021, for total consideration of **$30.5 million** resulted in the recognition of **$20.4 million in goodwill** and **$10.0 million in identifiable intangible assets (patents)**[310](index=310&type=chunk)[315](index=315&type=chunk) [Controls and Procedures](index=34&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2021 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[211](index=211&type=chunk) - Based on an evaluation using the **COSO 2013 framework**, management concluded that the company's internal control over financial reporting was effective as of December 31, 2021[213](index=213&type=chunk)[214](index=214&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=35&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the forthcoming 2022 proxy statement - Information for this section is incorporated by reference from the forthcoming Proxy Statement for the 2022 annual meeting of shareholders[220](index=220&type=chunk) [Executive Compensation](index=35&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the forthcoming 2022 proxy statement - Information for this section is incorporated by reference from the forthcoming Proxy Statement for the 2022 annual meeting of shareholders[221](index=221&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=35&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section details equity compensation plans, including outstanding options and securities available for future issuance, with further details in the proxy statement Equity Compensation Plan Information (as of Dec 31, 2021) | Plan Category | Securities to be Issued Upon Exercise (thousands) | Weighted-Average Exercise Price | Securities Remaining for Future Issuance (thousands) | | :--- | :--- | :--- | :--- | | 2017 Stock Option Plan | 867 | $1.09 | 3,937 | | Other Plans (2005 Plan, Warrants, etc.) | 452 | $0.68 | 0 | | **Total** | **1,319** | **$0.97** | **3,937** | [Certain Relationships and Related Transactions, and Director Independence](index=36&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The Board has determined that all Audit Committee members are independent directors, with additional information incorporated by reference from the proxy statement - The Board has determined that all members of the Audit Committee (Messrs. Cress, Disbrow, and Michaels) are **independent directors** under NASDAQ rules[227](index=227&type=chunk) [Principal Accounting Fees and Services](index=36&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the forthcoming 2022 proxy statement - Information for this section is incorporated by reference from the forthcoming Proxy Statement for the 2022 annual meeting of shareholders[228](index=228&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=37&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all consolidated financial statements and exhibits filed with the Form 10-K, including key agreements and certifications - This section contains a list of all financial statements, schedules, and exhibits filed with the 10-K report[230](index=230&type=chunk) - Key filed exhibits include the **Stock Purchase Agreement for the Kestrel Labs acquisition (Exhibit 10.11)** and the **Loan Agreement with Bank of America (Exhibit 10.12)**[232](index=232&type=chunk)

Zynex, Inc. (NASDAQ:ZYXI) Q4 2021 Earnings Conference Call February 24, 2022 4:15 PM ET Company Participants Thomas Sandgaard – Chairman, President and CEO Dan Moorhead - CFO Anna Lucsok - Chief Operating Officer Donald Gregg - Vice President, Monitoring Division Conference Call Participants Matthew O'Brien - Piper Sandler Yi Chen - H.C. Wainwright Operator Good afternoon, ladies and gentlemen. And welcome to the Zynex Fourth Quarter 2021 Earnings Conference Call. At this time all participants are in listen ...

