Sharps Compliance Corp.
Q4 2019 Earnings Call Transcript

Published: 21 Aug 2019

[Operator:]

Greetings, and welcome to the Sharps Compliance Fourth Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.It is now my pleasure to introduce your host, Bill McKeown, with IMS Investor Relations. Thank you. You may now begin.

[Bill McKeown:]

Good morning, and welcome to the Sharps Compliance fourth quarter fiscal 2019 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. Immediately following their formal remarks, we will take questions from our call participants.As you're aware, we may make some forward-looking statements during the formal presentation and in the question-and-answer session 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 Web site or at sec.gov.So, with that, let me turn the call over to David to begin the review and discussion. David, go ahead.

[David Tusa:]

Okay. Thank you, and good morning everyone, and welcome to our fourth quarter fiscal year 2019 earnings conference call. We closed out fiscal year 2019 with a strong fourth quarter, as evidenced by strong growth in our customer billings and revenue both year-over-year and on a sequential basis. This revenue growth drove improved gross margins and increased profitability. Now, from our perspective, what's really exciting about this fourth quarter is a strong revenue growth, but also being reflected in all three primary revenue streams, which are, one, medical waste management mailback; two, medical waste management route-based pickup; and three, unused medication management services.In the fourth quarter, medical waste mailback, medical waste route-based, and unused medication customer billings grew 33%, 27%, and 41% respectively. The net growth was all organic. These are solid growth rates. And we believe these primary solution offerings should drive sustained growth and value for our shareholders over the long term. Further, we believe the fourth quarter growth reflects the success of our strategy to transforming the business from a medical waste mailback only business to a comprehensive solutions provider serving a broad range of customers in the healthcare and retail markets with many value added service offerings.So, a bit more on the quarterly revenue by market, the retail market customer billings increased 54%, and this was driven by strong flu-related orders as well as higher MedSafe in retail pharmacies. Pharmaceutical manufacture market customer billings almost tripled for the fourth quarter compared to the prior year. This increase was driven by inventory builds in four existing and four new patient support program. As we mentioned on our last earnings call, we expect that the fiscal year 2019 billings for this market to fall in the range of $4 million and $4.5 million. And we ended the fourth quarter with strong billings of $1.5 million in this market. And the full-year billings ended up at $4.2 million. As you know, we began expanding our medical waste management route-based presence a few years ago. We did this to complement our mailback offering to address larger facilities such as the surgery center and to establish a more predictable consolidated revenue stream.On June 30, 2019, we serviced 12,900 customer locations directly with our route-based offering, which is currently operating in 24 states which compares to 10,300 customer locations at June 30, 2018, an increase of 25% year-over-year. Our current route-based infrastructure has the capacity or the capability of reaching about 55% of the population. So to place this in perspective, we generated fiscal year '19 revenue from the route-based business of $9 million. And this was an increase of $5.1 million over the acquired revenue of $3.9 million. So therefore, we more than doubled the business.Regarding fourth quarter profitability, the company delivered $0.03 per share for the fourth quarter versus a loss of a $0.01 per share in the prior year. Fourth quarter EBITDA was $1 million versus $309,000 in the prior year. Now as we kickoff fiscal year 2020, we believe our diverse capability positions us very well to continue to grow our market share in the small- to-medium quantity generator segment. We believe we are unique in our strategy to structure our service offerings to include route-based pickup, mailback or a combination of both. We do this to best meet the needs of the customer in an effective and cost-efficient service model. We believe we are the leader in the patient dispensed unused medication management business.And as such, we continue to see strong demand for our unused medication solutions including the MedSafe and the TakeAway Medication Recovery System Envelopes. This part of our business now accounts for 18% of overall billings in the fourth quarter. As of June 30, 2019, we have grown this business organically to an installed base of 3600 collection receptacles in retail as well as hospital pharmacies, long-term care drug treatment, and law enforcement facilities. And our customers have returned over 33000 liners as June 30, 2019.Now as of today, the installed base of collection receptacles is 3800 and return liners are 35,500. As a reference point, installed collection receptacles were 2,500 units a year ago and 1,100 units two years ago. Returned inner liners were 16,000 through June 30 of '18, and 7,000 through June 30, 2017. We see continued strong growth for our unused medication management solutions, and we're proud of our leadership position, and we see the company playing a role in solving the epidemic in the U.S. of prescription drug abuse and accidental poisonings.As we mentioned last quarter, in March of 2019, Linda Brock joined our company as Vice President of Sales. Linda is managing and leading the field sales team, including business development, national account managers, and territory managers, with a focus on accelerating the closing of existing opportunity and meeting our exceeding sales budgets or growing the sales pipeline. Linda is a seasoned sales leader with extensive experience in healthcare and related services industry. Like us, she sees a significant opportunity to greatly expand the customers -- the company's customer base and revenue, and has correspondingly increased the field sales team from nine at the end of December 2018 to 12, currently, which includes six new sales professionals. She may add headcount over the next quarter or two as we begin to see results for her team's efforts.So looking forward to fiscal year 2020, we see the September 2019 quarter, our first quarter of fiscal year 2020 shaping up as strong, and believe the full fiscal year 2020 should benefit from growth in all solution offerings in many of our markets. Our growth is being driven not only by the company's successful transformation from our mailback only business to a comprehensive solutions provider, but also our focus on customer service, regional contract terms, and fair pricing in markets where we believe are vastly underserved. These are leading differentiators that are greatly responsible for our revenue growth.And with that, I'll turn it over to Diana, and she'll cover the financials in a bit more detail.

