Q4 2021 Sharps Compliance Corp Earnings Call

August 18, 2021

[music].

Greetings and welcome to the Sharps compliance Corporation fourth quarter 2021 earnings conference 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 assistance during the conference. Please press star zero on your telephone keypad and please note that the conference is being recorded I will now turn the conference over to your host Jen belly, though I M. S of Investor Relations you may begin.

Thank you.

Good morning, and welcome to the Sharps compliance fourth quarter fiscal 2021 earnings call on the call today, we have David P. Tusa, the company's President and Chief Executive Officer, and Diana P. Diaz Executive Vice President and Chief Financial Officer, David will review, the company's business performance operations and outlook, while Diana will review the financials and immediately following their formal remarks.

We'll 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.

Filed by the company with the Securities and Exchange Commission. These can be found at our website or at SEC Dot Gov with that out of the way, let me turn the call over to David to begin the review go ahead David.

Thanks, Shannon and good morning, everyone. Thank you for participating in our fourth quarter fiscal year 2021 earnings call I am going to tell you the same practices I have previously.

Previously it was really just.

Speaking and formally about the business.

And about the quarter end.

Outlook.

So the business a quarter and the outlook, we had great success in fiscal year 2021.

I would tell you to me its most important is the fact that in addition to revenue growth and profitability.

We ended the year is a much stronger company.

We have much greater infrastructure additional planned route based capacity additional geographic coverage for our route based business and a very strong balance sheet with $28 million in cash.

In my opinion. This is just what we need to support a much larger company and continue our leadership positions in the markets, we're addressing regulated medical waste and unused medication now.

We also accomplished something I think of equal or maybe even greater importance.

The the superhuman effort so that.

We show during COVID-19, Slashy immunization business during the height of the pandemic to date.

Further strengthen our customer relationships, we had no disruption in our business.

We serve all of our customers and we delivered solution offerings and I think theres lots, we said for that and our customers recognize that.

Now of course, we can't have a bit discussion business discussion without covering COVID-19.

So regarding the Covid business the March and June quarters, as they represent the highest to date of our Covid related mail back business.

<unk> related orders were about $28 million in customer billings about $25 million in revenue for both quarters combined.

And this is a great start to the season.

While it's very impressive and we're very happy to have the business.

As everyone has seen in the news immunization immunizations over the last couple of months of slow.

So during the current quarter Theres fewer shops, the September quarter to date fewer shots administered as a result of melt activity mail back activity, so far and occur in September quarter has slowed.

So from a timing perspective.

Related to immunization orders I anticipate a slower than expected September 2021 quarter.

Consistent with fewer shots being administered at least now plus the fact that the rate of some of our customers have accumulated inventory.

They have some leftover inventory that can be used to facilitate a portion of the flu season.

Looking past the September 2021 quarter and this is the remaining 2020 fiscal year 2022.

Which includes the December March and June quarters, we have the potential not a guarantee but the potential for the resumption of larger immunization related customer bills, and then will be driven by the following.

An increase in adults and adolescence, receiving their initial vaccine as a matter of fact I've just looked at the numbers worried about 61% of the adults that are fully back to the vaccinated and this and this.

As a country hopefully we can move that higher the approval this fall.

The children's vaccine there'll be one zero to four and there'll be one five to 11.

A strong flu season.

Additional shots for the immunocompromised adults, which the FDA has approved the additional shop lost weight.

And as many of you have seen on the news today that the rollout of the boosters, which I just saw on the news.

Debt.

Begin as early as September 'twenty and that would be for recommended for Americans eight months. After they received their second COVID-19 shots. So we're watching this development closely.

But the third shot looks to be.

Our reality here next book, which is big news.

Really big news for us so moving past the Humanization business.

As many of you know we are much more than an immunization mailbox business, where a comprehensive provider of medical pharmaceutical and hazardous waste services. We have the infrastructure footprint officially serves small and medium quantity generators, but our markets are primarily healthcare and retail.

We focus over the last seven years on positioning the company step not a mailbag company, but as a comprehensive service provider. We added the route based business and the end use medications. They play a key role in our numbers and our growth and we think theyre going to continue to play a key role in the growth of the business.

The route based business continues to achieve 30 plus percent growth annually, we remain bullish about the business and the opportunities we're seeing to further penetrate the market.

We're in 37 states, 80% of the population with our direct service of our route based business our customer locations are now over 16000 a year.

A year ago, there were about 13000.

Impressive growth and we believe we have the opportunity to continue the trend now one more thing about the route based business.

We remain focused on our goal of supplementing our organic growth with acquisition growth, we're seeing more activity and possibly some viable acquisition opportunities on this front.

We're not offering guarantees, but the strength of our balance sheet expanded Rob based infrastructure provides us with great flexibility around this initiative to supplement the organic growth.

Unused medications just logistics.

Or two on that.

<unk> business was undoubtedly slowed by COVID-19, as retail pharmacies in law turf care, we're much more focused on COVID-19.

Versus unused medication or the lot of returns continue to be strong.

And we have been receiving orders for med safety units and we think starting in the September quarter that will start to get back on track with some growth rates similar to what we've seen in the in the past on these medications I think will continue to play a big part in the future growth of the company and as many of you know.

Beyond academic is actually worsened during the pandemic our metric is seeing as a leading solution. So we like where we are there.

No.

One more time.

We ended the year extremely well positioned for further growth.

And we build a much larger company with our inquiries infrastructure additional plant in route based capacity geographic coverage and again strong balance sheet with <unk>.

$28 million in cash.

And just a quick word on the employee base dedicated everyone's been working quite hard we have to we have to recognize them for what they are.

What they've done we want to thank them for what they've done and it's it's been busy and my guess is getting ready to get busier, so with that I'll turn it over to Diana who will address the financials in a bit more detail.

David Sachs reported revenue.

$7 million.

Great.

$1 million grew 49%, primarily due to an increase.

<unk> million dollars.

Musician business and increased route based pick up service is about $800000.

Billings were $18.7 million in the fourth quarter of fiscal 2021, an increase of five 1 million.

38%.

The increase in customer billings for the fourth quarter was driven by <unk>.

Great.

$2 million.

And an increase in our route based pick up service.

Okay.

Retail market billings grew 68% from $9 million in the fourth quarter fiscal 2021, and compared to $5.4 million.

Our year period.

The increase in retail.

Immunization related orders of $7.8 million, which were higher than the prior year at $3.6 million professional market billings increased 44% to $4.7 million in the fourth quarter. Okay.

