Zynex, Inc (ZYXI) Q1 2021 Earnings Call Transcript

Image source: The Motley Fool.

Zynex, Inc (ZYXI 2.47%)
Q1 2021 Earnings Call
Apr 29, 2021, 4:15 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to the Zynex 2021 First Quarter Earnings Call. [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 31, 2020, as well as Forms 10-Q and 8-K, press releases in the company's website. Please note this event is being recorded.

I would 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

Good afternoon. My name is Thomas Sandgaard, President and CEO of Zynex. Welcome to our 2021 first quarter earnings call. First of all, I'm excited to announce 140% year-over-year order growth as our sales force continued to gain traction. Our first quarter revenue of 24.1 million was an increase of 58% compared to the same quarter last year. We continue to see good order flow as the economy returns to normal. As I mentioned, the first quarter orders came in 140% higher than the first quarter of last year, and 15% sequentially compared to the fourth quarter of last year. As a comparison, previous first quarter had a sequential growth in the 4% to 8% range as part of the seasonality there is in our industry, and we'll touch more on that. And we were able to double that prior average as an indication that things are really picking up. The continued strength 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 their patients in pain. As a reminder, the majority of cash and revenue related to an order comes in over the year or two following the receipt of an order as the patient uses the device and related supplies, which should lead to expanding revenue and profitability in the second half of 2021 and beyond. During the first quarter, we focused on the productivity of our sales reps and also trimmed our sales force slightly below our year-end total of just over 500 sales reps. We still expect to have 600 sales reps by year end, many of these hires will be in the second half of 2021.

The addition of a net of 100 sales reps compares to a net of 300 we added in the second half of 2020. The additional sales force growth is now happening at a much slower pace, which will directly hurt our bottom line obviously. I also want to mention that our operations continued without issues and our supply chain remains uninterrupted. It is our practice to keep several months of finished products on the shelf, four months of components on hand for internal assembly and 12 to 18 months of orders being placed with our vendors on top of the in-house materials. During 2020 and early this year, we've taken a more conservative position in response to COVID. And any possible supply chain issues which again resulted in increased inventory of approximately up toward 3 million in excess of our normal levels. We should be back to normal inventory levels during the second half of 2021. As announced earlier this month, due to our growth, we're moving into a new corporate headquarter, a new building just down the street from the existing headquarters and will expand the footprint from approximately 86,000 square feet in this building to starting Monday morning being in 110,000 square feet for further expansion within the building. The new building, combined with our production facility, gives us an approximate 161,000 square feet on the lease and the facilities are conveniently just a few miles apart. The opioid epidemic continues to be a serious issue in this country, and we are increasingly working to get patients off 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, the NexWave for pain management, our NeuroMove device for stroke rehabilitation and the InWave for incontinence treatments are examples of products that puts us in a very strong product position in the rehabilitation markets. We continue to see great potential in both our product division, our existing revenue generating area for pain management as well as a huge unmet potential for our blood volume monitor. Earlier this month, we hired Donald Gregg as Vice President of Sales and Operations for our Monitoring Solutions Division, where we have the non-invasive blood volume monitor. Don will be leading our sales, marketing, clinical research and engineering efforts. With Don's background, I'm confident we will soon have our technology become standard of care for early detection of internal bleeding in surgical and post recovery situations as well as being used to detect blood loss during surgery. While the CM-1500 is already in full production, the next generation CM-1600 is well under way and we hope to apply for FDA clearance for that market soon. Don brings a wealth of experience to Zynex. He previously held leadership roles at Smith Medical's Vice President and General Manager of Infusion Systems and at Medtronic Senior Director of Product, Marketing and Business Development of Health Informatics and Monitoring.

