John Nesbett - IR, Institutional Marketing Services David P. Tusa - CEO and President Brandon Beaver - SVP of Sales Diana P.

Diaz - VP and CFO

Joseph Munda - First Analysis Securities Nick Hiller - William Blair Kevin Steinke - Barrington Research Brian Butler - Stifel Nicolaus Craig Hoagland - Anderson Hoagland & Company

Good morning and welcome to the Sharps Compliance's fourth quarter 2015 earnings call. On the call today we have David Tusa, the Company's President and Chief Executive Officer; Diana Diaz, Vice President and Chief Financial Officer; and Brandon Beaver, Senior VP of Sales.

David will review the Company's business operations and growth strategies and Diana will review the financials. Brandon will discuss the Company's sales initiatives and related activities.

Immediately following their formal remarks, we will take questions from our call participants. If you are listening via Webcast, please note that you have the ability to submit questions through the Internet.

As you are aware, we may make some forward-looking statements during the formal presentation and in the question-and-answer portion of this teleconference. These statements apply to future events, which are subject to risks and uncertainties, as well as other factors that could cause actual results to differ materially from where we're today.

These factors are outlined in our earnings release as well as in documents filed by the Company with the SEC. These can be found at our Web-site or at sec.gov.

So with that, I will now turn the call over to David to begin the review and discussion. Go ahead, David.

Thanks, John. Good morning, everyone, and welcome to our fourth quarter and fiscal year end 2015 earnings conference call.

Fourth quarter customer billings increased 28% to $9.5 million, led by growth in the retail, pharmaceutical manufacturer, and government markets. With this growth, we generated gross margins of 42%, operating margins of 15% and EPS of $0.08 a share.

In addition to clearly demonstrating the operating leverage of our business model this quarter, both at the gross and operating margin level, we also saw the results of additional launches of new solution offerings and shortly after the end of the fiscal year we closed an acquisition. So let's review a few more details by market.

The retail market, the billings increased 54% to $3.1 million in the fourth quarter as our retail customers prepare for the upcoming flu shot season. For the full year, this market grew by 36%.

As we've said before, we believe this market will continue to drive our long-term growth as customers look to alternate sites to receive their flu shot and other immunization, and as retail clinics continue to transform healthcare in this country. Now, the government sector, the government billings increased 53.1% to about $800,000.

This growth was driven by sales and increased awareness of our new TakeAway Medication Recovery System envelopes and our new MedSafe solution. For the full fiscal year 2015, we generated government market billings of $1.8 million, an increase of 255% over the prior fiscal year.

Now these solutions were designed to meet all of the requirements of the DEA's October 2014 Secure and Responsible Drug Disposal Act. This act allows the collection, transportation and treatment of consumer-dispensed unused medications including controlled substances.

Both the TakeAway envelope and the MedSafe solutions have been approved and added to our Federal Supply Schedule as well as DAPA for the purchase by the Defense Department agencies. These approvals are important as they enable the efficient purchase of these solutions by government agencies.

Looking to the pharmaceutical manufacturer market, where the billings grew 23% to $1.4 million for the fourth quarter. For the fiscal year, billings in this market were $4.9 million, a 30% increase over the prior fiscal year.

During the quarter, we filled orders for new inventory builds for existing customers and we launched one new patient support program for a new drug therapy. We expect to launch two additional patient support programs for new drug therapies over the next three to four quarters, and once fully rolled out, the three new programs already launched in fiscal year 2015 plus the two additional programs, are expected to generate annual revenue of $4 million a year or higher.

Our ability to provide innovative, customized programs for our customers and their patients have enabled us to build strong relationships in this sector. We are focused on attracting new customers while also adding new programs for existing customers.

Now the professional market did grew by 5% to $1.5 million in the fourth quarter as we continued to educate and rollout sales and marketing initiatives around our Sharps Recovery System. For the fiscal year 2015, the market grew 17% to $6.2 million.

The fourth quarter comparison was skewed a bit by the impact of distributor activity, and if you took it out, the fourth quarter was up about 14%, consistent with the full-year growth of about 17% year-over-year. Our focus is on raising awareness and understanding of this solution in the small quantity generator sector which is largely made up of doctors, dentists, vets and other healthcare professionals.

We with our mailback system offer significant cost savings, improved operational efficiencies and convenience for the small quantity generator. As we've often discussed, our long-term growth strategy has always included the evaluation of acquisition opportunities as well as additional solution offerings that will allow us to offer complementary value-added services to our current and prospective customer base.

