Q1 2021 Sharps Compliance Corp Earnings Call
[music].
Greetings and welcome to Sharps compliance <unk> first quarter 2021 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator systems. During the conference. Please press star zero on your telephone keypad, Oh now I will turn the conference over to your host Jen.
Though you may begin.
Thank you good morning, and welcome to the Sharps compliance first quarter fiscal 2021 earnings call on the call today, we have David Pete You said, the company's President and Chief Executive Officer, and Diana P. Diaz, Vice President and Chief Financial Officer, David will review, the Companys business performance operations and growth strategies, while Diana will review the financials.
Immediately following their formal remarks, we will take questions from our call participants as you're aware we may make some forward looking statements during the formal presentation and in the question and answer portion of this teleconference. These statements apply to future events, which are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from where we are today.
These factors are outlined in our earnings release as well as in documents filed by the company with the Securities and Exchange Commission. These can be found at our website or at SCC Dhaka. So with that let me turn the call over to David to begin the review and discussion go ahead David.
Great. Thank you Jim good.
Morning, welcome everyone to our first quarter fiscal year 2021 earnings conference call.
As we kicked off fiscal year 2021, U.S. continues to contend with the public health issues and economic impacts associated with Carbonite chain. We believe our performance. During these unprecedented times demonstrates our ability to operate on an uninterrupted basis as well as the strength of our strategy finally the.
Power of our diversified business model as we have transformed the company from a mailback only company to a comprehensive provider with three primary revenue streams.
Revenue in the first quarter of fiscal year, 2021 was 13.2 million a decrease of 3% compared to 13.6 million in the same prior year quarter.
Customer billings decreased 6% to 13.4 million for the first quarter compared to $14.2 million.
For the same prior year quarter.
The shortfall in revenue from our revenue expectations at 15 million.
Let's do the customer ordering patterns and timing of flu and COVID-19 related mailback orders for the 2020 flood related season.
The shortfall was covered in early October 2020, with orders that shifted from the September to December 2020 quarter.
Well, we've always viewed flu related activity as a nine month season, comprising the June September and December quarters.
Historically order volumes within the season have often vary from quarter to quarter, depending about customer ordering patterns.
Their distribution and warehouse facility operations, which this season.
Have been disrupted by the demands are covered knitting.
This has resulted in a delay in orders fewer bulk orders resources more just in time orders.
It's important to note.
We are experiencing a timing issue [noise].
We have not lost any retail pharmacy customers are major distributors, nor market share and the retail pharmacy space, our relationships with our fluid and COVID-19 customers have only strengthened during these difficult times.
We remain confident that we're in the midst of a very strong flu immunization season, as evidenced by 50 plus percent increase.
And flu related return mail backs for the August September and October 2000, 2020 period versus the prior year now.
Also contributing to the decrease in revenue, where the home health care market billings, which had a tough comparison given there was a $900000 stocking order in the prior year related to a new distributor relationship.
So our internal expenses and expectations for the quarter were closer to $15 million in revenue, 33% gross margin and a 5% operating margin now while Diana will provide more detail on the financial highlights for you in a few minutes.
Im going to discuss the bulk the broader view of what we believe to be significant opportunities ahead of us and the strategic investments we've made in the business.
Book to fully take advantage of such opportunities.
So during the first quarter, we saw significant rebound in our route based business with revenues, increasing 19%, surpassing pre COVID-19 levels as well as our internal expectations.
Likewise professional market billings have recover first quarter billings from this segment also exceeded.
Pre COVID-19 levels.
The strength represents not only resumption of operations for most of our COVID-19 affected customers, but it also reflects sales to new customers.
We now have 14175 direct route based customer locations versus.
Versus 13750 at June Thirtyth, 2020, and 13100 at September 32019.
We're also hopeful that the fluidization season should be followed by substantial activity for.
Related to potential COVID-19 vaccine, which many experts believe could be available later this year or early 2021.
We have a robust inventory of our medical waste Mailback solutions in place to meet anticipated strong demand.
