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Edited Transcript of ZYXI earnings conference call or presentation 31-Jul-19 8:15pm GMT

Q2 2019 Zynex Inc Earnings Call

LONE TREE Aug 6, 2019 (Thomson StreetEvents) -- Edited Transcript of Zynex Inc earnings conference call or presentation Wednesday, July 31, 2019 at 8:15:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Daniel J. Moorhead

Zynex, Inc. - CFO

* Thomas Sandgaard

Zynex, Inc. - Founder, President, CEO & Chairman

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Conference Call Participants

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* Jeffrey Scott Cohen

Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research

* Marc Wiesenberger

B. Riley FBR, Inc., Research Division - Associate

* Shawn Boyd

Next Mark Capital, LLC - Founder & Portfolio Manager

* Yi Chen

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst

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Presentation

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Operator [1]

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Good day, and welcome to the Zynex Second Quarter 2019 Earnings Conference Call. (Operator Instructions)

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. Risk factors that could cause actual results to materially differ from forward-looking statements are 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 ending December 31, 2018, as well as forms 10-Q, 8-K and 8-K/A, press releases and the company's website. Please note that this event is being recorded.

I would now like to turn the conference over to Thomas Sandgaard, Founder, Chairman and Chief Executive Officer. Please go ahead.

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Thomas Sandgaard, Zynex, Inc. - Founder, President, CEO & Chairman [2]

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Good afternoon. My name is Thomas Sandgaard, President and CEO of Zynex. Welcome to our second quarter 2019 earnings call.

I'm pleased to announce that the second quarter was our 12th consecutive quarter with positive net income. Our second quarter revenue was $10.3 million with a net income of $0.06 per fully diluted share. Revenue increased 36% compared to the same quarter last year, and we reported positive net income of $2.2 million. Adjusted EBITDA in the quarter was just over $2.8 million, slightly above our estimate for the quarter.

Many of you may have seen our press release earlier this month. We were named the fastest-growing company in Colorado from a net income perspective during the last 2 years. This speaks not only to our growth, but also cost controls as well. We're very proud to have received this honor.

Our cash position was $10.1 million at the end of the second quarter. We had some significant cash payments in the first half of 2019, including the payment of our first quarter special dividend of $2.3 million and a significant amount of income taxes.

As we keep growing our sales force and geographic footprint across the U.S., we have grown orders 65% year-over-year comparing the second quarter, and we continue to see strong reimbursement for our products.

Orders grew 29% between the first and the second quarters as a result of more new sales reps becoming productive. This order growth is a result of aggressively adding new sales reps to the sales force every month, and received order growth is an early sign of order growth momentum and the subsequent revenue growth that we expect to see over future periods.

As you may know already, the revenue of an order is typically recognized over many months as patients continue to use our device and the related supplies for continued pain relief. In the second quarter, we sustained our aggressive sales force growth. We continue to add 10 new reps every month. That pace should get us to around 200 sales reps by the end of 2019, with reduction in our independent sales reps down to approximately 60 reps, stemming from before 2018 an approximately 140 direct new sales reps, all added in 2018 and '19.

I'm also very pleased to see our gross profit margin remain at a level of 81%, an indication that the industry for prescription strength electrotherapy is still not only stable, but very healthy and viable.

The opioid epidemic continues to be a serious issue in this country, and we are increasingly working to get patients off opioids and for physicians to use our prescription strength technology as a first line of defense when treating pain. Currently, the devastating impact has reached a level where tens of thousands die yearly due to opioid abuse. We continue to develop more tools to make physicians aware of our technology that literally has no side effects.

Our products for pain management and rehabilitation still stand out as some of the best products in the industry: the NexWave for pain management; our NeuroMove device for the stroke rehabilitation; and the InWave for incontinence treatment, puts us in a very strong product position in the rehabilitation markets.

We also continue to see great potential in both of our product divisions, our existing revenue-generating area for pain management as well as the huge unmet potential for our Blood Volume Monitor.

2019 has been a transformational year from an investor perspective. In February, we succeeded in getting listed on NASDAQ. And in June, we were added to the Russell 2000 Index. The combination of these events increased our daily traded volume over 10x from approximately 30,000 shares traded per day to over 350,000 shares per traded -- traded per day presently.

