Good afternoon, everyone, and welcome to the Zynex Second Quarter 2025 Earnings Conference Call. A question-and-answer session will follow the formal presentation. This conference is being recorded. I will now hand it over to Dan Moorhead, Chief Financial Officer of Zynex. Please proceed.

Thank you, operator, and good afternoon, everyone. Earlier today, we released financial results for the Second Quarter ended June 30, 2025. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that during this conference call, the company will make projections and forward-looking statements regarding events. We encourage you to review the company's past and future filings with the SEC including, without limitation, the company's 2024 Form 10-K and subsequent Form 10-Qs, along with any amendments which identify the specific factors that may cause actual results or events to differ materially from those described in these forward-looking statements. These factors may include, without limitation, statements regarding product development, product potential, the regulatory and legal environment, sales and marketing strategies, capital resources or other operating performance. With that, I'll now turn the call over to Thomas.

Thank you, Dan, and good afternoon, everyone. Thank you for joining us today for the Second Quarter 2025 earnings call. With me today are Anna Lucsok, our Chief Operating Officer; Don Gregg, President of Zynex Monitoring; and Dan Moorhead, our Chief Financial Officer. And I will provide an update on our initiatives in the pain management division, and Don Gregg will discuss how far we have come in our Patient Monitoring division and our recent submission to the FDA for our NiCO pulse oximeter. Dan will go through the second quarter's financial results. The second quarter of 2025 was dominated by many improvements centered around refocusing our pain management business model, not only reshaping our sales force and redirecting them to slightly different call points, but also transforming our corporate structures to better reflect and streamline operations. Later this year and into next year, we'll see the impact of this effort. We're seeing a reduction to overall expenses of approximately $40 million annualized and a more efficient use of our inventories better supply chain management, a more diversified prescriber and payer customer base, all in support of our goal to return to positive cash flow by the end of this year. We recently announced the addition of Steven Dyson as our new CEO. And Steven brings over 25 years of experience in the medical technology sector, primarily through his leadership at Apax, a global private equity firm. Steven brings deep expertise and a proven track record in the medical sector. His leadership will be helpful as we refocus our business strategy towards a more optimized payer mix and work to return Zynex to a strong growth trajectory. The start date is August 18, and I look forward to working with him in my new role as just Chairman of the Board. I should also mention that he and I are very aligned on all the major things that need to get done. In another also important development, Dan Moorhead, our CFO has recently resigned as announced in our 8-K filing 2 days ago. He is on the call today and available to answer questions. As I'm sure most of our listeners know, we submitted the FDA application on our NiCO laser pulse oximeter back in May. This product marks a historic milestone in the evolution of pulse oximetry and is a major game changer in our mission to improve the quality of care and patient outcomes with unique breakthrough technologies in our hospital monitoring division. We are encouraged by the early attention we have received from the FDA and the line of questions we have answered already. We expect at least one more round of questions that will take several months before clearance. Don will provide you with more details on this exciting development. And the TRICARE temporary payments suspension is still ongoing, and it's hard to predict exactly how long it will take before we have a resolution to this. We are obviously hopeful that it will be sooner rather than later. We are actively cooperating with DHA and TRICARE in their claims reviews, and we are advocating for the lifting of the payment suspension. In support of TRICARE's goals of patient care, we have also agreed to continue servicing existing TRICARE patients, and we are honoring prescriptions for new patients. While we are working on a resolution with TRICARE we are redirecting our focus to fully operate without relying on TRICARE's revenue. We are committed to diversifying our revenue streams even more. And during the quarter, we continued our efforts to refocus our sales force and operations to reflect the current landscape of insurance coverage and have made significant strides towards improving cash flow. This has included several efficiency improvements in our internal operations, relocating staff to more profitable business units, reducing our cost of goods sold, updating our sales management structures while driving the sales force in the field to become more efficient and productive. Our efforts to redirect our sales force and reduce expenses internally are beginning to take effect now and over the next several quarters, it will naturally show as improvements to our bottom line. We reported net revenue of $22 million in the quarter, while we collected $26 million in cash in the second quarter. We posted a net loss of $20 million, while more than half of that was due to a noncash adjustment to our tax allowance. We strongly believe in our commitment to help patients with the best product for pain relief without side effects that are typically associated with opioids. We are confident that our efforts to reduce costs and redirecting our sales force will be pivotal to improve cash flow and create a foundation for continuing to grow into the huge demand for our products. Our revenue is becoming more diversified with increased call points, increasing sales of other products, technologies and more end users. We are very optimistic about the future of Zynex as we have proven to be a business that can grow profitably. I'll now turn the call over to Anna Lucsok to provide a more detailed update on the operations. Anna?

