Zynex - Earnings Call - Q3 2020

Transcript

Speaker 0

Good afternoon, everyone, and welcome to the Zynex Q3 twenty twenty Earnings Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. 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 ks for the year ended December 3139, as well as Forms 10 Q, eight ks and eight Ka, press releases and the company's website. Please also note today's event is being recorded. And at this time, I'd like to turn the conference call over to Thomas Sandgaard, Founder, Chairman and Chief Executive Officer. Sir, please go ahead.

Speaker 1

Thank you, and good afternoon. My name is Thomas Sandgaard, President and CEO of Cynix. Welcome to our twenty twenty third quarter earnings call. I'm excited to announce yet another quarter of revenue growth and positive net income. Our third quarter revenue of $20,000,000 increased 69% compared to the same quarter last year.

It was also the highest quarterly revenue in the history of the company. It was actually our seventeenth straight quarter with positive net income and fully diluted earnings per share was $04 Adjusted EBITDA for the third quarter was $2,400,000 as we continue to invest in growing our sales force. Similar to many companies, we've seen the impact of COVID-nineteen pandemic and Q3 orders came in at 96% higher than Q3 of last year, which was an increase of 37% year over year order growth in Q2, and we saw momentum in order growth during Q3 with 83% in July and August and 117% in September. October is currently trending above 120 compared to October, which is a strong benchmark as October was by far our strongest month in 2019. The continuous strength in order 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.

The investment in expanding our sales force continues to progress as we expand our geographic footprint across The U. S. We continue to aggressively add sales reps and eclipsed 400 total reps in the third quarter. Our recruiting efforts have been aided by a surge in candidates due to increased unemployment rates related to COVID-nineteen. We expect these new hires to provide significant productivity increases in Q4 and beyond.

We expect to have over 500 sales reps by year end. Revenues slowed slightly in Q3 due to the lower Q2 orders in April and May related to COVID-nineteen, but still grew 69% in the third quarter compared to 87% in the second quarter. As a reminder, our business model, the billing for the device's monthly use and supplies as they're consumed by our patients causes a lag between orders and revenue growth. As business continues to get back to normal and orders continue to grow, we expect revenue and revenue growth to follow accordingly. I also want to mention that our operations continue without interruption and our supply chain remains uninterrupted.

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 twelve to eighteen months of orders placed with our vendors on top of the in house material. We have also increased our second sourcing to become less dependent on individual vendors. It is critical for us to have the ability to ship immediately to a patient in pain. 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 a level where tens of thousands die yearly due to opioid abuse.

We continue to develop more tools to make physicians aware of our technology that literally has no side effects. Our products for pain management and rehabilitation still stand out as some of the best products in the industry, the NexWave for pain management, our NeuroMove device for stroke rehabilitation and the NWave for incontinence treatment. Those all puts us in a very strong product position in the rehabilitation markets. We continue to see great potential in both our product divisions, our existing revenue generating area for pain management as well as the huge unmet potential for our blood volume monitor. As most of you probably already know, we managed to get FDA clearance for our CM1500 blood and fluid monitor earlier this year.

The CM1500 is a noninvasive monitor intended to monitor patients' fluid balance in hospitals and surgical centers. We expect to initially target ORs 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. Last week, we announced we hired Neil Frey as the President and COO of the division. Neil has a strong background from primarily semi biomed, in particular the surgical side, and comes with a lot of knowledge about medical devices and also blood loss monitoring in hospitals.

At Zimmer Biomet, Neil managed P and L, led product development, manufacturing, sales and marketing, product launches, and quality functions for their 400,000,000 surgical division with 600 employees and 35% EBITDA margins. He specifically built a 130 man sales force from scratch and also led several acquisition efforts in the cardiac device market. Before that, he was Director of Finance or Controller for five years of Syma Surgical. Going forward, Neil will be leading our sales, marketing, clinical research and engineering efforts. In the near term, this division still utilizes manufacturing, human resources, accounting and QA resources from Cynix Medical, the other division, but will at some point have their own self sufficient functions.

