Q4 2020 Sharps Compliance Corp Earnings Call
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Greetings and welcome to the Sharps compliance fourth quarter, two dozen 20 earnings conference call.
At this time, all participants are in listen only mode.
Brief question answer session will follow the formal presentation.
If anyone should require operators that since during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Jennifer Bilodeau of Imus Investor Relations. Thank you you maybe getting.
Thank you good morning, and welcome to the Sharps compliance fourth quarter fiscal 2020 earnings call on the call. Today, we have data teach you said, the company's president and Chief Executive Officer, and Diana P.D., as Vice President and Chief Financial Officer, David will review the company's business performance operations in growth strategies, well Diana will review the financials immediately.
Following their formal remarks, we'll take questions from our call participants as you're aware, we may make some forward looking statements during the fall presentation and in the question and answer portion of this teleconference. These statements apply to future events, which are subject to risks and uncertainties. That's all the other factors that could cause actual results to differ materially from where we are today. These factors are outlined in our.
He is released as well as in documents filed by the company of the Securities Exchange Commission. These can be found at our website or it at DC Dot Gov.
With that other way, let me turn the call over to David to begin the review and discussion David go ahead right.
Right. Thank you Dan Good morning, and welcome everyone to our fourth quarter fiscal year 2020, <unk> earnings Conference call.
Despite what remains a challenging environment.
The U.S. continues to contend with a public health and economic impact.
Got it was covered 19.
Trucks delivered a solid fourth quarter performance revenue growth improved margins, while also achieving increased increased operating income and EBITDA.
Customer billings increased 6%, we saw growth across all of our key solutions. The Mailback route based business and unused medication.
When we bought performance during these unprecedented times demonstrates the ability to operate on an uninterrupted basis.
It also illustrates our strength of our strategy and finally, the power of our diversified business model orchards transforming well know backed company to a comprehensive service provider.
Wow Diana will provide more details on the financial highlights for you in a few minutes I'm going to discuss the broader view of what we believed to be significant opportunities ahead of us.
And the strategic investments, we're making in the business.
Before we take advantage of the opportunities.
So first there's a seasonal flu immunization opportunity.
Our focus on capitalizing what experts believe will be up very strong flu vaccine season.
This belief is driven by the need to protect Americans from contracting the seasonal outflow further taxing.
Our stretched health care systems.
Additionally, the mixture of the seasonal flu and carbon 19 could worse than the current public health crisis.
Therefore, the CDC and others are strongly encouraging Americans together seasonal flu shot.
And again, it's early.
Prior to this year or an estimated 45% of adult Americans received a seasonal flu immunization.
We estimate about 40% of these were administered in a retail setting like a drug store grocery store.
In our current public health situation, what consumers focus more on health risk.
Experts believe a greater percentage of the population well received the flu vaccination this year.
Experts also believed the public Steve the retail clinic setting is very convenient.
Efficient and say.
And as many of you are aware, we provide medical waste management services to about 70% of the retail clinics grocery stores and a lot.
Further supporting our belief that were in store for a potentially strong flu immunization season season.
Our the opening daughter Smartflow customers.
We shipped in the June 2020 quarter about three point Sixmillion.
Worked a flu related orders and that 70% higher than the prior year June quarter of 2.1 day.
Now the second opportunity.
Probably 19 back saying experts believe the potential covered.
Could I came back saying will be the solution to the current pandemic.
Further they expect the vaccine when available.
Well the administered into initial injections 30 days apart what subsequent boosters to ensure maximum strength immunity and efficacy of the vaccine.
The frequency of follow uncovered shots could be determined by dot on the effectiveness of the vaccine, but also the immune response.
Like seasonal flu shots experts believe that the retail clinics, adding should play a key role in the efficient effective and safe administration of immunization immunization, such as flu covered 19 and otherwise.
Whether estimated 70% coverage of the retail clinics administering immunizations, we see this as a significant significant growth opportunity.
Most importantly, we're proud to be part of the solution supporting efforts in this country to help solve the covered 19 pandemic.
So what does this mean once all of this means to us as a company.