We also continue to add talent to our organization to help facilitate our continued growth. In February, we added Chris Brown as our new VP of sales. And last week, we added a new Chief Operating Officer, Joseph Papandrea. Both Joseph and Chris will help us accelerate and streamline our growth as we finish 2019 and head into 2020.

I will now turn the call over to Dan Moorhead, our CFO.

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Daniel J. Moorhead, Zynex, Inc. - CFO [3]

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Thanks, Thomas. First, I'll review our 2019 second quarter results. Orders grew 65% year-over-year, which drove net revenue up 36% to $10.3 million from $7.6 million in 2018. Device revenue increased 37% to $2.3 million compared to $1.7 million last year. Supplies revenue increased 36% year-over-year to $8 million from $5.9 million. Gross margins were 81% in the second quarter.

Beginning in 2019, we began breaking out sales and marketing expense from G&A. This breakout provides greater clarity related to our sales growth initiatives and the overall financial statement impact.

Sales and marketing expenses increased 111% year-over-year as we continue to grow our sales force. G&A expense grew 30% year-over-year. Much of the increase was related to increased headcount in our billing and patient support functions related to our order growth. G&A was flat compared to Q1 of 2019.

Second quarter net income was $2.2 million or $0.06 per diluted share compared to net income of $2.4 million or $0.07 per diluted share in the second quarter last year.

Adjusted EBITDA, which is a standard EBITDA calculation plus an exclusion of noncash stock-based compensation and other income expense and is reconciled on our press release, was $2.8 million in the second quarter of 2019 and 2018.

We have increased income tax expense year-over-year due to our profitability over the last 2 years, which utilized our net operating losses and puts us in a taxable position.

Now on to our 6 months' results. Orders grew 48% year-over-year, which drove net revenue up 35% to $19.5 million from $14.5 million in 2018. Device revenue increased 31% to $4.3 million compared to $3.3 million last year. Supplies revenue increased 36% year-over-year to $15.2 million from $11.2 million. Gross margins were 81% in the first half of 2019. 2019 net income increased 4% to $4.5 million or $0.13 per diluted share compared to net income of $4.3 million last year. Adjusted EBITDA was $5.3 million, up 9% from $4.9 million last year.

We generated operating cash flows during the first 6 months of 2019 of $2.4 million compared to $3.6 million in 2018. Cash flows were affected by increased tax expense in 2019 and the timing of 2018 tax payments, both of which were related to our NOLs, which were 100% utilized in 2018.

On the balance sheet, as of June 30, 2019, our cash balance was $10.1 million and was affected by the tax expense that I've already mentioned, and the fourth quarter special dividend of $2.3 million, which was paid in January. Working capital grew 62% to $11.9 million in Q2 compared to $7.3 million as of December 31, 2018.

During Q2, we entered into a new lease for additional office space, which caused us to record approximately $1.6 million in lease liabilities on the balance sheet, of which approximately $300,000 are current. We recorded the related assets, but those are all noncurrent in nature, so there is a negative effect on working capital related to the new leases.

With that, I'll turn the call back over to Thomas.

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Thomas Sandgaard, Zynex, Inc. - Founder, President, CEO & Chairman [4]

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Thank you, Dan. I'm especially excited about our year-over-year growth in orders of 65% compared to our revenue growth of 36%. It's a huge testament to our efforts to grow our sales force and clearly justifies the investments in our sales personnel, sales management and inside support functions.

Our focus continues to be growing our sales force at a rapid rate in geographic areas which we don't currently cover to take advantage of the void left in the market by 2 previously very large competitors.

Our increased orders due to a larger sales force, combined with strong reimbursement for our products, continue to drive increased revenue and profitability.

We estimate our third quarter revenue to be between $10.7 million and $11.2 million, with an adjusted EBITDA in the third quarter between $2.4 million and $2.9 million.

My long-term goal for our electrotherapy and rehab division is to continue to grow our share of the huge market for prescription pain management and to take advantage of the huge void in the market after the disappearance of our main competitors. This includes growing our domestic sales force as well as potential acquisitions of complementary technologies.

