Q2 2021 Sharps Compliance Corp Earnings Call
Greetings and welcome to the Sharps compliance second quarter 2021 earnings call.
All participants are in a listen only mode.
<unk> and answer session will follow the formal presentation.
I think once you require operator assistance during the conference. Please press star zero on your telephone keypad.
Now my pleasure to introduce Jennifer Peladeau IMS Investor Relations. Thank you you may begin.
Thank you.
Good morning, and welcome to the Sharps compliance second quarter fiscal 'twenty 'twenty, one earnings call on the call today, we have David P. Tusa, the company's President and Chief Executive Officer, and Diana P. Diaz, Vice President and Chief Financial Officer, David will review, the company's business performance operations and growth strategies, while Diana will review the financials and immediately following their formal remarks.
We will take questions from our call participants as Youre 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.
<unk> filed by the company with the Securities and Exchange Commission. These can be found at our website or at SEC Gov with that of the way, let me turn the call over to David Go ahead David.
Good morning, and welcome everyone to our second quarter fiscal year 2021 earnings Conference call.
Our second quarter results reflect growth across all markets as well as significantly increased customer billings and our mail back in route based solution offerings.
We anticipated this growth and in March of 2020, we launched several substantial infrastructure initiatives to support this growth.
In September 2020, we completed projects, including new Autoclave, one age and the company's Texas.
Pennsylvania treatment facility.
Essentially tripling our treatment capacity.
To the addition of mail back related warehouse and distribution space of 52000 square feet.
In Pennsylvania.
And mail back inventory on January 1st 2021, or 300000 units with an ongoing plan to manufacture.
Many adds an additional 1 billion units by the end of fiscal year 2021.
These projects that has proven to be critical to the business, allowing us to facilitate uninterrupted service to our customers throughout the COVID-19 pandemic.
The increased volume of medical waste from all of our markets.
To continue the fulfillment of COVID-19 related mail back orders, which began in December of 2020.
And should continue as a country immunize Americans with a COVID-19 vaccine.
In addition to the significant growth in our mailbox business, we're very pleased with the $1 million or 41% increase in the route based billings for the second quarter.
Contributing to this growth was an increase in customers and new business of about 700000.
As well as increased volume from our long term care customers from about 300000.
We continue to be bullish on the prospects of growth prospects for our route based offering which we believe.
A strong potential to provide long term recurring revenue in a market. We believe is greatly underserved.
Earlier this month, we announce.
$10 million in advance mail back orders to be filled primarily in the March 2021 quarter for the support of COVID-19 related immunization activity and the long term care and retail market.
Today, those advance mail back orders totaled approximately $15 million and include our mail back solutions from both COVID-19 vaccine.
And COVID-19 testing waste management.
While these orders are expected to be shipped during the March 2021 quarter the other.
Precedented economic and public health situation in the <unk>.
Not as states could affect the timing and status of these orders.
We believe the mail back orders received to date related to COVID-19.
Medical waste management are just the beginning of COVID-19, immunization activity should be followed by additional waters as the country works to immunize, All Americans with a COVID-19 vaccine.
As we've come to understand the current COVID-19 vaccines involved two shots.
The initial immunization followed by a booster a few weeks later, given what's being reported in the news and what we're hearing from health care professionals. We believe there's also the potential for additional booster shot to address variance of the virus plus eventual vaccines for children.
She is currently in clinical trials.
Diana will address the financials in a bit more detail, but I want to hit just on a few highlights revenue in the second quarter of fiscal 'twenty one with.
$17 million, an increase of 17% compared to the $14 6 million in the same prior year quarter, and a sequential increase of 29% compared to the first quarter of 2021.
Customer billings increased to $18 5 million for the second quarter compared to $14 9 million for the same prior year quarter, an increase of 24%.
The significant GAAP adjustment of $1 5 billion included about $800000 per mailbox shipped in late December 2020.
That did not reach the docs are the customers until early January 2021 day.
$800000 will be recognized as revenue in the March 2021 quarter.
