Redishred Capital Corp (Pre-Merger)
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Redishred Capital Corp (Pre-Merger)
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Thank you for standing by. This is the conference operator. Welcome to the RediShred Capital Corp. Second Quarter 2021 Financial Results and Business Update Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions]I would now like to turn the conference over to Jeffrey Hasham, Chief Executive Officer. Please go ahead.
Good morning, everyone. Welcome to the RediShred Capital Corp. Q2 2021 conference call and update. I want to first indicate that we had a great quarter and EBITDA was well up from last year, that was, I think, the easier part. The harder part was making sure that not only with the EBITDA up over 2019, but that we improved the business along the way. And for many of you that have been following us over the last 18 to 20 months, even 24 or 36 months, I think one thing that everyone knows is that we've been striving and now accomplishing some good improvements in the business, and we're starting to see some of the results show up here on our financial statements. So first and foremost, we need to thank our employees for the job that they do, our franchisees who are out there every day as well. And of course, our Board and our shareholders for all their support over these many years, and in particular, through the last 18 to 24 months that have been very much unprecedented. Second quarter, CAD 2.6 million that was up 68% versus Q2 2020. I want to make a comment. We do not include government assistance in these numbers. We haven't included government assistance even last year during the heart of the pandemic when we received our second round this year. All of our numbers are excluding the government assistance, you're getting a real feel of what the business is doing and how it's performing. Our overall consolidated EBITDA margin, 30%. So that was a 400 basis points increase versus last year and 200 -- in the same quarter last year and 200 basis points ahead of the first quarter. So we did see some good improvement quarter-over-quarter and then comparable prior year quarter. What drove this? I'd like to first start, one of the things that we -- everyone who knows us, we want to buy things and then we want to build on it. And when you buy something, the first very important metric is that same corporate location driver. Katherina is going to talk in more detail. But we saw a good increase in our sales, and we'll be having an investor presentation out later today, and we'll provide some of that analysis where you'll see that same corporate location growth not only, of course, versus 2020 but versus 2019, strong kudos to our marketing and sales team because that was driven a lot by new business. The marketing teams jumped on things early in the year. They knew that things were opening up, let's be front of mind for our customers, and of course, our sales team executed on that by also being ready. So kudos to them. And last but never least, the client service and operations team needed to be ready. So for that same location growth was very important. Of course, we had clients returning from COVID-19 restrictions and opening their offices. Not everyone is open yet. So that might be the good news. And not everyone is open. So some of our clients are partially open or will be opening later in the year. And of course, the Springfield acquisition that we did on December 31, and we'll talk a little bit more about acquisitions later in the presentation. And then, of course, our Richmond acquisition that we did on May 1, both of those were accretive, adding to the top and bottom lines. So overall, we'll come back to the revenue line for a moment. Again, a record revenue month $8.7 million. That's a 44% growth over the -- of course, the prior year and we'll have some comparatives to 2019, which is very, very important as well. If you take out the foreign exchange effects, that was actually a 58% constant currency growth. Well, obviously, the Canadian dollar continues to strengthen, but looking at U.S. dollars, and we'll continue to report this, the constant currency growth to provide that incremental color. Overall, the team worked hard, they put their head down and all the moving parts came together, and again, we're very appreciative of everything everyone did. I'm going to pass it over to Kasia so she can go into the details of the corporate locations at this time.
