Sharps Compliance Corp.
Q2 2018 Earnings Call Transcript

Published: 23 Jan 2018

[Operator:]

Greetings and welcome to the Sharps Compliance Inc. Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now pleasure to introduce your host Jen Belodeau, Investor Relations for Sharps Compliance. Thank you. Ms. Belodeau, you may begin.

[Jennifer Belodeau:]

Thank you. Good morning and welcome to the Sharps Compliance second quarter fiscal 2018 earnings call. On the call today, we have David Tusa, the company’s President and Chief Executive Officer; and Diana 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 are aware, we 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 would 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.gov. So with that out of the way, let me turn the call over to David to begin the review. Go ahead, David.

[David Tusa:]

Thanks, Jen, and good morning, everyone, and welcome to our second quarter fiscal year 2018 earnings conference call. Our second quarter fiscal year 2018 revenue was $11.1 million, an increase of 15% over the prior year. And with this increase, we saw growth in customer billings for all of our solution offerings in all of the markets served, notably an increase in quarterly billings of 57% in the Retail market, 11% in the Professional market, 11% in the Government market, 9% in Assisted Living and 5% in Pharma Manufacturer billings. We also achieved triple-digit growth in our Environmental third-party treatment billings. Regarding the billings by solution offerings, we generated growth for the quarter of 17% in the route-based pickup business, 11% in the mailback-related billings and 78% in unused medication billings. Our Retail market experienced significant gains related to increased flu shot-related orders, as well as a growing demand for our unused medication solutions, including the MedSafe in the retail pharmacy market. Additionally, our Environmental business generated triple-digit growth related to third-party services at our treatment facility in Texas. As a result of the volume growth, we added a second shift to our treatment facility in Pennsylvania. The second shift is a positive development for long-term that resulted in some onetime expenses in the quarter as we worked through training and onboarding of new staff, which compressed margins a bit – gross margins in the quarter. Gross margins were also adversely impacted by costs associated with unplanned repair and maintenance cost of our treatment facilities in both Pennsylvania and Texas. The costs associated with these items were about $400,000 and reduced gross margin by about 360 basis points. Second quarter net income was $156,000, or $0.01 a share versus a loss of $227,000, or $0.01 a share loss in the second quarter of the prior year. Now Diana will go into a bit more specifics regarding the financials. But before I turn it over to you, I want to provide some color on our strategic focus as we move through the balance of 2018. We began a couple of years ago to effect the transformation of the company from a provider of mailback services to a comprehensive provider of multiple services in multiple markets. So now we provide both mailback and route-based pickup services to our medical waste customers. We also provide unused medication management solutions to many markets, which now accept both controlled and non-controlled medications. With that, it’s important to note that we service the entire country with our mailback and unused medication management solutions. And in a relatively short period of time, we served 23 states, or about 48% of the population with our route-based offering. And that route-based offering has now increased to 17% of our overall billings and we expect this percentage to increase. We believe our ability to provide a diversified solution, even mailback, route-based pickup or a combination of the two, based on our customers’ needs is proving to be a competitive advantage in the small and medium-quantity generator market. This is a market that we target and it should enable us to continue to capture more market share. Now billings from our unused medication management solution grew 78% in the second quarter and represented 12% of our overall revenue. We see the percentage of consolidated revenue from unused medication solutions growing over calendar year 2018. And further to unused medication solutions and related growth, we’re well underway with our roll out of the MedSafe to a major national retail pharmacy chain, and we expect to see positive impact from this launch during the March 2018 quarter. Market recognition for our MedSafe and TakeAway Medication Recovery System envelopes designed for the safe disposal of opioid, painkillers and other unused medications is growing. As the U.S. contends with the ongoing opioid crisis, we believe making proper disposal of unused medications available to customers to be very important. We believe convenient and cost-effective disposal of unused medications to be an important component in addressing the problem of drug abuse and accidental poisonings. So while our March quarter has been historically weak, we believe the March 2018 quarter should be positively impacted from the continued growth in billings in all of our markets, including Retail, where we expect to see particularly strong growth in customer billings related to our unused medication management solutions. We should also see third quarter gross margin levels more consistent with the 33% to 35% range. And one last thing, the consensus analyst estimates for revenue for the March 2018 quarter is about $9.2 million. And we believe we have the opportunity to beat this revenue estimate for the March quarter. Now I’ll turn it over to Diana who will cover the financials in just a bit more detail.

