GlobeNewswire Inc | Jan 26, 2022 06:55AM EST

January 26, 2022

-- Second quarter revenue of $18.9 million increased 11% from the prior year and 36% sequentially -- Route-based customer locations increased 17% to 17,400 from 14,900 in the prior year -- Professional market billings grew 15% compared to prior year second quarter -- Unused medication revenue increased 9% driven by increased Inner Liner sales -- Immunization-related mailback billings increased by $2.8 million sequentially as compared to 1Q22, from $1.8 million to $4.6 million, reflecting COVID-19 vaccines and booster shots administered in the Retail Pharmacy market -- Closed on Affordable Medical Waste acquisition on October 22, 2021 -- Partnership with PharMerica recently announced to address the cost-effective and compliant management of unused medications in the long-term care market -- Cash balance of $36.0 million at December 31, 2021

HOUSTON, Jan. 26, 2022 (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 of fiscal 2022, ended December 31, 2021.

Revenue in the second quarter of fiscal 2022 grew 11% to $18.9 million, compared to $17.0 million in the same prior year quarter and grew 36% sequentially. Customer billings of $17.0 million decreased 8% compared to $18.5 million for the same prior year quarter. Second quarter 2022 gross margin increased to 35%, as compared to gross margin of 33% in the second quarter of 2021. SG&A increased by approximately $0.6 million or 17% to $4.4 million in the second quarter of fiscal 2022, compared to the same prior year quarter. The increase in SG&A is related primarily to $0.2 million in acquisition related costs, a $0.2 million increase in the accrual of management incentive compensation and continued investment in sales and marketing.

The Company reported operating income of $2.0 million in the second quarter of 2022, compared to operating income of $1.7 million in the second quarter of 2021. Sharps recorded net income of $1.4 million, or $0.07 per basic and diluted share, in the second quarter of fiscal 2022, as compared to net income of $1.2 million, or $0.07 per basic and diluted share in the second quarter of fiscal 2021. Sharps recorded improved EBITDA of $2.6 million in the second quarter of fiscal 2022 compared to EBITDA of $2.2 million in the second quarter of fiscal 2021. (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 delivered strong second quarter results as demonstrated by solid revenue growth, improved gross margin and consistent profitability, which we believe is reflective of our success in establishing Sharps as a leading and comprehensive provider of medical, pharmaceutical and hazardous waste management solutions. We were pleased with the 17% increase in the route-based customer locations which was directly related to continued demand for our solution offerings across the markets we serve, and particularly our Professional market billings which increased 15% for the second quarter. Unused medication billings increased 9% for the quarter as a result of a 25% increase in the number of MedSafe Inner Liners sold for the quarter. The sequential $2.8 million increase in quarterly immunization-related customer billings was a result of retail pharmacies continuing to administer COVID-19 vaccines and booster shots. For the second quarter and fiscal year to date, the reduction in customer billings for the Long-Term Care segment was a result of significantly increased volume, in the prior year, driven by the impact of COVID-19 in Long-Term Care communities.

Tusa added, We pride ourselves on our ability to solve complex problems for our customers. The latest problem we are solving is the industry challenge regarding the proper, cost-effective, and compliant management of unused medications, including controlled substances and hazardous wastes, such as blood thinners, in the long-term care and assisted living markets. In fact, the Secure and Responsible Drug Disposal Act approved by the DEA in 2014 was written primarily to address proper and compliant unused medication management practices in long-term care communities which have been very inconsistent. To help customers meet the new requirements set forth in the new DEA rules, we designed the MedSafe to address the proper and cost-effective collection and destruction of unused medications, including controlled substances. MedSafe has seen solid demand from retail pharmacy and other settings, such as government, and we believe Sharps is the leader in the retail pharmacy and government markets for the cost-effective and compliant disposal of unused medications. We are now taking our vast knowledge, experience and success gained from introducing MedSafe in the retail pharmacy and government settings and bringing this solution to the long-term care and assisted living markets, where we believe the MedSafe has the opportunity to become the industry standard. We are excited about our recently announced partnership with PharMerica, a nationwide leader in long-term care pharmacy services, and look forward to working with them to solve a complex problem.

Second Quarter Review

Professional market billings increased 15% to $5.2 million in the second quarter of fiscal 2022 as compared to $4.5 million in the second quarter of 2021 consistent with the increase in route-based customer locations.

