Greetings, and welcome to the Sharps Compliance First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] I will now turn the conference over to your host Jen Belodeau you may begin.

Thank you. Good morning, and welcome to the Sharps Compliance first quarter fiscal 2021 earnings call. On the call today, we have David P. Tusa, the Company's President and Chief Executive Officer; and Diana P. Diaz, 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 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. Go ahead David.

All right. Thank you, Jen. Good morning. Welcome everyone to our first quarter fiscal year 2021 earnings conference call. As we kicked off fiscal year 2021 the U.S. continues to content with the public health issues and economic impacts associated with COVID-19. We believe our performance during this unprecedented times demonstrate our ability to operate on an uninterrupted basis as well as strength of our strategy, finally the power of our diversified business models as we have transformed the company from the mailback only company to a comprehensive provider with three primary revenue streams. Revenue in the first quarter of fiscal year 2021 was $13.2 million a decrease of 3% compared to $13.6 million in the same prior year quarter. Customer billings decreased 6% to $13.4 million for the first quarter compared to $14.2 million for the same prior year quarter. The shortfall in revenue from our revenue expectations of $15 million was due to the customer ordering patterns and timing of flu and COVID-19 related mailback orders for the 2020 fluid-related season. The shortfall was covered in early October 2020 with orders that shifted from the September 2020 to the December 2020 quarter. We've always viewed flu related activity as a nine month season comprising the June, September and December quarters. Historically order volumes within the season have often vary from quarter to quarter depending upon customer ordering patterns, their distribution and warehouse facility operations which this season have been disrupted by the demands of COVID-19. This has resulted in delay in orders, fewer bulk orders versus more just in time orders. It's important to note that we are experiencing a timing issue. We've not lost any retail pharmacy customers or major distributors nor market share in the retail pharmacy space. Our relationships with our flu and COVID-19 customers have only strengthened during these difficult times. We remain confident that we're in the midst of a very strong flu immunization season as evidenced by a 50-plus percent increase in flu related return mailbacks for the August 2020, September 2020 and October 2020 period versus the prior year. Now also contributing to the decrease in revenue where the home healthcare market billings which had a tough comparison given there was a $900,000 stocking order in the prior year related to a new distributor relationship. So our internal expectations for the quarter were closer to $15 million in revenue, 33% gross margin and a 5% operating margin. Now while Diana will provide more detail on the financial highlights for you in a few minutes I'm going to discuss the broader view of what we believe to be significant opportunities ahead of us and the strategic investments we've made in the business to fully take advantage of such opportunities. So during the first quarter we saw a significant rebound in our route-based business with revenues increasing 19% surpassing pre-COVID-19 levels as well as our internal expectations. Likewise professional market billings have recovered. First quarter billings in this segment also exceeded pre-COVID-19 levels. This strength represents not only resumption of operations for most of our COVID-19 affected customers but it also reflects sales to new customers. We now have 14,175 direct route-based customer locations versus 13,750 at June 30, 2020 and 13,100 at September 30, 2019. We're also hopeful that the flu immunization season should be followed by substantial activity related to potential COVID-19 vaccine which many experts believe could be available later this year or early 2021. We have a robust inventory of our medical waste mailback solutions in place to meet anticipated strong demand and this month we're commissioning a new autoclave at our Pennsylvania facility and this expands our medical waste processing capacity from 18 million pounds to 27 million pounds a year and that's up from 10 million pounds a year ago. We are more than ready for the potential follow-on COVID-19 vaccine season. Now of even greater importance than the flu and the potential COVID-19 vaccine-related business is the potential to land larger, rapid opportunities serviced by our expanded infrastructure which now serves 32 states addressing 70% of the population. The pipeline of these opportunities is robust and very active with prospects more engaged now than they were during the onset of the pandemic in March of 2020. Our goal is to close many of these opportunities in the December 2020 quarter and potentially begin generating revenue from these as early as the March 2021 quarter. As I've said many times I continue to believe that the small and medium quantity generator market is quite underserved and is looking for an alternative to their incumbent provider. We believe our excellent customer service, responsiveness and reasonable contract terms are our primary differentiators in the marketplace. Now a quick update on unused medications. We believe that we are the industry leader for the collection of unused medication solutions through our med safe and take away medication recovery system envelopes. We currently have about 5,700 med safe collection receptacles deployed with our customers and it processed over 62,000 return message liners as of today. unused medication buildings were down slightly as compared to the first quarter of 2020 but we have seen returns of med safe liners continue to rebound to above pre-COVID levels. While currently being overshadowed a bit by concerns around the pandemic the Opioid crisis in the U.S. continues to loom as a major health issue and we're pleased to provide solutions that play a part in the proper collection, return and destruction of unused prescription medications. We anticipate the continued adoption of our unused medication solutions as consumers, increasingly return to retail pharmacies and as long-term care facilities begin to return to more normalized operations. So looking forward, we believe we have the opportunity to deliver a strong December 2020 quarter as a result of the expected strength in the retail market, flu related and COVID-19 testing business, long-term care market, billings and pharmaceutical manufacturer billings. Of greater importance is the opportunity to drive more revenue growth for the fiscal year 2021 as we work to close larger field sales opportunities utilizing our expanded route-based infrastructure. I remind everyone that we're operating and operating quite efficiently during the pandemic providing uninterrupted service and taking advantage of the opportunities presented whether it be a 50% increase in return flu mailback volumes, servicing the 100 plus percent increase in volumes from long-term care facilities, positioning the company to service a retail pharmacy market as it prepares for a potential COVID-19 vaccine administration season or utilizing our expanded route-based infrastructure to land larger and new route-based customers. The team remains very excited and committed to the opportunities in front of us for fiscal year 2021 and beyond. Now I'll turn it over to Diana to take us through the financials and after that I'd like to make a few closing comments before we open it up for questions.

