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Zynex, Inc (NASDAQ:ZYXI)
Q1 2020 Earnings Call
Apr 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 First Quarter 2020 Conference Call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]

Certain statements in this release are forward-looking and such statements 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 ending December 31, 2019, as well as Forms 10-Q, 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 sir.

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

Good afternoon. My name is Thomas Sandgaard, President and CEO of Zynex. Welcome to our 2020 first quarter earnings call. I'm excited to announce another quarter of revenue growth and positive net income. Our first quarter revenue of $15.2 million increased 66% compared to the same quarter last year. It was also the highest quarterly revenue in the history of the company. It was our 15th straight quarter with positive net income and $0.09 per fully diluted share income.

Adjusted EBITDA for the first quarter was $3 million, an increase of 23% compared to the first quarter of 2019. The investment in expanding our sales force continues to progress as we expand our geographic footprint across the US. We grew orders 126% year-over-year in the first quarter and we continue to see strong reimbursement for our products. This order growth is a result of aggressively adding new sales reps to the sales force every month and the steep order growth is a continued sign of strong demand for our products. Order growth momentum and the subsequent revenue growth we expect to see from these orders in future periods.

As you may know already, the revenue of an order is typically recognized over many months or years after the order or we call it, prescription, as patients continue to use our device and the related supplies for continued pain relief. The length of time the patient uses our devices is primarily decided by the health insurance company as well as if the patient reaches a point of no longer needing the device. In Q1, we sustained our aggressive sales force growth. During the first quarter, we hired more than 70 direct sales reps. We've continued our aggressive hiring in Q2 adding over 48 new sales reps so far in April, as we push up to reach our goal of filling all 400 territories across US by November this year. We expect to have just about 300 sales reps by the end of Q2.

Revenue is not growing faster than in 2019, as we grew revenue 66% over the first quarter of 2019. Our fourth quarter growth between 2018 and 2019 was 52%. This is obviously a result of orders having grown well over 100% year-over-year for several quarters prior. Our business model was billing for the devices monthly use and supplies as they're consumed by our patients is actually helpful in a temporary slowdown like now. 80% of our revenue is typically derived from orders received in prior periods even years earlier.

Similar to many companies, we have seen the impact of COVID-19 pandemic not only on the availability of physicians to prescribe our products, but also on navigating employee and supply chain issues. March orders were down 14% compared to the average number of orders in January and February, and our April orders are down approximately 35% compared to the January and February average. We still expect orders in Q2 to come in more than 50% higher than Q2 of last year, and be back to the same doubling the numbers compared to last year's order numbers in Q3 and going forward. This minor temporary decline in orders speaks volumes to the relationships our sales force has with many prescribers and the need for them to prescribe non-opioid non-addictive prescription strength solutions for the patients in pain.

As a reminder, revenue from an -- excuse me, revenue from an order is typically recognized over the time the patient uses our device and related supplies, and therefore short-term slowdown in orders has less impact on revenue and cash collections. Our cash collections in the first quarter and April of this year were strong, which adds to our confidence in our full year estimates. Our operations continue without an interruption despite a few of our employees staying at home due to either suspected illness or anxiety during this difficult period.

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 is critical for us to have the ability to ship immediately to a patient in pain as we receive a prescription. The opioid epidemic continues to be a serious issue in this country and we're increasingly working to get patients off of opioids and for physicians to use our prescription strength technology as the first line of defense when treating pain.

Currently, the devastating impact has reached the 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 that makes way for pain management, our NeuroMove device for stroke rehabilitation, and InWave for incontinence treatment puts us in a very strong product position in the rehabilitation markets. We continue to see great potential in both of our product divisions. Our existing revenue generating area for pain management as well as a huge unmet potential for above volume monitor.

As most of you probably already know, we managed to get FDA clearance for CM-1500 blood and fluid 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 bleeding 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.