Thank you, Thomas. As Thomas mentioned, we were notified by TRICARE that the temporary suspension of payments will continue as they complete their review. We continue to remain an in-network provider and service existing and new TRICARE patients as directed by DHA. In June, we decreased overall staff by an additional 14% mostly in our corporate office. We anticipate this along with previous expense reductions will result in annual savings up to $40 million. As part of the restructure and based on payer performance analysis, we've categorized payers into different tiers and are actively shifting our focus to the most favorable segments. As a result, we've rightsized shipments for orders and adjusted sales commissions to reflect performance. Internally, we've eliminated close to 90 corporate roles, replacing them with more cost-effective outsourced teams. These actions are expected to reduce expenses while allowing our teams to focus more efficiently on our core business on a monthly basis. While we anticipate a near-term impact on revenue primarily within our supply segments, it reinforces our patient-centric approach and strengthens our ability to build and sustain long-term value-based relationships with payers. We believe this strategy will drive greater patient outcomes and operational sustainability over time. We've undertaken a comprehensive realignment of our sales force to drive productivity and position the organization for long-term growth. One of the key initiatives has been resetting our sales organization to better align with and reflect our business objectives. In parallel, we've restructured the sales team by reducing the overall headcount and exiting sales reps that don't meet our standards. We also streamlined our organizational structure by removing redundancies, which has allowed for oversight and support from senior leadership. This leaner structure empowers leadership to stay focused on the metrics that matter for the business and performance indicators that enable faster identification of coaching opportunities to ensure every individual representing our company embodies our values. Additionally, we revamped our sales compensation model to drive a performance-focused culture that meets the company's objectives for good patient care and experience and regulatory compliance. High-performing sales employees are now rewarded with increased base pay, while mid-tier performers are incentivized to improve to clearly defined targets. This approach not only drives accountability but also creates a clear pathway for representatives to appropriately grow their earnings as they deliver better business outcomes through better patient experiences. Long term, our objective remains unchanged. We aim to fully staff all 800 sales territories with highly capable data-driven representatives. We believe this focused and disciplined strategy will allow us to serve our patients more effectively and deliver consistent profitable growth. I'll now turn the call over to Don Gregg to provide a more detailed update on the patient monitoring business. Don?

Thank you, Anna. I want to provide an additional update on the progress of our NiCO pulse oximeter and the overall market opportunities for this product. We successfully submitted NiCO to the FDA in May, and there has been initial interactive review with the FDA. We are expecting an additional information request in August and an overall six-month clearance process. Last quarter, I spent some time explaining why we are well positioned with this technology and the massive opportunity we believe is in front of us. Clinical results show the NiCO laser technology is superior to LED pulse oximeters currently in the market today as they have severe accuracy issues in patients with darker skin, elevated carbon monoxide, or hemoglobin in the bloodstream, and especially those with low levels of blood oxygen. There are very few clinical procedures that do not use pulse oximetry. Skin segmentation has been shown to alter the oxygen measurement displayed when using LED-based pulse oximetry, resulting in biases, which can have negative impacts on patient care and outcomes. These accuracy issues are on the FDA agenda and have resulted in device manufacturer litigation to date. Numerous clinical publications prove LED-based pulse oximeters that are on the market today are inaccurate on darker skin. Given this, 25 attorney generals and the U.S. Senate requested the FDA to address pigmentation bias. As a result of this, the FDA funded open oximetry to improve the safety and precision of pulse oximeters that openly publish their testing results. Multiple FDA panel meetings resulted in a new draft guidance issued in January of 2025 in which our technology conforms to that guidance. The NiCO Pulse Oximeter recently submitted to the FDA is powered by patent-protected laser technology that has been validated to solve the accuracy issues of LED technology in a clinical study at Duke University. Laser pulse oximetry is not biased, allowing for more accurate readings across all individuals regardless of skin pigmentation, elevated carbon monoxide or methemoglobin in the bloodstream, and especially those with low levels of blood oxygen. More accurate data results in improved care and better patient outcomes. We believe our NiCO pulse oximeter will provide reliable and equitable care for all. In addition to solving current LED-based pulse oximeter technology accuracy issues, the NiCO technology platform is poised to unlock the $1 billion invasive lab-based co-oximetry market with noninvasive laser pulse oximetry technology by bringing it directly to the bedside with instant results and shifting the standard of care. Co-oximetry is a critical diagnostic tool for emergency room and hospital patients to determine their treatment pathway. Current co-oximetry technology is lab-based for the most part, uses a similar laser spectrometry technology, and suffers from a number of drawbacks that affect patient outcomes and high hospital costs. Oximetry measurements require a blood draw today, which is painful and risks infection. Patients wait for results from the lab, which reduces the ability to select appropriate treatment in a timely fashion. These labs are sometimes offsite and result in lengthy delays. It's also a more expensive approach due to hospital lab processes and high-cost consumables. The NiCO platform uses needle-free patent-protected laser technology to deliver instant, continuous, and low-cost results at the bedside to unlock this opportunity. To close, we submitted NiCO to the FDA in May of this year, and we expect approval to take approximately six months from receipt of an additional FDA information request that's scheduled for August. Patient monitoring is a multibillion-dollar market, approximately $3.5 billion globally, that we believe NiCO will enter as a superior product that can meaningfully improve care to the broadest range of patients when they need it most. Zynex is pushing to be a key industry partner and leader to all clinicians and further demonstrate how NiCO's laser pulse oximetry technology inherently solves the current market challenges, especially accuracy and skin pigmentation bias while improving the field of patient monitoring. I will now turn the call over to Dan Moorhead, Chief Financial Officer, for a more in-depth look at the quarter's financial performance.