On the product side, the patent obtained last year in our Blood Volume Monitor indicates the beginning of the next phase of developing this division, with more clinical research to support our advertising, staffing up and business development, et cetera. We're also looking at adding more products to add to this division, including additional product development internally.

In summary, we announced yet another great quarter with strong growth in orders and revenue, plus, we added some great talent, including the addition of a COO to the organization, which sets us up for a seamless growth and strong financial performance going forward.

We will now answer questions from our listeners.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question comes from Jeffrey Cohen with Ladenburg Thalmann.

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Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research [2]

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So again, nice quarter. You're certainly saying that fairly frequently these days. So talking a little bit about the sales. You're talking about 60 previous independent reps, plus 140 now direct that you have, total 200 growing at 10 a month. Is that a good way to envision that for the rest of this year?

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Thomas Sandgaard, Zynex, Inc. - Founder, President, CEO & Chairman [3]

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Yes, that -- that's sort of a round number target for where we should be at, at the end of the year. So yes.

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Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research [4]

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Okay. Got it. And then talk to me a little bit about the facility as you took on the floor #4, correct, fourth floor.

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Thomas Sandgaard, Zynex, Inc. - Founder, President, CEO & Chairman [5]

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That's the third floor, so we have the first floor where we have production and quality and IT and many -- and engineering and many other functions. We had the fourth floor in the building, which was basically all the other functions. And our billing group has now -- are now grown so much that we have moved them to the third floor. So we have a total of 64,000 square feet in this building now.

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Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research [6]

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Okay. And what's your FTE count in Colorado in total -- fourth quarter total?

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Daniel J. Moorhead, Zynex, Inc. - CFO [7]

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It's about 120, give or take.

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Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research [8]

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Okay. Got it. Perfect. And then, Thomas, talk to me a little bit about your commentary regarding getting more favorable therapy into first line as opposed to beyond? How does one kind of grapple with getting earlier amongst physicians and clinicians and prescribers of the technology?

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Thomas Sandgaard, Zynex, Inc. - Founder, President, CEO & Chairman [9]

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Yes. That's really two parameters, and they all spin around our sales force. One is obviously to have the geographic -- this geographical footprint, so we have sales reps that can meet with these physicians as well as physical therapist face-to-face and discuss our treatment option as an alternative.

And second, the quality of those sales reps is obviously very important as the better the quality of the sales reps and the message we can deliver, the more efficient they should be in terms of convincing the physician to write prescriptions for our device before they start heading into prescribing a whole lot of opioids for patients in pain.

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Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research [10]

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Okay. Got it. And then how do you think about, as you succeed -- successfully leapfrogged drugs, what's the differential in the TAM as you get close to first line or at first line versus where you currently stand predominantly currently?

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Thomas Sandgaard, Zynex, Inc. - Founder, President, CEO & Chairman [11]

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Could you rephrase that question?

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Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research [12]

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The -- if you're able to successfully leapfrog into first line versus where you are today, that addressable market is how many times the size?

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Thomas Sandgaard, Zynex, Inc. - Founder, President, CEO & Chairman [13]

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That's obviously in the tens of millions of patients that are in so much pain that they seek some level of treatment for it. So we are talking tens of billions when you multiply that by the revenue we typically see on a -- an average prescription. So it's in the tens of billions.

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Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research [14]

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Okay. So it's upwards of 5 or 10 or 15x greater market as you're able to get more writing in a first-line status.

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Thomas Sandgaard, Zynex, Inc. - Founder, President, CEO & Chairman [15]

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That's right, that's right. That's obviously the very long-term scenario, assuming that we are successful in, first of all, picking up the low-hanging fruit in that. This market is well developed, well established in terms of reimbursement as well. And once we get past the point where the number of prescriptions that were traditionally written in this market and we kept on developing it further from that and possibly getting into the billions of revenue on the very long term, that will also require a different strategy on our part that it will be more educational rather than just asking physicians that used to prescribe this technology and send the orders our way instead, which is a very simple sales process. The more educational sales process that may come into play in the future is obviously more complex. But certainly, I look forward to hopefully getting there and really make lives better for people that are in pain in terms of providing pain relief and yet, at the same time, avoiding or limiting the amount of opioids that they need to take.