Financial Data and Key Metrics Changes - The company reported record revenue of $34.8 million for Q3 2021, a 74% increase compared to the same quarter last year and a 12% sequential increase from Q2 2021 [5][17] - Net income increased 118% sequentially from Q2 2021, reaching $6.1 million, which represents a 358% year-over-year increase [5][18] - Gross margins improved to 80% in Q3 2021, up from 77% in Q2 2021, with expectations to maintain margins between 75% and 80% going forward [17][18] Business Line Data and Key Metrics Changes - Device revenue increased 71% year-over-year to $9.1 million, while supplies revenue rose 75% to $25.7 million [17] - Orders grew 70% year-over-year, indicating strong demand across both divisions [17] Market Data and Key Metrics Changes - The company is experiencing a competitive labor market, impacting the hiring of sales representatives, which decreased to approximately 430 by the end of Q3 2021 [6][7] - The average revenue per sales rep increased to approximately $325,000, up $50,000 from Q2 2021 and nearly $100,000 from Q3 2020 [7] Company Strategy and Development Direction - The company aims to grow its share in the prescription pain management market and is considering complementary acquisitions to enhance its product offerings [23][26] - The Monitoring Solutions Division is seeing increased staffing and clinical research activities, with plans to submit the wireless CM-1600 to the FDA by the end of 2021 [9][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's growth trajectory, expecting Q4 2021 revenue between $40 million and $43 million, which would represent a 54% to 65% increase compared to Q4 2020 [22] - The company anticipates significant positive cash flow in Q4 due to seasonal factors and continued profitability [22] Other Important Information - The opioid epidemic remains a critical issue, and the company is focused on promoting its non-opioid pain management solutions [8] - The company has no reported supply chain issues and is returning inventory levels to normal [8] Q&A Session Summary Question: Can you discuss the CMS business and potential acquisitions? - The company is exploring opportunities that fit into both the pain management and monitoring solutions divisions, focusing on products with established reimbursement codes [26] Question: What are the expected sales rep numbers by the end of Q4? - The company expects to maintain around 430 sales reps by the end of the year, with minimal net change due to trimming less productive reps [32][33] Question: How do you anticipate the blood monitoring category will impact the business in 2022? - Management is optimistic about the potential revenue from the blood monitoring division, with commercialization plans for the CM-1600 expected in the second half of 2022 [41] Question: What is the current status of the patient monitoring division? - The patient monitoring division has expanded its team significantly, focusing on engineering and clinical trials, with plans for further growth in 2022 [64] Question: How is the company addressing labor constraints? - The company has around 80 to 100 unfilled positions across departments, impacting back-office operations but still managing to process orders effectively [49][50]

PART I—FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's unaudited consolidated financial statements detail its financial position, performance, and cash flows for the periods ended September 30, 2021 [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The company's financial position shows increased total assets and stockholders' equity, driven by growth in accounts receivable and operating lease assets | Metric | Sep 30, 2021 (in thousands) | Dec 31, 2020 (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | | Total Assets | $90,723 | $72,175 | | Total Liabilities | $27,340 | $15,320 | | Total Stockholders' Equity | $63,383 | $56,855 | | Accounts Receivable, net | $24,234 | $13,837 | | Operating Lease Asset | $17,234 | $5,993 | [Unaudited Consolidated Statements of Operations](index=4&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Operations) The company reports significant growth in revenue and net income for the three and nine months ended September 30, 2021, compared to the prior year | Metric | 3 Months Ended Sep 30, 2021 (in thousands) | 3 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | | :----------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net Revenue | $34,786 | $20,026 | $89,935 | $54,517 | | Net Income | $6,107 | $1,333 | $8,209 | $7,287 | | Basic EPS | $0.18 | $0.04 | $0.24 | $0.22 | | Diluted EPS | $0.17 | $0.04 | $0.23 | $0.21 | - Net Revenue increased by **73.7%** for the three