2021 fiscal year as compared to $3.3 million in the fourth quarter of last year.

Related to our med <unk> business.

172 days during the fourth quarter, which is pretty consistent with our forecast going into the quarter, our large retail pharmacy customer accelerated their annual net profit metric installation program and through the summer months of 2020, so that they can focus all COVID-19 related response, and then December March and June quarters.

And we're still seeing minimal sales activity at current and potential customers dealing with COVID-19.

But on a positive note as David mentioned, our bed liners profit for the quarter of 8200 <unk>.

73% over the prior year and 6% higher than the preceding March 2021 quarter, indicating a lot more traffic and retail pharmacy.

As we said previously we continue to believe there is significant opportunity for further penetration of the message and the long term care market and thank you.

These medications is a key contributor to fighting the opioid crisis.

Therefore, we believe the lower unused medication billings is more in that space and we saw this quarter is a temporary situation and expect to see a return to pre COVID-19 levels.

Z program and have gained meaningful traction.

So looking forward in the September and December 2021 quarters, we expect that number to increase by about 300 units in each quarter incremental revenue associated with this higher level of installs would be about 400 to $500000 per quarter.

Gross margin for the fourth quarter was 33% consistent with the gross margin in the fourth quarter of last year. The fourth quarter of this year, a gross margin of 33% reflects a year over year increase in the fixed portion of cost of goods sold of about $450000 or 240 basis points as a result.

Of investments in our treatment plant autoclave route based infrastructure and other expenditures designed to address the increased immunization business emphasis will take a breath.

Our SG&A expense increased by about 700000 or 21% for the quarter.

This is related primarily to a $200000 increase in management incentive comp.

And cash of 100000 dollar increase in board member compensation and continued investments in sales and marketing.

We reported operating income of $2 million and an operating margin of 10, 6% in the fourth quarter of 2021 compared to operating income of 700000 in the fourth quarter of 2020.

The company recorded a gain on forgiveness of Hey.

The tax protection program or PPP loan of $2.2 million in the fourth quarter 2021.

We reported net income of $5.1 million.

For 30 cents per basic and 29% per diluted share this quarter compared to $2.2 million or 13 cents per basic and diluted share in last year's fourth quarter.

Without the impact of the PPP loan debt forgiveness, EPS would have been 17 cents per diluted share for the quarter.

We generated EBITDA of $4.7 million or 25% of revenue in the fourth quarter of fiscal 2021, compared to EBITDA of $1 million or 8% of revenue in the fourth quarter of last year.

Without the impact of the PPP loan forgiveness, adjusted EBITDA with $2.5 million or 14% of revenue for the current quarter.

Now I'll take a look at the full fiscal year results.

<unk> reported revenue of $76.4 million, an increase of $25.3 million or 49%, primarily due to an increase of $21.9 million and our immunization business net of deferral and an increase in <unk>.

Route based pick up services of $3.3 million.

Billings were $81.6 million in fiscal 2021, an increase of $28.6 million or 54%.

The increase in customer billings for 2021 was driven by an increased $25.3 million and our immunization business and an increase in route based pick up services of $3.3 million.

Retail market billings grew a 153% to $45 million for 2021 as compared to $16 million for the prior year due primarily to an increase in billings for immunization related orders of $21.9 billion net of deferrals.

Partially offset by a decrease in unused medication billings and the retail market of $700000.

Professional market billings increased 15% to $18 million for the year compared to $15.6 million in the prior year.

Long term care market billings increased 25% to $4.2 million for 2021 compared to $3.3 million in the prior year and that was related primarily to an increased volume of COVID-19 related waste management and ancillary supplies.

Our pharmaceutical manufacturer market billings increased 12% to $5.2 million for 2021 as compared to $4.7 million last year.

Gross margin increased to 38% in the full fiscal year 2021, as compared to 31% for the full fiscal year last year and this was due primarily to the leverage from higher revenue, partially offset by year over year increase in the fixed portion of our cost of goods sold of $1.7 million.

For 225 basis points.

The results of those investments and our treatment plants.

Rob its infrastructure and other expenditures designed to address our increased immunization business to facilitate growth.

For the year, SG&A expense increased $1.8 million or 12%.

Kris is related primarily to a $600000 increase in management incentive costs, including both GAAP and cash of $400000 increase in board member compensation and $700000 due to SEC.

Continued investment in sales and marketing.

We reported operating income of $12.3 million and an operating margin of 16, 1% for the year 2021, and as previously mentioned we recorded the gain on forgiveness of our PPP loan of $2.2 million during the fourth quarter of fiscal 2021.

That give tax rate of 10, 2% for the year with less than $1.1 million tax benefit associated with stock compensation and $5 million benefit associated with the permanent exclusion of the gain on forgiveness of the PPP loan from taxable income.

We recorded net income of $12.9 million or <unk> 76 cents per diluted share for the year of 2021 compared to net income of $2.3 million or 14 cents per diluted share for the prior year.

Without the impact of the PPP loan debt forgiveness, EPS would've been 63 cents per diluted share for the year.

We generated EBITDA in 2020 was $16.5 million or 22% of revenue compared to EBITDA of $2.4 million or four 7% for the prior year.

Without the impact of the PPP loan debt forgiveness adjusted EBITDA for the full year was $14.3 million for 19% of revenue for the current year.

David mentioned, our balance sheet remains solid with $27.8 million of cash as of June 32021 up from $5.4 million at the end of last year and our working capital is $27.9 million up from $11.1 billion at the end of last year.

And with that I'll turn the call back over to David.

Thanks, Diana operator, let's go ahead and open up for questions.

Yeah.

Thank you.

At this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

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For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys one.

One moment, please while we poll for questions.

Our first question comes from the line of Gerry Sweeney with Roth capital.

Steve with your question.

Hey, good morning, David Diane Thanks for taking my call Beth good morning.

I wanted to start on the vaccine front, obviously, a little bit of.

Disappointment vaccines did slow down but you know.

We've talked a lot about vaccines.

Vaccines being given in the retail setting as.

As we look out to the rest of this year.

You're talking about boosters adolescence.

Shops et cetera.

How do you feel about the activity takeaway.

Our place in the retail setting is this matching your expectations.

And is there any any thoughts on how this develops on a go forward basis.

Sure.

Yeah, I think that we felt good about the shots or mentioned in a retail setting what we were surprised with and I think everyone is surprised with it only.