Thank you, David. First quarter fiscal 2021 revenue decreased 3% to $13.2 million as compared to $13.6 million in the first quarter of last year. First quarter customer billings decreased 6% to $13.4 million compared to $14.2 million in the same quarter of last year. Sequentially, the first quarter fiscal 2021 revenue increased 5% to $13.2 million as compared to $12.6 million in the fourth quarter ending June 30, 2020. As David mentioned our GAAP revenue and customer billings in the first quarter of fiscal 2021 were negatively impacted by the timing and ordering patterns of flu related mailback orders received from our customers. Retail market billings decreased $500,000 or 12% to $3.6 million in the first quarter of fiscal 2021 as compared to $4.1 million in the same prior year period. The decrease in retail billings is primarily due to lower flu shot or COVID-19 related orders of $900,000 related to the timing of those orders partially offset by higher unused medication billings of $300,000 from MedSafe and the TakeAway medication recovery system envelopes. Excluding the flu related billings retail market billings increased 26% reflecting strength and unused medication billings in this sector. Home healthcare market billings decreased 29% to $2.3 million in the first quarter of fiscal 2021 compared to $3.3 million in the first quarter of last year. The first quarter of last year included a large stocking order of $900,000 from a major healthcare distributor. Professional market billings of $4.1 million in the first quarter of fiscal 2021 were consistent with the same period of last year. This market which is comprised of physicians, clinics, dentists, surgery centers, labs, veterinarians and other healthcare providers has recovered to billing levels higher than the March 2020 pre-pandemic time period as most of the companies’ customer locations have reopened. Long-term care billings increased 110% to $1.3 million in the first quarter of fiscal 2021 compared to 600,000 in the prior year period related primarily to an increased volume of COVID-19 related waste management and ancillary supplies. Billings for the inside and online sales channel increased 13.3% to $2.9 million in the first quarter of fiscal 2021 as compared to $2.5 million in the same prior year period primarily due to increases in route-based pickup services to the long-term care and professional markets. Pharmaceutical manufacturer billings increased 26% to $1.2 million in the first quarter of fiscal 2021 compared to $900,000 in the first quarter of last year. This change is related to the timing of inventory bills for patient support programs. Route-based pickup billings for the first quarter of fiscal 2021 grew 19% to $3.2 million compared to the prior year quarter and contributed 24%, I'm sorry they contributed 24% of total billings for the quarter. With this rebound and route-based activity billing surpassed pre-COVID levels and also beat our internal estimates. Our unused medication billings of $2.4 million are consistent with the prior quarter and contributed 18% of total billings for the quarter. While we didn't see growth in unused medication billings we believe that our ability to stay consistent with pre-COVID levels for this solution demonstrates the growing number of consumers returning to the retail setting for their healthcare needs and using the trip as an opportunity to dispose of their unused medications. As consumers become more comfortable with a return to the retail setting we anticipate that our unused medication solutions will be favorably impacted. There are currently 5,700 MedSafes deployed as of September 30, excuse me, 2020 with about 415 units installed in the September 2020 quarter. To-date as of September 30, 