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 first quarter results. Orders grew 126% year-over-year, which drove net revenue up 66% to $15.2 million from $9.2 million in 2019. Device revenue increased 74% to $3.4 million compared to $2 million last year. Supplies revenue increased 63% year-over-year to $11.8 million from $7.2 million. Gross margins were 78% in the first quarter of 2020. Sales and marketing expenses increased to 111% year-over-year as we continue to aggressively grow our salesforce. G&A expense grew 55% year-over-year, much of the increase was related to the increased headcount in our billing and patient support functions related to our order growth.

First quarter net income was $2.9 million or $0.09 per diluted share compared to net income of $2.4 million or $0.07 per diluted share in the first 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 23% to $3 million in the first quarter of 2020. During the quarter, we had an income tax benefit of $483,000 for deductions related to stock option exercises. On the balance sheet as of March 31, 2020, our cash balance was $14.6 million, up from $14 million at year end. During the quarter, we increased our inventory levels by 1 million to protect against possible supply chain slowdown related to COVID-19. We have not had any supply chain issues to-date. Our working capital grew to $19.9 million at March 31 compared to $17.4 million as of December 31, 2019.

I'll now 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 of 126% and our revenue growth of 66%. It a huge testament to efforts to grow our sales force and clearly justifies the investments 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 which we don't currently cover to take advantage of the void left in the market by two previous very large competitors.

Our increased orders due to a larger sales force combined with strong reimbursement for our products continue to drive increased revenue and profitability. We estimate our second quarter revenue to come in between $17.5 million and $18 million, with adjusted EBITDA between $3.2 million and $3.7 million. This revenue range would be 70% to 75% higher than last year's second quarter revenue. This is up from the 66% year-over-year revenue growth we just saw here in the first quarter and our annual guidance on revenue is maintained at $78 million to $83 million.

As a reminder, nearly all of our collections from billing comes from insurance companies, mostly private insurance, but also government, auto insurance, workers' comp, and personal injury attorneys. Payments from those are either dictated by contractual amounts we have established, allowable amounts already well established throughout our industry and negotiated amounts 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 a -- as it is typical throughout the healthcare industry in the US. This pattern is the same whether we get paid for the device or patient supplies. We are careful to make sure that 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 market 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 acquisitions of complementary technologies. We're in the process of adding seven executives and managers to the blood volume monitor division and start building an entire organization to launch that product after we recently had the product cleared by the FDA. We also recently obtained both the European and the US patent for that device and still working with the European notified body to obtain CE marking to eventually be able to sell the product in Europe. We will continue to update everyone as we continue to build out this division.

In summary, we announced yet another great quarter with strong growth in orders, growth in revenue, and profit, which puts us in a very strong position going forward.

We will now answer questions from our listeners.

Questions and Answers:

Operator

We will now begin the question-and-answer session. [Operator Instructions] And our first question today comes from Jeffrey Cohen with Ladenburg Thalmann. Please go ahead, sir.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Hi, Thomas and Dan. How are you?

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

Good. How are you doing, Jeff?

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Just fine. So, fantastic quarter. A few questions. Did you break out the device and supply revenue for the quarter?

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

Did we break...

Dan Moorhead -- Chief Financial Officer

Yeah. It's on the face of the income statement in the press release.

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

That's always we do.

Dan Moorhead -- Chief Financial Officer

Yeah.

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

Maybe -- I don't know if you can.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Okay. There it is. $3.44 million and $11.78 million. Okay. Got it. And then, can you talk about the blood volume monitor a little bit as far as timing to market as far as placements, manufacturing supplies, and it sounds like you're going direct in not planning on using any collaborations or distributors domestically?

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

Initially, we're working on building the organization to support it. We -- as part of that organization, there'll be a couple of people that we expect will have strong relationships in that space and therefore be able to not only just sell devices into some key hospital, but also help us develop some key opinion leaders, as well as potentially place some devices on loan for testing so they can see that it actually works for them. But we also expect to develop relationships for some of the larger medical device companies. I wouldn't be surprised that that take a little longer and hopefully, we will be able to prove the concept and create interest on our own and therefore, indirectly spark more interest from other companies.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Okay. Got it. And on the sales force, it sounds like you're full steam ahead to get 300 plus by the end of Q2 and how does that look for the back half of the year and going forward? Is there a number which I think you've said in the past...