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Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research [16]

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And are you seeing prescribing trends currently that lead you to believe that you're jumping in front of drug therapy?

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Thomas Sandgaard, Zynex, Inc. - Founder, President, CEO & Chairman [17]

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Not necessarily. We are very focused on hiring 10 reps every month, getting them trained, getting them deployed. We just restructured our sales management with a new VP of sales and added 5 regional sales managers that are now holding the hands of the sales reps in these regions and making sure that we develop the sales force we have right now, and that we keep adding -- develop that into a good quality sales force. And also compared to how the sales force looked in the past, which was comprised primarily of independent sales reps carrying many different product line, now having a much more unified sales force that are aligned more with the company rather than many, many different scenarios.

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Operator [18]

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The next question comes from Yi Chen of H.C. Wainwright.

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Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [19]

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First question is how many more sales rep you plan to add each quarter going forward? And has the top line revenue grows in proportion to the number of sales rep you've added in the past quarters?

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Thomas Sandgaard, Zynex, Inc. - Founder, President, CEO & Chairman [20]

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To answer your last question first, yes. We have -- we've been positively surprised as to how well our new reps have been performing. We've also seen that the reps we hired in 2019, if we compare the first 90-day performance to the performance in the first 90 days of those reps that got hired last year, we have introduced better training. And we now see the first 90 days of order from the -- these new reps are approximately 50% better than those that were not trained as efficiently last year. So we're very encouraged by that.

And something that has made it stand out when we look at the second quarter is that we were able to grow year-over-year 65% on the orders by adding all these sales reps. It's a significant investment, but we saw that, obviously, in increase of orders. So compared to the revenue growth we've seen for a while being in the 35%, 36% range, I'm very encouraged because that could indicate that we will continue to grow as a company.

In terms of how we expect to add sales reps, we expect to -- we have mapped up, so we ultimately will have sales reps in 400 territories across United States with little less than 1 million citizens in each territory. And we expect to get there in approximately 23, 24 months from today. So we still need to add approximately 200 over the next 8 quarters. So that's -- I guess, you can do the math in terms of the pace we will be hiring at. So that's approximately 25 a quarter that needs to be added. So a little less than 10 a month, but we're currently running at -- you should also expect a little bit of attrition, so it should all come together that way.

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Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [21]

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My second question is of all the patients who received the NexWave device in the second quarter, how -- what percentage of them are newly diagnosed patients receiving this treatment and what percentage are patients who have switched from opioid product treatments to NexWave?

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Thomas Sandgaard, Zynex, Inc. - Founder, President, CEO & Chairman [22]

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Sometimes, we have that information in the form of a very extensive medical records. These days, they're not always just handwritten, but printouts from hospitals or doctor's offices. And in some cases, we barely have a prescription and a photocopy of insurance card. And we may obtain some information as we contact the patient the same day as we receive the prescription and get them -- the patient involved. So we don't exactly have that information, so we -- that will just be a qualified guess. But I would expect it to be, at this point, probably well below 50%, showing that scenario that you're asking about there. But it's not something we exactly are able to measure.

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Operator [23]

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The next question comes from Marc Wiesenberger with B. Riley FBR.

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Marc Wiesenberger, B. Riley FBR, Inc., Research Division - Associate [24]

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Can you talk about any changes to the types of physicians the sales staff is targeting and some impacts on the business?

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Thomas Sandgaard, Zynex, Inc. - Founder, President, CEO & Chairman [25]

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There's not a whole lot of change in who we are targeting. And a significant group that we're targeting is obviously orthopedic surgeons. It's a great technology for getting pain management introduced, in some cases, even before the surgery, so the patient is used to the device and how to operate it, but increasing blood circulation and getting some pain management right after orthopedic surgery. We see quite a bit of prescriptions also from the pain management doctors, physical medicine and rehabilitation doctors. And we also see quite a bit prescribed by anesthesiologists. And as you could probably expect, doctors of physical therapy also account for a significant amount of orders. And then it's literally spread out to all kinds of specialties, family physicians, podiatrist, chiropractors, et cetera. But our primary target has been -- for a long time has been orthopedic surgeons. That's about 20-something percent of all orders coming in with probably other groups I just mentioned are nearly up in the 20% range. But nothing has really changed in terms of our focus. That's still the same, but it's a very, very broad spectrum of physicians that we see.