[Diana Diaz:]

Thank you, David. Second quarter fiscal 2018 revenue increased 15% to $11.1 million, as compared to $9.7 million in the second quarter of last year with gross margin of 28%, down from the gross margin of 30% for the second quarter of last year. Gross margin in the quarter this year was impacted by costs associated with our treatment facilities, including unplanned repair and maintenance costs in both Pennsylvania and Texas plants, as well as startup expenses related to the launch of a second shift at the Pennsylvania plant. SG&A expense decreased to $2.8 million, or 25% of sales, as compared to $2.9 million, or 30% of sales in the second quarter of last year. We expect SG&A for the March 2018 quarter to be in the range of $2.8 million to $3 million. The company reported operating income of $100,000 in the second quarter, compared to an operating loss of $200,000 in the second quarter of fiscal 2017. Sharps’ reported net income of $157,000, or $0.01 per basic and diluted share this quarter compared with a net loss of $227,000, or a loss of $0.01 per basic and diluted share in the second quarter of last year. The company achieved EBITDA of $0.5 million in the second quarter of fiscal 2018, as compared to EBITDA of only $200,000 in the same period of last year. Looking at the key comparisons for the second quarter of fiscal 2018, the company achieved revenue and customer billings of $11.1 million. Retail billings increased 57% to $2.6 million, reflecting increased billings for flu shot-related orders and for MedSafe; Professional Market billings increased 11% to $3.4 million; Home Health Care billings increased 5% to $2.1 million; Pharmaceutical Manufacturer billings increased 5% to $1.5 million due to the timing of inventory builds; Assisted Living billings increased 9% to $600,000; and Government billings increased 11% to $400,000. Looking at the key comparisons for the first six months of fiscal 2018, revenue increased 8% to $20.8 million and customer billings increased 9% to $20.9 million. For this year-to-date period, Professional Market billings increased 11% to $6.5 million; Retail billings increased 8% to $4 million; Pharmaceutical manufacturer billings decreased 6% to $3 million due to the timing of inventory builds; Home Health Care billings increased 6% to $4.1 million; Assisted Living billings increased 5% to $1.2 million; and Government billings increased 17% to $1 million. On a trailing 12-month basis, Pharmaceutical Manufacturer market billings increased 12% in the current period, compared to the prior year. Fiscal 2018 year-to-date gross margin was 30%, which is consistent with the first six months of last year. SG&A expense was reduced by 16% to $5.5 million for the first-half of fiscal 2018. SG&A for the first-half of last year includes $700,000 of acquisition-related costs. Without these acquisition-related costs, SG&A decreased 7%, compared to the first-half of fiscal 2017, which reflects the impact of cost savings initiatives that we launched in the second quarter of fiscal 2017. Net income for the first-half of fiscal 2018 was $231,000, or a $0.01 per basic and diluted share, compared with a net loss of $1.2 million, or a loss of $0.08 per basic and diluted share in the first six months of last year. Excluding those acquisition-related expenses of about $700,000 on a non-GAAP basis, the company reported an adjusted net loss of $0.5 million, or $0.03 loss per diluted share in the first-half of 2017. Our balance sheet remains solid with $5.8 million of cash and cash equivalents at December 31, 2017 and working capital of $10.9 million. And with that, I’ll turn the call back over to David.

[David Tusa:]

Right, thanks, Diana. Operator, why don’t we just go ahead and go straight to the Q&A. So open it up for questions, please.

[Operator:]

Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session [Operator Instructions] Our first question comes from the line of Matt Hewitt from Craig-Hallum. Please proceed with your question.

[Matt Hewitt:]

Good morning and thank you for taking our questions.

[David Tusa:]

Good morning, Matt.

[Matt Hewitt:]

Couple of questions regarding the Retail segment, obviously, a strong second quarter. And I’m curious we know that the flu obviously has been very strong, but you had talked about a customer leaving mid last year calendar year. And so this is a little bit of a surprise. Is this the existing customers ramping up because of the flu season, or was there something else that popped into this quarter?

