Sharps Compliance Corp.
Q4 2018 Earnings Call Transcript

Published: 14 Aug 2018

[Operator:]

Greetings and welcome to Sharps Compliance fourth quarter 2018 earnings conference 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. I would now like to turn the conference over to John Nesbett from IMS.

[John Nesbett:]

Good morning and welcome to the Sharps Compliance fourth 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're aware, we may make some forward-looking statements during the formal presentation and in the question-and-answer portion of this teleconference. These statements apply to future events, which are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from where we are today. These factors are outlined in our press 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 let me turn the call over to David to begin the review and discussion. David?

[David Tusa:]

Thank you, John. Good morning, everyone and welcome to our fourth quarter fiscal year 2018 earnings conference call. Our fourth quarter revenue of $9.9 million was lower than the prior year revenue of $10.4 million and also lower than our internal expectations of about $11 million. The actual revenue for the quarter was adversely impacted by lower than expected retail market flu season mail back orders of about $600,000 and lower pharma manufacturing orders of about $350,000 resulting from a recently terminated patient support program. Now, partially offsetting these revenue shortfalls was the 62% increase in unused medication management revenue and 21% increase in the route-based medical waste management business. These two solutions offerings which now account for 37% of the overall revenue were launched over the last few years to mitigate the impact of unpredictable flu related business and to provide additional solution offerings to supplement our traditional mail back business. So, Sharps is a very different company today compared to when the company's growth was driven primarily by retail flu and other mail back related business. We transformed the business to become the number two provider of comprehensive route-based and mail back solutions for small and medium sized medical waste generators in the U.S. We also believe that we're the number one provider of ultimate user unused medication management solutions in the U.S. The strategic shift is designed to decrease reliance on unpredictable businesses which increasing our revenue and solution offerings for a much more stable and predictable recurring revenue business. The shift also facilitates the management of medical waste from medium quantity generators such as a surgery center. We believe the strategic transformation overtime should not only drive growth and existing and new solution offerings but should also improve profitability as we've reduced our reliance on the unpredictable parts of the business while driving revenue growth. Our route-based footprint now covers 23 states. In the next few months that will expand to 24 states, representing 55% of the U.S. population. We service over 10,000 individual customer locations through our route-based offering. Our MedSafe Solutions which are in use in all 50 states have generated over $6.4 million in revenue with more than 2500 units installed since inception and over 2.5 million pounds of unused medications collected and treated to-date, including our takeaway recovery system envelopes [ph]. Our MedSafe solution is currently utilized in retail pharmacy, hospital pharmacy, long term care and drug treatment facilities, also licensed law enforcement. Additionally, we continue to be the leader in the medical waste in the mail back business for the small quantity generator market. All of our solution offerings are supported by our expanded infrastructure, which includes treatment plans and distribution facilities in Texas and Pennsylvania as well as offices in Texas, Pennsylvania and New York. We believe our leadership position in the ultimate user unused medication disposal market has not only resulted in closing major deals and retail pharmacy, hospital pharmacy, government and long-term care. It was also key to our recent award we received of the statewide federally funded contract for the purchase of about 200 MedSafe units along with multipacks of liners. The programs is valued up to $700,000 is expected to rollout as early as September at the September quarter, September 2018. Now, the actual value of the award and the number of MedSafe units installed could be lower than this amount. We're very pleased to support statewide efforts to fight the opioid epidemic by providing a convenient method for residences to properly dispose of unused medications that clearly controls substances. And we look forward to opportunities to assist other states. We also applaud the federal government for making funding available to states in order to supplement their efforts to fight opioid epidemic. Now, on to our takeaway recycle system. We've recently entered into an agreement with the major single used device manufacturer to integrate our takeaway recycle system with the manufacturer single use device offer and these were used in various hospitals and surgery center markets. Single use devices are used in hospitals and surgery centers and include such as laryngoscopes curve tubes, masks, forceps, scopes, airway management devices and the like and they are composed of recyclable components such as stainless steel, copper, aluminum, batteries and circuit boards. The significant increase in single use devices utilized in healthcare has created a need for true recycling solution that not only keeps the customer compliant with disposal regulations they buy according fines but also support sustainability efforts. We are seeing greater interest in our takeaway recycle system and believe we should see a positive revenue impact beginning with the December 2018 quarter from the sale of this new solution offering. Now as we go into fiscal year 2019 we see four primary revenue streams driving our growth. One our traditional medical waste mail back, two our route based medical waste pick-up services, three unused medication management solutions and four the new single use of ice recycling system. For fiscal year 2018 our mail bag solutions represented 54% of the customer billings, the route-based pick up 19% and unused medications 15% of customer billings. Although, we plan to drive growth in all markets for fiscal year 2019 we expect customer billings from the route base pick up and the unused medication business to continue to grow as a percentage of overall customer billings as we further penetrate the medical ways management market for small and medium quantity generators and we continue to develop what we believe to be a $1 billion market in the management of ultimate user unused medications including to troll substance. Now, the market for recycling of single use devices via the sale of our takeaway recycle systems is still developing but we believe it has the potential to become a material revenue stream. The management team and our employees are very focused and very excited on growth opportunities in all markets as we enter into what we believe to be a very busy fiscal year 2019. And with that, I'll turn it over to Diana who will cover the financials in a bit more detail.

