Document





 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
October 23, 2019
SHARPS COMPLIANCE CORP.
Commission File No. 001-34269

(Exact Name Of Registrant As Specified In Its Charter)
 
 
 
Delaware
(State Or Other Jurisdiction Of
Incorporation Or Organization)
 
74-2657168
(IRS Employer
Identification No.)
9220 Kirby Drive, Suite 500
Houston, Texas 77054
(Address Of Principal Executive Offices)

Registrant’s Telephone Number, Including Area Code)
713-432-0300

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 






TABLE OF CONTENTS
Item 2.02    Disclosure of Results of Operations of Financial Condition

Item 9.01    Financial Statements and Exhibits

SIGNATURES

INDEX TO EXHIBITS

Press Release





















































Item 2.02. Results of Operations and Financial Condition.
On October 23, 2019, the Company announced its results of operations for the three months ended September 30, 2019. A copy of the earnings release is attached as Exhibit 99.1.
The information in this Current Report is being furnished pursuant to Item 2.02 including Exhibit 99.1 of Form 8-K and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Act of 1934, as amended (the “Exchange Act”), and Section 11 of the Securities Act of 1933, as amended, otherwise subject to the liabilities of those sections nor incorporated by reference in any filing under the Exchange Act unless specifically referenced in such subsequent filing as being incorporated by reference. The Company does not undertake a duty to update the information in this Current Report and cautions that the information included in this Current Report is current only as of October 23, 2019 and may change thereafter.


Item 9.01. Financial Statements and Exhibits.
(a)
Financial Information
Not applicable.
(b)
Pro Forma Financial Information
Not applicable.
(c)
Exhibits
Exhibit        Description
99.1        Press Release, dated October 23, 2019.

    







SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: October 23, 2019
SHARPS COMPLIANCE CORP.


By: /s/ DIANA P. DIAZ
Diana P. Diaz
Vice President and Chief Financial Officer








INDEX TO EXHIBITS

Exhibit Number
Description









Exhibit


EXHIBIT 99.1
IMMEDIATE RELEASE    


Sharps Compliance Reports Fiscal 2020 First Quarter Results
First quarter 2020 revenue of $13.6 million, an increase of 32% over prior year
Record first quarter customer billings of $14.2 million, an increase of 38% over prior year
Gross margin improved to 33%
Net income of $0.7 million, earnings per share of $0.04 for the quarter and EBITDA of $1.2 million
Retail market billings increased 83%
Home Health Care billings increased 72%
Unused medications business grew 45%
Route-based business increased 25%

HOUSTON, Texas, October 23, 2019 - 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 of fiscal year 2020, ended September 30, 2019.
Revenue in the first quarter of fiscal 2020 was $13.6 million an increase of 32% compared to $10.3 million in the same prior year quarter and a 12% increase sequentially as compared to revenue for the 2019 fourth quarter. Customer billings were $14.2 million for the first quarter compared to $10.3 million for the prior year, an increase of 38%, and an increase of 12% on a sequential quarter basis. Gross margin improved to 33.0% compared to 32.6% in the first quarter of fiscal 2019 and 32.0% in the 2019 fourth quarter. The Company reported operating income of $0.8 million in the first quarter of 2020, compared to operating income of $0.1 million in the first quarter of 2019. Sharps recorded net income of $0.7 million, or $0.04 per basic and diluted share in the first quarter of fiscal 2020, as compared to net income of $0.1 million, or $0.00 per basic and diluted share in the first quarter of fiscal 2019. Sharps recorded EBITDA of $1.2 million in the first quarter of fiscal 2020, as compared to EBITDA of $0.5 million in the first 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, “Fiscal 2020 is off to a strong start, with first quarter results reflecting record revenue and billings, enhanced gross margins and increased profitability. Our retail segment achieved particularly robust growth of 83%, driven by strong flu related business and increased demand for unused medication solutions for both commercial and state prevention programs. Customer billings in the Home Health Care market increased 72% for first quarter 2020, largely due to the expansion of our relationship with a major healthcare distributor, including additional orders as well as large stocking orders.
“We also delivered substantial growth across each of our three key solutions -- route-based, mailback and unused medications. Mailback growth of 38% in the quarter was primarily due to strong flu related orders and our growing presence in the home healthcare segment. Our unused medication solutions, which include the MedSafe and Takeaway Medication Recovery System Envelopes, demonstrated growth of 45% compared to the first quarter of fiscal 2019 and sequential growth of 6% compared to the fourth quarter of 2019. At September 30, 2019 we have an installed base of 4,100 collection receptacles in retail as well as