Thanks, Don. Please refer to our press release issued earlier today for a summary of our financial results for the Second Quarter ended June 30, 2025. Net revenue was $22.3 million compared to $49.9 million in the second quarter of 2024. Device revenue was $11 million and supplies revenue was $11.3 million. The revenue decline was primarily attributable to the temporary payment suspension from TRICARE and slowing order growth, which was impacted by sales force reductions, shipping policy adjustments, and the redirection of the sales force activity. Gross profit in the second quarter was $15.2 million or 68% of revenue as compared to $39.9 million or 80% of revenue in Q2 2024. Sales and marketing expenses decreased by 45% to $12.8 million in the second quarter of 2025. The primary contributor to the decrease in sales and marketing expenses was our headcount reduction as we continue to focus on sales rep productivity. G&A expenses were $12.7 million in the second quarter of 2025 compared to $14.5 million last year. Net loss was $20 million and $0.66 per share in the second quarter of 2025 compared to net income of $1.2 million in Q2 2024. As Thomas mentioned, included in our net loss is a noncash charge of $10.3 million or $0.34 per share related to an allowance on our deferred tax assets. Adjusted EBITDA loss for the three months ended June 30, 2025, was $8.9 million as compared to adjusted EBITDA of $3.5 million in the quarter ended June 30, 2024. On the balance sheet, we had $17.5 million of cash on hand at June 30, 2025, and we're able to reduce our cash burn significantly in Q2. We expect it to be even less in Q3. Our convertible debt of $60 million is due in May of 2026. So you'll notice it's now a current liability. We are currently working with our advisors to refinance this liability. With that, I'll now turn it back over to Thomas.

Yes. Thank you, Dan. In terms of forward-looking guidance, we have decided to suspend quarterly guidance while we are onboarding our new CEO and looking to appoint a new CFO following Dan's announced departure. Steven Dyson, the incoming CEO, will lead a review of the company's forecasting procedures and will provide an update to investors on the potential assumptions of guidance in the coming quarters. Our mission is to improve the quality of life for patients suffering from debilitating pain and illness by providing the highest technology and service standards. In pain management, we do this by providing a non-opioid alternative to pain management and our monitoring division aimed to measure data more accurately across patients and provide better healthcare outcomes. We continue to adjust the cost structure as needed and we'll soon get back to a strong growth trajectory. Looking forward, we believe we have additional call points in revenue streams that can drive further growth. We have always shown an ability to adjust to market customer and reimbursement changes and continue investing in refocusing our business. With that, let's open the call up for questions.

And your first question will be from Jeffrey Cohen of Ladenburg Thalmann.

A few questions from our end. I guess firstly, I just want to review and recap with Don on NiCO. So the initial submission was made, August is when you expect to return questions back to the FDA? Or is August when you expect to hear back from them again and remind us on anticipated approval. Would it be closer to October or December?

Thank you for the question. We have been in discussions with the FDA through an interactive review process. We have received multiple questions and engaged in dialogue with them. We expect to receive an additional information request in August, and we anticipate it will take about six months from that point for clearance. Depending on the content of the additional information request, based on our previous discussions with the FDA, I believe the clearance may occur around December.