2020 we've processed a total of about 61,300 MedSafe liners which is 23,300 or 61% higher than the 38,000 processed as of September 30, 2019. Sequentially for the September 2020 quarter we processed 6,150 liners compared to 4,700 liners processed for the fourth quarter ended June 30, 2020 and the 5,300 liners processed in the September quarter of last year. Mailback billings of $6.4 million decreased 17% and contributed 48% of total billings for the quarter. This $1.3 million decrease in mailback revenue was related to the $900,000 impact from the timing of flu and flu shot related orders as discussed above and a decrease in mailback sold to the home healthcare market of about $800,000 associated with that large stocking order in last year. These decreases were partially offset by an increase of $250,000 in mailback billings to the pharmaceutical manufacturer market. Gross margin for the first quarter was 28% as compared to gross margin of 33% in the first quarter of last year. Had we received the expected volume of flu mailback orders our gross margins would have been closer to the 32% to 33% level. SG&A expense increased 8% to $3.8 million or 29% of revenue for the first quarter of fiscal 2021 compared to SG&A of $3.5 million or 26% of revenue in the same prior year quarter. The increase in SG&A which is consistent with our internal estimates is related to the company's continued investments in sales and marketing. We see SG&A increasing by approximately 10% to 12% for fiscal year 2021 reflecting increased headcounts and related costs as well as additional sales and marketing expense. We reported an operating loss of $400,000 in the first quarter of 2021 compared to operating income of $800,000 in the first quarter of last year. We recorded a net loss of 300,000 or a loss of $0.02 per basic and diluted share this quarter compared to net income of 700,000 or $0.04 per basic and diluted share in the first quarter of last year. The company generated EBITDA of about $100,000 in the first quarter of fiscal 2021 compared to EBITDA of $1.2 million in the first quarter of last year. Our balance sheet remains solid with $6.8 million of cash at September 30, 2020 and working capital of $10.1 million. Accounts receivable at September 30, 2020 was $10.6 million. Day sales outstanding or DSO using the month of September’s revenue was 55 days reflecting disproportionately higher billings in the month of September compared to other months in the quarter. Inventory at September 30, 2020 including both current and long-term was $6.5 million which is consistent with the levels at June 30, 2020. Inventory increased by $1.7 million compared to last year at September 30, 2019 largely due to higher levels of flu related mailback inventory and IV polls which increased by $1.3 million and $400,000 respectively over the same period. Property, plant and equipment increased $700,000 from June 30, 2020 to September 30, 2020 which includes primarily carryover expenditures related to the treatment facility in Texas and about a $100,000 going towards that new autoclave in Pennsylvania. Long-term debt was $5.5 million at September 30, 2020 compared to $5.2 million at June 30, 2020 and the increase in debt was due to borrowings to fund the Texas treatment facility expansion partially offset by repayment of the prior year's acquisition debt. As we've discussed previously we received $2.2 million under the paycheck protection program or PPP established as part of the Coronavirus Aid Relief and Economic Security Act or CARES act. We have applied for forgiveness of this loan be our lender under the guidance provided by the small business administration and the department of treasury. And with that I'll turn the call back over to David.