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

Speaker 2

Thanks, Thomas. First, I'll review our twenty twenty third quarter results. Orders grew 96% year over year and net revenue grew 69% to $20,000,000 from $11,800,000 in 2019. Device revenue increased 99% to $5,300,000 compared to $2,700,000 last year. Supplies revenue increased 61% year over year to $14,700,000 from $9,200,000 Gross margins were 79% in the third quarter twenty.

Sales and marketing expenses increased 125% year over year as we continue to aggressively grow our sales force. G and A expense grew 70% year over year, much of that increase was related to increased headcount in our reimbursement and patient support functions related to our order growth. Third quarter net income was $1,300,000 or $04 per diluted share compared to net income of $2,000,000 or $06 per diluted share in the third 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 was $2,400,000 in the third quarter. I'll now review our twenty twenty nine month results.

Orders grew 85% year over year, which increased net revenue 74% to $54,500,000 from $31,300,000 in 2019. Device revenue increased 88% to $13,000,000 compared to $6,900,000 last year. Supplies revenue increased 70% year over year to $41,500,000 from 24,400,000.0 Gross margins were 78% in the first three quarters of twenty twenty. Sales and marketing expenses increased 117% year over year and G and A expense grew 63% year over year. Twenty twenty nine months net income was $7,300,000 or $0.21 per diluted share compared to net income of $6,500,000 or $0.19 per diluted share through three quarters last year.

Adjusted EBITDA increased 27 to $10,200,000 in the first three quarters. On the balance sheet, as of September 30, our cash balance was $41,200,000 up from $14,000,000 at year end. As many of you know, we completed an equity transaction during July, which added approximately $25,000,000 to the balance sheet. Our working capital grew 189% to $50,300,000 at September 30 compared to $17,400,000 as of December 3139. With that, I'll now turn the call back over to Thomas.

Speaker 1

Thank you, Dan. I'm especially excited about our year over year growth in orders of 96% and our revenue growth of 69% in the midst of the COVID-nineteen pandemic. It's 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 to eventually cover the entire country now in just a few months from now. It is also important that we really don't have any significant competitors left.

Our increased orders due to a larger sales force combined with strong reimbursement for our products continues to drive increased revenue and profitability. I'd like to take a minute to review what we have accomplished so far in 2020. In the midst of a pandemic, we are forecasting to beat our original full year revenue guidance, which we gave in February. This year alone and before year end, we'll have hired over 300 new sales reps. Our reps are now more effective in the first three months than ever before and we are very bullish on expanding sales orders and what it will be able to produce in Q4.

And therefore, the revenue those orders will turn into in 2021 and 2022. We estimate our fourth quarter revenue to be between $25,500,000 and $26,500,000 with adjusted EBITDA between 2,300,000.0 and $3,300,000 This revenue range is 80% to 87% higher than last year's fourth quarter revenue. This is up from 69% year over year revenue growth in the third 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 those are either dictated by contractual amounts we have established or allowable amounts already well established through our industry and negotiated amounts on a patient by patient basis.

These amounts are typically discounted by deductibles and co pay and other allowable discounts. And we end up getting much less than our MSRP 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 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 have just recently added three employees in the Monitoring Solutions division, including our new President and COO, and we are in the process of adding four additional executives and managers to this division through long term Blood Volume Monitor. We'll 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 position of strength going forward.

We will now answer questions from our listeners.

Speaker 0

Our first question today comes from Jeffrey Cohen from Ladenburg Thalmann. Please go ahead with your question.

Speaker 3

Hi, Thomas and Dan. How are you?

Speaker 1

Doing well. How are doing, Jeff?

Speaker 3

Just fine hanging in there. So just a few questions for you. Firstly, on the device side, it looked like about 8% higher than our estimates. Is there any read into that? Is that, you know, basically as a function of more sales coming on with earlier orders?

Or is there something else to read into there?

Speaker 1

Not a whole lot, but thanks.

Speaker 2

Yes. No, I don't think there's much. But, you know, there can always be changes in mix, you know, when they lease or buy the device. You know, it's really just how the revenue comes in on the devices. So I don't think there's anything trending that you would need to know.

Speaker 1

Maybe slight changes in the mix of insurance companies and their preferences, which is how we have set up how we bill each insurance company.

Speaker 3

Okay, got it. And could you give us a little flavor on the ratio of back office support to the sales organization? Is that increasing kind of ticking up along with the sales organization build out or any color there for us?