Six 1% of adults in 50% of Americans have received.

The vaccine.

That was a bit of a surprise.

Going forward.

Let me just tell you how I look at it.

My World as I stand back and look at.

For the for fiscal year 2022 for the vaccine side I'm Gonna do a little bit of math.

Here.

But for the March and June quarter, we had $28 million in billings, we had about $2 million right in the December quarter for long term care, so call it $30 million.

So far so.

I do think that there will be some increase not a lot, but some increase in the adults from what I understand there is a percentage of the population that are not bags that are waiting for full approval from the FDA, which I understand is going to be around labor day. So.

Let's say that we get another I don't know 10.15, 20% pick up in the adults that 30 may looked like 34.

I will say this.

Our mail back that's used for immunization has the same mailbox is used for flu.

It's fungible.

So the orders they typically bake in June and September.

Really all part of the orders that they place for the last couple of quarters, the March and June quarters. So.

Im guessing it looks like about $5 million of purchases that have been made so far it looks like will be designated for the initial flu orders that we would have received in like in June and September so thank.

If you were just looking at totally do you take the five away from the 34.

And that really puts you at about 2029.

Children's vaccine is supposed to be available in the fall.

ROE to 11.

Who knows but you would think there'll be a couple of million dollars of business related to that which gets you a little bit over 30.

$30 million in.

The opportunity for the entire season.

And.

If you believe that the folks that received the vaccine are going to get the booster then.

Just one shot instead of two the 30 is really 45, if everyone gets a poster. So you know youre looking at roughly <unk>.

45, and that's if all these things happen so call it.

Call. It 45, we've we'll have some remaining flows some additional flu that probably was not used in that stock that they currently have so maybe we get up closer to $48.49 million. So what is that 18 $19.18 million to $19 million increment.

Over what we perceived.

So far in that took all of those things happen and that's that seems to make it make some sense I will tell you. This.

The September quarter, the quarter that we're in although it may change now because of what happened. This morning with the announcement of the booster being available September 20th.

September has been slow we've only received about a half a million dollars round about a half a million dollars in orders. So hopefully you will receive more related to more shots or the booster and maybe that may increase a bit, but I think it's likely that that roughly 18.

<unk> 18, 19 million again, if everything happens would probably be spread between December.

December March and June maybe heavier December and March as people are getting there.

Theyre boosters, that's how we see it and you know how it rolls out is really going to be dependent upon the number of shots on it'll be.

The number of shops will be administered but that's that's just share your thoughts on how we see it.

I hope it makes it.

That's incremental over sort of.

Historically <unk> been running 'twenty four 'twenty five 'twenty six right higher depending on so that's the incremental above that immunization immunization type, yes, right right got.

Gotcha Gotcha Okay.

Uh huh.

Switching gears, a little bit route based.

You mentioned, some pretty strong growing 30% type growth.

Hum.

What's driving that activity you know obviously you know it's an underserved market, we talked about that you've got some geographic expansion right.

You've made some.

Expansion into the southwest.

What is driving that market had been growing 20%, 25%, but it feels like it's actually accelerating a little bit.

Well, we've had a tremendous focus on.

Well on the route based business. Our sales team is very very focused on that and I'll remind you one of the reasons why we went into these areas.

We werent selling into those areas before we weren't selling into the Midwest or in the southwest we were sub contracting that so now we are selling in those areas and it doesn't necessarily have to be part of a much larger opportunity. So we're selling directly forsaken, the south west and in the Midwest, where we really.

Have it before and I think that's one of the drivers here, Greg I agree that.

Sure.

Focus on our direct markets and our sales team is getting.

Getting out there and adding customers they're good they're good there are they're good at it and where we remain bullish and we could hope to keep up those trades.

And then acquisitions you mentioned specifically.

More geographic expansion or is this sort of a route density play or.

What are you what are you seeing or what is there a particular focus.

So I think we're talking about really more.

Route density improvement.

Worked really hard in putting in place an infrastructure in 37 states.

80% of the population so what these look like assuming that we're able to complete these they almost look like tuck ins because we already have the infrastructure in place and I like those because that not only improves route to have stable improves.

The profitability as well for the full for the business, So where we're talking to four or five different folks where we are in due diligence on a couple of them and they would they will look much more that would look much much more like a like a tuck in than they would have a geographic expansion.

Got it and then just final question for me unused meds.

Long term care always a huge opportunity, but that's been out there and obviously COVID-19 pushed that back because.

Instead of a sort of ground zero.

Where does that stand.

Opportunity wise.

In the next 12.18 months.

I think we're finally, starting to see some submitted with Dennis and the team is finally, starting to see some interest in the <unk>.

And the long term care side as they are coming out of the Covid.

Out of Covid in <unk> and in our sales meetings and some of the prospects that we're looking at it seems like long term care is popping up more and.

More and more so.

Hopeful that 'twenty, two that we'd have the opportunity to be able to get more of the med sites into.

Into long term care it what's been definitely shut down.

But hopefully we'll be able to see some movement on that in the fiscal year 'twenty two.

Got it okay. That's it for me I'll jump back in line. Thank you.

Alright. Thanks.

Our next question comes from the line of Rob Brown with Lake Street Capital markets. Rob You May proceed with your question.

Good morning.

Okay.

I just wanted to kind of continue on the med safeguard discussion here. The I think you said about 300 units.

I plan to go in over the next.

Two quarters and it is that is that sort of represent a kind of a step back to a normalized run rate or is that some catch up from being.

Being held back for the last year.

Probably a little bit of both right.

So.

They were suspended there for a while at least in retail pharmacy because of Covid. So I think we're getting back on we're.

We're getting back on track with that.

With getting the units out and probably a little bit of that.

Catch up from what should have probably gone out a year ago.

Okay great.

And then.

The mail back business.

The baseline there of 19 immunization business.

And that means it's about $15 million a year and so you're saying that the team are familiar with <unk>.

<unk> would be on top of that sort of gets to a $30 million.

Businesses that is that what youre.

Thank you.

Sure Neal thanks.

Business.

39.

About 25 to 28.

28 last year.

Hi.

This year.

Okay.

Revenue of $9 million.

Last year.

31 million.

Yes.

So that $28 million included about.

For this session. So Russell back was roughly $20 million without I mean as a baseline.

This year.

Right.

The 25 without authorization. So 25 this year without the immunization of the mailbox business revenue.

Okay. Okay. Good.

