Zynex Q2 Revenue Drops 55%

Zynex (ZYXI 1.21%), a medical technology company specializing in non-opioid pain management devices, issued its second quarter 2025 results on July 31, 2025. The release highlighted a significant miss versus analyst expectations, with GAAP revenue of $22.3 million falling short of the $27.4 million forecast and GAAP earnings per share of ($0.66) came in worse than the projected ($0.20). Both revenue and profitability (GAAP) declined steeply compared to the prior year. Management described the period as one of major transition, with financial results pressured by external reimbursement issues, internal cost cuts, and executive turnover. With forward guidance suspended and leadership changes underway, the quarter marked a period of heightened uncertainty and operational reset for the company.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

About the Business: Direction and Key Factors

Zynex is a medical device company focused on electrotherapy devices for pain management and rehabilitation. Its primary products are prescription-based electrical stimulation devices, which provide alternatives to opioid pain management. The company generates revenue from device sales and ongoing sales of consumable supplies such as electrodes and batteries.

In recent years, Zynex’s business has centered on expanding its U.S. sales force, seeking regulatory clearance for new devices, and building recurring revenue through consumable sales. The ability to secure and maintain reimbursement from insurers is critical, as much of the company’s revenue relies on ongoing coverage from payers, including government health plans. Key to its future performance are the effectiveness of its sales and marketing teams, the company’s regulatory strategy, the strength of its product pipeline—including new monitoring devices—and steady recurring revenue from supply sales.

Developments and Performance During the Quarter

The quarter was marked by a steep drop in both sales and profitability. Revenue (GAAP) declined 55%, driven by a sharp fall in supplies revenue—down 66.9% year-over-year—alongside a device revenue decline of 30.7%. The main factor behind these declines was the continuing payment suspension from Tricare, a major government payer. This payer disruption removed a significant stream of recurring revenue, and the company was required to keep providing consumables to these patients without being reimbursed. According to management, "Net revenue was negatively affected by the Tricare payment suspension, continued changes to our shipment and billing procedures to improve patient experience, and the impact of restructuring and reductions in our sales force required for cost savings."

Margin pressures were severe. Gross profit margin (GAAP) dropped to 68%, compared to 80% in the prior year. This was due to ongoing costs to support Tricare patients, even as the related revenue was suspended. Expense reductions, with sales and marketing costs falling 45% and general and administrative spending down 12%, were achieved through job cuts and efforts to streamline operations. Still, cost cuts could not offset the revenue drop, contributing to a $20.0 million net loss (GAAP), a swing from a $1.2 million profit (GAAP) in the prior year. Adjusted EBITDA, a metric often used to remove certain expenses and give a ‘core profit’ view, fell from a $3.5 million gain in the prior year to an $8.9 million loss, showing a sharp deterioration in underlying profitability. Cash and cash equivalents also decreased, reflecting negative cash flow from operations and continued financial outflows.

Operationally, Zynex shifted strategy from rapid sales force expansion to consolidation and efficiency gains. The company reduced sales headcount, leaving some territories open in hopes of better future hires. This reorientation was driven by an urgent need to lower expenses and respond to lost volumes from payer disruptions.

In terms of its product portfolio, Zynex filed its new NiCO laser pulse oximeter—a patient-monitoring device aimed at providing unbiased oxygen readings for all skin tones—with the U.S. Food and Drug Administration (FDA). This submission marks an important milestone, but commercial launch is not expected until after regulatory clearance, with revenue contributions flagged for 2026 at the earliest. No other major new product launches or segment expansions were detailed this quarter. The emphasis is on ensuring current products meet doctor and patient needs, maintaining regulatory compliance of existing product lines, and tightening cost controls as the company navigates the uncertain reimbursement landscape.

Looking Ahead: Guidance, Leadership, and Investor Focus

Looking forward, management suspended all financial guidance. According to the company, "the Company is temporarily suspending revenue and profitability guidance. Steven Dyson, the incoming Chief Executive Officer, will lead a review of the Company’s forecasting procedures and will provide an update to investors on the potential resumption of guidance in the coming quarters." This move was announced as Zynex transitions to new leadership, following the retirement of the current CEO and the announced departure of the CFO. Until Dyson completes a review, there will be no public forecasts for revenue or profit metrics.

Investors will want to watch for updates on several fronts in upcoming quarters. The outcome of the Tricare payment suspension remains a significant variable; resolution could impact revenue streams and cash positions if claims are paid retroactively or further payer losses occur. There is also a looming cash crunch, with cash and cash equivalents of $17.5 million (GAAP) as of quarter end, and $59 million in convertible notes now classified as a current liability as of June 30, 2025 (GAAP). The impact and timing of approximately $40 million in annualized cost savings remain to be seen as expense reductions progress, with most savings expected to take full effect in the second half of 2025. Finally, the pace of recovery will depend on the effectiveness of new leadership and execution of a renewed focus on payer and sales force optimization. Zynex does not currently pay a dividend.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.