Greetings and welcome to the Sharps Compliance Second Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] It is now my pleasure to introduce Jennifer Belodeau, IMS Investor Relations. Thank you. You may begin.

Thank you. Good morning, and welcome to the Sharps Compliance second quarter fiscal 2021 earnings call. On the call today, we have David P. 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 earnings release, as well as in documents filed by the company with the Securities and Exchange Commission. These can be found at our website or at Sec.gov. So, with that out of the way, let me turn the call over to David. Go ahead David.

Good morning and welcome everyone to our second quarter fiscal year 2021 earnings conference call. Our second quarter results reflect growth across all markets as well as significantly increased customer billings in our mailback and route-based solutions offering. We anticipated this growth and in March of 2020, we launched several substantial infrastructure initiatives to support this growth. In September 2020, we completed projects including new autoclave one each in the company's Texas and Pennsylvania treatment facilities, essentially tripling our treatment capacity. Two, the addition of mailback-related warehouse and distribution space of 52,000 square feet in Pennsylvania. And mailback inventory on January 1st, 2021 of 300,000 units was an ongoing plan to manufacture as many adds in additional 1 million units by the end of fiscal year 2021. These projects have proven to be critical to the business, allowing us to facilitate uninterrupted service to customers throughout the COVID-19 pandemic. Three, the increased volume of medical waste from all of our markets and to continue the fulfillment of COVID-19-related mailback orders which began in December of 2020 and should continue as the country immunizes Americans with the COVID-19 vaccines. In addition to the significant growth in our mailback business, we're very pleased with $1 million or 41% increase in the route-based billings for the second quarter. Contributing to this growth was an increase in customers and new business of about $700,000 as well as increased volume from our long-term care customers of about $300,000. We continue to be bullish on the prospects -- growth prospects for our route-based offering which we believe has strong potential to provide long-term recurring revenue in a market we believe is greatly under-served. Now, earlier this month, we announced $10 million in advanced mailback orders to be filled primarily in the March 2021 quarter for the support of COVID-19-related immunization activity and the long-term care and retail market. Today, those advanced mailback orders total approximately $15 million and include our mailback solutions for both COVID-19 vaccine and COVID-19 testing waste management. While these orders are expected to be shipped during the March 2021 quarter, the unprecedented economic and public health situation in the United States could affect the timing and status of these orders. We believe the mailback orders received today related to COVID-19 medical waste management are just the beginning of COVID-19 immunization activity should be followed by additional orders as a country works to immunized all Americans with the COVID-19 vaccine. As we as we've come to understand the current COVID-19 vaccines involve two shots, the initial immunization followed by a booster a few weeks later. Given what's being reported in the news and what we're hearing from healthcare professional, we believe there's also the potential for additional booster shots to address variants of the virus, plus eventual vaccines for children, which is currently in clinical trials. Diana will address the financials in a bit more detail, but I want to hit just on a few highlights. Revenue in the second quarter of fiscal 2021 of $17 million, an increase of 17% compared to the $14.6 million in the same prior year quarter and a sequential increase of 29% compared to the first quarter of 2021. Customer billing increased to $18.5 million for the second quarter compared to $14.9 million for the same prior year quarter, an increase of 24%. The significant GAAP adjustment of $1.5 million included about $800,000 for a mailback shift in late December 2020 that did not reach the docks of the customers until early January 2021. This $800,000 will be recognized as revenue