[Diana Diaz:]

Thank you, David. Fourth quarter fiscal 2019 revenue increased 23% to $12.2 million, as compared to $9.9 million in the fourth quarter of last year, and also increased by 29% sequentially compared to the third quarter of fiscal 2019. Our route-based pickup revenue for the fourth quarter of fiscal 2019 of $2.6 million is at 27%, compared to $2 million in the prior year quarter, and contributed 21% of total revenue for the quarter. Our unused medication revenue of $2.2 million is at 41%, compared to $1.6 million in the prior year quarter, and contributed 18% of total revenue for the quarter. And finally, our mailback billings of $6.8 million are up 33% compared to $5.1 million in the prior year quarter, which contributed 52% as the total revenue for the quarter net of the GAAP adjustment.Gross margin improved to 32% in the fourth quarter as compared to 30% gross margin in the fourth quarter of last year. SG&A expense increased to $3.1 million, but decreased to 26% of revenue for the fourth quarter of fiscal 2019, compared to SG&A of $2.8 million or 28% of revenue in the same prior year quarter. The increase in SG&A compared to the prior year quarter is related to our continued investments in sales and marketing. We're focused on driving profitability and we continue to closely manage our controllable SG&A costs, while also making strategic investments in sales and marketing to ensure that we're well positioned to facilitate a long-term growth of revenue.We reported operating income of $600,000 in the fourth quarter of fiscal 2019, compared to an operating loss of $100,000 in the fourth quarter of last year. We recorded net income of $500,000 or $0.3 per basic and diluted share this quarter, compared to a net loss of $100,000 or a loss of a $0.01 per share in the fourth quarter of last year. We recorded EBITDA of $1 million in the fourth quarter of fiscal 2019, as compared to EBITDA of $300,000 in the same period last year.Now looking at key billing comparisons for the fourth quarter of fiscal 2019, professional market billings increased 13% to $3.9 million, retail billings were 54% to $3.5 million as compared with last year. Home and healthcare billings increased 4% to $2.1 million, government billings increased 29% to $800,000; pharmaceutical manufacturer billings increased 187% to $1.5 million primarily related to inventory bills for four current and four new patient support programs.During the fourth quarter of fiscal 2019, our mailback solutions represented 54% of customer billings, and increased 33% over the prior year. And our route-based pickup with 20% percent of customer billings, increased 27% over the prior year; and our unused medications grew 41% and represented 18% of customer billings.The growth of our unused medication segment is primarily due to higher billings from MedSafe, including billings related to the ongoing launch of the major unused medication program. The rollout of this specific program began in 2018, and as we continue with the bills, we will install greater number of units in calendar 2019 than in 2018. Inside and online sales channel which primarily targets the professional and government market, achieved a 13% increase in billings in the fourth quarter of fiscal 2019 compared to last year.Now let's look at the key comparisons for the full-year of fiscal 2019. Revenue increased 10% to $44.3 million and customer billings increased 13% to $45 million. Professional market billings increased 15% to $15.1 million, retail billings increased 46% to $11.5 million. The increase in retail billings for fiscal 2019 is primarily due to a $2.8 million increase of flu shot-related orders, and an $800,000 increase in MedSafe billing.Pharmaceutical Manufacturer billings decreased 8% to $4.1 million. Although there were new pharma programs launched in fiscal 2019, there were significant inventory bills for larger program during last year which did not reoccur in fiscal 2019 due to their significant size. Home healthcare billings decreased 2% to $7.8 million. Assisted living billings were consistent with the prior fiscal year at $2.5 million, and government billings increased 19% to $2.5 million.For the full fiscal year of 2019, our mailback solutions represented 56% of customer billings and increased 15% over the prior year, driven primarily by strong flu shot-related orders. For the same period, our route-based pickup was 20% of customer billings and grew 21% over the prior year. And finally, our unused medication made up 15% of customer billings and grew 17% over the prior year. The inside and online sales channel achieved an 18% growth in billings in fiscal 2019 compared to last year.Our year-to-date gross margin was 30%, which is an improvement over the fiscal 2018 gross margin of 28%. SG&A expense increased 7.5% to $12 million in fiscal 2019. And the Company achieved net income for the year of $200,000 or $0.1 per basic and diluted share for the fiscal year 2019 compared to a net loss of $700,000 or a loss of $0.4 per basic and diluted share in fiscal 2018. Our balance sheet remains solid with $4.5 million of cash at the end of the fiscal year and working capital of $10.6 million.And with that, I'll turn the call back over to David.

