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Zynex, Inc (NASDAQ:ZYXI)
Q2 2020 Earnings Call
Jul 28, 2020, 4:15 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day and welcome to the Zynex Second Quarter 2020 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] 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. Risk factors that could cause actual results to materially differ from forward-looking statements are 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 31st, 2019 as well as Forms 10-Q and 8-K and 8-K/A press releases in the company's website. Please note, this event is being recorded. I would now like to turn the conference over to Thomas Sandgaard, Founder, Chairman, and Chief Executive Officer. Please go ahead.

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

Yeah, good afternoon. My name is Thomas Sandgaard, President and CEO of Zynex. Welcome to our 2020 second quarter earnings call. I'm excited to announce another quarter of revenue growth and positive net income. Our second quarter revenue of $19.3 million was an increase of 87% compared to the same quarter last year. It was also the highest quarterly revenue in the history of the company. It was our 16th straight quarter with positive net income and earnings were $0.09 per diluted share. Adjusted EBITDA for the second quarter was $4.8 million, an increase of 69% compared to the second quarter of last year and it was also the highest in the company's history.

Similar to many companies, we have seen the impact of COVID-19. The second quarter orders came in 37% higher than the second quarter of last year, which were substantially lower than the 126% growth year-over-year in the first quarter, but we saw momentum in order growth throughout Q2 with where we -- in April and May only saw 21% and 11% growth year-over-year while we were up [Phonetic] 76% in June. We continue to see the same increase here in the month of July and expect once we end the month to have again an increase in order growth. The continued strength in order growth speaks volumes to the relationship our sales force has with many prescribers and the need for them to prescribe non-opioid non-addictive prescription strength solutions for their patients in pain.

The investment in expanding our sales force continues to progress as we expand our geographic footprint across United States. We continue to aggressively add sales reps and as of today have surpassed more than 335 sales reps. Our recruiting efforts have been helped by a surge in candidates due to the increased unemployment rates related to COVID-19. We expect these new hires to provide significant productivity increase in orders in the second half of 2020 and in the years to come. Applications for our over 60 open positions at our corporate office have also skyrocketed, which is obviously helpful for improving our workforce. In regards to our sales force, we expect to have over 400 sales reps in September and approximately 500 by year-end.

Revenue continued its strong growth in the second quarter and grew 87% compared to a growth of 66% in the first quarter on a year-over-year basis. Our business model with billing for the devices monthly used and supplies as they are consumed by our patients is actually helpful in a temporary slowdown like now. Remember, approximately 80% of our revenue in the quarter is typically derived from orders received in prior periods even years earlier. In the second quarter, we also introduced a catalog with over 3,300 products, all the most popular brands and products that physical therapy clinics all over the U.S. order on a regular basis. We plan on this initiative to be a great door opener for our sales force in an effort to get into more clinics and obtain prescriptions for our NexWave device, traction devices, low back support etc.

Our operations continue without interruption and our supply chain remains uninterrupted as we previously secured non-Chinese second sources for all of our components and raw materials. In addition, it's our practice to keep several months of finished products on the shelf, have over four months of components on hand for internal assembly, and 12 months to 18 months of orders placed with our vendors on top of the in-house materials. It's critical for us to have the ability to ship immediately to a patient in pain once we obtain the prescription.

The opioid epidemic continues to be a serious issue in this country and we are increasingly working to get patients off opioids and and for physicians to use our prescription strength technology as the first-line of defense when treating pain. Currently, the devastating impact has reached a level where tens of thousands die yearly due to opioid abuse. We continue to develop more tools to make physicians aware of our technology that literally has no side effects.

Our products for pain management and rehabilitation still stand out as some of the best products in the industry. The NexWave for pain management, our NeuroMove device for stroke rehabilitation, and the InWave for incontinence treatment puts us in a very strong product position in the rehabilitation markets. We also continue to see great potential in both of our product divisions, our existing revenue generating area for pain management as well as the huge unmet potential for our blood volume monitor.