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Marc Wiesenberger, B. Riley FBR, Inc., Research Division - Associate [26]

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Understood. On previous calls and even earlier, you alluded to kind of the realignment of sales territories and adding the 5 sales regional managers. Can you talk about how that's impacted the sales reps and their business?

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Thomas Sandgaard, Zynex, Inc. - Founder, President, CEO & Chairman [27]

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It's going really well. Obviously, there has been some, we call them, legacy reps that's been with us for many, many years that not necessarily fit into the territories we defined. That was very computer-based and based on population. And we have to obviously carve out a few exceptions, so that they could keep seeing the clinics that may historically have produced a very, very high volume. But for the most, it's going really well. We're -- I can kind of tell per your question that -- that's something that you -- we can always expect that the -- when we talk -- talking about that many sales reps and then some of them being impacted, that could create a lot of noise. That's actually gone really well. We've been very structured about it and approached it very delicately. So I really applaud our sales management team for having implemented that in a very professional manner, and that really sets us up for the future. So it's very easy to just take 1 territory at a time, or I should say, 10 territories per month and plug in new reps with a whole interviewing, the qualifying and getting them hired and trained. It's working like a well-oiled machine at this point.

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Marc Wiesenberger, B. Riley FBR, Inc., Research Division - Associate [28]

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That's really good to hear and that kind of goes along with my next question. Are you having any difficulty at this point finding qualified sales reps? And as you kind of ramped that process, do you anticipate having trouble with the tight labor market?

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Thomas Sandgaard, Zynex, Inc. - Founder, President, CEO & Chairman [29]

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No. I can see the last few years that as we add more sales reps, that it should maybe a little harder to keep finding good sales reps. But the fact that we have mapped out the territories the way we have, and every time we add sales reps -- a sales rep in a new territory after having interviewed a number of applicants, the number of applicants is always the same because the population we are putting them into. Whether it's a rural area or a high-density area, the amount of square miles might be different, but the size of the population and therefore, also the percentage of that population that has a sales background or interested in selling medical devices, it's about the same every time. So that's why we can keep that cadence and that pace. And there doesn't seem to be any slowing down because the pool, the talent -- the pool of talent is the same for every new territory we interview for. So that -- that's actually good news.

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Marc Wiesenberger, B. Riley FBR, Inc., Research Division - Associate [30]

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That is good to hear. Have you noticed any changes in reimbursements in terms of dollar value or maybe timing of payments? And what are your expectations for the near and medium term?

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Thomas Sandgaard, Zynex, Inc. - Founder, President, CEO & Chairman [31]

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No. It's -- what we've seen for several years now is pretty constant. The thing that keeps changing is, as I believe I mentioned before, the name of the insurance company that's the most difficult this month. But other than that, across the board, it's still the same as it was 20 years ago, 25 years ago, 10 years ago. So we just, as I also have mentioned or talked about in previous earnings calls, over the past 3 years, we've done a lot better at just processing the files and not making so many mistakes internally, and that seems to be at a fairly constant level. We keep getting great -- or hiring great talent into all parts of the company, including the billing department as the orders grow. And I expect we can keep being as efficient as we've been in the past.

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Marc Wiesenberger, B. Riley FBR, Inc., Research Division - Associate [32]

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Sure. With the success you've been having, are you seeing any changes in the competitive landscape with new entrants?

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Thomas Sandgaard, Zynex, Inc. - Founder, President, CEO & Chairman [33]

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Not yet. I know that question comes up on every earnings call, and that's another one where we haven't really seen anything. And I'm sure we would hear about it pretty quickly through the grapevine and the sales force. So that is still the same. So we are obviously in a very unique position here with a well-developed market, well-established reimbursement and with basically no significant competition. And we just keep adding sales reps to expand our geographic coverage.

