Redishred Capital Corp (Pre-Merger)

XTSX:KUT

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Thank you for standing by. This is the conference operator. Welcome to the RediShred Capital Corp. Second Quarter 2024 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.

[Jeffrey Hasham, executive]

Thank you very much, Drew. Good morning, everyone. Thank you for joining us today, and welcome to RediShred's Second Quarter 2024 investor call. I want to thank everyone who's joined us this morning. With me here this morning to co-present would be is Harjit Brar, who is our CFO. And together, we will be reviewing the second quarter of 2024 results. And as per usual, we'll have a session for Q&A.

I do want to let everyone know that the financial statements for the second quarter, the MD&A and press release were disseminated yesterday evening and are available on SEDAR. So I guess, to cut to the chase, second quarter of the year, just pardon me while I take off my noise-making device here.

We had a good second quarter of the year. The key for us and what we're pleased about is we continue to grow our service revenue. Our shredding revenue was up $2.1 million or 17% compared to the second quarter of 2023, of which $1.3 million of that was organic. So good organic growth as a company that continues to do M&A in the shred space, another $1 million of top line added through acquired revenue.

Paper prices continue to remain slightly under the 10-year average, in the second quarter of 2024, and of course, well off the elevated highs we saw in Q1 and Q2 of 2023 as comparisons. Obviously, this impacted our recycling revenue, which was $2 million in the second quarter of 2024, and that would be down from $2.6 million in the second quarter of 2023.

The good news in all of this, and I think it is something we should be stressing as our dependency on paper revenue, the commodity, if you will, has continued to diminish. And we've really been focusing on the core business. How do we drive more service revenue, how do we drive more route density, -- and of course, all of that on the shredding side drives a bottom line profitability.

EBITDA overall increased by $0.1 million to $4.5 million in the second quarter of 2024 versus second quarter of 2023. And obviously, with that paper variance, that's -- we've essentially made up the loss in paper revenue with gains in service revenue and of course, gains and service revenue are much more sustainable, much more durable and much more reliable. And so we're very pleased to see that movement. When we look at organic growth, and again, Harjit will get much more into the details of the numbers in a moment. When we look at our organic growth, lots of levers, new client acquisition, of course, is a lever, price increases have also been a lever.

As noted on our last call, we were in the starting phases of pushing through our annual price increases and those price increases have been implemented. So the -- starting now in the summertime and certainly into Q3 and Q4, we will start to see some of the positive impact of those price increases. I think one thing to make note of in the quarter is we're now a SOC 2 Type 1 certified company. I mentioned this in prior quarters, our IT infrastructure generally has been upgraded over the last year. And one of those key areas of upgrade has been on the security and defense front and to obtain that SOC 2 Type 1 certification, number one. tells the world that we are a secure company. Our branding is one of that, so we should be. And this is going to help us market particularly in the scanning business.

Obviously, a lot of clients will look for this. If you're in health care space, you'll probably look for this. But certainly, in the scanning business, this is going to be very helpful. Many, many large institutions are looking for their service provider, their digital imaging service provider to have this certification. Our operations team, our technology team, our risk team, they put a ton of work into this. And obviously, lots of details behind that. I want to thank them, of course, for their efforts. And this is a good news situation for us.

Acquisition side, we've been busy this last couple of months. We finished the quarter with a small tuck-in in Florida, SelectShred, on-site paper, hard drive destruction, products, shredding business, nice business, nice tuck-in for that market. And then shortly after the second quarter ended about a month in to the third quarter, we completed Confidential Shredding, another tuck-in in the New York, New Jersey market. Our operations team and finance teams are be very busy integrating that one as well. So really 2 deals have been integrating, Confidential a bit bigger than SelectShred.

Again, both of these will have great impact on the right densities and, of course, enhance our margins on those routes and enhance our margins overall. So good news there.

On that note, let me pass it over to Harjit, who will dig into the numbers.

