Sharps Compliance Corp.
Q4 2013 Earnings Call Transcript
Published:
- Operator:
- Greetings and welcome to the Sharps Compliance Corporation's Fourth Quarter and Fiscal Year 2013 Financial Results Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Deborah Pawlowski, Investor Relations for Sharps Compliance Corporation. Thank you. Ms. Pawlowski, you may begin.
- Deborah K. Pawlowski:
- Thank you, Doug, and good morning, everyone. We appreciate your participation in our fourth quarter fiscal year 2013 financial results conference call. You should have a copy of the news detailing Sharps' results that was released earlier this morning. If you do not have the release, you may obtain it from the Company's at www.sharpsinc.com. On the call with me today are David P. Tusa, Sharps’ President and CEO; and Diana Diaz, its Vice President and Chief Financial Officer. David and Diana will provide formal remarks, after which we will open it up for questions. If you are listening via webcast, note you do have the ability to submit questions through the Internet. 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 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, let me turn the call over to David to begin the review and discussion. David?
- David P. Tusa:
- Thank you, Debbie, and welcome, everyone to our fourth quarter call. I'll briefly review the fourth quarter results as well as discuss how we’re executing on our growth strategy, and the progress we’re making in our targeted markets. I’ll then turn the call over to Diana, who will review the financials in a bit more detail. As you can see we reported revenue of $5.3 million for the fourth quarter, up nearly 16% or $710,000 over the prior-year period. Solid growth in sales and in our Professional and Pharmaceutical manufacturer market drove the increase, which was partially offset by lower billings in the retail market, which were softer due to the timing of flu shot related orders. Professional market billings grew almost $260,000 or 33% in the fourth quarter, driven significantly by alliance related business of about $150,000 for the quarter. Now, when I refer to alliance related business, this is the new business that we’ve lined that includes both our mailback as well as the Daniels pickup service making for a comprehensive offering. The Professional market results have positively impacted by the targeted telemarketing activities and our ecommerce driven website. Billings for our inside and online sales channel increased by 47% year-over-year or about $300,000 to nearly $925,000 in the fourth quarter. We are building stronger awareness of our cost effective solutions for the inside and online sales channel in the professional market and we believe we still continue to see substantial market inroads in the coming quarters. We recently hired a new Director of inside sales who has over 20 years of experience with call center management and we expect great things from him as he manages the team, expands the customer base and attacks the over 800,000 Professional market prospects. He is working very closely with our marketing teams and launch of number of new and innovative initiatives over the next few weeks. The Pharmaceutical manufacturer market also posted strong revenue growth this quarter, up $322,000 or 115% compared to the year-ago quarter. This quarter included re-supply orders from two Patient Support Programs as well as the increases in fulfillment activity for our Patient Support Programs in general. Our customers have been very pleased with the positive results of the Patient Support Programs and we’re leveraging this to drive more opportunities with existing and new programs. Sales for this market again fluctuated measurably from quarter-to-quarter, due to the variability and the timing of re-supply orders associated with the programs. And yes, we’re beginning to see new Patient Support Program opportunities for new drug launches, that has the potential to positively impact calendar years 2014 and 2015 and to give you an idea for the annual revenue opportunity, we’re looking at as many as five potential new programs and watchfully roll that to generate up to $5 million in annual revenue. Following a couple a very strong quarters of sales in the retail market driven by seasonal flu shot orders, our sales were down 136,000 or 16%. However, we’re positive about the anticipated growth in the sector looking forward. In this market, this retail market, it should be positively impacted in the future as shown with recently published reports that talk about our projected increases in clinics, doubling over the next four years. So we see increasing demand in the retail clinic sector not only because of the newly insured patients under healthcare reform, but also patients looking for more convenient care. The two leading retail pharmacies in the country are emphasizing their efforts to grow their capability as a low cost provider of healthcare services for non-chronic conditions. So given our market share, we believe we’re very well positioned and capitalize on this trend, which would in turn drop demand for cost effective regulatory compliant solutions for medical waste management. Now in addition to the alliance related to Professional market growth of $150,000 for the quarter that I mentioned earlier, we’re beginning to gain more visibility regarding the potential impact of future alliance related opportunities, which we believe we could close over the next few quarters. So with that we’ve a solid pipeline of opportunities. And when you exclude government opportunities, our pipeline well exceeds $30 million in annual revenue, recurring revenue opportunities with over 60% of these attributable to alliance type opportunities, where we provide comprehensive medical waste management service offerings for both the mailback and the pick-up service are integrated in the offering. The offering also includes single point of contact, consolidated billing, and complete integration of our Sharps Tracer System. As many of you’re aware, the alliance Daniels allows us to position the Company as a full service, medical waste provider, not just a mailback company. And as a result, that makes up our pipeline is made up of multi-sites, multi-location organizations which have higher sales potential per customers than the standard small quantity generated market that we’ve historically addressed. Now in addition to the benefits with the alliance, our business is positively impacted by the changing demographics of the U.S. population as well as the change in the delivery of healthcare. The National Institute on Aging has cited that one out of every five Americans will be 65 years or older by 2030, which is going to increase the need for cost effective medical waste management solutions, and many of the markets we serve including Assisted Living and Long-Term care. Further as a result of the uncertainty created by the current state of healthcare, our prospective customers are looking for cost savings, now or never. But it’s very important to note that we just don’t differentiate ourselves with cost savings. We believe our excellent customer service, our obsession with responsiveness, our proactive regulatory support and operational efficiencies play a very key role in the sales process. So with that, I’d like to turn it over to Diana, who is going to provide more details on the financials. Diana?