[Diana Diaz:]

Thank you, David. Fourth quarter fiscal 2018 revenue decreased 4.3% to $9.9 million as compared to $10.4 million in the fourth quarter of last year. The fourth quarter revenue came in lower than our prior year and also lower than our internal expectations, which were about $11 million. The reasons for the shortfall include about $600,000 and lower flu shot related orders and the termination of a pharma manufacturer patient support program which would have generated about $350,000 in orders. Flu shot related mail-bag orders are driven by expected demand from retail pharmacies. Our internal forecast included the same level of orders for the June 2018 quarter that we saw in the June 2017. But that's just didn't happen. This market has been quite volatile and unpredictable driving our decision a few years ago to expand and sale the route base business unused medication management and now single use device recycling business. The termination of the one pharma patient support program is directly related to a cost saving initiative launched by the pharma customer. So, with lower revenue come lower gross margins, since the portion of our cost sales is fixed. The revenue shortfall for the June 2018 quarter represented higher margin revenue therefore the gross margin impact was significant. SG&A expense of $2.8 million or 28% of revenue for the fourth quarter of fiscal 2018 was consistent with SG&A of $2.8 million or 27% of revenue in the same prior year quarter. We're very cognizant of the - to generate profitability so we continue to closely and vigilantly manage our controllable SG&A cost which is reflected in the fiscal 2018 numbers. It's a balancing act as we believe that continued investment in sales and marketing make sense for the long-term growth of revenue. The company reported an operating loss of a $100,000 in the fourth quarter compared to operating income of $600,000 in the fourth quarter of last year. We reported a net loss of $100,000 or a loss of $0.01 per basic and diluted share this quarter compared with net income of $600,000 or $0.04 per basic and diluted share in the fourth quarter of last year. We reported EBITDA of $300,000 in the fourth quarter of this year as compared with an EBITDA of $1 million in the same period of last year. Looking at the key comparisons, for the fourth quarter of fiscal 2018, the company achieved revenue of $9.9 million and customer billings of $9.7 million. Professional market billings increased 11% to $3.5 million, retail billings decreased 10% to $2.3 million, government billings increased 36% to $600,000 and pharmaceutical manufacturer billings decreased 63% to $500,000. Now looking at the key comparisons for the full year for fiscal 2018. Revenue increased 5.1% to $40.1 million and customer billings increased 4.3% to $39.8 million. Professional market billings increased 10% to $13.1 million, retail billings increased 13% to $7.9 million. The growth in the retail billings attributable to unused medical solutions of $1.6 million was partially offset by a decrease in flu-related orders of $800,000 for the full year. Pharmaceutical manufacturer billings decreased 25% or $1.5 million to $4.5 million for the year. Of the $1.5 million reduction in pharma manufacturer billings, $500,000 was related to the terminated pharma manufacturer patient support program. The remaining decrease was primarily due to the timing of inventory bills of one major customer that ordered $1 million of inventory in fiscal 2017, but only $400,000 in fiscal 2018. There have been no reductions in patient counts for the program, in fact, the patient count was actually increased. The customer just ordered more in 2017 than in 2018 for budgeting reasons. We expect to see additional orders from this customer in the September and December 2018 quarters, and additionally, we expect to see new inventory builds from other programs apart from this major customer of about $500,000 in the September 2018 quarter. Government billings increased 24% to $2.1 million and environmental billings increased 115% to $900,000 for the full year due to large projects in the first two quarters of the year. Fiscal 2018 gross margin was 28% compared to 31% in fiscal 2017. Gross margin was adversely impacted by unplanned second quarter 2018 repair and maintenance cost at both of our treatment facilities, start-up cost as we added another shift at the Pennsylvania plant and unplanned incremental costs associated with our treatment facility route-based operations in the Northeast related to severe winter storms in the third quarter. The total impact of these operations related items was about 100 basis points for the year. Gross margin was also negatively impacted by approximately 60 basis points for the year related to a lower margin on the unused medication collection receptacle portion of a major program launched during fiscal 2018. Finally, without the decline in flu related to retail billings and pharmaceutical manufacturer billings, gross margin for fiscal 2018 would have been higher by about 100 basis points. SG&A expense was reduced by 9% to $11.2 million in fiscal 2018. SG&A for fiscal 2017 included $700,000 of acquisition-related costs. Without those acquisition-related costs, SG&A for 2017 was $11.5 million, reflecting a net reduction in SG&A in 2018 of $300,000 or 3%. Net loss in fiscal 2018 was $700,000 or a loss of $0.04 per share for the year compared to a net loss of $1.3 million or a loss of $0.08 per share in fiscal 2017. Excluding acquisition-related expenses of about $700,000 on a non-GAAP basis, the company reported an adjusted net loss of $600,000 or a loss of $0.04 per diluted share in fiscal 2017 last year. Our balance sheet remains solid with $5.2 million in cash and cash equivalents as of June 30, 2018 and working capital of $10.3 million. As David mentioned, we're excited about the prospects for fiscal 2019 as we focused on these four major revenue strengths. We have the people and the infrastructure in place to drive growth in all markets and we're ready to meet the challenges ahead. With that I'll turn the call back to David.