[David Tusa:]

[Diana, you can take.] [ph]

[Diana Diaz:]

This was the existing customers popping up, so I think it’s a lot of timing and the flu orders coming in. So on a trailing 12-month basis with our existing customers, we’re about flat, but $1 million down compared – based on the loss of the customer. So really, I think it’s timing.

[Matt Hewitt:]

Got it. And then – go ahead.

[Diana Diaz:]

We did have some increase in our unused medication solutions for the quarter in the Retail market.

[Matt Hewitt:]

And now it’s going to be the follow-up. With this new customer on the unused medication side, will there be a period – stocking period with that that will affect in the third quarter, or well how should we be thinking about that from a modeling perspective, at least, for the next couple of quarters?

[David Tusa:]

Well, first of all, let’s talk about the unused medication for the quarter. As Diana mentioned, the Retail sector was positively impacted. There was about 520,000 of billings in the quarter just related to Retail and which is, we’re really excited about the unused medication as unused medication impacts Retail, Government Professional, Assisted Living. It impacts positively many of our markets. So we generated about $1.3 million in the December quarter, Matt, for unused medication. So I can’t go into a lot of detail about the new program, other than I’ll just say that, we think March – the March quarter will be positively impacted by unused medications in the Retail sector. And we did a $1.3 million in the December quarter. And we think we have the opportunity to do quite a bit higher than that in the March quarter, maybe even as much as $2 million in the March quarter.

[Matt Hewitt:]

That’s fantastic. Okay. And then shifting gears a little bit, obviously, with the addition of a second shift at your facility that would imply that you’re seeing pretty strong demand. Is that demand that you’re seeing already where you’re getting the billings orders already, or is that something within the channel, or something that gives you a sense that that’s going to be picking up and therefore you want to be ahead of it?

[David Tusa:]

I’m sorry, I didn’t quite get that, Matt. One more time please?

[Matt Hewitt:]

Oh, I’m sorry. With the second shift that you’ve added at the facility, is that a result of demand that you’re already seeing, or is it anticipation of demand maybe something that you’re picking up in the channel, or something else that leads you believe that you need that second shift for the quarters ahead?

[David Tusa:]

Sure, no, no that’s a great question. It’s a couple of things. One, it’s the existing demand that we have. It’s also the volume that we’re finally getting in regarding – or associated with our mailbacks. The mailbacks don’t just all come back the next day after we send them to the customers, there’s a delay. But Pennsylvania had a quite a bit of volume. And so just to give you an idea, the Pennsylvania plant – hold on, I had it right here. The Pennsylvania plant in the December quarter, they’re almost twice the volume as in the December quarter of the prior year and about 20% to 25% higher than the sequential quarter. So it’s both. We’re also looking at doing some third-party treatment up in Pennsylvania as well, which will become some forward-looking revenue in the mix as to have that second shift in place for the third-party treatment.

[Matt Hewitt:]

Great. And then one last one for me and then hop back in the queue. The unexpected maintenance, is that result or was that just a one-time item? Any color that you could provide on that front? Thank you.

[David Tusa:]

We think it was unplanned. We think it’s – it was one-time, it was unplanned and hopefully won’t…

[Diana Diaz:]

It’s been resolved

[David Tusa:]

It’s been resolved, absolutely been resolved. And hopefully, we won’t see that going forward.

[Matt Hewitt:]

Okay, great. Thank you.

[Operator:]

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

[Joseph Munda:]

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

[David Tusa:]

Hey, Joe, good morning.

[Diana Diaz:]

Good morning.

[Joseph Munda:]

I’d like to touch on the route-based pickup business, another good quarter here, 17% growth. Just curious, David, as you guys are expanding your geographies as far as pickup, is it new accounts that are generating this, or is it deeper penetration moving upstream? I know, the goal had always been to penetrate these multi-facilities sort of businesses, some color there would be great?

[David Tusa:]

Good question, Joe. It’s definitely more customers And I think, we have – we’re up to on the route-based side, was over 10,000 customers now.

[Diana Diaz:]

Correct.

[David Tusa:]

And which is up significantly. So it’s just what you mentioned, it’s new customers whether it’s our inside sales selling it or whether it’s our field sales folks that are closing more deals. And yes, you’re correct. They’re focused more with respect to the route-based business on multi-state deals or deals outside of just typical local or regional areas.

[Joseph Munda:]

And can you remind us what does the inside and field sales force look like at this point?