Thanks, Jeff. Good morning, everyone. Thanks for joining. Yes. So I'll jump into the corporate location second quarter results and then just touch on the year-to-date results as well. So Jeff mentioned, during the second quarter, we did see the U.S. dollar continue to be weaker relative to the Canadian dollar versus last year. We saw the average rate decline from 1.37 in the prior year to 1.25 in Q2 2021. So I'll speak to the constant currency growth results, which we now disclose in our MD&A as well just to eliminate that foreign exchange fluctuation. So overall, we saw very strong performance from our corporate locations in the second quarter, and that's not only when comparing to the prior year, which was the worst pandemic quarter we saw but also from an efficiency and margin standpoint. And then as Jeff mentioned, we don't include our government assistance in any of these operational results either. So it is strictly an operational perspective on these results. Our same location shredding sales grew by 47% this quarter versus Q2 2020 as our nonessential clients continue to resume their services with the easing of the COVID restrictions and our sales teams continue to add new clients on a monthly basis. For same location recycling sales, those grew by 15% quarter-over-quarter and that was driven by an increase in the paper tonnage, which was quite significant and consistent with the increase that we saw in the shredding sales, but also offset partially by lower paper prices, as we did see a temporary surge in pricing last year due to COVID-related paper products shortages. And then in terms of the other 2 revenue streams that we have, electronic waste sales and scanning sales. Our scanning sales in the second quarter were strong and primarily stemmed from the Massachusetts acquisition. We generated $445,000 in the quarter. And the e-waste sales actually declined by 18% during the second quarter as we're still seeing an impact from COVID with many clients disposing desktops rather than laptops as employees continue to work from home and that's resulted in lower resale values. We do expect the sales to improve though in the next coming quarters as the larger clients return to offices, and there's a shift back to higher dollar equipment, like laptops. So in total, our same-location sales grew by 39% in Q2 2021 over Q2 2020 and have also grown past pre-COVID sales levels. specifically when we look at the second half of 2019. So we're very pleased about that. Our costs continue to be well managed this quarter as well, and so that resulted in same location EBITDA growth of 63% over the last quarter, the prior comparative quarter and a 500 basis points improvement in EBITDA margin to 37%. So while we increased our costs over last year to support the growth, it was at a much lower level than the growth in sales that we saw, which was over $1.1 million year-over-year. And in terms of the EBITDA margin level and whether that's sustainable going forward, we certainly will continue to work towards achieving these margins, and we don't have any significant plans to increase costs in any one particular area in the near future. When we do invest in increased marketing spend, for example, we closely monitor our return on investment and the related sales increases so to ensure that these margins are still there. We are, however, seeing some market pressures when it comes to driver wages as well as insurance premiums, but maintaining an EBITDA margins in and around the 35% level, we still see as achievable going forward. In terms of our results from acquisitions or what we call our non-same locations, those included the Massachusetts results, which includes the PROSCAN business. and the Richmond results for May and June as these were not in the comparative prior year. The EBITDA from the acquisitions was $785,000 in the quarter, and our EBITDA margin was strong at 50%. And as mentioned earlier, our PROSCAN sales were very strong in the quarter, and that didn't require additional fixed costs. So that resulted in the margins being strong. And the Proshred Massachusetts and Richmond locations also had a great quarter and are both performing to plan. When looking at total corporate location results then for the quarter, so that includes our same and non-same locations, we saw total sales grow by 53%. And then we saw our EBITDA grow 151% year-over-year to $3.2 million. And with the cost management, our EBITDA margin improved by 800 basis points to 40%. So we're definitely pleased with this level of performance and the record level of sales and EBITDA we've been able to achieve this quarter. And now we'll just touch on the year-to-date results. Obviously, on a year-to-date basis, the strong second quarter certainly helped improve the year-to-date results, as we did still see the business coming back from COVID restrictions in Q1. And of course, Q1 2020 was mostly a pre-COVID quarter. So we're definitely glad to have now surpassed the pre-COVID level sales and EBITDA levels, and we'll continue to push that forward. So on a year-to-date basis, our same locations grew 15%, and we saw EBITDA growth of 36%. And then on a total sales basis, we were up 43% year-to-date with an EBITDA growth of 76%, and our margins still remained strong at 36% for same locations and 44% for the acquired locations, and we've also seen an EBITDA margin improvement by 500 basis points. And of course, this doesn't include any of the government assistance that we did receive in the first quarter, and that was $1.3 million. So that sort of wraps up the corporate locations. I'll just speak briefly to our capital management and then pass it back to Jeff on the acquisitions. So during the quarter, we generated $1.8 million in cash from operations, and we continue to pay off a significant amount of debt, which was a total of $1.3 million. We also used another $1.3 million in our cash reserves for the purchase of the Richmond acquisition, and so we ended the quarter with $2.2 million in the bank. And we have another $1 million available on our line of credit and $1.4 million available on our term loan facility. During the quarter, we also had our financial institution approve 2 favorable terms to our credit agreement, one of which was reducing one of our covenant ratios and the other one was allowing the inclusion of our government subsidies in the calculation of the financial covenants. So this will provide us with additional cushion in the covenant limits going forward and more flexibility in our borrowings, which is great. So I'll pass it over to Jeff to speak about the acquisitions.
