Zynex Inc (ZYXI) 2020 Q2 法說會逐字稿

Good day, and welcome to the Zynex Second Quarter 2020 Earnings Call. (Operator Instructions) Certain statements in this 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 31, 2019 as well as forms 10-Q and 8-K and 8-K/A, press releases and 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.

Yes. 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 first quarter was -- for the second quarter, sorry, 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 a 21% and 11% growth year-over-year, while we were up 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 that our sales force has with many prescribers and the need for them to prescribe nonopioid, nonaddictive prescription strength solutions for the 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 search 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 sky rocketed, 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% and 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 next wave device, traction devices, low back support, et cetera.

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 4 months of components on hand for internal assembly and 12 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're increasingly working to get patients off opioids and propositions 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 next wave for pain management, our new removed device for stroke rehabilitation and the in-wave 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 claims for our CM-1500 fluid and Blood Volume Monitor earlier this year. The CM-1500 is a noninvasive 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 earn more than a dozen people employed in this division by the end of the third quarter. And short term, we're obviously also leveraging the common functions from the main business, such as human resources, payroll, recruiting, quality, accounting and production.

I will now turn the call over to Dan Moorhead, our CFO.

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 noncash, 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 6-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 6 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 30, 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 30 compared to $17.4 million as of December 31, 2019.

With that, I'll turn the call back over to Thomas.

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 investments in our sales personnel, sales management and insight 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 2 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 double -- 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 amounts sometimes on a patient-by-patient basis. These amounts are typically discounted by deductible and co-pay deductions, and we end up getting much less than our MSRP, as is typical throughout the health care industry in the U.S. This pattern is the same whether we get paid for a device or the patient supplies. We're 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.

(Operator Instructions) First question comes From Yi Chen from H.C. Wainwright.

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?

Yes, 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 some we see sometimes in personal injury cases, might be 3 or 4 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. Our 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 our -- the financials we just posted, you'll 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 is just about 40 -- 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.

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

Yes. 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.

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?

Yes. 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 doesn't send in any orders yet. So -- and then obviously, there's 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 the peak of COVID in April, May, maybe we're just now beginning to see a little bit of revenue. So we're still buying 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 annualized. We'll continue actually, we can say that COVID slowed us down a little bit. We'll get down in the middle $200,000s in Q3, probably because we we've handled 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're adding. And then we're getting into 2022, 2023. Then we'll 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 the 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 had another one that it will take a little while before this and in the first few orders. So there's a lot of inertia in growing our revenue.

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

Yes, we have. Obviously, it fluctuates a lot. It's mostly fluctuates with sometimes, there's an insurance company that certainly for 3 or 4 months, can really figure out to push the button 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 through our internal organization and also have potential revenue backed up. So for that reason, we see a little bit of fluctuation. Overall, we have seen it very constant here the last 4 to 5 years. I would say for 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.

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

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 fluctuation. Next month, it could drop down a little bit. So overall, I'd say it's very stable.

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

Yes. Obviously, depending on how the COVID pandemic has hit various states. It is something we are following very closely. And unfortunately, despite the media, there's not any increase in death, if we look at 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 clinics are very busy. They even have extended their hours so that they can -- they can handle all the patients that may have delayed going to either a physician or going to physical therapy. And obviously, need treatment may have delayed it. So we see clinics obviously apply social distancing, et cetera. 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, customize 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 via other means where we may -- the rep may have shipped material to them. But overall, we've -- 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 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.

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

Thomas, for starters, on the productivity expectation 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, 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?

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 early productivity as well as the probability that we have sales reps that's going to survive and stay for us -- with us for a long time. We also see that the efforts in terms of training. We have improved significantly on that in 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 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 our -- the layer of regional sales managers from 5 to 15, where 12 of them are in place and trained and are now managing our sales reps. And we expect the last 3 to be higher in the next couple of weeks. That's also going to help improve on new rep initial performance.

That's really helpful. I appreciate that color. Just to follow-up on that a little bit more. The -- 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 ads, making sure everybody is 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?

Yes. Obviously, the attrition rate is important. We do pretty well on that because in a class of 15 or 18 reps we train every 2 weeks, there are sometimes 1 or 2, typically 1 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 with that we literally nip that end about as early as possible and is very helpful. It looks like we're getting better at that.

Got it. And then last one for 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?

