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ZI

ZYNEX INC (ZYXI)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue fell sharply to $26.6M vs $46.5M YoY, driven primarily by a temporary TRICARE payment suspension and a smaller salesforce focused on productivity; gross margin compressed to 69% from 80% YoY, and Adjusted EBITDA turned to a loss of ($11.8M) with a -44% margin .
  • Management issued Q2 2025 guidance of at least $27M revenue and loss per share of ($0.20) or better, and withheld full‑year guidance pending clarity on TRICARE; Q1 results missed prior Q1 guidance of at least $30M revenue and ($0.30) loss per share or better .
  • The company implemented ~15% staff reductions and other cost actions expected to save ~$35M annually; working capital stood at $40.1M and cash at $23.9M at quarter‑end, providing near‑term liquidity while rightsizing the business .
  • Strategic catalyst: NiCO laser pulse oximeter submission to FDA “in the next couple of weeks,” with management targeting commercialization and revenue in 2026; the device aims to address skin pigmentation bias in traditional LED oximetry and carbon monoxide detection limitations .

What Went Well and What Went Wrong

What Went Well

  • Salesforce productivity focus and diversification: despite ~39% fewer reps, total orders fell only 3% YoY; non‑new product orders reached 34% vs ~30% last year, supporting product mix evolution (“we were encouraged by the strong performance of the current sales reps”) .
  • Cost actions instituted: ~15% staff reduction and other expense cuts should yield ~$35M annual savings, with S&M and G&A trending lower sequentially into Q2 (“We continue to monitor expenses and adjust as necessary”) .
  • NiCO laser pulse oximeter nearing FDA submission, with management highlighting superior accuracy across skin pigmentation and potential to detect carbon monoxide; commercialization plan anticipates 2026 revenue (“game‑changing pulse oximeter”) .

What Went Wrong

  • Material revenue and earnings miss vs prior guidance: Q1 revenue $26.6M vs prior guide ≥$30M; diluted EPS ($0.33) vs guided loss of ($0.30) or better, reflecting TRICARE suspension and payer timing volatility .
  • Margin compression: gross margin fell to 69% from 80% YoY due to supporting TRICARE patients (COGS incurred without revenue); Adjusted EBITDA swung to ($11.8M), -44% of revenue .
  • Visibility overhang: full‑year guidance withheld pending TRICARE resolution; management indicated revenue recognition is sensitive to payer “ins and outs,” adding near‑term uncertainty .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$49.966 $45.975 $26.578
Gross Profit ($USD Millions)$39.8 $36.0 $18.2
Gross Margin %80% 78% 69%
Net Income ($USD Millions)$2.382 ($0.615) ($10.396)
Diluted EPS ($USD)$0.07 ($0.02) ($0.33)
Adjusted EBITDA ($USD Millions)$5.050 $0.584 ($11.783)
Adjusted EBITDA Margin %10% 1% (44)%

Segment breakdown

MetricQ3 2024Q4 2024Q1 2025
Devices Revenue ($USD Millions)$14.858 $14.809 $11.898
Supplies Revenue ($USD Millions)$35.108 $31.165 $14.680

KPIs and Operating metrics

KPIQ3 2024Q4 2024Q1 2025
Orders YoY Growth (%)+13% n/a(3)%
Sales & Marketing Expense ($USD Millions)$20.713 $19.262 $16.940
G&A Expense ($USD Millions)$15.274 $17.292 $14.366
Working Capital ($USD Millions)$58.5 $58.3 $40.1
Cash & Equivalents ($USD Millions)$37.6 $39.6 $23.9