[David Tusa:]

Thanks, Diana. Operator, I think we're ready for questions, for the Q&A session.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from the line of Gerry Sweeney with ROTH Capital. Please proceed with your question.

[Gerry Sweeney:]

Good morning, thanks for taking my call.

[David Tusa:]

Good morning, Gerry.

[Gerry Sweeney:]

Just want to talk a little bit about the sales and sales initiatives. It's been a few months since Linda was there, but it sounded like you're adding sales people, and curious if couple of questions on that front, what sort of the normal ramp up time from hiring a salesperson to them sort of hitting their stride and getting sales, and are there -- these sales additions focused on any specific markets, just wanted to get a little clarity on that?

[David Tusa:]

Good, very good questions. The last one first, what we're doing in the majority of the new personnel that she put in place or territory managers, where they focus on different territories in the United States, and ones that we think that have a significant opportunity for sales growth. Well, we as far as salesperson, what we'd seen in the past is a ramp up, it can be three to six months depending upon their experience, if they have experience in the industry on healthcare services it may be closer to that three months, but it can't be as much as six months before they're totally ramped up, and they're selling. We saw three solution offerings when it's the mailback or the pickup or the unused medication. So, we want to make sure they're well-trained, and we want to make sure they understand the market, and the customer base, and the solution offerings before they get out there and make the big push.

[Gerry Sweeney:]

Got it. And then it sounds like on the sales, the new hires territory managers, it sounds like you're almost adding a little bit maybe scaffolding for lack of a better phrase or word around the sales side, and it also sounds like there could be additional hires going forward, obviously, but in the near-term, would these be hires similar to territory managers or would this sort of be like backfilling, adding sales guys under territory managers type of opportunity?

