Sharps Compliance Reports Fiscal 2020 Second Quarter Results

• Second quarter 2020 revenue of $14.6 million, an increase of 18% over prior year
• Gross margin improved to 33.5%
• Net income of $1 million, earnings per share of $0.06 and EBITDA of $1.5 million for the second quarter 2020
• Unused medications billings grew 72%
• Route-based billings increased 19%
• Billings increased in several key markets including Pharmaceutical Manufacturer at 170%, Professional at 14% and Home Health Care at 21%

HOUSTON, Jan. 28, 2020 (GLOBE NEWSWIRE) -- Sharps Compliance Corp. (NASDAQ: SMED) (“Sharps” or the “Company”), a leading full-service national provider of comprehensive waste management solutions including medical, pharmaceutical and hazardous, today reported financial results for the second quarter and first six months of fiscal year 2020 ended December 31, 2019.

Revenue in the second quarter of fiscal 2020 was $14.6 million, an increase of 18% compared to $12.4 million in the same prior year quarter and a 7% increase sequentially as compared to revenue for the fiscal 2020 first quarter of $13.6 million.  Customer billings increased 20% to $14.9 million for the second quarter compared to $12.5 million for the same prior year quarter and increased 5% on a sequential quarter basis. Gross margin improved to 33.5% compared to 32.2% in the second quarter of fiscal 2019 and 33.0% in the 2020 first quarter. SG&A increased 22% to $3.6 million or 25% of revenue in the second quarter of fiscal 2020, as compared to SG&A of $3.0 million, or 24% of revenue in the same prior year quarter and $3.5 million or 26% of revenue in the first quarter of fiscal 2020.  The increase in SG&A is related to the Company’s continued investments in sales and marketing as well as increased professional fees incurred during the first and second quarters of fiscal 2020.

The Company reported operating income of $1.1 million in the second quarter of 2020, compared to operating income of $0.8 million in the second quarter of 2019. Sharps recorded net income of $1.0 million, or $0.06 per basic and diluted share in the second quarter of fiscal 2020, as compared to net income of $0.8 million, or $0.05 per basic and diluted share in the second quarter of fiscal 2019. Sharps recorded EBITDA of $1.5 million in the second quarter of fiscal 2020, as compared to EBITDA of $1.2 million in the second quarter of fiscal 2019. (See Reconciliation of Net Income to EBITDA in the supplemental table included at the end of this release).

David P. Tusa, President and Chief Executive Officer of Sharps, stated, “We’re seeing continued momentum as we move through 2020, with strong second quarter results reflecting record revenue and billings, enhanced gross margins and increased profitability.  We delivered substantial growth across each of three key solutions - unused medication management, route-based and our traditional mailback offering. Additionally, we were very pleased with the strong growth in quarterly customer billings in the Pharmaceutical Manufacturer, Home Health Care and Professional markets.  At December 31, 2019 we have an installed base of 4,500 collection receptacles for unused medications in retail as well as hospital pharmacies and long-term care, drug treatment and law enforcement facilities and customers have returned and we have processed over 45,000 inner liners."

Tusa added, “We believe the strong growth and improved profitability generated in the last three fiscal quarters is a direct result of our Company’s successful transformation from a medical waste mailback and flu business only company to a comprehensive solutions provider to the Healthcare-related and Retail markets. As further evidence of success, customer billings increased 36%, 32% and 24% for the second quarter, fiscal year to date and trailing twelve-month periods, respectively, without the impact of the flu related business. We are proud of our leadership position in the marketplace and are using our reputation for excellent service to drive more business.”

Second Quarter Review

Professional market billings increased 14% to $4.4 million in the second quarter of fiscal 2020 compared to $3.8 million in the prior year period. Through a combination of its cost-effective and easy to use Sharps Recovery System™ and route-based pick-up services, Sharps has driven organic growth in this segment by addressing the small to medium quantity waste generator market comprised of physicians, clinics, dentists, surgery centers, veterinarians and other healthcare providers. Billings for the inside and online sales channel, which primarily targets the Professional and Government markets, increased 17% to $2.3 million in the second quarter of fiscal 2020 as compared to $1.9 million in the same prior year period.

Pharmaceutical Manufacturer billings increased 170% to $2.3 million in the second quarter of fiscal 2020 compared to $0.8 million in the second quarter of fiscal 2019, related to inventory builds for several current patient support programs.

Home Health Care billings increased 21% to $2.6 million in the second quarter of 2020 compared to $2.2 million in the second quarter of 2019 due primarily to an expanded relationship with a major healthcare distributor.