Don also successfully built a direct sales force, launched and commercialized infusion products, remote patient monitoring and clinical decision support software applications. As a result of innovating new products, executing sales plans and creating strategic distribution and partnership agreements, he grew each of these businesses by double digits. As most of you probably already know, we managed to get FDA clearance on our CM-1500 monitor about a year ago and also recently obtained three patents on the blood volume monitor. The CM-1500 is a non-invasive monitor intended to monitor patient's flow balance in hospitals and surgical centers. We expect to initially target ORs and surgeries that typically displace a potential blood loss as well as recovery rooms and ICUs when internal bleeding today are common and difficult to detect up until the point where 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 should also mention that I recently filed a patent application for early detection of sepsis, a new technology we will soon begin prototyping. We continue to see solid preliminary results from a clinical study at Wake Forest and are preparing to commence more studies on the device shortly. We're seeing interest in purchasing the device from hospitals that have devices on demo and our engineering team is well under way with building prototypes of the next generation CM-1600 that again would be even easier to use in surgical settings.

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

Dan Moorhead -- Chief Financial Officer

Thanks, Thomas. First, I'll view our 2021 first quarter results. Orders grew 140% year-over-year and net revenue grew 58% to $24.1 million from 15.2 million in 2020. Device revenue increased 85% to 6.4 million compared to 3.4 million last year. Supplies revenue increased 51% year-over-year to 17.8 million from 11.8 million. Gross margins were 76% in the first quarter of 2021. As we mentioned previously, we transitioned our production and warehouse to a new facility in Q1. This will greatly enhance our efficiency, but in the short term will put some pressure on gross margins. Sales and marketing expenses increased 148% year-over-year, as our sales force grew by 121% year-over-year. G&A expense grew 45% year-over-year. Much of the increase was related to increased headcount and our reimbursement in patient support functions related to our order growth. First quarter had a net loss of $700,000 or $0.02 per share. Adjusted EBITDA, which is a standard EBITDA calculation plus an exclusion of non-cash, stock-based compensation and severance and other income and expense and is reconciled in our press release, was a loss of 400,000 in the first quarter of 2021. On the balance sheet, as of March 31, our cash balance was 33.4 million, which is down from year end, but much of this is related to the increased inventory, which will level out during the second half of 2021. Our working capital was $51.5 million at March 31.

With that, 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 pleased with our full year growth in orders of 140% and our revenue growth of 58%. It clearly justifies investments in our sales personnel, sales management and inside support functions. Our focus for 2021 is increasing sales rep productivity as selling resumes to its normal course, continuing to leverage the investments we made in sales as well as on the G&A side to improve profitability, and most importantly, helping our patients in pain. We will continue our sales force growth in 2021, but at a slower pace than in 2020. We have made the investments in growing our sales force, primarily in the second half of last year. This investment is showing all the right signs as Q4 orders grew 117% year-over-year and Q1 orders grew 140% year-over-year. These orders will eventually convert into revenue over the next year and further out, and therefore we expect to return to a much healthier relationship between the top line revenue and sales expenses as we get into the third and fourth quarters of 2021. As always, with beginning of the year in insurance deductibles, this seasonality means our first quarter revenue is always much lower than how it progresses throughout the year.

We estimate our second quarter revenue to be between 31 million and 32.5 million with an adjusted EBITDA between 3 million and 4 million. The second quarter revenue range is about 61% to 69% higher than the second quarter of 2020. And the full year 2021 revenue is estimated between 135 million and 150 million, again, with adjusted EBITDA between 15 million and 25 million. The full year revenue estimate is approximately 68% to 87% above 2020's revenue of 80.1 million. 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 a couple of main competitors. This includes growing our domestic sales force as well as potential acquisitions of complementary technologies. Our long-term goal is still to fill all 800 territories in the U.S. and get sales reps fully productive. We see that it typically takes on the average up to two years to make a sales rep fully productive. In summary, we announced strong growth in orders which will drive revenue and profit in the second quarter and the second half of 2021.

And we will now take questions from our listeners.