months ended September 30, 2021, compared to the same period in 2020[12](index=12&type=chunk) - Net Income increased by **358.1%** for the three months ended September 30, 2021, compared to the same period in 2020[12](index=12&type=chunk) [Unaudited Consolidated Statements of Cash Flows](index=5&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) Cash from operations decreased while financing activities used cash for stock repurchases, contrasting with prior year's equity offering proceeds | Cash Flow Activity | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | | :------------------------------------------ | :--------------------------------------- | :--------------------------------------- | | Net cash (used in)/provided by operating | $(589) | $2,514 | | Net cash (used in) investing | $(420) | $(759) | | Net cash (used in)/provided by financing | $(2,796) | $25,434 | | Net (decrease)/increase in cash | $(3,805) | $27,189 | | Cash at end of period | $35,368 | $41,229 | - Operating activities used **$0.6 million** in cash for the nine months ended September 30, 2021, a decrease from **$2.5 million** provided in the prior year[14](index=14&type=chunk) - Financing activities used **$2.8 million** in cash for the nine months ended September 30, 2021, primarily due to treasury stock purchases, contrasting with **$25.4 million** provided in 2020 from an equity offering[14](index=14&type=chunk) [Unaudited Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Total stockholders' equity increased, driven by net income and additional paid-in capital, partially offset by treasury stock repurchases | Metric | Sep 30, 2021 (in thousands) | Dec 31, 2020 (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | | Total Stockholders' Equity | $63,383 | $56,855 | | Retained Earnings | $31,639 | $23,430 | | Treasury Stock | $(6,513) | $(3,846) | [Unaudited Notes to Consolidated Financial Statements](index=7&type=section&id=Unaudited%20Notes%20to%20Consolidated%20Financial%20Statements) These notes detail the company's accounting policies and provide breakdowns of specific financial statement line items [(1) BASIS OF PRESENTATION](index=7&type=section&id=(1)%20BASIS%20OF%20PRESENTATION) Zynex, Inc operates primarily in the U.S medical device segment, with a monitoring solutions subsidiary that has not yet generated revenue - The Company operates in one primary business segment: medical devices, including electrotherapy and pain management products[17](index=17&type=chunk) - Zynex Monitoring Solutions, Inc (ZMS) developed a blood volume monitoring device approved by the U.S Food and Drug Administration (FDA) in 2020, but has achieved no revenues to date[17](index=17&type=chunk)[74](index=74&type=chunk) - Substantially all revenue is generated in the United States from sales of devices and related supplies to patients and healthcare providers[19](index=19&type=chunk) | Device Revenue Type | 3 Months Ended Sep 30, 2021 (in thousands) | 3 Months Ended Sep 30, 2020 (in thousands) | | :------------------ | :--------------------------------------- | :--------------------------------------- | | Purchased | $2,076 | $1,618 | | Leased | $6,995 | $3,683 | | Total Device Revenue| $9,071 | $5,301 | [(2) PROPERTY AND EQUIPMENT](index=11&type=section&id=(2)%20PROPERTY%20AND%20EQUIPMENT) Property and equipment consist mainly of office furniture, equipment, and leased devices, with a notable increase in depreciation expense for leased devices | Category | Sep 30, 2021 (in thousands) | Dec 31, 2020 (in thousands) | | :----------------------- | :-------------------------- | :-------------------------- | | Property and equipment | $4,913 | $4,432 | | Less accumulated depreciation | $(2,660) | $(2,507) | | Total, net | $2,253 | $1,925 | | Depreciation Expense | 3 Months Ended Sep 30, 2021 (in millions) | 3 Months Ended Sep 30, 2020 (in millions) | 9 Months Ended Sep 30, 2021 (in millions) | 9 Months Ended Sep 30, 2020 (in millions) | | :------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Leased devices | $0.4 | $0.2 | $1.0 | $0.6 | [(3) EARNINGS PER SHARE](index=12&type=section&id=(3)%20EARNINGS%20PER%20SHARE) Basic and diluted earnings per share increased for the three and nine-month periods, reflecting higher net income | EPS Type | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic | $0.18 | $0.04 | $0.24 | $0.22 | | Diluted | $0.17 | $0.04 | $0.23 | $0.21 | - For both the three and nine months ended September 30, 2021, options to purchase **0.2 million shares** were excluded from dilutive EPS calculation due to their anti-dilutive effect[48](index=48&type=chunk) [(4) STOCK-BASED COMPENSATION PLANS](index=12&type=section&id=(4)%20STOCK-BASED%20COMPENSATION%20PLANS) Stock-based