- Retail market billings increase 67%
- Professional billings increase 30%
- Quarterly operating margin of 8.6%
- Cash balance increases to $16.4 million
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 year 2015, ended December 31, 2014.
Revenue in the second quarter of fiscal 2015 was $8.7 million, a
14% increase as compared to revenue of $7.6 million in the same
prior year quarter. Sequentially, revenue grew 23% as compared to
the first quarter of 2015. The Company reported operating income of
$744,000 in the second quarter of 2015 as compared to operating
income of $120,000 in the second quarter of fiscal 2014. Sharps
recorded net income of $749,000, or $0.05 per basic and diluted
share in the second quarter of fiscal 2015, compared with net
income of $120,000, or $0.01 per basic and diluted share, in the
second quarter of fiscal 2014.
Customer billings grew 20% to $8.7 million compared to the prior
year period. The company reported very strong growth in the Retail
market and solid increases in the Professional and Assisted Living
markets. Pharmaceutical Manufacturer billings decreased 10% and
Home Health Care billings decreased 2% as compared to the second
quarter of fiscal 2014. (See Reconciliation of Customer Billings to
Revenue in the supplemental table included at the end of this
release).
David P. Tusa, President and Chief Executive Officer of Sharps,
commented, "During the second quarter we delivered strong growth in
overall customer billings to $8.7 million, led by solid results in
our Retail and Professional markets. Our Retail segment benefitted
from strong flu shot activity in the quarter consistent with the
increase in the number of flu shots administered in the retail
setting. The Professional market billing growth is a result of our
continued efforts to educate this market about our mailback
solutions. Our Pharmaceutical Manufacturer billings can vary from
quarter to quarter, related to the timing of bulk orders for vendor
managed inventory programs. Customer billings for this market
increased 31% for the fiscal year-to-date period. As expected, we
launched one new patient support program for a new drug during the
second quarter and we expect to launch three additional patient
support programs for new drug therapies as we move through calendar
year 2015 and the first half of calendar 2016."
Focused sales and marketing initiatives continue to
drive revenue
Retail market billings grew 67% to $3.1 million, compared with
$1.8 million in the prior year period, primarily related to a
strong flu season driving increased demand for flu shots
administered in a retail setting. Sharps anticipates that this
segment will drive long-term growth for the Company as consumers
look to alternative venues to obtain flu shots and as retail
pharmacies increase the variety and volume of healthcare services
they provide.
Professional market billings grew 30% to $1.7 million in the
second quarter of fiscal 2015 as the Company continued its focus on
inside sales initiatives and promotional activities around
educating doctors, dentists, veterinarians and other healthcare
professionals on the favorable economics and convenience of the
Sharps Recovery Systemâ„¢ as compared to the traditional pick-up
service for the small quantity generator sector. The Company's
inside and online sales channel, which focuses primarily on the
Professional market, realized a 48% increase in billings to $1.4
million in the fiscal 2015 second quarter from $0.9 million in the
same prior year period.
Pharmaceutical Manufacturer billings declined 10% to $1.3
million in the second quarter of fiscal 2015 compared to the second
quarter last year. Billings in this segment vary due to the timing
of orders for vendor managed inventory programs. During the
quarter, the Company filled a large order for new inventory builds
for an existing customer and launched one new patient support
program for a new drug. Moving forward, during calendar year 2015
and through the first half of calendar 2016, Sharps expects to
launch three additional patient support programs for new drug
therapies.
Home Health Care market billings were essentially flat at $1.8
million for the fiscal second quarter of 2015. Second quarter
Assisted Living billings grew 10% to $0.5 million, as compared to
$0.4 million in the prior-year period. Environmental market
billings were $46,000 compared to $109,000 in the prior year
period.
Steady operating performance
Gross margin was 37.1% in the second quarter of fiscal 2015
compared to gross margin of 35.2% in the second quarter of fiscal
2014. Gross margin improvement was driven by the leverage
gained from higher revenue.