Speaker 1

Yes, can say we finally completed the addition of a total of 15 regional sales managers that obviously each control what eventually will be their share of nearly 800 sales reps. In the back office, we now have 15 inside sales people that are supporting those sales reps with anything they might need during the day. And obviously, then we have the whole pipeline to the system from order entry to patient enrollment, the patient experience group, a new group we have established that call patients within a day or two after they receive the device. And obviously, we have a very, very large call center for all the questions that the patients may have. So that's all there.

But really what you can say is the core of the business is the engine we have that builds insurance companies. That is separate from our sales force obviously, and they work directly on that. We can call it the second part of the sales process, making sure that insurance companies understand with the prescription and insurance coverage and the fact that we have shipped the device. We obviously need to get paid. And that's what the billing the biggest department we have is the billing department.

But there's a lot of Okay. Other

Speaker 3

got it. One more if I may. Could you talk about the second sourcing? And what's it for? Is it specific to PCM boards or other components?

Can you

Speaker 1

talk about that a little bit? Yes, it's every component we use. So one example is obviously the semiconductors that go in it. It's like building a cell phone, what we do. And some of the components automatic.

It's very easy to find second sources for those. So that's not a problem. But when you get to customize LCD displays, for instance, then we for a long period after we develop the device just have one vendor. We have another one that's up and running. The same goes for the customized plastic enclosure, for the lead wires, etcetera, for the bags that the device comes in.

So everything literally has a second source now Just to make sure and we now have volumes that can justify having two multiple vendors without hurting the pricing. So the cost price of our devices are certainly not going up.

Speaker 3

Okay, perfect. Thanks for taking the questions.

Speaker 1

Sure. Thank you. Our

Speaker 0

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

Speaker 4

Thank you for taking my question. Could you remind us currently how many sales reps do you have?

Speaker 1

At the end of the quarter, we had approximately four ten or something like that.

Speaker 2

It might have been a little higher than that, but yes, four twenty, four thirty somewhere in there.

Speaker 1

Yes, right around there. And obviously it's a higher number as of today and we expect by year end to have 400 or 500.

Speaker 4

Okay, got it. So right now The U. S. Is experiencing a rebound in COVID-nineteen cases. It looks like the rebound is not going to end until probably the end of the coming winter.

So do you expect a continuing negative impact from COVID-nineteen for the coming quarter? And how do you see the growth trend will ramp up going into the first and second quarter of twenty twenty one?

Speaker 1

At this point, we don't see an impact. As I mentioned, October is even stronger than September in terms of year over year order growth. And we can obviously attribute that a lot to addition of sales reps and also how productive new reps are now becoming. What we're also seeing, in April, May when there was a lot of nervous and people were not sure about how to open clinics, how to deal with patients, if they should allow them in, if they should allow sales reps in, etcetera. That has now found, could call it, a balance between making sure that there's enough distancing and just dealing with the pandemic while still operating as a business.

So we don't at this point see any slowdown in terms of clinics that are willing to see our sales reps, etcetera. And I'm sure there's also some telemedicine going on. Of the prescribers we have see the patients or maybe a Zoom call and then prescribe accordingly. And obviously, found ways to still communicate with those prescribers. So all in all, at this point, we don't see any signs of slowdown.

So compared to when we got out of COVID and how orders are growing right now, It's nearly a straight line up.

Speaker 4

Got it. So for the division of the blood volume monitor, do you can you give us some color on what activity the company will be conducting during the current and next quarter? And any update on the timeframe for a commercial launch?

Speaker 1

Yes. Technically, we can sell and there might be a few hospitals that might be interested in placing some purchase orders. So those are initial talks at this point. We continue to conduct pilot studies to collect more data that we use for product development. And we also have clinical studies in the works to eventually be published when using the device in the surgical setting.

And then we also have a few studies underway that are much more practical that are geared towards actually suggested by a few researchhospitals, research institutions hospitals. They suggested to assist us with collecting data. So we pretty, in a very simple fashion, can see how many minutes we detect earlier than someone that's in a a nurse in a recovery room, for instance, would detect that someone has an issue with maybe internal bleeding. So we are initiating a couple of studies that are very simply put will be helping us significantly in terms of the sales efforts. So that's on the clinical side.