And this month, we are commissioning a new autoclave at our Pennsylvania facility.
This expands our medical waste processing capacity from 18 million to 27 million pounds, a year and thats up from 10 million pounds a year ago.
We are more than ready for the potential follow on COVID-19 boxing season.
Now have even greater importance in the flu and the potential co. The 19 vaccine related business is the potential to land larger route based opportunity service by our expanded infrastructure, which now serves 32 states addressing 70% of the population.
The pipeline to these opportunities is robust and very active.
What prospects more engaged now.
They were doing the onset of the pandemic in March of 2020. Our goal is to close many of these opportunities ended December 2020 quarter and potentially begin generating revenue from these as early as the March 2021 quarter.
As I've said, many times I continue to believe that the small and medium quantity generator market.
It's quite underserved and is looking for an alternative to their incumbent provider.
We believe our excellent customer service.
Responsiveness and reasonable contract terms are our primary differentiators in the marketplace.
A quick update on unused medications, we believe that we are the industry leader for the collection of unused medication solutions through our Medsafe and takeaway medication recovery system onto clubs. We currently have about 5700, Medsafe collection receptacles deployed with our customers.
And it processed over 62000 return medsafe liners as of today.
Use medication billings were down slightly as compared to the first quarter of 2020.
But we have seen returns of Medsafe liners continue to rebound to above pre coated levels.
While currently being overshadowed a bit by concerns around the pandemic DLP oil prices in the US continues to alone as a major health issue and we're pleased to provide solutions that play a part in the proper collection return and destruction of unused prescription medications.
We anticipate the continued adoption of our unused medication solutions as consumers increasingly return to retail pharmacies.
And as long term care facilities begin to return to more normalized operations.
So looking forward.
We believe we have the opportunity to deliver a strong December 2020 quarter as a result of the expected strength in the retail market flu related encoded 19 testing business.
Long term care market billings and pharmaceutical manufacturer billings.
Of greater importance is the opportunity to drive more revenue growth for the fiscal year 2021.
As we work to close larger field sales opportunities utilizing our expanded route based infrastructure.
And I remind everyone that we're operating and operating quite efficiently during a pandemic, providing uninterrupted service and taking advantage of the opportunities presented whether it be a 50% increase in return flu mailback volumes servicing the 100 plus percent increase in volumes for long term care facilities.
Positioning the company to service a retail pharmacy market as it prepares for a potential COVID-19 vaccine administration system season are utilizing our expanded route based infrastructure to land larger and new route based customers. The team remains very excited and committed to the opportunities in front of us.
For fiscal year, 2021, and beyond now I will turn it over to Diana to take us through the financials and after that I'd like to make a few closing comments before we open it up for questions.
Thank you David first quarter fiscal 2021 revenue decreased 3% to $13.2 million as compared to $13.6 million in the first quarter of last year first quarter customer billings decreased 6% to $13.4 million.
Paired to $14.2 million in the same quarter of last year sequentially first quarter fiscal 2021 revenue increased 5% to $13.2 million as compared to $12.6 million in the fourth quarter ending June 32020.
As David mentioned, our GAAP revenue and customer billings in the first quarter of fiscal 2021 were negatively impacted by the timing and ordering patterns of flu related mail back orders received from our customers.
Retail market billings decreased $500000 or 12% to $3.6 million in the first quarter of fiscal 2021 as compared to $4.1 million in the same prior year period.
The decrease in retail billings is primarily due to lower flu shot or COVID-19 related orders of $900000 related to the timing of those orders, partially offset by higher unused medication billings of $300000 from met.
Dave and the takeaway medication recovery system on the lab it.
Excluding the flu related billings retail market billings increased 26%, reflecting strength in unused medication billings in this sector.
Okay.
Home health care market billings.
Decreased 29% to $2.3 million in the first quarter of fiscal 2021 compared to $3.3 million in the first quarter of last year effort.
The first quarter of last year included a large stocking order of $900000 from a major healthcare distributor.