First Six Months Results

Sharps recorded revenue of $28.2 million in the first six months of 2020, an increase of 24% compared to revenue of $22.7 million in the first six months of 2019. Customer billings increased 28% to $29.1 million in the first six months of fiscal 2020. Retail billings increased 30% to $8.4 million as compared to $6.4 million in the first six months of fiscal 2019. The increase in retail billings for the first six months of 2020 is primarily due to an increase in flu shot related orders and MedSafe billings. Home Health Care billings increased 45% to $5.9 million in the first six months of fiscal 2020 compared to $4.1 million in the same period of 2019. In the first six months of fiscal 2020, Pharmaceutical Manufacturer billings increased 95% to $3.2 million as compared to $1.7 million in the first half of fiscal 2019. Professional billings increased 13% to $8.5 million in the first half of fiscal 2020 as compared to $7.5 million in the prior year period. 

Gross margin increased to 33.2% for the first six months of fiscal 2020 as compared to 32.4% in the first six months of fiscal 2019. SG&A expense increased 19% to $7.1 million compared to $6.0 million in the first six months of 2019, related to the Company’s continued investments in sales and marketing, but decreased as a percentage of sales at 25% for the first six months of fiscal 2020 as compared to 26% in the first six months of fiscal 2019. The Company recorded operating income of $1.8 million in the first half of fiscal 2020 as compared to $1.0 million in the first half of fiscal 2019.

Net income for the first six months of 2020 was $1.7 million, or $0.10 per basic and dilutes share compared to net income of $0.8 million or $0.05 per basic and diluted share in the first six months of fiscal 2019.

Sharps recorded improved EBITDA of $2.6 million in the first six months of fiscal 2020, as compared to EBITDA of $1.8 million in the first six months of fiscal 2019. (See Reconciliation of Net Income to EBITDA in the supplemental table included at the end of this release).

Financial Flexibility and a Strong Balance Sheet

Cash was $5.3 million at December 31, 2019, compared to cash of $4.5 million at June 30, 2019.  The Company had working capital of $10.8 million at December 30, 2019 compared to working capital of $10.6 million at June 30, 2019.

Looking Forward

Mr. Tusa concluded, “We are very excited and energized about the recent success and the significant growth we are experiencing, and we remain intent on driving sustainable, recurring revenue over the longer term as we continue to create awareness of the Company and its solution offerings. We are particularly focused on markets that we believe to be underserved and where we believe there is a significant opportunity to attract customers who are looking for alternatives to their current provider."

Second Quarter Fiscal Year 2020 Webcast and Conference Call

The Company will host a teleconference today beginning at 11:00 a.m. Eastern Time, during which management will review the financial and operating results for the period and discuss Sharps’ corporate strategy and outlook.  A question-and-answer session will follow.

The Sharps conference call can be accessed by domestic callers by dialing [phone]. International callers may access the call by dialing [phone]. The webcast can be monitored at www.sharpsinc.com.

A telephonic replay will be available through February 28, 2020.  To listen to the replay, domestic callers should dial [phone] and international callers should dial [phone] and enter replay ID number 57116. Transcript will also be posted to the Sharps website, once available.

About Sharps Compliance Corp.

Headquartered in Houston, Texas, Sharps Compliance is a leading full-service national provider of comprehensive waste management services including medical, pharmaceutical and hazardous. Its key markets include healthcare facilities, pharmaceutical manufacturers, home healthcare providers, assisted living / long-term care, surgery centers, retail pharmacies and clinics, and the professional market which is comprised of physicians, dentists and veterinary practices. The Company's flagship product, the Sharps Recovery System, is a comprehensive solution for the containment, transportation, treatment and tracking of medical waste and other used healthcare materials. The Company also offers its route-based pick-up service in a twenty-four (24) state region of the South, Southeast and Northeast portions of the United States. Sharps also provides two simple solutions for safe and easy disposal of unused medications: MedSafe collection receptacles and TakeAway Medication Recovery System Envelopes.

More information on the Company and its products can be found on its website at: www.sharpsinc.com.

Safe Harbor Statement

The information made available in this news release contains certain forward-looking statements which reflect Sharps Compliance Corp.'s current view of future events and financial performance. Wherever used, the words "estimate," "expect," "plan," "anticipate," "believe," "may" and similar expressions identify forward-looking statements. Any such forward-looking statements are subject to risks and uncertainties and the company's future results of operations could differ materially from historical results or current expectations. Some of these risks include, without limitation, the company's ability to educate its customers, development of public awareness programs to educate the identified consumer, customer preferences, the Company's ability to scale the business and manage its growth, the degree of success the Company has at gaining more large customer contracts, managing regulatory compliance and/or other factors that may be described in the company's annual report on Form 10-K, quarterly reports on Form 10-Q and/or other filings with the Securities and Exchange Commission. Future economic and industry trends that could potentially impact revenue and profitability are difficult to predict. The Company assumes no obligation to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results, express or implied therein, will not be realized.