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q1 2025≥$30M Actual $26.6M Missed (lower than guided)
Diluted EPS ($USD)Q1 2025Loss ($0.30) or better Actual ($0.33) Missed (worse than guided)
Revenue ($USD Millions)Q2 2025n/a≥$27M New guidance
Diluted EPS ($USD)Q2 2025n/aLoss ($0.20) or better New guidance
FY 2025 GuidanceFY 2025n/aWithheld pending TRICARE clarity Maintained (no guidance provided)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 and Q4 2024)Current Period (Q1 2025)Trend
TRICARE payment suspensionNot mentioned in Q3; introduced in Q4 with temporary suspension and potential up to 12 months; TRICARE ~20–25% revenue; company to present appeal in April Appeal meeting held April 9; response expected by June; Q1 revenue excludes TRICARE payments; management restructuring to operate without TRICARE if needed Continued uncertainty; key overhang
NiCO laser pulse oximeter (FDA)Q4: human trials completed at Duke/UCSF; submission delayed into 2025 EMC/safety tests passed; submission targeted in “just over a week”; commercialization targeting 2026 revenue Advancing toward submission
Expense actions/OpEx trajectoryQ4: ~15% staff cuts underway; ~$35M annual savings; S&M and G&A to move down by ~$2M quarterly run rate Staff down ~15% in Q1; S&M down 28% YoY; G&A $14.4M; more reductions to flow through in Q2 Cost base lowering
Product mix diversificationQ3: revenue per rep +25% YoY; new therapy products, bracing; TENS device clearance Non‑new product orders 34% vs ~30% last year; pursuing personal injury and payer expansion Diversification expanding
Payer dynamics and revenue recognition sensitivityQ4: revenue shortfall due to slower payments; recognition sensitive to payer changes Q1 miss attributed to TRICARE hold and normal payer “ins and outs” Persistent sensitivity
Regulatory/health equity narrativeQ4: NiCO aims to address LED oximetry bias Emphasis that laser oximetry avoids skin pigmentation bias and improves accuracy, including CO detection Strengthening narrative

Management Commentary

  • “Total orders decreased 3% year‑over‑year, but our sales force headcount was approximately 39% less… we were encouraged by the strong performance of the current sales reps” (CEO Thomas Sandgaard) .
  • “We made the difficult decision to decrease our overall staff by approximately 15% in the first quarter… savings of approximately $35 million annually” .
  • “We expect to complete our FDA submission for our NiCO laser pulse oximeter in the next couple of weeks… a significant driver of new customers, revenue streams and will diversify our product offering” .
  • “Net revenue was $26.6 million… The revenue decline was primarily attributable to the temporary payment suspension from TRICARE and slowing order growth related to our focus on sales rep productivity and lower sales headcount” (CFO Dan Moorhead) .
  • “We estimate our [Q2] revenue to come in at $27 million, and the EPS… a loss of $0.20 per share” (CEO) .

Q&A Highlights

  • TRICARE process clarified: It is a temporary payment suspension (not denial of coverage); Zynex remains in‑network and continues treating patients; reimbursement for processed claims would be paid upon resolution .
  • Q1 miss drivers: revenue recognition sensitive to payer changes; company withheld full‑year guidance until better TRICARE clarity (targeting an update with Q2 results) .
  • Contingency planning: if TRICARE outcome is negative, salesforce will refocus to drive equivalent or better revenue in other channels .
  • NiCO timing: launch immediately upon clearance; management expects meaningful revenue in 2026 .

Estimates Context

  • S&P Global/Capital IQ Wall Street consensus for quarterly revenue and EPS was unavailable for ZYXI for Q4 2024, Q1 2025, and Q2 2025 at the time of retrieval; as a result, estimate comparison tables could not be populated. Values retrieved from S&P Global.

Key Takeaways for Investors

  • The TRICARE payment suspension is the dominant near‑term overhang; resolution timing (response expected by June) will likely drive stock narrative and estimate revisions .
  • Q1 underperformance vs guidance underscores payer‑related volatility and revenue recognition sensitivity; cost reductions should increasingly benefit Q2 and beyond .
  • Gross margin compression reflects TRICARE support costs without revenue; expect margin rebuild only after reimbursement resumes or mix shifts offset .
  • Sequential revenue stabilization targeted in Q2 (≥$27M) with a narrower loss per share (≈$0.20), contingent on execution and payer dynamics .
  • Strategic upside: NiCO submission imminently; management articulates a differentiated laser oximetry value proposition addressing equity and accuracy issues, with revenue expected in 2026 upon clearance .
  • Diversification in pain management continues, with growing non‑new product orders (34%) and new payer channels (e.g., personal injury) partially offsetting TRICARE headwinds .
  • Liquidity remains adequate (cash ~$23.9M; working capital ~$40.1M), affording time to rightsize operations and pursue growth catalysts .

Other Relevant Q1 2025 Press Releases

  • Zynex Sets First Quarter 2025 Earnings Call (April 22, 2025) .
  • Zynex Reports First Quarter 2025 Financial Results (April 29, 2025) .

Appendix: Cross‑Period References

  • Prior quarter (Q4 2024) report and call: detailed revenue shortfall drivers and introduction of TRICARE issue; Q1 guidance of ≥$30M revenue and ($0.30) loss per share or better .
  • Q3 2024 baseline: solid performance with $50.0M revenue, $2.4M net income, and 10% Adjusted EBITDA margin; productivity gains and product expansion initiatives .