As most of you probably already know, we managed to get FDA clearance for our CM-1500 Fluid and Blood Volume Monitor earlier this year. The CM-1500 is a non-invasive monitor intended to monitor patient's fluid balance in hospitals and surgical centers. We expect to initially target operating rooms and surgeries that typically display substantial blood loss as well as recovery rooms and ICUs where internal bleedings today are common and difficult to detect until serious complications occur. We believe this product will lead to safer surgeries, fewer complications, and less mortality, one of the biggest unmet needs in hospitals today.

We began hiring for this division in July and will continue building out the team during the next few quarters. We expect to have more than a dozen people employed in this division by the end of the third quarter, and short-term, we're obviously also are leveraging the common functions from the main business subsets human resources, payroll, recruiting, quality, accounting, and production. I will now turn the call over to Dan Moorhead, our CFO.

Dan Moorhead -- Chief Financial Officer

Thanks, Thomas. First, I'll review our 2020 second quarter results. Orders grew 37% year-over-year, which drove net revenue up 87% to $19.3 million from $10.3 million in 2019. Device revenue increased 87% to $4.3 million compared to $2.3 million last year. Supplies revenue also increased 87% year-over-year to $15 million from $8 million. Gross margins were 79% in the second quarter. Sales and marketing expenses increased 106% year-over-year as we continue to aggressively grow our sales force. G&A expense grew 78% year-over-year. Much of that increase was related to increased headcount in our reimbursement and patient support functions related to our order growth. Second quarter net income was $3 million or $0.09 per diluted share compared to net income of $2.2 million or $0.06 per diluted share in the second quarter last year. Adjusted EBITDA, which is a standard EBITDA calculation plus an exclusion of non-cash stock-based compensation and other income expense and is reconciled in our press release, increased 69% to $4.8 million in the second quarter of 2020.

I'll now review our 2020 six month results. Orders grew 76% year-over-year, which increased net revenue 77% to $34.5 million from $19.5 million in 2019. Device revenue increased 81% to $7.7 million compared to $4.3 million last year. Supplies revenue increased 76% year-over-year to $26.8 million from $15.2 million. Gross margins were 78% in the first half of 2020. Sales and marketing expense increased 108% year-over-year and G&A expense grew 67% year-over-year. 2020 six months net income was $6 million or $0.17 per diluted share compared to net income of $4.5 million or $0.13 per diluted share in the second -- or in the first half of last year. Adjusted EBITDA increased 47% to $7.8 million in the first half of 2020.

On the balance sheet as of June 30th, 2020, our cash balance was $16.9 million, up from $14 million at year-end and our working capital grew 37% to $23.8 million at June 30th compared to $17.4 million as of December 31st, 2019. With that, I'll turn the call back over to Thomas.

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

Thank you, Dan. I'm especially excited about our year-over-year growth in orders up 37% and our revenue growth of 87% in the midst of the COVID-19 pandemic. It's a huge testament to our efforts to grow our sales force and clearly justifies the investment in our sales personnel, sales management, and inside support functions. Our focus continues to be growing our sales force at a rapid rate in geographic areas we don't currently cover to take advantage of the void left in the market by two previously very large competitors. Our increased orders due to a larger sales force combined with strong reimbursement for our products continues to drive increased revenue and profitability. We estimate our third quarter revenue to come in between $22.3 million and $22.8 million with an adjusted EBITDA between $2.3 million and $2.8 million. The revenue range is 89% to 93% higher than last year's third quarter revenue. So we're getting close to doubling the revenue. This is up from 87% year-over-year revenue growth in the second quarter and 66% year-over-year growth in the first quarter.

As a reminder, nearly all of our collections from billing come from insurance companies mostly private insurance but also government auto insurances, workers' comp and personal injury attorneys. Payments from these are either dictated by contractual amounts we have established, allowable amounts already well established throughout our industry, and negotiated amount sometimes on a patient-by-patient basis. These amounts are typically discounted by deductible and copay deductions and we end up getting much less than our MSRP as is typical throughout the healthcare industry in the U.S.