We continue to develop on the CM1600 a version that is a lot more elegant to use. It's also wireless and looking at some of the parameters in a fashion that's going to make it even less complicated in the OR in terms of the wires, etcetera. So that's what's going on. And we already have initial sales of what's going. We've had a few contacts from international side that we could also or we will be looking at.

And other than that, it's soon as Neil comes into the office in a few days, we've already started talking about the strategic plan for that division, and that will be the first step. There are so many things we can do with this product. So let's make sure we start in the right corner.

Speaker 4

Is it reasonable to expect that 5,050 could be launched sometime in 2021?

Speaker 1

Yes, absolutely. It's already launched, but in terms of maybe no trade shows right now, but there are things we can do on social media and obviously with direct sales efforts as we're doing now. It's hard to say when we can call that a formal launch because we'll probably more just be slowly ramping up those efforts rather than a big splash. So we'll see.

Speaker 4

And to follow-up on CM1600, does that device need a separate five ten approval? And in what timeframe do you expect approval to occur?

Speaker 1

It doesn't you could say technically it would not necessarily need a separate five ten plans, but our plan is to run it through the FDA with another five ten. We should be able to in somewhere between two and maybe five months file that application.

Speaker 4

Got it. And finally, regarding the use of the newly leased facility, so what's the progress of moving the inventory and other related operations into the new facility? Is there any disruption to the overall operations of the company?

Speaker 1

The good news is that the way we are set up, we won't even know that there was a difference there. I think we can do that seamlessly. A big portion of our inventory is already over there, but it's taken now a couple of weeks. We do it slowly because we do have so much to make sure we have everything ready in the pipeline. And here in a few weeks, I believe the whole assembly line and the workstations will hit towards the November, be over there and it will all be everybody will start moving.

I would say December 1 is probably an appropriate day. So we now have a total of 84,000 square feet here. We have 50,000, 51,000 square feet over there and we have nearly 10,000 square feet in the building next door. So that's 145,000 square feet that we now occupy. And we need more here soon.

Definitely getting production and the warehouse out of here, it's going to give us a little bit of breathing room.

Speaker 0

Our next question comes from Matthew O'Brien from Piper Sandler. Please go ahead with your question.

Speaker 5

Afternoon. Thanks for taking the questions. For starters, just the supplies number in the quarter was a lot lower than I had been modeling. So can you talk about the weakness there? And specifically, I think you had a payer that stopped covering starting July 1.

What kind of impact did you see in that region?

Speaker 2

What? It wasn't really a payer issue. If you're talking about the TRICARE That's an option. That's really not it. The decrease in orders during Q2 drove revenue was up from about 19,300,000.0 to $20,000,000 in the quarter.

Devices were up just because the orders and the supplies flattened out in the quarter, but they should start driving again on the order growth that we posted in the quarter.

Speaker 5

Okay. So I guess the next question would be on the from the press release, the employee and supply chain issues that you had seen in Q3, are those completely resolved? Do you feel comfortable that you're in good shape now as we head into Q4?

Speaker 2

Yes, there weren't any issues. I think we were pointing out that we've seen the issues of COVID-nineteen and we've dealt with those. And we haven't really seen a lot of issues. We've done a pretty good job on the operations side, making sure that we've gone pretty smooth through the pandemic in Q2 and Q3. And then now we're just looking towards Q4.

Speaker 5

Okay. And then I guess the reason for these questions is really surrounding the Q4 guide. It's a humongous step up, and I know you've got a lot more reps in place. But, you know, versus what we saw in Q3, it's a really big step up. So the confidence in that level of improvement is driven by, I get, the reps, but what from a productivity perspective gives you that confidence?

Are you seeing it so far here early days in October that you feel comfortable in getting to that level of a step up? And I guess to follow through on that question, as we head into 2021, I know you guys are pretty bullish about what the 2021 outlook is for the business. Any updated thoughts as you think about next year? Thanks.

Speaker 1

I'd say without putting too many numbers on it, obviously, the growth in orders we are seeing right now, we won't see much revenue in Q4 from that. But that is what is part of building some confidence into what level of revenue we'll see over the four quarters in 2021. So I think we'll be expecting that we for quite some time can keep the growth rates on revenue at around the 100%. And if we can continue order growth for another quarter or two of well over 100, then eventually revenue will catch up to that and start showing growth over 100%. But here in late this year, we'll formally be working here internally on setting the or forecasting the numbers for next year.

