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 first quarter
ended September 30, 2020.
Revenue in the first quarter of fiscal 2021 was $13.2 million, a
decrease of 3% compared to $13.6 million in the same prior year
quarter. Customer billings decreased 6% to $13.4 million for the
first quarter compared to $14.2 million for the same prior year
quarter. GAAP revenue and customer billings were negatively
impacted by the timing of flu and COVID-19 related mailback orders.
Additionally, the Home Health Care market billings comparison was
adversely impacted by a $0.9 million stocking order in the prior
year related to a new distributor relationship.
First quarter 2021 gross margin was 28% compared to 33% in the
first quarter of fiscal 2020. The decrease in the gross margin was
driven by the timing of flu and COVID-19 related mailback orders
for the quarter. Without the impact from the shift in flu related
orders, the first quarter 2021 gross margin would have been 32% to
33%. SG&A increased 8% to $3.8 million, or 29% of revenue, in
the first quarter of fiscal 2021, as compared to SG&A of $3.5
million, or 26% of revenue, in the same prior year quarter. The
increase in SG&A, which is consistent with our internal
expectations, is related to the Company’s continued investments in
sales and marketing.
The Company reported an operating loss of $0.4 million in the
first quarter of 2021, compared to operating income of $0.8 million
in the first quarter of 2020. Sharps recorded net loss of $0.3
million, or a loss of $0.02 per basic and diluted share, in the
first quarter of fiscal 2021, as compared to net income of $0.7
million, or $0.04 per basic and diluted share in the first quarter
of fiscal 2020. Sharps recorded EBITDA of $0.1 million in the first
quarter of fiscal 2021, compared to EBITDA of $1.2 million in the
first quarter of fiscal 2020. (See Reconciliation of Net Income
(Loss) to EBITDA in the supplemental table included at the end of
this release).
David P. Tusa, President and Chief Executive Officer of Sharps,
stated, “During the first quarter we saw a significant rebound in
our route-based business with revenues increasing 19% and
surpassing pre-COVID-19 levels as well as our internal
expectations. Likewise, Professional market billings have
recovered and first quarter billings from this segment also
exceeded pre-COVID-19 levels. This strength represents not only the
resumption of operations for most of our COVID-19 affected
customers but also reflects sales to new customers.
“We have always viewed flu-related activity as a nine-month
season, comprising the June, September and December quarters.
Historically, order volumes, within the season, have often varied
from quarter to quarter, depending upon customer ordering patterns
and their distribution and warehouse facility operations which,
this season, have been impacted by COVID-19. Accordingly, we
experienced a shift in flu immunization and COVID-19 related orders
from the September 2020 to the December quarter.
“From our vantage point today, we remain confident that we’re in
the midst of a very strong flu immunization season as evidenced by
50%+ increase in flu-related return mailbacks processed for August,
September and October 2020. We are also hopeful that the flu
immunization season could be followed by substantial activity
related to a potential COVID-19 vaccine which many experts believe
could be available later this year or early 2021. We have a robust
inventory of our medical waste mailback solutions in place to meet
anticipated strong demand and this month are commissioning a new
autoclave online at our Pennsylvania facility, expanding our
medical waste processing capacity from 18 million to 27 million
pounds per year, which is up from 10 million pounds a year ago.
“In addition to flu and potential COVID-19 vaccine related
business, we remain keenly focused on landing larger route-based
opportunities serviced by our expanded footprint which now serves
32 states, addressing 70% of the population. The pipeline of these
opportunities is robust and very active, with prospects more
engaged now than they were during the onset of the pandemic in
March of 2020. Our goal is to close many of these opportunities in
the December 2020 quarter, and begin generating revenue from these
new contracts starting as early as the March 2021 quarter.”
First Quarter Review
Retail market billings decreased $0.5 million or 12% to $3.6
million in the first quarter of fiscal 2021 as compared to $4.1
million in the same prior year period. The decrease in retail
billings is primarily due to, lower flu shot / COVID-19 related
orders of $0.9 million due to the timing of related orders,
partially offset by higher unused medication billings of $0.3
million from MedSafe and TakeAway Medication Recovery System
envelopes. Excluding the flu-related billings, the Retail market
billings increased 26%.
