President and CEO Commentary:
Thomas Sandgaard, CEO, commented: “2014 was a pivotal year for Zynex as we narrowed our sales focus to the pain management TENS electrotherapy and compound pharmacy markets. Development of our proprietary blood volume monitor achieved notable progress culminating with an initial FDA filing in March of 2015. The compound pharmacy added complimentary revenue during 2014 and was 27% of our fourth quarter revenue and we continue to recruit more sales reps for this highly profitable part of our business. Our electrotherapy business stabilized during last year which was important after nearly two years of declining orders.”
Sandgaard continued: “We made significant expense reductions during last year, including a 40% reduction in the workforce and negotiated a new building facilities lease agreement that annualized saves us a million dollars. We improved our inventory utilization as we saw our EZ-Rx program take off with our sales force, restructured our billing department, reduced payables by two hundred thousand dollars and reduced the amount owed to our lender by $1.4 million during the year. The reduced expenses and the impact from the renegotiated lease contributed significantly to the third and fourth quarter positive income of about a million dollars. These improvements have positioned us well for 2015 and beyond.”
Summary of Financial Results:
The Company’s net revenue decreased 49% to $11,117,000 for 2014, compared to $21,684,000 for the year ended December 31, 2013. Net revenue for the fourth quarter of 2014 of $2,197,000 was negatively impacted by the disruption to operations in December related to moving all departments because of the new lease agreement. Operations were back to normal at the end of December. The decrease was primarily due to reductions in prescriptions (orders) for our electrotherapy products. This decrease was partially offset by sales of our compounded pain creams.
The Company reported Selling, General and Administrative (“SG&A”) expenses of $11,397,000 for 2014, compared to $21,144,000 for the year ended December 31, 2013, at 46% reduction. Based on SG&A expenses for the fourth quarter of $2,396,000 the annualized rate of SG&A expenses is about $10 million. Decreases in the Company’s SG&A expenses during 2014 were primarily attributable reduced operating expenses, headcount reductions, and lower rental payments in the latter part of 2014.
The Company reported a net profit of $515,000 or two cents per share for the fourth quarter of 2014, which included a net gain on the termination of the facilities lease of $2.2 million. For the full year ended 2014, the Company reported a net loss of $6.2 million, or $0.20 cents per share, compared to a net loss of $7.3 million, or $0.23 cents per share in 2013.
The Company’s line of credit balance as of December 31, 2014 was $4,442,000, compared to $5,820,000 at December 31, 2013.
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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’s product lines are fully developed, FDA-cleared and commercially sold world-wide. Zynex also operates a non-sterile compound pharmacy providing topical and transdermal pain creams. Zynex is developing a new blood volume monitor for use in hospitals and surgery centers. For additional information, please visit: http://www.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 compound pharmacy and international expansion efforts, our ability to engage additional sales representatives, the success of such additional sales representatives, 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 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, 2014.