Speaker 5

Okay. Thomas, and the big step up in Q4, the confidence there?

Speaker 1

Again, in terms of orders, absolutely, we're already seeing it. And a little bit of that will obviously drop into revenue for Q4. But cash collections are still strong, which is what is used to drive the net revenue numbers that we post. So I think we can say we're very confident about the numbers we just put out there.

Speaker 5

Okay. Thank you.

Speaker 0

Our next question comes from Mark Wiesenberger from B. Riley FBR. Please go ahead with your question.

Speaker 6

Thanks. Good afternoon. Can you talk about what drove the order acceleration from the kind of seventy six percent in July to 117% in September? Was that primarily driven by the new reps or was there some productivity gains as well from existing reps?

Speaker 1

Primarily new reps. I would say what we consider existing so those reps that have been with us for a year or two, we haven't overall really seen any significant productivity gains from, but those reps that may have started in January, February, early March that had a very significant slowdown in during COVID. For us, we experienced COVID as April, May slowdown in orders and a little bit early June. Once we really got back into it, we've seen some incredible productivity gains as well as brand new reps that may have gotten on board in July, July, August that are now producing incredible numbers. So I'd still say we believe it or not, it seems like we've been able to recruit even better and provide initial training even better than we did maybe a year or two ago.

And on top of that, we now have 15 regional sales managers in place. So now they really do have the time to get out there and hold the hands of brand new reps immediately after they get deployed. That probably also helps a little.

Speaker 6

Understood. Of the 200 reps that you started the year with, how many are producing at least $1,000,000 in trailing twelve month sales? And then how many are producing at least 500,000 in trailing twelve month sales?

Speaker 1

I don't have that number present. But if I should guess, somewhere between ten and twenty of those, if you look at the run rate wise, yes, maybe not anymore than that, not yet. It's still heavy lifting.

Speaker 6

Got it. In a steady state world, what are your expectations for the number of orders a sales rep can generate per month?

Speaker 1

They should be able to produce over 100 orders per month. Our projections in order to make all the numbers come together is fairly conservative. As long as they do 60 orders a month on the average throughout the sales force, then we realistically may not be able to push them any more than that. And that will make our long term goals come together. If we can get above 100, I remember when our big competitor MP that was a division of GGO, when they were in business, if someone produced less than $100 a month, they wouldn't be working for them anymore.

So I think for budgeting and forecasting purposes, we have a pretty conservative number in there. That will get us to $1,000,000 in annual revenue annualized revenue per rep.

Speaker 5

Got it. Thanks. And one

Speaker 6

more from me. Turning to the Blood Volume Monitor, I mean, we saw that you released an announcement expanding your facilities. You've hired a new Chief Operating Officer for the Monitoring Solutions division. Can we read between the lines to infer that you guys are closer to determining your go to market strategy and favoring a go it alone path as opposed to a joint venture or licensing deal? And then how should we think about the cadence of spending associated with the blood volume on and over the next twelve to eighteen months?

Thank you.

Speaker 1

Yes, think with Neil coming on board and with his background and the talks we've many talks we've had already obviously that we're pretty close to be defining the at least the initial strategy here. Without preempting what we'll come up with, I'm still expecting that we'll be doing a bit of everything in terms of working strategic partnerships, licensing, royalty, or OEM private labeling versus going it alone until we find out what really works. As far as I know, this part of the market, that's typically a very viable strategy. So you don't box yourself in too much and too easy to negotiate with either way. But we'll see how all that works.

We'll probably see a little bit of revenue maybe towards early or middle of next year. How much is hard to say. That probably depends on how many resources we put on the sales side of it early on. We already have a few resources. It's I got to admit, we get we have received with a lot of interest and very open arms when we talk about it, which is a little unusual when you're out there trying to sell some boxes.

So it's very encouraging.

Speaker 5

Great. Thank you.

Speaker 1

Thank you.

Speaker 0

And our next question comes from James Terwilliger from Northland Capital Markets. Please go ahead with your question.