Home Health Care market billings decreased 29% to $2.3 million
in the first quarter of fiscal 2021 compared to $3.3 million in the
first quarter of fiscal 2020. First quarter fiscal 2020 included a
large stocking order of $0.9 million from a major healthcare
distributor.
Professional market billings of $4.1 million in the first
quarter of fiscal 2021 were consistent with the same period of
fiscal 2020. This market, which is comprised of physicians,
clinics, dentists, surgery centers, labs, veterinarians and other
healthcare providers, has recovered to billing levels higher than
the March 2020 pre-pandemic time period, as most of the Company’s
customer locations have reopened.
Long-Term Care billings increased 110% to $1.3 million in the
first quarter of fiscal 2021 compared to $0.6 million in the prior
year period, related primarily to an increased volume of COVID-19
related waste management and ancillary supplies.
Billings for the inside and online sales channel increased 13.3%
to $2.9 million in the first quarter of fiscal 2021 as compared to
$2.5 million in the same prior year period primarily due to
increases in route-based pickup services to the long-term care and
professional markets.
Pharmaceutical Manufacturer billings increased 26% to $1.2
million in the first quarter of fiscal 2021 compared to $0.9
million in the first quarter of fiscal 2020, related to the timing
of inventory builds for patient support programs.
Financial Flexibility and a Strong Balance
Sheet
Cash was $6.8 million at September 30, 2020, compared to cash of
$5.4 million at June 30, 2020. The Company had working capital of
$10.1 million at September 30, 2020 compared to working capital of
$11.1 at June 30, 2020.
Mr. Tusa concluded, “We believe we have the opportunity to
deliver a strong December 2020 quarter as a result of expected
strength in Retail flu-related business, Long-Term Care market
billings and Pharmaceutical Manufacturer market billings. Of
greater importance is the opportunity to drive more revenue growth
for fiscal year 2021 through the closing of larger field sales
opportunities utilizing our expanded route-based infrastructure. We
continue to provide uninterrupted service to our customers and
thank our loyal and committed employees for their service to the
Company and our customers during the pandemic.”
First Quarter Fiscal Year 2021 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 (877) 407-0782. International callers may access
the call by dialing (201) 689-8567. The webcast can be
monitored at www.sharpsinc.com.
A telephonic replay will be available through November 26,
2020. To listen to the replay, domestic callers should dial
(877) 481-4010 and international callers should dial (919) 882-2331
and enter replay ID number 38113. 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 thirty-two (32) state region of the South,
Southeast, Midwest 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. DiazSharps Compliance Corp.Vice President
and Chief Financial Officer Phone: (713) 660-3547Email:
ddiaz@sharpsinc.com |
John Nesbett/Jennifer BelodeauIMS Investor RelationsPhone: (203)
972-9200Email: jnesbett@institutionalms.com |
FINANCIAL TABLES FOLLOW