[David Tusa:]

It would probably be both territory managers, as well as traditional business development, sales persons as well, where they're not as much focused on a territory; they're more focused on sectors, regardless of where they are in the country. And we have a few of those right now, and we will probably add against, probably add another one by the end of this year.

[Gerry Sweeney:]

Got it. And then, switching gears over to MedSafe, obviously, a great quarter up, something like 12.5% sequentially in terms of units out in the field, and I think you've said in the past that look at this as a calendar year rollout, but I did some quick math, used liners per number of MedSafe out there and it seems to be increasing from seven to eight to nine to like nine-and-a-half. I'm not sure that is a true indication, but it appears more and more liners being used per safe. Just curious if you're getting any feedback from some of your partners in that space, may be upping their rollout or how -- you know, feedback on their view of how the program is going?

[David Tusa:]

Well, no, your numbers are actually pretty accurate, and they're increasing, and I think what's happening out there is, you remember, the unused medication business for a patient has spent pharmaceutical -- it's still relatively new in the country. And so, with it becomes more education, with it becomes more training of the personnel like whether it's a retail pharmacy or whatever, and I think also the awareness that the collection receptacles are available in the country is helping to improve the use of the MedSafe and the collection of unused medications.I will tell you something, I saw something yesterday, SAMSA which is a government organization that monitors a lot of this, we're starting to see -- just a bit, we're starting to see a bit of a reduction in the in the deaths related to overdoses, or misuse of prescription drugs, and I think a lot of that has to do with prevention. And we're part of prevention, prevention of three things, prevention of education, treatment, and believe it or not, the disposal, and keeping the medications out of the hands of folks who may otherwise use it is also seen as a critical component. So, more and more awareness, and just making everyone in the country aware that there are proper ways and convenient ways to dispose around these medications. I think that'll help to increase returns of those lines as well.

[Gerry Sweeney:]

Got it. Okay. That's it from me. I'll jump back in line, and I appreciate it.

[David Tusa:]

Okay, great. Thanks, Gerry.

[Operator:]

Our next question comes from the line of Joe Munda from First Analysis. Please proceed with your question.

[Joe Munda:]

Good morning, David and Diana. Can you hear me okay?

[David Tusa:]

We can. How are you doing, Joe?

[Joe Munda:]

Good. How are you? So, a couple of things, really strong quarter, as evidenced, and then looking out to '20, you're talking about strong growth, other categories should benefit from the growth. I'm just curious in your prepared remarks Diana mentioned unused medication program from a customer, is that customer going to continue into 2020? Where are we, I guess, in the cycle with that customer and their rollout, and I'll hop back, and then I have a follow-up.

[David Tusa:]

Well, they're one of many customers of ours. The one that Diana mentioned, the large retail pharmacy, and we had a nice and very successful program, we can't make projections or conjecture, but I'll just tell you that the program is going really well, they're pleased and we're pleased. I think we have a real opportunity to continue the rollout.

[Joe Munda:]

Okay. Is it possible to get any sense of what they possibly contributed to the growth in the quarter?

[David Tusa:]

They omit [ph] that on the retail market, on the retail market when we talk more about terms for the year, for the year for the unused medication, they probably contributed about 20%, about 20% of the growth in unused medications for the fiscal year, fiscal year '19, Joe, I think it's probably better way to look at…

[Diana Diaz:]

For the retail market.

[David Tusa:]

-- for the retail market, right.

[Joe Munda:]

20% of the growth in the retail market, or -- I'm sorry, in the -- I'm sorry, in the retail…

[Diana Diaz:]

The MedSafe growth being $800,000 for the year, and it was 20% of that, I'm sorry, that was for the quarter.

[Joe Munda:]

Okay. So they contributed 20% for the quarter, or for the year?

[David Tusa:]

For the year.

[Joe Munda:]

Okay.

[Diana Diaz:]

Both the year and the quarter.

[Joe Munda:]

Both the year and the quarter, okay. And then, David, my other question is, it's fairly recent you came out with a new hazardous drug offering, I'm just curious, how you plan to are your thoughts on rolling that solution out, as well as how does that play into your outlook for '20, and maybe if you could give us a little bit more detail on the opportunity there? Thanks.