What it means is that historically, our seasonal flu, which impacts our June.
September and December quarters.
Historically generates about $8 million in customer billing.
No.
That historical revenue could then be followed by potential cover 19 vaccine administration season. So Americans could receive covered 19 vaccines. In addition to the seasonal slow. So we are preparing for what could be obviously very strong.
No flow in covered 19 vaccine seasons in the third opportunity.
Expanded route based infrastructure, we really don't want to minimize us during this time, but it announced it spans 32 states or 70% of the population and in addition to facilitating our ability to service.
Larger route based prospects. The route based business was critical to the near doubling of the customer billings and the assisted living market for the June 2020 quarter.
We believe the expanded route based infrastructure will be an important part of growing our core medical waste management business outside of the Mailback business.
Although we're excited about the prospects of a strong flow in cover 19 immunization season, we've not lost sight of growing our core medical waste management business. In fact, it's a significant focus of the organization and the sales team now now what these opportunities.
We create strategic investment opportunities in the business.
As follows.
As we disclosed in March of this year, we significantly increased manufacturing and inventory of medical waste Mailback and shift back solutions.
To ensure we remain well positioned to meet the anticipated increase customer demand related to the flow the seasonal slow and the potential covered 19 vaccine.
So what this means is that we are building three to four times as many mail backs.
Through calendar year 2020, as we sold and the entire calendar year.
2019.
We have advised our customers prospects in the industry there were more than ready to service all or medical waste management needs as a country addresses what appears to be a strong flow and potential covered 19 boxing season.
Secondly.
As we also disclosed in March 2020 were significantly expanding our medical waste treatment capacity. We recently commissioned our new autoclave into Texas facility, expanding our overall medical waste processing capacity.
From 10 million to 18 billion pesos per year.
The additional autoclave and Texas was part of an overall expansion of that facility that we started back in October of 2019.
We also expect in addition off additional autoclave at our Pennsylvania facility should be completed an operational by October of 2020 now now with the addition of the Pennsylvania additional autoplay. This will increase our medical waste processing capacity to 27 million pounds a year, what's your sense.
Essentially triples, our capacity.
As a reference point, we processed about 7 million pounds of medical waste in the calendar year 2019.
The capital cost a triple R. treatment capacity is about 800, dollarss and that's about $400000. Each for the auto claims. We think this 800000 dollar investment has not only very prudent but also important to our ability to properly and efficiently treat the expected increases in medical waste prop.
Yes.
While at the same time building valuable permitted growth infrastructure.
Third we continue to invest in our route based service and infrastructure. We're now serves started two states reaches about 70% of the population.
Subordinate understand that our expanded route based footprint with them, we're now able to directly pickup medical waste from more customers and more locations and more frequently.
This is an important capability capability that allows us to pitch in land larger route based prospects that we were not able to be able to service. When we were had a smaller infrastructure.
The pipeline of opportunities as quite full and we're bullish in our ability to close deals and increase route based revenue.
While improving route density and profitability.
So now let's move to unused medications, we continue to see opportunities for unused medication solutions to the Medsafe and the takeaway medication novel ups. We believe we're the leader in this industry. We now have over 5500, Medsafe collection receptacles deployed with our customers and Weve pro.
Process over 58000 return medsafe liners as of today.
We believe our leadership position and the continued need for proper disposal of unused medication in southern control substances drove the 32% increase and unused medication business for the fiscal year 2020 versus a prior fiscal year.
Although the return to the Medsafe liners dipped a bit in the June quarter. The returns are now at or above pre cobot 19 levels in July.
Which supports the view that customers are returning to the retail pharmacy and say focus on their health.
An added benefit this is what we wanted to be believe a very positive development in terms of the upcoming immunization seasons within customers. Good again potentially be looking to retail pharmacies as a safe. Thank you and then can see continued venue to receive healthcare.
Rather than visiting Doctor's office.
While the covered 19 environment persist.
This is a very exciting time for the company, we're energized by the opportunities we see in the marketplace.
But what we believed to be are meaningful role addressing in helping solve concern surrounding the current pandemic.