The 24% increase in second quarter customer billings were driven by significant strength in the retail long term care.
Pharmaceutical manufacturer market.
It also demand for our route based and mail back solutions as a COVID-19 vaccine programs began to roll out.
Again, we're particularly pleased with a 41, 841% increase in second quarter, Rob based billings as we believe we have a significant opportunity to further increase our market share with this offer.
Well, we believe to be in a very underserved small to medium quantity generator sector.
As we move through the balance of 2021 and beyond.
We expect to continue to play a key role as a COVID-19 vaccine is more widely distributed and Americans are vaccinated.
And as I have stated on previous occasions and as experts have also stated we believe the retail pharmacy value will play a significant role in a COVID-19 immunization process as it is seen as safe efficient.
And convenient.
Based on published information the retail pharmacy chains are near completion with immunizations at.
Long term care facilities and are scheduled to begin vaccinations.
And the retail pharmacies in February.
While HHS originally stated that Americans should be vaccinated by June.
June of 2021, it looks like this will most likely extend through late summer or early fall.
Our route based footprint spans 32 states addressing 70% of the population and we see a solid opportunity to leverage our expanded infrastructure.
Capture larger route based partnerships.
We now have 14900 route based customer locations.
This was 14200 at September 32020, and 13000 at December 30 <unk>.
30, <unk> 2019.
Pipeline of route based opportunities is robust and active.
And our strength in infrastructure and capabilities are a competitive advantage as we work to convert prospects to customers, particularly among the underserved small to medium quantity generators.
Our ability to close these opportunities have been hampered over the past few quarters as prospects have been keenly focused on addressing the impact of COVID-19 on their operations.
But we are beginning to see increased engagement with the prosper.
I'd like to just touch briefly on unused medications.
During the quarter unused medication billings were down 26% or $600000.
Impaired to the second quarter of 2000 and taught them.
The reduction was due to a $300000 takeaway envelope order in the prior year.
And lower merchandise sales in government long term care and retail markets in the quarter ended December 31 2020 as.
As prospects are continuing to focus on COVID-19.
We continue to believe that there are significant opportunity for further penetration of the med say for the long term care market.
The rollout of med safe in long term care has been delayed.
And as the customers or the prospects are currently focused on mitigating the challenges.
And navigating through COVID-19.
The opioid crisis has not gone away and by many estimate that's with its likely increasing as a pandemic runs its course.
Disposal of unused medications as a key contributing factor to fighting this crisis. Therefore, we believe the decline in unused medication billings billings.
As a temporary situation and expect to see a return to pre COVID-19 levels. Once the vaccine program has gained meaningful traction.
Finally, the December 2020 quarter gross margins reflects about 400000, it infrastructure investments related to our two treatment facilities, our new Pennsylvania based distribution facility and our route based business, yes, we.
We've invested in the infrastructure in advance of the corresponding increase in revenue, which we believe will begin to the March 2021 quarter with that said, we do not see any significant infrastructure investments needed to support it.
The expected increase in revenue for the remainder of the calendar year 2021.
This is an exciting time for the company. We believe we have a significant opportunity opportunity to deliver exceptional results in the March 2021 quarter and believe we will see continued strength in revenue as our country works to immunize Americans against the COVID-19 virus.
Like the experts, we believe multi shop vaccines could be the new normal for Americans for the foreseeable future as we address various potential and potential new viruses now I'll turn it over to day to take take you through the financials and after that I want to make a few closing remarks before we turn it over to questions.
Thank you David.
Second quarter fiscal 2021 revenue increased 17% to $17 million as compared to $14 $6 million in the second quarter of last year.
Second quarter customer billings increased 24% to $18 $5 million compared to $14 $9 million in the same quarter of last year.
Sequentially second quarter fiscal 2021 revenue increased 29% as compared to the $13 $2 million in the first quarter ending September 30 of 2020.
Retail market billings grew 46% to $6 1 million in the second quarter of fiscal 'twenty, one as compared to $4 $2 million in the same prior year period.