[David Tusa:]

There's actually two opportunities on the industry question. There's two opportunities on Haz, we mentioned this before, we're starting to grow an increased space of hazardous business, because we don't permit our trucks. So we can pick up Haz at the same time we're picking up medical waste at a facility. And that's growing, and that's actually doing quite well.I think you're talking about -- the second thing you're talking about is the Haz Spill Kit that came out, the USP solution that's being driven by a rule change, and where healthcare facilities are required to have Haz lights primarily chemo spill kits, and we're starting to sell those. And I think as we get closer towards the end of the calendar year that we should see that -- we should see that pick up and but again it's in response to something that's required from a regulatory standpoint, and it's a mailback, which we're really good at that.

[Joe Munda:]

Okay. And I mean is that something that would be offered in pick up as well, maybe down the line, or as you said that you do permit the trucks?

[David Tusa:]

So, the [indiscernible] the trucks is related to the large box, we pick up the large boxes of medical waste, picking up some haz waste, the other one, the spill kit is really more for individual facilities. And I was wrong, mailback to pick up, we do pick that up as -- we do pick that up as well. We'll pick that up in our service area. If it's at our service area, then we'll have to work with another provider.

[Joe Munda:]

Okay, thank you. I'll hop back in the queue.

[Operator:]

Our next question comes from the line of Peter Rabover with Artko Capital. Please proceed with your question.

[Peter Rabover:]

Hey, David. Congratulations on the quarter. Hey. So I just want to make sure I caught something in -- you said in the beginning. Did you say that you think your fourth quarter sales run rate of 23% is something that is sustainable in the future?

[David Tusa:]

Yes, what I said was -- what I said, we see the September quarter, which is our first quarter as strong, also strong. I mean, the revenue level in the September quarter can be similar to the revenue level in this June quarter, roughly $12 million. That's really all that we said while we think fiscal year 2020 could be strong and we're really only talked about the first quarter.

[Peter Rabover:]

Okay. Now, that's fair enough, and then maybe just on that. I mean, I think the two more volatile parts of your business of your revenues are the flu medication and the pharmaceutical and it sounds like you had a really good fourth quarter with them. So would you say that is a sustainable level? Or is there should we expect more volatility around those revenue lines?

[David Tusa:]

I stopped predicting the flu business a couple of few years ago because you just don't -- you just never know there's so many factors that come into play, but I will tell you, last year was a strong flu season. And it looks like this year it is pointing and being even and even stronger flu season.Now, on a pharmaceutical manufacturer side, that's probably driven by programs and new programs, and we were pleased because in the fourth quarter, we launched four new programs. And so, these are really more of large bulk orders where they order up front because our custom systems and we ship them that throughout the year. So I think that was really going to be driven by our ability to land more and more patients for programs with pharmaceutical manufacturers.

[Peter Rabover:]

Okay. And then maybe on the cost side, you had, this was obviously a nice quarter and you had about 30 -- about a 30% flow through to the EBITDA margin, does that kind of a good run rate going forward for additional revenue growth, like a 30-30%ish flow through?

[David Tusa:]

Well, the way we look -- the way we look at it is incremental, revenue, incremental gross margin. So Diana, will look at roughly.

[Diana Diaz:]

Right.

[David Tusa:]

We've always had about 45% gross margin on the incremental revenue. And in this particular quarter -- the June quarter, well it was strong. We probably had about 100,000 to 150,000 or 200,000, roughly, in expenses in the cost of sales that they were not budgeted. So the margins actually would have been a little bit higher.

[Peter Rabover:]

Okay. Now that's great. And then on the SG&A side is I think it's; the run rate is about 12, 12.5. Is that a good run rate to think, going forward? Or are you expecting more investments in the SG&A line?

[Diana Diaz:]

We expect quarterly SG&A to be in a $3.1 million to $3.3 million range for each quarter.