Questions and Answers:

Operator

[Operator Instructions]. Our first question comes from Matt O'Brien with Piper Sandler. Please go ahead.

Drew Stafford -- Piper Sandler -- Analyst

Hi, guys. Good afternoon. This is Drew on for Matt. Thanks for taking the questions. I just want to start off on the rep commentary. I have kind of a multipart question here. One, particularly what were you seeing as far as that group of reps that you're uncomfortable with that kind of led you to trim your sales force? Two, what measures are you putting in place to make sure that you don't run into the same issues as you try to bring a lot of reps onboard here? And then three, are you seeing anything abnormal from a voluntary attrition perspective?

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

If I take the last question first, because that's probably the shortest answer, we don't see any attrition in terms of leaving the company more than would be normal relative to having about 500 sales reps. So that's obviously a good sign. We actually see quite a bit of loyalty in the sales force. When it comes to the parameters we look at, we put a lot of emphasis on the first 90 days of a sales rep. We were probably a little more lenient and gave maybe one or two months more as part of the process of adding so many sales reps in the second half of last year. So it was -- literally in January, a lot of reps were put under scrutiny. We put a lot of emphasis on those first few months on how their orders develop. So it is very much simply keeping up to the benchmarking we have and coming up to a minimum amount of orders within 90 days. And there are obviously some that won't survive. And so we trimmed our sales force a little. At the same time, we were then hiring new sales reps at a slower rate than in the second half. So we started that in January. And up until today, we've hired sales reps at a rate that was about a third of what we did.

So that barely just kept up with the attrition that we've seen hit during the first quarter. So the net result of that is obviously later in the year and in the years to come that those particular territories that we now have filled here, they will be -- we know they'll be high producing. That is something that is very deliberate, like we take a break now until we get into the third quarter of this year, so that when we start growing the sales force up through 600, then up toward 800 sales reps, that we don't have a whole lot of loose ends we need to tie up in -- and perhaps not so great performing territories. So it will be easier for our 15 regional sales managers to manage the addition of those reps, those territories as we move forward. So it's something that obviously is rough for our financials that we just hired that many new sales reps at the same time as when we had that seasonality of a relatively low revenue quarter because of the insurance deductibles. But you'll see, as we already indicated with what we think about the second quarter, we can see we are back to profitability. And then we'll start growing the sales force again later in the year. I hope that answers your question.

Drew Stafford -- Piper Sandler -- Analyst

Yes, that makes sense. And maybe you could share -- as of the end of April here, are you above or below 500 at this point?

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

The last number I saw was right below 500.

Drew Stafford -- Piper Sandler -- Analyst

Okay, that makes sense. And then I just want to push a little bit on the guidance. It looks like the Q2 guide is pretty much in line with the street. And now you obviously expect to hire reps at a little bit of a slower pace until the second half. So that implies you need a fairly big step up in the second half from a productivity perspective from some of those seasoned reps.

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

Yes. I see a much higher order growth in the second quarter than we saw here in the first quarter. Part of that is obviously because COVID primarily hit us last year on the orders in April and May last year. But you'll probably see something like 300% order growth in April, 300% in May and maybe 200% order growth in June. That's the kind of numbers we're looking at right now. But again, that sets the stage for that we're pretty confident or beginning to be pretty confident about some significant revenue in 2022.

Drew Stafford -- Piper Sandler -- Analyst

Okay. I was just wondering if you could speak to kind of what you're seeing from some of those seasoned reps that kind of give you confidence in that larger revenue rep in the third and fourth quarter of the year.

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

Right. Actually, we see -- if you take our top 10 or top 25 sales reps, we actually have a pretty good mix of -- a few of our brand new reps getting up in that category already as well as the seasoned reps that are just either running at the normal cadence or are just inching up a little more all the time. So it's not just a very seasoned rep. There are actually a few of the new ones that outdid pretty quickly. Again, I think we have here over the past couple of years gotten better at recruiting, better training. And now with 15 regional sales managers holding their hands in the first several months when they get deployed to make sure that they eventually become highly productive reps.