Thank you, Diana. Just a couple of comments before we turn it over to the Q&A. While we experienced some adverse timing issues for the first quarter related to the flu related mailbacks we remain very optimistic about the strong flu season and the potential for a follow-on COVID-19 immunization season but probably the most important thing is we remain extremely optimistic about the long-term opportunity. Our three revenue streams whether it be mailback, route-based pickup or unused medication remain very bullish on the long term and committed to the business and with that operator we can go ahead and turn it over to questions.

And at this time we'll be conducting a question-and-answer session. [Operator Instructions] Our first question is from Gerry Sweeney with ROTH Capital. Please proceed with your question.

Hey good morning David and Diana.

Good morning.

Good morning.

I wanted to start with the mailback and flu right and we've discussed this in the past. I think historically $8 million is sort of a solid number for the flu business but I was just curious maybe you can describe when you do have a good year on which you really describe as a nine month season. What the order patterns look like right? So you have fourth quarter of the previous year then you have Q1, Q2 and 3. How do those orders sort of stack up and how long does ordering have to go to have an exceptional year end flu?

Right. So very good question. First of all when you look historically at the flu related orders, I think one of the things that is certain is there is not a lot of consistency year to year to year in the ordering patterns. That's why we look at it for the season and last year was very strong in the December quarter whereas a year prior to that it may not have been as strong as September could have been strong. Jerry here is where we look at it if you look at say June, September, December which is not all the flu but most of the flu between those it was roughly 7 million when you just look at those three quarters for last year ‘19. And if you look at the trends for the seasonal flu which basically returns and based upon what you hear publicly that flu looks to be about a 50% increase business. So from a season standpoint I guess that would infer that it could be as high as 10 million. We did what 5.2 million in through September.

Correct.

That leaves a gap of about 4.8 in the December quarter if we were to achieve let's say we'll do it before we were to achieve a 50% growth so that 4.8 we already have over 2 million of that in order. So that leaves the remaining 2.8 million for flu and of course that would be a great flu season if that all came in December. And it's going to depend upon a lot of things. It's going to depend upon the continuing demand and strength for flu shots. It's also going to spend a lot on warehousing limitations and supply chain issues that some of our customers are dealing with for COVID. They are minimizing some of their orders because they're trying to allocate more and more of their warehouse for more COVID related supplies and we'll just say have to see how that rolls out but we're confident in the business we think we'll have a good flu season, I don't know if it'll be that total $10 million, but it'll definitely be higher than what we did last year.

Got it and then I know you said there is no consistent pattern, but historically how late into the December quarter have you seen orders?

We tune it all the way through the end of the December quarter and sometimes in January and February if there is a follow on. So we're only one month into the December quarter we have two more months and we expect to continue to receive flu related orders.

Got it. And then, switching gears a little bit obviously you've talked about COVID being an opportunity as well and it falls into that mailback space. Have you had discussions with your retail channel customers about COVID vaccines? Are they expecting or anticipating being part of the distribution channel?

Sure. Right. Absolutely I think that we have had discussions with them and we are more than ready for a COVID-19 vaccine season. What we've also seen is that the retail pharmacy we believe is going to play a key role in the administration of the COVID-19 vaccine. But yes, we're in close contact with our customers. One of the things that's different and no one knows exactly when the vaccine is going to be available but one of the things that's different about the COVID-19 vaccine season is most of the drugs or I'm sorry, the vaccines in the later stage clinical trials are multi-shot and that's going to be a little bit different than what we've experienced for the typical seasonal flu. A number of them are two shots 28 days apart or one of them may be one shot with a booster a month or two later. So I will tell you how we're preparing for that. So let's say that we're going to sell somewhere between 200,000 to 300,000 mailback for the seasonal flu and we are maintaining a level of mailbacks over and above what we need for the seasonal flu of about 300,000 and that's what we have right now that's allocated for the COVID-19 vaccine. So that's about an investment of about a million and a half we have an inventory which we think is smart to be able to make sure that we're ready to support the customers but yes we've spoken with them and we have let them know that we're more than ready for the follow one COVID-19 vaccine season.

Got it. Then switching gears then I'll jump back and I just want a question around route-based. Obviously, really good quarter up about pre-COVID levels, but specifically 32 States you keep expanding it and you talked about a little bit the size of the contract but just because you can service larger accounts. Can you give us an indication of maybe where contract sizes have gone over the last couple of years and how does that relate to what's in the pipeline today?