[Peter Rabover:]

Okay. That's great. And then, I think you I guess, maybe not to put you in an awkward spot. So it's not -- try to answer that as best as you can. But I know you've started to see some competitors in the MedSafe business and maybe talk about the market, the landscape that you're seeing in that, is you're first mover advantage, still kind of a, you know, flywheel effect that the more you put out there, the more people will accept you. And that's what you need to do or just that anything you can give color on that. I would appreciate it.

[David Tusa:]

Now, that's a great question. Yes. I think not only the first mover advantage really helps us. But the fact that we've been doing this for a while, I think is very, very beneficial to our ability to land deals, we've landed some recent state deals. And the fact that we have been doing this for a while was one of the key factors in why we won that while we won that business, so I think it's both of those. We are bullish on the end-used medication, market and I think from a percentage growth standpoint, I think that particular offering the end-used medication offering with percentage growth standpoint is probably going to be, you know, lead the -- lead the charge of the three solution offerings, at least for the foreseeable future.

[Peter Rabover:]

Okay. But I mean, maybe on the competitive landscape, is just like one of those things where like, in retail, it actually makes more sense to have like a McDonald's and a Burger King right next to each other off the highway where they both driving revenues to each other and in a way, and then competitors coming in actually makes the market realize that they need this and should drive revenues forward, or is that -- is there a different dynamic, do you think?

[David Tusa:]

I'm sorry, I don't quite understand.

[Peter Rabover:]

So, sometimes competition is healthy in that, it introduces more customers to the product offering, especially in the kind of nascent stage where you guys are at, so I'm just trying to figure out in the MedSafe business you have some competition and how you deal with that. That's what the --

[David Tusa:]

I look at it a bit differently. I mean, we're the clear leader in the collection receptacles, the collection receptacles and liner so what I see is you got a couple of few companies out there that are looking it as a potential opportunity. I still think that we are the dominant player in that business and when you're dealing with on these medications, especially controlled substances. I think what's really important is the experience that you experience that you have, so I think it is probably a better chance to not and it's going to be our collection receptacle that's out there. So I don't think it's a way that you described as everyone sees more and more of these, and it helps create awareness. I like our position. I like our first mover advantage position. And I like the fact that we've been doing this doing this quite a while.

[Operator:]

Our next question comes from the line of Kevin Steinke from Barrington Research. Please proceed with your question.

[Kevin Steinke:]

Hi, good morning. Just following up on the discussion of your outlook for a strong September quarter, could you maybe just dig a little bit more into the factors that you expect to drive that strong revenue in the September quarter?

[David Tusa:]

Sure. The June quarter prior year was about $10 million and the September quarter prior years about the same thing. I think it is 10, three in the prior year. And again, I think we have the opportunity not a guarantee but the opportunity for the September quarter revenue to kind of look like a June quarter, so I think a lot of the things that are driving the business in the June quarter will continue to drive the business in the September quarter. So I think they'll see contribution for many other same markets and many other same solution offerings.

[Kevin Steinke:]

Okay. And in references to the pharmaceutical market, it sounds like maybe that is one we are absent any new patient support program rollouts and fiscal '20 maybe you know that mark is more flattish in the upcoming year or how do you see that developing, what's the pipeline like I'm just trying to get a sense of what the outlook is there for the coming year?

[David Tusa:]

I think that really without adding any new significant programs, it would it in this year for too, it can maybe be the 5% or 10% higher in 2020 without any significant programs but if we add more programs, we have the opportunity to increase that number.

[Kevin Steinke:]

Okay. That's helpful. Yes, I think on the last call, David, you talked about opportunities for MedSafe penetration in the assisted living long-term care market. So maybe can you talk about that opportunity there? Do you see MedSafe opportunities picking up in the long-term care market that might ignite some more growth in that area.