This pattern is the same whether we get paid for the device or the patient supplies. We are careful to make sure our billing practices are always within the law and comply with all guidelines and regulations. We also undergo regular accreditation by a third-party to ensure we continue to be compliant. My long-term goal for our electrotherapy and rehab division is to continue to grow our share of the huge unmet need for prescription pain management and to take advantage of the huge void in the market after the disappearance of our main competitors. This includes growing our domestic sales force as well as potential acquisition of complementary technologies and long-term potentially international expansion.

We are also still working with the European notified body to obtain CE marking for the CM-1500 and we will update everyone as we continue to build out on the personnel side and infrastructure in the monitoring solutions division. In summary, we have now announced yet another great quarter with strong growth in orders, growth in revenue and profit, which puts us in a very strong position of strength going forward. We will now take questions from our listeners.

Questions and Answers:

Operator

We will now begin the question-and-answer session. [Operator Instructions] First question comes from Yi Chen from H.C. Wainwright. Please go ahead.

Yi Chen -- H.C. Wainwright -- Analyst

Thank you for taking my questions. My first question is, could you comment on the current ratio of reimbursement coming from government payers and what is the current average time needed to collect reimbursement from various payers, including private and government payers.

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

Yeah, this is Thomas. Let me try to answer this. We have a little over 10% Medicare, if you add other government insurers, there's some Department of Labor, there's some TRICARE, there's some Medicaid business. It may add up to less than 15%. And in terms of the time it takes to collect, there's a couple of ways to describe that. Obviously, we do have files where we end up not getting paid anything even in cases where we have a good solid contract with an insurance company and we see sometimes in personal injury cases, it might be three or four years before a case settles and we get our share of it.

Commercial insurances typically pay pretty well. Medicare pays pretty fast. Medicare pays relatively fast as well. Workers' comp business is kind of the middle of the road in terms of how fast they pay on the average. So that doesn't really give you any actual information, but if you go to the financials we just posted, you will see -- you can take a look at our revenue, whether you do it on a trailing 12 month basis or you do it more real-time and compare that to the accounts receivables, you will see a DSO or days sales outstanding that it is just above 40 days and that is an indication of obviously how fast our bills are moving compared to when the cash comes in. So the average would be there in less than 45 days.

Yi Chen -- H.C. Wainwright -- Analyst

Okay, so would you say that quite a portion of the second quarter revenue just reported actually were related to orders placed in 2019?

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

Yeah, obviously, we reported the cash value of what we build out during the second quarter, but it was obviously based on orders that came in, in 2019, 2018 and also in the earlier parts of 2020.

Yi Chen -- H.C. Wainwright -- Analyst

Got it, got it. And I believe the company is currently on track to reach the target of sales rep by the end of this year. So, could you comment on the trend of average sales generated per sales rep as you get more new sales rep into the team?

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

Yeah, right now, it's hard to move that average up because every time we have a rep that become more productive, we just added another one that hasn't sent in any orders yet. And then obviously there is a delay between when we hire a rep, once they get trained, once they get deployed and then later, they start becoming productive and as we were just talking about them as we start getting a few orders from those reps, the revenue comes in subsequent periods. So some reps that may have started early 2020 started sending in orders maybe during where we had to peak of COVID in April, May, maybe we are just now beginning to see a little bit of revenue. So we're still running an average that is less than if you analyze the revenue per rep, that is less than $300,000 per the average rep per year or annualized.

