nasdaq: smed investor presentation

Investor Presentation

October 2018

NASDAQ: SMED

2

Safe Harbor

These slides contain (and the accompanying oral discussion will contain) “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe”, “estimate”, “anticipate”, “project” and “expect” and similar expressions are intended to identify forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to differ materially from the results expressed or implied by such statements, including general economic and business conditions, conditions affecting the industries served by the Company, conditions affecting the Company’s customers and suppliers, competitor responses to the Company’s products and services, the overall market acceptance of such products and services, the effectiveness of the Company’s strategy and other factors disclosed in the Company’s periodic reports filed with the Securities and Exchange Commission. Consequently, such forward looking statements should be regarded as the Company’s current plans, estimates and beliefs. The Company does not undertake and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

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Agenda

I. Company Overview

II. Medical Waste Solutions

III. Unused Medications

IV. New Solutions

V. Financial Review

4

Providing Comprehensive Medical Waste Solutions

Medical Waste for Small to Medium Sized Generators: Route-Based & Mailback

Unused Medication

10.8% 4-Year CAGR; With Strong Balance Sheet

Market Market

Size

Market Growth

Rate

Market Position

(U.S.)

Market

Penetration

Small-Medium

Quantity

Medical Waste

>$1B ~5.5% 2nd <4%

Unused

Medication

>$1B ~4.2% 1st <1%

A Leader in Two Attractive Markets

5

*

*Source: Kaiser Family Foundation Analysis of National Health Expenditure from Centers for Medicare & Medicaid Services, Office of the Actuary, National Health

Statistics Group (Accessed on December 13, 2017)

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Growing End Market Opportunity

Addressable

Market Size:

$1.0B

$2.0B

Founding of

Company ~3 Years Ago Today

Comprehensive

Medical Waste:

Mailback

+

Pick-Up Service

(Company Owned)

+

Unused

Medication

Comprehensive

Medical Waste:

Mailback

+

Pick-Up Service

(Company Owned)

Medical Waste:

Mailback

$0.25B - $0.5B

7

Improving Revenue Mix

% of Total Revenue

1996-2012

Route-Based Unused Medication Mailback

Q1 2019


1% 6% 21%

16%

2013


8

Medical Waste SolutionsMedical Waste Solutions

Everything But The Hospital

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Sharps Serves All Small to Medium Quantity Generator Markets

* Professional includes dentists, veterinarians, clinics, private practice physicians, urgent care facilities, ambulatory surgical centers and other healthcare facilities.

Point of Care Shifting Towards Sharps’ Core Customers

Aging Population

Traditional Healthcare Setting

Professional

Market*

Retail

Pharmacies

Home

Health Care

Assisted Living/

Long-Term Care

Small to Medium Setting

Cost Pressure

10

Market Landscape: Small & Medium Quantity Generators

$0

$200

$400

$600

$800

$1,000

Local/Regional National/Full-Service

Revenues (in millions)

Market Opportunity

200+ Small Private

Local & Regional Providers

+

~ $40M

~ $750M

Well Positioned to Grow Organically and Through Acquisition

No Other

Providers

11

Acquisitions: Significant Part of Growth Strategy

▪ Three strategic acquisitions significantly expanded footprint

▪ Focusing route-based strategy on densely populated areas

12

Evolution of National Footprint

• Initial mailback service

• Route-based service (via network)

• Company owned route-based

13





14





Service to 24 States & 55% of U.S. Population

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State-Of-The-Art Treatment Facilities

Carthage, TX

1 of 10 permitted incinerators for medical waste and

unused medications in the U.S.

Autoclave and incinerator

Nesquehoning, PA

Autoclave

Distribution facility

Treating Sharps-Collected Waste & Providing Third Party Treatment Services

16

Significant Capacity Available to Support Growth at Treatment Facilities

Both Facilities Have Additional Capacity As Business Scales

Current

Shifts

1

2

3

Shifts

1

2

3

Total Capacity

Currently running one

autoclave with two

shifts

Current

Shifts

1

2

3

Shifts

1

2

3

Current

Capacity

Utilization

Total Capacity

Carthage, TX Nesquehoning, PA

Running one autoclave

and one incinerator

with two shifts

Capacity to run 3 shifts

each

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Shift to Full-Service

Q1 2019

Route-Based Mailback

27%

2013

Mail-back Route-based

1996-2012

Mail-back

1%

Route-based as Percentage of Medical Waste Revenue

18

Attractive Segments in Small to Medium Quantity Generator Markets

²Assumes about 28% of U.S. flu shots for adults administered in retail pharmacies

¹Average projected growth rates of physician, dental, and veterinary spending

Over the flu seasons from 2011-2018, Sharps saw growth in five years of 10% to 36% and declines in three years of 13% to 17%.

Market Market Size Market Growth Rate Current Penetration

Professional $648M 5%¹ 2%

Assisted Living/

Long-Term Care $84M 6% 2%

Home Health Care $100M 7% 8%

Retail Pharmacy $9.5M² 20-25%³ 58%

(FY 2018)

Excludes revenues associated with unused medications solutions

3

4

4

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Professional Market

Customers

▪ Dental

▪ Veterinarian

▪ Physicians

▪ Other service-related professionals

▪ Surgery Centers

▪ Funeral Homes

▪ Dialysis, etc.

Market Opportunity

800,000Professional

Offices (U.S.)