Professional market billings of $4.1 million in the first quarter of fiscal 2021 were consistent with the same period of last year. This.
This market, which is comprised of physicians clinics dentists surgery centers labs to veterinarians and other health care providers has recovered to billing levels higher than the March 2020, pre pandemic time period as most of the company's customer locations have reopened.
Long term care billings increased 110% to $1.3 million in the first quarter of fiscal 2021 compared to 600000 in the prior year period related primarily to an increased volume of COVID-19 related waste management and ancillary supply.
Why.
Billings for the inside and online sales channel increased 13.3% to $2.9 million in the first quarter of fiscal 2021 as compared to $2.5 million in the same prior year period, primarily due to increases in route based pick up services to the long.
Homecare and professional market.
Pharmaceutical manufacturer billings increased 26% to $1.2 million in the first quarter of fiscal 2021 compared to $900000 in the first quarter of last year and this is this change is related to the timing.
Of inventory bills per patient support program.
Well based pickup billings for the first quarter fiscal 2021.
Grew 19% to $3.2 million compared to the prior year quarter and contributed 24%.
I'm sorry, they contributed 24% of total billings for the quarter.
With this rebound.
And Rob.
With this readout and robust activity going surpassed.
Recovered levels and also beat our internal estimates.
Sorry.
Yep.
And our unused medication billings of $2.4 million are consistent with the prior year quarter and.
And contributed 18% of total billings for the quarter.
While we didn't see growth and unused medication billings.
We believe that our ability to stay consistent with pre covered levels for this solution demonstrates the growing number of consumers returning to the retail setting for their healthcare needs and using metric as an opportunity to dispose of their unused medications.
As consumers become more comfortable with a return to the retail setting we anticipate that our unused medication solutions will be favorably impacted.
There are currently 5700 medsafe.
Deployed as of September Thirtyth.
Excuse me 2020 with about 415 units installed in the September 2020 quarter.
[laughter] excuse me to date as of September Thirtyth 2020, we processed a total of about 61300, Medsafe liners, which is 23300 or 61% higher than the 38000 processed as of September Thirtyth 2019.
Sequentially for the September 2020 quarter, we processed 6115 liners compared to 4700 liners process for the fourth quarter ended June 32020, and the 5300 liners processed and the September quarter of last year.
Mailback billings of $6.4 million decreased 17% and contributed 48% of total billings for the quarter.
This $1.33 million decrease in Mailback revenue was related to the 900000 dollar impact from the timing of flu and flu shot related orders as discussed above and a decrease in mailback sold to the home health care market of about $800000 associated with that large stocking.
Quarter end last year.
These decreases were partially offset by an increase of $250000 and mailback billings to the pharmaceutical manufacturer market.
Gross margin for the first quarter was 28% as compared to gross margin of 33% in the first quarter of last year.
Had we received the expected volume of flu mail back orders, our gross margins would have been closer to the 32% to 33% level.
As DNA expense increased 8% to $3.8 million or 29% of revenue for the first quarter of fiscal 2021 compared to S. DNA of $3.5 million.
Or 26% of revenue in the same prior year quarter.
The increase in EPS, DNA, which is consistent with our internal estimates as related to the Companys continued investments in sales and marketing.
We see SDMA, increasing by approximately 10% to 12%.
For fiscal year, 2021, reflecting increases increased headcount and related costs as well as additional sales and marketing expense.
We reported an operating loss of $400000 in the first quarter of 2021 compared to operating income of $800000 in the first quarter of last year.
We recorded a net loss of 300000 or a loss of two cents per basic and diluted share this quarter compared to net income of 700000 or four cents per basic and diluted share in the first quarter of last year.
The company generated EBITDA of about $100000 in the first quarter of fiscal 2021 compared to EBITDA of $1.2 million in the first quarter of last year.
Our balance sheet remains solid with $6.8 million of cash at September Thirtyth, 2020, and working capital of $10.1 million.