We'll continue actually -- we can say that COVID slowed us down a little bit. We'll get down in the middle 200s [Phonetic] in Q3 probably because we've added a lot of reps that have not produced very high numbers yet. We expect at the end of the year to be back in the $300,000 a year and by the end of next year more -- $400,000 a year. Long-term, we expect to be right around $1 million per sales rep in annual production, but that will only start maturing when the percentage of new reps we are adding, and then we are getting into 2022, 2023 then we will start seeing that average per rep go up dramatically when we're not adding as many reps as fast anymore, but obviously in terms of how that plays into actual revenue since we continue to hire 30 to 40 new reps every month, we will obviously see a growth in revenue simply as a result of that. And as I mentioned as these reps become more and more productive, we just add another one that it will take a little while before they send in the first few orders. So there's a lot of inertia in growing our revenue.

Yi Chen -- H.C. Wainwright -- Analyst

Got it. And my next question is, have you observed any change in the average reimbursement you can collect from a single patient in the year?

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

Yes, we have. Obviously, it fluctuates a lot. It mostly fluctuates with -- sometimes there's an insurance company that suddenly for three or four months can really figure out to push the button that, that actually prints a check or wire transfers payments to us and then eventually gets released. So sometimes it fluctuates a little bit. Sometimes changes to our internal organization can also have potential revenue backed up. So for that reason, we see a little bit of fluctuation. Overall, we have seen it's very constant here the last four to five years. I would say the last few months it's helped a little. It's actually gone up even though it's marginal, but we do collect better than we did a few months ago.

Yi Chen -- H.C. Wainwright -- Analyst

Would you be able to give us sort of a range for this fluctuation?

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

The range is on the average order less than $200 maybe more in the $100 range per the average order. So we're talking less than 10% increase, but again it could be part of the fluctuation. Next month, it could drop down a little bit. So overall, I'd say it's very stable.

Yi Chen -- H.C. Wainwright -- Analyst

Okay, my final question is could you provide us some color on the latest trends for prescribing physicians in terms of office reopening and accessibility to your sales team?

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

Yeah, obviously depending on how the COVID pandemic has hit various states. It's something we are following very closely and unfortunately despite the media, there is not any increase in death, if we look at is the entire country. There's a couple of states where we have -- people call it hotspots where obviously, it's been a little harder for us in those particular cities to get into clinics, but for the most we see that the clinics are very busy. They even have extended their hours so that they can handle all the patients that may have delayed going to either a physician or going to physical therapy and obviously, need treatment that may have delayed it.

So we see clinics obviously apply social distancing etc. So there are fewer employees, fewer patients in the clinic at all times. Sometimes, our reps have been able to at least get in and drop off for instance customized prescription pads to those clinics or they've been able to actually get in and talk to people. Some of the interaction is obviously also over phone and by other means where we may direct may have shipped material to them, but overall, I'd say we have a surprisingly good success rate with keeping in touch with those clinics and keeping a good flow of orders. In the the later part of July, we've seen very strong order numbers at the same level or maybe even higher than we've ever seen as a company.

Yi Chen -- H.C. Wainwright -- Analyst

Got it. Thank you very much.

Operator

The next question comes from Matthew O'Brien from Piper Sandler. Please go ahead.

Matthew O'Brien -- Piper Sandler -- Analyst

Afternoon. Thanks so much for taking my questions. Thomas for starters on the productivity expectations for Q3 and even Q4, you saw, obviously a pretty big drop on a productivity per rep basis here in Q2, but then things kind of -- based on the guidance that you're giving us and the number of reps we're expecting for Q3 kind of level off, they go down a little bit in Q3, but not nearly as much as we saw from Q1 to Q2. So what are you seeing so far from the reps that you hired earlier this year or even earlier in Q2 that gives you the confidence that, that level of productivity won't fall off dramatically given how many reps you've added especially here in Q3?

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

Right, fortunately, the amount of reps we are hiring. So we started doing that already early this year and that's -- when you do something like that, that's obviously a risk that we either slack on the quality of reps that we offer an employment agreement to or because of the amount of reps we are training that the quality of the training gets less than is desired and as they get deployed how well our regional sales managers can grab hold of them and hold their hands in the first few days, first few months. We have seen that the quality of reps we are hiring is probably increasing. So that helps a lot in terms of the the early productivity as well as the probability that we have sales reps that's going to survive and stay with us for a long time.