We positioned the company as a cost effective and efficient and reliable comprehensive provider of medical waste management solutions.
We're also focusing on supporting the needs of our customers, while also growing our leadership position.
Yes, I'm going to turn it over to Diana who's going to cover the financials.
And then we'll have to finance and then after Q and I'll make a few closing remarks Diana.
Thank you David our fourth quarter fiscal 2020 revenue increased 3% to $12.6 million as compared to $12.2 billion in the fourth quarter fiscal 2019.
GAAP revenue was adversely impacted by a higher than expected net revenue deferral and a million dollars for the June 2020 quarter compared to $500000 in the prior year. That's 500000 dollar increase is what we refer to as the GAAP adjustment.
Was caused primarily due to the slowdown during the June 2020 quarter of return Mailback, which adversely impacts revenue recognition.
And that's reduces GAAP revenue.
Looking at the trend in July and August we've seen an increase in return mailbacks by about 30%.
I want to know that does.
GAAP adjustment is not lost revenue, it's rather revenue deferred to future periods.
We would expect to see primarily in the September and December 2020 quarters.
The fourth quarter increase in billings was led by one point million dot $1.9 million or 54% increase in the retail market.
Doubling of the assisted living market customer billings to $1.3 million included in the 1.9 million dollar increase and retail market billings is $1.5 million related to our flu shot business.
Our professional market billings were down $660000 or 17% to $3.3 million in the fourth quarter fiscal 2020 compared to the prior year.
The decrease in this professional market, which is comprised of physician clinics dental surgery centers.
Absent veterinarians and other healthcare providers was primarily related to mandated closures associated with the cobot 19 pandemic that temporarily closed some of our dental physician and other customer facilities.
About half of this decrease impacted our route based business.
And the other half impacted our medical waste Mailbacks.
Most of the affected customers that had temporary closures have sense reopened.
As we stated publicly we expect at a reduction in our professional market billings for the June quarter with a temporary closure of a number of our customers, including dental and various physician practices, resulting from the impact of Cowen 19th. We also stated that we believe to these decreases should be offset.
That by increased revenue from the assisted living sector as that industry generated much higher volumes of materials classified as medical waste as you can see from today's release. This is exactly what happened. The good news is is that we've seen the reopening of the vast majority of our temporarily closed.
Customer locations and continue to see strength and the long term care billings in July and August 2020.
Additionally, in based on what we see in the July and August numbers, we expect a bounce back and the professional market billings in the September 2020 quarter.
Route based pick up billings for the fourth quarter of fiscal 2020.
$2.6 million are up 3% compared to the prior year quarter and contributed 19% of total billings for the quarter.
The quarterly billings were positively impacted by increased drilling and the long term care market of about $200000 adversely impacted by reduced fillings and the professional market of approximately $300000.
Based on the trends, we see in July and August of 2020, we believe the route based billings for the September 2020 quarter should be in the range of $2.8 million to $2.9 million.
Now onto the unused medication billing.
Our billings for this Mark this area were $2.3 million.
5% compared to $2.2 million in the prior year quarter and contributed 17% of total billings for the quarter.
Out of the 5250 Medsafe deployed as of June 32020 about 550 weren't dog during the June 2020 corridor.
Medsafe deployed as of June 32019, So last fiscal year were 3600 units with 450 units deployed in the quarter ended June 32019.
Additionally, medsafe deployed during that sequential quarter ended March 31, 2020 or about 230 units.
As of June starting 2020, we have processed about 55000, medsafe liners, which is 22541% higher than the 32500 process as of June 32019 at the end of last fiscal year.
For the June 2020 corridor, we processed 4700 liners versus 6800 process for the sequential quarter ended March 2020.
And compared to the prior year June quarter of 4900.
Liners.
Mailback billings as $7.2 million increased 5%.
Contributed 53% of total billings for the quarter.
This 340000 dollar increase and Mailback revenue was led by a was the 1.5 million dollar increase in flu related Mailback business.
Partially offset by an almost 900000 dollar decrease in pharmaceutical manufacturer market Mailback orders and a decrease in mailback sold to the professional market of about $300000.