Non-GAAP Measures

This release contains certain financial information not derived in accordance with generally accepted accounting principles (“GAAP”), including customer billings information and EBITDA. The Company believes this information is useful to investors and other interested parties. EBITDA is a significant performance metric used by management and by external users of our financial statements such as investors, research analysts and others to assess the financial performance of our assets without regard to financing methods, capital structure or historical cost basis; the ability of our assets to generate cash sufficient to pay interest costs and support our indebtedness; and our operating performance and return on capital as compared to those of other companies in our industry. Such information should not be considered as a substitute for any measure derived in accordance with GAAP, and may not be comparable to other similarly titled measures of other companies. Reconciliation of this information to the most comparable GAAP measures is included as an attachment to this release.

For more information contact:
Diana P. Diaz Sharps Compliance Corp. Vice President and Chief Financial Officer Phone: [phone] Email: [e-mail]	John Nesbett/Jennifer Belodeau IMS Investor Relations Phone: [phone] Email: [e-mail]

FINANCIAL TABLES FOLLOW

Sharps Compliance Corp. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)

	Three-Months Ended										Six-Months Ended
	December 31,										December 31,
	2019				2018			% Change			2019				2018			% Change
Revenue	$	14,565			$	12,394		17.5	%		$	28,164			$	22,687		24.1	%
Cost of revenue	9,693				8,403			15.4	%		18,808				15,344			22.6	%
Gross profit	4,872				3,991			22.1	%		9,356				7,343			27.4	%
Gross margin	33.5		%		32.2		%				33.2		%		32.4		%
SG&A expense	3,606				2,959			21.9	%		7,118				5,985			18.9	%
Depreciation and amortization	197				205						401				406
Operating Income	1,069				827						1,837				952
Operating margin	7.3		%		6.7		%				6.5		%		4.2		%
Interest income	4				8						9				13
Interest expense	(26		)		(23		)				(45		)		(46		)
Total other expense	(22		)		(15		)				(36		)		(33		)
Income before income tax expense	1,047				812						1,801				919
Income tax expense	77				33						145				70
Net Income	$	970			$	779					$	1,656			$	849
Net Income Per Share
Basic and diluted	$	0.06			$	0.05					$	0.10			$	0.05
Weighted Average Shares Outstanding
Basic	16,225				16,100						16,185				16,091
Diluted	16,303				16,106						16,236				16,098

Sharps Compliance Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)

	December 31,				June 30,
	2019				2019
ASSETS:
Current assets:
Cash	$	5,328			$	4,512
Accounts receivable, net	12,307				9,289
Inventory	3,202				3,770
Contract asset	82				260
Prepaid and other current assets	1,130				922
Total current assets	22,049				18,753
Property, plant and equipment, net	6,588				5,867
Operating lease right of use asset	8,736				—
Inventory, net of current portion	961				1,046
Other assets	448				443
Goodwill	6,735				6,735
Intangible assets, net	2,955				3,196
Total assets	$	48,472			$	36,040
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable	$	2,593			$	2,946
Accrued liabilities	3,089				2,213
Operating lease liability	1,920				—
Current maturities of long-term debt	550				517
Contract liability	3,093				2,502
Total current liabilities	11,245				8,178
Contract liability, net of current portion	694				503
Operating lease liability, net of current portion	6,931				—
Other liabilities	—				42
Deferred tax liability	332				243
Long-term debt, net of current portion	1,205				948
Total liabilities	20,407				9,914
Stockholders’ equity	28,065				26,126
Total liabilities and stockholders' equity	$	48,472			$	36,040

Sharps Compliance Corp. and Subsidiaries
Supplemental Customer Billing and Revenue Information
(in thousands)
(Unaudited)