[Harjit Brar, executive]

Thank you, Jeff, and thank you again, everyone, for joining us on this call this morning. So in terms of our financial results, we kind of look at our top line consolidated revenue for the second quarter. We grew that to $18 million, that compares to $16.8 million in Q2 of 2023. That growth was really driven by our service line, shedding revenues up 17% or $2.1 million, that was offset by, of course, recycling revenue, as Jeff alluded to, prices still -- price is normalizing, but still slightly below the 10-year average.

So in terms of the top line results, they resulted in sort of a bottom line impact of $4.5 million in EBITDA for the quarter. That is up $0.1 million compared to Q2 of 2023. Organic same-store basis. If we take a look at that for the quarter, we alluded to the shredding revenue growth, $1.3 million of that is organic shredding revenue growth or 10%. And if you strip out the paper focusing on the sort of the operational side, EBITDA, excluding the impact of paper was actually up 16% or $0.6 million for the quarter.

From a cash flow perspective, free cash flow was at $3.5 million or $0.19 per share. That was driven by $4.1 million in cash generated from operations, offset ofcourse by CapEx, which came in at $0.5 million for the second quarter. On a year-to-date basis, through the first 6 months of the year, total revenue grew to $35.1 million. That compares to $33.7 million for the first 6 months of 2023, with EBITDA finishing at $8.6 million.

So overall, a good first half of the year, both from a financial and operational perspective. And then definitely the -- from an acquisition front as well, as Jeff alluded to, we're obviously executed on integrating a few good good acquisitions that we've completed in the first half of the year.

With that said, I will turn it over to Jeff for some closing comments before we open it up to Q&A.

[Jeffrey Hasham, executive]

Thanks, Harjit. Yes, look, as always, management continues to do everything they can to execute on the plan, in particular, drive revenue growth, service revenue growth, whether in all our businesses, drive operational excellence. So we're operating it in the best way possible in a safe way, in a profitable way. All those things the team is doing, they do it every day. And when -- obviously, for those that are in the field, it's every day that they're dealing with something, and we appreciate that attention to detail because that's what it takes, is attention to detail.

And we look forward to the rest of the year to grow and scale this business. That's the exciting part for the management team. And of course, why many of you have joined us in this journey as shareholders and partners. So with that all being said, Drew, would you be so kind as to open up to Q&A.

[Operator]

[Operator Instructions] The first question comes from Nick Corcoran with Acumen Capital.

[Nick Corcoran, analyst]

Jeff and Harjit. A couple of questions for me. The first is margins improved sequentially. How much room do you think there is for margins to improve in kind of a short to medium term?

[Jeffrey Hasham, executive]

I think there's still some room to improve. There's always room to improve. Obviously, this is one of our very best operational orders. And -- but I think there's still some room to obviously obtain more route density because those 2 acquisitions we just did are early in early stages of integration. So there's going to be some opportunity there, both on a same-store basis and on a total store basis. .

Obviously, our businesses in the e-waste and PROSCAN businesses are also in their infancy, and we're putting more emphasis on the sales side there and that emphasis on the sales side should generate more revenue and hopefully, again, help drive margins, the store level margins and of course, that will help on the consolidated margin.

So look, there's still some room there. to continue to do better. Probably really the biggest thing not in our control would be fuel prices thats the one thing that on the operational side that back goes up, that could erode margins. knock on wood, luckily, the trend of paper prices going up and down. And generally, fuel prices going up and down that correlation is held so far. So -- and we're in a steady state on the fuel prices as well. So, so far, so good there, Nick.

[Harjit Brar, executive]

I think one thing just to add there, Nick, as well is I think we talked about one of the organic levers in terms of increasing prices. So as we look at our Q2 results, they don't really fully bake in the price increase impact. So we did start implementing price increases in the summer. We are going to start seeing the full benefit of that in Q3.

So in addition to what Jeff pointed out, obviously, the opportunity to scale and grow, there's also that lever as well. And so you should see some improvements from that as well in the third quarter.

[Nick Corcoran, analyst]

That's helpful. And then you mentioned that you did receive the SOC 2 certification. How long do you think it'll take to see business wins as a result of that?