The increase in retail billings is primarily due to increased flu shot related orders of about $300000 and COVID-19 related orders of $2 $2 million, partially offset by a decrease in unused medication billings of $600000.
So for the for the season flu shot related business for the calendar year 2020.
$8 $3 million, an increase of 14% over the prior year billings of $7 $3 million.
And while it looks as though flu shots administered increased by about 50% cash.
Our customers appear to have adopted a more just in time ordering model for the flu shot related season, which minimized their inventory level.
Pharmaceutical manufacturer billings increased 35% to $3 $1 million in the second quarter of fiscal 2021 compared to $2 $3 million in the second quarter of fiscal 2020 related to the timing of inventory builds for patient support programs.
Long term care billings increased 56% to $1 $1 million in the second quarter of fiscal 2021 compared to $700000 in the prior year.
Similarly related to increased volume of COVID-19 related waste management and ancillary supplies.
Our home health care market billings increased 9% to $2 $8 million in the second quarter of fiscal 2021 compared to $2.6 million in the second quarter of last year.
Professional market billings increased 4% to $4 $5 million in the second quarter of fiscal 2021 compared to $4 $4 million in the same prior year period.
<unk> increased 10% sequentially as compared to $4 $1 million in the first quarter of fiscal 2021.
This market, which is comprised of physician clinics dentists surgery centers.
Veterinarians and other health care providers has shown continued recovery compared to the March 2020, pre pandemic time period as most of the company's customer locations have reopened.
Billings for the inside and online sales channel increased 24% to $2 $8 million in the second quarter of fiscal 2021 as compared to $2 $3 million in the same prior year period, primarily due to increases in route based pick up services to the profession.
And long term care market.
Route based pick up billings for the second quarter of fiscal 2021 grew 41% to $3 $5 million compared to the prior year quarter and contributed 19% of total billings for the quarter.
There are currently about 5800 net saves deployed as of December 31, 2020, compared to 5700 units at the end of September 32020.
And there are 4500 units at December 31 of 2019.
As of December 31, 2020, we have processed a total of about 68000 net safe liners, which is 24400 or 56% higher than the 43600 units processed as of December 32019.
Sequentially for the December 2020 quarter, we processed 6700 liners versus the 61 50 processed in the first quarter of September 32020, and 5700 liners processed in the December quarter of the prior year.
Now that billings increased 33% to $11 $9 million and contributed 64% of total billings for the quarter that's.
This increase is related to the robust order activity to meet end market demand a rapid flu shot and COVID-19 vaccination activity. We continue to see heightened demand from mail backs and as David mentioned have approximately $15 million in advance mail back orders and expect it to be felt during the March 'twenty.
2021 quarter and while these orders are expected to be shipped during the March 2021 quarter, the unprecedented economic and public health situation in the U S could affect the timing and status of these orders.
Gross margin for the second quarter was 33, 1% as compared to gross margin of 33, 5% in the second quarter of last year.
As David mentioned earlier, we have invested in the infrastructure and advance a corresponding revenue, which we believe will begin in the March 2021 quarter with that said, we do not see any significant and prescribed infrastructure investments needed to support the expected increase in revenue for the remainder of cash.
Under your 2021.
SG&A expense increased 4% to $3 $8 million or 22% of revenue for the second quarter of fiscal 2021, compared to SG&A of $3 $6 million or 25% of revenue in the same prior year quarter.
The increase in SG&A, which is consistent with our internal estimate is related to the company's continued investments in sales and marketing.
See SG&A, increasing by approximately 9% to 11% for fiscal 2021, reflecting increased head count and related costs as well as additional sales and marketing expense.
We reported operating income of $1 $7 million in the second quarter of 2021 compared to operating income of $1 $1 million in the second quarter of last year.
We recorded net income of $1 2 million or seven cents per basic and diluted share this quarter compared to net income of $1 million or six cents per basic and diluted share in the first and the.
First quarter of 2020.
The company generated EBITDA of $2 2 million or 13% of revenue in the second quarter of fiscal 2021, compared to EBITDA of $1 $5 million or 10% of revenue in the second quarter of last year.