Drew Stafford -- Piper Sandler -- Analyst

Okay. Thank you very much.

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

Thanks, Drew.

Operator

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

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Hi, Thomas and Dan. How are you?

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

We're doing great. How are you doing, Jeff?

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Just fine. So first, I typically always like to ask this one, but any read into the mix in particular through devices and supplies? It looks like supplies was a bit higher than what we expected. Is that just a function of utilization?

Dan Moorhead -- Chief Financial Officer

Yes, it's pretty close to normal. We're running 25/75, and it was 74% in Q1. We talked about Q4 sometimes having a little bit of a variance, but generally we should be in kind of that 25/75 range.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Okay, got it. And can you talk a little bit about where you're seeing traction? I know that Q1's a little wonky with the providers out there. But do you see more traction between more doctors than your sales force is getting into, better new starts or you're seeing more traction with the existing physicians that are now higher prescribing in the territories.

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

Yes, I think things normalized, meaning that clinics, doctors found a way in terms of dealing with patients as well as dealing with sales representatives that changed from the second quarter and into the second half of last year. So what we saw from the end of last year and into the first quarter here was about the same. So it's entirely a reflection of that. A lot of our new sales reps are now beginning to start sending in some real orders. That's really what you've seen here. We probably need another three or four months before we'll see significant changes in terms of how easy it will be for our sales force to come in and do in-services and show up without masks and just move around more freely, try to grab doctors in the hallway. Sometimes that's what opens up a new account, etc. So it's entirely a reflection of the sales reputations we have made right now, and especially the percentage growth we're going to see in the second quarter is a reflection of that second quarter last year, it was a little rough on us in terms of orders and we still keep increasing orders very dramatically.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Okay, got it. And then lastly for me, any commentary on the blood volume as far as the 1500 unit. Is there a particular number that you're planning on producing during 2021? And then what's that look like for the 1600? Is that something planned for 2022?

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

I'm thinking -- so the engineering efforts and manufacturing is two separate animals. In terms of the CM-1500, we made enough so we can finish up about 130 of those. For the most these days, it goes out on clinical studies and just to be placed in hospitals for them to get used to it and maybe eventually keep it with an invoice being sent to them. And how long -- how many of those we need to make will literally depend on how the next generation -- how fast we can get them done. I have a feeling as I look at it now, we're already looking at a CM-1700 that the CM-1600 could well be more of a stepping stone to get quickly to the CM-1700. But again, in terms of how many we'll sell, meaning how many we'll need to make of the 1500 to some degree depends on how fast we can be ready was the 1600 or the 1700.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Okay.

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

That was obsolete that first model pretty easily, partly because of the wireless and easy user interface and all the things that would be obvious for us to make the other one obsolete.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Okay, got it. And the step down in inventory that you spoke about, we'll see that throughout the balance of 2021 or will be more pronounced in the second quarter?

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

Yes, it's -- that's a slow moving thing. It's simply a matter of making sure that the shipments we have on the way in for those orders we have placed out well over a year on items we keep buying that they are spread out. So indirectly as a result of that, we will end up with lower inventory values. We also benefit from having been able to negotiate better prices on many of the components as well as the assembly costs. We've been able to negotiate better prices. So our cost prices in general are decreasing as well. So that will help on that too. But again, before it really hits and it kicks in on the financials, etc., it will be later in the year that you will see that.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Okay, perfect. That does it for me. Thanks for taking the questions.

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

Thanks, Jeff.

Operator

Our next question comes from Yi Chen with H.C. Wainwright. Please go ahead.

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

Thank you for taking my questions. My first question just to follow up on the inventory. So would you say the normal level of inventory is somewhere between 3 million and 5 millions?

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

No, between 6 million and 8 million, that would be an appropriate level for the business we're running at right now.