- Diana P. Diaz:
- Thank you, David. Gross margin was 30% in the fourth quarter of fiscal 2013, up 700 basis points from the prior-year period. The prior-year period was negatively impacted by a $300,000 charge, or 655 basis points in gross margin associated with last year's accrued loss for lease-related liabilities for Atlanta facility. Remember that we close that facility upon the termination of the U.S. government contract, which was effective January 31, 2012. This quarter’s margin improvement also benefited from the 16% increase in sales compared with the prior-year. SG&A expenses in the fourth quarter of 2013, of $2.17 million were comparable with last year and lower compared with the sequential quarter of $2.35 million, which included about $200,000 of severance cost. Further, we expect to maintain a quarterly level of about $2.2 million to $2.4 million in SG&A expense over the next several quarters, unless additional targeted sales and marketing initiatives present themselves and more at further investments. We generated an operating loss of almost $700,000 in the fiscal 2013 fourth quarter, compared with an operating loss of about $1.2 million in the same period of prior-year and $940,000 in the sequential quarter. Earnings before interest, taxes, depreciation and amortization or EBITDA was a loss of about $435,000 for the fourth quarter of fiscal 2013, compared with an EBITDA loss of almost $970,000 in the same period of the prior fiscal year. Net loss for the fiscal 2013 fourth quarter was about $690,000 or $0.05 per diluted share, compared with a net loss of $2.8 million or $0.18 per diluted share for the prior-year period. We recorded deferred tax valuation allowances in each period amounting to about $250,000 or $0.02 per diluted share in the fiscal 2013 fourth quarter and $2 million or $0.13 per diluted share in the fiscal 2012 fourth quarter. Our breakeven level is quarterly revenue of about $6.4 million with a corresponding gross margin of about 35%. Now let’s look at a few of the highlights for the fiscal year ended June 30, 2013. Core customer billings, which exclude the government CDC contract, increased almost 6% to $21.3 million. Several markets drove the improvement, including strong growth in Professional billings of 28% to $3.9 million while Assisted Living billings increased almost 21% to $1.6 million. We believe the Assisted Living market is ideal for our solutions and we believe we will continue to seek growth in this sector, through expansion of existing accounts as well as new prospects. Our Pharmaceutical manufacturer market billings also increased over 13% to $2.4 million. Core Government billings were up almost 75% to almost $750,000 as a result of a large, stocking order placed by the U.S. Department of Defense for about $200,000 through our distributor channel during the quarter ended September 30, 2012. This market also reflects about $100,000 of purchases by the VA of the Takeaway Environmental System by sites that participated in the pilot program that launched several years back. Retail billings were down modestly about 4% to $5 million for the year. Retail billings were impacted by the timing of orders and the new program launched in the prior-year period of the TakeAway Environmental Return System solutions. This was somewhat offset by higher sales of the Complete Needle Collection & Disposal System in the current fiscal year. Flu shot related orders were down about $200,000 to $3.6 million for the current year. This is due to a large customer orders that would have normally been shift in the June 2013 quarter being pushed out to fiscal year 2014. If this order would have been placed consistent with history, then our flu business would have been up 10% year-over-year. Our balance sheet remains solid with $15.5 million in cash and cash equivalents as of June 30, 2013. Cash is down about $2 million compared with June 30, 2012, as a result of our continued investment in sales and marketing, investments in our treatment facility and maintenance of operational infrastructure to support a much larger revenue run rate than we currently generate. Based on the significance of our pipeline, we’ve been investing in our future to position our self to take advantage of those opportunities. We continue to be debt free, our financial position is very strong and this bodes well for us as we invest to build the larger company. The Board authorized a stock repurchase program in January of 2013, for up to $3 million over a two-year period. During the quarter ended March 31, 2013 we repurchased 25,360 shares at an average price of $2.93 per share. We did not make any repurchases during the June 2013 quarter. Our outlook for our business is strong and we believe repurchasing our stock at an appropriate price is a good use of available capital. And with that, I’ll turn the call back to David.