Our balance sheet remains solid with $7 $2 million of cash as of December 31, 2020, and working capital of $12 million.
Accounts receivable as of December 31, 2020 was $13 $3 million day.
Days sales outstanding or DSO using the month of December revenue was 53 days, reflecting disproportionately higher billings in the month of December 2020, compared to other months in the quarter.
Property plant and.
Equipment increased $1 $1 million from June 32020 to December 31, 2020, which includes $850000 for expenditures on the expansion of our treatment facility in Texas from 13000 to 30500 square feet and $480000.
For the new autoclave in Pennsylvania.
Long term debt was $5 $8 million at the end at December 31, 2020, compared to $5 2 million as of June 32020.
The increase in debt was due to borrowings to fund the Texas treatment facility expansion, partially offset by repayment of prior year's acquisition deck.
We recently extended the maturity of our $14 million credit agreement and secure additional $4 million of capacity for working capital, which is available upon our request to support our growth.
And as we previously announced we received $2 $2 million under the Paycheck protection program or P. P. P that was established as part of the Coronavirus aid relief and economic Security Act or cares Act, we have apply for forgiveness of Islam via our lender under the guidance provided by the small business administration.
And the department of Treasury, and with that I'll turn the call back to David.
Thanks Diana.
Before we turn the phone call over to the Q&A, Let me just make just a couple of closing comments.
One while the COVID-19 related orders we've received a day a very significant we do believe we're just getting started as the country works.
Americans.
The virus.
Our 70% leadership position in the retail pharmacy space allows us to support the.
The management of these millions of syringes that will be utilized in the country Vaccinate Americans.
Many experts believe that the COVID-19 type vaccines could be the new norm as pharmaceutical manufacturers develop boosters to address variants and other potential viruses or reformulation of existing vaccines.
One last side and while the company has been significantly from the COVID-19 related business, let's not look past a significant growth in our route based business.
With a 41% increase from a quarterly revenue we are moving in the right direction to make this business a larger part of our revenue growth.
Additional predictable recurring revenue opportunities for the company.
Operator lets go and turn it over to the Q&A.
Okay.
Thank you we will now be conducting a question and answer session. We would like to ask a question. Please press star one on your telephone keypad.
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You May press Star two if you would like to remove your question from the queue.
Participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for your questions.
Our first questions come from the line of Rob Brown with Lake Street Capital markets. Please proceed with your questions.
Good morning.
Florida.
A question on the $15 million in the orders that you've now received from the Covid activity Whats your sense of how much or how long of a demand that that actually fulfills points for your customer how long will they be able to kind.
Kind of give vaccinations with that and how much how.
How much kind of.
You know Reorders can you expect.
Well I will tell you. This it looks like based upon the forecasting and information we've received from.
From our customers that you know what.
It's estimated that that'll take them through March.
And being able to meet the kind of.
Vaccination numbers that they're talking about now.
After that it's really difficult to.
To predict but again as I mentioned earlier I think it's pretty clear that in this country, we're going to need through late summer, maybe even early fall to immunize All Americans.
Okay, Okay, great and then.
Maybe shifting to the ER to the route based business are you.
The growth. There was nice are you are you sort of seeing share gains where or how much of that is a recovery.
Kind of a snapback in the business and how much of share gains from interest.
And maybe.
Following on that how how does the pipeline look for you mentioned that that was starting to loosen up what sort of pipeline look like for new business in that segment.
No.
It's definitely share gains as well with new business and share gains is driving.
That that route based business I think we recovered.
For the most part back in September from the professional market have recovered last quarter.
The long term care growth was a lot of our existing customers that that was about a third of the route based right and it's been a remaining portion of that would have been new customers.
As far as going forward I have spoken that some of the larger route based opportunities have been delayed because you know the prospects are focused on COVID-19, we're starting to see that.
We're starting to see that.
Breaker bed and are in the process it can be more and more engaged and it's getting more active.
And providing pricing responding to rfps, so it's difficult to predict but we would hope to see that.