Selling, general and administrative (SG&A) expense decreased
slightly to $2.4 million as compared to $2.5 million in the second
quarter of fiscal 2014. SG&A for the second quarter of
fiscal 2014 was negatively impacted by legal expenses of $0.2
million associated with our claim to the CDC related to the
termination of a government contract and severance costs of $0.1
million for a former officer of the Company. SG&A for the
second quarter of fiscal 2015 includes increased sales and
marketing related spending compared to the prior year
period. SG&A as a percentage of sales decreased to 28% as
compared to 32% in the second quarter of fiscal
2014.
The Company reported operating income of $0.7 million in the
second quarter of fiscal 2015 as compared to operating income of
$0.1 million in the second quarter of fiscal 2014. Sharps
recorded EBITDA (earnings before interest, taxes, depreciation, and
amortization) of $1.0 million for the second quarter of fiscal 2015
as compared to EBITDA of $0.4 million in the second quarter of
fiscal 2014. Sharps believes that when used in conjunction
with GAAP measures, EBITDA, which is a non-GAAP measure, provides
additional information related to its operating
performance.
First Half Fiscal 2015 Review
Sharps recorded revenue of $15.7 million in the first six months
of fiscal 2015, an increase of 13% compared to revenue of $13.9
million in the first six months of fiscal 2014. Customer
billings increased 16% to $16.2 million in the first half of fiscal
2015. In the first six months of fiscal 2015, Retail billings
grew 37% to $5.1 million as compared to $3.7 million in the first
six months of fiscal 2014, primarily due to increases in flu shot
related business. Sales to this market are trending upward as
demonstrated by a 27% increase in trailing twelve months sales when
compared with the prior year's trailing twelve month
period. While this market traditionally experiences volatility
on a quarter-by-quarter basis, due to variability in demand for flu
shot solutions, the growing trend of retail pharmacies expanding
the healthcare services they provide helps drive growth for the
Company. Pharmaceutical Manufacturer billings increased 31% to
$2.7 million in the first half of fiscal 2015 as compared to $2.1
million in the first half of 2014. Professional billings
increased 14% to $3.2 million in the first six months of fiscal
2015 as compared to $2.8 million in the same prior year
period.
Fiscal 2015 year-to-date gross margin was 35.3% as compared to
gross margin of 36.0% in the first six months of fiscal
2014. SG&A expense increased to $4.7 million in the first
half of fiscal 2015 as a result of the Company's ongoing investment
in sales and marketing initiatives. The Company recorded
operating income of $0.7 million in the first half of fiscal 2015
as compared to operating income of $0.3 million in the first half
of fiscal 2014.
Sharps achieved EBITDA of $1.1 million in the first six months
of fiscal 2015 as compared to EBITDA of $0.8 million in the first
six months of fiscal 2014. Net income in the first half of
fiscal 2015 was $0.7 million or $0.04 per basic and diluted share,
compared to a net income of $0.2 million or $0.02 per basic and
diluted share in the first six months of fiscal
2014.
Financial flexibility and a strong balance
sheet
Cash and cash equivalents increased to $16.4
million at December 31, 2014 compared to $13.7 million at June 30,
2014. The increased cash position is due to a $1.5 million
settlement payment from the U.S. government collected in July 2014
plus cash generated from operations. At December 31, 2014, working
capital, stockholders' equity and total assets were $18.9 million,
$22.7 million and $28.2 million, respectively, compared with $17.9
million, $21.9 million and $26.5 million, respectively, at June 30,
2014.
In January 2013, the Company's Board of Directors authorized a
stock repurchase program for up to $3.0 million over a two-year
period. During the quarter ended December 31, 2014, the
Company did not repurchase shares under the program. Since the
inception of the program, the Company has repurchased 191,250
shares under the program at a cost of $0.8 million.