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

Yeah. Then we'll have five months to get from 300 to 400, that's 20 a month. And right now, we're running at a cadence of more than 48 a month. So there should be room for potential slowdown mistakes and as well as some potential attrition when people don't perform.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Got it. And Dan any commentary in particular on the margins, a little bit shy of what we expected and when you had less over the last year, but how should we think about going forward or was there a particular item or two that hit the first quarter slightly?

Dan Moorhead -- Chief Financial Officer

We'd say normal is 78% to 82%. Sometimes it's on the high end, it depends on product mix, payer mix, there's a lot of factors in there. Deductibles at the beginning of the year can weigh on margins a little bit. So, we think they're in the normal range and we expect them to stay in that normal range.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Okay. And then lastly from me, have you seen any change among the payers from this year -- first four quarters of this year, just generally speaking, as far as coverage reimbursement, duration, and how that may affect how docs are prescribing compared to pharmaceuticals. Thank you.

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

No, real hit in the shorter term, no real change in terms of how our products are prescribed. Obviously, it has more -- just temporarily here for a couple of months more [Indecipherable] medicine and our sales reps been able to maintain our -- our relationships or their relationships with those doctors that are doing more of that and therefore kept the prescriptions coming in at a pretty steady rate, so that's very impressive.

In terms of reimbursement, we have not seen any significant change. Our cash collections in the first quarter and April has come in stronger than they normally do in the early phases of the year, where it's typically a little depressed because of patient's insurance deductibles. So that was a positive surprise. We have seen here with a little after the COVID crisis really kicked in that a few very large insurance companies decided to scrutinize claims less than they normally do and therefore that has expedited payments a little. It doesn't look like that long-term will change how much we get paid on the average prescription. But it has helped our cash flow a little bit. But other than that it's at least as good as it used to be, put it that way.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Okay. And how does it feel? Does it feel like you're getting scripts written earlier in the cycle? Are docs avoiding pharmaceuticals at a greater degree to go straight to bioelectrics?

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

I should say that we don't really see any significant development. It's probably something that happens much slower over time. Yet, I would expect as we get sales reps out in every corner of the country, that there'll be more physicians that they'll be reminded about it and therefore more likely to exactly do what you're suggesting, prescribe this non-addictive technology rather than an opioids as a first line of defense. So I could definitely see that, but probably more as a result of getting our sales force in every corner of the country.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Okay. Got it. Nice quarter. Thanks for taking my questions.

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

Have a good day.

Operator

And our next question comes from Yi Chen with HC Wainwright. Please go ahead.

Yi Chen -- HC Wainwright -- Analyst

Thank you for taking my question. My first question is, for the 2020 revenue guidance, have you incorporated the consideration that the COVID-19 pandemic could persist, persist through summer and there is -- there could be a second surge in the fall and winter?

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

We have incorporated that orders slow down and to some degree in the very end of March and obviously slow down to that same degrees throughout the entire month of April, as I mentioned a little earlier. We expect May to be soft just the first half or two-thirds of May to be soft to the same degree, then pick up right, -- start picking up again right toward the end of May, and for the month of June, to eventually get back to a rate where our sales reps will be producing a little less, but nearly the same amount of orders per rep per month that we saw early in the year.

So from an order standpoint, instead of growing well over 100% compared to the year for we expect to be 50% to 55% over the second quarter last year, so much softer than -- then we saw, but because of our revenue or business model, where a short period of downfall or shortfall of orders like that, that doesn't really impact our, our revenue much as most of our revenue comes from the first quarter and most of last year when we received orders there. So therefore, we have a lot of predictability in terms of where the year's going to end up and that predictability actually helps us in a situation like that. So we don't -- we don't take a huge hit, when doctors are not as available as they used to be.