Yes. Thanks, Kasia. I appreciate that update. She gets the fun stuff. The corporate locations that performed very well. It was nice to see that the acquisitions that we did, to start the year and during the year, do very well. So just to recap that. So Massachusetts was a December 31 acquisition. It's something we wanted to do earlier in 2020, we held off, sometimes things happen for a reason, and we were able to buy a business that was poised to do well, and we can see that in the numbers. Just to recap that, had 10 shredding trucks and also the scanning PROSCAN business. So good business. They did $3 million in revenue in 2020, and we can see that they're doing much better in 2021. The Proshred Richmond business that we acquired on May 1, that had 4 truck or has 4 trucks. They did reasonably well during COVID. That business is also performing well as we can see in the numbers. And that fits really nicely because now the whole state of Virginia is being serviced by corporate entities. And we're now starting to regionalize the area with good management, good client service but we're able to share within the region, which is wonderful. And Atlanta adds to that Southeast Mid-Atlantic region. So we'll talk about Atlanta next. So Atlanta, as many of you know, we purchased that business on July 30, 2021. So essentially, August is the first operating month. So we don't have any results in the quarter from Atlanta, but obviously will favorably impact third quarter as well Richmond as well because we'll have a full 3 months for the Richmond business, so a full quarter and then we'll have 2 out of 3 months in the quarter for Atlanta. So Atlanta was $1.3 million last year, 5 shred trucks and a hard drive truck. So again, a nice business. We also did, on July 1, a very small acquisition in Albany $100,000 a year in revenue and $170,000 was the purchase price with a good chunk of that being on earn-out. We like those ones, too, and you'll see a little bit of disclosure in our MD&A and financial statements on that one. That one, we paid out of cash flow. We're integrating that into routes. We didn't even buy trucks. We just tucked that into our existing routes. The trucks were not great. We've actually been adding trucks to the region anyhow to support the growth in upstate New York as well as in New York City, which New York City is now returning to work and returning from the COVID times, we're seeing good growth in that market. So it was a good time to do that acquisition. So all our acquisitions to date have been very good, as you can see in the numbers. The team has done a good job in bringing these together. And I think as I look out now, the timing for these are all very good because what we're seeing in the U.S., of course, with COVID-19, and yes, the delta is like here is moving upwards, but in the U.S., they have a very different mentality. They stay open. And right now, what we are seeing many, many of our clients are now mandating that all employees and all service providers entering their facilities need to be vaccinated. So that's going to further push vaccination. And as vaccination continues to get pushed, that is a very positive factor for our business. So those are all positive things. The FDA approving the Pfizer vaccine and soon the Moderna not for emergency use, but for full-time use, again, that's going to have a very positive impact. So we're starting to see the impact of -- from vaccine mandates and things like that, that are going to have further positive impact as the remaining clients of ours go back to work and get back into the office. So we're really pleased that those developments have happened in the marketplace, and we'll continue to be agile, continue to be monitoring the market. Both the marketing and sales team are very, very in tune with the staff online, and those things allow us to react a little sooner, which is great. So with that all being said, love to open it up to questions. Appreciate everyone joining us this morning. So I'll turn that back to Ariel to get some questions in front of us.
[Operator Instructions] Our first question comes from Amr Ezzat of Echelon Partners.
Jeff, Kasia, congrats on a very strong quarter.
Thank you, Amr.