Accounts receivable at September Thirtyth, 2020 was $10.6 million.
Day sales outstanding or DSL using the month of September's revenue was 55 days, reflecting disproportionately higher billings in the month of September compared to other months in the quarter.
Okay.
Inventory at September Thirtyth, 2020, including both current and long term was $6.5 million.
Which is consistent with the levels at June 32020.
Inventory increased by $1.7 million compared to last year.
At September 32019, largely due to higher levels of flu related mailback inventories.
And Ivy Poles, which increased by $1.3 million and $400000, respectively over the same period.
Property plant and equipment increased $700000 from June 32020 to September 32020, which includes primarily.
Carry over expenditures related to the treatment facility in Texas and about $100000 going towards that new autoclave in Pennsylvania.
Long term debt was $5.5 million at September Thirtyth 2020, compared to 5.2 million at June 32020, and the increase in debt was due to borrowings to fund the Texas treatment facility expansion, partially offset by repayment of the prior year's acquisition debt.
And as we've discussed previously we received $2.2 million under the Paycheck protection program or PPP.
Established as part of the Cronto virus.
Aid relief and economic Security Act or cares Act.
[laughter], we have applied for forgiveness of this loan VR 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.
Great. Thank you Diana just a couple of the.
Comments before we turn it over to the Q and a.
While we experienced some adverse timing issues for the first quarter related to the flu related mailbox, we remain very optimistic.
About the.
Strong flu season, and the potential for a follow on COVID-19 immunization season, but probably the most important thing is.
We remain so.
Extremely optimistic about the long term opportunity or three revenue streams, whether it be mailback route based pick up or unused medication. We remain we remain very bullish on the.
On the long term and committed to the business and with that operator, we can go ahead and turn it over to questions.
And at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Information cone was King your line is the question.
You May press star to if you like to remove your question from the queue for participants using speaker equipment may be necessary to pick up your handset before Christmas Darren Please.
One moment, please while we poll for questions.
Okay.
And our first question is from.
Gerry Sweeney with Roth capital. Please proceed with your question.
Good morning, David Dan Good morning, good morning.
I wanted to start with the you know the Mailback and flew right and we've discussed this in the past I think historically $8 million is sort of a.
A solid number for the flu business, but I was just curious maybe you can describe.
When you do have a good year, which you really describe as a nine month season, what the order patterns look like right. So you have fourth.
Fourth quarter.
The previous year than in Q1 two.
How did those orders sort of stack up and how long does ordering have to go to have an exceptional year insulin right.
Right. So let me just question.
First of all when you look historically at the flu related orders I think one of the things that is.
Certain is.
There's not a lot of consistency year to year to year in the in the ordering patterns. That's why we look at it for the season and.
Last year was very strong in the December quarter, whereas the year prior to that it may not have been the strongest September pit has been.
Strong.
So Gerry here is when we look at it if you look at.
Say June September December, which is which is not all the flu, but most of the flow between those it was roughly 7 million. When you just look at those three quarters for last year 19 and.
You know if you look at the trends for the seasonal flu, which based on returns and based upon what you hear publicly that flew looks to be about a 50% increase business. So.
From a season standpoint, I guess I would infer that it could be as high as.
10 million, we did what $5.2 million in through September correct.
That leaves a gap of about 4.8 in the December quarter. If we were to achieve let's say, we'll do it if we were to achieve 50% growth. So that 4.8, we already have over 2 million of that in.
In order so that leaves the remaining 2.8.
And for for flu the courts that will be a great flu season that that all came in in India.
In December and it's going to depend upon a lot of things is going to depend upon the continuing demand as strength for flu shots. It's also going to spend a lot on.
Warehousing limitations and supply chain issues that some of our customers are dealing with for a while.
For Covance there there are minimizing some of their orders because they're trying to allocate more and more of their warehouse or more covered related supplies and we'll just have to see how that rolls out.
But.
We're confident in the in the business, we think we'll have a good flow.
Flu season, auto, notably that totaled $10 million, but it'll it'll definitely be higher than what we did last year.