[David Tusa:]

Exactly, you’ve got that, Diana, right?

[Diana Diaz:]

Yes, I do. We – today, we’re at 29 employees that are made up of six field salespeople, 19 inside salespeople and 4 sales and regulatory support personnel.

[Joseph Munda:]

Okay. And then switching gears here, David, a little bit more on the Retail pharmacy deal. Is that an exclusive deal with this chain? Do you have the ability to offer it out to the other customers in your portfolio, or is this, like I said, exclusive?

[David Tusa:]

Well, right, it’s an exclusive deal. I mean, we sell the MedSafe throughout many markets, not only in retail pharmacy, long-term care, the professional markets, pharmacies and hospitals, but it doesn’t prohibit us from being able to sell to whoever we want to sell to.

[Joseph Munda:]

No. What I’m saying is, does it prohibit you from selling it to another retail pharmacy chain?

[David Tusa:]

No.

[Joseph Munda:]

Okay. So you’re white-labeling it on behalf of this pharmacy chain essentially?

[David Tusa:]

Right.

[Joseph Munda:]

Okay, okay. And then the last question I have and I’ll hop back in the queue. David, you talked about March quarter, you think you guys could vest the $9.2 million in consensus out there? But are you willing to go as far as saying, you can get sequential quarterly growth, or is that too much for the March quarter you think?

[David Tusa:]

I think the way that I look at it is that we did – the March quarter last year, we did about $8.6 million in revenue for the March quarter of 2017. And I think that with all the activity we have going on that, that we should be able to revenue – generate revenue growth at or maybe higher than what we did for this last quarter. So we did 15% increase year-over-year in the December quarter and hopefully the March quarter could be at that level or maybe higher.

[Joseph Munda:]

Okay. Thank you.

[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 commentary about confidence in being $9.2 million-plus in the third quarter, is that confidence coming mostly just from this MedSafe roll out with the retail pharmacy chain, or what other factors might play into that confidence in the next quarter’s revenue outlook?

[David Tusa:]

Well, Kevin, as you saw in the December numbers, we see growth in all of our markets and with all of our solution offerings. And we’re evolving into a company that’s not just focused on the flu business and the downturn in the March quarter. And that’s one of the reasons – the impetus for the transformation of the company. So no, I think it’s much more than just the MedSafe and one particular deal. I think that we’ll see – we have the opportunity to see again growth in all of the markets and in all of solution offerings. It’s a result of the changes that we’ve made over the last couple of years to introduce new offerings into the multiple markets that we serve and not being so adversely impacted by one business, meaning the flu business.

[Kevin Steinke:]

Okay, that’s great. And speaking about that transformation of the company a little further, you noted in your prepared comments that you continue to think it’s a competitive advantage to have this combined menu of services, the combination of mailback and route-based and unused med. Can you – I don’t know, cite any examples or what you’re seeing in the marketplace in terms of how the competitive advantage is playing out as you approach new customers?

[David Tusa:]

I think it’s working extremely well. Already, I’ve worked in the healthcare. In healthcare from what we see with the customers and the prospects, they want one company to solve their problems and they don’t necessarily like multiple vendors. So in most of the deals or most of the larger deals that we’re closing, we’ll provide route-based pickup on the medical waste, maybe some mailbacks, we’ll help with the unused medications. And then we’re also seeing a lot more opportunities from some of the hazardous waste, so – which is a big problem in the healthcare setting. So when we go in and I could just tell you, I’m just looking at a couple of the last proposals that we have in place, it’s hazardous waste, medical waste, both a mailback and a pickup, and then maybe unused medications. And then we also have a DEA pail for registrants or registrants’ disposal of controlled substances. So we’re definitely focused on multiple services into multiple markets and I think it’s actually – it’s working quite well.

[Kevin Steinke:]

Okay, that’s helpful. You provided some commentary there on the gross margin of $400,000 of additional costs. Was that all-in related to both the unplanned repair and maintenance and the ramp-up of the second shift?

[David Tusa:]

Yes, that was the vast majority of that number.

[Kevin Steinke:]

Okay. And you mentioned 33% to 35% third quarter, Is that kind of the number we should think about going forward? You had talked about maybe 34% to 36% at $10 million to $11 million of revenue, was that still a decent way to frame it, or I’m just trying to get a sense of a normalized gross margin at a certain revenue level going forward?