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

Okay. So, the COVID-19 pandemic is subsiding in the U.S., but if there is another wave hitting the country, inventory level will go up again?

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

Well, one of the things we have improved since the COVID pandemic started is also we have more second sources that are actively up and running, rather than just having sent us prototypes or samples of their products. So we would potentially be able to be a little more lean even during a disaster period like that simply because we have more suppliers up and running. That effectively allows us to take a little more risk on that we will see those products eventually hit the docket. So not necessarily, but I'd say we do.

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

Okay. And for those sales personnel you train, are they all coming from the group of personnels you hired during the second half of 2020, or are there any members that are with the firm at the beginning of 2020?

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

I'm sorry. I didn't really understand your question.

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

I'm asking those sales personnel you have trained of your sales team, they are all relatively new reps, right?

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

They are. Yes, most of them hired in the second half last year.

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

Okay. But there are a few that has been with the firm for quite a long time also, right?

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

Yes, there are reps that have been with us for over 10 years.

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

Okay. So last question is you said that you expect the blood volume monitor 1600 to be approved in the near term. Is that going to occur this year, sometime later this year?

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

That's a good question. I need to be a little more comfortable with how the prototyping that we're looking at right now, how that plays out. That would obviously be the basis for the data we sent in to the FDA. But going forward, it will obviously be a lot easier than the first generation because we can use the same 1500 as the predicate device, and then just keep improving on it and expand indications, etc.

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

So if it does get approved later this year, would it make more sense that you would just commercialize the 1600 model instead of the 1500 model in the future?

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

We have some big decision to make there. It would be fairly easy to jump over to the CM-1700, which will physically look more like your more traditional monitor, but also in terms of the data collection, etc, and the ease of use will be the same as the 1600. We might skip right over to that one for commercial reasons. But in terms of the FDA clearance process, we obviously take them one at a time. I want to make sure we stay on the safe side of that instead of trying to --

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

Just to clarify, there is 1500, 1600 and 1700.

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

That's right. And, of course, in the future that will probably continue [Indecipherable]. We will continue that numbering system or we'll come up with some fancy names like other companies do for their product.

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

Does each new model require a separate FDA approval?

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

They probably wouldn't. But I'd like to play it strategically so that as we try to add more indications for use, that we use the next generation of product to tag along that we could probably get away with that, but there's no need to do it. We'll try to have more indications for use by following simply when we have a new generation product. So it's part of our strategy to do it that way.

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

Okay. Thank you.

Operator

Our next question comes from Marc Wiesenberger with B. Riley Securities. Please go ahead.

Marc Wiesenberger -- B. Riley Securities -- Analyst

Thanks. Good afternoon. Can you talk about the payer mix in the first quarter and how that's evolved year-over-year and sequentially as well?

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

It is pretty much the same. It always has been. The mix of payers is still fairly constant. Who is the most difficult insurance company today or this month? That is definitely a moving target. Sometimes things loosen up in one area. And then you see another insurance company be more difficult in terms of how they can slow down payment to us with a lot of medical terminology as the excuse, that's really all it's about how can they slow down payments to us. That's the industry we're in. It's pretty much the same thing. And obviously the way we direct our sales forces is obviously they're also incentivized to hit clinics that give us better paying orders, etc. So fundamentally, nothing has really changed. Obviously, first quarter is always hit heavy by insurance deductibles and we try to take that into account when we report revenue for the first quarter of the year.

Marc Wiesenberger -- B. Riley Securities -- Analyst

Got it, understood. You have made big investments in the sales force to reach prescribers. However, have you or do you plan to engage in any direct patient marketing that could further drive order growth?

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

No.

Marc Wiesenberger -- B. Riley Securities -- Analyst

Okay.

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

I'm so old now and I've dealt with sales and marketing all my life on different continents, different industries, etc. It would make absolutely no difference if we spent $1 or $10 million or $100 million on end user advertising for this. This only works through a pull strategy, not approach strategy.