in the March 2021 quarter. The 24% increase in second quarter customer billings were driven by significant strength in the retail, long-term care, and pharmaceutical manufacturer market and also demand for our route-based and mailback solutions as the COVID-19 vaccine programs began to roll out. Again, we're particularly pleased with the 41% increase in second quarter route-based billings as we believe we have a significant opportunity to further increase our market share. With this offer, we believe to be in a very underserved small to medium quantity generator sector. As we move through the balance of 2021 and beyond, we expect to continue to play a key role as a COVID-19 vaccine is more widely distributed and Americans are vaccinated. And as I have stated on previous occasions and as experts have also stated, we believe the retail pharmacy venue will play a significant role in the COVID-19 immunization process, as it is seen as safe, efficient, and convenient. Based on published information, the retail pharmacy chains are near completion with immunizations and long-term care facilities and are scheduled to begin vaccinations in the retail pharmacies in February. While HHS originally stated that Americans should be vaccinated by June of 2021, it looks like this will most likely extend through late summer or early fall. Our route-based spans 32 states addressing 70% of the population, and we see a solid opportunity to leverage our expanded infrastructure to capture larger route-based partnerships. We now have 14,900 route-based customer locations, versus 14,200 at September 30th, 2020 and 13,000 at December 30th -- December 31st, 2019. The pipeline or route-based opportunities is robust and active and our strengthened infrastructure and capabilities, our competitive advantages, we work to convert prospects to customers, particularly among the underserved small to medium quantity generators. Our ability to close these opportunities have been hampered over the past few quarters as prospects have been keenly focused on addressing the impact of COVID-19 on their operations. But we're beginning to see increased engagement with the prospects. I'd like to just touch briefly on unused medications. During the quarter, unused medication billings were down 26% or $600,000 compared to the second quarter of 2020. The reduction was due to a $300,000 takeaway envelope order in the prior year and lower MedSafe sales and government long-term care and retail markets in the quarter ended December 31st, 2020 as prospects have continued to focus on COVID-19. We continue to believe that there are significant opportunity for further penetration of the MedSafe in the long-term care market. The rollout of MedSafe and long-term care has been delayed. As the customers or the prospects are currently focused on mitigating the challenges and navigating through COVID-19. The opioid crisis has not gone away. By many estimates its likely increasing as a pandemic runs its course. The safe disposal of unused medications is a key contributing factor to fighting this crisis. Therefore, we believe the decline in unused medication billing is a temporary situation and expect to see a return to pre-COVID levels once the vaccine program has gained meaningful traction. And finally, the December 2020 quarter gross margins reflects about $400,000 in infrastructure investments related to our two treatment facilities, our new Pennsylvania-based distribution facility, and our route-based business. Yes, we've invested in the infrastructure in advance of the corresponding increase in revenue, which we believe will begin in the march 2021 quarter. With that said, we do not see any significant infrastructure investments needed to support expected increase in revenue for the remainder of the calendar year 2021. This is an exciting time for the company. We believe we have a significant opportunity to deliver exceptional results in the March 2021 quarter and believe we will see continued strength in revenue as a country works to immunize Americans against the COVID-19 virus. Like the experts, we believe multi-shot vaccines could be the new normal for Americans for the foreseeable future, as we address various potential and potential new viruses. Now, I'll turn it over to Diana to take us through the financials. And after that, I want to make a few closing remarks before we turn it over to questions. Diana?