Remember that orders in the pharmaceutical manufacturer market are lumpy and we believe a better way to look at this market is on a trailing 12 month basis, which showed an increase of 12% for the pharmaceutical manufacturer market for fiscal 2020 over the prior year.
Gross margin for the fourth quarter increased to 33% as compared to gross margin of 32% in the fourth quarter fiscal 2019.
As DNA expense.
Increased 7% to $3.3 million or 26% of revenue for the fourth quarter of fiscal 2020 compared to add DNA of $3.1 million are 26% of revenue in the same prior year quarter.
The increased SDMA is related to the company's continued investments in sales and marketing.
We see as DNA, increasing by approximately 11% to 13% for fiscal year, 2021, reflecting increased headcount and related costs as well as additional sales and marketing expense.
Sharps reported operating income of $700000 in the fourth quarter of 2000 to replenish compared to operating income of $600000 and the fourth quarter of last year.
The company recorded a $1.7 million or 10 cents per share income tax benefit as a result of the release of the valuation allowance on the basis of our reassessment of the recoverability of our deferred tax assets.
Assemblies that the $1.7 million represents the recognition of previously unrecognized GAAP tax benefits associated with prior year GAAP losses.
Going forward and beginning with the September 2020, Porter, our GAAP financials will reflect income tax expense.
I have about 26%.
Pre tax income, including both federal and state income taxes.
Sharps reported net income of 2.2, my end up our or 13 cents per basic and diluted share this quarter compared to net income of $500000 or three cents per basic and diluted share in the fourth quarter of last year.
The combined company generated EBITDA of $1 million in the fourth quarter fiscal 2020, which is consistent with EBITDA in the same period of fiscal 2019.
Now, let's look at the key comparisons for the full year fiscal 2020.
Revenue increased 15% to $51.1 million and customer billings increased 18% to $53 million.
Retail billings increased 40% to $16 million due primarily to an increase in billings for flu shot related orders of $2.2 million as well as an increase and unused medication solutions, including the medsafe takeaway medication recovery system level.
As of $2 million.
Home Health care billings grew 27% to $9.9 million.
Pharmaceutical manufacturer billings increased 1% to $4.7 million and professional market billings increased 4% to $15.6 million.
Gross margin increased slightly to 31% for fiscal 2020 as compared to 30% in fiscal 2019.
DNA increased 17% to $14 million compared to $12 million in fiscal 2019 that increase was related to our continued investments in sales and marketing, but was consistent with the prior year as a percentage of sales at 27%.
The company reported operating income of $900000 in fiscal 2020 as compared to operating income of $400000 in fiscal 19.
The Companys income taxes for fiscal year 2020 included that $1.7 million or 10 cents per share income tax benefit.
As a result of the release of the valuation allowance that I described previously.
Net income for fiscal 2020 was $2.3 million or 14 cents per basic and diluted share compared to net income of $200000 or one cents per basic and diluted share for last year.
The company generated EBITDA of $2.4 million for the fiscal year ended for the fiscal year 2020, which was an increase of 14% over last year.
Our balance sheet remains solid with $5.4 million of cash at June 32020, and working capital of $11.1 million.
Accounts receivable at June 32020 was $11.8 million, our days sales outstanding or DSL using the month of chance revenue was 56 days, reflecting disproportionately higher billings in the month of June 2020, compared to other much in the quarter.
Inventory at June 32020 includes including both current and long term portion was $6.7 million.
An increase of $1.9 million over the prior year.
Most of the increase in inventory is due to higher levels of flu related mailback inventory and Ivy pools, which increased 900000 and $500000 respectively over the same period.
Property plan equipment increased $3.3 million from June 32019 to June 30 of 2020 and that includes a spend of about $2.9 million in the current year on the expansion of our treatment facility in Texas, which grew from 13000 square feet to 30000.
500 square feet, including the cost of the new autoclave.
Our long term debt increased $3.7 million from the end of last year to the end of this year due to borrowings of $2 million to fund the Texas treatment facility expansion plus the funds that we drew from the PPP lown of $2.2 million, partially offset by.
Repayment of our prior years acquisition debt of $500000.
