Meridian Bioscience, Inc. (NASDAQ: VIVO) today announced
financial results for the second quarter and first six months ended
March 31, 2019.
Second Quarter 2019 Highlights:
- Total revenue decreased 11% to $50.2
million, as compared to $56.5 million in the second quarter of
fiscal 2018 (10% decrease in constant-currency)
- Diagnostics segment revenues decreased
16% to $33.5 million (15% decrease in constant-currency)
- Life Science segment revenues were flat
at $16.7 million (2% growth in constant-currency)
- Reported operating income of $9.8
million (including $1.4 million of costs associated with
acquisition activities, restructuring activities and litigation),
as compared to $7.7 million in the second quarter of fiscal 2018,
which included $4.9 million of costs associated with restructuring
activities and litigation
- Reported EPS of $0.17 per diluted share
and Adjusted EPS of $0.19 per diluted share (see non-GAAP financial
measure reconciliation below)
- Quarterly cash dividend suspended in
connection with the announcement of the Company’s agreement to
acquire the business of GenePOC Inc. and decision to allocate
capital to related and other growth initiatives
Year-to-Date Fiscal 2019 Highlights:
- Total revenue decreased 6% to $101.7
million, as compared to $108.7 million in same period of fiscal
2018 (also a 6% decrease in constant-currency)
- Diagnostics segment revenues decreased
9% to $70.2 million (also a 9% decrease in constant-currency)
- Life Science segment revenues were flat
at $31.6 million (2% growth in constant-currency)
- Reported operating income of $20.4
million (including $2.1 million of costs associated with
acquisition activities, restructuring activities and litigation),
as compared to $15.7 million in the fiscal 2018 year-to-date
period, which included $6.4 million of costs associated with
restructuring activities and litigation
- Reported EPS of $0.35 per diluted share
and Adjusted EPS of $0.39 per diluted share (see non-GAAP financial
measure reconciliation below)
Second Quarter 2019 Results
Total revenue for the second quarter of fiscal 2019 decreased
11% to $50.2 million, compared to $56.5 million in the second
quarter of 2018. This decrease was driven by a 16% decrease in
Diagnostics business unit revenues from $39.8 million to $33.5
million, as a result of continued competitive pressures in a number
of our molecular products, particularly C. difficile, weaker
respiratory product demand, and volume and pricing declines in
certain gastrointestinal products. Life Science business unit
revenues were relatively flat at $16.7 million (a 2% increase on a
constant-currency basis compared to the second quarter of 2018), as
growth in both Americas and EMEA was largely offset by soft
customer order activity in China.
Reported operating income for the second quarter of fiscal 2019
increased $2.2 million to $9.8 million from the second quarter of
fiscal 2018. This increase resulted from a $7.4 million decrease in
operating expenses including a $3.5 million decrease in
acquisition, restructuring and litigation costs, more than
offsetting the lower amount of gross profit from decreased
revenues. Excluding the effects of the acquisition, restructuring
and litigation costs in each period, operating income decreased 11%
to $11.2 million. R&D spending was down in the quarter compared
to second quarter of fiscal 2018, due to the timing of certain
product development project expenses including clinical trial
expenses incurred in the fiscal 2018 second quarter for the cCMV
test, which launched this quarter. Sales and marketing expenses in
the quarter were down due to fiscal 2018 organization streamlining
initiatives, as well as lower sales commissions as a result of
lower revenues. General and administrative expenses were down in
the quarter, also due largely to the effects of organizational
streamlining initiatives implemented in fiscal 2018, but also due
to lower FDA Quality System remediation costs for the Billerica
manufacturing facility and lower incentive compensation costs.
Fiscal 2019 second quarter operating income in Diagnostics
decreased 29%, due entirely to the decrease in revenues, as
spending was down significantly. Operating income for the second
quarter of fiscal 2019 was up 47% in Life Science, driven by the
continued benefit of fiscal 2018 restructuring activities,
including a lower-cost commercial organization.
Net earnings for the second quarter of fiscal 2019 totaled $7.1
million, or $0.17 per diluted share, as compared to $5.3 million,
or $0.12 per diluted share, for the second quarter of fiscal 2018.