[Jeffrey Hasham, executive]

Yes. That's a good question. We're starting to have meetings with the folks in the past that have said, "Hey, get your SOC 2 and we'll talk to you again. And so we're having those meetings now, which is good. And so I think, like anything in the summer, it gets a little bit tough to get those folks, but we're starting to have those meetings. I think in the fall, we'll be getting there for sure.

And then it depends on the timing of when they have the paper that they want to digitize. But the good news is we've reengaged those folks. We are actively marketing the certification that we have it to all our existing clients to prospects to new clients on our website. All of those things are happening now. So I think we need to give it a little bit of time to like you, Nick, I want it today, but I think we have to give a little bit of time to germinate. But there's been some discussions now with some clients that we value that certification. In fact, wouldn't do business with us unless we had it.

[Nick Corcoran, analyst]

That's helpful. And then maybe last question for me. Just in terms of CapEx, what are you expecting for the full year? And when should we think about the timing of truck deliveries?

[Jeffrey Hasham, executive]

Harjit, you want that one?

[Harjit Brar, executive]

Sure. So in terms of the sort of the CapEx spend, it is something that, obviously, we do very closely monitor look at optimizing and making sure we're buying in the right markets at the right time.

If you look at sort of the year-to-date trend, obviously, we were a little bit heavier on the Q1 side, a little bit lighter on Q2, and that just had to do with timing of purchases. As we sort of look at the second half of the year, I would say, from a CapEx perspective, we're going to be at a sort of a similar clip if you kind of look at it at an aggregate.

But one thing to point out is it's probably going to be a little bit more steady in terms of the trucks that come in. We have been working very closely with our suppliers to make sure the logistics and timing of those deliveries coincides with our requirements. And so for that reason, you're going to see a little bit less volatility, but we're probably expecting, I would say, in the range of about 3 trucks -- 3 to 4 trucks per quarter in the coming 2 quarters.

[Operator]

The next question comes from Devin Schilling with Ventum Financial.

[Devin Schilling, analyst]

Jeff and Harjeet, good quarter. Just maybe if you could just please comment on the waste management acquisition of Stericycle and Shred-it here and how you see this impacting the competitive landscape going forward? Also, I guess, was there any private equity activity in the space?

[Jeffrey Hasham, executive]

Yes, good question. So look, Whenever somebody that big buy somebody that big, Shred-it gets a little more lost in the shuffle, I think. And yes, Shred-it, it's not small, right? But certainly, my take is Waste Management bought that for Stericycle. There's going to be some benefit to Shred-it, I think, in -- on the paper side that there's more paper buying power there given that they're in the waste business.

So that's sort of broad stroke there. So that's interesting. Our -- we tend to steal a lot of business from Shred-it, they tended to focus on larger clients and we tend to focus on small [indiscernible] enterprise. So and that does show itself in their offering. So look, I think it's too soon to really know other than the messaging that I put out there is, look, everyone just keep your ears open, keep your eyes open. Let's let's jump on opportunities there because there will be opportunities there. There's service issues, let's be the first to respond, let's be the first on the advertising from a Google perspective, like let's give those clients an opportunity to come to us first.

Let's start mining our Shred-it related database. Let's start tracking those clients and Salesforce is so new to us, and that's a powerful instrument and a very powerful instrument because now we can do things with that and track things with that. So look, we're going to continue to do what we do, but we're going to be eyes wide open on what might happen there.

On your second question on the PE activity, look, there's PE that owns some of the larger competitors out there like a vital records control is known by Private Equity. I really haven't seen any other PE firms buying independents at the moment. And I shouldn't say I haven't seen it. It doesn't mean it's not happening, like I can't tell you with certainty that, that's not happening. Just I haven't seen any of that. And so it could be out there, but I just don't know.

[Devin Schilling, analyst]

Okay. Yes. No, that's very helpful. I guess just secondly here, maybe if you can just touch on capital allocation for the remainder of the year here. Obviously, you saw a pretty strong free cash flow this quarter and expecting more for the balance of the year. Should we be anticipating further acquisitions or possibly some debt reduction? Again, I guess, just how are you viewing capital allocation?