Start to pick up over the next couple of quarters.
Okay. Thank you I'll turn it over a nice the nice to have in the corner.
Thanks.
Thank you our next questions come from the line of Gerry Sweeney with Roth Capital. Please proceed with your questions.
Hey, Diana David Good morning, and thanks for taking my call.
I wanted to talk a little bit more about mail back if we could I think historically some of your larger customers. So the pharmacy groups did not actually provide a whole lot of visibility into ordering in and now it sounds like.
That has certainly changed one.
I think you've touched upon a little bit in your previous answer, but just wanted to see how much discussions you're having with them, how often and how much visibility they sort of I can give you sounded like into March but.
Just wanted to see how that could potentially evolve.
Right.
Well, there's a number of things with it.
Changed.
Some of the warehouse issues, we saw back in the flu season, and I'm wondering just in time, but that doesn't apply to COVID-19 vaccines, they're much more measured and providing us with forecasts and and in volume.
Needs that they see and they've given us visibility probably sort of like the June July timeframe.
What day.
And what they see so so far as I mentioned earlier it looks like we have the orders that'll get them primarily through the March time frame.
But it's kind of difficult to predict.
Predict but I do think that June will be strong as well as as March as the COVID-19 vaccines from not gonna have shopped with you in March.
Got it got it that's helpful and.
How has activity been on return so far in January.
Moving to see some of those.
I believe you're probably ship some in December but how.
Are you starting to see the returns immunization started.
During December et cetera.
I'll tell you what what's going on.
When we look at the returns we're looking really at Blue Slash Covid and we monitor those those returns.
And they've been they've been a little bit.
Slower than what's expected I think because of what's going on in the package world.
And again the majority of these come back USPS, but they've been slowed down a bit by what's going on with the pandemic.
The significant demands on our on our transportation systems here in the.
Here in the U S.
Got it.
And then shifting gears a little bit this maybe more for Diana.
It was $1 5 million was deferred revenue and I believe 800000.
Was shipped but just not recognized.
Well again.
I guess that leaves about 700000.
Little Nit Picky question, but that's 700000 in revenue.
Is that does that carry the same.
Gross margin as the revenue that's recognized in the quarter.
Or is there some variability in that meeting you know potentially have a higher margin because of.
It's about the same its about the thing that's kind of the way that the accounting rules work is that if it's similar so yeah.
Okay, well I want to make sure there wasn't any change or some clos were.
Different from either side so.
Perfect I appreciate it I'll jump back in line.
Okay.
Thank you. Our next question is coming from the line of Danielle.
<unk> with H C. Wainwright. Please proceed with your question.
Good morning, everyone. Thank you for taking my questions. Good morning.
With respect to the advance mail back orders going from 10 to 15 million you are hedging a little bit on timing David can you provide some color on this you know there are some of the.
Yes collection or.
Hum.
It could come from.
Well no I mean, we think right now of that.
The majority if not all of those 15 million will.
What will ship out by by March all indications are now that that's going to happen is maverick, we ship out every day.
So I think we feel reasonably confident that the majority of the vast majority of those should fall into the March quarter.
And then as we go through the rest of calendar 2021.
I don't know if you have that level of visibility to do but.
Should we expect sort of sequential growth in these music back orders.
It's just really too early to tell I mean, there's there's.
We really have to say again, we know we know March is going to be strong and we think that.
June will be probably quite robust what we'll just have to see how that shakes out and I tell you that because theres a lot of there's a lot of variables you know it's not just the COVID-19.
19 initial vaccine.
The one that hopefully get between now and late summer early fall, but.
Herta is working right now on a a booster.
That will address some of these variance and you could see a booster in the fall maybe buy them or maybe by some of the other pharmaceutical manufacturers. The other thing is there they're conducting clinical trials right now for children and that's probably not going to be available till later till later this year. So.
You also could have potential re formulations of some of these vaccines. So I think there's there's uncertainty, but I think that you know I think we feel.
Reasonably confident that this kind of vaccine activity is going to continue for some for some period of time I don't believe it's just going to be get two shots and you're done and then the last thing I'll say is you know.