hospital pharmacies and long-term care, drug treatment and law enforcement facilities and customers have returned over 38,000 inner liners. Unused medication management is a growing market segment as retail pharmacies, healthcare facilities and communities at large increasingly focus on solutions to promote the proper disposal of unused medications as a component of addressing and solving our nation’s opioid crisis.
Tusa added, “The strong growth and improved profitability generated in the June and September 2019 quarters is a direct result of our Company’s successful transformation from a medical waste mailback only company to a comprehensive service provider to the Healthcare and Retail markets. Our two portfolio expansion services, route-based pick-up and medication management via the MedSafe, are increasing at the rates of 25% and 45%, respectively, and accounted for 37% of consolidated revenue in the first quarter. We are proud of our leadership positions in the market place and are using our success to drive more business.”
First Quarter Review
Professional market billings increased 13% to $4.1 million in the first quarter of fiscal 2020 compared to $3.7 million in the prior year period. The growth was wholly organic, related to the Company’s ability to provide a combination of the cost-effective and easy to use Sharps Recovery System™ and the Company’s route-based pick-up services to serve customers from the small to medium quantity generator sector made up of physicians, clinics, dentists, surgery centers, veterinarians and other healthcare professionals. Billings for the inside and online sales channel, which primarily targets the Professional and Government markets, increased 9% to $2.5 million in the first quarter of fiscal 2020 as compared to $2.3 million in the same prior year period.
First quarter Retail market billings grew 83% from $2.3 million to $4.1 million as compared to the prior year period. Contributing to the growth were increased billings for flu shot related orders of $1.4 million and unused medication solutions of $0.4 million.
Home Health Care billings increased 72% to $3.3 million in the first quarter of 2020 compared to $1.9 million in the first quarter of 2019 due primarily to an expanded relationship with a major healthcare distributor, including additional orders as well as large stocking orders.
Pharmaceutical Manufacturer billings increased 16% to $0.9 million in the first quarter of fiscal 2020 compared to $0.8 million in the first quarter of fiscal 2019, related to inventory builds for several current and one new patient support program.
Government billings increased 28% to $0.8 million in the first quarter of fiscal 2020. Government market billings included $0.2 million of orders under the VA’s Blanket Purchase Agreement. MedSafe related orders to the government market were $0.4 million for the first quarter of fiscal 2020.
Additional Operating Results
The Company reported gross margin of 33.0% for the first quarter of fiscal 2020, an increase compared to gross margin of 32.6% in the same prior year quarter. SG&A increased 16% to $3.5 million but decreased as a percentage of revenue to 26% for the first quarter of fiscal 2020 as compared to SG&A of $3.0 million, or 29% of revenue, in the same prior year quarter. 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 quarter.
Financial Flexibility and a Strong Balance Sheet





Cash was $4.9 million at September 30, 2019, compared to a cash level of $4.5 million at June 30, 2019. The Company had working capital of $9.9 million at September 30, 2019 an increase over working capital at June 30, 2019 of $10.6 million.
Looking Forward
Mr. Tusa concluded, “While we are very proud of the strong growth we have seen over the past two quarters, we are focused on driving longer-term sustainable growth and increased recurring revenue, which we believe could be accomplished through further penetration in the $1 billion dollar medical waste management market for small and medium quantity generators and through our continued leadership role in the U.S. providing solutions designed to facilitate the management of unused ultimate user medications which we believe could evolve into another $1 billion market opportunity. The team is very excited about being part of a Company not only generating significant growth rates but also addressing two markets that we believe to be very underserved: small and medium quantity medical waste generators and ultimate user unused medication management."
First 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 (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 23, 2019. 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 53915. 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: (713) 660-3547
Email: ddiaz@sharpsinc.com
John Nesbett/Jennifer Belodeau
IMS Investor Relations
Phone: (203) 972-9200
Email: jnesbett@institutionalms.com

FINANCIAL TABLES FOLLOW







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

 
Three-Months Ended
 
 
September 30,
 
 
2019
 
2018
% Change
 
 
 
 
 
Revenue
$
13,599

 
$
10,293

32.1%
 
 
 
 
 
Cost of revenue
9,115

 
6,941

31.3%
Gross profit
4,484

 
3,352

33.8%
Gross margin
33.0
%
 
32.6
%
 
SG&A expense
3,512

 
3,026

16.1%
Depreciation and amortization
204

 
201

 
 
 
 
 
 
Operating Income
768

 
125

 
Operating margin
5.6
%
 
1.2
%
 
 
 
 
 
 
Interest income
5

 
5

 
Interest expense
(19
)
 
(23
)
 
Total other expense
(14
)
 
(18
)
 
 
 
 
 
 
Income before income tax expense
754

 
107

 
Income tax expense
68

 
37

 
Net Income
$
686

 
$
70

 
 
 
 
 
 
Net Income Per Share
 
 
 
 
     Basic and diluted
$
0.04

 
$
0.00

 
 
 
 
 
 