[Jeffrey Hasham, executive]

Yes. I guess a couple of things. So M&A is -- we've got a good pipeline. I think we have the opportunity to be cherry-picking our deals. So a good deal for us. Obviously, let's put franchisees aside because we know them, they're always good deals when they want to retire, leave -- that's an opportunity for us. But those tuck-ins, if you look at the last 2 tuck-ins we did, that's very strategic and very much cherry picking.

In market, they've got trucks, they've got clients, but we have the infrastructure. And that's a magic, that's magic from a cash generation. And really, this is about cash generation, right? That's -- so those are really good acquisition. So I'm not going to go buy anything right now on Idaho or any of those places. I think the best bang for our dollar right now is those types of tuck-ins in the markets that we're in. And a lot of people go, 1 or 2 trucks, you bought 1 or 2 truck or 3 truck operators. And these things are heavily -- they are great cash flow generators once integrated.

And then anything about those smaller ones is you can integrate them. You can integrate them easier. So from a cash generation perspective, those types of M&A opportunities are good M&A opportunities. And for any other type of an opportunity, it's going to have to be really good, right? And something that might transform us right? And that's a different story and a different equation. But for the time being, given our resources, that's where we're really focused it on.

From a debt reduction perspective, look, as we start to generate cash, it does give us opportunity, right? We have opportunity to do cherry-pick M&A. We have opportunity maybe to pay down some debt, especially the more expensive debt. It depends on how that pipeline looks and it depends on the equation, right? Which is going to give us a better return, right? That's really what it's going to come down to between paying off debt or doing an M&A deal, right? And we'll make the right decision for sure.

I guess the good news is that interest rates are starting to come down. Harjit had the foresight on a couple of these M&A loans that we took to buy some of these folks to go a little shorter on them, in terms of term. And for example, we have one of the loans renewing later this year. If interest rates continue to come down, we'll be able to renew that at a lower interest rate. Well, that's excellent, right? So that's how we're going to look at that capital allocation equation, Devin. I hope that helps give you a little insight. Do you have any follow-ups on that? Or did that get...

[Devin Schilling, analyst]

I think that's a good overview and a good recap on that, and I'll jump back in the queue.

[Operator]

The next question comes from David Ocampo with Core-Mark Securities.

[David Ocampo, analyst]

Yes, I just wanted to circle back on some of the previous lines of questions that maybe approach it a little bit differently. So you guys do have price increases that are going to be fully reflected in the back half of the year, but Q2 is typically your strongest margin quarter. But I guess when you guys are modeling it out, do you expect the back half of the year to be stronger than the first half? And I guess that's sort of implied that you guys are going to hit your $17.7 million EBITDA target. Just curious how you guys are thinking about that?

[Jeffrey Hasham, executive]

Yes. Look, on Q3, you're right, Q2 tends to be the strongest quarter, just a heavy demand quarter. Q3, we think will be a good quarter. Q4 is always a soft quarter, right? That's typically the softer quarter. And we're planning now, and I think if you look at last year's Q4, it was our softest quarter.

However, the good news from last year's Q4 was that we actually performed much better than any prior Q4, other than put COVID stuff to the side. So the idea there is, look, what do we have going in our favor for Q4. We know what's coming, lower number of business days. We tend to run strong sales and incentive programs in Q4.

The M&A that we've just conducted should help in that regard to help bolster Q4. And of course, the price increases should also help to bolster Q4. So I'm going to tell you Q4 is not the toughest quarter, it is, but we certainly are gearing up for that now. We're not gearing up for that on October 1. So we're certainly gearing up for that.

In the third quarter, yes, it tends to lag a little bit in the second quarter. But again, we've been pushing pretty hard here in the second quarter as well -- or third quarter as well. So look is the -- is this going -- are we going to hit our numbers? We still think we have a very good shot at hitting our numbers. A good shot, let's say, because, again, we've done some acquisitions. We continue to improve our cost structure. We continue to increase our revenues. So we feel we have a good shot at this. That's my take, Harjit. Do you have any comments on that as well?

