Sharps Compliance (SMED) Misses Q3 EPS by 6c; Revenues Miss

Sharps Compliance (NASDAQ: SMED) reported Q3 EPS of ($0.07), $0.06 worse than the analyst estimate of ($0.01). Revenue for the quarter came in at $9.45 million versus the consensus estimate of $10.09 million.

David P. Tusa, President and Chief Executive Officer of Sharps, stated, “Historically, the March quarter is our weakest quarter and this one is no exception. While our internal expectations were about $10 million plus in revenue and breakeven earnings, we fell short as a result of lower MedSafe sales and the timing of orders in our home healthcare market. Exacerbating the challenging quarter were higher than expected costs of sales related to a number of items including EPA required testing and the adverse impact of the new revenuerecognition standard which lowered gross margin by about 100 basis points.

“We believe our target market for medical waste management solutions is vastly underserved and continue to be pleased with the positive customer response for an alternative provider focused on customer service, online training tools, responsiveness and reasonable contract terms. A few years ago we made the strategic decision to expand our route-based presence to complement our mailback offering and establish a more predictable revenue stream. Our ability to provide a diversified solution appeals to a broader base of the small to medium quantity waste generators as we now offer our route-based service in 24 states and have the capability of reaching 55% of the population in addition to our traditional mailback offering in all 50 states. As a result, we saw continued traction from our route-based medical waste pick-up solutions in the third quarter, with billings increasing 20% to represent 24% of total revenues. As evidence of the success from our expansion of offerings, our trailing twelve months revenue from the route-based business is $8.5 million, more than doubling the associated acquired revenue base of $3.9 million.

“We also continue to see strong demand for our unused medication solutions, including the MedSafe and TakeAway Medication Recovery System Envelopes and believe that Sharps is evolving as the leading provider of ultimate user unused medication disposal solutions in the U.S. Billings for unused medication solutions were down for the quarter, largely because the third quarter of 2018 included a higher number of MedSafe units installed than the current quarter related to the ongoing launch of a major unused medication program. The rollout of this specific program is ongoing with a greater number of units scheduled to be installed in calendar 2019 than in 2018 but installs in 2019 will be distributed over more of the calendar year. Sequentially, we achieved 26% growth in unused medications billings or an increase to 18% of total revenue in the third quarter of 2019 from 11% in the second quarter of 2019. On a fiscal year-to-date basis, unused medication billings have increased 9% compared to the prior year. Since 2015, we’ve installed about 3,200 MedSafe collection receptacles in retail and hospital pharmacies and long-term care, drug treatment, and law enforcement facilities and customers have returned over 28,500 inner liners with over 1.2 million pounds of unused medications. Additionally, Sharps has sold nearly 3.6 million TakeAway Medication Recovery Envelopes since 2009. As the epidemic of prescription drug abuse and accidental poisonings continues to grow, we’re committed to providing our effective solutions to help communities, retailers and healthcare providers solve this pervasive problem. We are proud to be part of the solution with convenient medication disposal, in addition to education and treatment, being seen as one of the components designed to solve the opioid crisis.”

For earnings history and earnings-related data on Sharps Compliance (SMED) click here.

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