		Three-Months Ended December 31,
		2019				% Total			2018				$ Change				%
BILLINGS BY MARKET:
Professional		$	4,365			29.2	%		$	3,828			$	537			14.0		%
Retail		4,218				28.3	%		4,152				66				1.6		%
Home Health Care		2,606				17.5	%		2,161				445				20.6		%
Pharmaceutical Manufacturer		2,274				15.2	%		842				1,432				170.1		%
Assisted Living		681				4.6	%		620				61				9.8		%
Government		489				3.3	%		543				(54		)		(9.9		)%
Environmental		66				0.4	%		78				(12		)		(15.4		)%
Other		231				1.5	%		249				(18		)		(7.2		)%
Subtotal		$	14,930			100.0	%		$	12,473			$	2,457			19.7		%
GAAP Adjustment *		(365		)					(79		)		(286		)
Revenue Reported		$	14,565						$	12,394			$	2,171			17.5		%
		Six-Months Ended December 31,
		2019				% Total			2018				$ Change				%
BILLINGS BY MARKET:
Professional		$	8,500			29.2	%		$	7,502			$	998			13.3	%
Retail		8,360				28.6	%		6,412				1,948				30.4	%
Home Health Care		5,923				20.3	%		4,088				1,835				44.9	%
Pharmaceutical Manufacturer		3,211				11.0	%		1,650				1,561				94.6	%
Assisted Living		1,305				4.5	%		1,265				40				3.2	%
Government		1,253				4.3	%		1,140				113				9.9	%
Environmental		85				0.3	%		181				(96		)		(53.0	)%
Other		512				1.8	%		539				(27		)		(5.0	)%
Subtotal		$	29,149			100.0	%		$	22,777			$	6,372			28.0	%
GAAP Adjustment*		(985		)					(90		)		(895		)
Revenue Reported		$	28,164						$	22,687			$	5,477			24.1	%
*Represents the net impact of the revenue recognition adjustments to arrive at reported GAAP revenue. Customer billings include all invoiced amounts for products shipped or services rendered during the period reported. GAAP revenue includes customer billings as well as numerous adjustments necessary to reflect, (i) the deferral of a portion of current period sales, (ii) recognition of certain revenue associated with product returned for treatment and destruction and (iii) provisions for certain product returns and discounts to customers which are accounted for as reductions in sales in the same period the related sales are recorded. Most of the difference between customer billings and GAAP revenue is reflected in the Company’s balance sheet as Contract Liability.

Sharps Compliance Corp. and Subsidiaries
Supplemental Customer Billing by Solution Information
(in thousands)
(Unaudited)

		Three-Months Ended December 31,
		2019				% Total			2018				$ Change				%
BILLINGS BY SOLUTION:
Mailbacks		$	8,929			59.9	%		$	8,118			$	811			10.0		%
Route-Based Pickup		2,480				16.6	%		2,078				402				19.3		%
Unused Medications		2,321				15.5	%		1,350				971				71.9		%
Third Party Treatment		66				0.4	%		78				(12		)		(15.4		)%
Other		1,134				7.6	%		849				285				33.6		%
Total Billings By Solution		$	14,930			100.0	%		$	12,473			$	2,457			19.7		%
		Six-Months Ended December 31,
		2019				% Total			2018				$ Change				%
BILLINGS BY SOLUTION:
Mailbacks		$	16,666			57.2	%		$	13,736			$	2,930			21.3	%
Route-Based Pickup		5,137				17.6	%		4,206				931				22.1	%
Unused Medications		4,704				16.1	%		2,989				1,715				57.4	%
Third Party Treatment		85				0.3	%		180				(95		)		(52.8	)%
Other		2,557				8.8	%		1,666				891				53.5	%
Total Billings By Solution		$	29,149			100.0	%		$	22,777			$	6,372			28.0	%

Sharps Compliance Corp. and Subsidiaries
Supplemental Customer Billing by Channel Information
(in thousands)
(Unaudited)

		Three-Months Ended December 31,
		2019				% Total			2018				$ Change				% Change
BILLINGS BY CHANNEL:
Direct Sales		$	8,531			57.1	%		$	6,828			$	1,703			24.9		%
Distributors		4,121				27.6	%		3,703				418				11.3		%
Inside and Online Sales		2,278				15.3	%		1,942				336				17.3		%
Total Billings By Channel		$	14,930			100.0	%		$	12,473			$	2,457			19.7		%
		Six-Months Ended December 31,
		2019				% Total			2018				$ Change				% Change
BILLINGS BY CHANNEL:
Direct Sales		$	16,229			55.7	%		$	11,453			$	4,776			41.7	%
Distributors		8,112				27.8	%		7,060				1,052				14.9	%
Inside and Online Sales		4,808				16.5	%		4,264				544				12.8	%
Total Billings By Channel		$	29,149			100.0	%		$	22,777			$	6,372			28.0	%

Sharps Compliance Corp. and Subsidiaries
Supplemental Table to Reconcile Net Income to EBITDA*
(in thousands)
(Unaudited)

	Three-Months Ended								Six-Months Ended
	December 31,								December 31,
	2019				2018				2019				2018
Net Income	$	970			$	779			$	1,656			$	849
Income tax expense	77				33				145				70
Interest expense, net	22				15				36				33
Depreciation and amortization	382				416				803				807
EBITDA	$	1,451			$	1,243			$	2,640			$	1,759
*The Company defines earnings before interest, taxes, depreciation and amortization (“EBITDA”) as net income, plus income tax expense, net interest expense, and depreciation and amortization. Other companies may define EBITDA differently. EBITDA is presented because it is a financial measure that is frequently requested by third parties. However, EBITDA is not considered under generally accepted accounting principles as a primary measure of an entity’s financial results, and accordingly, EBITDA should not be considered an alternative to operating income, net income, or cash flows as determined under generally accepted accounting principles and as reported by the Company.