Sharps Compliance Corp. and
SubsidiariesCondensed Consolidated Statements of
Operations(in thousands, except per share
data)(Unaudited)
|
Three-Months Ended |
|
|
September 30, |
|
|
2020 |
|
|
2019 |
% Change |
|
|
|
|
|
Revenue |
$ |
13,151 |
|
|
|
$ |
13,599 |
|
|
(3.3 |
)% |
|
|
|
|
|
Cost of revenue |
9,528 |
|
|
|
9,115 |
|
|
4.5 |
% |
Gross profit |
3,623 |
|
|
|
4,484 |
|
|
(19.2 |
)% |
Gross margin |
|
27.5 |
% |
|
|
|
33.0 |
% |
|
SG&A expense |
3,788 |
|
|
|
3,512 |
|
|
7.9 |
% |
Depreciation and
amortization |
204 |
|
|
|
204 |
|
|
|
|
|
|
|
|
Operating Income
(Loss) |
(369 |
) |
|
|
768 |
|
|
|
Operating margin |
(2.8) |
% |
|
|
5.6 |
% |
|
|
|
|
|
|
Interest income |
— |
|
|
|
5 |
|
|
|
Interest expense |
(32 |
) |
|
|
(19 |
) |
|
|
Income associated with
derivative instrument |
5 |
|
|
|
— |
|
|
|
Total other expense |
(27 |
) |
|
|
(14 |
) |
|
|
|
|
|
|
|
Income (loss) before income
tax expense |
(396 |
) |
|
|
754 |
|
|
|
Income tax expense
(benefit) |
(103 |
) |
|
|
68 |
|
|
|
Net Income
(Loss) |
$ |
(293 |
) |
|
|
$ |
686 |
|
|
|
|
|
|
|
|
Net Income (Loss) Per
Share |
|
|
|
|
Basic and diluted |
$ |
(0.02 |
) |
|
|
$ |
0.04 |
|
|
|
|
|
|
|
|
Weighted Average Shares
Outstanding |
|
|
|
|
Basic |
16,391 |
|
|
|
16,145 |
|
|
|
Diluted |
16,391 |
|
|
|
16,168 |
|
|
|
Sharps Compliance Corp. and
SubsidiariesCondensed Consolidated Balance
Sheets(in
thousands)(Unaudited)
|
|
|
|
|
September 30, |
|
June 30, |
|
2020 |
|
2020 |
|
|
|
|
ASSETS: |
|
|
|
Current assets: |
|
|
|
Cash |
$ |
6,785 |
|
|
$ |
5,416 |
|
Accounts receivable, net |
10,629 |
|
|
11,789 |
|
Inventory |
5,476 |
|
|
5,638 |
|
Contract asset |
37 |
|
|
156 |
|
Prepaid and other current assets |
985 |
|
|
1,287 |
|
Total current assets |
23,912 |
|
|
24,286 |
|
Property, plant and equipment,
net |
9,865 |
|
|
9,127 |
|
Operating lease right of use
asset |
9,844 |
|
|
8,747 |
|
Inventory, net of current
portion |
1,034 |
|
|
1,064 |
|
Other assets |
160 |
|
|
154 |
|
Goodwill |
6,735 |
|
|
6,735 |
|
Intangible assets, net |
2,667 |
|
|
2,771 |
|
Deferred tax asset |
1,355 |
|
|
1,252 |
|
Total assets |
$ |
55,572 |
|
|
$ |
54,136 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY: |
|
|
|
Current liabilities |
|
|
|
Account payable |
$ |
3,140 |
|
|
$ |
3,291 |
|
Accrued liabilities |
2,738 |
|
|
2,833 |
|
Operating lease liability |
2,506 |
|
|
2,192 |
|
Current maturities of long-term debt |
2,091 |
|
|
1,658 |
|
Contract liability |
3,296 |
|
|
3,262 |
|
Total current liabilities |
13,771 |
|
|
13,236 |
|
Contract liability, net of
current portion |
791 |
|
|
705 |
|
Operating lease liability, net
of current portion |
7,493 |
|
|
6,671 |
|
Other liabilities |
417 |
|
|
441 |
|
Long-term debt, net of current
portion |
3,428 |
|
|
3,505 |
|
Total liabilities |
25,900 |
|
|
24,558 |
|
Stockholders' equity |
29,672 |
|
|
29,578 |
|
Total liabilities and stockholders' equity |
$ |
55,572 |
|
|
$ |
54,136 |
|
Sharps Compliance Corp. and
SubsidiariesSupplemental Customer Billing and
Revenue Information(in
thousands)(Unaudited)
|
|
Three-Months Ended September 30, |
|
|
|
2020 |
|
% Total |
|
2019 |
|
$ Change |
|
% |
|
BILLINGS BY
MARKET: |
|
|
|
|
|