[David Tusa:]

Great. Thank you, Diana. And operator, we are ready to open it up for questions.

[Operator:]

At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Matt Hewitt, Craig-Hallum. Please proceed with your question.

[Unidentified Analyst:]

Hi, this is Charlie Epson [ph] on for Matt Hewitt, thanks for taking my questions.

[David Tusa:]

Hey good morning Charlie. How are you doing?

[Unidentified Analyst:]

Good. As you've continued to experience success building out the company's route-based coverage overtime. Are you seeing larger deals start to enter your sales pipeline? I guess any color on the sales pipeline will be helpful?

[David Tusa:]

We have. I think the way we look at it is, when we look at the opportunities on the medical waste side. We are seeing a larger opportunity and we're seeing that the pickup is becoming a more important on the larger issues and then the larger customers across the volumes are larger. We just launched a relatively large deal in June relative to the 200 plus location deal. The pickup the route-based pickup was a critical component to that business, but we are seeing larger opportunities on the medical waste side and believe that with the infrastructure we have in place and the 24 states that we cover that we're able to obviously propose and facilitate those.

[Unidentified Analyst:]

Okay great. And then the question about the takeaway recycle program. Is this large enough customer that once it's fully ramped it could be a material driver of sales growth over the next few years or where we need to see other contracts layer on for that program or that segment to become material driver of Sharps.

[David Tusa:]

Well, firstly, well let's say with this one particular customer, we do have minimum purchase requirements as part of the deal. And so, for quarter 2018 and 2019. But what I think we really need to see as to determine that this is going to be a material revenue stream are other opportunities that are out there. And we are in discussions with other single used device manufacturers for he recycles system. There just appears to be over the last six months, it's been the inquiries have been significant. And with the change or with the move in the hospital setting towards single used devices that they're looking for the proper disposal systems in many cases, they're looking for recycle systems. So, while the initial deal we signed is a nice deal that's a nice dollar deal. I really think we need to see others commend as determine that this is going to ultimately be a material revenue stream.

[Unidentified Analyst:]

That's helpful color. And then I guess one more, are you see any changes in the competitive front as pricing continue to stay relatively stable?

[David Tusa:]

I think so. We haven't seen any real change on the pricing. And I would say this, and I said this before, while pricing is important, I think we pay in the majority of our deals with much more than just pricing, the customer service element, the reasonable contract terms and the regulatory support is very important. As matter of that, all of those were the most important regulatory sport customer service was most important in the recent deals that we've just launched in Jan with 200 location chain. So, pricing staying the same, but there is much, much more to this business and just pricing.

[Unidentified Analyst:]

Sounds great. Thank you.

[David Tusa:]

Thanks, John.