Outlook
Mr. Tusa stated, "Our second quarter results reflect continued
momentum and solid overall growth for our Company. Our sales
and marketing initiatives are gaining traction as we focus on
continued growth in the Professional, Retail and Pharmaceutical
Manufacturer markets. We are encouraged by the interest that's
been shown in our MedSafe program and new line of TakeAway
mailbacks launched in response to the DEA regulations to implement
the Secure and Responsible Drug Disposal Act."
Second quarter fiscal year 2015 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. Webcast listeners will have
the opportunity to submit questions to the speakers. Select
questions will be summarized and addressed during the
question-and-answer portion of the call.
A telephonic replay will be available through February 28,
2015. To listen to the replay, domestic callers should dial
(877) 660-6853 and international callers should dial (201) 612-7415
and enter conference ID number 13599285. A 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 pharmaceutical manufacturers, home healthcare
providers, assisted living / long-term care, 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 Systemâ„¢, is a comprehensive
solution for the containment, transportation, treatment and
tracking of medical waste and used healthcare materials.
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, EBITDA and
non-GAAP net income per share. The Company believes this
information is useful to investors and other interested parties.
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.
FINANCIAL TABLES FOLLOW
Sharps Compliance Corp.
and Subsidiaries |
Condensed Consolidated
Statements of Income |
(in thousands, except
per share data) |
|
|
|
|
|
|
|
|
Three-Months
Ended |
|
Six-Months
Ended |
|
|
December
31, |
|
December
31, |
|
|
(Unaudited) |
|
(Unaudited) |
|
|
2014 |
2013 |
% Change |
2014 |
2013 |
% Change |
|
|
|
|
|
|
|
Revenue |
$ 8,693 |
$ 7,649 |
13.6% |
$ 15,740 |
$ 13,922 |
13.1% |
|
|
|
|
|
|
|
Cost of revenue |
5,465 |
4,960 |
10.2% |
10,178 |
8,908 |
14.3% |
Gross profit |
3,228 |
2,689 |
20.0% |
5,562 |
5,014 |
10.9% |
Gross margin |
37.1% |
35.2% |
|
35.3% |
36.0% |
|
SG&A expense |
2,415 |
2,452 |
(1.5%) |
4,738 |
4,531 |
4.6% |
Depreciation and amortization |
69 |
117 |
(41.0%) |
154 |
233 |
(33.9%) |
|
|
|
|
|
|
|
Operating income |
744 |
120 |
|
670 |
250 |
|
Operating margin |
8.6% |
1.6% |
|
4.3% |
1.8% |
|
Other income |
10 |
5 |
|
18 |
10 |
|
|
|
|
|
|
|
|
Income before income taxes |
754 |
125 |
|
688 |
260 |
|
Income tax expense |
5 |
5 |
|
13 |
18 |
|
Net income |
$ 749 |
$ 120 |
|
$ 675 |
$ 242 |
|
|
|
|
|
|
|
|
Net income per
share |
|
|
|
|
|
|
Basic |
$ 0.05 |
$ 0.01 |
|
$ 0.04 |
$ 0.02 |
|
Diluted |
$ 0.05 |
$ 0.01 |
|
$ 0.04 |
$ 0.02 |
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding |
|
|
|
|
|
|
Basic |
15,281 |
15,295 |
|
15,285 |
15,319 |
|
Diluted |
15,423 |
15,438 |
|
15,428 |
15,402 |
|
|
|
Sharps Compliance Corp.