I think health care professionals are going to recommend that everyone get their flu shots. This fall. So you see the potential this is not a guarantee but you see a potential for going back in the fall for a booster maybe a COVID-19 booster and then maybe you wait a couple of weeks and you get a flu shot and maybe you get a flu shot and then a couple of few weeks you get to COVID-19.
Booster. So there's just a lot of unknown, but I think theres going to be a lot of activity for for a while and obviously all of this will drive ordering and revenue growth.
Right.
And then on the route based business, you're seeing pretty strong growth there.
And so all of this come sort of organically or have you acquired it erodes again on that front, but are you planning to maybe acquire roads going forward.
So that's all organic growth on the on the route based business Theres No acquisition growth in there you know we stay active in the market and trying to identify acquisition opportunities are there are there they're difficult I will tell you. This right now with Covid.
You know the smaller players out there are very very busy too and so you know what we'd probably need to get through this COVID-19 activity before acquisition.
Opportunities will will surface.
So that's all I had guys. Thank you so much.
You bet.
Thank you our next questions come from the line of Kevin Stankey with Barrington Research. Please proceed with your question.
Hi, good morning.
No.
You meant talked about the strong growth in the pharmaceutical manufacturer market.
<unk> said related to the timing of inventory builds for patient support program should we think about that is it.
Just mostly builds for existing customers or.
Are there any new customers in the mix there.
We actually had two new programs that started that whereas in that December number.
One with a new program for an existing customer and one with a completely new pharmaceutical manufacturer. So we were we were pleased to see that.
And the Bill.
Okay, great and what about the pipeline of new opportunities going forward in the pharmaceutical space.
I think we have a number of opportunities.
Net debt or there were chasing out there as we always do there's always a few of them in the pipeline that we're chasing you know, it's very difficult to predict when they may land, but we're definitely chasing stuff.
Okay. Good.
Yeah, you know you talked about the various infrastructure projects you you've completed to support.
The growth you're experiencing here right.
And you said you don't see any further significant infrastructure costs for the rest of.
Well I think calendar 2021, I was just curious though about.
You talked about manufacturing as many as an additional 1 million units a mail back units by the end of fiscal 2021 that seems like a pretty large number compared to the 300000, you've done so I'm just.
Any color you can provide on additional costs associated with that or any potential bottlenecks to doing that.
The amount of manufacturing or is that just not something we should really.
Would be concerned about so that's a good question. It's a really good question and we're doing it.
For a number of different reasons, one we want to make sure that we're gonna have ample supply for our.
Customers I mean, you know where we're the leader of the smell back space and.
You know when you consider the number of Americans, who could get the shot the percentage in retail pharmacy, the numbers could be big day, you throw in there.
You know, Kevin some booster shots or you have a children's vaccine.
No the numbers could get quite large so we're we're building.
Another million to half a million and additional millions, but by June 30th and.
If we use them great. That's that's fantastic that means that the season was was huge.
If not we always we always have the flu season that follows that they can be used for as well so they're really the only incremental cost as we leased that facility the additional warehouse in Pennsylvania.
And then of course all of that inventory cost is capitalized as inventory until we until we until we sell it.
But where we're quite busy you know we own our own molds and we have a number of the manufacturers that we're working with to make these sharps containers in the core good and.
So far so good on the production plan.
Okay, Yeah, that's helpful color.
Lastly, I just wanted to ask about.
You know with the surge in Covid.
Covid related mail back orders I know you called out the GAAP.
GAAP adjustment related.
Related to.
So the timing of shipping but.
Going forward in the March quarter and June quarter should we think about.
Proportionately larger GAAP adjustments related to those mail backs I know you know I think there is a component of that.
But that's just related to the return in treatment of the mail backs as well so your thoughts on how we should think about that GAAP.
GAAP adjustment over the next couple of quarters here.
Generally as revenue increases the GAAP adjustment becomes more negative.
Just because you have more sales that you're deferring them.