My first question is on the organic growth rate. I just want to dig a bit more into it. You guys spoke to 2 factors in your prepared remarks, one being that even with COVID restrictions and 2 being the additional new client accounts. How do I think about the split between both any way to quantify how much is from the easing of COVID restrictions and how much from new clients?
Yes. And that's -- it's an interesting one. There's still about probably -- depending on the market, anywhere from 8% to 12% of our clients still on hold. So if you use the baseline of 2019, right, you've got sort of that baseline there of clients that are out there. Again, some markets might be a little bit better, some markets a little bit worse, but use that range. So when you look at the schedule -- and this is really mainly scheduled, right? Because the purge clients, they sort of come and go, but mainly scheduled. So then if you look at the sort of the 5% growth scheduled that we had versus the latter part of 2019, on a same-store basis, that's a pretty strong growth. A lot of that -- and again, that's happened because over the last year, we continue to book new clients, right? So it's not been 0, right? So we continue to have new scheduled clients. And of course, I think you can see from this quarter that it was a very good quarter from an acquisition perspective. And there was some pent-up demand, frankly, starting in March and going through the quarter, there was some pent-up demand as people returned to the office. The purge is that they were going to do, they in 2020, they finally got to. So we saw some of that as well. So we don't have exact quantification of that, but we can see from who's still on hold that there was not a lot of people still on hold, which is good, but the incremental growth from new bookings was certainly there.
No, that's a good proxy like comparing it to late 2019. Okay. Can you maybe speak to us about the competitive landscape out of COVID and how it compares to pre-COVID? Like, what is allowing you guys to win new accounts? Are these accounts were they serviced by somebody else in the past? Or they just didn't have a shredding service?
Yes, look, it's a little bit of everything still, right? So again, our target market is small, medium-sized enterprise. And small medium-sized enterprise often are still unvended. So there's some of that where we're still winning net new business due to shredding services. And then like anything, everybody -- all our competitors are out there of a contract that's coming up for renewal, we're hoping to be in front of that customer ahead of that renewal and looking at how do we win their business and earn their business. So we have some of that. Like anything, there's also, I think, some churn that can happen from time to time. Sometimes -- and again, we're winning a little bit more of our fair share of larger clients. And I think, again, with larger clients, they will go to RFP and we have a reasonable chance, not with the largest clients but with those medium and large clients. So there's some of that that's going on. So yes, we're stealing some business which is fine. Others, they try to steal from us too. I think our target market, obviously, being the more SME space has been a good one for us. And because they are sort of driving -- the small business is what drives the growth, it's always driven the growth in the United States. People start new businesses. And when you start a new business now, what do you need, right? You need all your services, whether it's phone service, Internet service, coffee service, shredding service, right? So there is some net new there. And we're seeing even the smallest type of clients need to service, right? Even if you're a 3-person law firm, you need this service. So that's helping drive the growth.
Great. I want to switch gears to the scanning side. Obviously, it's hard to assess the year-on-year performance because you didn't have Massachusetts in last year's quarter. But I'm not sure if you have the Massachusetts number for last year when they weren't part of your operations? Like, how does this $400,000 in scanning compared to last year?
It was really good. Last year, they were under $1 million in revenue for the whole year, right? And now here we are sitting here for the first half of the year, well, for the quarter, as you said, there was $473,000. So certainly,-- and you can see in the non-same location 445, so it was a good quarter. It's interesting because as people came back to their offices -- and remember who came back first, right? So SMEs came back first. Government institutions started to come back and we have some good government clients. We have good SME clients. But there's also -- this is more of a large client-focused business, right? So our target market is more large. So as those companies start to reopen they got back on the standing projects and started to bring those back to us. So like 2020 hit the scanning business, probably not as hard as shredding, but it still hit them and now it seems to be coming back. And the more and more people get in the office, the more and more they're going, "Oh, I've got to go revisit this project, right?" And so we're really -- it's really good there. We're also learning this business in a good way. We've got some new software that we're looking at and saying, hey, can we invest in some new software that might reduce some of the direct costs. So now that we've had this business for a little while, we're starting to understand the marketing dynamics, the sales dynamics and also looking for operational improvements. So that's sort of where we're at now. So I think the scanning business was a good one to invest in and will continue to be a good one to invest in because I think what we can do from here, and we're already doing it. We're already marketing PROSCAN in all of our corporate locations. So that's something we're doing. Our salespeople are enabled to initiate the sales process and then hand that off to more veteran and seasoned scanning professionals as we go deeper in the sales cycle, so longer sales cycle, as you can imagine. That's the beauty of our corporate locations now, right? We can send one message across the entire system, market -- we market to every single Proshred customer. Every other month, on PROSCAN. And so we're going to see some more wins from PROSCAN just by that very sheer size of the database and our ability to market to it.