- David P. Tusa:
- Thanks, Diana. Before we turn the call over to the Q&A session, I just want to make a few comments. We are confident in the momentum that we’ve generated with our sales team, our long-term strategy and having overcome the loss of the government CDC contract in January 2012, which contributed almost $2 million to our fiscal year 2012 revenue. The various sales initiatives that we’ve instituted or taken hold, we’ve gained much more visibility regarding our sales pipeline and opportunities that we believe we can close. We’ve successfully transformed the organization from the mailback company to a cost effective provider, a comprehensive medical waste and unused medication management solutions. The Sharps [stated] alliance is helping us to realize a significant potential in the market for penetration of various multi-site – multi-site facilities across the country. As we look forward into fiscal year 2014, we’re encouraged by these activities as well as the growing market demand for medical waste management solutions. We believe we’re in the best position to service that demand. So with that, operator, let’s open it up for questions.
- Operator:
- Thank you. (Operator Instructions) Our first question comes from the line of Ryan Daniels from William Blair. Please proceed with your question.
- Unidentified Analyst:
- Hi. This is [Nick] in for Ryan. Thanks for taking my question. With the Daniels relationship, when you sell services to say a large dental or web chain, what percent of the offer waste is mailback versus the percent that does that with pick-up?
- David P. Tusa:
- It’s different by different market and it’s still (indiscernible) the different prospect. But in general that’s probably it can be 20% maybe 25% of the facilities where we use the pick-up versus the mailback. On most of the markets that we serve the mailback is the most cost effective solution, but just roughly 20%, 25% of the time, there could be the larger facility where we use the pick-up.
- Unidentified Analyst:
- Okay, great. Thanks. Those are my only question.
- David P. Tusa:
- Thanks, Nick.
- Operator:
- Our next question comes from the line of Brian Butler from Wunderlich Securities. Please proceed with your question.
- Brian Butler:
- Good morning. Thanks for taking my call.
- David P. Tusa:
- Good morning, Brian.
- Brian Butler:
- Just we – if we start on the retail business and look a little bit more in detail on that, because I was surprised that on a year-over-year basis, it was down 4 percentish, I mean obviously you have some of that with the timing of the flu shot, but I would expected that some of the other programs they’re kind of offset that. So how do we think about that going forward on what kind of growth is really achievable there? I mean is it really more a mid single-digit kind of grow or is there some upside to the retail side?
- David P. Tusa:
- Well as Diana mentioned, if we’d have received initial orders from our largest flu shot customer this year consistent with what we received in last year that the market would have been up about 10%. The way I look at this retail market, the flu shot business, its going to continue to grow as mentioned earlier, the retail clinic should double over the next four, five years. So the earnings growth of what 20%, 25% a year, which we think that it will grow with them. And we don’t see any impact in this continuing to be a leading provider for this flu shot business in this space.
- Brian Butler:
- And how about on the other retail products, do you have any updates on kind of the cost sharing programs or some of the retailers on the Sharps product and the mailback?
- David P. Tusa:
- Sure. The – on the Sharps – you’re talking about the Complete Needle, which is in the retail sector. We’ve been pleased with the unit that have been sold into the retail chain, but we’ve been disappointed with the return or the redemption rates and we’ve been a bit disappointed because we have not been able to capture as much as the sponsorship that we had hoped for, where we bring Pharmaceutical manufacturers are other participants into a cost sharing program or to a support program. So it’s been a bit disappointing on the return side. We still think we’ve the opportunity there, but it’s been little bit slower growth than we expected.
- Brian Butler:
- Okay, great. And then on the – that Pharmacy with the business (indiscernible) place right now, I think you’ve targeted that being somewhere around $3 million in annualized revenues. It’s about $2.4 million in the ’13 – in your fiscal ’13. How do we think about that ramping up through the 2014? I mean that’s probably about 25% growth to get there and that’s not including any new orders or any new program that you have in the pipeline?
- David P. Tusa:
- We’re seeing some very positive activities from those programs recently. And we think that achievement of that $3 million run rate, we should be able to be there based upon resupply orders and some program changes and just growth of the program and the patients over the next couple, a few quarters. So we’re still very optimistic that we will see the $3 million plus on the – on those existing programs. And the other thing that what I mentioned was new programs. We’ve over the last couple of quarters have seen some significant activity on new program than it is with the programs where we launched with new drug launches in calendar years ’14 and ’15. So we’re working on those and it’s really good to see more opportunities within Pharmaceutical manufacturer space, we’re excited that we have the opportunities to lance more deals over the next year or two.