Retail market billings grew 4% to $6.4 million in the second quarter of fiscal 2022 as compared to $6.1 million in the same prior year period. Within the retail market, immunization related orders were down slightly at $4.6 million in the second quarter of fiscal 2022 compared to $4.8 million in the prior year.

Pharmaceutical Manufacturer market billings decreased by $1.2 million to $1.9 million in the second quarter of fiscal 2022 as compared to $3.1 million in the same prior year period due to the timing of inventory builds for patient support programs, driving over half of the $1.7 million decrease in mailback solution billings.

Long-Term Care billings decreased by $0.3 million to $0.8 million in the second quarter of fiscal 2022 compared to $1.1 million in the prior year period, related primarily to heightened volumes of COVID-19 related waste management in the prior year, most of which adversely impacted the route-based business customer billings.

Home Health Care market billings decreased $0.8 million to $2.0 million in the second quarter of fiscal 2022 compared to $2.8 million in the second quarter of fiscal 2021 due to the timing of distributor orders, driving some of the $1.7 million decrease in mailback solution billings.

Billings for Unused Medications grew 9% to $1.9 million in the second quarter of fiscal 2022 as compared to $1.7 million in the same prior year period as result of the 25% increase in the number of MedSafe Inner Liners sold.

First Six Months Fiscal 2022 Results

Sharps recorded revenue of $32.8 million in the first half of fiscal 2022, an increase of 9% compared to revenue of $30.2 million in the first half of fiscal 2021. Customer billings decreased 7% to $29.7 million for the first half of fiscal 2022. Professional market billings increased 12% to $9.7 million in the first half of fiscal 2022 as compared to $8.7 million in the same prior year period. Retail market billings increased 5% to $10.2 million as compared to $9.8 million in the first half of fiscal 2021, with billings for flu shot / COVID-19 related orders relatively flat at $6.4 million, and unused medications billings also relatively flat at $2.2 million. Long-Term Care market billings decreased 35% to $1.5 million as compared to $2.4 million in the prior year period. During the first half of fiscal 2022, Pharmaceutical Manufacturer market billings decreased 44% to $2.4 million as compared to $4.2 million in the first half of fiscal 2021. Home Health Care market billings decreased 23% to $4.0 million for the first half of fiscal 2022 compared to $5.2 million in the first half of 2021.

Gross margin was essentially flat at 30.6% for the first half of fiscal 2022 as compared to 30.7% in first half of fiscal 2021 despite being negatively impacted by a $0.8 million increase in the fixed cost component of cost of sales. SG&A expense increased 14% to $8.6 million in the first half of fiscal 2022 compared to $7.5 million in the first half of fiscal 2021, related to $0.2 million in acquisition related costs, a $0.5 million increase in the accrual of management incentive compensation and the Companys continued investments in sales and marketing. The Company recorded operating income of $1.0 million in the first half of fiscal 2022 as compared to operating income of $1.3 million in the first half of fiscal 2021.

Net income for the first half of fiscal 2022 was $0.6 million, or $0.03 per basic and diluted share compared to net income of $0.9 million or $0.06 per basic and diluted share for the first half of fiscal 2021.

Sharps recorded EBITDA of $2.2 million in the first half of fiscal 2022, consistent with EBITDA in the first half of fiscal 2021. (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 $36.0 million at December 31, 2021, compared to cash of $27.8 million at June 30, 2021. The Company had working capital of $42.8 million at December 31, 2021 compared to working capital of $27.9 million at June 30, 2021.

Mr. Tusa concluded, Looking forward, were energized to continue capitalizing on the opportunities were seeing to grow our leadership position in all of the markets we serve and all solutions we offer. We continue to focus on the growth of our route-based business and complementing this with acquisition opportunities. The acquisition pipeline remains vibrant, and we believe we have the opportunity to close more acquisitions during the calendar year 2022.

Regarding immunizations, weve seen that the ongoing emergence of new variants causes the COVID-19 related business landscape to remain fluid. As we move through the balance of fiscal year 2022, future immunization-related orders should be driven by the timing and volume of the continued roll out of COVID-19 shots and boosters. As a point of reference, only approximately 40% of fully vaccinated Americans have received a booster to-date. Additionally, there are new vaccines being developed to address specific variants, such as Omicron, which could be available by March of 2022. We remain confident that we are well positioned to continue to support our immunization customers, with mailback inventory and increased treatment capacity to meet the continuing demands of this business."