We also see that the efforts in terms of training, we have improved significantly on that the past couple of years I would say and are running at a level where compared to about a year ago, the order production for a new rep within the first 30, 60, 90 days is a little more than twice what it used to be and more surprisingly, we actually see that kind of performance for new reps even though they haven't become high production sales reps yet. We've seen that level of production for new reps actually continue during COVID here in the second quarter and we obviously also see that here in the third quarter.

So that is very encouraging because they have really difficult conditions out there, but improvements in the talent we hire, improvements in the training compared to a year ago have certainly mitigated that and I should also mention that we have expanded the layer of regional sales managers from five to 15 where 12 of them are in place and trained and are now managing our sales reps and we expect the last three to be hired in the next couple of weeks and that is also going to help improve on new rep initial performance.

Matthew O'Brien -- Piper Sandler -- Analyst

That's really helpful. I appreciate that color. Just to follow-up on that a little bit more. You're expanding really quickly, it seems like the reps are doing really well, they're pretty well trained. How are you going to manage through the pace of new adds making sure that he's fully trained and then making sure that churn rate especially doesn't grow to levels that could be a little bit unmanageable for the company?

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

Yeah, obviously the attrition rate is important. We do pretty well in that because in a class of 15 or 18 reps we train every two weeks, there are sometimes one or two, typically one that don't survive the early days, but it's my impression we're getting really good at catching them within the first few days so we don't end up wasting a lot of time. It makes a big difference if regional sales managers and the rest of the organization don't have to deal with reps that won't survive anyway and they typically also take a lot of your time and therefore, making sure we literally nip that in the bud as early as possible is very helpful. It looks like we're getting better at that.

Matthew O'Brien -- Piper Sandler -- Analyst

Got it. And then last one from me, just, I know you don't want to put too much emphasis on the blood volume monitoring business especially this year, but it seems like things are going a little bit faster than expected there, 12 people by the end of Q3 and the investments that you're making there. Can this be even back half of next year a bit more of a contributor than I think some of us are anticipating and how do we kind of frame up what to think about that market given how large it is.

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

I think I'm going to frame my answer more in context of what do you do for a living as a research analyst and obviously try to not put a whole lot of emphasis on potential revenue from that division. We'll obviously try to not burn any more money in that division then it will still be an insignificant part of the overall flow of money through the company.

So I think the numbers in the pain management division are so strong and so solid and we don't expect them to be tempered significantly by the initial burn here with the blood volume monitor. And also because we don't have enough people in terms of the COO and we just started the efforts of the first Business Development Director getting in touch with hospitals and some key opinion leaders. We just started that effort now. So it's too early to predict when we're going to see any real revenue. So I'll probably have a little more feedback from those people, then I'll probably be able to speak more about it.

Matthew O'Brien -- Piper Sandler -- Analyst

Okay, very helpful. Thank you.

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

Thanks, Matt.

Operator

The next question comes from Jeffrey Cohen from Ladenburg Thalmann. Please go ahead.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Hi. Thomas and Dan, how are you?

Dan Moorhead -- Chief Financial Officer

Good. How are you?

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

I'm doing great. How are you doing there?

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Just fine. Two questions, I guess the first one, to jump on the back of what Matt was asking about, how are you thinking about that commercially on the CM-1500 at least domestically and how are you thinking about as far as perhaps other commercial products as well as far as the hospital markets go in the ASCs.

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

I'm sorry, could you repeat the question.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

So I guess, how are you thinking about commercial expansion of the CM-1500 into the hospital?