- Brian Butler:
- And on those new deals over the next, can you talk about where they are in the cycle of the five deals we have in there on the sales cycle, I mean are some in the very early innings or are they -- just a little bit more color I guess on when we could potentially expect those?
- David P. Tusa:
- I’ll tell you what, it's a good question and I appreciate it but I think for competitive reasons right now that we’re just going to keep quite on that. We think we are very well positioned in this space, and we have got primitive solution and we’ve shown that we can improve patient compliance and patient satisfaction. So again I think that you can see the impact in the calendar year ’14, and ’15 is imminently we lay on these deals.
- Brian Butler:
- Okay. And then on the alliance partnership or the Daniels partner, how you want to call it that was about $150,000 in the fourth quarter, I think you guys talked about that going to around $200,000 kind of in the early quarters of 2014. Do you have anymore color on how you think that ramps up, is $200,000 a quarter kind of the right pace for 2014 or is there really more upside that you guys can talk to coming from that partnership?
- David P. Tusa:
- Well that’s one deal, and that one particular deal it should be close to around right of about $200,000 a quarter which we should start to see. Now that’s just one. We’re working on many deals in many markets that with the Daniels alliance it has the opportunity to generate some significant recurring revenue. And when I think about these deals I think about them in the range of maybe $400,000 to $600,000 a year each and that’s a big part of that $30 plus million in the pipeline that I mentioned earlier. So we’re in the latter stages of many of these larger opportunities where we integrate the pickup with the mailback. So I think over the next couple of few quarters that we’ll be able to report increases related to certain markets that are attributable to these alliance type opportunity.
- Brian Butler:
- Okay. Did that just get the -- I guess my next question which is just kind of on the breakeven, I mean breakeven seems like it's picked up a little bit now because I think last quarter it was around $6.2 million a quarter, and now about $6.4 million, so I mean is it realistic that to achieve breakeven in fiscal ’14 or is that really kind of a stretched goal?
- David P. Tusa:
- No, I don’t think so -- I don’t think that’s a stretched goal at all. It won't take many opportunities to close to be able to get us to that level. Now, that doesn’t mean that we won't spend on sales and marketing if we believe it's necessary and it's opportunistic, but I don’t think that’s unrealistic at all.
- Brian Butler:
- So that’s, I mean we’re talking 15 plus percent revenue growth there in between ’13 and ’14, and that’s in the range of – not that again, not at he high end at what your expectation is, that’s more of the midpoint?
- David P. Tusa:
- I expect probably (indiscernible).
- Brian Butler:
- Okay. And then last one just to kind of growth CapEx requirements for ’14; do you have any color on that what you’re going to possibly spend in for growth and maintenance?
- David P. Tusa:
- We’ve been around that $1 million year level; it maybe a bit higher. We’re making some more investments in our treatment facility, I don’t see it higher than maybe a $1 million, $1.5 million it will still be relatively low.
- Brian Butler:
- Okay, great. Thank you very much.
- David P. Tusa:
- You bet.
- Operator:
- Our next question comes from the line of Kevin Steinke from Barrington Research. Please proceed with your question.
- Kevin Steinke:
- Good morning.
- David P. Tusa:
- Good morning Kevin.
- Kevin Steinke:
- Good morning. How are you?
- David P. Tusa:
- Good. We’re doing great.
- Kevin Steinke:
- Great. So you mentioned a couple of times that you have much more visibility into closing alliance related business, I am just wondering what you might attribute that to?
- David P. Tusa:
- A couple of things, Kevin I think what we’ve done a much, much better job of is identifying the opportunities, capturing, managing and monitoring. We have launched salesforce.com and I think that the sales team has done a much, much better job in capturing the opportunities managing and monitoring them. And it's actually really a good tool and it really helps us with focus as well on the larger dollar, higher margin, higher profitability opportunity. Now of course the fact that we had this alliance now allows us to focus on much larger opportunity. So if you went into sales force and you looked at sales force and look who was assigned to the sales person and obviously we’ll focus on those top 10 opportunities of each of the sales force that with the larger dollar opportunities. But just using the technology and then focus, a focus of the larger dollar opportunities I think have made a real difference. And Kevin the other thing is, we’re starting to win deals. And that really gets the sales team excited and closer to $600,000 deals is a heck of a lot better than closing the $50,000 deal, and you create excitement with your sales team with success, and again I think you’re going to see the impact of that over the next few quarters.
- Kevin Steinke:
- Okay, good. I think you also mentioned in your prepared comments that you recently hired an experienced operator of call centers, and it sounds like that’s still early on. But I was just wondering what sort of initiatives you might put in place in the professional market and what you hope to accomplish there?