and Subsidiaries |
Condensed Consolidated
Balance Sheets |
(in
thousands) |
|
|
|
|
December 31,
2014 |
June 30, 2014 |
|
(Unaudited) |
|
ASSETS: |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 16,359 |
$ 13,717 |
Restricted cash |
-- |
111 |
Accounts receivable, net |
4,361 |
4,728 |
Legal settlement receivable |
-- |
1,538 |
Inventory |
2,208 |
1,320 |
Prepaid and other current
assets |
919 |
474 |
Total current assets |
23,847 |
21,888 |
Property, plant and equipment, net |
3,662 |
3,858 |
Intangible assets, net |
688 |
715 |
Total assets |
$ 28,197 |
$ 26,461 |
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY: |
|
|
Current liabilities: |
|
|
Accounts payable |
$ 2,029 |
$ 1,617 |
Accrued liabilities |
1,459 |
1,046 |
Deferred revenue |
1,449 |
1,337 |
Total current liabilities |
4,937 |
4,000 |
Long-term deferred revenue |
519 |
524 |
Other long-term liabilities |
12 |
33 |
Total liabilities |
5,468 |
4,557 |
Stockholders' equity: |
|
|
Total stockholders' equity |
22,729 |
21,904 |
Total liabilities and stockholders'
equity |
$ 28,197 |
$ 26,461 |
|
|
Sharps Compliance Corp.
and Subsidiaries |
Supplemental Customer
Billing and Revenue Information |
(unaudited) |
(in
thousands) |
|
|
Three-Months Ended December 31, |
|
2014 |
% Total |
2013 |
$ Change |
% |
BILLINGS BY MARKET: |
|
|
|
|
|
Retail |
$ 3,065 |
35.4% |
$ 1,836 |
$ 1,229 |
66.9% |
Home Health Care |
1,752 |
20.3% |
1,787 |
(35) |
(2.0%) |
Professional |
1,707 |
19.7% |
1,309 |
398 |
30.4% |
Pharmaceutical Manufacturer |
1,303 |
15.0% |
1,453 |
(150) |
(10.3%) |
Assisted Living |
455 |
5.2% |
414 |
41 |
9.9% |
Environmental |
46 |
0.5% |
109 |
(63) |
(57.8%) |
Core Government |
150 |
1.7% |
97 |
53 |
54.6% |
Other |
195 |
2.2% |
226 |
(31) |
(13.7%) |
Subtotal |
$ 8,673 |
100.0% |
$ 7,231 |
$ 1,442 |
19.9% |
GAAP Adjustment * |
20 |
|
418 |
(398) |
|
Revenue Reported |
$ 8,693 |
|
$ 7,649 |
$ 1,044 |
13.6% |
|
|
|
|
|
|
|
Six-Months Ended December 31, |
|
2014 |
% Total |
2013 |
$ Change |
% |
BILLINGS BY MARKET: |
|
|
|
|
|
Retail |
$ 5,060 |
31.3% |
$ 3,684 |
$ 1,376 |
37.4% |
Home Health Care |
3,505 |
21.7% |
3,740 |
(235) |
(6.3%) |
Professional |
3,158 |
19.5% |
2,779 |
379 |
13.6% |
Pharmaceutical Manufacturer |
2,688 |
16.6% |
2,058 |
630 |
30.6% |
Assisted Living |
905 |
5.6% |
846 |
59 |
7.0% |
Environmental |
140 |
0.9% |
153 |
(13) |
(8.5%) |
Core Government |
284 |
1.8% |
250 |
34 |
13.6% |
Other |
428 |
2.6% |
433 |
(5) |
(1.2%) |
Subtotal |
$16,168 |
100.0% |
$13,943 |
$ 2,225 |
16.0% |
GAAP Adjustment * |
(428) |
|
(21) |
(407) |
|
Revenue Reported |
$15,740 |
|
$13,922 |
$ 1,818 |
13.1% |
|
|
|
|
|
|
* Represents the net impact of
the revenue recognition adjustments to arrive at reported GAAP
revenue. Customer billings include all invoiced amounts for
products shipped 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 and
(ii) recognition of certain revenue associated with product
returned for treatment and destruction. The difference between
customer billings and GAAP revenue is reflected in the Company's
balance sheet as deferred revenue. |
|
|
Sharps Compliance Corp.