compensation expense decreased in 2021, with no new stock options granted but new restricted stock awards issued | Stock-Based Compensation Expense | 3 Months Ended Sep 30, 2021 (in thousands) | 3 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | | :------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Total | $533 | $730 | $1,042 | $1,806 | - As of September 30, 2021, the Company had approximately **$5.9 million** of unrecognized compensation expense related to stock options and restricted stock awards, to be recognized over a weighted average period of approximately **2.9 years**[55](index=55&type=chunk) - **No stock option awards** were granted during the three and nine months ended September 30, 2021[52](index=52&type=chunk)[54](index=54&type=chunk) [(5) STOCKHOLDERS' EQUITY](index=14&type=section&id=(5)%20STOCKHOLDERS'%20EQUITY) The company completed a $10.0 million stock repurchase program and saw the exercise of 10,000 stock warrants - The Company repurchased **175,179 shares** of common stock for **$2.7 million** at an average price of **$15.22 per share** under a $10.0 million program from March 8 to September 8, 2021[56](index=56&type=chunk)[111](index=111&type=chunk) - **10,000 stock warrants** were exercised during the nine months ended September 30, 2021, at an average exercise price of **$2.50**[57](index=57&type=chunk) [(6) INCOME TAXES](index=15&type=section&id=(6)%20INCOME%20TAXES) The company's income tax expense increased significantly in 2021, with an effective tax rate of 23-24% for the reported periods | Income Tax Metric | 3 Months Ended Sep 30, 2021 (in millions) | 3 Months Ended Sep 30, 2020 (in millions) | 9 Months Ended Sep 30, 2021 (in millions) | 9 Months Ended Sep 30, 2020 (in millions) | | :---------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Income Tax Expense| $1.9 | $0.1 | $2.5 | $0.7 | | Effective Tax Rate| 24% | N/A | 23% | N/A | - Discrete items, primarily related to excess tax benefits on stock option exercises, adjusted for **$0.3 million** and **$0.8 million** for the three and nine months ended September 30, 2021, respectively[58](index=58&type=chunk)[92](index=92&type=chunk) [(7) LEASES](index=15&type=section&id=(7)%20LEASES) A new operating lease for corporate headquarters significantly increased the company's lease liabilities, assets, and expenses in 2021 - The Company entered into a sublease agreement for a new corporate headquarters, commencing May 1, 2021, through April 29, 2028, with an initial rent of **$26.50 per square foot**[62](index=62&type=chunk) - Upon lease commencement, an operating lease liability and corresponding right-of-use asset of **$13.4 million** each were recorded[62](index=62&type=chunk) | Lease Expense | 3 Months Ended Sep 30, 2021 (in thousands) | 3 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | | :-------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Operating Lease | $1,072 | $419 | $2,415 | $1,181 | | Finance Lease | $40 | $21 | $109 | $58 | | Total Net Lease | $1,112 | $440 | $2,524 | $1,239 | [(8) CONCENTRATIONS](index=16&type=section&id=(8)%20CONCENTRATIONS) The company has significant supply chain and accounts receivable concentrations with a small number of vendors and third-party payers - For the three months ended September 30, 2021, **51%** of electrotherapy product supplies were sourced from three significant vendors[66](index=66&type=chunk) - For the nine months ended September 30, 2021, **36%** of supplies were sourced from two significant vendors[67](index=67&type=chunk) - As of September 30, 2021, receivables from two third-party payers constituted approximately **37%** of the net accounts receivable balance[69](index=69&type=chunk) [(9) LITIGATION](index=16&type=section&id=(9)%20LITIGATION) The company is not currently involved in any material pending legal proceedings - The Company is not currently a party to any material pending legal proceedings[71](index=71&type=chunk)[108](index=108&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses significant revenue and net income growth driven by increased device orders and sales force expansion [General](index=17&type=section&id=General) Zynex, Inc operates primarily in the medical device segment, with a monitoring solutions subsidiary that has not yet generated revenue - Zynex, Inc operates one primary business segment: medical devices, including electrotherapy and pain management products[74](index=74&type=chunk) - Zynex Monitoring Solutions, Inc (ZMS) developed a blood volume monitoring device approved by the U.S Food and Drug Administration (FDA) during 2020, but has achieved no revenues to date[74](index=74&type=chunk) [RESULTS OF