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)
April 28, 2021
SHARPS COMPLIANCE CORP.
Commission File No. 001-34269

(Exact Name Of Registrant As Specified In Its Charter)
 Delaware74-2657168

(State Or Other Jurisdiction Of
Incorporation Or Organization)

(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))

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Shares, $0.01 Par ValueSMEDThe NASDAQ Stock Market LLC

Indicate by check mark whether the registrant is a an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 




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 April 28, 2021, Sharps Compliance Corp. (the "Company") announced its results of operations for the three and nine months ended March 31, 2021. 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 April 28, 2021 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 April 28, 2021.


    





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: April 28, 2021
SHARPS COMPLIANCE CORP.


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






INDEX TO EXHIBITS

Exhibit Number            

Document
EXHIBIT 99.1
IMMEDIATE RELEASE

Sharps Compliance Reports Fiscal 2021 Third Quarter Results

•    Third Quarter Revenue of $27.5 million, increased 164% from the prior year
•    Third Quarter Customer Billings of $31.0 million, increased 200% over the prior year
•    Retail market billings increased 838%
•    Professional, Home Health Care and Long-Term Care market billings grew 19%, 38% and 28%, respectively
•    Route-Based Pickup billings increased 37% for the quarter
•    Operating margins of 33%; EBITDA margins of 35%
•    Third Quarter Net Income of $6.9 million, or $0.40 per share
•    Mailback billings of $24.4 million grew 428%, driven by strong COVID-19 related orders
•    Robust COVID-19 related mailback order activity expected to continue through calendar year 2021 and potentially thereafter
•    Playing a key role in COVID-19 vaccine programs in Retail and Long-Term Care Settings

HOUSTON, Texas, April 28, 2021 - 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 third quarter ended March 31, 2021.

Revenue in the third quarter of fiscal 2021 grew 164% to a record $27.5 million, compared to $10.4 million in the same prior year quarter, and a sequential increase of $10.5 million, or 62%, compared to the second quarter of fiscal 2021. Customer billings increased $20.7 million, or 200%, to $31.0 million for the third quarter compared to $10.3 million for the same prior year quarter. Third quarter customer billings benefitted from increased immunization business of $19.5 million and increased route-based pickup services of $1.0 million. Third quarter revenue benefitted from increased immunization business of $16.1 million (net of revenue deferrals) and increased route-based pickup services of $1.0 million. The difference between the increases in billings and revenue related to immunization volumes of $19.5 million and $16.1 million, respectively, is the impact of revenue recognition related to the deferral of a portion of current period sales, partially offset by the recognition of revenue associated with product returned for treatment and destruction.

Third quarter 2021 gross margin was 49% compared to 21% in the third quarter of fiscal 2020. Gross margin was positively impacted in the current quarter by the impact of revenue recognition where there was a higher proportion of immunization related mailbacks sold, with a higher up front gross margin, compared to immunization related mailbacks returned, with a lower gross margin upon return. On a normalized basis (excluding the impact of revenue recognition), gross margin would have been 41%. SG&A increased by about $600,000 or 16% to $4.2 million in the third quarter of fiscal 2021, compared to the same prior year quarter. The increase in SG&A is related primarily to a $400,000 increase in management incentive compensation, including both stock and cash, a $100,000 increase in board member compensation and continued investments in sales and marketing.

The Company reported operating income of $9.0 million in the third quarter of 2021, compared to an operating loss of $1.6 million in the third quarter of 2020. Sharps recorded net income of $6.9 million, or $0.41 per basic and $0.40 per diluted share, in the third quarter of fiscal 2021, as compared to net loss of $1.6 million, or ($0.10) per


basic and diluted share in the third quarter of fiscal 2020. Sharps recorded EBITDA of $9.6 million, or 35% of revenue in the third quarter of fiscal 2021 compared to an EBITDA loss of $1.2 million in the third 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, “As we anticipated, we experienced tremendous growth in the third quarter of fiscal 2021, as evidenced by record revenue and billings, significantly enhanced gross margin and greatly increased profitability. In March 2020 we launched several substantial infrastructure projects to support what we expected would be significantly increased demand, including: the tripling of capacity at our treatment facilities in Texas and Pennsylvania; an additional mailback related warehouse and distribution facility; and significant increases to our mailback inventory. These initiatives positioned us very well to provide uninterrupted service to our customers throughout the pandemic, particularly as COVID-19 vaccinations became widely available and we saw exponentially increased demand for our mailback solutions. It is important to note that we anticipate continued demand through the balance of this calendar year, as our customers prepare for several upcoming developments including: the continued roll-out of the COVID-19 vaccines, expected rollout of a COVID vaccine for children and adolescents; heightened seasonal flu-shot demand and potential booster shots to address efficacy of existing vaccines and to combat COVID variants. We also believe that some level of incremental vaccine related business should continue into 2022 and beyond as the country and the world move much more proactively in vaccine development, distribution and administration to combat COVID-19 and other potential viruses in the future.