Got it and then.
I know you said theres no consistent pattern, but.
Historically, how we eat into.
The December quarter have you seen orders we've seen it all the way through the end of December quarters, sometimes the January and February if there is a if theres a follow on so we're only one month into the December quarter, we have two more months and we expect to continue to receive flu related orders.
Got it and then switching gears a little bit obviously, you've talked about being an opportunity as well and it falls into that mill back space.
Have you had discussions with your retail channel.
Summers about covert vaccine are they expecting or anticipating being part of the distribution channel.
No absolutely thanks.
Right now.
Absolutely I think that we have had discussions with them and we are more than ready for a COVID-19 vaccine season.
What we've also seen is that the retail pharmacy, we believe is going to play a key role in the administration of the COVID-19.
Vaccine and the yes are in close contact with our customers one of the thing Thats different and no one knows exactly when the vaccine is going to be available, but one of the things that that's different about the COVID-19 vaccine season is most of the drugs are the im sorry, the vaccines in the light.
Her stage clinical trials are are multi shop, and that's going to be a little bit different than what we've experienced for the for the typical seasonal flu a number of them are two shots 2028 days apart or whatever that may be.
One shot with a booster you know a month or two later.
So I will tell you how we are prepared for that so, let's say that we're going to sell somewhere.
Between two and 300000 mail backs for the seasonal flu.
For the seasonal flu and we are maintaining a level of mail backs over and above what we need for the seasonal outflow of about 300000 and Thats. What we have right now that's allocated for the for the cover that the vaccine. So thats about an investment of about a million and a half we have an inventory, which we think is smart.
To be able to make sure that we're ready to support the customers, but yes, we've spoken with them and we have let them know that were more than ready for the for the follow one COVID-19 boxing season.
Got it switching gears, then I'll jump back in I just wanted a question around properties obviously.
Really good quarter.
Pre covered levels, but specifically 32 states I know you keep expanding and you talked about a little bit the size of the contract just because we can service larger accounts.
Can you give us some indication of maybe where contract sizes have gone over the last couple of years and how does that relate to what's in the pipeline today.
Sure the.
Park on change significantly when we have fully launched this.
The route based business, meaning not just a couple of few states, but 32 states. So we can service much much larger.
Customers with many many locations I would say the average size of the opportunities in our Salesforce pipeline for the route based businesses, probably four to $500000 a year opportunities 500 to 1000 location.
Customers in this change quite a bit over the last few years.
Closing of those was definitely slowed with the onset of covered back in March and what we've seen over the last couple of months isn't reengaging and we have many of them in the pipeline and we're hopeful can't guarantee it but we're hopeful to to close some of those in this ended December December quarter I still believe.
Like I said, I think that that that market, a small medium quantity generator market or the route based side is is very underserved and we think we're very well suited to be able to to land more and new customers.
Got it I'll jump back in line. Thank you.
And our next question is from Rob Brown with Lake Street Capital markets. Please proceed with your question.
Good morning, David and Dan Ford.
Hi.
I wanted to clarify something on the on the flu numbers you gave I think you said last year through.
June September December was a 7 million what what was the comparable number for sort of June through September I guess.
He said it was 5.2, what was that comparable number last year.
Yeah that was 4.6.
4.6 last year through September 5.2 through September of this year.
Okay. Okay. Good Thats helpful. And then and then Youre you said I think you had had already received some some orders for the December quarter.
And that that's replenishment cycle, but typically how much visibility do you have as you get into December to get to get kind of flow through their eyes that sort of come in the day by day or do you get some visibility from your customers about that replenishment effort.
It's a good question, it's literally day by day, it's a it's an off season. This year with some of the constraints that the customers have on their warehousing capabilities their inventories capabilities, but it is day by day, we're seeing this one particular large.
Large distributor that we've done business with for years and were literally seeing orders like everyday every other day versus.
Versus ball type of orders, so I'd love to be ill tell you, we haven't kind of visibility, but it really is more of a day by day and well get more orders will give orders between now and the end of the.