$648M

Market

Opportunity

20

Assisted Living/Long-Term Care Market

Customers

*National Institute on Aging

Market Opportunity

$84M

Total

Addressable

Market

1 in 5 Americans

Age 65+

21

Retail Pharmacy Market

We serve 58% of retail immunizing pharmacies

*Centers for Disease Control and Prevention, November 2017

Market Opportunity

Percentage of adults getting flu

shots in the retail setting:

24%

2016

28%

2017

22

Unused Medications

23

Proper Disposal of Unused Medications is a National Priority

53%Percent of those who misused

prescription painkillers obtained them

from a friend or relative¹

11%Percent of unused medication disposed

of properly²

57%Percent of chronic pain patients who did

not receive information on what to do

with expired medication³

72,000Drug overdose deaths in the U.S. in

2017

¹ National Survey on Drug Use and Health

² Geisinger Center for Health Research

Sharps’ Disposal Solutions for Unused Meds and Controlled Substances

Are a Preventative Measure in the Battle Against Opioid Abuse

³Partnership for Druge-Free Kids

Center for Disease Control and Prevention 4

4

24

Unused Medications Market Opportunity

Growing Concern Given Overdose Epidemic

~250M lbs. Unused Medication

Waste Per Year

$1BMarket

Opportunity

Sharps Has Properly Disposed of More Than

2.7 Million Pounds of Unused Medication

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Unused Medication & Controlled Substances: MedSafe

Solution Designed to Meet or Exceed DEA Proper Disposal Guidelines:

Helping Address the Opioid Abuse Crisis

Customers

▪ Pharmacies (retail and hospital)

▪ Long-term care facilities

▪ Government & local law enforcement

▪ Narcotic treatment programs

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Growing Installed Base of MedSafe Creates Recurring Revenue Opportunity

Installs: 876

Returned Liners: 5,583

(3/31/17)

Installs: 1,587


(12/31/17)

Installs: 2,173


(3/31/18)

Installs: 2,539


(6/30/18)

Installs: 2,800

Returned Liners: 20,000+

(9/30/18)

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TakeAway Medication Recovery

System™ envelopes for proper

mailback disposal of unused

medication, including controlled

substances, from ultimate users


Unused Medication & Controlled Substances: TakeAway Envelopes

Customers

▪ Retail pharmacies

▪ Long-term care

▪ VA & Military

Note: Envelope image shown above is for marketing purposes only. The actual envelope is not branded as

to meet the requirements of the Disposal Act (nondescript packaging).

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New Solution Offering: TakeAway Recycle System

Increased Use of Single Use Devices in Healthcare Settings Is Driving the Need For

Compliant Solutions for Recyclable Components

Customers

▪ Surgery Centers

▪ Hospitals

▪ Device Manufacturers

• Opportunity to bundle the original

product with the Sharps TakeAway

Recycle System

Solution Designed for Compliant, Sustainable Disposal/Recycling of

Single Use Devices:

Laryngoscopes

Tubes

Masks

Forceps

Scopes

Airway Management

29

Financial Review

74.6%

2.8%

8.6%

14.0%

54.5%

20.7%

15.9%

8.9%

FY 2015 Revenue $30.9 million

Q1 2019 Revenue $10.3 million

30

Breakdown By Solution

Mailback

Route-Based

Unused Medications

Other

Home Health Care19%

Retail22%

Pharmaceutical Manufacturer

8%

Assisted Living/ Long-term Care

6%

Other2%

Professional36%

Government6%

Environmental1%Home Health

Care55%

Retail8%

Pharmaceutical Manufacturer

7%

Assisted Living/ Long-term Care

9%

Other15%

Professional 6%

FY 2008 Billings $13.2 million

Q1 2019 Billings$10.3 million

31

Breakdown By Market

Increased Revenue Diversity by Market

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Billings By Market

Three Months Ended September 30,

2018 % Total 2017 $ Change %

BILLINGS BY MARKET:

Professional $ 3,674 35.7% $ 3,101 $ 573 18.5 %

Retail 2,260 21.9% 1,400 860 61.4 %

Home Health Care 1,927 18.7% 2,001 (74) (3.7)%

Pharmaceutical Manufacturer 808 7.8% 1,532 (724) (47.3)%

Assisted Living 645 6.3% 604 41 6.8 %

Government 597 5.8% 554 43 7.8 %

Environmental 103 1.0% 434 (331) (76.3)%

Other 290 2.8% 218 72 33.0 %

Subtotal $ 10,304 100.0% $ 9,844 $ 460 4.7 %

GAAP Adjustment * (11) (161) 150

Revenue Reported $ 10,293 $ 9,683 $ 610 6.3 %

* 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, (ii) recognition of certain revenue associated with product returned for treatment and destruction and (iii) provisions for certain rebates, product

returns and discounts to customers which are accounted for as reductions in sales in the same period the related sales are recorded. The difference between customer

billings and GAAP revenue is reflected in the Company’s balance sheet as contract liability.

33

Revenue

$21.5

$26.6

$30.9

$33.4

$38.2$40.1

$10.3

$-

$5

$10

$15

$20

$25

$30

$35

$40

$45

FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Q1 2019

Steady Annual Revenue Growth; 10.8% 4-Year CAGR

($ in millions)

34

Select Financials

(in thousands,

excluding per share data)

Three-Months Ended

September 30,

2018

Three-Months Ended

September 30,

2017

Revenue $10,293 $9,683

Gross Margin 32.6% 31.3%

SG&A Expense $3,026 $2,725

% of Sales 29.4% 28.1%

Net Income $70 $75

EPS $0.00 $0.00

EBITDA $516 $491

Strong Balance Sheet: $10.9M in Working Capital

35

Attractive Business Model

Significant Operating Leverage

Costs are relatively fixed

• Operating infrastructure in place to grow 2-3X

45% - 50% gross margins on incremental revenues

5-10% SG&A increase on incremental revenues

High Recurring Revenue

Recurring revenue model; high customer retention rates

Attractive Alternative For Marketplace

Competitive contract pricing and terms

Customizable solution

Nationwide coverage

nasdaq: smed investor presentation

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