As we previously announced we did receive $2.2 million under the Paycheck protection program, our PPP established as part of that care that and we're in the process of applying for the forgiveness of this lousy our lender lender under the guidance provided by the small business administration and the department of Treasury and with that.
I'll turn the call back over to David.
Thanks.
Operator, let's go ahead and open it up for the Q I'd say, it's after the Q and I'm going to make a few closing remarks.
Thank you we will now be conducting a question answer session. If he would like to ask your question. Please press star one on your telephone keypad.
Confirmation total indicate your line is my question Q.
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All participants using speaker equipment, it may be necessary to pick up your hands up before person Sarkies one moment. Please when we pull for questions.
Thank you. Our first question comes from the line of Gerry Sweeney with Roth Capital. Please proceed with your question.
Good morning, Diana David Thanks for taking my call you back good morning.
I wanted to start with mail back obviously the.
Flu season, the rubber is going to hit the road in the next couple of weeks.
CDC marketing I think some of the retail pharmacies are going to start marketing.
We're doing a little bit of work in this area and we know.
I wanted to just get a little bit more information on some of the stats.
Feedback you're getting from.
From your customers as you discussed in the.
In your prepared remarks, I think 45% of adults have gotten flu shots in the past 40% of this is in the retail settings.
Just want to see what your customers are saying about maybe a shift in where this is going to be taking place I know the cdcs.
Kind of holding some calls and conferences this week talking about the talking with some retail pharmacies about administering.
Shifting some of the inoculations two different locations satellite locations.
Lease for the flu side.
Using this that maybe as a.
A test for covert vaccines.
What are your customers, saying.
About just the shift.
At least potential shift and are there more opportunities for them.
So I understand.
Some retail pharmacies are partner schools to provide clinics et cetera, as well so just want to get some thoughts or I know long winded question, there, but that's what we know that.
Very good.
Question, obviously, we're in close contact with all of our customer than they do expect.
A significant are very busy flow.
I'll, just say mark to Mark standpoint, and then listening to them.
First of all from everything we say I think the vaccines that are being manufacturer, 20% to 20% higher.
The.
In the prior year I think the will really.
Packed.
Assuming that it happens is I think theres, a real chance that.
Percentage of shots administered in that reach offsetting could go over they die in the last year. There were 40% roughly 40, 40% I can remember not too long ago, where they were 15 or 20%.
But.
I will tell you what we're doing.
Because to be ready and we have a sure than there were ready for however, long harbour larger seasonal flu is we're.
Just for the seasonal flu alone we're building at least 50% lower mailbox and what we saw last year in 2019 to be.
To be prepared I'm, not saying, it's going to increase 50% of you're saying, we're going to be ready for that but if you look a lot of the data.
And what the experts, saying I think it's pretty easy to say the Tina 20, 25%.
Should be should be achieved but you're exactly right with your observations and that there partnering with a number of different groups and whether schools are universities or our communities. So they're going to be very reactive in the in the administration of the seasonal flu.
You gave us some details on some of the Mailback units I think shipped in the June quarter can you give us any detail on the carry one the carryover into July and August or.
Caveat to that.
When would you expect to start to see some carryover.
Right and shipping so so first of all they started administering flu shots a couple of weeks ago I know some of the larger.
Chains have been starting on the flu shots. The business has always worked I think it's going to work its way as well as we get the large upfront orders in the June quarter, and then we have follow on and the follow on orders are usually sometime in September and what they're doing is replenishing the warehouse distribution warehouse for customer.
Because hopefully all the mail backs that we shipped to enrich would have been sent out are being used by the.
By the retail pharmacy, so we probably won't have a good idea that until sometime in September what to follow one would be and then again, depending on the strength of flu shot as what's happened in the past it will happen again in November December although order again to reload there.
To reload their warehouses. So we'll we'll just have to see will have a better idea in September.
Got it then switching gears and then I'll jump back in queue is just back to route based obviously.
That's one of them by quarter drivers in my model, but.
The expansion into 32 states.
What does that pipeline look like I know you sense it looks steep.
And.