On an adjusted basis (non-GAAP), earnings were $8.2 million, or
$0.19 per diluted share, as compared to $8.9 million, or $0.21 per
diluted share, for the second quarter of fiscal 2018, decreases of
8% and 10%, respectively. Adjusted basis excludes the effect of
acquisition transaction and litigation costs in the fiscal 2019
quarter and restructuring and litigation costs in the fiscal 2018
quarter.
Jack Kenny, Chief Executive Officer, commented, “While I am
disappointed in our results for the second quarter for both our
Diagnostics and Life Science business units, I am excited about the
shift that our pending acquisition of GenePOC represents for
Meridian. The addition upon closing of GenePOC and its revogene™
molecular diagnostics platform is a critical step in our strategy
to invest in new products and technologies. We believe this
transaction and other initiatives are necessary to stabilize our
Diagnostics business and re-position the Company for sustainable,
long-term growth. The suspension of our quarterly cash dividend
represents a change in our capital allocation philosophy to support
this strategy and increase re-investment in the business. We
recognize the near-term trends and competitive pressures in our
business and we have recently reorganized our Diagnostics
commercial organization as an additional step to help address these
pressures. For our Life Science business unit, we are expecting
customer order activity in China to improve over the back half of
the year, but not to previously expected levels. Good growth
performance this quarter in the Americas and EMEA, however, are
evidence that the Life Science business is well-positioned, despite
the recent unforeseen weakness in China.”
Fiscal 2019 First Half Results
Total revenue for the first half of fiscal 2019 totaled $101.7
million, a 6% decrease from the $108.7 million achieved in fiscal
2018. This decrease reflects a decline of 9% (also 9% on a
constant-currency basis) to $70.2 million in Diagnostics, driven
largely by competitive pressures in molecular assays, particularly
C. difficile, volume and pricing declines in gastrointestinal
products, and volume declines in respiratory assays. Revenues in
the Life Science business unit were relatively flat (up 2% on a
constant-currency basis), reflecting softness in customer order
activity in China.
During the first half of fiscal 2019, operating income totaled
$20.4 million, an increase of 30% or $4.6 million. This increase
primarily resulted from lower expenses for restructuring and
litigation activities. Excluding the effects of the acquisition,
restructuring and litigation costs in each period, operating income
increased 1% to $22.5 million compared to the first half of fiscal
2018, despite the decline in revenues. Operating expenses were
broadly lower in all categories across both business units, which
favorably affected operating income, despite the revenue decline in
Diagnostics.
Net earnings totaled $15.2 million, or $0.35 per diluted share,
for the first half of fiscal 2019, as compared to $11.6 million, or
$0.27 per diluted share, for the same period in fiscal 2018. On an
adjusted basis, earnings were $16.8 million, or $0.39 per diluted
share, increases of 9% and 8%, respectively, over fiscal 2018’s
adjusted earnings of $15.4 million, or $0.36 per diluted share.
Adjusted earnings exclude the effect of acquisition transaction and
litigation costs in the first half of fiscal 2019, and
restructuring and litigation costs, and certain one-time tax
effects of the tax reform act, in the same period in fiscal 2018
period (see non-GAAP financial measure reconciliation below).
Tax Reform Impact
Our net earnings for both fiscal year-to-date periods include
the effects of the tax reform act signed into law during December
2017. The fiscal 2019 year-to-date period reflects the lower U.S.
federal tax rate of 21% being fully phased-in, and the first six
months of fiscal 2018 includes: (i) a benefit of $1.7 million
($0.04 per diluted share) primarily related to the re-measurement
of U.S. net deferred tax liabilities based on the new federal rate;
and (ii) a charge of $0.9 million ($0.02 per diluted share) for the
mandatory U.S. repatriation transition tax. The effective tax rate
for both the second quarter and first six months of fiscal 2019 was
23%.