[Operator:]

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

[Joseph Munda:]

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

[David Tusa:]

We can. Good morning. How are you doing?

[Joseph Munda:]

Good. David, I just want to I guess piggyback of Charlie's question regarding single-use - the device takeaway, a recyclable solution. And I just want to kind of get a sense how this is going to work essentially because you have a lot of these re-processors in these hospitals that go in and take these devices, re-process them and try to sell them back into the marketplace. So, maybe, can you give us some color of how this system is going to work and how they ensure that the devices are ending up in your receptacle and not in a re-processors' receptacle, because it seems like the manufacturer has a lot of incentives to have the products end up in their or your receptacle rather than in re-processors' bucket?

[David Tusa:]

Yeah. That's a great question. What we did when we work with the manufacturers is that we're providing this system to their customers. And most important thing, Joe is that, they're being bundled. This system or this one particular deal are being bundled with the sale of the device. So, with the device it can see the recycle, recycle system. And what we are seeing, and I think what the manufacturers are telling us as well is there is a real push for true single-use versus re-processing. And single-use is just that where it's disposed of or recycled after one use. And it appears based upon the activity we're seeing from the manufacturers that there is a significant push and a significant increase in just that, a true disposable device. And with that, our recycle system with this one particular deal comes with the device. So, their sales people, the manufacturers' sales people are training their customers at the hospital on the proper recycling of the single-use device, obviously our takeaway recycle system.

[Joseph Munda:]

So, are their reps - so their reps are making sure that devices are going ending up in your box. And then how does receptacle or product then get back to your facility for recycling, is it being sent or picked up?

[David Tusa:]

Right. The - you're right, the reps are responsible for working with the customers on the property use of the takeaway recycle system. We use a common carrier or our UPS return model. And that's really important because there is sort of disruption from a pick-up and these systems are dedicated to specific single-use devices. So, when they're full, they can be returned back to us via UPS. So, very, very convenient way for the devices to be recycled. The other thing that's really important, Joe, what we're learning from the manufacturers is that with our systems we track everything, and we have proof of destructions in different businesses, but in this one we have our actual proof of recycling. So, with each system we have an electronic database that shows that the systems are what returned that these systems were recycled, and they have a proof of recycling. The other thing we do is we provide this in the annual report to their customers. The total pounds that were recycled then they can include in their sustainability reporting. And sustainability is becoming more and more important in the hospital setting.

[Joseph Munda:]

Okay. That's helpful. I appreciate it. And then flipping over to the pharma business, Diana, you touched on a little bit of pharma contract not being renewed. I'm just curious, this one customer, how many pharma programs are they - are you conducting for them, is it just a one - is it one program or do they have other programs, you said that they are cutting back because of budgetary constraints. I'm wondering, do they have other programs that you guys are currently working on?

[Diana Diaz:]

It was just the one program.

[Joseph Munda:]

No, but do they - are you undertaking - do you have other programs that you're undertaking for them or is it just they just have one program like you?

[Diana Diaz:]

They just had one program with us and that's it.

[Joseph Munda:]

Okay.

[Diana Diaz:]

Does that answer your question?

[Joseph Munda:]

Yeah, it does. I appreciate it. And I guess, David, in regard to pharma, I know it's been a focal point in the past as far as delivering growth. I guess what are your plans as far as attacking that business going forward?

[David Tusa:]

Well, to sign-up more deals and to grow existing deals, we just signed one, it's going to hit September, it's going to hit the September quarter. We just landed a deal with prominent pharmaceutical manufacturer. And that's an indication, a new indication that we've haven't sold into yet, which we're really, really excited about. So, what we have to do is continue to sell and show the value to our existing customers which we do every day and then we need to land more and more. So, we have sales people focused on pharmaceutical manufacturers and landing more deal offset this show for many, many years and some pharmaceutical manufacturers embrace it. They like the program. They believe that it's improving the patient's touchpoints and adherence and doing many, many things. But, sometimes they don't get it and if there is cost cutting or budget cutting then we caught up with it and we did, and we got caught up of it on this one particular manufacturer in this one program.

[Joseph Munda:]

Okay, thank you.

[Operator:]

Our next question comes from Kevin Steinke, Barrington Research. Please proceed with your question.

[Kevin Steinke:]

Morning, just following up on the pharma manufacture discussion. You mention that this continued customer, would it generate about 350,000 in the fourth quarter. Were they a customer that typically rebuild inventory, once a year, you mean, how much should we think about that impact kind of an annual, fiscal annual basis?