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

Yes, so it's a kind of an extension of what I was just talking about, which is we are now getting hold of what we consider people with relevant experience and therefore influence. We call them key opinion leaders. That's our first point of attack. And as we get more into that, then we'll obviously be talking more to other points of contact, people that are responsible for recovery rooms, ICUs, and obviously the anesthesiology and OR nurses, and eventually we'll also make our way into hospital administrators because we believe at least early on that a big sales argument for us an important one is going to be the whole risk mitigation.

What he can do to the risk profile in hospitals potentially the insurance premiums and what it can do or not do to help them in terms of the -- some high profile cases in terms of complications or mortality that potentially can be prevented using this technology. We will also obviously be in contact with other obviously larger medical device companies that have a solid distribution and build relationships and see what we can do in terms of in parallel either licensing or OEM or private labeling of device for them. I hope that answers your question.

Operator

The next question comes from Marc Wiesenberger from B. Riley FBR. Please go ahead.

Marc Wiesenberger -- B. Riley FBR -- Analyst

Thank you. Following on the some of the first set of questions, I'm wondering if you can quantify the number of physician interactions from your reps both on an in-person and virtually in the second quarter, and maybe thus far in the third quarter, relative to what the activity was either in the first quarter or maybe the fourth quarter of 2019. I'm just trying to get a sense of how your reps are interacting with providers and then any detail on kind of conversion rates would be really helpful?

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

I am afraid I won't be able to answer that question. We obviously measure the number of orders we get by minute, by hour, by day etc. We know exactly how many reps we have employed, and I can only obviously speak to the interactions on a more soft basis in that.

Marc Wiesenberger -- B. Riley FBR -- Analyst

Yes. Would you say that they are able to still kind of have the regular interactions and kind of the pace is continuing or is COVID limiting that and potentially hurting or helping conversion rates or kind of -- I guess maybe more qualitatively then?

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

Of course it has been slower. April and May was very slow for us, the last week of March as well in terms of being able to get into clinic and face-to-face interactions. Some reps especially here in the last two months have been able to get to a more normal cadence. Some have still to some degree have relied on their telephonic and maybe even texting interactions with the prescribers they already have relationships with. So it's a mix. It's really something that's better explained on a rep-by-rep basis, and then we would have to go through a 350 of them.

Marc Wiesenberger -- B. Riley FBR -- Analyst

Understood.

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

We don't really measure that. We really just look at the order production per rep, and if it's not satisfactory after X amount of months having worked here, then they don't work anymore, and if they still work here, it's because they're producing a significant amount that's enough to sustain our profitability and also make a good living for them.

Marc Wiesenberger -- B. Riley FBR -- Analyst

Understood.

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

I know it's tempting to look at those things, but it doesn't really help us in terms of how we operate a [Speech Overlap] sales force.

Marc Wiesenberger -- B. Riley FBR -- Analyst

I think there was some talk about maybe TRICARE'S decision earlier this year. I'm wondering if you could talk about the TRICARE business and any maybe potential impact to Zynex from their decision to not reimburse for TENS treatment, or if there's any impact at all?

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

Well, they certainly reimburse for TENS treatment for hundreds of indications, except one indication they decided to stop covering and TRICARE is less than 5% of our business and having one indication not to recovered. I actually looked at the-- we've talked a little earlier about that we've been able to see better collections across the board on the average file. I remember having looked at TRICARE collection, so a few days ago and how it's developed the last three or four months, and it's actually increasing. So we're doing perfectly OK with TRICARE.

Marc Wiesenberger -- B. Riley FBR -- Analyst

Great. Have you had any unusual or out of the ordinary interactions with any kind of state insurance investigators during the second quarter? And maybe could you remind us about your general interactions with kind of insurance investigators, if at all?

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

Well, let me put it this way. We've been doing this for well over 20 years, right? And all insurance companies when you deal with them, there seems to be a flow as to -- obviously you start sending them initial claims and they either want to pay or they pay you very poorly and sometimes they pay OK, etc and that's the flow, and then after a while, all insurance companies to our experience, they have departments they most commonly label special investigations units and it's really how do we protect our employers meaning the insurance companies' cash flow. So all hospitals doctors offices, DME providers like us on a regular basis get sent letters that accuse us of the worst things between here and the moon.