Immunization numbers, you were talking about would be sort of additive or whatever they are would be additive to sort of that 20% to 25 baseline.

Right.

Okay, Okay great.

And then maybe just on the September quarter walking through the the order rates.

How does that.

Sort of go through the mail back business do you expect.

What's sort of the tail on returns and an expectations of shipments I would presume that makes sense.

Fairly low in September, but could you help us kind of understand how that flows through.

The September quarter.

Hmm.

Revenue I mean, just as a normally would've been if it was a half million dollars in sales it would be.

$5 million in revenue there'll be a deferral component of about 15% to 20% of that.

So what 80, 85% of it going to recognize as revenue in the quarter and then some of the items will be coming back.

Yes.

That's right.

Sure.

Okay.

Got it.

And then and then in terms of the route based business.

Do you feel that's sort of fully recovered from Covid and now this is the new baseline of growth in the sort of 30 plus percent should be able to continue.

We didn't really see.

If you think about our route based business, while we had a little bit of the business I think it was April through June.

Toilet.

Where we saw a bit of a downtick on the rap as you'll remember that was offset or more than offset by the substantially increased volumes coming out of long term care, which as Ralph base as well. So one really offset the other so we really didn't see that much of a.

The downtick now the long term care volumes.

However days.

But the other businesses that we have have have increased so.

We think we're extremely well positioned and very very fortunate to have that long term care volume to offset a bit of a slowdown in the what was it was like dermatology and dental dental and physicians that may have been slowed down for a short period of time.

Right.

Okay, great. Thank you for the color I'll turn it over.

Our next question comes from the line of Amit Dayal with H C. Wainwright.

With your question.

Thank you guys.

Appreciate you taking my questions most of them have been asked but just on the margin front should we think about gross margins.

Stabilizing at these levels.

Potential upside coming from any volume increases you may see you know as people continue to get the Covid vaccine.

Sort of.

It's all really driven by revenue operating leverage model and it's.

Yeah. They they ran up this year because of the volume was as high as it can be.

If the revenues lower that'll be down if the revenue is higher.

Will be they will be up.

Okay. Thank you for that.

And then.

It looks like you've had a decent increase in customer locations to 16000 from 13000 year over year do you have a target.

Where you might want to be over the next 12 to 18 months in terms of customer locations.

So you know we've talked about this 30% increasingly Rob based business and I think you can directly correlate that with the <unk>.

Number of.

Of locations.

We've been growing at 30%. So you can you can do the math and.

Of course, if we supplemented that with acquisitions of that percentage could could be higher.

Yeah.

In terms of how the.

The quarterly revenues are now coming through for you do you feel because of.

How COVID-19 has played out there should be some changes in how the cadence in revenues quarterly revenues.

For you or.

You know in a few quarters do people go back to maybe sort of a more normalized strength.

Well you know it all it all depends on the things that I mentioned earlier about what happens with respect to the immunizations and with the boosters and so on and so forth. In that example that I mentioned earlier you know there is a potential for maybe another 18 or $19 million and immunization with less revenue for us.

For fiscal year 2022, I will say this.

Kind of looking out past 'twenty to another way to look at it is what does this mean going forward in 'twenty, three and going forward and the way I've always looked at it is.

You know I think that the two shot regiment, meaning a flu and COVID-19 something shot.

It is probably here to stay so the.

The way I look at 'twenty, three and going forward is probably $15 million to $20 million of revenue, which think of it as like two flu seasons going forward. So maybe an additional as much as 19 billion for 'twenty, two and then going forward past that maybe 15 or 20 million for a couple of flu shots a year.

Thank you that's all I have for now thank you so much.

Thanks, Amit.

Okay.

Our next question comes from the line of Kevin.

With Barrington Research you May proceed with your question.

Hey, good morning.

So just.

When we think about the flu season, and you mentioned there would you.

The numbers typically are I think the last couple of calendar years.

Flu season billings were $7.8 million.

And about 5 million.

Sitting in inventory that could be used for the flu season. So.

Should we just kind of think about the seven to eight minus five is how.

Oh season.

Flu season orders might might play out.

Right, Yes, I think so I think that you're right I think last year 'twenty. It looks like April and $2 million. So the way we looked at it as we would have typically had about 5 million of orders.

About $5 million of old flu related orders in June and September. So I think you subtract the five eight and about $3 million remaining I think that's a good way to look at it Kevin.

Okay understood makes sense.

Yeah.

Since since you specifically called out the <unk>.

5 million impact.

Impact on gross margin as a result of the various investments you've made in infrastructure in treatment.

Should we think about that as a having an impact on gross margin for the next couple of quarters here or is that something you start to lap I mean, what kind of what was the timing of those investments and how does it play out on the impact on gross margin over the next couple of quarters.

Sort of what's the infrastructure investments in mid to late 2020.

Calendar.

And the impact on the current quarter.

About 400000 about 400000 for the quarter and it's it's it's about this at the same level that we had in this quarter looking out throughout fiscal year 'twenty two.

See increases.

So this isn't related to the addition.

Expansion of the Texas facility. The addition of the auto plays the continued build out of the.

The Rab based business, but once we get through 'twenty, two and the incremental fixed cost will be much less on an annual basis, because we would have built out the infrastructure, maybe a half a million or so a year going forward 'twenty three and then going forward. So I think we're going to have most of it behind us as fiscal year 'twenty, two and by the way it is.

Good thing that we did it because the volume that we're processing has obviously increased tremendously.

Because of the increasing of route based business and as well the significant increase in the mail backs relative to the.

To the Humanization of business.

Alright, great understood and.

You.

Specifically talked about your ability to serve your customers.

Effectively throughout the pandemic and how that you believe that strengthen your customer relationships is there any way you can you can capitalize on that going forward in terms of.

The stronger relationships just from a competitive standpoint.

How do you see that.

Playing out are benefiting you move forward, but that's a good question.

Our relationship with our customers all customers and included the amortization side I think a very strong I think they're much much much stronger now that we are deliberate we've received many many compliments.

We're the go to company to support their medical waste management needs, whether it be immunization or are otherwise I'm sure. We're going to try to parlay that into some cross sell they were going to try to use that and capturing.

More business, but.

We're really pleased with that and again the customer relationship is strong and I think it's stronger now.

Alright, Great and then just lastly can you talk about the competitive environment and the route based business when you're.

Bidding on deals is that.

All the same as it's always been or any changes.

Competitively there no we havent really seen any.