“In addition to the extraordinary growth in our mailback business, we achieved solid growth in our route-based business where billings increased 37% for the third quarter. Long before the pandemic, we recognized the growth opportunity represented by the strategic expansion of our route-based pick-up solution and during the quarter we announced the expansion of our direct route-based services to Arizona, Colorado, New Mexico and Utah. With this addition, our direct route-based footprint now includes 37 states and 80% of the U.S. population. We view our route-based business as a key growth driver with solid long-term recurring revenue potential and we look forward to continuing to pursue opportunities to grow our route-based presence and to further penetrate this $1 billion market opportunity.”
Third Quarter Review

Retail market billings grew 838% to $21.7 million in the third quarter of fiscal 2021 as compared to $2.3 million in the same prior year period. The increase in retail billings is primarily due to increased immunization related orders of $19.5 million.

Professional market billings increased 19% to $4.6 million in the third quarter of fiscal 2021 as compared to $3.9 million in the third quarter of 2020.

Home Health Care market billings increased 38% to $2.3 million in the third quarter of fiscal 2021 compared to $1.7 million in the third quarter of fiscal 2020.

Long-Term Care market billings increased 28% to $1.0 million in the third quarter of fiscal 2021 compared to $0.8 million in the prior year period, related to an increased volume of COVID-19 related waste management as well as new customers.



Pharmaceutical Manufacturer market billings decreased 34% to $0.6 million in the third quarter of fiscal 2021 compared to $0.9 million in the third quarter of fiscal 2020, related to the timing of inventory builds for patient support programs.

Billings for the inside and online sales channel increased 36% to $3.5 million in the third 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 Professional and Long-Term Care markets.

First Nine Months Fiscal 2021 Results

Sharps recorded revenue of $57.7 million in the first nine months of fiscal 2021, an increase of 50% compared to revenue of $38.6 million in the first nine months of fiscal 2020 and surpassing full year 2020 revenue of $51.1 million. Customer billings increased 59% to $62.9 million for the first nine months of fiscal 2021. Retail market billings increased 195% to $31.5 million as compared to $10.7 million in the first nine months of fiscal 2020, due primarily to an increase in billings for immunization related orders of $21.1 million, partially offset by a decrease in unused medications billings in the retail market of $0.2 million. Long-Term Care market billings increased 62% to $3.3 million as compared to $2.1 million in the prior year period related primarily to an increased volume of COVID-19 related waste management and ancillary supplies. Professional market billings increased 7% to $13.3 million in the first nine months of fiscal 2021 compared to $12.4 million in the same prior year period. During the first nine months of fiscal 2021, Pharmaceutical Manufacturer market billings increased 18% to $4.8 million as compared to $4.1 million in the first nine months of fiscal 2020.

Gross margin increased to 39% for the first nine months of fiscal 2021 as compared to 30% in first nine months of fiscal 2020. SG&A expense increased 9% to $11.7 million, from $10.7 million, in the first nine months of fiscal 2021, related to a $400,000 increase in management incentive compensation, including both stock and cash, a $250,000 increase in board member compensation and $350,000 due to the Company’s continued investments in sales and marketing. The Company recorded operating income of $10.3 million in the first nine months of fiscal 2021 as compared to operating income of $0.3 million in the first nine months of fiscal 2020.

Net income for the first nine months of fiscal 2021 was $7.8 million, or $0.47 per basic and $0.46 per diluted share compared to net income of $0.1 million or $0.01 per basic and diluted share for the first nine months of fiscal 2020.

Sharps recorded EBITDA of $11.8 million, or 20% of revenue, in the first nine months of fiscal 2021, as compared to EBITDA of $1.5 million in the first nine months of fiscal 2020. (See Reconciliation of Net Income (Loss) to EBITDA in the supplemental table included at the end of this release).

Financial Flexibility and a Strong Balance Sheet

Cash was $11.2 million at March 31, 2021, compared to cash of $5.4 million at June 30, 2020. The Company had working capital of $20.7 million at March 31, 2021 compared to working capital of $11.1 million at June 30, 2020.