Cash Dividend Matters
As part of the Company’s regular evaluation of its capital
allocation, upon evaluation of earnings, cash flow requirements and
future business developments, including the pending acquisition of
the business of GenePOC Inc., and other factors deemed relevant,
the Board of Directors, at its discretion, suspended the Company’s
quarterly cash dividend effective immediately. This action was
taken in order to deploy cash into new product development
activities for the revogene™ molecular diagnostics platform among
other investments and to preserve capital resources and liquidity
for general corporate purposes.
Fiscal 2019 Guidance Including Effects of the Pending
Acquisition
The Company provided revised guidance for full year fiscal 2019
in its press release dated April 2, 2019. Excluding amortization
expense, the Company expects the transaction to add approximately
$4 million - $5 million in operating expenses in fiscal 2019. The
Company currently estimates that the transaction will be dilutive
to full year fiscal 2019 EPS by approximately $0.10 to $0.12 per
share, based on current purchase accounting estimates.
Financial Condition
The Company’s financial condition remains sound. At March 31,
2019, cash and equivalents were $66.1 million and the Company had
100% borrowing capacity under its $30.0 million commercial bank
credit facility. The Company’s bank-debt obligations totaled $47.9
million as of March 31, 2019.
In connection with the pending acquisition of GenePOC, the
Company also expects to execute a new five-year $125 million
revolving credit facility that would replace its existing $30
million credit facility. The new credit facility is expected to be
secured by substantially all of the Company’s assets and include
certain restrictive financial covenants. The Company expects to use
this new facility and cash on-hand to repay the existing term loan
outstanding at March 31, 2019 and fund the closing payment for the
acquisition of GenePOC.
Conference Call Information
Jack Kenny, Chief Executive Officer, and Eric Rasmussen, Chief
Financial Officer, will host a conference call on Tuesday, April
30, 2019 beginning at 10:00 a.m. Eastern Time to discuss the second
quarter financial results and answer questions.
To participate in the live call by telephone from the U.S., dial
(866) 443-5802, or from outside the U.S., dial (513) 360-6924, and
enter the audience pass code 3893028. A replay will be available
for 14 days beginning at 1:00 p.m. Eastern Time on April 30, 2019
by dialing (855) 859-2056 or (404) 537-3406 and entering pass code
3893028.
INTERIM UNAUDITED OPERATING RESULTS
(In Thousands, Except per Share Data)
The following table sets forth the
unaudited comparative results of Meridian on a U.S. GAAP basis for
the interim periods of fiscal 2019 and fiscal 2018.
Three Months Ended Six Months Ended March 31, March 31, 2019
2018 2019 2018 Net revenues $ 50,248 $ 56,451 $
101,728 $ 108,734 Cost of sales 20,910 21,882 40,818
42,155 Gross profit 29,338 34,569
60,910 66,579 Operating expenses Research and
development 3,816 4,491 7,700 8,895 Selling and marketing 6,911
8,647 14,474 17,461 General and administrative 7,388 8,842 16,286
18,090 Acquisition and restructuring costs 785 3,458 872 4,192
Litigation costs 603 1,453 1,192 2,202
Total operating expenses 19,503 26,891 40,524
50,840 Operating income 9,835 7,678 20,386 15,739
Other expense, net (588 ) (454 ) (663 ) (857 ) Earnings before
income taxes 9,247 7,224 19,723 14,882 Income tax provision 2,153
1,936 4,523 3,292 Net earnings $ 7,094
$ 5,288 $ 15,200 $ 11,590
Net earnings per basic common share $ 0.17 $ 0.12 $ 0.36 $ 0.27
Basic common shares outstanding 42,496 42,323 42,472 42,289
Net earnings per diluted common share $ 0.17 $ 0.12 $ 0.35 $ 0.27
Diluted common shares outstanding 42,946 42,732 42,925 42,693
Adjusted Financial Measures (see non-GAAP financial
measure reconciliation below) Operating income $ 11,223 $ 12,589 $
22,450 $ 22,133 Net earnings 8,159 8,863 16,783 15,404 Net earnings
per diluted common share $ 0.19 $ 0.21 $ 0.39 $ 0.36
Condensed Balance Sheet Data
March 31, 2019 2018 Cash and equivalents $ 66,097 $
56,400 Working capital 120,583 113,691 Long-term debt 47,946 52,414
Shareholders’ equity 181,645 174,336 Total assets 253,964 254,547
Segment Data
The following table sets forth the
unaudited revenue and segment data for the interim periods in
fiscal 2019 and fiscal 2018 (in thousands).