In the quarter, but we've we've told our customers were well stocked and we're ready we're ready when they need it.
Okay. So your sense is there given there were.
Warehouse situation Theres, not a lot of inventory out there in the channel and so as demand happens you sort of see that more directly maybe I'm, putting words in your mouth here, but is it your sense that channel inventories pretty well and there you know as it happens it will flow through to you correct, that's exactly right, whereas the inventory in the prior years in the channel was quite high it's actually.
Quite low with the customers right now so we'll we'll see those orders come in as they come in.
And where.
Well again, we've told the customers are ready we have the inventories when you need it we're more than happy to to ship it but they're dealing with a lot of they're dealing with many many other issues.
First as you know a consumable like a mailbox.
Okay. Good and then last question is on the unused.
The market sort.
Sort of flat this quarter or I guess, what's your sense on how this recovers from from Cobra do you see it slowly recovering in terms of growth rate as this retail traffic comes back or do you see more of a snap back as these customers start to focus more on putting out.
Sceptical says this is normalize here.
I mean, well go ahead so we.
We saw a pickup in the <unk> and the retail side of the business. The government doesn't seem to have recovered quite yet to the pre covet levels and so I think we'll see continued improvement in that side of things customers seem to be reengaging to some degree on on the Medsafe install.
Paul and I, hopefully, we'll see that over the remainder of the fiscal year right and one of the really important signs is that the return liners are well above three covered levels, which means that the mistakes are being used in the retail pharmacy, and where they're going back into the into the stores and again above pre covered levels, which also tells me.
As well that again, the retail pharmacy, I think it will be quite well positioned and they are for the for the flu the seasonal flu and if customers are comfortable with going into the retail pharmacy and that would tell you that when there's a COVID-19 vaccine that we would believe that the retail pharmacy will play a key role in that as well.
Great. Thank you.
Your next question is from Michael Hoffman was a cool. Please proceed with your question.
Hi, David Dan.
Hope you both are doing well.
So you get a bunch of data and I couldn't write that fast could you repeat.
Mhm Medicaid.
Installs and then the liner numbers I, just I couldn't get a real written down sure sure hold on just one second let me flip back.
[noise] [noise]. Okay. So currently we have 5700 medsafe deployed as of September 32020, and we had 415 installed during the September 2020 corridor.
Related to liners processed we had from inception today 61300 liners returned as of September Thirtyth 2020.
That 61% higher than what we had process at the end of the year before.
And then sequentially for the September 2020 corridor, we processed 6150 liners Vern.
Versus 4700 for the fourth quarter ended June 32020, and 5300 liners processed in the September quarter of last year.
Okay.
So the.
So the installs were not actually a bad things I mean, the the poor 15th is a little bit lower than through you know the thinking that maybe be about 1700 for the year do you still think you're on a track of 1700 incremental installs in 2000 fiscal 21.
Well you know it really is going to it's going to depend on a number of things and the retail pharmacy side.
We think it will be a strong like the real question Mark on the on the Medsafe for for going forward is as long term care and we were we were well on our way into launching more and more long term care deals and that's been slowed down with with Covance, we still feel good about the retail pharmacy side, it would really be nice to be able to.
Sell more into long term care, but that may be pushed it could be pushed until maybe maybe or maybe even in the summer of next year.
So are.
Are you, suggesting maybe we refine our thinking and pull back to more like 1600 for the year and then HM.
And that's a better place to be for the year given your non profit.
Probably so probably so that would make make losses now no.
Well that's important okay, what's what's even more important is we're seeing the return liners increase.
Significantly, especially over the last week or two they've really been high acquired higher than they are.
Then the pre covered levels and why that's important Michael is that there's the theres. The ordering of the return liners is not just domestic unit itself is retort return liners. So we're we're bullish on that and we see the opportunity to generate more and more recurring revenue with more and more liners from the existing message to.
Okay and then.