Any changes we like we're well positioned we continue to lead with great customer service and flexibility.

And contracts.

Great responsiveness and that's that's how we sell and I think it shows in that 30% increase in your office visits.

Okay, great. Thanks for taking my questions you bet. Thanks, Kevin.

At this time, we have reached the end of the question and answer session. I will now turn the call back over to management for closing remarks.

Okay. Thank you operator, thank you everyone for participating in our call our call today, we remain very excited and bullish about the business. We look forward to that continued growth revenue opportunities and expansion for fiscal year 'twenty two and beyond. Thank you we'll talk next quarter.

Yeah.

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Greetings welcome to the Sharps compliance Corporation fourth quarter 2021 earnings Conference 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 assistance. During the conference. Please press star zero on your telephone keypad and please note that the conference is being recorded I will now turn the conference over to your host Jen Bilodeau IMS of Investor Relations you may be.

Again.

Thank you.

And welcome to the Sharps compliance fourth quarter fiscal 2021 earnings call on the call today, we have David P. Tusa, the company's President and Chief Executive Officer, and Diana P. Diaz Executive Vice President and Chief Financial Officer, David will review, the company's business performance operations and outlook, while Diana will review the financials immediately following their formal remarks, we will.

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 filed.

All by the company with Securities and Exchange Commission. These can be found at our website or at SEC Dot Gov with out of the way, let me turn the call over to David to begin Arabia go ahead David.

Thanks, Shannon and good morning, everyone. Thank you for participating in our fourth quarter fiscal year 2021 earnings call.

Trying to obtain the same practices I have previously.

Previously with religious.

Speaking informally about the business.

And about the quarter end.

So the business a quarter and the outlook, we had great success in fiscal year 2021.

I'd tell you to me is most important is the fact that in addition to revenue growth and profitability.

We ended the year is a much stronger company.

We have much greater infrastructure additional planned route based capacity additional geographic coverage for our route based business and a very strong balance sheet with $28 million in cash.

So in my opinion. This is just what we need to support a much larger company and continue our leadership positions in the markets, we're addressing regulated medical waste and unused medication now.

Now, we also accomplished something I think of equal or maybe even greater importance.

The the superhuman efforts that we.

That will show during COVID-19, Slashy immunization business during the height of the pandemic to date.

Further strengthen our customer relationships, we had no disruption in our business.

We served all of our customers and we delivered solution offerings and I think theres lots of we said for that and our customers recognize that.

Now of course, we can't have a bit of discussion business discussion without covering COVID-19.

So regarding the Covid business the March and June quarters, as they represent the highest to date of our Covid related mail back business immunization related orders were about $28 million in customer billings about $25 million in revenue for both quarters combined.

And this was a great start to the season.

While it's very impressive and we're very happy to have the business.

As everyone has seen in the news the immunization immunizations over the last couple of months of slow.

So during the current quarter Theres fewer shots the September quarter to date fewer shots administered as a result of melt activity no back activity. So far in the current September quarter has slowed.

So from a timing perspective.

Related to immunization orders I anticipate a slower than expected September 2021 quarter.

Consistent with fewer shots being administered at least now plus the fact that the rate of some of our customers have accumulated inventory.

May have some leftover inventory that can be used to facilitate a portion of the flu season.

Looking past the September 2021 quarter and this is the remaining 2022 fiscal year 2042.

The increase in adults and adolescence, receiving their initial vaccine as a matter of fact I've just looked at the numbers worried about 61% of the adults that are fully back to the vaccinated and this and this.

Country, hopefully, we can move that higher the approval this fall.

The children's vaccine there'll be one zero to four and there'll be one five to 11.

A strong flu season.

Additional shops for the immuno compromised adults, which the FDA has approved the additional shaft last way.

And as many of you have seen on the news today that the rollout of the boosters.

I just saw on the news.

Debt.

Begin as early as September 'twenty and that would be for recommended for Americans eight months. After they received their second COVID-19 shock. So we're watching this development closely.

But the third shot looks today.

Our reality here next month, which is big news.

Really big news for us so moving past the immunization business as many of you know we are much more than an immunization mail back business, where a comprehensive provider of medical pharmaceutical and hazardous waste services. We have the infrastructure footprint officially serves small and medium quantity generators, but our mark.

So primarily healthcare and retail.

The route based business continues to achieve 30 plus percent growth annually, we remain bullish about the business and the opportunities we're seeing to further penetrate the market.

We're in 37 states, 80% of the population with our direct service of our route based business our customer locations are now over 16000 a.

A year ago, there were about 13000.

<unk> growth and we believe we have the opportunity to continue the trend now one more thing about the route based business. We remain focused on our goal of supplementing our organic growth with acquisition growth.

Seeing more activity and possibly some viable acquisition opportunities on this front.

We're not offering guarantees, but the strength of our balance sheet.

Expanded Rob based infrastructure provides us with great flexibility around this initiative.

Supplement the organic growth.

Chinese medications just so just.

A minute or two on that.

This business was undoubtedly slowed by COVID-19, as retail pharmacies in long term care, we're much more focused on COVID-19.

First is unused medication or the lot of returns continue to be strong and we have been receiving orders for med safety units and we think starting in the September quarter.

We'll start to get back on track with some growth rates similar to what we've seen in the in the past unused medications I think will continue to play a big part in the future growth of the company and as many of you know the opioid academic is actually worsened during the pandemic, our med side youre seeing as a leading solution. So we like where we are.

Are there.

So.

One more time.

We ended the year extremely well positioned for further growth.

And we build a much larger company with our inquiries infrastructure additional plant in route based capacity geographic coverage and again strong balance sheet with <unk>.

$28 million in cash.

Hey, just a quick word on the employee base dedicated everyone's been working quite hard we have to we have to recognize them for what they.

For what they've done we want to thank them for what they've done and it's it's been busy and my guess is getting ready to get busier, so with that I'll turn it over to Diana who will address the financials in a bit more to thank you David Sharp's reported revenue of $87 million, an increase of $6.1 million.

49%, primarily due to an increase of $4.

$7 million.

Immunization business and increased route based pick up service is about $800000 customer billings were $18.7 million in the fourth quarter of fiscal 2021, an increase of $501 million or 38%.

Increase in customer billings for the fourth quarter was driven by an increase of $4.

$2 million.

Nathan business and an increase in our route based pick up services.

Retail market billings grew 68% to $9 million in the fourth quarter of fiscal 2021, and compared to $5.4 million in the same prior year period.