Three Months Ended Six Months Ended March 31, March 31, 2019
2018 2019 2018
Net Revenues - By
Product Platform/Type
Diagnostics Molecular assays $ 7,132 $ 9,976 $ 14,434 $ 18,692
Immunoassays & blood chemistry assays 26,368 29,806 55,731
58,580 Total Diagnostics 33,500 39,782 70,165 77,272 Life Science
Molecular reagents 5,390 6,143 11,998 11,832 Immunological reagents
11,358 10,526 19,565 19,630 Total Life Science 16,748 16,669 31,563
31,462 Total Net Revenues $ 50,248 $ 56,451 $ 101,728 $ 108,734
Net Revenues - By
Disease State/Geography
Diagnostics Gastrointestinal assays $ 16,177 $ 19,149 $ 34,792 $
39,419 Respiratory illness assays 7,553 9,543 15,534 17,029 Blood
chemistry assays 4,330 4,257 8,760 8,523 Other 5,440 6,833 11,079
12,301 Total Diagnostics 33,500 39,782 70,165 77,272 Life Science
Americas 5,453 5,121 9,975 10,373 EMEA 7,901 7,478 15,376 12,659
ROW 3,394 4,070 6,212 8,430 Total Life Science 16,748 16,669 31,563
31,462 Total Net Revenues $ 50,248 $ 56,451 $ 101,728 $ 108,734
Geographic
Regions
Americas = North and Latin America EMEA = Europe, Middle East and
Africa ROW = Rest of World Three
Months Ended
Six Months Ended
March 31,
March 31,
2019
2018
2019
2018
OPERATING
INCOME
Diagnostics $ 7,561 $ 10,684 $ 16,346 $ 19,310 Life Science 5,361
3,638 10,492 6,580 Corporate (3,101 ) (6,723 ) (6,493 ) (10,334 )
Eliminations 14 79 41 183 Total
Operating Income $ 9,835 $ 7,678 $ 20,386 $
15,739
NON-GAAP FINANCIAL MEASURES
In this press release, we have supplemented our reported GAAP
financial information with information on operating expenses,
operating income, net earnings, basic earnings per share and
diluted earnings per share excluding the effects of acquisition
transaction costs, restructuring costs, litigation costs, and
certain one-time tax effects of the tax reform act, each of which
is a non-GAAP measure. We have provided in the tables below
reconciliations to the operating expenses, operating income, net
earnings, basic earnings per share and diluted earnings per share
amounts reported under U.S. Generally Accepted Accounting
Principles for the second quarters and six month periods ended
March 31, 2019 and March 31, 2018.
We believe this information is useful to an investor in
evaluating our performance because:
- These measures help investors to more
meaningfully evaluate and compare the results of operations from
period to period by removing the impacts of these non-routine
items; and
- These measures are used by our
management for various purposes, including evaluating performance
against incentive bonus achievement targets, comparing performance
from period to period in presentations to our board of directors,
and as a basis for strategic planning and forecasting.
Revenue reported on a constant-currency basis is also a non-GAAP
measure and is calculated by applying current period average
foreign currency exchange rates to each of the comparable periods.
Management analyzes revenue on a constant-currency basis to better
measure the comparability of results between periods. Because
changes in foreign currency exchange rates have a non-operating
impact on revenue, management believes that evaluating revenue
changes on a constant-currency basis provides an additional and
meaningful assessment of revenue to both management and
investors.
These non-GAAP measures may be different from non-GAAP measures
used by other companies. In addition, the non-GAAP measures are not
based on any comprehensive set of accounting rules or principles.
Non-GAAP measures have limitations, in that they do not reflect all
amounts associated with our results as determined in accordance
with U.S. GAAP. Therefore, these measures should only be used to
evaluate our results in conjunction with corresponding GAAP
measures.