It was no issues. This data on the number of flu vaccines that are potentially being distributed and.
Hmm.
The numbers are pretty healthy number for this year.
And the flu vaccine season started earlier than normal so I'm I'm struggling with.
Why the $2 million shortfall for your own book budget, that's I I'm trying to make sure we're not theres not some smoke here about maybe the American public isn't going to get a flu shot after all.
Yes, no I don't I don't think that at all I think the.
You know the data that's most important is the return mailbox at where we're processing and you know we have tremendous amount of data. We track every mailback, and we know, which mailbox or or allocable to the to the flu season and they are very very strong 50 plus.
Per cent increase I think the inventory and warehousing levels are what pushed the orders over and.
And into October, but I will tell you this.
I think the retail pharmacy is increasing market share as well. So I think that consumers are or more comfortable that go into the retail pharmacy for their flu shots versus the doctor's office, where they may be sick people in the <unk>.
And the waiting room, so I think that we're going to see as a result of this is that retail pharmacy picks up mark.
Market share, but was it last year Diana the retail pharmacy was a 35, 40% right. There is about 40% of it last year, Mike or flu shots administered in the retail study I think that number is going to be higher after we complete this year right and one other thing is that children have typically not receive their their inoculations in a retail pharmacy and.
Now.
They're they're starting to be allowed to tick gift shops to children in retail pharmacy. So that's another opportunity for an increase.
So there was a story bouncing around that I think is full Bologna, but I want to get you all the comment on it that there's a different quality of vaccine done by the retail pharmacy. Then if you went to your doctor's office can be bumped that.
That's that's just not true.
So just who is just not true yes. That's so just to be clear. That's the same vaccine no matter, where you got it doesn't really matter we get it. It's the same vaccine oh personal and public multiple trolley multiple.
Vaccines, but you're going to get the same thing whether it be a retail pharmacy or a a or a doctor's office with the same efficacy.
Okay on.
The route based side the capacity expansion how quickly do you think you fill that.
Are you talking about the are you talking about the Atlanta, Yeah, sorry go to Clinton, Pennsylvania, Oh, the opposite in Pennsylvania.
Well I got to tell you right now its being there being inundated with return mailbox are coming in for the.
For the.
For the flu season, and waived we'd love to totaled up sooner rather than later I'll tell you why we did it Michael in addition to having the opportunity to process more more medical waste, what's really important is after as we go after these larger and larger route based opportunities with larger and larger prospects.
What's really important is how much capacity do you have and we now have triple capacity and and if you don't want to be in a position where utilizing 80% of it you want to have significant capacity to grow and the customers get comfortable that you're going to process all their their their medical waste, but we'd love to.
To to do use it sooner rather than a.
Then later, but I think the most important thing is we haven't we have it for not only the the seasonal flu we have it for the the potential for the COVID-19 vaccine is levels all the medical waste is being generated from the from the route based business.
Okay.
Thank you very much.
Michael.
[noise] and our next question is from Kevin Steinke from Barrington Research. Please proceed with your question.
Hey, good morning.
Oh, yes, I want to do it.
Good morning, I wanted to.
Let's talk a little bit more about the route based opportunities in my mind.
The goal of closing many of these opportunities on the December 2020 quarter, just maybe talk a little bit about your.
Confidence level in those being able to close in the current quarter, maybe the risk of.
You know those being pushed out or what what might cause them to not.
Close to the current quarter.
Well, we you know we're in active discussions with many in many of these prospects and they've been very very positive, but no deal is done until the contract is signed so go to get pushed out maybe could we not get it maybe but.
There's there's many in the pipeline and we think we have the opportunity to get our fair share of those but I'd.
I'd love to be able to talk in the March quarter about you know that the revenue in the March quarter for the route based being up because we closed deals in a in December that's we're hopeful hopeful but can make no guarantees, but we remain positive.
Okay fair enough.
So he is the one of the contributing factors you mentioned, we're expecting expecting a strong December 2020 quarter was the pharmaceutical manufacturer market.