The increase in retail.

Primarily due to immunization related orders of $7.8 million, which were higher than the prior year at $3.6 million professional market billings increased 44% to $4.7 million in the fourth quarter.

2021 fiscal year as compared to $3.3 million in the fourth quarter of last year.

Related to our metals business, we installed 170 key messages during the fourth quarter, which is pretty consistent with our forecast going into the quarter.

Large retail pharmacy customer accelerated their annual net mistakes installation program into the summer months of 2020.

Focus on hazard related response.

March and June quarters, and we're still seeing minimal sales activity at current and potential customers.

Great.

But on a positive note as David mentioned, our bed liners processed for the quarter of 8270.

73% over the prior year and 6% higher than the preceding March 2021 quarter, indicating a lot more traffic and retail pharmacy.

As we said previously we continue to believe there is significant opportunity for further penetration of domestic in the long term care market.

Thank you.

Medicaid is a key contributor to fighting the opioid crisis. Therefore.

Therefore, we believe the lower unused medication billings and Scott.

We saw this quarter.

Already situations and expect to see a return to pre COVID-19 levels.

Z program has gained meaningful traction.

So looking forward in the September and December 2021 quarters, we expect the number of installs.

<unk> increased by about 300 units in each quarter incremental revenue associated with this higher level events to us would be about 400 to $500 per quarter.

Of about $450000 or 240 basis points as a result of investments in our treatment plant autoclave, Robert its infrastructure and other expenditures.

To address the increased immunization business emphasis will take breath.

Our SG&A expense increased by about 700000 or 21% for the quarter.

This is related primarily to a $200000 increase in management incentive comp.

GAAP and cash 100000 dollar increase and four member compensation and continued investments in sales and marketing.

We reported operating income of $2 million and an operating margin of 10, 6% in the fourth quarter of 2021.

<unk> operating income of 700000 in the fourth quarter of 2020.

The company recorded a gain on forgiveness of Paycheck protection program or PPP loan of $2.2 million in the fourth quarter 2021.

We reported net income of $5.1 million correct.

Of our 30 cents per basic and 29% per diluted share this quarter compared to $2.2 million or <unk> 13 per basic and diluted share in last year's fourth quarter.

Without the impact of the PPP loan forgiveness, EPS would have been 17 cents per diluted share for the quarter.

We generated EBITDA of $4.7 million or 25% of revenue in the fourth quarter of fiscal 2021, compared to EBITDA of $1 million or 8% of revenue in the fourth quarter of last year.

Without the impact of the PPP loan debt forgiveness, adjusted EBITDA was $2.5 million or 14% of revenue for the current quarter.

Now I will take a look at the full fiscal year results.

<unk> reported revenue of $76.4 million, an increase of $25.3 million or 49%, primarily due to an increase of $21.9 billion and our immunization business net of deferral and an increase in <unk>.

Thanks.

This is up $3.3 million.

Billings were $81.6 million in fiscal 2021, an increase of $28.6 million or 54%.

The increase in customer billings for 2021 was driven by an increased $25.3 million and our immunization business and an increase in route based pick up services of $3.3 million.

Retail market billings grew a 153% to $45 million for 2021 as compared to $16 million for the prior year due primarily to an increase in dollars for immunization related orders of $21.9 billion net of deferral.

Partially offset by a decrease in unused medication billings and the retail market of $700000.

Professional market billings increased 15% to $18 million for the year compared to $15.6 million in the prior year.

Our pharmaceutical manufacturer market billings decreased 12% to $5.2 million for 2021 as compared to $4.7 million last year.

Gross margin increased to 38% in the floor fiscal year 2021, as compared to 31% for the full fiscal year last year and this was due primarily to the leverage from higher revenue, partially offset by year over year increase in the fixed portion of our cost of goods sold.

The $1.7 million or 225 basis points.

As a result of those investments and our treatment plan.

Well based infrastructure and other expenditures designed to address our increased immunization business to facilitate growth.

For the year, SG&A expense increased $1.8 million or 12%.

Increase is related primarily to a $600000 increase in management incentive costs, including cash of $400000 increase in board member compensation at $700000.

Our continued investment in sales and marketing.

We reported operating income of $12.3 million and an operating margin of 16, 1% for the year 2021, and as previously mentioned we recorded the gain on forgiveness of our PPP allowed up to $2 million.

During the fourth quarter of fiscal 2021.

The effective tax rate of 10, 2% for the year reflects a $1.1 million tax benefit associated with stock compensation and $5 million benefit associated with the permanent exclusion of the gain on forgiveness of the PPP loans for taxable income.

We recorded net income of $12.9 million of our 76 cents per diluted share for the year of 2021 compared to net income of $2.3 million of our 14 cents per diluted share for the prior year.

Without the impact of the PPP loan debt forgiveness, EPS would've been 63 cents per diluted share for the year.

We generated EBITDA in 2020 was $16.5 million or.

Our 22% of revenue compared to EBITDA of $2.4 million or four 7% for the prior year.

Without the impact of the PPP loan debt forgiveness adjusted EBITDA for the full year was $14.3 million or 19% of revenue for the current year.

And with that I'll turn the call back over to David.

Thanks, Diana operator, let's go ahead and open up for questions.

Thank you.

At this time, we will be conducting a question and answer session.

I would like to ask a question. Please press star one on your telephone keypad.

A confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Our first question comes from the line of Gerry Sweeney with Roth capital.

Proceed with your question.

Hey, good morning, David Diane Thanks for taking my call good bad and good morning.

I wanted to start on the vaccine front, obviously, a little bit of.

Disappointment vaccines to slowdown but.

We've talked a lot about.

Vaccines being given in the retail setting and as we look out to the rest of this year I mean, I know you're talking about boosters adolescence.

Shops et cetera.

How do you feel about the activity taking.

Our place in the retail setting is this matching your expectations.

And is there any any thoughts on how this develops on a go forward basis for the rest of that sure.

Yes, I think that we.

We felt good about the shots administered in the retail setting what we were surprised with nothing to everyone is surprised worth at only.

Six 1% of adults in 50% of Americans have received.

The vaccine.

That was a bit of a surprise.

Projected going forward let.

Let me just tell you how I look at it.

My World as I stand back and look at.

For the for fiscal year 2022 for the vaccine side I'm going to do a little bit of math.

Sure.

But for the March and June quarter, we had $28 million in billings, we had about $2 million right in the December quarter for long term care, so call it $30 million.