[David Tusa:]

We do and that actually that one year is where Linda is focused. She has a lot of experience in the long-term care market and she's allocating significant resources towards that long-term care market. So we're hopeful that over the next couple of few quarters, we can see that market, we can have a pickup in MedSafe sales in that long-term care market, so we'll have to watch it over the next couple of quarters. But I think we should have the opportunity to do that.

[Kevin Steinke:]

Okay. And any update on the TakeAway Recycle System for single use medical devices?

[David Tusa:]

Right. We're still cautiously optimistic about that. We have a number of pilots going on around the country at various large healthcare facilities, once you would you would readily recognize and as I said, on the last call, I think we need kind of to the end of this calendar year to make a call. But again, we're so cautiously optimistic and I think you'll see I think you'll see the December quarter positively impacted related to that. I think we have about $0.5 million scheduled in the December quarter for the TakeAway Recycle on a program we signed up a year or two ago, but we'll do more over the next couple of quarters, again, this is another area where Linda is focused and including our regulatory folks as we work with the healthcare facilities on this. But I've got to tell you, it's -- we get a lot of inquiries, and we do receive -- it's well-received from different audiences. So when you actually do something new in healthcare, it takes time and when you're introducing a change in healthcare it just takes a little bit more time because it's healthcare. They're treating patients, and want to make sure they're doing things right.

[Kevin Steinke:]

Okay. And the last question from me, there is an unusually strong growth in what you categorize as other market segment. Just any color perhaps on what drove that in fiscal 2019?

[Diana Diaz:]

Is it in other markets?

[Kevin Steinke:]

Yes, you give the billings by market and one is categorized as Other, and that grew 44%.

[Diana Diaz:]

Right. So it was $350,000. I mean it's really more that -- it's the small dollars.

[David Tusa:]

We sell --

[Diana Diaz:]

[Indiscernible] containers

[David Tusa:]

Sometimes we sell containers only, assets, boxes IV poles, and a number of other smaller solution offerings. And while it is 44%, it is $350,000.

[Diana Diaz:]

And in the market category though, it's commercial. So we've being seeing some interest from building management, companies and wall mounts with that are included in restrooms and such. So that's some part of it there.

[Kevin Steinke:]

Okay, fair enough. Thanks for taking the questions.

[Operator:]

Our next question comes from the line of Michael Hoffman with Stifel. Please proceed with your question.

[Michael Hoffman:]

Thank you for taking the questions. David, on the unused med and the haz med side, what's your form of disposal? Are you able to internalize that disposal or do you actually use outside disposal once you've collected the medication?

[David Tusa:]

Well, on our unused medication, we have an incinerator, so we're able to treat the unused medications via incineration. On the haz, the true haz business, we use third-parties to treat the haz.

[Michael Hoffman:]

Okay. And then you made a point of defining or qualifying for the target market; and how you characterize it? You're very specific in your - describe for us if you would what that looks like?

[David Tusa:]

Sure. What --

[Michael Hoffman:]

In your prepared remarks, you were very specific.

[David Tusa:]

Right. I just think it's really important to point out, we used to be a mailback only Company and it was - the story was pretty easy. It was a pretty straightforward story, it was an easy story. It was mailbacks. We changed and changed for the better, and changed dramatically. So what I think it's really important to point is there's three primary revenue streams. There's not all the mailback, there's also the route-based pickup, and then the unused medication management. And each one of those groups in 27% to 33% to 41%. And what I'm saying is that's what we're focused on. We're focused on those three and driving growth in those three. And we think those three revenue streams are the revenue streams that could provide long-term growth and help us grow a much-much larger much-much larger Company. This is where the majority of the resources of the Company are allocated.

[Michael Hoffman:]

Okay. So maybe I asked my question poorly. So those are the lines of business. For your opening remarks, you made this distinction that we target unique markets with those three business lines. What does a unique market look like for you? Is it a MSA that's a certain sized, is it age of population? I'm just curious about that when you made a point of drawing out that market distinction away from the three lines of business there.