Sure. The pipeline change significantly when we have fully launched the route-based business meaning not just a couple of few States, but 32 States. So we can service much-much larger customers with many-many locations. I would say the average size of the opportunities in our salesforce pipeline for the route-based business is probably $400,000 to $500,000 a year opportunities 500 to 1,000 location customers and it's changed quite a bit over the last few years. Closing of those was definitely slowed with the onset of COVID back in March and what we've seen over the last couple of months has been re-engaging and we have many of them in the pipeline and we're hopeful, can't guarantee it, but we're hopeful to close some of those in the December quarter. I still believe like I said, I think that bark in the small medium quantity generator market on the route-based side is very underserved and we think we're very well suited to be able to land more and new customers.

Got it. I'll jump back in line. Thank you.

And our next question is from Rob Brown with Lake Street Capital Markets. Please proceed with your question.

Good morning David and Diana. I just wanted to clarify something on the flu numbers you gave. I think you said last year through June, September, December was a 7 million. What was the comparable number for sort of June through September I guess, I think this year you said it was 5.2 what was that comparable number last year?

That was 4.6. 4.6 last year through September, 5.2 through September this year.

Okay. Good. That's helpful and then you said I think you had already received some orders for the December quarter and that's replenishment cycle. But typically how much visibility do you have as you get into December to get kind of flow through there? Is that just sort of come in day by day or do you get some visibility from your customers about that replenishment effort?

It's a good question. It's literally day by day. It's an odd season this year with some of the constraints that the customers have on their warehousing capabilities, their inventory capabilities but it is day by day. We're seeing this one particular large distributor that we've done business with for years and we're literally seeing orders like every day, every other day versus bulk type of order. So I'd love to be able to tell you we have a ton of visibility, but it really is more of a day by day and we'll get more orders. We'll get more orders between now and the end of the quarter. But, we told our customers we're well stocked and we're ready when they need it.

Okay. So your sense is there, given their warehouse situation there's not a lot of inventory out there in the channel and so as demand happens you'll sort of see that more directly maybe I'm putting words into your mouth here but is your sense the channel inventory is pretty low and there as it happens it'll flow through to you directly?

That's exactly right. Whereas the inventory in the prior years in the channel was quite high. It's actually quite low with the customers right now so we'll see those orders come in as they come in and we're again, we've told the customers we're ready. We have the inventory when you need it. We're more than happy to ship it, but they're dealing with a lot of, they're dealing with many many other issues versus a consumable like a mailback.

Okay. Good and then the last question is on the unused medicine market was sort of flat this quarter I guess what's your sense on how this recovers from COVID. Do you see it slowly recovering in terms of growth rate as this retail traffic comes back or do you see more of a snap back as these customers start to focus more on putting out receptacles as things normalize here?

Let me, Diana go ahead.

So we saw a pickup in the retail side of the business. The government doesn't seem to have recovered quite yet to the pre- COVID level and so I think we'll see a continued improvement in that side of things. Customers seem to be re-engaging to some degree on the MedSafe installs and hopefully we'll see that over the remainder of the fiscal year.

Right. And one of the really important signs is that the returned liners are well above pre- COVID levels which means that the MedSafes are being used in the retail pharmacy and they're going back into the source and again above pre-COVID levels which also tells me as well that again the retail pharmacy I think will be quite well-positioned and they are for the flu, the seasonal flu and if customers are comfortable with going into the retail pharmacy and that would tell you that when there is a COVID-19 vaccine that we would believe that the retail pharmacy will play a key role in that as well.

Great. Thank you. I will turn it over.

And our next question is from Michael Hoffman with Stifel. Please proceed with your question.

Hi David, Diana. I hope you both are doing well. Diana you gave a bunch of data and I couldn't write that fast. Could you repeat the MedSafe installs and then the liner numbers? I just I couldn't get a real written down.

Sure. Hold on just one second. Let me flip back to that. Okay. So currently we have 5,700 MedSafes deployed as of September 30, 2020 and we have 415 installed during the September 2020 quarter. Related to liners processed, we had from inception to date 61,300 liners returned as of September 30, 2020. That's 61% higher than what we had processed at the end of the year before. And then sequentially for the September 2020 quarter, we processed 6,150 liners versus 4,700 for the fourth quarter ended June 30, 2020 and 5,300 liners processed in the September quarter of last year.

Okay. So the installs weren't at actually a bad pace. I mean, the 415s is a little lower than through the thinking that maybe be about 1,700 for the year. Do you still think you're on a track of 1,700 incremental installs in fiscal 2021?