So following the quarter, we announced the acquisition of Alpha Bio/Med. Alpha is a route-based pick-up service located in Pennsylvania, and with the addition of Alpha, this expands our capabilities and footprint.

So we now service Pennsylvania, Maryland and Ohio with both route-based pick-up service as well as our Sharps Recovery mailback systems. We're also launching a route-based pick-up operation in Texas serving Dallas, Houston, San Antonio and Austin as well as Shreveport, Louisiana.

The inside sales team has been well trained to cross-promote our new services. Now the route-based pick-up services are focused on the professional, assisted living and long-term care markets, and they are designed to allow us to expand our service offering beyond small quantity generators to medium quantity generators as well such as surgery centers.

We're also exploring the possibility of a treatment facility located in Pennsylvania which will be a great fit for our Northeast operations. These are exciting developments for our business that we believe will significantly augment our ability that meet the needs of our customers and drive growth.

So with that, I'll turn the call over to Brandon who will give an update on our sales initiatives. Brandon?

Thank you, David. As David mentioned, we continued to see very strong results from the retail and pharmaceutical manufacturer markets this quarter.

Professional sector saw solid growth. As well, we believe it will benefit greatly from the addition of our new services.

We have very strong relationships in the pharma market where our partners recognize the value of our unique solution. We offer not just a disposal solution for patients in the home setting but an opportunity for pharma branding and data generation related to patient compliance and medication adherence.

Among the data we provide are alerts to the manufacturer if a patient is not using the drug the way it should be, which gives the manufacturer a meeting opportunity to reach out and touch the patient. We're encouraged by the ongoing opportunities we are seeing pharma, especially as we are seeing programs for new self-injectables, additional indications and higher patient counts.

As a result, we are optimistic about the long-term growth prospects for the market. Let's touch on assisted living.

Assisted living market billings grew 16% in the quarter and we are focusing our resources on closing new customer deals to drive growth in the market that we believe hold significant untapped opportunities. The addition of the pick-up service offering is expected to facilitate growth in this market as volumes from assisted living and long-term care market can be higher and those in the traditional small quantity generator sector, thereby warranting a route-based pick-up service to supplement the mailback system.

Professional market billings grew 5% in the quarter. As mentioned previously, distributor activity negatively impacted the comparability to this quarter.

Without distributor activity, professional market grew 14% compared to the prior year and 17% year-over-year. This market remains a key focus of our ongoing sales efforts as we continue to educate the market about the convenience and cost efficiency of our mailback solutions.

We continually launch inside sales initiatives and promotional activities to attract health care professionals from all practice areas and our field sales team is actively pursuing larger multi-location professional market opportunities. As David mentioned, with our recent acquisition, the inside sales group now proactively includes a pick-up service in addition to mailback in Pennsylvania, Ohio, Maryland and Texas.

The interest to date in the route-based offering has been extremely positive. We have already begun closing new customers where the route-based pick-up better serves the customers' needs.

We continue to supplement our service areas where needed with our network of over 35 sub-contractors for larger opportunities. We're in the process of launching a route-based pick-up operation in Texas servicing Dallas, Houston, San Antonio and Austin as well as Shreveport, Louisiana.

We see this move as an extension of our treatment facility operations in Texas where we are fortunate to have personnel with experience in the route-based pick-up service business. Now let's talk about the sales team.

As of today, we have 11 field sales and sales support personnel, 10 inside sales personnel for a total of 21 employees in the sales department. With the addition of the route-based pick-up service offering, we'll likely add more internal inside sales personnel to take advantage of the multiple service offerings primarily in the professional market.

We have assembled what I truly believe one of the strongest and most experienced sales teams in the Company's history and we are intent on accelerating the closure rate for additional new business in multiple markets throughout the calendar year in 2015. Our new TakeAway envelope and MedSafe solutions are making inroads not only in the government sector but also in the retail pharmacy and assisted-living markets.

Sales to date of the MedSafe have been to smaller chains that quickly realize the convenience and safety of a new DEA approved collection receptacle. Our sales team continues to pursue MedSafe opportunities in retail, assisted living, drug treatment, hospice, law enforcement and other commercial markets.

We believe we are the leader in the marketplace with our innovative and convenient unused medication management solutions and plan on taking advantage of our position as this market continues to develop. I'll turn it back to you, David.