[David Tusa:]

Well, I will tell you this. Well, what we do is we look at markets where we think we have an advantage and selling the ones that are underserved, whether it's the retail clinic, where we're providing the fluid solutions, or if it's long-term care. If actually it's long-term care, we can sell three or four different solution offerings into that market. But we're really good at the small or medium quantity and whether it's a doctor, dentist, vet, long term care or whether we're serving home patients through pharmaceutical manufacturer sales. So we want to focus on where we think we're going to close a sale, where that market is underserved, and one where we think that we can drive some significant growth.

[Michael Hoffman:]

Okay. Last question from me, so you have made this fascinating transition, you do now have these three business lines, but if we were being honest with our ourselves, there's been this lumpiness of pace which core critical mass the three gets billed so that incremental growth in the future always is profitable as is opposed to lumpiness and the profitability, where are we in that at this point on those three lines? Are you at critical mass where you can be four quarters in a row of profit?

[David Tusa:]

I think we're getting closer. I won't tell you that what's happening in the business. With that unused medication business and with the route-based business, it provides a bit more predictable and recurring revenue, whether it's a liner or the unused for the medical waste pick up you see usually on a monthly or quarterly schedule. So I will tell you we're seeing more - what this is doing for us is allowing us more and more visibility in the business. And it's allowing us to be able to get a better view of the revenue growth rate based upon those recurring revenue markets. So I think we're getting closer, Michael. And that's a fair question and I think we're getting closer to the point where not only where we can have better quarterly profitability, but in my view better than where we can forecast better. And with a visibility as such, it's going to be able to allow to manage the business better. And I will tell you that being able to have visibility and see the growth, it sure is helpful where we'll work with Linda on bringing in additional sales people. You know you want to do that when you see that the revenues there to be able to support it. And we would have done that if we didn't have more visibility of the revenue going forward.

[Michael Hoffman:]

Fair enough. Thank you very much.

[David Tusa:]

All right. Thanks, Michael.

[Operator:]

Our next question is a follow-up question from the line of Joe Munda with First Analysis. Please proceed with your questions.

[Joe Munda:]

Yes. Hey, Dave and Diana, just once one quick follow-up if I may. You talked about pickups 12,900 sites, coverage of 24 states. So the first part of my question is, I mean, how penetrated are those 24 states? Do you have any idea how many sites are potentially in play in those 24 states relative to what you guys are covering now? And then the second part is, thought on increasing coverage geographically, if so would that involve possible M&A or do you have the ability to leverage the existing network that you have in place and by adding more trucks? Thanks.

[David Tusa:]

Right. Now I think the way to look at that Joe, is we're still at very low market penetration rate. And I think that, for instance, we have data that shows that there's 800,000 different facilities, individual facilities in this country that could be served in a small to medium quantity market. So for a 12,000 or 13,000 we're obviously still at a very low penetrate rate. But again, that's what we focus on every day and grow in those particular markets. And that's why we're so excited about the opportunity, because we have a great opportunity to further penetrate that marketing and drive revenue for us, like we have. As far as expanding the infrastructure, there's a couple of ways to do it. And one is, yes, it's through - potentially through acquisition. We have a heavy presence in the northeast, southeast, south. And we don't have a direct presence in the Midwest and the west coast.So we're looking at that and we continue to look at that and see if there's ways that we can expand that - expand our coverage of the infrastructure. And it's something that we focus on and something to you hope to do. We'd like to get a little bit more currently in our stock and that's also one of the benefits of a higher stock prices being able to give us the ability if we want to go out there, because we would do it through primarily through acquisition, acquisition of haulers and another companies in those areas where we don't sever. So it's something we look at and it's something that we think that we ultimately have to do.

[Joe Munda:]

Okay, thank you.

[David Tusa:]

Thanks, Joe.

[Operator:]

That's all the time we have for questions. I'd like to hand the call back to Management, for closing comments.

[Bill McKeown:]

Thank you everyone for participating in the call. We appreciate it and we will be talking to you next quarter. Thanks.

[Operator:]

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.