Mr. Tusa concluded, “While the third quarter results were very strong, we believe that we are just getting started as we grow to become a much larger company penetrating multiple $1 billion markets, and as we further solidify our leadership position as a comprehensive provider of medical, pharmaceutical and hazardous waste solutions to the small and medium quantity generator markets. Our team has performed exceptionally well in successfully delivering our solutions to our customers in a very high growth environment and we are well prepared and planning for continued growth in all of our businesses.”



Third 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 May 28, 2021. 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 40727. Transcript will also be posted to the Sharps website, once available.

About Sharps Compliance Corp.

Headquartered in Houston, Texas, Sharps Compliance (NASDAQ: SMED) is a leading business-to-business services provider to the healthcare, long-term care and retail pharmacy markets. Sharps Compliance offers comprehensive solutions for the management of regulated medical waste, hazardous waste and unused medications. For more information, visit: www.sharpsinc.com.

Safe Harbor Statement

The information made available in this news release contains certain forward-looking statements relating to the Company that are based on the beliefs of the Company’s management as well as assumptions made by and information currently available to the Company’s management. When used in this document, the words "may," “position,” "plan," “potential,” “continue,” "anticipate," "believe," "expect," "estimate," “project,” and “intend” and words or phrases of similar import, as they relate to the Company or its subsidiaries or Company management, are intended to identify forward-looking statements. Such statements reflect the known and unknown risks, uncertainties and assumptions related to certain factors including, without limitation, competitive factors, general economic conditions, customer relations, relationships with vendors, governmental regulation and supervision, seasonality, distribution networks, product introductions and acceptance, technological change, changes in industry practices, onetime events and other factors described herein including the impact of the coronavirus COVID-19 (“COVID-19”) pandemic on our operations and financial results. Based upon changing conditions, should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. Consequently, no forward-looking statements can be guaranteed. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in the Company’s Quarterly Report on Form 10-Q or refer to our Annual Report on Form 10-K. Actual results may vary materially. You are cautioned not to place undue reliance on any forward-looking statements. You should also understand that it is not possible to predict or identify all such factors and as such should not consider the preceding list or the risk factors to be a complete list of all potential risks and uncertainties. The Company does not intend to update these forward-looking statements.

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.
Executive 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 Nine-Months Ended
March 31,March 31,
20212020% Change20212020% Change
Revenue$27,528 $10,414 164.3 %$57,690 $38,578 49.5 %
Cost of revenue14,129 8,191 72.5 %35,031 26,999 29.7 %
Gross profit13,399 2,223 502.7 %22,659 11,579 95.7 %
Gross margin48.7 %21.3 %39.3 %30.0 %
SG&A expense4,181 3,600 16.1 %11,725 10,718 9.4 %
Depreciation and amortization216 201 625 602 
Operating Income (Loss)9,002 (1,578)10,309 259 
Operating margin32.7 %(15.2)%17.9 %0.7 %
Interest income— — 13 
Interest expense(55)(36)(134)(81)
Income associated with derivative instrument26 — 41 — 
Total other expense(29)(32)(93)(68)
Income (loss) before income tax expense8,973 (1,610)10,216 191 
Income tax expense (benefit)2,123 (54)2,431 91 
Net Income (Loss)$6,850 $(1,556)$7,785 $100 
Net Income (Loss) Per Share
Basic$0.41 $(0.10)$0.47 $0.01 
Diluted$0.40 $(0.10)$0.46 $0.01 
Weighted Average Shares Outstanding
Basic16,556 16,264 16,481 16,211 
Diluted17,187 16,264 16,978 16,312 


Sharps Compliance Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
March 31,June 30,
2021
2020 (*)
ASSETS:
Current assets:
Cash$11,216 $5,416 
Accounts receivable, net23,415 11,789 
Inventory4,378 5,638 
Contract asset37 156 
Prepaid and other current assets446 1,287 
Total current assets39,492 24,286 
Property, plant and equipment, net10,952 8,740 
Financing lease right of use asset, net647 387 
Operating lease right of use asset8,407 8,747 
Inventory, net of current portion988 1,064 
Other assets110 154 
Goodwill6,735 6,735 
Intangible assets, net2,390 2,771 
Deferred tax asset— 1,252 
Total assets$69,721 $54,136 
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities
Account payable$3,550 $3,291 
Accrued liabilities3,044 2,768 
Operating lease liability2,398 2,192 
Financing lease liability115 65 
Current maturities of long-term debt2,836 1,658 
Contract liability6,877 3,262 
Total current liabilities18,820 13,236 
Contract liability, net of current portion1,692 705 
Operating lease liability, net of current portion6,150 6,671 
Financing lease liability, net of current portion537337 
Other liabilities54 104 
Deferred tax liability32 — 
Long-term debt, net of current portion3,616 3,505 
Total liabilities30,901 24,558 
Stockholders' equity38,820 29,578 
Total liabilities and stockholders' equity$69,721 $54,136 
(*) Certain prior year amounts have been reclassified to conform to current year presentation.


