08 May Zynex: Altering the Medical Industry in “Non-Invasive” Ways
Zynex, Inc. (Nasdaq: ZYXI) is an innovative medical technology company specializing in manufacturing and selling non-invasive medical devices for pain management, rehabilitation, and patient monitoring.
The Company and its Products
As of December 31, 2022, the Company’s active subsidiaries are Zynex Medical, Inc. (ZMI) and Zynex Monitoring Solutions, Inc. (ZMS). The Company’s inactive subsidiaries include Kestrel Labs, Inc., Zynex Europe (ZEU), Zynex NeuroDiagnostics, Inc. (ZND), Pharmazy, Inc., which was incorporated in June 2015.
ZMI designs, manufactures, and markets medical devices that treat chronic and acute pain and activate and exercise muscles for rehabilitative purposes with electrical stimulation. The Company’s devices are intended for pain management to reduce reliance on medications and provide rehabilitation and increased mobility through the utilization of non-invasive muscle stimulation, electromyography technology, interferential current (IFC), neuromuscular electrical stimulation (NMES) and transcutaneous electrical nerve stimulation (TENS).
ZMI markets and sells Zynex-manufactured products such as NexWave, NeuroMove, InWave, and E-Wave. It also distributes complementary products like electrodes and batteries and privately labeled supplies such as Comfortrac/Saunders, JetStream, LSO Back Braces, and Knee Braces.
Zynex Monitoring Solutions Products in development (not yet available for sale) include CM-1500, CM-1600, NiCO CO-Oximeter, and HemeOx tHb Oximeter.
Zynex, Inc. (NASDAQ: ZYXI)
Market Cap: $343.46M; Current Share Price: $9.37
Data by YCharts
We’ll discuss a few key factors that indicate a promising future for Zynex.
- Large Total Addressable Market (TAM)
The Company primarily competes in the home electrotherapy market for pain management, with products based on IFC, TENS, and NMES devices and consumable supplies.
Today, over 1.5 billion worldwide and approximately 50 million Americans suffer from chronic pain. If pharmaceuticals such as opioids continue to be used as the first line of defense, America will continue to see a rise in opioid misuse, addiction, and drug-related deaths. The current opioid epidemic has been declared a health emergency, and Zynex is uniquely positioned to help reduce the number of opioids prescribed to treat chronic and acute pain symptoms.
NexWave, ZMI’s prescription strength electrical nerve stimulation device, can be used for chronic pain at all stages of patient care. The highly useful and innovative product relieves pain, augments healing, alleviates swelling through increased blood circulation, prevents muscle disuse atrophy, and relaxes muscle spasms. It displays superior performance to over-the-counter TENS devices and inferential efficacy.
The annual domestic market for home electrotherapy products is estimated at approximately $500 million to $1 billion. Hence, Zynex stands to benefit greatly from this market.
Image Source: Company
On the other hand, ZMS is focused on developing products within the non-invasive multi-parameter patient-monitoring marketplace. The TAM for Patient Monitoring stands at about $3.7 billion, including Hemodynamic Monitoring, Pulse Oximetry, and Sepsis.
Image Source: Company
So far as Hemodynamic Monitoring is concerned, the CM-1500 was cleared by the FDA in 2020. The CM-1600 has been submitted to the FDA and is pending clearance.
The Pulse Oximetry market, in particular, is especially promising.
Image Source: Company
The Company has two revolutionary products for this market, both awaiting FDA clearance. The NiCO™ Non-invasive CO-Oximeter, the first laser-based photoplethysmographic patient monitoring technology, is designed to noninvasively measure and monitor four crucial hemoglobin species with unprecedented accuracy.
The HemeOx™ Total Hemoglobin Pulse Oximeter is designed to noninvasively measure total hemoglobin and oxygen saturation, two critical parameters that typically require invasive arterial blood sampling for measurement.
Sepsis Monitoring also presents a huge market because of at least 48 million associated cases and 11 million deaths per year globally. In the U.S. alone, 1.7 million cases and nearly 300,000 deaths are reported annually. The Company’s Sepsis Monitor can provide early warning of deteriorating patient conditions to indicate and predict the onset of sepsis, replacing current complex protocols through proactive detection and alerting. Zynex has already filed a utility patent for this product in December 2021.
- Sound Growth Objectives
The Company already has a robust revenue model with high recurring revenue. In FY22, its capital/ consumable business model allowed it to generate 72% of revenue from supplies.
Shortly, the Company aims to
Zynex has a distinguished management team that seems capable of achieving all the above objectives, driving the Company toward further growth.
- Exceptional Financial Performance
Zynex has displayed seven consecutive years of profitability and a CAGR of 49% from 2018 to 2022.
Image Source: Company
Particularly for FY22, revenue stood at $158.2 million – an increase of 21% YoY. EBITDA was $28.1 million – this translates into an increase of 5% YoY. The gross margin for FY22 was 80%. During this time, the Company reported a net income of $17 million and diluted EPS of $0.44.
Also, Zynex produced $13.7 million in cash from operations in FY22, an increase of 98% compared to FY21.
Image Source: Company
During FY22, Zynex bought back over $26 million of its common stock, benefiting all shareholders.
For Q1 FY23, the Company reported net revenue of $42.2 million, a 36% increase over Q1 FY22. The gross margin for Q1 FY23 was 78%, and net income was $1.6 million – a 14% increase YoY. Cash on hand was $16.8 million at the end of the first quarter. Zynex produced $1.9 million in cash from operations in the first quarter of 2023, an increase of 10% compared to the same period in 2022.
Especially worth mentioning is that for Q1 FY23, Zynex reported that orders increased 61% YoY – this marks the highest number of orders in Company history for the 4th consecutive quarter.
The Company completed the latest stock buyback by repurchasing $3.4 million of its common stock during Q1 FY23 and has repurchased about $30 million over the past year.
Q1 FY23 revenue is estimated to range between $43.5 – $45.5 million, an increase of approximately 21% from Q2 FY22. FY 2023 revenue is estimated to range between $180 – $200 million, with Diluted EPS of $0.40 – $0.50 per share.
As can be seen from the Company’s recent results, Zynex has consistently delivered path-breaking performance over the last few years. The record-breaking growth is expected to continue because of the Company’s durable business model, target market expansion, and innovative pipeline products.
Thus, Zynex seems like an interesting stock to watch out for.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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Reference:
https://zynexmed.investorroom.com/2023-04-27-Zynex-Announces-2023-First-Quarter-Earnings
https://www.sec.gov/ix?doc=/Archives/edgar/data/846475/000141057823000824/zyxi-20230331x10q.htm
https://www.sec.gov/ix?doc=/Archives/edgar/data/846475/000141057823000257/zyxi-20221231x10k.htm
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