- David P. Tusa:
- Well personally I think we’ve done a good job in growing the business where we were. But what we thought made a lot of sense is for instance within a significant call center experience where we can really address it from two standpoints. We get a lot of enquiries actually inbound that can handle the inbound, but more importantly work with marketing to launch some new initiatives on the outbound side and no, he’s working on them right now, we don’t take months to do things, we usually take weeks or days. So we’re going to be launching over the next couple of weeks some very new initiatives. And then it's a great time for him to come in and to come in and work with inside sales on the outbound side with the launching of some new initiatives. And I am going to hold off talking about the new initiatives because we haven't released it yet, but we’ll be able to talk more about it on the next quarter call. But we’re excited he is here. We think he can make a significant different and he’s got a tremendous amount of experience. He’s very successful in the past, and he’s excited as he can be, he’s never worked on an opportunity where only maybe 2% penetrated in a $600 million market opportunity.
- Kevin Steinke:
- Good, good. Now on the Assisted Living side, that market had a nice pickup in growth in fiscal 2013 relative to the year ago; is there anything in particular that you did this year to address that market that you hadn’t done in the past or any color on how you see that market continuing to grow?
- David P. Tusa:
- You know it's a great market for us, I think it's just focus -- is focusing on the market opportunities. That represents expansion with existing customers as well as landing of new customers. So, I think that we’ve realized it's a great market for us, and it's one where we’re focusing much, much more in the way of resources. So, I’m excited about that market and I think you’re going to see significant increases in that market on a going forward basis.
- Kevin Steinke:
- Great. On the SG&A expenses you talked about a range of $2.2 million to $2.4 million over the next few quarters and you’ve been pretty consistent in kind of the $2.2 million level; so is the potential for a little bit higher run rate there, just general growth of business or you’re going to do more marketing or what's -- any color there?
- David P. Tusa:
- Well, we’re always looking for sales people. We’re always looking for field and sales folks. And actually we’ve replaced about three of the field sales folks with folks with much more experience and what we relate to the higher powered sales folks. So we’re out there every day looking. So, if we come across opportunities to hire folks that we think could make an impact in the near term we’re going to do it. And that’s how we showed the range there, in case we want to bring in a couple of few more folks that you could see the SG&A higher. We’re very prudent, and we’re responsible with the spending of the SG&A, but at the same time well we have targeted opportunities to spend in a way that we think we’re going to get a significant return and we’re going to do it.
- Kevin Steinke:
- That’s true, that makes sense. And one last one for me, and I know David that you’re really focused on the recurring revenue opportunities, but any update with on any potential further rollout of business with the VA?
- David P. Tusa:
- Well I liked what you said at the beginning of your statement Kevin is that we’re focused on recurring revenue opportunities and that is absolutely positively true, that’s a beautiful part about this business. But regarding the VA, we continue to wait for them and their decision making on what they’ve done there. There’s been delays and they’ve missed deadlines and all I can tell you is that we think we’re uniquely qualified to meet all the requirements, but with any government opportunity the timing is just incredibly difficult to predict or there’s no assurances that they’re going to launch the program at all. So as a Company we’re focused on what I call the commercial opportunities, recurring revenue opportunities where in a regulated market the customer is required, by law the properly disposed that’s a medical waste and we’re focused on that, but what I’ll call the core business. Now along the way we land one of two of these government deals along the way that’s tremendous. That is really good, but that’s not to make the company we’re trying to build. What we’re trying to build is a company based on recurring revenue, core growth business and again sprinkled in with some government business along the way.
- Kevin Steinke:
- Okay, great. Well thanks for the update.
- David P. Tusa:
- Thank you, Kevin.
- Operator:
- Our next question comes from the line of Joe Munda from Sidoti & Company. Please proceed with your question.
- Joseph Munda:
- Good afternoon, David and Diana. Thanks for taking the questions.
- David P. Tusa:
- Good afternoon. How you’re doing Joe?
- Joseph Munda:
- Good. First off, touching on your, well I guess your guidance -- quarterly guidance with the SG&A, I am just wondering what is the number of direct reps currently you’re at?
- David P. Tusa:
- The direct reps, what number we’re up to now, well its six reps that we’re up to now and again we – that reflects switching out like three of them over the past couple of few quarters.
- Joseph Munda:
- Okay. And you talked about 800,000 market prospects. I am just trying to figure out is that enough reps to actually touch that market opportunity?
- David P. Tusa:
- Well, those direct reps don’t attack that professional market. The 800,000 some of these the doctors, dentist reps that’s really address through the web and through inside sales, that’s the one thing to these. And what the field sales reps are really focused more on large opportunities in Home Healthcare, Assisted Living long-term care. If it's a professional market it's going to be a large dental chain or a large vet chain. But they’re focused on opportunities that are sizable in many other markets that we serve. The 800,000 really literally is your dentist down the street, maybe a one or two (indiscernible).