Thank you, David. Second quarter fiscal 2021 revenue increased 17% to $17 million, as compared to $14.6 million in the second quarter of last year. Second quarter customer billings increased 24% to $18.5 million compared to $14.9 million in the same quarter of last year. Sequentially, second quarter fiscal 2021 revenue increased 29% as compared to the $13.2 million in the first quarter ending September 30th of 2020. Retail market billings grew 46% to $6.1 million in the second quarter of fiscal 2021 as compared to $4.2 million in the same prior year period. The increase in retail billings is primarily due to increased flu shot related orders of about $300,000 and COVID-19-related orders of $2.2 million, partially offset by a decrease in unused medication billings of $600,000. So, for the season, flu shot-related business for the calendar year 2020 was $8.3 million, an increase of 14% over the prior year billings of $7.3 million. And while it looks as though flu shots administered increased by about 50%, our customers appear to have adopted a more just-in-time ordering model for the flu shot-related season, which minimized their inventory level. Pharmaceutical manufacturer billings increased 35% to $3.1 million in the second quarter of fiscal 2021 compared to $2.3 million in the second quarter of fiscal 2020 related to the timing of inventory built for patient support programs. Long-term care billings increased 56% to $1.1 million in the second quarter of fiscal 2021 compared to $700,000 in the prior year, primarily related to increased volume of COVID-19 related waste management and ancillary supplies. Our home healthcare market billings increased 9% to $2.8 million in the second quarter of fiscal 2021 compared to $2.6 million in the second quarter of last year. Professional market billings increased 4% to $4.5 million in the second quarter of fiscal 2021 compared to $4.4 million in the same prior period and increased 10% sequentially as compared to $4.1 million in the first quarter of fiscal 2021. This market, which is comprised of physicians, clinics, dentists, surgery centers, labs, veterinarians, and other healthcare providers, has shown continued recovery compared to the March 2020 pre-pandemic time period as most of the company's customer locations have reopened. Billings for the inside and online sales channel increased 24% to $2.8 million in the second quarter of fiscal 2021 as compared to $2.3 million in the same prior period, primarily due to increases and route-based pickup services to the professional and long-term care market. Route-based pickup billings for the second quarter of fiscal 2021 grew 41% to $3.5 million compared to the prior quarter and contributed 19% of total billings for the quarter. There are currently about 5,800 MedSafe deployed as of December 31st, 2020, compared to 5,700 units at the end of September 30, 2020 and there were 4,500 units at December 31, of 2019. As of December 31st, 2020, we have processed a total of about 68,000 MedSafe liners, which is 24,400 or 56% higher than the 43,600 units processed as of December 30, 2019. Sequentially for the December 2020 quarter, we processed 6,700 liners versus the 6,150 processed in the first quarter of September 30, 2020 and 5,700 liners processed in the December quarter of the prior year. Mailback billings increased 33% to $11.9 million and contributed 64% of total billings for the quarter. This increase is related to the robust order activity to meet end market demand around flu shot and COVID-19 vaccination activity. We continue to see heightened demand for mailback and as David mentioned, have approximately 15 million in advance mailback orders are expected to be filled during the March 2021 quarter. And while these orders are expected to be shipped during the March 2021 quarter, the unprecedented economic and public health situation in the U.S. could affect the timing and status of these orders. Gross margin for the second quarter was 33.1% as compared to gross margin of 33.5% in the second quarter of last year. As David mentioned earlier, we have invested in the infrastructure in advance of corresponding revenue which we believe will begin in the March 2021 quarter. With that said, we do not see any significant infrastructure investments needed to support the expected increase in revenues for the remainder of calendar year 2021 SG&A expense increased 4% to $3.8 million or 22% of revenue for the second quarter of fiscal 2021 compared to SG&A of $3.6 million or 25% 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 9% to 11% for fiscal 2021, reflecting increased headcount and related costs as well as additional sales and marketing expense. We reported operating income of $1.7 million in the second quarter of 2021 compared to operating income of $1.1 million in the second quarter of last year. We recorded net income of $1.2 million or $0.07 cents per basic and diluted share this quarter compared to net income of $1 million or $0.06 per basic and diluted share in the first quarter of 2020. The company generated EBITDA of $2.2 million or 13% of revenue in the second quarter of fiscal 2021 compared to EBITDA of $1.5 million or 10% of revenue in the second quarter of last year. Our balance sheet remains solid with $7.2 million of cash as of December 31, 2020 and working capital of $12 million. Accounts receivable as of December 31, 2020 was $13.3 million. Days sales outstanding or DSO using the month of December revenue was 53 days, reflecting disproportionately higher billings in the month of December 2020 compared to other months in the quarter. Property, plant, and equipment increased $1.1 million from June 30, 2020 to December 31st, 2020, which includes $850,000 for expenditures on the expansion of our treatment facility in Texas from 13,000 to 30,500 square feet and $480,000 for the new autoclave in Pennsylvania. Long-term debt was $5.8 million at the end December 31st, 2020 compared to $5.2 million as of June 30, 2020. The increase in debt was due to borrowings to fund the Texas treatment facility expansion partially offset by repayment of prior year's acquisition debt. We recently extended the maturity of our $14 million credit agreement and secured additional $4 million of capacity for working capital, which is available upon our request to support our growth. And as we previously announced, we received $2.2 million under the Paycheck Protection Program or PPP that was established as part of the Coronavirus Aid Relief and Economic Securities Act or CARES Act. We have applied for forgiveness of this loan via 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 to David.