So that's very good color. So you feel that $400,000 is sustainable. There isn't a lot of like pent-up sort of demand in there. Is that fair?
There's some seasonality. So great question, follow-up question. Q2 and Q3 are the better quarters in scanning. So I think in Q3, we should see something hopefully similar, maybe a little less, but and -- maybe a little more, but in and around there. And then Q4 tends to be light. It's always been seasoned-light in the scanning business. Interestingly enough, it's light in the shredding business, too. And again, at the end of the year, people aren't always making decisions or they're making decisions to spend money for the next year, right? So we have a little bit of that. But I think in the -- as we look at the longer run, we're investing in marketing and in sales in the scanning business and that should pay dividends for us into 2022 and 2023.
Maybe one last one, and I'll pass the line. M&A. So you did one largest one on December 31, a couple of tuck-ins, then very smallest ones, I guess, like recently. How do we talk about the M&A, capital deployment into M&A from here until year-end? Is your plate full, more of an integration, or can we expect you to continue to make progress?
Well, the good news, especially for Atlanta with the borders opening up, we can send people in to integrate these things the way we like to integrate them. So with Richmond -- with Springfield, it's hard, but fortunate for us, a great team there, and we levered our U.S. team. We levered our U.S. team even more for Richmond in Atlanta, which is great. And so integrations, we've got a good team. The team is executing on the integration side. What does that allow myself to do and others on our team here? It allows us to continue to build the pipeline. And the pipeline continues to be good. There's a bit of a shift towards independents. We expected that. I mean, I think if you remember, when the paper prices crashed in 2019, we said this is game on. I think this is a good opportunity because some of these smaller guys are going to have some troubles. And then COVID hit and Paycheck Protection money came in and 2 rounds of that money came in. So that held them -- that actually helped them out and allowed them to hang in there. I think we're starting to see -- I'm seeing in my pipeline, people going, "Okay, is this something that I want to do. Paper prices are still not near where they were in 2019." And so we're getting -- we're seeing a shift to that independent side pipeline. And I think look, I'd love to get more deals done this year, and we still have capital to do it. And we've got every kind of deal in our pipeline, large, medium and small. So that's the good news. So we'll continue to push hard on the acquisition front. And I know we've got a great team to integrate these things.
Our next question comes from David Ocampo of Cormark Securities.
My first question here is just on the margin outlook that Kasia and you provided. And kind of how I'm scoring it up is you have this increase in cost from drivers, and then that's partially offset by some of your customers coming back. I think the 8% to 12% that you noted. But then you layer that on with the paper pricing, which looks like it's up again or it should be up again in the quarter. So I'm a bit surprised by the margin guidance of 35%. I thought it would at least hang on here, if not move up a little bit higher.
Yes. I'll jump in and let Kasia add some color, but I think that's a longer-term average for us, right? So we might sort of looking beyond the advice on the paper. Paper has gone up in the third quarter. Will it continue to go up? I don't know. David, if I could predict the paper market, I'd be a very rich man at the moment. So that's one of the challenges. And one of the things that we had to do is make sure operationally we were sound, make sure our routing was sound, make sure we're geo-targeting our sales, all those types of things to enhance the margin. And the team has done a good job. So there's some margin accretion here from paper, not a lot because paper was about $108, but there was some, and they'll continue to be. But I would argue that I think it's important to look at this more longer term, and so paper plays a role in that margin percentage. Having said that, and I'll counter myself a little bit there. Yes, we're going to continue to grow the business, geo-target, route management so that should help us. But if you sort of look at last year and even the last couple of years, with paper being low, we've been in those sort of let's call it, 33% to 36% range is sort of been where we are. So I think 35% is a very good target for us. And David, I'll tell you, we're -- everyone is looking to beat it as we can. But Kasia, do you have any other color on that?