So far so.

Let's say that we get another I don't know $10.15, 20% pick up in.

The adults that 30 may looked like 34.

I will say this.

Our mail back that's used for immunization has the same mailbox is used for flu.

It's fungible.

So the orders they typically bake in June and September.

All part of the orders that they place for the last couple of quarters of March and June quarters.

So.

Im guessing it looks like about $5 million of purchases that have been made so far it looks like will be designated for the initial flu orders that we received in like in June and September So if.

If you were just looking at it currently if you take the five away from the 34.

And that really puts you at about 2029.

Children's vaccine is supposed to be available in the fall.

ROE to 11.

Who knows but you would think there'll be a couple of million dollars of business related to that which gets you a little bit over 30.

30 million and the opportunity for the entire season.

<unk>.

If you believe that the folks that received the vaccine are going to get the boats are then.

Just one shot instead of two the 30 is really 45, if everyone gets a poster so youre looking at roughly maybe 45 and Thats. If all these things happen so call it.

Call. It 45, we've.

We'll have some remaining flow some additional flu that probably was not used in that stock that they currently have so maybe we get up closer to $48.49 million. So what does that 18 $19.18 million to $19 million increment over what we perceived.

So far and Thats, if all of those things happen and that's that seems to make it make some sense I will tell you that the SEC.

Timber quarter the quarter that we're in although it may change now because of what happened. This morning with the announcement of the booster being available September 20th.

September has been slow we've always seen about a $5 million by about a half a million dollars in orders. So hopefully you will receive more related to more shots or the booster and maybe that.

The increase of debt, but I think it's likely that that roughly.

18, 19 million again, if everything happens would probably be spread between December.

March and June maybe heavier December and March as people are getting there.

Theyre boosters, that's how we see it and how it rolls out is really going to be dependent upon the number of shots elderly.

The number of shops will be administered but thats.

Sure and what your thoughts on how we see it hopefully I hope it makes sense.

Thats incremental over sort of.

Historically <unk> been running 'twenty four 'twenty five 'twenty six right higher depending on so that's the incremental above that.

<unk> immunization type, yes, right right.

Gotcha Gotcha Okay.

Uh huh.

Switching gears, a little bit route based.

You mentioned, some pretty strong growth, 30% type growth.

Bob.

What's driving that activity, obviously, it's an underserved market, we talked about that you've got some geographic expansion.

Sure.

You've made some expansion into the southwest.

What is driving that market had been growing 20%, 25%, but it feels like it's actually accelerating a little bit.

We've had a tremendous focus on the <unk>.

On the route based business. Our sales team is very very focused on that and I'll remind you one of the reasons why we went into these areas.

We werent selling into those areas before we weren't selling into the Midwest or in the southwest we were sub contracting that so now we are selling in those areas and it doesn't necessarily have to be part of a much larger opportunity. So we're selling directly forsaken the southway at west and in the Midwest, where we really have.

But before and I think that's one of the drivers here.

Great.

Just focus on our direct markets and our sales team is getting out there.

They're good they're good they're they're good at it and we are we remain bullish and we could hope to keep up those trends.

And then.

Acquisitions, you mentioned specifically.

<unk>.

More geographic expansion or is this sort of a route density play or.

What are you what are you seeing or what is there a particular focus.

So I think we're talking about really more.

Route density improvement.

Looked really hard and putting in place an infrastructure in 37 states.

80% of the population so what these look like assuming that we're able to complete these.

Look like tuck ins, because we already have the infrastructure in place and I like dose because that not only for us around this table improves.

The.

The profitability as well for the pull forward the business, so where we're talking to four or five different folks where we are in due diligence on a couple of them and they would they will look much more that would look much much more like a like a tuck in than they would a geographic expansion.

Got it and then just final question for me unused meds.

Long term care always.

Huge opportunity that that's been out there and obviously COVID-19 pushed that back because nursing homes et cetera sort of ground zero.

Where does that stand.

Opportunity wise.

And the next I don't know 12.18 months.

I think we're finally, starting to see some submitted with Dennis and the team is finally, starting to see some interest in.

The long term care side as they are coming out of the Covid.

Out of Covid in and in our sales meetings and some of the prospects that we're looking at it seems like long term care is popping up more.

More and more so.

Also that 'twenty, two that we'd have the opportunity to be able to get more of the med sites into.

Into long term care, it's been definitely shut down but.

But hopefully we'll be able to see some movement on that in the fiscal year 'twenty two.

Got it okay. That's it for me I'll jump back in line. Thank you alright. Thanks.

Our next question comes from the line of Rob Brown with Lake Street Capital markets. Rob You May proceed with your question.

Good morning.

Okay.

Hi, just wanted to kind of continue on the med safe discussion here. The I think you said about 300 units.

We plan to go in over the next or each of the next two quarters and it does that is that sort of represent a kind of a step back to a normalized run rate or is that some catch up from.

Being held back for the last year.

Probably a little bit of both right.

They were suspended there for a while at least in retail pharmacy because of <unk>.

So I think we're getting back on.

We're getting back on track with.

With getting the units are probably a little bit of that.

Catch up for what should have probably gone out a year ago.

Okay great.

And then.

The mail back business, what sort of the baseline there of 19 immunization business.

And that in that segment is about $15 million, a year and so youre, saying that the team or so million of immunization would be on top of that to sort of kitchen.

And kind of build back business is that is that what youre thinking.

Millwork.

<unk>.

39.

About 25% to 28.

28 last year at 55.

Sure.

Okay.

Revenue.

9 million last year.

31 million.

Yes.

So that $28 million included about $9 million for what immunization rent. So Russell back was roughly $20 million without I mean as a baseline.

Sure.

Great.

The 25 without inflation. So 25 this year without the immunization of the mail business revenue.

Okay. Okay. Good so.

So the amortization numbers you were talking about would be sort of additive or whatever they are would be additive to sort of that 20% to 25 baseline.

Okay.

Right.

Okay. Okay, Great and then maybe just on the September quarter walking through the the order rates.

How does that.

Sort of go through the mail back business do you expect.

What's sort of the tail on returns and.

Patients of shipments I would presume that makes the mail back fairly low in September but could you help us kind of understand how that flows through in just the September quarter.

Given.

Revenue I mean, just as a normally would've been if it was a half million dollars in sales it would be.

$5 million in revenue there'll be a deferral component of about 15% and 20% of that so what 80, 85% of a recognized as revenue within the quarter and some of the items will be coming back.