and Subsidiaries |
Supplemental Customer
Billing by Channel Information |
(unaudited) |
(in
thousands) |
|
|
Three-Months Ended December 31, |
|
2014 |
% Total |
2013 |
$ Change |
% Change |
BILLINGS BY CHANNEL: |
|
|
|
|
|
Direct Sales |
$ 4,218 |
48.6% |
$ 3,388 |
$ 830 |
24.5% |
Distributors |
3,056 |
35.3% |
2,898 |
158 |
5.5% |
Inside and Online Sales |
1,399 |
16.1% |
945 |
454 |
48.0% |
Total Billings By Channel |
$ 8,673 |
100.0% |
$ 7,231 |
$ 1,442 |
19.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Six-Months Ended December 31, |
|
2014 |
% Total |
2013 |
$ Change |
% Change |
BILLINGS BY CHANNEL: |
|
|
|
|
|
Direct Sales |
$ 7,830 |
48.4% |
$ 5,833 |
$ 1,997 |
34.2% |
Distributors |
5,835 |
36.1% |
6,059 |
(224) |
(3.7%) |
Inside and Online Sales |
2,503 |
15.5% |
2,051 |
452 |
22.0% |
Total Billings By Channel |
$ 16,168 |
100.0% |
$ 13,943 |
$ 2,225 |
16.0% |
|
|
Sharps Compliance Corp.
and Subsidiaries |
Supplemental Table to
Reconcile Net Income to EBITDA |
(unaudited) |
(in
thousands) |
|
|
|
|
|
|
Three-Months
Ended |
Six-Months
Ended |
|
December
31, |
December
31, |
|
2014 |
2013 |
2014 |
2013 |
|
|
|
|
|
Net Income |
$ 749 |
$ 120 |
$ 675 |
$ 242 |
|
|
|
|
|
Income tax expense |
5 |
5 |
13 |
18 |
Interest income |
(10) |
(5) |
(18) |
(10) |
Depreciation and amortization |
218 |
282 |
460 |
554 |
|
|
|
|
|
EBITDA |
$ 962 |
$ 402 |
$ 1,130 |
$ 804 |
|
|
|
|
|
The Company defines earnings
before interest, taxes, depreciation and amortization ("EBITDA") as
net income, plus income tax expense, interest income, 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. |
|
|
Sharps Compliance Corp.
and Subsidiaries |
Supplemental
Reconciliation of GAAP to Non-GAAP Net Income Per
Share* |
(unaudited) |
(in thousands, except
per share data) |
|
|
|
|
|
|
Three-Months
Ended |
Six-Months
Ended |
|
December
31, |
December
31, |
|
2014 |
2013 |
2014 |
2013 |
|
|
|
|
|
Net Income |
$ 749 |
$ 120 |
$ 675 |
$ 242 |
|
|
|
|
|
Diluted net income per
share |
$ 0.05 |
$ 0.01 |
$ 0.04 |
$ 0.02 |
|
|
|
|
|
Adjustments: |
|
|
|
|
Severance costs |
-- |
102 |
-- |
102 |
Legal costs related to CDC claim |
-- |
157 |
-- |
157 |
|
|
|
|
|
Adjustments |
-- |
259 |
-- |
259 |
|
|
|
|
|
Adjusted Net Income |
$ 749 |
$ 379 |
$ 675 |
$ 501 |
|
|
|
|
|
Adjusted diluted net income per
share |
$ 0.05 |
$ 0.02 |
$ 0.04 |
$ 0.03 |
|
|
|
|
|
* In accordance with U.S.
generally accepted accounting principles (GAAP), the Company's net
deferred tax assets have been fully reserved by a tax valuation
allowance and any tax expense (benefit) has been offset by the
utilization of net operating loss carryforwards or additional
deferred tax valuation allowance. Therefore, the amounts shown
in this schedule have not been adjusted to reflect any tax impact.
The Company believes this information is useful to investors and
other interested parties. Such information would 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. |
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
Institutional Marketing Services (IMS)
Phone: (203) 972-9200
Email: jnesbett@institutionalms.com
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