[David Tusa:]

Right. No, I think that’s – that makes sense. I think that we’re comfortable at those gross margin levels.

[Kevin Steinke:]

Okay. Just lastly, here, it sounds like the pipeline of new customers is good in the route-based business. Are you also continuing to look at acquisition opportunities out there in the route-based pickup service line?

[David Tusa:]

We are. We continue to look at acquisition candidates. We continue to look at expansion areas as well. We expanded on the route-based side. We’re in the Northeast. We’re in Texas and Louisiana and we have just expanded organically into the Southeast,. and we just did that on our own. But we’re definitely looking at – continue to look at acquisition opportunities. And – but you have to be opportunistic and the seller has to have a reason to want to sell. But we continue to have discussions with a number of acquisition candidates, but it’s extremely difficult to predict when that may happen, if they happen.

[Kevin Steinke:]

Okay, fair enough. Thanks for taking my questions.

[David Tusa:]

You bet.

[Operator:]

[Operator Instructions] Our next question comes from the line of Brian Butler with Stifel. Please proceed with your question.

[Brian Butler:]

Good morning. Most of my questions have been answered, but I got a couple of follow-ups.

[David Tusa:]

Sure.

[Brian Butler:]

On the environmental services that third-party disposal kind of what’s behind that? And is that sustainable, or how should we think about that going forward here?

[David Tusa:]

Well, they’re project- based. And it’s – these were related – a lot of the activity we had in that quarter was related to Hurricane Harvey activity, where there were sensitive documents and materials that needed to be incinerated. So that’s why it’s lumpy. And when there’s a project that we have that we jump on it, but it may not be at that same level in the next quarter.

[Brian Butler:]

Is there a base level to think about that as kind of that, or is it really going to swing – could it swing from $100,000 to $400,000?

[David Tusa:]

I think, yes, it can. I mean, it could be potentially $100,000 in the next quarter and then it could be back up to $300,000 or $400,000. We are going to do some more third-party treatment at Pennsylvania, and I think that will help as well. We’ve been reluctant to do it so far, because we’ve been so focused on our plant – processing of our customers’ waste and making sure that the plant is running as efficient as possible. But we’re at that point now where we’re going to start to introduce some third-party in Pennsylvania and that may help that $100,000 a quarter number.

[Brian Butler:]

Okay. And then on the flu shot, how much of a contribution was the flu business in the second quarter?

[Diana Diaz:]

The flu business this quarter was $1.6 million.

[Brian Butler:]

Versus, what was it second quarter of 2017?

[Diana Diaz:]

$1.1 million.

[Brian Butler:]

And how does demand kind of look going into the first three weeks of January here?

[David Tusa:]

It’s early. It’s really early to tell. The good news is that what – that you do have healthcare professionals in the CDC and others advising. It’s never too late to give a flu shot and it’s quite epidemic with the flu now. But we’ll just have to see. I think it’s too early to tell, and the last thing I want to do is predict the flu business.

[Brian Butler:]

Yes. Okay. And then on the pharmaceutical business, you had some positive growth versus last quarter. It was down – you had talked in the past about maybe a 10% year-over-year growth rate for 2018. Can you give a little update? I mean, at this point, you’d have to see growth in the second half closer to 30% to kind of hit that number. And I’m just trying to understand what does the pipeline currently look like and kind of what our some expectations internally for the revenues in the second-half of 2018?

[David Tusa:]

Well, again, we look at everything on a trailing 12 basis. And if you look at the pharma business on a trailing 12, it’s up 12%. So that’s kind of how we measure it, because the orders are so lumpy and the bulk orders come in when they come in. They don’t necessarily come in, in the quarter that you expect. So I think the 12% trailing 12 is consistent with kind of our expectations in the kind of roughly the 10% trailing 12 increase that we see going forward.

[Brian Butler:]

Okay. Well, it’s tough, because last quarter the trailing 12 was a negative 8.8%. So I mean, even on a trailing 12, it appears to be very lumpy. So – but 10% still seems – based on the pipeline of patient support program, is it still a reasonable output?

[David Tusa:]

That’s correct. That’s what our goals are, what our expectations are.