OPERATIONS](index=17&type=section&id=RESULTS%20OF%20OPERATIONS) The company achieved substantial revenue and net income growth, driven by increased device orders and a larger customer base for supplies [Summary](index=17&type=section&id=Summary) The company reports significant growth in net revenue and net income for the three and nine months ended September 30, 2021, alongside improved working capital | Metric | 3 Months Ended Sep 30, 2021 (in millions) | 3 Months Ended Sep 30, 2020 (in millions) | 9 Months Ended Sep 30, 2021 (in millions) | 9 Months Ended Sep 30, 2020 (in millions) | | :--------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net Revenue| $34.8 | $20.0 | $89.9 | $54.5 | | Net Income | $6.1 | $1.3 | $8.2 | $7.3 | - Net revenue increased **74%** and **65%** for the three and nine months ended September 30, 2021, respectively[75](index=75&type=chunk) - Working capital at September 30, 2021, was **$59.6 million**, an increase of **13%** from **$52.9 million** as of December 31, 2020[75](index=75&type=chunk) [Net Revenue](index=17&type=section&id=Net%20Revenue) Net revenue growth was driven by a substantial increase in device orders, which expanded the customer base for consumable supplies | Metric | 3 Months Ended Sep 30, 2021 (in millions) | 3 Months Ended Sep 30, 2020 (in millions) | 9 Months Ended Sep 30, 2021 (in millions) | 9 Months Ended Sep 30, 2020 (in millions) | | :--------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net Revenue| $34.8 | $20.0 | $89.9 | $54.5 | - Net revenue growth is primarily related to a **70%** and **134%** growth in device orders for the three and nine months ended September 30, 2021, respectively[79](index=79&type=chunk) [Device Revenue](index=18&type=section&id=Device%20Revenue) Device revenue increased significantly due to higher order volumes from an expanded and more productive sales force | Metric | 3 Months Ended Sep 30, 2021 (in millions) | 3 Months Ended Sep 30, 2020 (in millions) | 9 Months Ended Sep 30, 2021 (in millions) | 9 Months Ended Sep 30, 2020 (in millions) | | :----------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Device Revenue| $9.1 | $5.3 | $23.3 | $13.0 | - The increase in device revenue is primarily related to increased orders attributable to the growth of the sales force and an increase in revenue provided by each sales representative[81](index=81&type=chunk) [Supplies Revenue](index=18&type=section&id=Supplies%20Revenue) Supplies revenue grew substantially, supported by a larger customer base resulting from strong device sales in 2020 and 2021 | Metric | 3 Months Ended Sep 30, 2021 (in millions) | 3 Months Ended Sep 30, 2020 (in millions) | 9 Months Ended Sep 30, 2021 (in millions) | 9 Months Ended Sep 30, 2020 (in millions) | | :------------ | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Supplies Revenue| $25.7 | $14.7 | $66.7 | $41.5 | - The increase in supplies revenue is primarily related to a larger customer base from increased device sales in 2020 and 2021[83](index=83&type=chunk) [Operating Expenses](index=18&type=section&id=Operating%20Expenses) Operating expenses rose across all categories to support growth, though some decreased as a percentage of the rapidly growing revenue [Cost of Revenue – Device and Supply](index=18&type=section&id=Cost%20of%20Revenue%20%E2%80%93%20Device%20and%20Supply) Cost of revenue increased due to higher order volumes and overhead, while remaining stable as a percentage of revenue | Metric | 3 Months Ended Sep 30, 2021 (in millions) | 3 Months Ended Sep 30, 2020 (in millions) | 9 Months Ended Sep 30, 2021 (in millions) | 9 Months Ended Sep 30, 2020 (in millions) | | :-------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Cost of Revenue | $6.8 | $4.3 | $20.0 | $11.8 | | % of Revenue | 20% | 21% | 22% | 22% | - The increase in cost of revenue is primarily due to a **70%** and **134%** increase in device orders for the three and nine months, respectively, along with increased overhead from a new manufacturing and warehouse facility and freight costs[86](index=86&type=chunk) [Sales and Marketing Expense](index=19&type=section&id=Sales%20and%20Marketing%20Expense) Sales and marketing expenses grew significantly, driven by the expansion of the sales force and related headcount costs | Metric | 3 Months Ended Sep 30, 2021 (in millions) | 3 Months Ended Sep 30, 2020 (in millions) | 9 Months Ended Sep 30, 2021 (in millions) | 9 Months Ended Sep 30, 2020 (in millions) | | :-------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Sales and Marketing | $13.1 | $9.4 | $40.7 | $21.8 | | % of Revenue | 38% | 47% | 45% | 40% | - The increase in sales and marketing expense is primarily due to the expansion of the sales force and