[Diana Diaz:]

They have some more around 500,000 to 600,000 a year.

[Kevin Steinke:]

Okay, perfect. And in the retail space, they 6000 of more than expected flew orders. Is that just, do you view that as a more of timing issue that something that will come a little later as we moved to around to season or you know what's the outlook for that piece of business?

[David Tusa:]

We're not going to guess, but, I will say this, because it's been such a volatile market for us over the last few years. As you all know, but, we've included in our September quarter, we included in our internal forecast about $700,000 which is what we generated last year. And we have existing orders of little more than half of that.

[Diana Diaz:]

Right.

[David Tusa:]

And we're half way to the quarter. So, that's we were thinking, and this will have the same this year. But will be surprised a bit more, may be little surprised and it could be less, may be. We rather business of predicting the flu market and the flu business. We've also surprised for us. We were disappointed, but there is something really outside of our control.

[Kevin Steinke:]

Got it, okay. Just, circling back and the pharma just for a minute. You talked about the new program that will roll out in the September quarter I think, trying it an also referenced some existing inventory builds that might hit September quarter as well. Just trying to get a sense of the, you know the magnitude of - I know maybe you don't want to predict exactly, but this kind of, we should probably expect a sequential increase as we moved in September relative to the June quarter.

[Diana Diaz:]

Yes, that's correct.

[Kevin Steinke:]

Okay. Now on the route-based, you mentioned the 200 plus location contract that you just landed in June. I think, you've talked how on prior calls of the pipeline potentially leading to even faster growth and route-based as we move into the September quarter and second half of calendar 2018. You know, did you still see business activity that's going to support strong and may be even stronger growth in route-based going forward.

[David Tusa:]

We do see straight, the route-based business as you see from the numbers is growing roughly 20% a year. We did think that there is significant opportunity there. Its matter of fact, we added two territory up in the north east specifically to go after more and more of this business. But, and just so you know, we're really looking from a big respective. We started the list with a few acquisitions the route-based as one of the growing organically we acquired roughly $3.9 million of revenue when we completed those three acquisitions and we're on a run rate for over $8 million of revenue I think that really supports the fact that there is a real opportunity out there to continue to grow this business and the market place is looking for an alternative. The market place is looking for a provider, a provider that can cover multi-states, multi-regions and one that can provide regulatory support and otherwise. We've gone from zero to over 10,000 customer locations, pickup locations, we have 34 trucks out there on the road including a couple of semis and that's adds to one of ways we monitor, and we manage the business roughly $8 million of revenue, 34 trucks that's 234,000 per truck which is a good number, which is a solid number for this route-based business. But I just think the fact that we can grow this by 20 plus percent shows and in another word good in selling or good in servicing but there's a real opportunity out there to continue to take market share in this business.

[Kevin Steinke:]

Okay, great. You had mentioned in the earnings release, rolling out a new state for route based into the next few months I don't know if you care to disclose that or discuss that expansion a little bit more?

[David Tusa:]

Well, I'd say right now for competitive reasons, we won't talk about that, but it gets this up to 55% of the population and we see a lot of business in one particular statement. Let us get passed the launch and we'll talk more about it, but I will tell you this with our service area which is Northeast, Southeast Texas, Louisiana, we're able to directly service a significant portion of not only existing customers but future prospects and that's really important that you minimize the subcontracting and I think we've done that pretty well as a matter of fact we'd only have 11,000 in total of volume of which 1000 is subcontract so we're contracting and servicing 10,000 directly. That's really good for this business.

[Kevin Steinke:]

Okay, good. And I guess lastly you mentioned the award of the state wide federally funded MedSafe contract that could start rolling out in the September quarter, and potentially seeing that in other states what does the pipeline look there in terms of those like in terms of federally funded deals I mean is that really driven at the state level in terms of states developing programs kind of any more insight on to the potential there?

[David Tusa:]

That's right. We have state business, North Dakota, we have some state business we generated in Oklahoma and these were through federally funded programs and this one can't tell you the other states. It will be announced here soon hopefully in the public but it's not public yet. But it is, it's a little bit of a longer haul because the state puts a lot of information together to help or they go after the federal money but there is federal money out there, we're working with certain states to help them and work with them to get this federal money and then to launch program. It's a longer haul because obviously federal dollars are included what we've got three safe programs so far and hopefully that with more federal money we'll be able to launch even more.