Speaker 7

Hey, Thomas. Can you hear me?

Speaker 1

Yes, can hear you. How are you doing?

Speaker 7

Good. How are you doing? Three quick questions really very quickly and thanks for taking my question. On the COVID issue, you guys have put up tremendous growth numbers, even better growth numbers when you're considering the impact of COVID and the shutdown of the economy and what it's done to other companies. You had tremendous momentum and then it kind of you almost had to catch your breath or it stumbled a little bit.

When it stalled or slowed down, was it more of a regional issue that you saw? Was it one particular region that said, hey, things are kind of shut down? Or did you really see that slight slowdown more on the national scale? Was it coming from one region, the Northeast, the Southeast, the West Coast? Or was it just, hey, every sales rep is saying, we're getting locked out of the facility?

Can you expand at all in terms of the COVID hit that you took?

Speaker 1

Yes. Would say when we look back at April, May, early June when that really hit us, and after that we worked ourselves out of it, we obviously saw in general that certain parts of the country were harder hit than others. But at that point, I would say our national coverage in terms of sales reps went that dense. So therefore, it was much more on a by sales rep basis. We saw for instance our best producing reps during that period were right smack in the middle of Manhattan.

And in terms of which reps had problems, were probably more a reflection of if they had good existing relationship with prescribers so that they could still contact them by phone, by email, by text messaging, or whatever it was. And in some cases have the ability to drive by and maybe just drop off updated prescription pads or something like that without actually entering the clinic. So there was a lot of creativity. We did a lot we really produced a lot of sales material and sales training to do distance selling during those months. And it was much more on a it looks like it was a random which reps picked up on that well and which ones didn't.

So it was much more by rep, and we couldn't see any direct correlation with the regions that were considered hotspots back then.

Speaker 7

Okay, great. Thanks. That was excellent additional color. My second question is really from a high level concerning reimbursement. Mean and again, within the healthcare marketplace, sometimes fiscal years in October and November, we might reset reimbursement.

Clearly, we're coming towards the end of the year with December. From a high level, do you view where you see it today? Do you view reimbursement as pretty stable? Or do you think there's going to be any significant changes with what you see today?

Speaker 1

Having done this for very close to twenty five years, I have not seen any changes in twenty five years that are on a macro level. On a micro level, it's always an issue which insurance company is the most difficult one this month. But other than that, we don't see any trends. When it comes to traditional HMO commercial insurances, see the same pattern right now. We're here towards the end of the year, many of the deductibles are met.

And of the allowable amounts that insurance companies produce, we therefore collect a bigger portion of the cash of it being cash. And so cash collections here in the last three months of the year are always a little stronger, and that's also why we we always somewhat upbeat when it comes to protecting fourth quarter revenue.

Speaker 7

Okay, great. And then lastly, just very quickly, think you're going to hate this one the most, so forgive me ahead of time. Now that we're talking about the launch of the Monitor in 2021 as you put that team together, What can you see? What can you discuss about maybe the R and D pipeline as we move into 2021? What are you excited that you're working on?

And what are you able to discuss that you're working on? And I'll jump back in queue. Thanks, Thomas.

Speaker 1

Yes. I talked a little bit about the CM1600 that we're probably well or halfway with. So we'll see when we can very soon start producing prototypes on that. I'm also looking ahead to a CM1700 that's a more embedded version of what we already have. Functionality will be more or less the same, But having it more embedded would also mean it will be easier for us to create versions for maybe the U.

S. Military as well as maybe private labeling or OEM for other companies. And then I've already made some other inventions that once I think we get some patents filed and stuff like that, maybe we'll talk more about that. And obviously, it's still an option to add more technologies that will fit into the hospital monitoring space other companies as there might be.

Speaker 7

All right. Well, thanks guys. Thanks for taking my questions. I'll jump back in queue. Thanks, Thomas.

Thanks, Dan. Good bye.

Speaker 1

Thanks, James.

Speaker 0

And ladies and gentlemen, with that, we will conclude today's question and answer session. I'd like to turn the conference call back over to management for any closing remarks.

Speaker 1

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

Speaker 0

And ladies and gentlemen, with that we'll conclude today's conference. We do thank you for attending. You may now disconnect your lines.