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

Three-Months Ended March 31,
2021% Total2020$ Change%
BILLINGS BY MARKET:
Retail$21,714 70.0 %$2,314 $19,400 838.4 %
Professional4,606 14.9 %3,885 721 18.6 %
Home Health Care2,299 7.4 %1,663 636 38.2 %
Pharmaceutical Manufacturer567 1.8 %857 (290)(33.8)%
Long-Term Care973 3.1 %758 215 28.4 %
Government642 2.1 %571 71 12.4 %
Environmental76 0.2 %38 38 100.0 %
Other131 0.5 %240 (109)(45.4)%
Subtotal31,008 100.0 %10,326 20,682 200.3 %
GAAP Adjustment *(3,480)88 (3,568)
Revenue Reported$27,528 $10,414 $17,114 164.3 %
Nine-Months Ended March 31,
2021% Total2020$ Change%
BILLINGS BY MARKET:
Retail$31,500 50.1 %$10,674 $20,826 195.1 %
Professional13,277 21.1 %12,385 892 7.2 %
Home Health Care7,479 11.9 %7,586 (107)(1.4)%
Pharmaceutical Manufacturer4,808 7.6 %4,068 740 18.2 %
Long-Term Care3,342 5.3 %2,063 1,279 62.0 %
Government1,654 2.6 %1,824 (170)(9.3)%
Environmental390 0.6 %123 267 217.1 %
Other452 0.8 %752 (300)(39.9)%
Subtotal62,902 100.0 %39,475 23,427 59.3 %
GAAP Adjustment *(5,212)(897)(4,315)
Revenue Reported$57,690 $38,578 $19,112 49.5 %
*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 Subsidiaries
Supplemental Customer Billing by Solution Information
(in thousands)
(Unaudited)

Three-Months Ended March 31,
2021% Total2020$ Change%
BILLINGS BY SOLUTION:
Mailbacks$24,373 78.5 %$4,614 $19,759 428.2 %
Route-Based Pickup3,597 11.6 %2,625 972 37.0 %
Unused Medications2,078 6.7 %2,111 (33)(1.6)%
Third Party Treatment76 0.2 %38 38 100.0 %
Other884 3.0 %938 (54)(5.8)%
Total Billings by Solution$31,008 100.0 %$10,326 $20,682 200.3 %
Nine-Months Ended March 31,
2021% Total2020$ Change%
BILLINGS BY SOLUTION:
Mailbacks$42,719 67.9 %$21,280 $21,439 100.7 %
Route-Based Pickup10,244 16.3 %7,762 2,482 32.0 %
Unused Medications6,152 9.8 %6,815 (663)(9.7)%
Third Party Treatment390 0.6 %123 267 217.1 %
Other3,397 5.4 %3,495 (98)(2.8)%
Total Billings by Solution$62,902 100.0 %$39,475 $23,427 59.3 %


Sharps Compliance Corp. and Subsidiaries
Supplemental Customer Billing by Channel Information
(in thousands)
(Unaudited)
Three-Months Ended March 31,
2021% Total2020$ Change% Change
BILLINGS BY CHANNEL:
Direct Sales$22,879 73.8 %$5,276 $17,603 333.6 %
Distributors4,667 15.1 %2,501 2,166 86.6 %
Inside and Online Sales3,462 11.1 %2,549 913 35.8 %
Total Billing by Channel$31,008 100.0 %$10,326 $20,682 200.3 %
Nine-Months Ended March 31,
2021% Total2020$ Change% Change
BILLINGS BY CHANNEL:
Direct Sales$41,064 65.3 %$21,505 $19,559 91.0 %
Distributors12,684 20.2 %10,613 2,071 19.5 %
Inside and Online Sales9,154 14.5 %7,357 1,797 24.4 %
Total Billing by Channel$62,902 100.0 %$39,475 $23,427 59.3 %


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

Three-Months Ended Nine-Months Ended
March 31,March 31,
2021202020212020
Net Income (Loss)$6,850 $(1,556)$7,785 $100 
Income tax expense (benefit)2,123 (54)2,431 91 
Interest expense, net55 32 134 68 
Depreciation and amortization522 388 1,445 1,191 
EBITDA$9,550 $(1,190)$11,795 $1,450 
*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 (loss), net income (loss), or cash flows as determined under generally accepted accounting principles and as reported by the Company.