SECOND QUARTER AND SIX MONTH
YEAR-TO-DATE GAAP TO NON-GAAP RECONCILATION TABLES
(In Thousands, Except per Share Data)
Three Months Six Months Ended March 31, Ended March 31, 2019
2018 2019 2018 Operating Expenses - U.S. GAAP basis $
19,503 $ 26,891 $ 40,524 $ 50,840 Acquisition and restructuring
costs (785 ) (3,458 ) (872 ) (4,192 ) Litigation costs (603
) (1,453 ) (1,192 ) (2,202 ) Adjusted
Operating Expenses $ 18,115 $ 21,980 $ 38,460
$ 44,446 Operating Income - U.S. GAAP basis $
9,835 $ 7,678 $ 20,386 $ 15,739 Acquisition and restructuring costs
785 3,458 872 4,192 Litigation costs 603 1,453
1,192 2,202 Adjusted Operating
Income $ 11,223 $ 12,589 $ 22,450 $ 22,133
Net Earnings - U.S. GAAP basis $ 7,094 $ 5,288
$ 15,200 $ 11,590 Acquisition and restructuring costs * 602 2,517
669 3,052 Litigation costs* 463 1,058 914 1,603 One-time benefit
from tax law change - - - (1,695 ) Repatriation transition tax
- - - 854
Adjusted Earnings $ 8,159 $ 8,863 $ 16,783 $
15,404 Net Earnings per Basic Common Share -
U.S. GAAP basis $ 0.17 $ 0.12 $ 0.36 $ 0.27 Acquisition and
restructuring costs 0.01 0.06 0.02 0.07 Litigation costs 0.01 0.02
0.02 0.04 One-time benefit from tax law change - - - (0.04 )
Repatriation transition tax - -
- 0.02 Adjusted Basic EPS $ 0.19 $ 0.21
** $ 0.40 $ 0.36
Three Months Six Months Ended March 31, Ended March
31, 2019 2018 2019 2018 Net Earnings per Diluted
Common Share - U.S. GAAP basis $ 0.17 $ 0.12 $ 0.35 $ 0.27
Acquisition and restructuring costs 0.01 0.06 0.02 0.07 Litigation
costs 0.01 0.02
0.02 0.04 One-time benefit from tax law change - - - (0.04 )
Repatriation transition tax - - - 0.02
Adjusted Diluted EPS $ 0.19 $ 0.21 ** $ 0.39 $ 0.36
* Net of tax. ** Does not sum to total
due to rounding.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a
safe harbor from civil litigation for forward-looking statements
accompanied by meaningful cautionary statements. Except for
historical information, this report contains forward-looking
statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, which may be identified by words such as
“continues,” “estimates”, “anticipates”, “projects”, “plans”,
“seeks”, “may”, “will”, “expects”, “intends”, “believes”, “should”
and similar expressions or the negative versions thereof and which
also may be identified by their context. All statements that
address operating performance or events or developments that
Meridian expects or anticipates will occur in the future,
including, but not limited to, statements relating to per share
diluted earnings and revenue, are forward-looking statements. Such
statements, whether expressed or implied, are based upon current
expectations of the Company and speak only as of the date made.
Specifically, Meridian’s forward-looking statements are, and will
be, based on management’s then-current views and assumptions
regarding future events and operating performance. Meridian assumes
no obligation to publicly update or revise any forward-looking
statements even if experience or future changes make it clear that
any projected results expressed or implied therein will not be
realized. These statements are subject to various risks,
uncertainties and other factors that could cause actual results to
differ materially, including, without limitation, the
following:
Meridian’s operating results, financial condition and continued
growth depends, in part, on its ability to introduce into the
marketplace enhancements of existing products or new products that
incorporate technological advances, meet customer requirements and
respond to products developed by Meridian’s competition, its
ability to effectively sell such products and its ability to
successfully expand and effectively manage increased sales and
marketing operations. While Meridian has introduced a number of
internally developed products and acquired products, there can be
no assurance that it will be successful in the future in
introducing such products on a timely basis or in protecting its
intellectual property, and unexpected or costly manufacturing costs
associated with its introduction of new products or acquired
products could cause actual results to differ from expectations.