Yes.

Right. Thank you.

Sure.

Okay.

Got it.

And then in terms of the route based business.

Do you feel that's sort of fully recovered from Covid and now this is a new baseline of growth in this sort of 30 plus percent should be able to continue.

We didn't really see.

If you think about our route based business, while we had a little bit of the business I think it was April through June.

Toilet, where we saw a bit of a downtick on the rap as you'll remember that was offset or more than offset by the substantially increased volumes coming out of long term care, which as Ralph base as well. So one really offset the other so we really didn't see that much of a.

The downtick now the long term care volumes.

<unk>.

But the other businesses that we have have have increased so.

We think we're extremely well positioned and very very fortunate to have that long term care volume to offset a bit of a slowdown in the.

Well it feels like dermatology and dental dental and physicians that may have been slowed down for a short period of time.

Right.

Okay, great. Thank you for the color I'll turn it over.

Our next question comes from the line of Amit Dayal with H C. Wainwright you May proceed with your question.

Thank you guys I appreciate you taking my questions. Most of them have been asked but just on the margin front should we think about gross margins.

Stabilizing at these levels.

Potential upside coming from any volume increases you may see you know as people continue to get the COVID-19 vaccines and sort of.

Does it mean for you.

It's all really driven by revenue operating leverage model and it's.

Yes, they are.

Ran up this year because of the volume was as high as it could be.

If the revenues lower there'll be down if the revenue is higher.

Will be they will be up.

Okay. Thank you for that.

And then.

It looks like you've had a decent increase in customer locations to 16 Johnson from 13000 year over year do you have a target.

The way you might want to be over the next 12 to 18 months in terms of customer communications.

We've talked about this 30% increasingly Rob based business and I think you can directly correlate that with a number of.

Of locations.

We've been growing at 30% you can you can do the math.

Of course, if we supplemented that with acquisitions of that percentage could could be higher.

Yeah.

In terms of how the.

The quarterly revenues are now coming through for you.

<unk> because of.

How COVID-19 has played out.

So.

As in how the cadence in revenues quarterly revenues.

For you or.

In a few quarters do we want to go back to maybe sort of a more normalized strict.

Well it all depends on the things that I mentioned earlier about what happens with respect to the immunizations and what the grocers and so on and so forth. In that example that I mentioned earlier, there is a potential for maybe another 18 or $19 million and immunization with revenue.

Sure.

For fiscal year 2012.

42.

I will say this.

Kind of looking out past 'twenty to another way to look at it is what does this mean going forward in 'twenty, three and going forward and the way I've always looked at it is.

I think that the two shot regiment, meaning our float and the covered something shot.

It's probably here to stay so the way I look at 'twenty, three and going forward is probably $15 million to $20 million of revenue, which think of it as like two flu seasons going forward. So maybe an additional as much as $19 million for 'twenty, two and then going forward past that maybe 15 or $20 million.

A couple of flu shots a year.

Thank you.

All I have for now thank you so much.

Thanks, Amit.

Yes.

Our next.

<unk> comes from the line of Kevin Spanky with Barrington Research you May proceed with your question.

Hey, good morning.

So just.

When we think about the flu season, and you mentioned there what the.

The numbers typically are I think the last couple of calendar years.

Flu season billings were $708 million.

Mentioned about 5 million sitting in inventory that could be used for the flu season. So.

Should we just kind of think about the 780 minus five is how.

Blue season, the remaining flu season orders might might play out right.

Right, Yes, I think so I think that Youre right I think last year 'twenty. It looks like April 2 million. So the way we looked at it as we would have typically had about $5 million of orders.

About $5 million of flu related orders in June and September. So I think you subtract the Fox affiliate in about $3 million remaining I think thats a good way to look at it Kevin.

Okay understood makes sense.

Yeah.

Since since you specifically called out the <unk>.

5 million.

Impact on gross margin as a result of the various investments you've made in infrastructure in treatment.

Should we think about that as a.

Having an impact on gross margin for the next couple of quarters here or is that something you start to lap I mean, what kind of what was the timing of those investments and how does it play out on the impact on gross margin over the next couple of quarters. So we started with the infrastructure investments.

Mid to late 2020.

Calendar and the impact on the current quarter.

About 400000.

About 400000 for the quarter.

And then it's.

It's about this at the same level that we had in this quarter looking out throughout fiscal year 'twenty two.

The increases over that so this isn't related to the addition.

Spansion, Texas facility. The addition of the autoclave the continued build out.

Of the Rab based business, but once we get through 'twenty, two and the incremental fixed cost will be much less on an annual basis, because we would have built out the infrastructure, maybe a half a million or so a year.

Going forward 'twenty, three and then going forward. So I think we're going to have most of it behind us This fiscal year 2000 and by the way. It's a good thing that we did it because the volume that we're processing is obviously increase tremendously.

<unk>.

The increase in the route based business and as well the significant increase in the mail backs relative to the.

To the immunization business.

Alright, great understood.

Hugh.

Specifically talked about your ability to serve your customers.

Effectively throughout the pandemic and how that you believe that strengthened your customer relationships is there any way you can you can capitalize on that going forward in terms of.

The stronger relationships just from a competitive standpoint.

How do you see that.

Perhaps playing out are benefiting you move forward, but that's a good question.

Our relationship with our customers all customers and included the amortization side I think a very strong I think they're much much much stronger now that we delivered we've received many many <unk>.

Compliments.

We are the go to company to support their medical waste management needs, whether it be immunization or are otherwise I'm sure. We're going to try to parlay that into some cross selling we're going to try to use that and capturing.

More business, but.

We're really pleased with that and again the customer relationship is strong and I think it's stronger now.

Alright, Great and then just lastly can you talk about the competitive environment and the route based business one year.

Bidding on deals is that.

Same as it's always been or any changes.

Competitively there no adequate we haven't really seen any.

Any changes, we like we're well positioned as we continue to lead with great customer service and flexibility.

And contracts.

Great responsiveness, and that's how we sell and I think it shows in that 30% anchors where opex business.

Okay, great. Thanks for taking my questions you bet. Thanks, Kevin.

At this time, we have reached the end of the question and answer session. I will now turn the call back over to management for closing remarks.

Alright. Thank you operator, thank you everyone for participating in our call our call today, we remain very excited and bullish about the business. We look forward to that continued growth revenue opportunities and can expansion for fiscal year 'twenty two and beyond. Thank you we will talk next quarter.

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