It just depends on how quickly the mail backs are returned for treatment and we can't really predict that but when we sell those mailbox like we will for the March quarter, that'd be what roughly 20% of that revenue that gets deferred right. So so think of 80% of it is a revenue for the current quarter with 20 percentage.
If it were deferred in the future and total returns.
Okay, great. Yeah, that's that's very helpful. Alright, well thanks for taking my questions you bet. Thanks, Kevin.
Okay.
Thank you. Our next question will come from the line of Brian Butler with Stifel. Please proceed with your questions.
Good morning, Thanks for taking my questions.
Florida.
First one just on the net sales it looks like your installed about I don't know 100, 150, new med saves.
In this period.
How should we think about that I mean, you mentioned on the call that Covid had slowed this how does that.
Three ramp I mean is that a 'twenty 'twenty fiscal 'twenty 'twenty two event.
Does it come.
Is there a lot of pent up demand or is it really just going to be you're going to restart this roll out and you're going to go back to 200 300, a month and it continues to grow.
I guess that.
For one thing our large retail pharmacy customer accelerated their annual net type installation program into the summer months, so that they could focus on COVID-19 related response during the December quarter. So that's one impact on the timing of the methane and staff.
We do think that there is a great opportunity and a long term care market.
Because it is important to them.
And we see that decline and a net sales installs being a temporary situation.
That would come back after the vaccination program is complete.
Okay do you have like a target of what you hope to achieve I mean, like 200 units a quarter or is it not that not that tangible it's really not that tangible now he doesn't like this this is.
As COVID-19 has really disrupted operations that is a change in effective some of the the the ordering the ordering patterns. You know you may have heard me talk before about you know one of the big opportunities. We saw with the Metlife was was in long term care and we were well on our way to.
Selling many many more in the long term care until Covid came along so that's going to be delayed until sometime this year I don't know exactly when but hopefully that will get back on.
Ill get back on track, but with the uncertainty of the of the virus I think it's just really difficult right now would be to be certain.
Okay and then on the.
On the route based I mean, you had a you had a great quarter and a route based.
The professional the professional segment billings seemed a little bit light.
You mentioned that they were still recovering from the Covid levels can you talk about a little bit about that.
Disconnect between the route based in the professional and what drove I guess more of the route based and then.
What.
How much of the professional will come back to pre COVID-19 levels or are you still below pre COVID-19 levels.
I think we're right where we're back from the Covid levels I pointed out here to talk about that what do we have in the prior period. Yeah. We had we had a large order on our for our takeaway recovery system.
Hospitals.
About $500000 last year.
So that.
Did not recur.
It took away from <unk>.
Cycle.
We use device recycling.
We had a significant order in the prior year period that did not reoccur this year.
And did that show up that showed up in professional.
Yes.
Okay.
Alright.
Makes sense.
And then just one on margins then so you talked about.
About about 400000 in costs related to the infrastructure being rolled out in this quarter.
You know incremental margins in.
In the second quarter here, where I think somewhere around 30% does that you know would you add.
We bought that plant 100000, you know you're back to kind of that 45, almost 50% incremental margin is that the right way to think about gross margin and incremental gross margins.
And in third quarter fourth quarter kind of going forward.
Right, Yes, yes, that's the right way to look at it and you should look from 40 to 40, 40% to 45% on the incremental revenue.
Going forward, what you will continue to incur a majority of that 400000 going forward.
Okay. That's all I had thank you.
Thanks, Brian.
Yes.
Thank you there are no further questions at this time I would like to hand, the call back over to David for any closing comments.
Thank you and thank you for everyone participating in the call today, we want to close by thanking our loyal and committed employees for their service to the company and to our customers. During the pandemic. We look forward to the opportunities ahead of us in 2021.
We believe the strategic initiatives, we we launch will only strengthen the company and its infrastructure.
Providing a very strong foundation for growth.
In the coming year and beyond again, Thank you everyone and we'll talk to you next quarter.
Yes.
Thank you that does conclude today's conference you may disconnect your lines at this time.
Thank you for your participation and have a great day.