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Marc Wiesenberger, B. Riley FBR, Inc., Research Division - Associate [34]

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Got it. And one final one from me, got to have an obligatory Blood Volume question on the call. Any updates on as FDA or CE Marking approval? And I guess, how are the clinical studies progressing as well?

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Thomas Sandgaard, Zynex, Inc. - Founder, President, CEO & Chairman [35]

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Clinical studies are progressing well. We -- there were some technicalities at the site where we had initial tests through our clinical research organization, and so we're redoing that in a few weeks. That should be fairly easy. And then all the studies we have lined up there should follow shortly after that. And in terms of the FDA and CE Marking, I would say, we are probably closer today than we were 3 months ago.

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Operator [36]

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The next question comes from Shawn Boyd with Next Mark Capital.

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Shawn Boyd, Next Mark Capital, LLC - Founder & Portfolio Manager [37]

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Great. Just want to clarify one thing. The sales force expansion, which, of course, is near and dear to all of our hearts here, if I understood correctly, you indicated you have about 200 reps right now going to 400 about 2 years out.

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Thomas Sandgaard, Zynex, Inc. - Founder, President, CEO & Chairman [38]

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By year-end. So right now, we are more in the 175 to 180 range. And by year-end, maybe, we can be over 200. But that's kind of a round number target, yes.

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Shawn Boyd, Next Mark Capital, LLC - Founder & Portfolio Manager [39]

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Okay. So 200 or so by year-end. And then with the intention to expand that to 400, another 2 years out, 24 months out. And so that's what got you to that cadence of 25 per quarter.

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Thomas Sandgaard, Zynex, Inc. - Founder, President, CEO & Chairman [40]

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Yes, exactly.

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Shawn Boyd, Next Mark Capital, LLC - Founder & Portfolio Manager [41]

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Okay. And perhaps I just misunderstood this, but I originally thought that 2020 might involve a little bit of a slowdown on adding reps as you kind of refine territories. So either I just got that wrong or you've kind of changed the plan a little bit and you've accelerated your hiring because, possibly, you guys are seeing the good payback on the hires. Can you just...

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Thomas Sandgaard, Zynex, Inc. - Founder, President, CEO & Chairman [42]

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Maybe. So that it -- what that does is it buys us a little bit of a cushion to maybe aggressively trim some of the independent sales reps that are not as productive. And it also has some cushion built in if we have higher-than-expected attrition. But also you're right. We could slow down a little bit, but I'd say since we don't really have any resistance or bottlenecks or barriers to adding 10 new reps a month, I'd like to continue to do that here as soon and as fast as possible. So if we can get to the 400 in 22 or 23 months instead of 24 months, that -- then we're obviously doing that.

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Operator [43]

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(Operator Instructions) The next question comes from [Kevin Mackie] with [Analyst].

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Unidentified Analyst, [44]

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Wonder if you could give us a more exact number on how many orders you have this quarter.

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Daniel J. Moorhead, Zynex, Inc. - CFO [45]

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The disclosure we give, we don't get to the exact order. We give growth percentages. And from the materials and the decks that we have, you can semi-extrapolate those. But it's -- what we give is the numbers we -- we're comfortable with.

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Unidentified Analyst, [46]

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All right. If my understanding is correct, last year in December, the competitive bidding program ended for Medicare. And that previously excluded you guys from 9 Metropolitan markets, I believe your 10-K had said. Are you working to push into those markets you were previously excluded from? And do you plan on bidding in the next round that is due for 2021?

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Thomas Sandgaard, Zynex, Inc. - Founder, President, CEO & Chairman [47]

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No. We don't plan on bidding and we don't see that we are really excluded for any markets.

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Unidentified Analyst, [48]

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Okay. And in terms of the NeuroMove, I mean, it sounds like an amazing device. I personally know people who had a stroke and can really benefit from that. But through the years, you continue to report you have a negligible amount of sales from the NeuroMove. I'm just curious what might be hampering you from getting that product to stick. Is it patient acceptance? Is it physicians acceptance? Is it a hurdle in the marketing environment? If you can speak to that, please?