Marc Wiesenberger -- B. Riley Securities -- Analyst

Got it, OK. Maybe just looking at some of the impacts on the quarter, would you say that the access to prescribers was maybe a larger factor or maybe a reduction in some elective surgeries or the fact that people maybe aren't doing normal activities and maybe injuries are less than they might be in a normal year? And kind of what's baked into your growth outlook in terms of kind of maybe a normalization of those different aspects?

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

I would say that if we look historically, up until today what we saw in April and May last year, that was -- taking orders was definitely impacted by the uncertainty and therefore much more of restricted access to prescribers. Since then, it has reached a more normal level not exactly what it used to be before COVID, and that's probably going to take several more months before we see a change there. However, our numbers -- because of how many reps we've been hiring and some of them are now becoming very productive, some somewhat productive and some are still being monitored if they can stay onboard long term. Our order growth is much more impacted by the addition of sales reps than anything there. But it's -- as long as we behave appropriately in clinics in terms of how we come in and ask for their business and ask for their time, then it's not a real issue today. It's not exactly the same as it was a year or two ago. But again, as long as you behave professionally and appropriate and respectful, these clinics still see patients. Are there fewer people getting into it because there's less activities throughout the country? Maybe a little bit. But again, that's more of a slow moving macroeconomic thing that I don't think impacts our numbers that much. Elective surgeries, some of that is in the orthopedic area. Yes, maybe it's still a little slower than it used to be, but it's not something that significantly impacts our numbers. It's really all internal making sure we make our sales reps -- our sales force as it is as productive as possible. And there's still a long way to go. The average rep can easily double or triple the orders they are producing right now. And obviously we need to hire long-term 300 more sales reps to get up to the 800 territories being filled.

Marc Wiesenberger -- B. Riley Securities -- Analyst

Understood. And final one for me. Can you talk about the expectations for increases in spending throughout the year? Maybe how much was removed last year as a result of COVID, and then kind of how should we think about that bouncing back throughout the rest of --?

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

Don't think we have removed a whole lot because we decided to go the opposite direction than most companies and doubled down. We started hiring more aggressively. So we had the infrastructure to keep up with increasing orders. And because other companies were scaling back or dropping out entirely, we actually during last year had access to a much better talent pool and more applications than normal. So we now have a workforce that are smarter and bigger than it normally would be. And still we were able to grow the G&A portion of our expenses slower than the top line. But [Indecipherable] on the bottom line was that we aggressively added that many sales reps. So, I don't know -- Dan, do you have anything you can point to where we have saved?

Dan Moorhead -- Chief Financial Officer

We've saved on a couple of things when we started doing training remotely for the big sales classes that were coming in. And I think we talked about savings between $100,000 and $200,000 a month related to that and those training. Those were the biggest ones. I think we did have some efficiencies. I think every company had some efficiencies that came in because of Zoom and some other things and doing things a little different than we had in the past. But I would say the travel was probably the largest one.

Marc Wiesenberger -- B. Riley Securities -- Analyst

Great. Thank you very much.

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

Thanks, Marc.

Operator

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

James Terwilliger -- Northland Securities -- Analyst

Hi, Tom. Can you hear me?

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

Yes. Hi, James. Loud and clear.

James Terwilliger -- Northland Securities -- Analyst

Great, thanks. Most of my questions have been answered. But, of course, I've got a couple. So first of all, nice growth numbers in this environment just looking at the release. My first question is really the deductible issue is kind of behind us. There's nothing you can do about that. That's from a seasonality perspective and everyone has it. But did you see as you moved from 2020 to 2021 any significant change in the reimbursement rates from the insurance companies or is reimbursement pretty stable? I thought that's what I heard, but I just wanted to ask the question in a different way.