Thanks Diana. Before returning the phone call over to the Q&A, let me just make just a couple of closing comments. One, while the COVID-19-related orders we've received today are very significant, we do believe we're just getting started as the country works to immunize Americans against the virus. Our 70% leadership position in the retail pharmacy space allows us to support the management of these millions of syringes that will be utilized in the country to vaccinate Americans. Many experts believe that the COVID type vaccines could be the new norm as pharmaceutical manufacturers developed boosters to address variants and other potential viruses or reformulation of existing vaccine. One last side and while the company has benefited significantly from the COVID-19-related business, let's not look past a significant growth in our route-based business. With a 41% increase in the quarterly revenue, we are moving in the right direction to make this business a larger part of our revenue growth and provide additional, predictable, recurring revenue opportunities for the company. And with that, operator, let's go ahead and turn it over to the Q&A.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first questions come from the line of Rob Brown with Lake Street Capital Markets. Please proceed with your question.

Good morning.

Good morning.

Good morning.

Question is on the $15 million in orders that you've now received for the COVID activity, what's your sense of how much or how long of demand that that actually fulfills for your customer? How long will they be able to kind of get vaccinations with that? And how much kind of, reorders can you expect?

Well, I will tell you this, it looks like based upon the forecasting and information we've received from our customers that it's estimated that that'll take them through March and being able to meet the kind of vaccination numbers that they're talking about. Now, after that, it's really difficult to predict. But again, as I mentioned earlier, I think it's pretty clear that in this country we're going to need through late summer, maybe even early fall to immunize all Americans.

Okay. Okay, great. And then maybe shifting to the route-based business, your growth there was nice are you? Are you sort of seeing share gains or how much of that is a recovery, kind of, snapback in the business? And how much is share gains in your sense? And maybe following on that, how does the pipeline look for -- you mentioned that that was starting to loosen up, what was sort of the pipeline look like for new business in that segment?

Right, no, it's definitely share gains is what new business and share gains is driving that route-based business. I think we've recovered for the most part back in September from the--

Right, the professional market has recovered last quarter. The long-term care growth was a lot of our existing customers. So, that was about a third of the route-based.

Right. And the remaining portion of that would have been new customers. As far as going forward, I have spoken that some of the larger route-based opportunities have been delayed, because the prospects are focused on COVID, we're starting to see that break a bit and the process is becoming more and more engaged, and it's getting more active and providing pricing responding to RFPs. So, it's difficult to predict, but we would hope to see that start to pick up over the next couple of quarters.

Okay. Thank you. I'll turn it over. Nice. Nice job in the quarter.

Thanks.

Thank you. Our next questions come from the line of Gerry Sweeney with ROTH Capital. Please proceed with your questions.

Hey, Diana, David, good morning, and thanks for taking my call.

Good morning.

I wanted to talk a little bit more about mailback if we could. I think historically some of your larger customers at the pharmacy groups did not actually provide a whole lot of visibility into ordering and it now sounds like that it certainly changed. One, I think you touched upon a little bit in your previous answer, but just want to see how much discussions you're having with them? How often? And how much visibility they sort of can give? It sounded of like into March, but just want to see how that could potentially evolve over time?

Right. There's a number of things that have changed. Some of the warehouse issues we saw back in the flu season and then more just in time, well, that didn't apply to COVID-19 vaccine. They're much more measured in providing us with forecasts and volume needs that they see. And they've given us visibility probably through like the June, July timeframe and what they see. So, so far, as I mentioned earlier, it looks like we have the orders that'll get them primarily through the March timeframe. But it's kind of difficult to predict. But I do think that June will be strong, as well as, as March as the COVID-19 vaccines, we're not going to stop in March.

Got it. Got it. That's helpful. And how has activity been on returns so far in January? Are you starting to see some of those -- I believe you probably ship some in December, but are you starting to see returns immunization started, I think in December, et cetera?

I'll tell us what's going on. When we look at returns, we're looking really at flu/COVID and we monitor those returns. And they've been a little bit slower than what's expected, I think, because of what's going on in the package world. Again, the majority of these come back to USPS, but they've been slowed down a bit by what's going on with the pandemic and the significant demands on our transportation systems here in the U.S.

Got it. And then shifting gears a little bit this may be more for Diana. $1.5 million was deferred revenue and I believe $800,000 was shipped, but just not recognized, is that correct?

Correct.

Again, I guess that leaves about $700,000. Little nitpicky question, but that $700,000 in revenue, is that -- does that carry the same gross margin as the revenue that's recognized in the quarter? Or is there some variability in that meaning, you know, potentially have higher margin, because--

It's about the same. It's about the same. That’s kind of the way the accounting rules work is that it's similar. So, yes.

Okay, I want to make sure there wasn't any change or some calls were different from either side. So, perfect. I appreciate it. I'll jump back in line.

Thank you. Our next questions come from the line of Dale [ph] with H.C. Wainwright. Please proceed with your questions.

Good morning, everyone. Thank you for taking my questions.

Good morning.

With respect to the advanced mailback orders growing from 10 million to 15 million, you are hedging a little bit on timing. David; can you provide some color on this where some of the, I guess, collection or the delays could come from?