Okay. And you feel confident that there won't be a second additional information iteration.

Well, nobody really knows exactly what the FDA might do in that case, but we have forecasted additional information questions. We've got responses ready for those and we feel pretty confident in our submission to the FDA, given all the work that we've done over the past several years.

Okay. Got it. Perfect. And then secondly, could you talk about TRICARE a little further as far as next steps and timelines as far as the next iteration when you may meet or have some news about the relationship there? And then maybe talk a little bit about those patients and their referrals. So TRICARE still referring patients to you; that flow has continued or perhaps diminished? And are those patients going on therapy or alternatively going elsewhere?

So we don't have any information about TRICARE payment suspension next steps at this point. And when, if it's going to get resolved. But we continue to service TRICARE patients, existing and new patients. The inflow of patients has reduced a little bit just as a result of reduced sales rep headcount by about half.

Got it. And then lastly for Dan, perhaps talk a little bit about the sales or the sales and marketing line and/or the G&A line as far as the back half of the year and how those last two quarters may compare with Q2 and where you ended up Q2.

Yes. I think you'll see continued reductions. We made the second of our cost reductions in June. And so you didn't really get the full effect of those. So on the sales side, I think you're going to continue to see a decrease, probably down another 15% to 20% in Q3 and then I think it probably flattens out for the rest of the year. And then on the G&A side, it's probably closer to a 10% to 12% decrease from Q2 to Q3 and then again flattening out, but you'll really start to see the full effect of the cost reductions starting in Q3.

Next question will be from Yi Chen at H.C. Wainwright.

This is Eduardo on for Yi. Do you have any more details on the nature of the data request from the FDA? You mentioned that you've done some preparation already to anticipate those questions. Just kind of get some color on any hesitation they might have or where they're looking for more detail in the technology.

I think the FDA is definitely focused on LED technology. They want to make sure that our technology in the clinical trial performs as well as or better than LED technology. We've had extensive discussions about how to position our claims since it is a different light source technology. I expect they will keep reviewing our clinical data and claims to ensure they are properly positioned. We are well-prepared to discuss this with them and respond quickly because we want to obtain clearance as soon as possible.

That's really helpful. And I guess, curious, I know it might be a little early. Any conversations with the new CEO and possible initiatives or strategies either on the commercial side or the reimbursement side that you guys might have moving forward?

Yes. Obviously, I have a close dialogue with Steven Dyson. And the rest of the leadership team is also engaged in making sure that things that come up at this point in time that we're all aligned. All these initiatives to refocus on the pain management side were fully aligned on. And it fits well what he's good at: sorting out a difficult situation and making sure that the valuation of the company over the next several years will be much better than it is today.

Next question will be from Shagun Singh at RBC Capital Markets.

I guess just a couple of questions for me. Could you touch on why revenue came in below the recently provided guidance. I understand it was due to TRICARE and some of the sales force reduction. But beyond that, was there anything incremental that drove the sort of low visibility coming into the quarter?

Yes, we shipped fewer supplies in the second quarter compared to previous quarters due to the insurance companies we are now working with and the initiatives we have implemented to engage more closely with patients regarding their actual supply needs.

Well, we continue to implement a utilization management control program in place to ensure better patient outcomes that continues to impact our supply shipments to patients.

Got it. And maybe on TRICARE, you talked about how you're still servicing some of these patients when you know that payments are not necessarily going to be coming in at this time. Is there a reason why you're still servicing them? And perhaps have you thought about reallocating resources elsewhere? And maybe can you help us think about what Zynex could look like ex-TRICARE?

Yes. TRICARE has specifically requested us to continue servicing both existing and new patients during this process. Although this situation is challenging, we are doing our best to comply with the requirements and provide good care to patients as we receive their prescriptions. This is part of how we are managing the current circumstances, and although it is incurring costs without generating revenue, we will keep assessing whether to proceed in this way. As Anna mentioned earlier, the volume of new orders we are receiving has significantly declined due to the restructuring of our sales force, which somewhat mitigates the situation.

And at this time, Mr. Sandgaard, we have no further questions registered. Please proceed.

Yes. Thank you for joining us today. We obviously didn't see the performance that we had expected this past quarter. However, I'm very pleased with our plan of improvement and the actions that we have already taken. We appreciate your time and interest in Zynex and have a great day.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.