- Joseph Munda:
- Okay. And that was Berkley’s export or expertise at waste management, right? I guess closing those bigger market opportunities?
- David P. Tusa:
- Well right, the larger was that the field sales forces are working on. So what Berkley is focused on is working with the field sales team to accelerate land and close the larger dollar opportunities. So he’s been in 99% of his time working with that field sales force, working on the large deals, half a million a year type deals. Now, that’s why we hired an experienced person on the inside sales with 20 years experience in a call center. Bob, our new guy on the call center he can handle that. He’s very experience and he handles that very, very well. So, with Berkley focusing on the field sales in the large deals that we think that they complement each other and we think that that’s going to lead us to success.
- Joseph Munda:
- Okay. As far as cash flow in the quarter; Diana can you give us some sense what it was the burn for the year; plus I’m sorry in the quarter?
- Diana P. Diaz:
- Yeah. It's going to be close to our EBITDA levels. The cash from operations will be around $1 million use of cash and cash from investing has been as said was about $1 million or so and not much in financing obviously.
- Joseph Munda:
- Okay. So do you expect with all these growth initiatives you have going forward to be then cash flow positive in fiscal ’14?
- David P. Tusa:
- We don’t make predictions, but as we mentioned earlier, I think when Kevin was speaking we don’t think it's unreasonable that the Company couldn’t be at a breakeven level which from a cash flow standpoint assuming no significant increases on the capital expenditure side with the roughly cash flow breakeven as well.
- Joseph Munda:
- Okay. Okay, and Diana in your prepared remarks you talked about stock repurchase, I happened to miss that, could you just give us an update there?
- Diana P. Diaz:
- Sure. We did not make any stock repurchases in the June quarter, but we’ve reported previously the March quarter purchases were the 25,000 or so shares at an average price of $2.93.
- Joseph Munda:
- Okay, I mean with the stock at the level with that right now; are you guys taking another look at possibly repurchasing stock?
- David P. Tusa:
- Absolutely. Well we will look at it, we’ll generally tell you you’ll have to wait about 48 hours after your earnings release to look at it, but absolutely we look at it from a standpoint to be opportunistic and if it makes sense then we’ll do it.
- Joseph Munda:
- Okay. And David my final question, regarding the facility, the treatment facility utilization, can you give us some sense of where you guys are at or a percentage and I know in the past you’ve talked about getting to a level where maybe you would be able to sell off the excess generated power from that facility. Are we still looking at something like that in the long-term -- in ’14 or is that more of a longer term deal?
- David P. Tusa:
- No, from the treatment facility it probably operates, we have both considerations in Autoclave, this probably operates about 20% to 30% of capacity level, and we do that for a number of different reasons to be able to handle the spikes in the business related to the flu shot. If you’re at that treatment facility during the, when all those mailbacks came back from the flu shot business it can be – it could be a bit overwhelming. But we certainly have plenty of capacity there. Remember that our mailbacks – more and more of our mailbacks everyday are going to the closest Daniels facility. So that’s going to free up capacity for our treatment facility assuming that we want to go out and maybe do more third party burns, more incineration burns which are typically higher margin burns.
- Joseph Munda:
- Is there an opportunity for that; I mean are you seeing an increase in the medical waste space where you guys can really use that excess capacity?
- David P. Tusa:
- What we’re seeing is, we’re seeing it on the pharma and waste side, we’re seeing it with government agencies or DEA or local law enforcement that needs to properly dispose of drugs, and that’s good margin, good high margin business. And we’re permitted to treat those kinds of burns. So what I see is more and more opportunity to take advantage of that kind of activity. And that’s kind of one of the benefits of the Daniels relationship is that if we send more and more of our mailbacks to the Daniels facility then we can use our facility to focus on the burning of guns and drug for government agencies.
- Joseph Munda:
- Okay. Yes, and I guess my final question, I know you guys probably don’t release this, but can you give us some sense of maybe the new account growth year-over-year and what you’re seeing there business wise?
- David P. Tusa:
- Well, we don’t loose customers, so pretty much all the drugs is either growth from the existing or new customers. And I’d say that the majority of the growth that you’re seeing is probably from new customers. I don’t have a breakdown between the two Joe, but really we think we have the opportunity to just to select on growth with the existing customers since we do with the new ones.