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

Yes. There are two moving parts and not just pricing or I should say allowable amounts that insurance companies have established, they move around a little bit, or you can say that it's fairly stable. Some areas, we've been able to improve pricing a little bit. In some areas, they just keep hammering on us. The other variable is the allowable quantities of supplies we send out to patient and you could also say the success rate or the probability that one of our devices is approved and not for coverage with patients, those are moving targets as well. So the quantity side of it, what's allowed by insurance companies, again, some are improving, some are going down a little bit. And it changes all the time. But both on the pricing side and the volume in terms of what's allowed from insurance companies, all seems to be constant. So no change yet. Not a whole lot different from what it looked like 25 years ago.

James Terwilliger -- Northland Securities -- Analyst

And you've been answering the question for 25 years, so thanks for that. My second one -- not that I want to age you or date you. My second question is really on the sales reps. So if I heard it correctly, you're at approximately 500 today and the target is to go to 600 by the end of 2021.

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

Correct.

James Terwilliger -- Northland Securities -- Analyst

And is that -- how should we think about that? Is that kind of evenly spread throughout 2021? Because when I looked at my model, it was really the second half of 2020 in Q3 and Q4 that the sales and marketing as a percentage of revenue really had an increase. So as you move into 2021, is it may be evenly spread or are you kind of catching your breath now and you're looking more at a higher digest what you have and maybe hire more reps in the second half of this year? How should I think of the timing of your hires for 2021? Hopefully concludes [Phonetic] my question.

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

Right. For a different reason than last year, we are hiring very slowly, basically to the same point of the attrition rate the first half of this year. And I would assume that July will still be fairly quiet. I think during August and September, we'll start stepping it up not the same rate as last year, but at a rate that's about a third of what it was last year. But we'll still keep adding 15 plus reps a month net to our sales force, maybe as much as 20 net. And as we get into I would say late November, early December would probably slow down again, simply because of the practicalities of training people, etc, getting them deployed right around the end of the year. But that should leave us with approximately a net of 100. So that would be a rate of a third of how we added sales reps in the second half of last year. So it will be a lot easier to manage, but it will start getting more expensive. However, the order growth we're seeing right now is directly correlated to the amount of revenue we're going to see in the third and fourth quarter of next year and into the following year. So the base salaries that are hurting so much right now will be proportionally a lot less when we get into the third and fourth quarter of the year.

James Terwilliger -- Northland Securities -- Analyst

Okay, fantastic for taking that one. And my last question, I think you guys touched upon it earlier, but how should I think of -- and this might be for the CFO, how should I think of for modeling purposes the -- you talked a little bit about maybe the patient support functions and kind of the reimbursement function, which I believe is in G&A. How should I think of -- and to support this growth that you're putting up, you've got to invest in those patients support functions. How should I think about maybe the G&A expenses going forward in 2021? You've given like a revenue guidance. Maybe as a percentage of revenue or however you're comfortable answering that. But I'm just trying to make sure I'm on target with maybe my G&A expense build to support your growth.

Dan Moorhead -- Chief Financial Officer

James, I would look at it, Q1 was about 23% of revenue. It will start to kind of trickle down from there even though the expense will increase from a dollar perspective. I think if you took 23% and then kind of layered it down to probably closer to 20% by the end of the year and you did that evenly based on the current revenue model we have out and the consensus is out there, that should get you pretty close.

James Terwilliger -- Northland Securities -- Analyst

Well, thanks guys. And again, nice job on the -- thanks for the clarity and nice job on the impressive growth numbers. Take care, guys. Thank you.

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

Thanks, James.

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 a great day to all.

Operator

[Operator Closing Remarks]

Duration: 46 minutes

Call participants:

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

Dan Moorhead -- Chief Financial Officer

Drew Stafford -- Piper Sandler -- Analyst

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

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

Marc Wiesenberger -- B. Riley Securities -- Analyst

James Terwilliger -- Northland Securities -- Analyst

More ZYXI analysis

All earnings call transcripts