Thanks for the update, Brandon. Now let's turn it over to Diana to cover the financials.

Thank you, David. During the fourth quarter, the Company recorded revenue growth of 27% to $9 million as compared to $7.1 million in the fourth quarter of last year.

Gross margin was 42% in the fourth quarter as compared to 36% in the prior year fourth quarter. The margin increase was driven by the leverage gained from higher revenue this quarter.

Selling, general and administrative expense was flat at $2.3 million for the quarter, and decreased to 26% of sales as compared to 33% of sales in the fourth quarter of last year. The Company reported operating income of $1.4 million in the fourth quarter as compared to $1.7 million in the fourth quarter of fiscal 2014.

Sharps reported net income of $1.3 million or $0.08 per basic and diluted share this quarter compared with net income of $1.6 million or $0.11 per basic and diluted share in the fourth quarter of last year. Last year's fourth quarter both operating income and net income included a positive impact of $1.5 million or $0.10 per share legal settlement related to the Company's claims against the U.S.

government related to a January 2012 contract termination. So, without the impact of the legal settlement, operating income and EPS increased by $1.3 million or $0.07 per share respectively.

Now let's take a look at the highlights for the year ended June 30, 2015. Revenue increased 16% to $30.9 million for fiscal 2015.

Customer billings increased 18% to $31.5 million. Retail billings grew 36% to $8.7 million, primarily due to increases in flu shot related business.

While the retail market is traditionally inconsistent quarter by quarter due to the variability and demand for flu shot solutions, the expansion of health care services in retail pharmacies overall will drive growth for the Company. Government billings increased 255% for the year to $1.8 million in fiscal 2015 compared to the prior year.

This is largely due to increased orders for the Company's new unused medication disposal solutions including the TakeAway Medication Recovery System and MedSafe solutions, which have been approved for purchase and use by several government agencies. Pharmaceutical manufacturer billings increased 30% to $4.9 million in fiscal 2015 and professional billings increased 17% to $6.2 million.

Fiscal 2015 gross margin improved to 35.6% as compared to 33.8% in fiscal 2014. SG&A expense increased to $9.5 million in fiscal 2015, an increase of 4% over the prior year period, as a result of the increased investment in sales and marketing initiatives.

The Company recorded operating income of $1.2 million in fiscal 2015 compared to operating income of $1 million in fiscal 2014. Without the impact of the prior year legal settlement, operating income increased $1.8 million over the prior year.

EBITDA for fiscal 2015 was $2.1 million, consistent with EBITDA for fiscal 2014. Net income for fiscal 2015 was $1.2 million or $0.08 per basic and $0.07 per diluted share, compared to net income of $1 million or $0.06 per basic and diluted share in fiscal 2014.

As discussed earlier, fiscal 2014 EBITDA, net income and EPS includes a positive impact of a $1.5 million or $0.10 per share legal settlement related to our claims against the government for a contract termination. Without the impact of this prior year legal settlement, EBITDA, net income and EPS grew $1.5 million, $1.7 million and $0.12 per share respectively.

Our balance sheet remained solid with $15.2 million of cash and cash equivalents at the end of 2015 fiscal year, compared to $13.7 million at June 30, 2014, with no debt this year. At June 30, 2015, working capital, stockholders' equity and total assets were $19.7 million, $23.6 million and $29.7 million respectively.

Inventory of $2.7 million at June 30, 2015 is higher than the balance at June 30, 2014 of $1.3 million. The increase in inventory is a direct reflection of growth in the business as well as preparing for upcoming flu shot season.

And with that, I'll turn the call back to David.

Thank you, Diana. Just a couple of comments before we turn it over to the Q&A.

While we are very excited to end fiscal year 2015 with strong organic growth, improved margins and profitability, we are very much focused on fiscal year 2016. We enter fiscal year 2016 with new solution offerings with route-based pick-up service capabilities.

We are also reviewing additional acquisition opportunities that we believe could drive additional and strategic revenue growth. And finally, just to thank our employees for all their efforts this past fiscal year.

As you can tell, it's been a very busy one. We generated significant growth, we've launched new products and we closed on an acquisition, and all of this would not have been possible without the talented and dedicated group of employees.

So with that, operator, let's go ahead and open it up for questions.

Thank you everyone for joining us. We look forward to speaking with you next quarter and we appreciate your continued support.