Yes. I mean I think breaking up our cost a little bit what you'll see is our direct costs will go up naturally with the increase in the sales, but at a reasonable level. And then while at the same time, we're trying to maintain the same level of fixed costs, there's not really a lot more to be added in those fixed costs. And yes, I mean paper prices have continued to go up a little bit more post Q2 as well. So we'll see a bit of an uptick there that obviously will flow to our margins. But of course, over last year, the paper prices were lower versus this year, and we're still not at that sort of 10-year average yet. So I think the margins are still keeping up even with the paper prices we're seeing.
And then sort of as a follow-up, the remaining 8% to 12% of your clients that aren't operational right now, those are primarily downtime customers. So are those customers more expensive to service? Because I would have thought that it would have been much better margin business just because of the rev density?
Yes. So 2 things there. They are much more expensive to service. And you can just imagine here in Toronto, here in New York, you have one client in the Empire State Building, you're losing money, right? It doesn't matter what you charge them and you can't charge them out of market, right? Look, our pricing in Manhattan is way higher than anywhere else in the country. It makes sense. The route density helps. And as these customers do come back, that will be good because we are routing in Manhattan every day as an example. We are going into downtown Chicago on our regular schedule, but we're not -- it's still not full right? And so -- and it's not really regular -- it's an abbreviated schedule. So we're doing anything and everything we can to ensure we're doing it the right way. you're going to get a little bit of both there, but pricing is much higher in those downtown cores, particularly in Manhattan. And it is about -- we're going to return like we're not proactively selling or marketing in that market. We are marketing but selling it at the moment is very difficult. Having said that, it's starting to come back. We are seeing more inbound. And then we're going to be launching -- we have started to launch, frankly, in the third quarter, more proactive sales measures in Manhattan as an example. So the good news is the downtown clients will come back. And as they come back, we'll start to layer on new clients, and that's the beauty of it. So we should see reasonable margin out of that. But it's -- the margins in Manhattan are not the same as a Westchester County. Because in Westchester County, I can go to a 2-story building and service that very, very easily. So those 3 containers we might have on the second floor in the Westchester building, even with the higher prices in Manhattan, you're still not making as much money. So we love the suburbs and we love servicing the suburbs way more than the downtown cores, that's for sure.
No, that's very helpful and very good color. And then a final one for me here. we're seeing all the supply chain issues. So I'm just wondering, are you guys having any issue with ordering trucks and maybe even securing parts for maintenance?
Yes. Right now, no. We are fortunate, I guess, that we're able to secure -- we plan our truck buys well in advance. We communicate with our vendors well in advance. We have an idea of when we need them well in advance. You don't always know, right? You land a big account, you might need a truck right out of the gate, right? But given that we have good relationships with our truck vendors, we've been able to accommodate -- get accommodation, if you will. So, so far, we've been lucky that we have good relationships, that's our luck, and we've been able to get the supply that we've needed on the truck side. That could change. Obviously, we were aware, microchips and all these things, and there's been challenges there. So from a supply chain perspective, that hasn't impacted us yet. And maybe it won't, as production starts to kick back in and as things start to grow, again, hopefully, the factories and production facilities will continue to uptick their production.
[Operator Instructions] Our next question comes from Devin Schilling of PI Financial.
Congrats on a great quarter here.
Good morning, David. Thank you.
Are you able to quantify any impacts from pent-up demand in this quarter? Like, I guess when clients go back to the office, are you normally taking a onetime for growth, take stockpile down prior to moving?