[Harjit Brar, executive]

Yes, sure, David. I think as Jeff sort of pointed out, obviously, there is a little bit of flux or volatility intra year in terms of different quarters. Again, there's a few different things, obviously, with price increases going into effect. We do have completed a few acquisitions, that should help as well. And then obviously, I think as we sort of look at Q1, Q2, Obviously, there's opportunities, right? And so some of those opportunities we're obviously hoping to capitalize on in the back half of the year, right?

And so all in all, again, those targets are very attainable. And we do expect a stronger quarter in Q4 relative to some of the past quarters. And I think, again, Q4 2023 was, again, also stronger historically than some of the other quarters as well. So all in all, I would definitely say we're still aiming for that target, and we think we have a good chance.

[David Ocampo, analyst]

Okay. That's helpful. Pretty good color there. And look, Jeff, most of the M&A discussion that we always have is always around your shredding business. And I understand the scanning business does have some pretty good green shoots in terms of growing organically, especially without SOC 2. But just on the inorganic side, we haven't seen you guys pull the trigger yet there. How is your pipeline building for scanning M&A? And how do the metrics look like for scanning transactions, are they similar to what you guys are seeing out there for shedding or if it's a tuck-in type acquisition, 2 to 4x EBITDA?

[Jeffrey Hasham, executive]

Yes. Good question. So we do have a bit of a scanning M&A now. We've been building that for, I'd say, about the last year or so. The -- there is fragmentation out there. And you've got some -- you got the large guys like Access and Iron Mountain, you've got some larger regional folks, and then you've got lots of independence as well.

Probably the difference between this and the shredding business, a lot of the independents, you can still do a tuck-in like if there's an independent in Massachusetts, I can do a tuck-in there, right, which is good. And the metrics that we're seeing in terms of multiples the way to value these businesses is a little bit different, as you can imagine, right, because it's going to be on contract history and contract extrapolation, right, because this is really what it comes down to, right? I mean the assets are minor in the equation, right? So it's really has that customer been with that company a long time. Are those contracts long term in nature? Are they renewable? Are they assignable? So those are the kinds of things that we're looking for in those equations.

And of course, historical repeat of EBITDA performance. And EBITDA is much closer to cash flow in that business is going to drive multiple. And again, that multiple range is similar sort of [ 4 to 5 is ] sort of where we're sort of honing in on in that business. That business doesn't tend to have as much recurring revenue. There's some scanning companies, especially midsize and larger regional folks that do have some recurring revenue, which is good, and that helps their equation. But that's sort of what we're looking at now and the due diligence is certainly very different because we're looking for different things because as you can imagine, we want to buy something that's going to be as durable as possible. And so we're looking for historical track record with those businesses and those contracts.

[Operator]

The next question comes from David Marsh with Singular Research.

[David Marsh, analyst]

Congrats on the quarter. So first for me, last year, SG&A ticked up a bit in the back half, and I want to say that I feel like that might have been related to Salesforce. And just wanted to get a sense of, is the expectation that you might be a little bit lower year-over-year on the SG&A side in the back half of this year?

[Jeffrey Hasham, executive]

Last year, Azure -- we did a large Azure implementation. We need to do Azure. If -- we need to do that Azure to get the SOC 2. So yes, last year, in the back half of the year, we had a lot of technology projects that were in initiation. Azure was getting done at that time, getting the implementation done. So yes, there's quite a bit of IT cost associated with that.

The IT costs are now tapering into more maintenance mode. There's still a little bit of sales force cost that's coming, not as much as the prior years, but there's some that's coming because we're literally in the middle of integrating Salesforce of our workflow software. Now that's a huge benefit to us because now we're not doing double data entry. Right now, we do data entry at Salesforce, and we do data entry into our workflow software. Now it's not even a data entry sometimes in the Salesforce. A lot of our leads are just flowing the Salesforce our teams are dealing with it, updating the data and then that's going to flow into workflow.

So it's going to be a long-term benefit to us by having this integration, double data entry as you can imagine, is not good use of people's time. It's not how we're going to scale this business. So yes, that was a long answer. The short answer is we're expecting to see IT costs taper off. Not even like -- just this year is still a heavy IT year, but we're going to start to see that taper off as we go forward.