Well, no, I mean, we think right now that the majority, if not all of those 15 million will ship out by March. All indications are now that that's going to happen, as matter, we ship out every day. So, I think we feel reasonably confident that the majority of that -- the vast majority of those should fall into the March quarter.

Then as we go through the rest of calendar 2021, I don't know if you have that level of visibility today, but should we expect sort of sequential growth in these mailback quarters?

It's just real too early to tell. I mean, there's -- we really have to say, again, we know March is going to be strong and we think that June will be probably quite robust. We'll just have to see how that shakes out. And I tell you that because there's a lot of variables. It's not just the COVID-19 initial vaccine, that everyone will hopefully get between now and late summer, early fall. But Moderna is working right now on a booster that will address some of these variants. And you could see a booster in the fall maybe by them or maybe by some of the other pharmaceutical manufacturers. The other thing is they're conducting clinical trials right now for children. And that's probably not going to be available till later this year. So, you also could have potential reformulations of some of these vaccines. So, I think there's uncertainty, but I think that -- I think we feel reasonably confident that this kind of vaccine activity is going to continue for some period of time. I don't believe it's just going to be get two shots and you're done. And then the last thing I'll say is I think healthcare professionals are going to recommend that everyone get their flu shot this fall. So, you see the potential -- it's not a guarantee, but you see a potential for going back in the fall for a booster, maybe a COVID-19 booster and then maybe you wait a couple of weeks and you get a flu shot, or maybe you get a flu shot, and then a couple of few weeks, you get the COVID-19 booster. So, there's just a lot of unknown -- but I think there's going to be a lot of activity for a while. And obviously, all of this will drive ordering in revenue growth.

Right. Understood. And then on route-based business, you're seeing pretty strong growth there, has all of this comes sort of organically or have you acquired any routes? And again, on that front, are you planning to maybe acquire routes going forward?

So, that's all organic growth on the route-based business. There's no acquisition growth in there. We stay active in the market and trying to identify acquisition opportunities, they're difficult. And I will tell you this right now, with COVID, the smaller players out there are very, very busy too. And so what we probably need to get through this COVID activity before acquisition opportunities will surface.

Understood. That's all I have, guys. Thank you so much.

Thanks.

Thank you. Our next questions come from the line of Kevin Steinke with Barrington Research. Please proceed with your question.

Hi, good morning. So, the -- you talked about the strong growth in the pharmaceutical manufacturer market. You said related to the timing of inventory bills for patient support program, should we think about that is just mostly bills for existing customers or are there any new customers in the mix there?

We actually had two new programs that started -- that were in that December number. One was a new program for an existing customer and one was a completely new pharmaceutical manufacturer. So, we were pleased to see that in the bill.

Okay, great. What about the pipeline of new opportunities going forward in the pharmaceutical space?

I think we have a number of opportunities that are -- that we're chased out there, as we always do. There's always a few of them in the pipeline that we're chasing. It's very difficult to get to kind of predict when they may land, but we're definitely chasing stuff.

Okay, good. And you talked about the various infrastructure projects you've completed to support the growth you're experiencing here. And you said you don’t see any further significant infrastructure costs for the rest of -- what I think calendar 2021. I was just curious, though, about you talked about manufacturing as many as an additional 1 million units -- mailback units by the end of fiscal 2021. That seems like a pretty large number compared to the 300,000 you've done. So, just any color could provide on additional costs associated with that or any potential bottlenecks to doing that amount of manufacturing? Or is that just not something we should really be concerned about?

That's a good question. It's a really good question. And we're doing it for a number of different reasons. One, we want to make sure that we're going to have ample supply for our customers. We're the leader in this mailback space. And when you consider the number of Americans that could get the shot, the percentage in retail pharmacy, the numbers could be big, then you throw in there, Kevin, some booster shots, or you have a children's vaccine, and the numbers could get quite large. So, we're building another million to have a million -- an additional million by June 30th. And if we use them, great, that's fantastic. That means that the season was huge. If not, we always have the flu season that follows that that they can be used for as well. So, really the only incremental costs as we lease that facility -- the additional warehouse in Pennsylvania and then of course, all of that inventory cost is capitalized as inventory until we sell it. But we're quite busy. We own our own molds and we have a number of manufacturers that we're working with to make the Sharps containers in the core. And so far, so good on the production plan.