Weighted Average Shares Outstanding
 
 
 
 
Basic
16,145

 
16,082

 
Diluted
16,168

 
16,089

 





Sharps Compliance Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
 
 
 
 
 
September 30,
 
June 30,
 
2019
 
2019
 
 
 
 
ASSETS:
 
 
 
Current assets:
 
 
 
Cash
$
4,866

 
$
4,512

Accounts receivable, net
10,688

 
9,289

Inventory
3,277

 
3,770

Contract asset
142

 
260

Prepaid and other current assets
989

 
922

Total current assets
19,962

 
18,753

Property, plant and equipment, net
6,190

 
5,867

Operating lease right of use asset
8,542

 

Long-term inventory, net of current portion
1,012

 
1,046

Other assets
443

 
443

Goodwill
6,735

 
6,735

Intangible assets, net
3,061

 
3,196

Total assets
$
45,945

 
$
36,040

 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY:
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
2,511

 
$
2,946

Accrued liabilities
2,279

 
2,213

Operating lease liability
1,734

 

Current maturities of long-term debt
528

 
517

Contract liability
3,002

 
2,502

Total current liabilities
10,054

 
8,178

Contract liability, net of current portion
653

 
503

Operating lease liability, net of current portion
6,938

 

Other long-term liabilities

 
42

Deferred tax liability
288

 
243

Long-term debt, net of current portion
1,068

 
948

Total liabilities
19,001

 
9,914

Stockholders’ equity
26,944

 
26,126

Total liabilities and stockholders' equity
$
45,945

 
$
36,040






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

 
 
Three-Months Ended September 30,
 
 
 
2019
 
% Total
 
2018
 
$ Change
 
%
 
BILLINGS BY MARKET:
 
 
 
 
 
 
 
 
 
 
 
Retail

$
4,142


29.1
%

$
2,260


$
1,882


83.3%
 
Professional
 
4,135

 
29.1
%
 
3,674

 
461

 
12.5%
 
Home Health Care

3,317


23.3
%

1,927


1,390


72.1%
 
Pharmaceutical Manufacturer
 
937

 
6.6
%
 
808

 
129

 
16.0%
 
Government

764


5.4
%

597


167


28.0%
 
Assisted Living
 
624

 
4.4
%
 
645

 
(21
)
 
(3.3)%
 
Environmental
 
19

 
0.1
%
 
103

 
(84
)
 
(81.6)%
 
Other
 
281

 
2.0
%
 
290

 
(9
)
 
(3.1)%
 
Subtotal
 
$
14,219

 
100.0
%
 
$
10,304

 
$
3,915

 
38.0%
 
GAAP Adjustment *
 
(620
)
 
 
 
(11
)
 
(609
)
 
 
 
Revenue Reported
 
$
13,599

 
 
 
$
10,293

 
$
3,306

 
32.1%
 
 
 
 
 
 
 
 
 
 
 
 
 
*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 September 30,
 
 
2019
 
% Total
 
2018
 
$ Change
 
%
BILLINGS BY SOLUTION:
 
 
 
 
 
 
 
 
 
Mailbacks
$
7,737

 
54.4
%
 
$
5,618

 
$
2,119

 
37.7%
Route-Based Pickup
2,657

 
18.7
%
 
2,128

 
529

 
24.9%
Unused Medications
2,383

 
16.8
%
 
1,639

 
744

 
45.4%
Third Party Treatment
19

 
0.1
%
 
102

 
(83
)
 
(81.4)%
Other
 
1,423

 
10.0
%
 
817

 
606

 
74.2%
Total Billings By Solution
$
14,219

 
100.0
%
 
$
10,304

 
$
3,915

 
38.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





Sharps Compliance Corp. and Subsidiaries
Supplemental Customer Billing by Channel Information
(in thousands)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three-Months Ended September 30,
 
 
2019
 
% Total
 
2018
 
$ Change
 
% Change
BILLINGS BY CHANNEL:
 
 
 
 
 
 
 
 
 
 
Direct Sales
 
$
7,698

 
54.1
%
 
$
4,625

 
$
3,073

 
66.4%
Distributors
 
3,991

 
28.1
%
 
3,357

 
634

 
18.9%
Inside and Online Sales
 
2,530

 
17.8
%
 
2,322

 
208

 
9.0%
Total Billings By Channel
 
$
14,219

 
100.0
%
 
$
10,304

 
$
3,915

 
38.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





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

 
Three-Months Ended
 
September 30,
 
2019
 
2018
 
 
 
 
Net Income
$
686

 
$
70

 
 
 
 
Income tax expense
68

 
37

Interest expense, net
14

 
18

Depreciation and amortization
421

 
391

 
 
 
 
EBITDA
$
1,189

 
$
516

 
 
 
 
 
 
 
 
*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.