[Brian Butler:]

Okay. And on the MedSafe – all right, the unused medication benefit that $600,000 you had in this quarter, can you break that down at all between how much was kind of new MedSafe installations or sales versus how much was recurring kind of replacement liners/the one-time use mailbacks?

[David Tusa:]

I think the best way to look at it is the unused medication solutions increased about $577,000 for the quarter versus the prior year. And about $300,000 of that was MedSafe activity and about $200,000 of that was envelope sales, and it’s a mixture of all, Brian. It’s new customers. It’s reordering of liners. We don’t have the specifics between those two. But I think what’s really positive, it was both the envelopes as well as $300,000 for the MedSafe. And when you talk about the MedSafe and again, we’re just as excited as can be. We’re in the boardroom here in Houston where we designed this offering not too long ago, just a few years ago, and we think it’s been quite successful. A year ago, if you look at December 31, 2016, we only had about 700 or so that were out in the – out with the customers. And if you look at this current quarter, we’re over 1,500. So that’s important. We think that number is going to continue to increase. In the last quarter, the quarter – the September quarter, it was only about 1,100 MedSafe. So we’re excited. We’re seeing both growth from new customers as well as, yes, existing customers ordering the replacement liners.

[Brian Butler:]

All right. That’s good to hear. And then the mailbacks, I mean, the fact that they are that large was – is positive. Is most of that going through the Government billings, or are you selling mailbacks as well via kind of the Retail side?

[David Tusa:]

Are you talking about the TakeAway envelopes?

[Brian Butler:]

Yes, TakeAway envelopes? The unused medication TakeAway envelopes?

[David Tusa:]

Yes. We do it with the Government, it’s – what it’s about 100,000 a quarter is what we’re doing roughly on those envelopes.

[Diana Diaz:]

Right.

[David Tusa:]

So, Brian, if we were up 200,000 on the TakeAway envelopes then about $100,000 of that would have been the Government deal.

[Brian Butler:]

Okay. And then just one last one. On the MedSafe roll out for the new large Retail customer, is that going to be primarily just a third quarter event, or is that rolling into fourth quarter as well?

[David Tusa:]

We respect the confidentiality agreements we have with our customers and we’re really excited about this program launching. And we think they’re going to – you saw a little bit of impact in the December quarter. I think you’re going to see a significant impact in the March quarter. And then maybe after that March quarter, we can talk a bit more on that. But we are focused just on completing the roll out and again, I think it’s going to positively affect our March quarter.

[Brian Butler:]

Okay, great. Thank you very much.

[Operator:]

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

[Joseph Munda:]

Hi, can you hear me?

[Diana Diaz:]

Yes.

[David Tusa:]

Yes, we can hear you, Joe.

[Joseph Munda:]

Sorry, I had you on mute. Just a follow-up to Brian’s question in regards to the roll out. I guess, how should we think about the liner portion of that business as you begin to roll it out? I mean, it almost – you’re going to be laying revenue on top of revenue. So I guess, how do you see that shaping up in the Retail business? You put up a nice quarter if you back out the flu business here. Are we going to continue to see, I guess, this stairstep of Retail revenue on a sequential basis because of the roll out of the MedSafe along with the – just the recurring liner business behind it? Is that how should – how we should look at it on a sequential basis?

[David Tusa:]

Well, I think the way to look at it is, first of all that we’re selling the MedSafe more than just in Retail – in the Retail market. But the retail pharmacy market, yes, you’ll see a pickup into March quarter primarily related to the roll out of the MedSafe themselves. And sure, I mean, with the MedSafe comes the liners. What I’d really like to do, because I want to be careful with this is that, let’s get the MedSafe rolled out throughout the March quarter. And I think, we’ll have a much better idea of what the result of the recurring liner revenue could be. But that’s But that’s what it’s all about. The MedSafe is a great solution. It’s really serving the need in the country. And then, ultimately, we generate a recurring revenue stream as a result of the replacement liners. So I’d really like another quarter or so to see how this kind of rolls out before we really get too granular.

[Joseph Munda:]

Okay, fair enough. Thank you.

[David Tusa:]

Thanks, Joe.

[Operator:]

There are no other questions in queue I’d like to hand the call back over to management for closing comments.

[David Tusa:]

Right. Thank you everyone for your participation in call. We appreciate your continued support. And we look forward to talking to you next quarter. Thank you.

[Operator:]

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