And I believe all providers, whether it's a hospital or provider like us, we have some certain tactics as to how we deal with those. We know some people just settle for a percentage of all those claims that come in with a regular basis. I believe we see more than a 1,000 of those every single month and has for many, many years, some of them large, some of them are small. So, it's just part of this industry. Our approach is typically to tear their documents apart and actually spend some resources on it and I can give you one example, a few months ago, we had a very large one from one of our big payers, obviously, amounted to $1.8 million, and once we had torn it apart, they agreed that maybe the real bill amount that they felt we owe -- we should offer them was $36,000, and then we negotiated a percentage off of that. So we paid them $24,000. That's not atypical. So, we are able to do that, and that's just part of the being in this industry and billing insurance companies. We have not seen any unusual activity, which is really where your question started and I expect it to continue for as long as insurance companies exist in this country.

Marc Wiesenberger -- B. Riley FBR -- Analyst

Understood, thank you. Are any of your products subject to competitive bidding?

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

No. There has been talks about having TENS in it, but since, we are not a full service provider, like an Apria or some of those types of companies, it doesn't really apply to us. Of course, the pricing and the price pressure that comes out of it indirectly, you could say that affects the allowable amounts that's programmed in this case Medicare's computers, and that's where we're dealing with. We're still making good money off of that, and that's tough. So you can say in a very indirect way, there is a little bit of an impact, but it's not something that we even talk about it at all here.

Marc Wiesenberger -- B. Riley FBR -- Analyst

Understood. And final one for me, I'm just wondering how the, introduction of a catalog has progressed relative to your expectations and how we should think about its impact on the business going forward? Thank you.

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

Well, it's actually we made a decision to make the catalog a little more appealing than many other catalogs you see out there. So first impression is great and that is to, we deliberately did that, so that we -- so it fits within our overall strategy in terms of it's supposed to be a door opener, so that it's even easier for our reps to get in and start a conversation again, because such a big percentage of our sales force is brand new sales folks and we've gotten great comments, great initial feedback from our reps and obviously from clinics on this. We have seen very limited sales on the catalog products so far, which is probably related to the physical therapy clinics during COVID.

I'm sure they're all small proprietorships. Some of them are part of bigger chains, but I'm sure all capital investments in exercise equipment or exercise balls or stretching bands or whatever they might purchase, I'm sure that's been put on hold for probably the rest of this year. So in terms of dollars, it's very minimal what we have seen, but what we are learning is that it is having the right impact, which is -- here is something -- one more thing for our sales rep that may not have relationships yet to talk about. So it's working out just as planned, and again, we want at least early on planning on any significant revenue from it. So it's very positive.

Marc Wiesenberger -- B. Riley FBR -- Analyst

Great. Thank you very much.

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

Yes. Thanks, Marc.

Operator

The next question comes from James Terwilliger from Northland Securities. Please go ahead.

James Terwilliger -- Northland Securities -- Analyst

Hi, Thomas and Dan, can you hear me?

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

Yes. How are you doing, James? I am doing well. Congratulations on a nice quarter. Very quickly, Thomas, I got three questions. Most of my questions have been answered or asked. You're doing such a tremendous job in terms of building out this sales and marketing infrastructure. This is a tough question though, but how do you define a territory, is it the population, the MSA, is it potential customer list, is it list of healthcare providers? When you look at a territory, say for example, Denver, and I assume it's non-ski season, how do you determine how many reps should be in that Denver market? Yes, it's actually very easy because if you look at the size of the population and the distribution of the population there, the number of people that live in an area typically equates to more or less the same amount of medical providers, there can be different specialties obviously, but since -- our core points cover so many different specialties, we can literally go by size of population. So what we did was take all the zip codes and we have territories that -- a few that are small as 350,000 to 400,000 people in the territory, and the largest are probably between 500,000, 550,000 people in a territory, that equates to very close to 800 territories and we're simply trying to fill those as fast as possible. We know that the size of those territories are still big enough because there's so many call points for us that a sales rep cannot even cover those clinics in one territory. So from here to 800 sales reps, there are no brakes, we're trying to drive as fast as we possibly can.

