President and CEO Commentary:
Thomas Sandgaard, CEO commented: “I am very excited to report strong net income of $1.5 million in the second quarter which continues our trend of bottom line improvement. Our revenue grew to $5.0 million, an increase of 47% compared to the first quarter and 53% above the second quarter of last year. Our gross profit margin continued to improve to 80% versus 75% in Q1-2017 and Q2-2016. Our focus on processing orders better to improve collections while keeping fixed expenses minimized is paying off in terms of positive cash flow and profitability.
We were able to strengthen our balance sheet at the end of the second quarter when we paid off the entire balance on our credit facility, to which we owed $2.2 million at the end of the first quarter 2017. Not only are we now saving significant amount of interest and fees but it also provides much more flexibility for us to operate. Our increasing profitability and cash flows will allow us to invest in sales growth initiatives during the second half of 2017.
We currently estimate our third quarter revenue to range between $5.4 and $5.8 million with Adjusted EBITDA between $2.0 million and $2.4 million.
Our long term goals are to continue to take advantage of the huge void in the electrotherapy industry, a listing on a national stock exchange and also launching our Blood Volume Monitor into the hospital market for non-invasively detecting blood loss and internal bleeding.”
Second Quarter Financial Results Summary:
The Company reported net revenue of $5.0 million, a 53% increase over Q2-2016 and a 47% increase compared to Q1-2017. For the six months ended June 30, 2017, total revenue was $8.5 million vs. $6.8 million for the six months ended June 30, 2016.
Cost of revenue increased to $1.0 million from $0.9, million which generated increased gross margins of 80% compared to 71% last year. Gross margins for the six months ended June 30, 2017 increased to 77% from 71% in 2016.
Selling, General and Administrative (“SG&A”) expenses were $2.1 million in the second quarter of 2017, compared to $2.5 million last year. The Company’s SG&A expenses decreased 16% compared to the same period last year, continuing a trend of decreasing operating expenses.
Net income grew 769% to $1.5 million in the second quarter of 2017, compared to a loss of $0.2 million last year. For the six months ended June 30, 2017, net income grew 378% to $1.9 million from a loss of $0.7 million in 2016.
Adjusted EBITDA grew 7463% to $2.0 million in the second quarter of 2017 compared to a loss of $27,000 last year. For the six months ended June 30, 2017, Adjusted EBITDA grew 1959% to $2.6 million from a loss of $0.1 million in 2016.
The Company generated $1.9 million of cash from operations during the first half of 2017, which allowed it to pay off its credit facility which had been in default since 2014.
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Non-GAAP Financial Measures
Zynex reports its financial results in accordance with accounting principles generally accepted in the U.S. (GAAP). In addition, the Company is providing in this news release financial information in the form of adjusted EBITDA (earnings before interest, taxes, depreciation, amortization and stock compensation). Management believes these non-GAAP financial measures are useful to investors and lenders in evaluating the overall financial health of the Company in that they allow for greater transparency of additional financial data routinely used by management to evaluate performance. Adjusted EBITDA can be useful for investors or lenders as an indicator of earnings available to service debt. Non-GAAP financial measures should not be considered superior to, in isolation from or as an alternative to the financial information prepared in accordance with GAAP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT NUMBER
|June 30,||December 31,|
|Accounts receivable, net||2,505||3,028|
|Total current assets||2,948||3,422|
|Property and equipment, net||497||580|
|Amortizable intangible assets, net||21||34|
|LIABILITIES AND STOCKHOLDERS’ EQUITY|
|Line of credit||$||–||$||2,771|
|Current portion of unsecured subordinated promissory notes||518||–|
|Current portion of capital leases||120||118|
|Accounts payable and accrued expenses||2,447||3,190|
|Accrued payroll and related taxes||659||732|
|Deferred insurance reimbursement||880||880|
|Total current liabilities||4,624||7,745|
|Obligation to issue common stock to private placement noteholders||466||–|
|Capital leases, less current portion||73||136|
|Commitments and contingencies|
|Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding as of June 30, 2017 and December 31, 2016||–||–|
|Common stock, $0.001 par value; 100,000,000 shares authorized; 32,048,484 and 31,271,234 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively||32||31|
|Additional paid-in capital||6,322||6,032|
|Total Zynex, Inc. stockholders’ deficit||(1,565||)||(3,713||)|
|Total stockholders’ deficit||(1,654||)||(3,802||)|
|Total liabilities and stockholders’ equity||$||3,521||$||4,091|
CONDENSED CONSOLIDATED STATEMENTS OF
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE
|For the Three Months Ended June 30,||For the Six Months Ended June 30,|
|COSTS OF REVENUE AND OPERATING EXPENSES|
|Costs of revenue – rental, product & supply||1,020||941||1,943||1,924|
|Selling, general and administrative expense||2,088||2,495||4,118||5,339|
|Total costs of revenue and operating expenses||3,108||3,436||6,061||7,263|
|Income (loss) from operations||1,934||(150||)||2,417||(500||)|
|Other income (expense)|
|Other income (expense), net||(394||)||(77||)||(515||)||(172||)|
|Income (loss) from operations before income taxes||1,540||(227||)||
|Income tax expense||36||–||45||–|
|Net Income (loss)||1,504||(227||)||1,857||(672||)|
|Plus: Net loss – noncontrolling interest||–||–||–||–|
|Net income (loss) – attributable to Zynex, Inc.||$||1,504||$||(227||)||$||1,857||$||(672||)|
|Net income (loss) per share attributable to Zynex, Inc.:|
|Weighted average basic shares outstanding||32,048||31,271||31,790||31,271|
|Weighted average diluted shares outstanding||33,262||31,271||32,413||31,271|
Reconciliation of GAAP to Non-GAAP Measures
(in thousands except per share data)
|For the Three Months Ended June 30,||For the Six Months Ended June 30,|
|Depreciation and Amortization||41||107||112||204|
|Stock-based compensation expense||13||16||37||158|
|Interest expense and other, net||394||77||515||172|
|Income tax expense||36||-||45||-|
|% of Net revenue||39%||(1%)||14%||(1%)|
Zynex, founded in 1996, markets and sells its own design of electrotherapy medical devices used for pain management and rehabilitation; and the company's proprietary NeuroMove device designed to help recovery of stroke and spinal cord injury patients. Zynex is also developing a new blood volume monitor for use in hospitals and surgery centers. For additional information, please visit: Zynex.com.
Safe Harbor Statement
Certain statements in this release are "forward-looking" and as such are subject to numerous risks and uncertainties. Actual results may vary significantly from the results expressed or implied in such statements. Factors that could cause actual results to materially differ from forward-looking statements include, but are not limited to, the need to obtain additional capital or augment our liquidity in order to continue our business, the success of our international expansion efforts, our ability to engage additional sales representatives and their success, the need to obtain FDA clearance and CE marking of new products, the acceptance of new products as well as existing products by doctors and hospitals, larger competitors with greater financial resources, the need to keep pace with technological changes, our dependence on the reimbursement from insurance companies for products sold or rented to our customers, acceptance of our products by health insurance providers, our dependence on third party manufacturers to produce our goods on time and to our specifications, implementation of our sales strategy including a strong direct sales force, the uncertain outcome of pending material litigation, our ability to up-list to a larger exchange and other risks described in our filings with the Securities and Exchange Commission including the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2016 as well as Forms 10-Q, 8-K and 8-K/A, press releases and the Company's website.
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