- Joseph Munda:
- Okay. I am sorry, one more; it seems like in your prepared remarks that it looks like you’re marketing now the Company as a lower cost to the alternative. I am just wondering how is that been going, has that been an affective sale for you guys by showing basically the impact on the P&L to some of these potential customers. Are you guys -- I know it's a touchy subject, but are you guys really going out there and explaining how much potentially these companies can be?
- David P. Tusa:
- Well, sure. Well first of all the first thing that we’re doing is we’re educating them market wise on a new full service provider which is us along with the Daniels alliance and making them aware that there is an alternative to their existing provider. That’s first and foremost what we do, and they are receptive to that. And by the way once we get in and we educate them on an alternative and we start talking about our offerings actually cost savings are important, but not what we’ve seen in the market place, not near as important as great customer service, responsiveness, regulatory support, operational efficiencies, single pointed contact, consolidated billing, that’s all very important to the customer and then it's, oh by the way we can save you 30%. So, we sell based on all of that. But really what we’re doing more than anything in Berkley and the field sales guys are out there everyday educating the market place in the larger prospects on an alternative that they didn’t know existed.
- Joseph Munda:
- Thank you.
- Operator:
- Our next question comes from the line of Craig Hoagland from Anderson Hoagland. Please proceed with your question.
- Craig Hoagland:
- Yeah, I wanted to touch briefly on the home market; revenue’s were flat this year over the last year and is the outlook consistent with that?
- David P. Tusa:
- That market has been flat for a number of years, but I’ll tell you we think we have the opportunity going into ’14 to change that trend and to increase that. What we’re doing now is in this home care market and now that we have the pickup as well as the mailback that is opening up doors for potential new opportunities on the Home Healthcare side. So we would hope to start to see increases in that sector.
- Craig Hoagland:
- So the alliance could be relevant there too?
- David P. Tusa:
- Oh, yeah because if you think about it from a Home Healthcare it's not just the mailbacks would be going to the patients at their home. I mean there is significance not a medical waste that’s generated in their branches or in their facilities, and a mailback doesn’t necessarily work in a situation where there is large quantities in one location. So, what we do is we bolt in the pickup. The pickups are which that facilitates the larger amounts of waste in single locations, and then maybe the mailback going to the Home Healthcare patients.
- Craig Hoagland:
- Right, okay. Then circling back to retail; is there – you talk about the clinic driven business, and I think primarily flu shots, is there other clinic driven business that’s part of that retail revenue number or is most of the retail revenue that’s not flu shot actually the retail products, the complete needle in the takeaway?
- Diana P. Diaz:
- Well, there was some growth in the complete needle market that we saw. But we’re also seeing growth in other clinic business. They’re not just doing flu shots anymore they’re also doing other inoculations, immunization programs and things like that. They’re trying to really expand their business as David discussed in the remarks.
- Craig Hoagland:
- Right, okay. So that $5.1 million debt we did this year was, it wasn’t just flu plus that’s completely on the takeaway there’s another chunk in there?
- Diana P. Diaz:
- Well, we call it flu shot related business, but it's inoculations as well as flu shots.
- Craig Hoagland:
- Oh, I see, okay. And that’s the portion that we might see grow in line with the industry at 20% or 25%?
- Diana P. Diaz:
- Correct, correct.
- Craig Hoagland:
- Okay. And then the retail product’s is a more questionable outlook?
- David P. Tusa:
- I think it's a fair statement. You’ve done a good job at getting it into the sales and the retail channel, but that one is a little bit more difficult to predict.
- Craig Hoagland:
- Right. So, if those product sales are now, I mean you refilled the channel and now we’re struggling with sell through. Can we expect retail revenues to be up in ’14?
- David P. Tusa:
- We sure plan on it. Again with the increase in the retail clinics and with more service offerings that we’re selling into them and then the retail clinic is offering more, I mean you can’t go into a retail clinic and not see an advertising for some sort of immunization and by the way that’s what Healthcare is living, Healthcare is living to the ultimate side. I saw a great article written by a pediatrician and he said -- I know it may negatively impact my business but if your child has just a minor illness it's so much easier going to that retail clinic where the treatment is provided by a PA, and it's done in a cost effective and very, very convenient manner. So, that’s going to I think board well for our business and as that retail clinics increase.
- Craig Hoagland:
- Right, okay. And then just to clarify, the $30 million recurring revenue you see in the pipeline with the alliance, is that revenue to Sharps or does that include the Daniels piece of that as well or is that structured or is there a pastor component of that or how should we think about that?
- David P. Tusa:
- No, well it's all of the revenue related to the opportunity. And what we do is, we are faces to the customer. If we have to subcontract out a portion of it to be able to get the larger deal then we will do that, and it's typically not a pass through. What we do is we put a comprehensive offering together that address both the mailback and the pick-up and present it to the customer along with all of the other services that we provide. The customer service, the regulatory support and again single pointed contact, consolidated billing. So there’s really four or five different services that are actually wrapped up together and packaged together that’s sold to the customer.