[David Marsh, analyst]

Okay. And then just lastly for me. Just on the acquisition front, can you just talk about acquisition multiples, what you're able to realize? And then kind of what your expectation is once integration is complete?

[Jeffrey Hasham, executive]

Yes. Well, yes, so look -- and again, let's deal with the shredding. On the shredding side, we've done deals at asset value, 3 multiples. Our typical range has been sort of [ 4 to 6 ] that's historical. We haven't done anything close to [ 6 ] in some time.

For obvious reasons, interest rate environment is different when you're cherry-picking deals, you can be picky, you can be more aggressive on the pricing of those deals. The last couple of deals that we've done, you can see those are weren't 5 multiples of EBITDA even. So that's good.

And then that's on the pre-synergy multiple. And then when you synergize these things, you can knock at a half turn to a turn more out of that. So that's the expectation that we have that we're going to extract. I'll give you an example like confidential. We're just in the guts of it, and the team is integrating billing. They're integrating the routes. They're they're integrating the drivers and we're determining all those, what do we -- how do we integrate all those routes to enhance the route profitability.

Confidential is a great example. We're in the middle of that now. The team is in the middle of it. The -- and like all integrations, you have a few bumps here and there, but -- that team is actually quite experienced in doing these in New York and New Jersey. Same in Florida, that SelectShred, they're a little more advanced. There's been more integration that's already happened. So yes, the expectation is we're going to knock out some costs and enhance our route profitability.

[Operator]

[Operator Instructions] The next question comes from [ Inigo Alonzo ] a Private Investor.

[Unknown Shareholder]

Congratulations on the impressive cash generation this quarter. I had a couple of housekeeping questions. The first one around the contingent consideration in the MD&A. There you say there's been a remeasuring loss this quarter. I was wondering if any of the latest acquisitions are underperforming and maybe we could expect an impairment going forward? Or it's not related to that?

[Jeffrey Hasham, executive]

Harjit, I think the [indiscernible] is small.

[Harjit Brar, executive]

Yes. So I think with the remeasurement loss, again, so as a part of the accounting standards, we are required to remeasure the earn-out consideration that we typically have as a part of the acquisition. So in this case, actually, since there is a -- it's a remeasurement loss, that means some of the acquisitions are actually doing a little bit better than we had originally anticipated. So it's actually good from that perspective that the acquisition is actually doing a little bit better.

[Unknown Shareholder]

Wonderful. The other housekeeping question is around the SOC 2 certification. You got the Type 1, you were going to try to get the Type 2, the next level of certification. What is the updated time line to get that one?

[Jeffrey Hasham, executive]

Yes. Great question. So now -- so Type 1 is the first audit. It's a moment in time audit. And so obviously, we were able to attain that. Now the second and the higher standard is Type 2. And Type 2 is are you doing this regularly through a year. So we just recently, this past June, received our SOC 2 Type 1. So now we have to demonstrate for the next year that we're following the processes, procedures, doing the testing, all of those types of things following the procedures and the policies.

And so then a year from there, the auditors will come back in and they'll test the year, right? So they're going to then take samples through the year to ensure that we are following the protocols. And so we're under a year away now. And I will -- the good news is our teams have been following the SOC 2 protocols, and we're doing the the appropriate testing.

And again, moving to Azure, which I mentioned earlier, is a big part of that because within Azure, you're already doing the right things, right? You already got multifactor authentication. You've already got things built into that. You already have endpoint security. So many things are built into Azure, that help you. And for those who might have actually had a couple of questions on this. We were lucky we didn't use CrowdStrike. That wasn't the vendor we chose to help us with our cyber items. So that's, I guess, the good news in hindsight.

Look, anything can happen to anybody at any time. And the key here and being a SOC 2 company is we've done everything we can on our end to protect ourselves and to respond and knock on wood, we're in good shape there, and we look forward to a 9 months' time passing and getting the second degree on that certification.

[Unknown Shareholder]

Regarding the credit facility or the loan that is coming to next May, when are you planning to refinance that one?

[Jeffrey Hasham, executive]

Go ahead, Harjit. Go ahead.