It really is going to depend on a number of things. On the retail pharmacy side we think it'll be strong. I think the real question mark on the MedSafe for going forward is long-term care and we were well along our way into launching more and more long-term care deals and that's been slowed down with COVID. We still feel good about the retail pharmacy side. It would really be nice to be able to sell more into long-term care but that may be pushed. It could be pushed until maybe earlier, maybe even the December of next year.

So are you suggesting maybe we refine our thinking and pull back to more like 1,600 for the year and that's a better place to be for the year given your --?

Probably so. That would make a lot of sense. Now well that's important I'll tell you what's even more important is we're seeing the return liners increase significantly especially here over the last week or two. They've really been high, quite higher than the pre- COVID levels and why that's important Michael is that there is the ordering of the returned liners. It's not just the MedSafe unit itself. It's return liners. So we're bullish on that and we see the opportunity to generate more and more recurring revenue with more and more liners from the existing MedSafe too.

Okay and then CDC issues this data on the number of flu vaccines that are potentially being distributed and then the numbers are pretty healthy number for this year and the flu vaccine season started earlier than normal. So I'm struggling with why the $2 million shortfall for your own budget. That's I'm trying to make sure we're not, there is not some smoke here about maybe the American public isn't going to get a flu shot after all?

No. I don't think that at all. I think the data that's most important is the return mailbacks that we're processing and we have tremendous amount of data. We track every mailbacks and we know which mailbacks are allocable to the flu season and they are very-very strong 50 plus percent increase. I think the inventory and warehousing levels are what pushed the orders over in October. But I will tell you this I think the retail pharmacy is increasing market share as well. So I think that consumers are more comfortable with going to the retail pharmacy for their flu shot versus the doctor's office where there may be sick people in the waiting room. So I think that's what we're going to see as a result of this is that retail pharmacy picks up market share. What was it last year Diana that the retail pharmacy was at 35%- 40%?

Right.

35%-40% of in last year Michael or flu shots are administered in the retail setting. I think that number is going to be higher after we complete this year.

Right and one other thing is that children have typically not received their inoculations in a retail pharmacy and now they're starting to be allowed to give shots to children in retail pharmacies. So that's another opportunity for an increase.

So there was a story bouncing around that I think is full of baloney but I want to get you all to comment on it that there is a different quality of vaccine done by the retail pharmacy than if you went to your doctor's office. Can you debunk that?

That's just not true. I don't know I'll just say that it's just not true.

Yes. That's so just to be clear it's the same vaccine no matter where you go it doesn't really matter where you get it it's the same vaccine.

Well, first of all there is probably multiple vaccines but you're going to get the same thing whether it be a retail pharmacy or a doctor's office with the same efficacy.

Okay. On the route-based side, the capacity expansion how quickly do you think you fill that?

Are you talking about the --

Yes. Sorry. The autoclave in Pennsylvania.

The Autoclave in Pennsylvania. Well I got to tell you right now it's being, they're being inundated with return mailbacks who are coming in for the flu season and we'd love to fill it up sooner rather than later. I tell you why we did it Michael, in addition to having the opportunity to process more medical ways what's really important is as we go after these larger and larger route-based opportunities with larger and larger prospects what's really important is how much capacity do you have and we now have triple capacity and you don't want to be in a position where you're utilizing 80% of it. You want to have significant capacity to grow and the customers get comfortable and you're going to process all their medical waste. But we'd love to use it sooner rather than later but I think the most important thing is we have it. We have it for not only the seasonal flu. We have it for potential for the COVID-19 vaccine as well as all the medical waste is being generated from the route-based business.

Okay. Thank you very much.

Thanks Michael.

And our next question is from Kevin Steinke from Barrington Research. Please proceed with your question.

Hi, good morning. I wanted to just talk a little bit more about the route-based opportunities in the pipeline. You mentioned the goal of closing many of these opportunities in the December 2020 quarter just maybe talk a little bit about your confidence level and those being able to close in the current quarter or maybe the risk of those being pushed out or what might cause them to not close in the current quarter?