[Kevin Steinke:]

Okay, great. Thank you.

[Operator:]

Our next question comes from Brian Butler, Stifel. Please proceed with your question.

[Brian Butler:]

Good morning. Thanks for taking my call.

[David Tusa:]

Morning.

[Brian Butler:]

Just first one just back on to the recycling of the single use solution, how should we think about the margins in that business is this similar to your current gross margins or is this going to be come on initially at a lower rate and then overtime maybe it improves to something better?

[David Tusa:]

No, it's going to be consistent with our product level margin at 50% and that's why that we've designed it and that we've priced it and by the way recycling is not - cost stood and we're going to generate a solid margin on it.

[Brian Butler:]

Okay, great. And is there any capital required and to put in this program in place and on the recycling side, is there anything larger asset wise, that you need on that CapEx side?

[David Tusa:]

No, there is - there really isn't and especially bringing these single used devices back to our facilities, breaking them down to the individual components they include plastics and metals, and batteries and circuit boards and we're able to break those down and put them in a different restock recycling stream. So, no additional capital at this point.

[Brian Butler:]

Okay, and then on the retail piece, the flu business has been down 600,000 so that means flu revenues was somewhere around $1.1 million is that right for the fourth quarter?

[Diana Diaz:]

Flu business wise, $1.3 million for the quarter.

[Brian Butler:]

$1.3 million, okay. And on that decline, is that - has the number of customers changed or is it same number of customers and everyone just ordering left?

[Diana Diaz:]

It's the same number of customers as last year's fourth quarter, they just what had left during that quarter.

[Brian Butler:]

Okay, I think we have talked a lot about the pharmaceutical pipeline, but just one more time, at least another tries. How should we think about growth in 2019, I mean is this really should we just assume this is kind of flat revenues and if you get some more wins, on patient support programs that's upside but the reality its unknown and we should just assume, you're not losing, you're going to be replacing customers, that at similar pace that you're gaining.

[David Tusa:]

Well, that the way we look at it is, the one customer that terminated their program for cost savings reasons was roughly $500,000 a year and when we look at it is that we first of all have to replace that revenue which we do have another program coming on line in September, and overtime has the potential to grow to be able to replace that and we chase and we're chasing as a deals as we speak, so that's kind of how we look at it Brian. But the good news with another program coming on is in September, it will help to soften some of the negative comparison.

[Brian Butler:]

Okay. And then on the revenue kind of drivers for 2019, do you kind of talked about - back route unused and then the single use. I mean are we talking growth expectations here in the double-digit range for those kind of line items or is that - I am just trying to understand what, those are going to be the drivers you're doing 5% growth this year I mean is single high single digit low double-digit a realistic target for 2019.

[David Tusa:]

Well, tell me how I look at it by the individual businesses, it's a route-based business are growing 20% plus, and I think that we are confident that we can contain there to generate revenue increase slowly to the route-based business deadline, at that level and maybe even higher. Then use medication business is growing substantially, 62% in the quarter, 75% for the year-to-date period and we have - obviously we have one large retailer deal that is relatively low penetration so far in that program when we think that that program has a substantial room to grow and the MedSafe continues to be just hot. So, I think that we'll continue to see the kind of - I don't know 62% to 70%, but I think we're going to see - continue to see significant growth in the end use medication. If on the mail back side, we can ever get some consistency in our flu orders, I think that we could start to see that stabilized on the mail back, because that's a big portion of the mail back business. And the former programs are mail back as well. So, with a loss one program we've got to make that up as well. So, we can all do the math of what we think that all comes down to - but I will just say that we're not very happy with single-digit growth and we think that with the route-based business, with the end used medication, and if we're fortunate on the single use device recycling business that that we could possible generate revenue growth greater than that.

[Brian Butler:]

Okay. And then just on breakeven just kind of thinking about what's the right annual revenue level, is it still kind of in the $43 million to $45 million range. Or is it a little bit higher than that now?

[David Tusa:]

Well, we did, $9.9 million of revenue call it $10 million of revenues and lots of pennies so you're close probably $10 million to $10.5 million of revenue that quarterly revenue that would represent breakeven.

[Brian Butler:]

All right, great. Thank you for taking my questions.

[David Tusa:]

You bet. Thank you.

[Operator:]

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to management for closing remarks.

[David Tusa:]

Great. Thank you very much everyone for your participation. And we look forward to next quarter's call. Have a great day.

[Operator:]

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.