|
|
|
|
|
|
Professional |
|
$ |
4,133 |
|
|
|
30.8% |
|
$ |
4,135 |
|
|
|
$ |
(2 |
) |
|
|
0 |
% |
|
Retail |
|
3,647 |
|
|
|
27.2% |
|
4,142 |
|
|
|
(495 |
) |
|
|
(12.0 |
)% |
|
Home Health Care |
|
2,348 |
|
|
|
17.5% |
|
3,317 |
|
|
|
(969 |
) |
|
|
(29.2 |
)% |
|
Pharmaceutical Manufacturer |
|
1,179 |
|
|
|
8.8% |
|
937 |
|
|
|
242 |
|
|
|
25.8 |
% |
|
Long-Term Care |
|
1,309 |
|
|
|
9.7% |
|
624 |
|
|
|
685 |
|
|
|
109.8 |
% |
|
Government |
|
515 |
|
|
|
3.8% |
|
764 |
|
|
|
(249 |
) |
|
|
(32.6 |
)% |
|
Environmental |
|
135 |
|
|
|
1.0% |
|
19 |
|
|
|
116 |
|
|
|
610.5 |
% |
|
Other |
|
162 |
|
|
|
1.2% |
|
281 |
|
|
|
(119 |
) |
|
|
(42.3 |
)% |
|
Subtotal |
|
13,428 |
|
|
|
100.0% |
|
14,219 |
|
|
|
(791 |
) |
|
|
(5.6 |
)% |
|
GAAP Adjustment * |
|
(277 |
) |
|
|
|
|
(620 |
) |
|
|
343 |
|
|
|
|
|
Revenue Reported |
|
$ |
13,151 |
|
|
|
|
|
$ |
13,599 |
|
|
|
$ |
(448 |
) |
|
|
(3.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
*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. |
Sharps Compliance Corp. and
SubsidiariesSupplemental Customer Billing by
Solution Information(in
thousands)(Unaudited)
|
|
Three-Months Ended September 30, |
|
|
2020 |
|
% Total |
|
2019 |
|
$ Change |
|
% |
BILLINGS
BY SOLUTION: |
|
|
|
|
|
|
|
|
|
Mailbacks |
$ |
6,439 |
|
|
47.9% |
|
$ |
7,737 |
|
|
$ |
(1,298 |
) |
|
|
(16.8 |
)% |
Route-Based Pickup |
3,156 |
|
|
23.5% |
|
2,657 |
|
|
499 |
|
|
|
18.8 |
% |
Unused Medications |
2,361 |
|
|
17.6% |
|
2,383 |
|
|
(22 |
) |
|
|
(0.9 |
)% |
Third Party Treatment |
135 |
|
|
1.0% |
|
19 |
|
|
116 |
|
|
|
610.5 |
% |
Other |
|
1,337 |
|
|
10.0% |
|
1,423 |
|
|
(86 |
) |
|
|
(6.0 |
)% |
Total Billings by Solution |
$ |
13,428 |
|
|
100.0% |
|
$ |
14,219 |
|
|
$ |
(791 |
) |
|
|
(5.6 |
)% |
|
|
|
|
|
|
|
|
|
|
|
Sharps Compliance Corp. and
SubsidiariesSupplemental Customer Billing by
Channel Information(in
thousands)(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Months Ended September 30, |
|
|
2020 |
|
% Total |
|
2019 |
|
$ Change |
|
% Change |
BILLINGS BY
CHANNEL: |
|
|
|
|
|
|
|
|
|
|
Direct Sales |
|
$ |
7,018 |
|
|
52.2% |
|
$ |
7,698 |
|
|
$ |
(680 |
) |
|
|
(8.8 |
)% |
Distributions |
|
3,543 |
|
|
26.4% |
|
3,991 |
|
|
(448 |
) |
|
|
(11.2 |
)% |
Inside and Online Sales |
|
2,867 |
|
|
21.4% |
|
2,530 |
|
|
337 |
|
|
|
13.3 |
% |
Total Billing by Channel |
|
$ |
13,428 |
|
|
100.0 % |
|
$ |
14,219 |
|
|
$ |
(791 |
) |
|
|
(5.6 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sharps Compliance Corp. and
SubsidiariesSupplemental Table to Reconcile Net
Income to EBITDA*(in
thousands)(Unaudited)
|
Three-Months Ended |
|
September 30, |
|
2020 |
|
2019 |
|
|
|
|
Net Income
(Loss) |
$ |
(293 |
) |
|
|
$ |
686 |
|
Income tax expense (benefit) |
(103 |
) |
|
|
68 |
|
Interest expense, net |
32 |
|
|
|
14 |
|
Depreciation and amortization |
423 |
|
|
|
421 |
|
|
|
|
|
EBITDA |
$ |
59 |
|
|
|
$ |
1,189 |
|
|
|
|
|
|
|
|
|
*The Company defines earnings before interest, taxes, depreciation
and amortization (“EBITDA”) as net income (loss), plus income tax
expense (benefit), 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. |
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