Okay, that's helpful color. And lastly, I just wanted to ask about with the surge in COVID-related mailback orders, I know you called out the gap adjustment related just the timing of shipping, but going forward in the March quarter and June quarter, should we think about proportionately larger gap adjustments related to those mailbacks? I know I think there's a component of that adjustment that's related to the return and treatment in the mailbacks as well. So, any thoughts on how we should think about that gap adjustment over the next couple quarters here?

Generally, as revenue increases, the gap adjustment becomes more negative, just because you have more sales that you're deferring. It just depends on how quickly the mailback are returned for treatment. And we can't really predict that.

But when we sell those mailbacks, like we will for the March quarter, that'll be what roughly 20% of that revenue that gets deferred.

Right.

So, think of 80% of it as revenue for the current quarter with 20% of it deferred in the future until it returns.

Okay, great. Yes, that's very helpful. All right. Well, thanks for taking the questions.

Thanks, Kevin.

Thank you. Our next questions come from the line of Brian Butler with Stifel. Please proceed with your questions.

Good morning. Thanks for taking my questions.

Good morning.

Good morning.

First one just on the MedSafe, it looks like you installed about I don't know 100, 150 new MedSafes in this period, how should we think about that? I mean, you mentioned on the call that COVID had slowed this, how does that re-ramp? I mean, is that a 2020 -- a fiscal 2022 event? Does it come -- is there a lot of pent-up demand or is it really just going to be -- you're going to restart this rollout and you're going to go back to 200, 300 a month, and it continues to grow?

I guess the -- for one thing, our large retail pharmacy customer accelerated their annual benefits installation program into the summer month, so that they could focus on COVID-related response during the December quarter. So, that's one impact on the timing of the MedSafe install. We do think that there is a great opportunity in the long-term care market, because it's important to them and we see the decline in MedSafe installs being a temporary situation that would come back after the vaccination program is complete.

Okay. Do you do have like a target of what you hope to achieve? I mean, like 200 units a quarter or is it not that not that tangible?

It's really not that tangible. This COVID-19 has really disrupted operations and is a change in effect of some of the ordering the ordering patterns. You may have heard me talk before about one of the big opportunities we saw with MedSafe was in long-term care and we were well on our way to selling many, many more in the long-term care until COVID came along. So, that's going to be delayed until sometime this year. I don't know exactly when, but hopefully, that will get back on -- get back on track. But with the uncertainty of the virus, I think it's just really difficult right now to be certain.

Okay. And then on the on the route-based, I mean, you had you had a great quarter in the route-based, but the professional segment billings seemed a little bit light. And you mentioned that they were still recovering from the COVID levels, can talk about -- a little bit about that disconnect between the route-based and the professional and what drove I guess more of the route-based? And then what -- how much of the professional comeback, I mean, to pre-COVID levels, are you still below pre-COVID level?

I think we're back from the COVID levels, go ahead Diana, talk about that, what do we have in the prior period?

Yes, we had a large order on -- for takeaway recovery system, which is used in hospitals about $500,000 last year. So, that did not recur--

Takeaway recycle,

Yes, takeaway recycle.

The single-use device recycling, we had a significant order in the prior year period that did not reoccur this period.

And did that showed up in professional?

Yes.

Okay. All right. That makes sense. Then just one on margins then. So, you talked about $400,000 in costs related to the infrastructure being rolled out in this quarter, incremental margins in the second quarter here where I think somewhere around 30%. Does that -- if you add back that $400,000, you're back to kind of that 45%, almost 50% incremental margin, is that the right way to think about gross margin -- incremental gross margins in third quarter, fourth quarter kind of going forward.

Right, yes, that's right way to look at it and you should look for 40% to 45% on the incremental revenue going forward, [Indiscernible] majority of that $400,000 going forward.

Okay, that's all I had. Thank you.

Thanks Brian.

Thank you. There are no further questions at this time. I would like to hand the call back over to David for any closing comments.

Thank you and thank you for everyone participating in the call today. We want to close by thanking our loyal and committed employees for their service to the company and to our customers during the pandemic. We look forward to the opportunities ahead of us in 2021. We believe the strategic initiatives we launch will only strengthen the company and its infrastructure, providing a very strong foundation for growth in the coming year and beyond. Again, thank you, everyone and we'll talk to you next quarter.

Thank you. That does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.