Meridian relies on proprietary, patented and licensed technologies.
As such, the Company’s ability to protect its intellectual property
rights, as well as the potential for intellectual property
litigation, would impact its results. Ongoing consolidations of
reference laboratories and formation of multi-hospital alliances
may cause adverse changes to pricing and distribution. Recessionary
pressures on the economy and the markets in which our customers
operate, as well as adverse trends in buying patterns from
customers, can change expected results. Costs and difficulties in
complying with laws and regulations, including those administered
by the United States Food and Drug Administration, can result in
unanticipated expenses and delays and interruptions to the sale of
new and existing products, as can the uncertainty of regulatory
approvals and the regulatory process (including the currently
ongoing study and other FDA actions regarding the Company’s
LeadCare products). The international scope of Meridian’s
operations, including changes in the relative strength or weakness
of the U.S. dollar and general economic conditions in foreign
countries, can impact results and make them difficult to predict.
One of Meridian’s growth strategies is the acquisition of companies
and product lines. There can be no assurance that additional
acquisitions will be consummated or that, if consummated, will be
successful and the acquired businesses will be successfully
integrated into Meridian’s operations. There may be risks that
acquisitions may disrupt operations and may pose potential
difficulties in employee retention, and there may be additional
risks with respect to Meridian’s ability to recognize the benefits
of acquisitions, including potential synergies and cost savings or
the failure of acquisitions to achieve their plans and objectives.
Meridian cannot predict the outcome of goodwill impairment testing
and the impact of possible goodwill impairments on Meridian’s
earnings and financial results. Meridian cannot predict the
possible impact of U.S. health care legislation enacted in 2010 –
the Patient Protection and Affordable Care Act, as amended by the
Health Care and Education Reconciliation Act – and any modification
or repeal of any of the provisions thereof initiated by Congress or
the presidential administration, and any similar initiatives in
other countries on its results of operations. Efforts to reduce the
U.S. federal deficit, breaches of Meridian’s information technology
systems, trade wars, increased tariffs, and natural disasters and
other events could have a materially adverse effect on Meridian’s
results of operations and revenues. In the past, the Company has
identified a material weakness in our internal control over
financial reporting, which has been remediated, but the Company can
make no assurances that a material weakness will not be identified
in the future, which if identified and if not properly corrected,
could materially adversely affect our operations and result in
material misstatements in our financial statements. In addition to
the factors described in this paragraph, as well as those factors
identified from time to time in our filings with the Securities and
Exchange Commission, Part I, Item 1A Risk Factors of our most
recent Annual Report on Form 10-K contains a list and description
of uncertainties, risks and other matters that may affect the
Company. Readers should carefully review these forward-looking
statements and risk factors, and not place undue reliance on our
forward-looking statements.
About Meridian Bioscience, Inc.
Meridian is a fully integrated life science company that
develops, manufactures, markets and distributes a broad range of
innovative diagnostic products. We are dedicated to developing and
delivering better solutions that give answers with speed, accuracy
and simplicity that are redefining the possibilities of life from
discovery to diagnosis. Through discovery and development, we
provide critical life science raw materials used in immunological
and molecular tests for human, animal, plant, and environmental
applications. Through diagnosis, we provide diagnostic solutions in
areas including gastrointestinal and upper respiratory infections
and blood lead level testing. We build relationships and provide
solutions to hospitals, reference laboratories, research centers,
veterinary testing centers, physician offices, diagnostics
manufacturers, and biotech companies in more than 70 countries
around the world.
Meridian’s shares are traded on the NASDAQ Global Select Market,
symbol VIVO. Meridian’s website address is
www.meridianbioscience.com.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190430005745/en/
Jack KennyChief Executive OfficerMeridian Bioscience, Inc.Phone:
513.271.3700Email: mbi@meridianbioscience.com
Meridian Bioscience (NASDAQ:VIVO)
Historical Stock Chart
From Mar 2024 to Apr 2024
Meridian Bioscience (NASDAQ:VIVO)
Historical Stock Chart
From Apr 2023 to Apr 2024