I think you're seeing -- I think you see that pent-up demand more in our unscheduled revenue number. And so when you look at, for example, the system sales, unscheduled really we have an uptick, not only versus, again, the 2020 number, which was easy, but certainly, quarter-over-quarter, so if you look at Q2 versus Q1, of this year and then if you look at sort of, again, the 2019 comparables, we're certainly up, and I think you'll see that in the MD&A. When you sort of look at those quarterly charts that we do, I'm just referring to it now, that's where we're certainly seeing -- I look at -- I'm just looking here at sort of Q4, we're back to that Q4 2019 number, not quite back to the full -- even very close to the Q2 2019 number. But again, that there was some pent-up demand there that we were able to capture. So I think that was good. You'll note, even during the pandemic, purge was the source of revenue that saved us in a way, right? We purposely started to market in about May of 2020. So June of 2020 was actually a good purge month for us because we knew people were starting to come back even at that point in time. So purge is one of those things you can turn on off and on. And we knew that there was going to be some pent-up demand. So we started the market in advance of that in February. We saw March and April and we saw that sort of 4-month span. We're still continuing to see good purge demand through the summer. The summer is always a little bit soft and then people get back to work in September. So I think looking at the purge is really what helps you determine that. And if you look at that quarter-over-quarter growth in the same year, you'll see that uptick. And that certainly was -- there was some pent-up demand in there.
Okay. No, that's helpful. And I guess if you just go back to the scanning business, so how should we be looking at revenue from this segment? Like is this largely scheduled? Or is it more personal in nature as well?
Yes. There's 3 categories really when you think of revenue in this area. There's -- number one, there's the project chunky purge revenue that we have, and those are people that come via once and then they're never back. And there's repeat customers. Repeat customers are those that they have projects, they have annual projects. So they might not be every month, but they will be with you every year or every 18 months, they will repeat and they are there. And we have the recurring and the recurring are those that are there every month and they're there forever. And they will be -- you're sort of embedded in their workflow. So we have a lot of repeats. We have some recurring. And we have, of course, a number of projects. And so we're seeing -- what we're actually seeing is our repeat clients are buying more, which is good. Our recurring clients are -- we're growing our recurring clients, but that's a light schedule in the shred business, that takes time. It's just a slow growth, go to your customers and get them on a program. And then, of course, you're seeing a bit of an uptick in project. Our hope here is using this moment to go out and secure more recurring customers, more repeat customers. We'll always take the project, but the project then gets chunky. So there's a little element of chunkiness in the business from those projects. But our #1 objective when we're selling is, "How do we make them repeat to start?" and then once they repeat, you can start to convert them into more recurring revenue.
This concludes the question-and-answer session. I would like to turn the conference back over to Jeffrey Hasham for any closing remarks.
Thank you, everyone. First of all, thanks for all the questions and everyone's time this morning. I think, as always, good questions. I think in responding to this, I think you can see that management is really focused on operational efficiency, marketing and sales and being proactive there on the marketing and sales side. That marketing and sales proactiveness plus the operational efficiencies that we've seen, we have a gentleman that's been amazing on the routing side and bringing technology to bear. We have more technology resources with us now. All those things, we hope, will continue to improve the business and put paper to the side and put COVID to the side, we're using the moment to make sure that the long term of this business is sustainable with good margins. So we've taken those moments now. And we've taken those moments literally through COVID, as I said, to start the call, we're seeing some of these good results from that, and the team will continue to use technology as a weapon, continue to think through the routing and continue to think through being surgical on marketing and sales, and I know they'll continue to do that. They've been doing it, and they'll continue to do that. And of course, that allows me to continue to execute on the M&A program, and then we can buy things and build things and that's really my message to everyone is, we're going to buy things, we're going to build things the right way. I want to thank everyone again for all the support over the last 2 years, the last -- and the last 20 -- last 18 months have been crazy, but here we are, and we got these results as a team. So thank you very much, everyone. Have a great day. And if you need anything, have any questions, please reach out to Kasia or I. We're always around. Take care.
Thank you.
This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.