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Thomas Sandgaard, Zynex, Inc. - Founder, President, CEO & Chairman [49]

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Yes, you're right. The NeuroMove is a very exciting device. It's literally -- it literally detects attempts from the brain when you're attempting to move muscles. It could be trying to extend your fingers and hand. So it's a very unique device and design, so it can also be used in the home. And more than 10 years ago, when it was introduced, we actually had a decent amount of revenue. Where our total revenue was only a few million dollars annually, nearly half of the revenue came from the NeuroMove device. What has happened since is -- since we until recently had fairly limited resources, we saw a bigger opportunity in terms of growing revenue and therefore, also creating profits for the company in growing the pain management market. So it's been a very deliberate decision to focus on that. Unfortunately, therefore, we've decreased the efforts on promoting the NeuroMove device. It's something that we see to really get significant revenue on will require a quite a bit of heavy lifting and that translates to a significant financial investment in the marketing of it. We occasionally sell some to clinics as a clinical sales. And then we have patient-friendly programs with relatively low self-pay option. So it's obviously something we could do much more of in terms of promoting it to stroke survivors. There's 600,000 or more new strokes every year in this country, so there's a lot of potential here. However, the -- in order to not spread ourselves is too thin, we're still focusing on the pain management market. But as you're alluding to, it could be one of the things we'll do more going forward to diversify our revenue a little bit. And fortunately, it's somewhat of the same call point for our sales force.

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Unidentified Analyst, [50]

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Yes, yes. That helps a lot. And finally, also on the Blood Volume Monitor, you had mentioned in your reports that you're kind of fielding questions from the FDA, responding to questions that they have. Can you just give us an idea what those questions might be and what your responses have been, just so we can get a better feel for how that progress is coming?

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Thomas Sandgaard, Zynex, Inc. - Founder, President, CEO & Chairman [51]

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Yes. That had been -- the nature of those questions have changed over time. In the beginning, it's very much pointed at our inability to literally write up the application in -- so that it fitted their framework. We spent some time on that. There's been questions a little while back as to getting additional safety testing done to a new standard that have been introduced in the meantime. So that took some time to get that done and have our device pass those additional tests. And here, more recently, they have had specific questions as to the specific 6 parameters we use to combine into an index and basically getting the volume right, so it fits into the framework of the 510(k) clearances that we are trying to get through with. So recently, we have submitted a response that should be aligned with a near word-for-word with their suggestions as to how we should phrase things. So with a bit of luck, with the next response, they don't have any further questions or suggestions to us. And else, we'll just keep answering their questions. But that -- so in summary, there hasn't really been any very heavy, very difficult questions. It's just getting the technicalities right. And unfortunately, every time we get a round of questions, we -- it takes some time -- several months before then we are able to get back to them. And then they have the time to respond back to us. So unfortunately, it's taken some time. And it's somewhat similar, all the different kind of questions that we -- in terms of getting moving forward on the CE Marking process.

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Unidentified Analyst, [52]

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And the last one for me. I just kind of ran some rough numbers based on your orders growth and how many sales reps you have. And it looks like your revenue per rep went up from the last quarter, but you revenue per order went down slightly. I'm just wondering if you can speak to that. Maybe in particular, what your billing department, the efficiency you're trying to create there because I understand that they are ones that are responsible for collecting the revenue after the order is placed. So with that number going down slightly, just wondering if there's anything we should be aware of there.

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Daniel J. Moorhead, Zynex, Inc. - CFO [53]

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There aren't any changes in reimbursement or productivity. It's really -- you have to take into account the sales headcount number still aren't huge numbers. So when you bring in a large number of people at the end of the quarter, beginning of the quarter, it can skew that revenue per order or dollars per submissions. So I think -- I would say, your numbers aren't correct.

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Operator [54]

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This concludes our question-and-answer session. I would like to turn the conference back over to Thomas Sandgaard for any closing remarks.

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Thomas Sandgaard, Zynex, Inc. - Founder, President, CEO & Chairman [55]

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Thank you. I hope today's earnings call has been informative for everyone, and I appreciate the interest in Zynex and listening in on this call. Thank you, and a great day to all.

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Operator [56]

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The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.