And I know you had.
A very strong.
You know.
First quarter there so.
Were pretty strong first quarter, so, but but you look at the year ago comp for the upcoming December quarter, and it's a pretty difficult comps I mean should we still think about.
Pharmaceutical manufacturing billings kind of being down year over year or do you think.
You know you kind of repeat.
Yeah that year ago December 2019 performance, that's a really good question.
Our December quarter for pharmaceutical manufacturers, we believe it's going to be very strong and we think they have we have the opportunity to beat the or the prior year December quarter with pharmaceutical manufacturer billings. So it's quite active and we think that again as I mentioned earlier the December quarter will be strong with flow, we think it will be.
Strong with the continued strength, we've seen in long term care and we think that the pharmaceutical manufacturer sector in the December quarter is going to be quite strong as well.
Do you think that strengthen pharmaceutical manufacturer is that expected to just come from replenishment or you know, what's what's the new business pipeline look like on the pharmaceutical products.
Both its both its existing programs as new programs, it's more patients with existing programs and it's all of the.
It's all the above and we.
We are quite pleased and we're looking forward to develop.
Division the December quarter, with a very strong pharmaceutical manufacturer market billings.
Okay, all right that's helpful.
You know what what how should we kind of think about the.
Home health care market going forward is that.
You know the situation, where we shouldn't necessarily see the.
Performance of the year ago September quarter, or what are your you are over 3 million repeat are there opportunities to kind of you.
No expand from current levels or.
As you go forward.
So.
Home health care market in the quarter, the second quarter, the sort of September quarter last year had that had the large stocking order about 900000, so what you've seen in the last couple of few quarters, one to three to four and in home health care and.
We you everything you read about home health care says it should benefit from probably 19, because ER patients treated at.
At home. So you know, we think there's an opportunity for growth, but right now we've been pleased with this roughly two three to four for the last couple of a couple of few quarters and the home health care has a has a similar.
Distributor for challenges, where their warehouses are full of pfeffer for public related items and so they have similar type challenges.
Their warehouses.
Okay. No. That's that's a helpful color well, that's all I have for now thanks for taking the questions.
Thanks Kim.
And again, we have Michael Hoffman from Stifel. Please proceed with your question.
Thanks for the follow up so you sure, but you had internal budget of.
15 million on 33% gross margins, 5%, even oh, what's your thoughts about the summer.
Well you know the December quarter should be a tick quite strong you know there's operating leverage in the ER.
In the in the model and I mean, it it could be it has the opportunity to be better than the expectations. We had for the.
For the September for the September quarter, So again pharmaceutical manufacturer market should be quite strong higher than what it was last year long term care will continue to be strong as it has been for the last couple of quarters and fluid <unk> it'll be what it'll it'll be but it has the opportunity to be a quite strong quarter.
So you did 14 six last year.
We're gonna do 15 in one Q this year, you're missing by 2 million how much of that 2 million rolls into Fourq do you.
No I don't know that's that's a tough one December so no and that's that's a good question. It's a tough one it's a it's a tough question. It kind of goes back a Michael I had laid it out in that you know for us to achieve a 50% growth in fluid we would need 4.8 billion in billings and in December we got about two so far so I don't know.
I don't know, where we're going to end up it just depends upon the ordering patterns in the warehouse requirements of the.
The the customers.
I don't think it's prudent to roll to roll in the full 2 million, but I do think it'll be a quite strong quarter for that between flow and what the pharmaceutical manufacturer and as well as continued strength in long term care in the and the route based business.
Okay. Thank you sure.
And we have reached the end of the question and answer session and I will now turn the call over to David trick and closing remarks.
Thank you. Thank you everyone for participating in the call today, we want to close by thanking our loyal and committed employees for their service to our customers and the company during a pandemic a it's a it's a challenging environment, though we are again on providing uninterrupted service to our to our customers. We want to thank all of you.
Our employees for their efforts and it is greatly appreciated we look forward to talking to everyone on the next call. Thank you.
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