- Craig Hoagland:
- I see. And then so Daniels would be as a subcontractor in that structure?
- David P. Tusa:
- That’s correct.
- Craig Hoagland:
- That piece would be of lower margins obviously than the mailback?
- David P. Tusa:
- It may, it may not.
- Craig Hoagland:
- Okay. Thanks for answering all the questions. I appreciate it.
- David P. Tusa:
- Thank you. Good questions.
- Operator:
- Our next question comes from the line of George Walsh from Gilford Securities. Please proceed with your question.
- George Walsh:
- David, I want to (indiscernible) Home Healthcare a little bit because you did also mention that last quarter, it's about 30% of revenues is – what kind of growth rate do you think is possible there because it's, right now it stayed pretty flat, it's been consistent but is there some type of growth rate you think you can generate out of that base?
- David P. Tusa:
- Well we have seen a lot of activity on the Home Healthcare side. And with a number of particular customers, some of the existing customers, and again it's all part of the change in Healthcare and trying to move more of the -- of Healthcare out to the alternate site setting. So, George I mean I would say that if we’re successful on our initiatives that we should be able to grow that by conservatively by at least 10%, with some of the new business coming here, lining some of the new customers.
- George Walsh:
- Okay. And that’s good – that’s fairly good part of your revenue stream and it seems to be something historically that’s been pretty consistent, so if I can take a growth rate on it?
- David P. Tusa:
- Well, that’s true. But remember now we’re really positioned as a much different Company before we may not have been able to handle large probably healthcare deal, because we couldn’t handle large quantity waste, maybe at branch level, but we can do that.
- George Walsh:
- Okay. And also just with the retail clinics that you mentioned, this would be through the change and is there a rollout that they’re doing with that and how would that ramp up and do you work with them as they ramp that up or you just kind of see it develops and then you say well we can get services to what you’re doing here?
- David P. Tusa:
- Well, we’re part of what they do. They’re adding services not only in flu shot, they’re providing many, many different immunizations and what they do is and where there are different ports, the syringe disposal as they grow. So our business grows as their business grows and they provide more immunization, they’re going to get more year round immunizations as well.
- George Walsh:
- Okay. So, what kind of volumes is that – any basic estimate of that versus a flu season that’s a spike? Are there other immunizations that could really smooth that out on an annualized basis?
- David P. Tusa:
- I don’t think so. I think you’re always going to see that spike from the flu shot, because the flu shots are always going to be that, my guess it’s a significant portion of what they’re doing. But at least probably the next couple of few years, I think we will continue to see that as spike. Now you will see I think a little bit of moving out with some of the other immunizations, that I think so dominated by flu.
- George Walsh:
- Okay. And how is the flu season shaping up so far from what you’re seeing?
- David P. Tusa:
- It’s a good season, it’s an interesting season. The vaccine is out little bit later this year, because I think they wanted to make sure that it will formulate to handle as many of the strains -- the flu strains as possible, but we know we’re dealing with our customers that the vaccine is rolling out a little bit later than what was expected. But so far we see a very strong season.
- George Walsh:
- Okay. And it should hit the next quarter, first quarter of fiscal year ’14?
- David P. Tusa:
- Well, it hit all quarters. It hit the March quarter big, and then hit (indiscernible) June quarter and then hopefully it will hit back in the September quarter and every year it’s different, because sometimes they order up front and they warehouse it and ship it out to the stores, sometimes they – we ship it in the stores, sometimes they wanted to ship to the warehouse and breakdown a large order into five different orders. So it’s just different pretty much every year. It’s very difficult to predict.
- George Walsh:
- Okay. All right. Thanks, David.
- David P. Tusa:
- Thank you. Thank you, George.
- Operator:
- There are no further questions in the queue. I’d like to turn the call back over to management for closing comments.
- David P. Tusa:
- Thank you. And in closing, I just want to thank everyone for their participation in call. We appreciate the questions, all great questions. And appreciate your support to the Company. Hope everyone has a great day and again thank you for your support.
- 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.
Other Sharps Compliance Corp. earnings call transcripts:
- Q3 (2022) SMED earnings call transcript
- Q2 (2022) SMED earnings call transcript
- Q1 (2022) SMED earnings call transcript
- Q4 (2021) SMED earnings call transcript
- Q3 (2021) SMED earnings call transcript
- Q2 (2021) SMED earnings call transcript
- Q4 (2020) SMED earnings call transcript
- Q3 (2020) SMED earnings call transcript
- Q2 (2020) SMED earnings call transcript
- Q1 (2020) SMED earnings call transcript