Well, I think I'm going to frame my answer more in context of what 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'll still be an insignificant part of the overall flow of money through the company. So I think the numbers in the pain management divisions are so strong and so solid, and we don't expect them to be tampered significantly by the initial burn here with the Blood Volume Monitor. So -- 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 just have a little more feedback from those people and then I'll probably be able to speak more about it.

The next question comes from Jeffrey Cohen from Ladenburg Thalmann.

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 and at least domestically? And how are you thinking about it as far as perhaps other commercial products as well as far as the hospital markets go and the ASCs?

I'm sorry, could you repeat the question?

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

Yes. It's 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 into -- 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 will 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 of what it 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 solid distribution and build big relationships and see what we can do in terms of in parallel, either licensing or OEM or private labeling, our device for them. Hope that answers your question.

The next question comes from Marc Wiesenberger from B. Riley FBR.

Following on 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.

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, et cetera. We know exactly how many reps we have employed. And I can obviously speak to the interactions on the more -- on a more soft basis in that...

Well, I guess would you say that they're 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 are kind of, I guess, maybe more qualitatively then?

Of course, it has been slow. 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 have face-to-face interactions. Some reps was -- especially here in the last 2 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 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 350 of them.

Understood. Okay.

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

Understood.

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

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?

Well, they certainly reimburse with 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 recovered. I actually looked at the -- we talked a little earlier about that we've been able to see better collections across the board on our -- on the average file. I remember having looked at TRICARE collections here a few days ago and how it's developed at the last 3 or 4 months, and it's actually increasing. So we're doing perfectly okay with TRICARE.

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?

Well, insurance -- 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 very poorly, sometimes they pay okay, et cetera, and that's the flow. And then after a while, all insurance companies is, to our experience, they have departments they most commonly label special investigations units. And it's really, a, how do we protect our employers, meaning the insurance company's cash flow. So all hospitals, doctors offices, DME providers like us, and on a regular basis, get sent, let us -- accuses of the worst things between here and the moon. And I believe all providers, whether it's a hospital or a provider like us, we have certain tactics as to how we deal with those. Some -- we know some people just settle for a percentage of all those claims that come in with the regular basis. I believe we see more than 1,000 of those every single month and have 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 arguments apart and actually spent some resources on it. And I can give you one example. A few months ago, we had a very large one. One of our big payers, obviously, amounted to $1.8 million. And once we have torn it apart, it -- they agreed that maybe the real bill amount that they felt we owe -- we should owe 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 this to continue for as long as insurance companies exist in this country.

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

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 type 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 into -- in this case, Medicare's computers, and that's what we're dealing with. We're still making good money off of that. And so you can say in a very indirect, indirect way, there's a little bit of an impact, but it's not something that we even talk about at all here.

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 impacts on the business going forward?

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've -- so it fits within our overall strategy in terms of that, 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 reps. 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 that physical therapy clinics during COVID. I'm sure they're all small proprietary ships some of them are part of bigger change, 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's having the right impact, which is something -- one more thing for 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.

The next question comes from James Terwilliger from Northland Securities.

Thomas and Dan, can you hear me?

Yes.

Congratulations on a nice quarter. Very quickly, Thomas. I got 3 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 to health care providers? When you look at a territory, say, for example, Denver and 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. The number of people that live in an area typically equate to more or less the same amount of medical providers. There can be different specialties, obviously. But since we -- our call 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 a 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 are simply trying to fill those as fast as possible. We know that the size of those territories are still big enough because there are 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, it's -- there are no breaks, we're trying to drive as fast as we possibly can.

Okay, great. 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 nonaddictive type of pharma? Or what -- who -- how should I think of the competition?

Well, there's 2 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 -- those roll on menthol type things 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 we can buy some very inexpensive not certainly not prescription things. TENS devices, not like ours with interferential current and all. You buy 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 preferred 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 sent electrotherapy 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 they have is wrong with them, it's 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're working with.

Okay, great. That was enlightening. And lastly, did I get this correct, so you had a little bit of a slowdown in terms of future orders or current orders in April and May because of the ramifications in COVID. And the business has kind of bounced back here in kind of a June, July. Is there any summer slowdown that we should think of typically in health care, 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 and May and kind of bounce back in June and July?

Yes. I think so. The impacts of COVID is much more powerful than the traditional seasonality. I bet 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 here 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.

Great. Thomas, congratulations on a good quarter. Keep it up.

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. But so I really appreciate that, James. Thank you.

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

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.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.