Looking for a little potential detail as to.
What sort of percolating in there but also.
Could you describe maybe the average size order and how it's changed over the last couple of years, especially as you expand it.
Should we continue assume maybe some larger deals going forward because of that expansion.
Sure I'll tell you what we're focused on we on the field sales side, which is.
Which would be driving a lot of the larger opportunities for this expanded route based business.
Hi, Brian this is quite.
So there is usually at least three to 400 opportunities.
That are in that pipeline.
We're actively.
Actively working.
I will tell you that probably the average size of the opportunities on the arm W. aside are probably annual opportunities of four to $500000. So that's the type of opportunities. So if you take about it. That's you know it's it's is opportunities with maybe 500 700000 locations.
Yeah.
That that we think we're really we're really good and over the last year too as we as we've expanded into the route based business. The opportunities that we've closed are growing and they're getting larger and larger so thats why we get really excited about it and we strongly believe that when you're talking about national day.
Bills are very very very large regional deals that.
There were its adjusters their cycle going after these opportunities so we like where we're positioned and.
We're quite excited we have a lot of resources pointed to closing those larger opportunities.
Got it.
Appreciate it I'll jump back in line. Thanks.
Our next question comes from the line of Rob Brown with Lake Street Capital markets. Please proceed with your question.
Hi, good morning, Thanks, taking my call.
Turning to.
I just wanted to give more color on the assisted living business growth, what's driving that and how do you see that continuing to grow.
So in assisted living and what you what happens or in the.
During the pandemic.
There's a lot of materials like.
The the PV glows mass scales. They look historically traditionally go into the solid waste the trash the during the pandemic the long term care facilities, because they've been really hit hard.
They've been.
Disposing of those as medical waste. So the volumes have increased from existing facilities, because theyre treating more items as medical waste versus versus solid waste. So that was very strong in the June quarter dissolves, roughly 600, plus thousand increase year over year, it's continuing as of today.
No. We don't know how long that's going to continue but the strength in the volume, but the long term care.
Has as continued I don't know if it continues through September our December or sometime next year, we don't know, but as of right. There appears to be continued strength in that market.
Okay, great. Thank you and then in the unused.
Medicine market, you had a nice growth in units in the quarter.
Maybe just give a sense of how that unit growth should should continue.
Terms of new placements for the rest of year.
The next year sorry.
We really look at it on an annual.
On an annual basis really on a calendar year basis, and I think this.
This year alone.
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32% growth and the unused medication.
About 32%, we can't guarantee that but you've seen some of the trends over the last couple of years.
And.
We think the as you have the opportunity to continue to grow that business I will tell you. This.
Retail pharmacy itself is still strong and we continue to.
To deploy medsafe and in the retail I will tell you right now that we've seen the slowdown with new sales the message in the long term care market and that's because long term care has been heavily with covance, so that could adversely affect maybe even over the next six to 12 months.
Incremental sales to long term care, but the retail the retail side continues to be strong.
Good and you said, how much long term care as a percent of that business.
Well I will tell you this is roughly half of our most space.
Our reach our original clinic market and the in the other half is split between long term care government license law enforcement drug treatment facilities.
Okay. Thank you I'll turn it over.
Our next question comes from the line of Michael Hoffman with Stifel. Please proceed with your question.
To the Dan Thank you for the time today.
Given where do you think your incremental margins have now settled as you exit 2020 going into 21.
I think and we continue to model out not continue to think our incremental gross margins are going to be somewhere between 45 in 50%.
On a.
Going forward basis.
Okay, and then you gave us a framing of 60% increase on 2019 mailers, how many mailers did you deliver deliver and 29 James.
Male now, but through the mail backs for the Mailbacks, sorry, My short Hills.
For for the medical.
Yeah, you talked about how you increased by 50% your inventory for Mailback real in response to the right.
2019, what's that what's that actual number look like so last year 2019 for the flu business alone we sold that goes 210 or 220000.
Mail backs for the for the flu season, so just for the seasonal flu we're building well over 300000, just for the seasonal flow. We're also continuing to build throughout calendar year 2019 were going to build.