Yi Chen -- HC Wainwright -- Analyst

Got it. I recall you mentioned that by the end of this quarter, you expect the total sales rep number to reach 300, right. Can you remind us the current number for sales reps?

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

Currently as of today, we have about 260 sales reps plus or minus 5, I think. And as we speak, we might be adding one or two. So we have another -- we have another 40 to go. And if we assume we can hire 40 to 50 a month, then there's room for a lot of attrition to hit that, we'll be well over 300 by June 30.

Yi Chen -- HC Wainwright -- Analyst

Okay. Could you comment on the tax benefit in the first quarter? Do you think that could -- that could recur in the following quarters?

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

No. It won't recur in the subsequent quarters. It's a one-time or related to some large option exercises from years back. So I would continue in the future to forecast in that 25% range the -- the 21% Fed plus 4% state.

Yi Chen -- HC Wainwright -- Analyst

Okay. Got it. Last question, could you give us a rough timeframe for the potential commercial launch of Blood Volume Monitor? Thanks.

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

Towards the very end of the year.

Yi Chen -- HC Wainwright -- Analyst

Okay. Got it. Thank you.

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

We have no reason to hurry it up. We need to build the organization.

Yi Chen -- HC Wainwright -- Analyst

Yeah. Thank you and congratulations on the solid quarter.

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

Yeah. Thank you.

Operator

And our next question comes from Marc Wiesenberger with B. Riley. Please go ahead.

Marc Wiesenberger -- B. Riley -- Analyst

Thank you. Good afternoon. Can you talk about the sales rep and healthcare provider interactions? What percentage of the sales reps are still able to meet in person with doctors and how -- what percentage are for meeting virtually? And then on that same point, with regards to the new orders kind of can you give us a breakdown which came from existing relationships versus new providers?

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

I think the short answer is to really go into detail, the answer would be no. But I can tell you that, we actually see even our new reps, that that just recently got trained through a technology called Zoom, I think it was called -- over a week rather than flying into to Denver and got very extensive training that way we've seen, maybe it was one or two exceptions, we've seen every single one of them getting at least one if not, if not, up to a dozen, or simply by creatively contacting physicians in this space and eventually getting any.

In some cases they've been able to -- and this also goes for, for the existing reps that have been able to drive by clinics and drop off material like the customized prescription pads we provide for clinics and demo devices, etc. So we're able to, without a whole lot of face to face contact still -- still keep those relationships going. And obviously, those seasoned reps we have with strong relationships, they can just text or email or call those physicians and keep reminding them that, hey, this is better than popping pills. So the actual mix between how the orders have come in like that we -- we not really try, we're not slicing the cake in that fashion and put it that way.

Marc Wiesenberger -- B. Riley -- Analyst

Understood. It sounds like you're leaning heavily on Zoom and other virtual tools for training. What's your expectation on how long that's going to last throughout the year? And I guess maybe talk about the experience that the reps are getting kind of virtually relative to what they would be getting in person. And would you expect that reps that have been trained virtually will ultimately come to line expert physical training?

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

I think the training is so good to take the last question. First, I think the training seems to be so good as we were probing into the efficiency of it that, we -- for as long as this is still an issue and traveling is not the safest thing to do that they can -- that they can continue to be trained. We have a very large class of probably 60 sales reps here in the first week of May, that'll be trained that way. And in terms of when, when the impact of all this is over, and most importantly, I decided that May 1, COVID is over. So that's easy. No. I am just kidding.

We think that as states are opening up. We see some mostly in the Southeast. They are beginning to open up for business. And we expect in that part of the country to be just a week or two, maybe three weeks maximum away from when they stopped opening up. It's still uncertain to what degree those clinics will have a policy that allows for sales reps to be running around inside of those clinics, just like they used to, but we definitely see things opening up. There'll be other states, typically states have been harder hit, or maybe politically are more shutdown than other states that probably followed by for several weeks after that, but I think as we get toward the end of May, we should be in a position where some states start operating more normal.