Second Quarter Fiscal Year 2022 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 Compliance conference call can be accessed by domestic callers by dialing (888) 506-0062. International callers may access the call by dialing (973) 528-0011. Callers should use conference entry code 618730. The webcast can be monitored at www.sharpsinc.com.

A telephonic replay will be available through February 25, 2022. 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 44124. Transcript will also be posted to the Sharps Compliance 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.

Forward-Looking Statements

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 Companys management as well as assumptions made by and information currently available to the Companys management. When used in this document, the words "may," position, "plan," potential, designed, 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 Companys Quarterly Reports on Form 10-Q, our Annual Report on Form 10-K, and our other filings with the Securities and Exchange Commission. 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, or as an alternative to cash flow from operating activities or measure of our liquidity 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 John Nesbett/Jennifer BelodeauSharps Compliance Corp. IMS Investor RelationsExecutive Vice President and Chief Financial Phone: (203) 972-9200Officer Email:Phone: (713) 660-3547 jnesbett@institutionalms.comEmail: ddiaz@sharpsinc.com

FINANCIAL TABLES FOLLOW

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

Three-Months Ended Six-Months Ended December 31, December 31, 2021 2020 % 2021 2020 % Change Change Revenue $ 18,878 $ 17,011 11.0 % $ 32,793 $ 30,162 8.7 % Cost of revenue 12,271 11,374 7.9 % 22,765 20,902 8.9 %Gross profit 6,607 5,637 17.2 % 10,028 9,260 8.3 %Gross margin 35.0 % 33.1 % 30.6 % 30.7 % SG&A expense 4,388 3,756 16.8 % 8,588 7,544 13.8 %Depreciationand 236 205 454 409 amortization Operating 1,983 1,676 986 1,307 IncomeOperating 10.5 % 9.9 % 3.0 % 4.3 % margin Interest income 14 ? 14 ? Interest (58 ) (47 ) (114 ) (79 ) expenseIncomeassociated with 27 10 34 15 derivativeinstrumentTotal other (17 ) (37 ) (66 ) (64 ) expense Income before 1,966 1,639 920 1,243 income taxesIncome tax 529 411 273 308 expenseNet Income $ 1,437 $ 1,228 $ 647 $ 935 Net Income Per ShareBasic and $ 0.07 $ 0.07 $ 0.03 $ 0.06 DilutedWeightedAverage Shares OutstandingBasic 19,245 16,497 18,562 16,444 Diluted 19,400 16,929 18,656 16,875

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

December 31, June 30, 2021 2021ASSETS: Current assets: Cash $ 36,001 $ 27,767Accounts receivable, net 13,047 9,738Inventory 6,821 6,114Contract asset 18 20Prepaid and other current assets 1,857 1,459Total current assets 57,744 45,098Property, plant and equipment, net 11,155 10,843Operating lease right of use asset 9,073 8,353Financing lease right of use asset, net 980 907Inventory, net of current portion 957 989Other assets 154 110Goodwill 7,996 6,735Intangible assets, net 2,772 2,239Deferred tax asset, net ? 157Total assets $ 90,831 $ 75,431 Current liabilities Accounts payable $ 3,592 $ 2,922Accrued liabilities 3,208 3,940Operating lease liability 2,457 2,368Financing lease liability 189 160Current maturities of long-term debt 480 735Contract liability 5,062 7,028Total current liabilities 14,988 17,153Contract liability, net of current portion 408 1,461Operating lease liability, net of current portion 6,752 6,118Financing lease liability, net of current portion 804 741Other liabilities 23 45Deferred tax liability, net 53 ?Long-term debt, net of current portion 3,172 3,329Total liabilities 26,200 28,847Stockholders' equity 64,631 46,584Total liabilities and stockholders' equity $ 90,831 $ 75,431