Gross or probably six to 700000 level to be able to be prepared for the potential covered 19 vaccine.
Okay.
You should see that inventory building up on the balance sheet.
Gradually each quarter as we get into the calendar year 21.
Right, we have about okay, right and as June I think we had mailback inventory I wasn't familiar to correct of about a million too.
That was that we had I would like 250000 units are so at June thirtyth for the.
For this for the seasonal flu. So yes, you will continue to see that of course, so they'll reduce hopefully as we as we continue to sell them throughout the year.
Great and then Youve talked about in the past said about approximately 13000 route based.
Customers about 13000, approximately how many aren't open percentage wise or number.
So we have about now it's rational about 15000 now on the.
Hi, four teams on the.
On the the route based customers. We saw what was down about 1007 that were temporarily impacted right and all but all the 20% have reopened so 80% of tobacco.
And another 20% things like schools and stuff like that.
Yes, it's just the past maybe the geographic location that they're in or yeah. There were a few school.
But most of the practices of physician practices and dentists are back on track.
Okay and then how is your.
Cash collections in the quarter.
Cash collections are at a normal pace.
We didn't see any significant impact from Kevin 19 on our cash collections.
Our DSO decreased.
As of June compared to March so.
We're not seeing any any issues or problems there.
She didn't need to make any adjustments the bad debt allowance or anything like that item.
Correct.
Then.
You have.
Significant shifts in the debt going current what's the plan.
Okay. So our our current portion of long term debt includes a million dollars related to the PPP loan.
Current terms it requires principal payment starting in October, but we're in the process of applying for forgiveness, which one that finalized would remove that the whole thing from the balance sheet.
Got it Okay, and then lastly, you had about a 30% increase in contract liabilities was fine that.
So that that Hello increases just over $700000 and some of it is related to the increase in the flu shot related orders for the quarter remember that increased the million five and we had deferrals of about 300000 additional amounts on on that.
Also some increase in the contract liability is because we had delays in the mail back return to that delayed delayed the recovery or the realization of that revenue. So that that's really the explanation for that increase in the contract liability. So we shouldn't see that walk back as planned plays out both the mail.
Backs catch up and if we really do see more of the population get a flu shot.
Correct, it'll it'll it'll come down as as mail backs or return for treatment.
But if we sell more stuff, it's going to go up again.
Alright, Thank you very much lifecycle.
Our next question comes from the line of Kevin Steinke, He would Barrington Barrington Research. Please proceed with your question.
Hey, good morning.
You had spoken about on on your.
This conference call in me about.
You know kind of at reassessing in the June July timeframe.
Your build out of mail back inventory for a potential coded vaccine and obviously you talked about how significantly you've ramped up production here, but I was wondering.
In the reassessment in June July maybe if things change from what you're thinking previously or.
I know you know you continued on what you had originally thought a prior to that.
So we're pretty much or the same thing you were on track right now to build for the calendar year.
At least 700000 mailbox and again, we saw a little bit over 200000.
Last year, so I think in inventory the inventory right now is.
There's about 200 and.
50000 of course, that's not what we shipped out in Chile, but what would you as we review at every couple of few weeks and then spreads. This when we get a further assessments in September of the follow on.
Flu shot related orders, we may adjust that upwards or downwards, but.
We just need to make sure that we have plenty of inventory.
And again roughly three maybe four times that we did last year to be able to.
To meet the needs of the of the season, if if where if we overestimated thats fine they can make and just be used next year, if we underestimated well that's a good thing I mean is way.
We need more we can turn the manufacturing back on pretty quickly.
Okay in the inventory build up here are you then.
In relation to the Kogut vaccine are you then preparing for kind of the multiple shots that you talked about you know two initial and then boosters what have you.
Right absolutely so in my mind the 700.
Our show that we're currently on track to manufacture.
You probably have about.
300000 of those for the seasonal float and then the access for.
For for program, but yes, what we consider covert potentially be.
Larger than the seasonal flu.
For two reasons, one theres a possibility more people may get a covered 19 vaccine and slow add whats multiple shots in boosters for the covert 19, but we've reviewed the inventories and the demands and what we're here for our customers.