related costs associated with increased headcount[88](index=88&type=chunk) [General and Administrative Expense](index=19&type=section&id=General%20and%20Administrative%20Expense) General and administrative expenses rose due to headcount growth and facility expansion, but decreased as a percentage of revenue | Metric | 3 Months Ended Sep 30, 2021 (in millions) | 3 Months Ended Sep 30, 2020 (in millions) | 9 Months Ended Sep 30, 2021 (in millions) | 9 Months Ended Sep 30, 2020 (in millions) | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | General and Administrative | $6.8 | $4.9 | $18.5 | $13.0 | | % of Revenue | 20% | 24% | 21% | 24% | - The increase in general and administrative expense is primarily due to increased compensation and benefit expense related to headcount growth and increased occupancy expense from corporate headquarters expansion[90](index=90&type=chunk)[91](index=91&type=chunk) [Income Taxes](index=19&type=section&id=Income%20Taxes) Income tax expense increased substantially, reflecting higher pre-tax income, with effective tax rates of 24% and 23% for the respective periods | Income Tax Metric | 3 Months Ended Sep 30, 2021 (in millions) | 3 Months Ended Sep 30, 2020 (in millions) | 9 Months Ended Sep 30, 2021 (in millions) | 9 Months Ended Sep 30, 2020 (in millions) | | :---------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Income Tax Expense| $1.9 | $0.1 | $2.5 | $0.7 | | Effective Tax Rate| 24% | N/A | 23% | N/A | - Discrete items, primarily related to excess tax benefits on stock option exercises, provided a benefit of **$0.3 million** and **$0.8 million** for the three and nine months ended September 30, 2021, respectively[92](index=92&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=20&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company maintains sufficient liquidity through cash and receivables, despite a shift to negative operating cash flow due to growth in working capital - Principal sources of liquidity at September 30, 2021, were **$35.4 million** in cash and **$24.2 million** in accounts receivable[93](index=93&type=chunk) - Net cash used in operating activities for the nine months ended September 30, 2021, was **$0.6 million**, compared with **$2.5 million** provided in the same period of 2020, primarily due to increased inventory and receivables[94](index=94&type=chunk) - Net cash used in financing activities for the nine months ended September 30, 2021, was **$2.8 million**, primarily due to purchases of treasury stock, contrasting with **$25.4 million** provided in 2020 from an equity offering[96](index=96&type=chunk) - Management believes current cash and cash equivalents, along with anticipated cash flow from operations, will be sufficient to meet working capital and capital expenditure requirements for at least the next twelve months[97](index=97&type=chunk)[100](index=100&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=20&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) The company's financial statements are prepared under U.S GAAP, with detailed policies available in its 2020 Annual Report on Form 10-K - Financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (U.S GAAP)[97](index=97&type=chunk) - Detailed critical accounting policies and estimates are available in the Annual Report on Form 10-K for the year ended December 31, 2020[98](index=98&type=chunk) [OFF BALANCE SHEET ARRANGEMENTS](index=20&type=section&id=OFF%20BALANCE%20SHEET%20ARRANGEMENTS) The company reports no significant off-balance sheet arrangements that could materially affect its financial condition or results - The Company had no significant off-balance sheet arrangements[99](index=99&type=chunk) [RISKS AND UNCERTAINTIES](index=20&type=section&id=RISKS%20AND%20UNCERTAINTIES) The company acknowledges ongoing uncertainties from the COVID-19 pandemic, though no significant operational disruptions occurred in the reporting period - The Company is unable to predict the future impact of COVID-19 on its business, financial position, and operating results due to numerous uncertainties[100](index=100&type=chunk)[101](index=101&type=chunk) - The Company did not incur significant disruptions to its operations during the three and nine months ended September 30, 2021, from COVID-19[100](index=100&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=21&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is primarily exposed to market risks from changes in interest rates, excluding non-quantifiable risks like regulatory changes - The Company is exposed to certain market risks, including changes in interest rates[102](index=102&type=chunk) - Non-financial or non-quantifiable risks (e.g, political, economic, tax, regulatory, healthcare reimbursement) are not included in the market risk assessment[102](index=102&type=chunk) [Item 4. Controls and Procedures](index=21&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective, with no material changes to internal controls during the quarter [Disclosure Controls and Procedures](index=21&type=section&id=Disclosure%20Controls%20and%20Procedures) The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2021 - Management, with CEO and CFO participation, concluded that disclosure controls and procedures are designed at a reasonable assurance level and are effective as of September 30, 2021[103](index=103&type=chunk) [Changes in Internal Control Over Financial Reporting](index=21&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) No material changes in internal control over financial reporting occurred during the third quarter of 2021 - During the three months ended September 30, 2021, there were no changes that materially affected or are reasonably likely to affect internal control over financial reporting[105](index=105&type=chunk) PART II—OTHER INFORMATION [Item 1. Legal Proceedings](index=22&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material pending legal proceedings - The Company is not a party to any material pending legal proceedings[108](index=108&type=chunk) [Item 1A. Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's 2020 Annual Report on Form 10-K - There have been no material changes in the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2020[109](index=109&type=chunk) [Item 2. Unregistered Sales of Equity Securities And Use of Proceeds](index=22&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20And%20Use%20of%20Proceeds) The company completed its $10.0 million stock repurchase program, buying back 175,179 shares between March and September 2021 | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Program | Approximate Dollar Value (in thousands) of Shares that may yet be Purchased under the Program | | :----------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------- | :------------------------------------------------------------------------------------------ | | March 8 to September 8, 2021 | 175,179 | $15.22 | 175,179 | $— | - The Board of Directors approved a program to repurchase up to **$10.0 million** of common stock, which was fully utilized by September 8, 2021[111](index=111&type=chunk) [Item 3. Defaults Upon Senior Securities](index=22&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - No defaults upon senior securities[112](index=112&type=chunk) [Item 4. Mine Safety Disclosures](index=22&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable (N/A)[113](index=113&type=chunk) [Item 5. Other Information](index=22&type=section&id=Item%205.%20Other%20Information) The company reported no other information - No other information to report[113](index=113&type=chunk) [Item 6. Exhibits](index=23&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the report, including officer certifications and XBRL data documents - Exhibits include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and XBRL Instance, Schema, Calculation, Label, Presentation, and Definition Linkbase Documents[115](index=115&type=chunk) [SIGNATURES](index=24&type=section&id=SIGNATURES) The report is duly signed by the Chief Financial Officer on behalf of the company as of November 2, 2021 - The report was signed by Daniel J Moorhead, Chief Financial Officer, on November 2, 2021[119](index=119&type=chunk)

Zynex, Inc. (NASDAQ:ZYXI) Q2 2021 Results Conference Call July 29, 2021 4:15 PM ET Company Participants Thomas Sandgaard - President and Chief Executive Officer Daniel Moorhead - Chief Financial Officer Conference Call Participants Jeffrey Cohen - Ladenburg Thalmann Yi Chen - HC Wainwright Marc Wiesenberger - BRiley FBR James Terwilliger - Northland Capital Markets Operator Good day, and welcome to the Zynex 2021 Second Quarter Earnings Call. All participants will be in a listen-only mode. [Operator Instruc ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-38804 Zynex, Inc. (Exact name of registrant as specified in its charter) NEVADA 90-0275169 (State or other jur ...

Investor Presentation April 2021 NASDAQ: ZYXI Forward Looking Statements 2 All statements other than historical facts in this release are forward-looking statements within the meaning of the Private Securities Litigtation Act of 1995, or projections and as such are subject to numerous risks and uncertainties. The company makes no express or implied representation or warranty as to the completeness of this information or, in the case of projections, as to their attainability or the accuracy and completeness ...