Marc Wiesenberger -- B. Riley -- Analyst

Understood. Real nice acceleration in supply growth in the quarter, have you expanded any offerings in with supplies for the next wave? And if so, do the payment and or reimbursement dynamics with them look different than the other previous supplies and symbols?

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

Could you repeat that question again? I didn't understand the first part of your question.

Marc Wiesenberger -- B. Riley -- Analyst

Sure. Have you expanded your supply offerings that go along with the next wave? And if so, are the payment dynamics associated with them similar to the other products or the other consumables?

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

No. Nothing has changed.

Marc Wiesenberger -- B. Riley -- Analyst

Okay. So, beyond the electrodes, there's no kind of wraps or anything that go around it might be easier for patients to put to attach, like that of braces?

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

For instance, low back garments that work was electrode, so it's easier for patients that have a hard time reaching their backs to place the electrodes that way. That actually has to do with reimbursement when we can get that added to the treatment for the patient. It's typically after we get the prescription we find out what the insurances if they allow that. There's also sleeves, knee, elbow and glove, hand gloves that can be used to provide to the electrical stimulation. And they also pay very well, but they did something we've done for years. And I don't think the percentage of that has increased to any significant amount.

Marc Wiesenberger -- B. Riley -- Analyst

Understood. Got it. Two more for me. Have you -- as you're looking reviewing your accounts maybe noted in any elevated counterparty risk, maybe across any of your items, accounts receivable, anything like that, that you're worried about as financial stresses throughout the economy?

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

Not at all. I mean, we've seen some very large insurance companies United Healthcare being one of them actually accelerating payments to us. So it looks like the financial helps is capable of doing that.

Marc Wiesenberger -- B. Riley -- Analyst

Great. And then last one, I think you announced a sales leadership change recently with the large growth that you're having with your sales force. Could you maybe talk about the timeline and the reasoning behind that move? And is that going to impact any change in strategy? Thank you.

Dan Moorhead -- Chief Financial Officer

I don't think there's a change in strategy there. It was just a change that was decided internally and made during Q1. So there's no change in strategy, everything's still the same as it was running before.

Marc Wiesenberger -- B. Riley -- Analyst

Great. Thank you very much.

Operator

[Operator Instructions] And our next question comes from James Terwilliger from Northland Securities. Please go ahead.

James Terwilliger -- Northland Securities -- Analyst

Hello, Thomas. Can you hear me?

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

Yeah, I can hear you. How are you?

James Terwilliger -- Northland Securities -- Analyst

Okay. Very good. Congratulations on some really nice numbers. I have got three questions for you and then, one for Dan. I don't want to leave Dan out. On the monitor side, and I think you've touched upon this. You're almost fortunate not to have a huge launch right now with the way COVID has shut down the hospital market.

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

Right.

James Terwilliger -- Northland Securities -- Analyst

As you look to do that limited launch or build that team of five to seven, many times when people get these products approved, it's been such a process with the FDA that sometimes by the time it gets approved they have some new bells and whistles already in their mind. Does that work here? Is there any clinical feedback that before you launch the monitor next year that you might want to tweak a few things or is the monitor pretty much ready to go?

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

All right. The monitor is pretty much ready to go. Yet, we have another version of this product, we call it, the CM-1500 here internally, that we are, you could say, more or less halfway done finishing up. And obviously, there's so many changes to that product, we expect to run that through the FDA as well. It's not just a few modifications that we can stick in a file. All of it was significant improvements. So you're right. We've been at it for so long and all the newer bells and whistles in order to be smart about the FDA process. We're sticking into the next generation.

James Terwilliger -- Northland Securities -- Analyst

So, well, no, and even with what's happened in the hospital setting, it's almost -- you're almost fortunate not to be trying to get into the hospital, especially if they're closed. A lot of device companies are struggling with that. So it's almost -- I don't want to call it a benefit, there's nothing about COVID that's a benefit nonetheless.