On a regular regular basis, we'll adjust accordingly.
Okay, great and.
You'd also talked about.
Last quarter potentially closing some deals on the route based side is.
It was early as to why your revenue from those willing as early as to why I mean, what's what's the closure rate.
And then the deal pipeline was the impact is all were delayed at all from the by the pandemic or.
Just kind of how is that pipeline progressing towards closure.
No. That's that's a good question, we did have a number of larger deals at work in progress and yes. Many of them did get slowed with covered 19 as healthcare facilities. Another type of facilities were calling on were much much more focused on cobot 19 in dealing with totaled 19, we are seeing them.
Now reengage and get more involved in looking as as an alternative providers are we definitely saw slowdown for a few months in our ability to sell the larger deals and that does not mean that we stopped calling on them that we are engaged as we speak.
Okay. Thanks, and then.
I just.
I found it interesting then the press release, you talked about a pickup in inside and online.
On line sales channel due to.
You know more route based services being sold into assisted living I mean I.
Mostly thought about ROE piece being sold through the field sales team, but I guess, maybe you can get Ed it as well a bit through the inside and online sales depending on the size of the customers that kind of the way to think about that.
That's correct. The inside sales has it has a very heavy focus on increasing the route based customers and they've they've had a lot of success and adding customers over the last few months.
That's a big part of our route based growth you know when we when we launch as inside sales initiative. Our thought was in its our mantra as of today the inside sales team, which is great by the way that is phenomenal.
Job led by Dennis and his team.
As they sell everything and the inside sales cannot sell a mailback or a pick up or medsafe than than we don't think their near as valuable as they are they can sell at all but.
They sell at all they do a great job on selling the the route based pick up in addition to fill telsey.
Okay, Great and then.
You heard a a temporary like in costs.
Is you you know wanting to ensure continuity of service.
During the pandemic if some some of those cost started or the roll off or.
We think about those.
Continuing forward.
We saw that those increases continue it was about 100000 dollar impact in the March quarter related to cobot.
Spending and that continued through June and some of that goes away starting in July.
Okay. Thanks, that's all I had.
Okay, great. Thanks, Kevin.
We have reached the end of the question answer session. Mr. Too. So I would now like to turn the floor back over to you for closing comments.
Thank you operator as discussed in my introduction world events have strengthened our view, but sharps as a number of growth opportunities in the markets, we serve and from our vantage point today, we believe the revenues could be favorably impacted over the next year and beyond what experts are indicating could be continued strong.
Including possession seasons, and multi shot totaled 19 immunization efforts for several years experts believe it's possible that the current pandemic.
Good or maybe already has morphed in to more of an endemic situation.
Which means that congress or or similar bars as could be here to stay.
So it's possible that will need not only seasonal flu vaccines, but also cobot type vaccines and boosters for the foreseeable future.
And one last thing about the potential covered.
19 vaccines were all wondering when it's going to be available.
You know every new story every news article is predicting when this government vexing night 19 vaccine will be available well no one really notice and we all have a love hubs it'll be sooner rather than later, but but there is one thing I do know is that were rather we're ready for no matter, how large a seasonal flu.
Or how large it probably 19 back season is where we're ready to meet the demands we have a shared our customers that we will have all the mail backs and whatever also you need so we can cost effectively and safely collect transport in Sri related medical waste.
In in again in addition to the near term opportunities, we've talked a lot about coveted and.
Hello, we continue to invest heavily in unused medication in the route based business is part of the expansion of the company outside of a mail back to our comprehensive.
Service provider I think it's worked.
I think it's worked quite well.
One last thing before signing off our our employees I've worked obviously very hard during a pandemic and because of them Weve is insured uninterrupted service our customers and we thank him for that.
We're also going to take him and advanced for what we think it's going to be are very busy 12 to 18 months going forward as we work with our customers and potentially strong seasonal flu coupled with helping solve the totaling 19 pandemic. So thank you very much our employees.
And again, thank you for everyone on the call today, we appreciate the questions and to support everyone stay healthy and safe and well talk soon.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.