James Terwilliger -- Northland Securities -- Analyst

Okay, great. Thank you. My next question is really based on competition. What's the feedback from the sales force when you don't get an order? I mean, we've talked about this void of the negative effects of opioids is there, if you're not doing opioids and you're not doing Zynex, are you doing a non-addictive type of former or how should I think of the competition?

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

Well, there's two types of competition. Those where patients are self-directed in terms of seeking medical help. So they might buy some stuff based on a TV commercial. That can be a roll-on mental type things that that gives you a nice feeling of maybe very short-term, a little less pain. They might seek without insurance reimbursement or even without prescription to seek out someone that does acupuncture. Then you can buy some very inexpensive, certainly not prescription things. TENS devices, not like ours with the interferential current and all. You buy by that either online or Walmart. So there's a self-directed portion of it.

And then there's the way they get into medical professionals to get a prescription. They can get referred to maybe additional physical therapy. They can obviously get, still will get a lot of opioids prescribed. In some cases, you see chiropractors trying to assist the patient, but obviously, our main argument is to use our devices, the prescription electrotherapy that we offer as first line of defense.

And from a sales force perspective, when they walk into a clinic, let's say they walk into a new clinic, their first question should really be so do you guys see patients in pain? And if they do, what the hell is wrong with them if they're not already writing prescriptions as the first line of defense. That is what we're trying to instill in terms of our approach to sales these days. Of course, I know that our sales reps are much better in terms of delivering this message more politically correct, and I just phrased it here but that's really the mindset we walk in with.

James Terwilliger -- Northland Securities -- Analyst

Okay, great. Thank you. That was enlightening. And lastly, did I get this correct? So you had a little bit of slowdown in terms of future orders or current orders in April, May, because of the ramifications in COVID, and the business has kind of bounced back here in kind of the June, July. Is there any summer slowdown that we should think of typically in healthcare, but with COVID muddying the waters, it's hard to put that in there. Am I thinking about this correctly that a slowdown in April, May and kind of bounce back in June and July?

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

Yes, I think so. The impacts of COVID is much more powerful than the traditional seasonality, but If clinics are open, they probably try to get as many hours in as possible or billable hours in as possible to treat as many patients as possible, simply from a financial point of view, but we saw that in June and even though the uptick really came in only in the second half of June, we still grew 76% year-over-year in June, and we see even better growth in July. So, obviously, the addition of sales reps is certainly helping on that. There's still a damper on the economy and therefore also the available clinics for us as a result of COVID, but we're more than mitigating that by the addition of sales reps.

James Terwilliger -- Northland Securities -- Analyst

Great, thank you very much for taking my questions, Thomas. Congratulations on a good quarter. Keep it up. Thanks, guys. Goodbye.

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

Yes, thank you. It sounds like everybody is beginning to be so used to how profitable we are that very few people actually make note of how profitable we are. So, I really appreciate that, James. Thank you.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Thomas Sandgaard for any closing remarks.

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

Thank you, I hope today's earnings call has been informative for everyone, and I appreciate the interest in Zynex and listening into this call. Thank you and have a great day to all.

Operator

[Operator Closing Remarks]

Duration: 51 minutes

Call participants:

Thomas Sandgaard -- Chairman of the Board, President and Chief Executive Officer

Dan Moorhead -- Chief Financial Officer

Yi Chen -- H.C. Wainwright -- Analyst

Matthew O'Brien -- Piper Sandler -- Analyst

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Marc Wiesenberger -- B. Riley FBR -- Analyst

James Terwilliger -- Northland Securities -- Analyst

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