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

Three-Months Ended December 31, 2021 % Total 2020 $ Change %BILLINGS BY MARKET:Retail $ 6,365 37.5 % $ 6,139 $ 226 3.7 %Professional 5,199 30.6 % 4,538 661 14.6 %Home Health Care 2,028 11.9 % 2,832 (804 ) (28.4 ) %Pharmaceutical 1,901 11.2 % 3,062 (1,161 ) (37.9 )Manufacturer %Long-Term Care 752 4.4 % 1,060 (308 ) (29.1 ) %Government 564 3.3 % 497 67 13.5 %Environmental 54 0.3 % 179 (125 ) (69.8 ) %Other 137 0.8 % 159 (22 ) (13.8 ) %Subtotal 17,000 100.0 % 18,466 (1,466 ) (7.9 ) %GAAP Adjustment * 1,878 (1,455 ) 3,333 Revenue Reported $ 18,878 $ 17,011 $ 1,867 11.0 % Six-Months Ended December 31, 2021 % Total 2020 $ Change %BILLINGS BY MARKET:Retail $ 10,232 34.4 % $ 9,786 $ 446 4.6 %Professional 9,716 32.7 % 8,671 1,045 12.1 %Home Health Care 3,967 13.3 % 5,180 (1,213 ) (23.4 ) %Pharmaceutical 2,397 8.1 % 4,241 (1,844 ) (43.5 )Manufacturer %Long-Term Care 1,530 5.1 % 2,369 (839 ) (35.4 ) %Government 1,271 4.3 % 1,012 259 25.6 %Environmental 85 0.3 % 314 (229 ) (72.9 ) %Other 526 1.8 % 321 205 63.9 %Subtotal 29,724 100.0 % 31,894 (2,170 ) (6.8 ) %GAAP Adjustment * 3,069 (1,732 ) 4,801 Revenue Reported $ 32,793 $ 30,162 $ 2,631 8.7 % *Represents the net impact of the revenue recognition adjustments to arrive atreported GAAP revenue. Customer billings include all invoiced amounts forproducts shipped or services rendered during the period reported. GAAP revenueincludes customer billings as well as numerous adjustments necessary toreflect, (i) the deferral of a portion of current period sales, (ii)recognition of certain revenue associated with product returned for treatmentand destruction and (iii) provisions for certain product returns and discountsto customers which are accounted for as reductions in sales in the same periodthe related sales are recorded.

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

Three-Months Ended December 31, 2021 % Total 2020 $ Change %BILLINGS BY SOLUTION: Mailbacks $ 10,192 60.0 % $ 11,907 $ (1,715 ) (14.4 ) %Route-Based Pickup 3,551 20.9 % 3,491 60 1.7 %Unused Medications 1,865 11.0 % 1,713 152 8.9 %Third Party Treatment 54 0.3 % 179 (125 ) (69.8 ) %Other 1,338 7.8 % 1,176 162 13.8 %Total Billings by $ 17,000 100.0 % $ 18,466 $ (1,466 ) (7.9 )Solution % Six-Months Ended December 31, 2021 % Total 2020 $ Change %BILLINGS BY SOLUTION: Mailbacks $ 15,749 53.0 % $ 18,346 $ (2,597 ) (14.2 ) %Route-Based Pickup 6,750 22.7 % 6,647 103 1.5 %Unused Medications 4,494 15.1 % 4,074 420 10.3 %Third Party Treatment 85 0.3 % 314 (229 ) (72.9 ) %Other 2,646 8.9 % 2,513 133 5.3 %Total Billings by $ 29,724 100.0 % $ 31,894 $ (2,170 ) (6.8 )Solution %

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



Three-Months Ended Six-Months Ended December 31, December 31, 2021 2020 2021 2020 Net Income $ $ $ $ 1,437 1,228 647 935Income tax 529 411 273 308expenseInterest 44 47 100 79expense, netDepreciationand 584 500 1,166 923amortization EBITDA $ $ $ $ 2,594 2,186 2,186 2,245 *The Company defines earnings before interest, taxes, depreciation andamortization (?EBITDA?) as net income, plus income tax expense (benefit), netinterest expense, and depreciation and amortization. Other companies may defineEBITDA differently. EBITDA is presented because it is a financial measure thatis frequently requested by third parties.However, EBITDA is not consideredunder generally accepted accounting principles as a primary measure of anentity?s financial results, and accordingly, EBITDA should not be considered analternative to operating income, net income, or cash flows as determined undergenerally accepted accounting principles and as reported by the Company.