Well, we're in actual discussions with many and many of these prospects and they've been very very positive but no deal is done until the contract is signed. So could it get pushed out? Maybe. Could we not get it? Maybe. But there is many in the pipeline and we think we have the opportunity to get to our fair share of those. But I'd love to be able to talk in the March quarter about the revenue in the March quarter for the route-based being up because we closed deals in December that's we're hopeful of but can make no guarantees but we remain positive.

Okay. Yes. Fair enough. So is it one of the contributing factors you mentioned for expecting a strong December 2020 quarter was the pharmaceutical manufacturer market and I know you had a very strong first quarter there. So pretty strong first quarter, but you look at the year ago comp for the upcoming December quarter and it's a pretty difficult comp. So I mean should we still think about pharmaceutical manufacturing billings kind of being down year-over-year? Do you think you could kind of repeat that year ago December 2019 performance?

That's a really good question. Our December quarter for pharmaceutical manufacturers we believe is going to be very strong and we think we have the opportunity to beat the prior year December quarter with pharmaceutical manufacturer billing. So it's quite active and we think that again as I mentioned earlier, the December quarter will be strong with flow. We think it will be strong with the continued strength we've seen in long-term care and we think that the pharmaceutical manufacture sector in the December quarter is going to be quite strong as well.

Do you think that strength in pharmaceutical manufacture is that expected to just come from replenishment or what's the new business pipeline look like on the pharmaceutical front?

It's both. It's existing programs, it's new programs. It's more patients with existing programs and it's all of above and we are quite pleased and we're looking forward to finish in the December quarter with a very strong pharmaceutical manufacturer market billings.

Okay. Alright. That's helpful. How should we kind of think about the home healthcare market going forward? Is that a situation where we shouldn't necessarily see the performance of the year ago September quarter where you are over 3 million repeat or are there opportunities to kind of expand from current levels as you go forward?

So the home healthcare market in the quarter the same quarter December quarter last year had that, had the large stocking order about 100,000. So what you've seen in the last couple of few quarters what 23, 24 in home healthcare and everything you read about home healthcare says it should benefit from COVID-19 because our patients treat it at home. So we think there is an opportunity for growth, but right now we've been pleased with this roughly 23, 24 for the last couple of few quarters.

A – Diana Diaz: And the home healthcare has a similar distributor challenges where their warehouses are full of stuff for COVID related items and so they have similar type challenges with their warehouses.

Okay. Now that's a helpful color. Well that's all I have for now. Thanks for taking the questions.

All right. Thanks Kevin.

And again we have Michael Hoffman from Stifel. Please proceed with your question.

Thanks for the follow-up. So you shared that you had internal budget of 15 million on 33% gross margins, 5% EBIT. So what’s your thought about December?

Well, December quarter should be, could be quite strong. There is operating leverage in the model and I mean it could be. It has the opportunity to be better than the expectations we had for the September quarter. So again, pharmaceutical manufacturer market should be quite strong higher than what it was last year. Long-term care will continue to be strong as it has been for the last couple of quarters and flu it'll be what it'll be, but it has the opportunity to be a quite strong quarter.

So you did 146 last year, you were going to do 15 and 1Q this year. You're missing by 2 million and how much of that 2 million rolls into 4Q?

I don't know. That's a tough one.

December, sorry.

No. and that's a good question. It's a tough one. It's a tough question. It kind of goes back Michael I had laid it out and that for us to achieve a 50% growth in flu, we would need 4.8 million in billings and in December we've got about two so far so I don't know. I don't know where we're going to end up. It just depends upon the ordering patterns and the warehouse requirements of the customers. I don't think it's proven to roll in the full 2 million, but I do think it will be a quite strong quarter for that between flu and with pharmaceutical manufacturer and as well as continued strength and long-term care in the route-based business.

Okay. Thank you.

Sure.

And we have reached the end of the question-and-answer session and I will now turn the call over to David for any closing remarks.

Thank you. Thank you everyone for participating in the call today. We want to close by thanking our loyal and committed employees for their service, to our customers and the company during a pandemic it's a challenging environment, but we again are providing uninterrupted service to our customers. We want to thank all of our employees for their efforts and it is greatly appreciated. We look forward to talking to everyone on the next call. Thank you.

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