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

We try to do things in an orderly fashion.

James Terwilliger -- Northland Securities -- Analyst

So my next question is really going back to the sales force. And I think a lot of that's been answered, but from a high level, what are you looking for? Is it more of a pharma background, a medical device background? What type of clinical focus are you looking for? Is it rehab? Is it pain? Just tell me what is -- when -- because it's so important to hire the right person. So how do you define the right person?

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

We define the right person by someone that is good at creating relationships or even more plainly, good at making friends. They also need to have a certain amount of drive to make things happen, because they're out there on their own and to begin with they have no existing relationships. So you got to be able to get the door smacked and closed in your face. And still keep going and come back every week to see those clinics. Those are the things we look for.

And it's actually rare we add someone that has prior medical sales background, whether it's pharmaceutical or medical device. They oft come with -- I wouldn't call it bad habits, but habits that doesn't necessarily fit with our sales strategy and how we're building the sales organization here early on. And so candidates with some basic business experience, hopefully some sales experiences, but not necessarily in the medical space usually what we hire. That would be, I would say, 90% of those that get hired right now have that profile without prior medical sales experience.

James Terwilliger -- Northland Securities -- Analyst

Excellent. And thank you. And then very quickly on seasonality and deductibles. In terms of the seasonality and deductibles, is Q1 kind of -- I mean, but you put up such strong growth, but is Q1 kind of a time that with some seasonality and deductibles, that's kind of a push and that things get stronger? How should I think about the deductibles as we move throughout the year? And then you try the seasonality.

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

Deductibles hit in two ways. First, it hit us on auto side, because in January and to some degree February, that's typically not that many physicians to see,.because they don't want to take the hit of patient deductibles where they get to bill an insurance company, but they are either very low or zero dollar check as payment for that, and then go hunt down the patient for their co-pay. We can really be selective on that we're out there all the time trying to help patients. But it's -- we get slowed down by having fewer physicians available. And then, we see a little bit in the summer simply because a physician takes some vacation there. We see around Thanksgiving, that entire week is usually very slow. And December is typically a strong month for us in that -- most physicians are at work and available to write prescriptions.

On the revenue side, since our revenue comes from recurring revenue from orders from just a quarter before one or two years before it typically goes in monthly intervals sometimes with all of our regular intervals. That means that if we get a prescription in December, we can suddenly stop billing in January and February to avoid that deductible shortfall that might be and then pick it up later. We have to bill for it because if the patient was using the device and getting supplies in January, we have to bill for that. And that date of service result would that's on the claim. That's what accounts for the deductible calculation. So, typically, our cash collections are somewhat weak in the first quarter of every year. And therefore, we go as conservative as we possibly can in terms of revenue recognition. So that's always, from a revenue standpoint, unproportionally weak compared to the rest of the year.

James Terwilliger -- Northland Securities -- Analyst

Excellent. Thanks. And then just lastly that actually leads into my question for Dan. Dan, I may have missed it. Did you give a DSO number for the quarter?

Dan Moorhead -- Chief Financial Officer

We're typically right around -- there's a lot of different ways to calculate it. We're about 45 days, which is about average for us.

James Terwilliger -- Northland Securities -- Analyst

Okay. Excellent. Thanks, guys. Congratulations on a nice quarter. I'll jump back in queue. Thank you very much for taking my questions.

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

Thank you.

Operator

And this concludes our question-and-answer session. I'd like to turn the conference back over to Mr. 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 signing and listening into this call. Thank you and a great day to all.

Operator

[Operator Closing Remarks]

Duration: 40 minutes

Call participants:

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

Dan Moorhead -- Chief Financial Officer

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Yi Chen -- HC Wainwright -- Analyst

Marc Wiesenberger -- B. Riley -- Analyst

James Terwilliger -- Northland Securities -- Analyst

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