[Harjit Brar, executive]

Sure. Just to kind of get clarity on that, when you mean credit facility, which line are you specifically looking at? Because if you talk about the truck loans specifically?

[Unknown Shareholder]

I'm looking at Page 24 in the MDA. This is the $146 million at 3.5%. I think is related to an acquisition, if I remember correctly.

[Harjit Brar, executive]

Oh, that one. Okay. So that's actually a specific loan as opposed to the facility itself that's coming for renewal. So with that one, typically, that what's happening is once that one comes up for -- so that one is actually the most recent one that we did. So basically, that -- you look at May 2024, right, the month of advance, the [ 560 ] you're looking at?

[Unknown Shareholder]

Most of advance, I'm looking at May '19, 2019.

[Harjit Brar, executive]

May '19. Okay. So that one Okay. So with that one, what ends up happening with that one that did have a -- so basically, with that one, that's a specific draw against our acquisition facility. So our acquisition facility is actually not expiring. It's just that, that loan is going to come due, right? So if you look at that -- yes, that loan when it's going to come due, it's going to be generally paid off if there's any residual bowls, there's always the opportunity to re-term it and extend it out. But that one's just again, it's just a specific draw against the facility.

[Unknown Shareholder]

Okay. And the last one around the strategy going forward in the East Coast. So you have a crazy density in New York and New Jersey at this point with your business. Are you planning on integrating or acquiring a scanning business over there or opening a new scanning center there or maybe even scaling the e-waste business through development on that side of the country?

[Jeffrey Hasham, executive]

Yes, I can speak to those. So we have a hub, a scanning hub in Massachusetts, it does service the Northeast quite well. and shipping costs to and from there are relatively low. So that's good. The nice thing about the scanning business is, first of all, we have the facilities and space in the New Jersey market in particular to -- in both New Jersey and Philadelphia to expand scanning.

The good news is it's not like shredding where you need a truck, and the truck of empty to start and then you go fill it up. In this case, you can land a large contract, and we can spin up essentially a scanning operation in any of those locations within 6 to 8 weeks. And appropriately spun up like SOC 2 compliant, all the security, everything we can do that. And so for us, it's -- so we're marketing on all of our corporate locations the scanning solution and the good news is because we have had we have a hub in the Midwest, a hub in the Northeast and a hub in the Southeast, we can essentially cover the East Coast through those hubs.

But if someone needed something done locally. And it was large enough, then yes, we can spend one up. That's on the scanning side. On the e-waste side, all of our locations do hard drive destruction, product destruction, takes some level of e-waste and then we work with a partner locally. And the only location where we have a dedicated e-waste company is -- or a facility in operations is in Kansas, [indiscernible] in Kansas is we can service the Midwest from there.

We're -- we put in some new software in there to manage inventory and the like, which is great. really, what we'd like to do in that business is finish the play both in the IT and enhance the sales in that location in the Midwest. And then look, again, if there's opportunity coming to us in the Northeast, either organically or by M&A, we would look at that.

The iPad business, there are companies that are looking to sell. We know that. We're just starting to build a bit of a pipeline there. So I think there'll be some opportunity there. Right now, first step we want to be very good at what we do on iPad, and we're going to finish the job in Kansas in terms of being good and growing that business. Similar to what we've done with PROSCAN. PROSCAN -- we've had the good fortune year-over-year typically of growing that business.

[Operator]

This concludes our question-and-answer session. I would like to turn the conference back over to Jeffrey Hasham for any closing remarks.

[Jeffrey Hasham, executive]

Yes. First of all, lovely to see so many people on the call. So many of our investors, so many of our Board members, employees, partners, we never do these things alone, and I want to thank everyone for all their contributions to what has made our company successful. And so we need to say that because we don't do it alone, number one. Number two, as always, the team is going to go right back to work right after this call. And finish up Q3, and we look to do our very best to finish up Q3 strong. And we also look to in Q4 and finish the year strong. So that's our job, and we're going to go right back at it. So thank you, everyone. Have a great Labor Day long weekend. Bye-bye.

[Operator]

This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.