Mesa Laboratories, Inc. (NASDAQ:MLAB) (we, us, our, “Mesa” or the
“Company”) today reported record revenues for the second quarter
ended September 30, 2018.
Revenues for the second quarter increased eight percent to
$24,865,000 as compared to $22,954,000 for the same quarter last
year. Operating income for the quarter decreased 69 percent
to $1,138,000 as compared to $3,648,000 for the same quarter last
year. Quarterly net income decreased 58 percent to $994,000
or $0.25 per diluted share of common stock as compared to
$2,353,000 or $0.60 per diluted share of common stock for the same
quarter last year. Operating and net income for the second
quarter were impacted by an unusual item consisting of a $3,300,000
expense, before tax, related to an estimate of our potential loss
associated with the TCPA lawsuit.
Revenues for the six months ended September 30, 2018 increased
10 percent to $50,007,000 as compared to $45,627,000 for the same
period last year. Operating income for the six months ended
September 30, 2018 increased five percent to $5,902,000 as compared
to $5,630,000 for the same period last year. Net income for
the six months ended September 30, 2018 increased 35 percent to
$5,224,000 or $1.30 per diluted share of common stock as compared
to $3,870,000 or $0.98 per diluted share of common stock for the
same period last year. Operating and net income for the six
months ended September 30, 2018 were impacted by the same unusual
item described above. Operating and net income for the six
months ended September 30, 2017 were impacted by unusual items
consisting of a $622,000 expense, before tax, related to relocation
costs associated with the consolidation of our Sterilization and
Disinfection Control facilities into our new building in Bozeman,
Montana and a $406,000 expense, before tax, related to a reserve
for slow moving inventory associated with the discontinuance for
sale of certain products due to the recent introduction of new or
modified products and the consolidation of other product
sets. Net income for the six months ended September 30,
2017 was also impacted by an unusual item consisting of a $300,000
expense (included in other expense, net), before tax, related to an
increase in the PCD earn-out liability which resulted from higher
revenues in the product line than were forecasted.
On a non-GAAP basis, adjusted operating income1 for the second
quarter decreased 31 percent to $3,970,000 or $0.98 per diluted
share of common stock as compared to $5,717,000 or $1.45 per
diluted share of common stock for the same quarter last year.
Adjusted operating income for the six months ended September 30,
2018 increased 15 percent to $11,333,000 or $2.81 per diluted share
of common stock as compared to $9,843,000 or $2.50 per diluted
share of common stock for the same period last year. Adjusted
operating income for the three and six months ended September 30,
2018 and 2017, were fully impacted by the same operating income
items noted above. Excluding unusual items in both periods,
adjusted operating income for the second quarter increased 25
percent to $7,270,000 or $1.80 per diluted share of common stock as
compared to $5,817,000 or $1.48 per diluted share of common stock
for the same quarter last year.
“Core operating performance in the quarter was solid with
revenues (ex Packaging) up 10 percent overall and four percent
organically. Excluding unusual items in both periods, gross
margin percentage expanded 70 basis points while adjusted operating
income margin percentage expanded 390 basis points.
Additionally, we reduced inventory by three percent versus the
first quarter of this year,” said Gary Owens, President and Chief
Executive Officer. “We also deepened our implementation of
The Mesa Way! with our first kaizen (process improvement) events in
our Denver facilities which were focused on our most critical
customer facing metrics. Additional kaizen events are planned
for our Bozeman and Butler facilities in the 2nd half of the
year.
- Sterilization and Disinfection Control (47 percent of revenues
in 2Q19), delivered 16 percent revenues growth in the quarter with
three percent organic growth. First quarter gross profit
margin percentage was up 50 basis points versus the same quarter in
the prior year, but essentially flat when excluding the impact of
unusual items. Physical consolidation of operations
into Bozeman, Montana is complete, and we expect final product
validations, which are required before certain shipments can resume
in the new facility, to be completed in the third
quarter.
- Instruments (35 percent of revenues in 2Q19) revenues grew nine
percent versus the same quarter last year both in total and
organically. Gross profit margin percentage contracted 70
basis points due to product mix.
- Cold Chain Monitoring (12 percent of revenues in 2Q19) revenues
were down six percent in the quarter due to the nature and timing
of orders and installations, although underlying bookings were
strong. Gross profit margin percentage increased 160 basis
points, primarily due to efficiency gains.
- Cold Chain Packaging (six percent of revenues in 2Q19) shrank
11 percent in the quarter due to an unexpected decreased order rate
from the division’s largest customer. This customer operates
in the flu vaccine segment and is highly exposed to
seasonality. Gross profit margin percentage in the
quarter decreased 860 basis points versus the same quarter last
year due to customer mix and increased raw material costs.
For the remainder of FY19, we plan to accelerate our investment
in sales and marketing capacity and, to a lesser extent, research
and development capabilities to continue to power our near and
long-term organic revenues growth. These investments will not
change our strategy of reinvesting the majority of free cash flow
in our acquisition program,” concluded Mr. Owens.
1 The non-GAAP measures of adjusted operating income and
adjusted operating income per diluted share are defined to exclude
the non-cash impact of amortization of intangible assets and
stock-based compensation expense. A reconciliation between these
non-GAAP measures and their GAAP counterparts is set forth in the
table below, along with additional information regarding their
use.
Financial Summary (Unaudited except for the
information as of March 31, 2018)
Consolidated Condensed Statements of
Income(Unaudited) |
|
|
|
(Amounts in thousands,
except per share data) |
Three Months Ended September 30, |
Six Months EndedSeptember 30, |
|
|
2018 |
|
|
2017 |
|
2018 |
|
2017 |
Revenues |
$ |
24,865 |
|
$ |
22,954 |
$ |
50,007 |
$ |
45,627 |
Cost of revenues |
|
10,288 |
|
|
9,721 |
|
20,339 |
|
19,723 |
Gross
profit |
|
14,577 |
|
|
13,233 |
|
29,668 |
|
25,904 |
Operating expenses |
|
13,439 |
|
|
9,585 |
|
23,766 |
|
20,274 |
Operating
income |
|
1,138 |
|
|
3,648 |
|
5,902 |
|
5,630 |
Other (income) expense,
net |
|
(168 |
) |
|
542 |
|
196 |
|
1,221 |
Earnings before
income taxes |
|
1,306 |
|
|
3,106 |
|
5,706 |
|
4,409 |
Income tax expense |
|
312 |
|
|
753 |
|
482 |
|
539 |
Net income |
$ |
994 |
|
$ |
2,353 |
$ |
5,224 |
$ |
3,870 |
|
|
|
|
|
Earnings per share
(basic) |
$ |
0.26 |
|
$ |
0.63 |
$ |
1.36 |
$ |
1.03 |
Earnings per share
(diluted) |
|
0.25 |
|
|
0.60 |
|
1.30 |
|
0.98 |
|
|
|
|
|
Weighted average common
shares outstanding: |
|
|
|
|
Basic |
|
3,850 |
|
|
3,764 |
|
3,833 |
|
3,754 |
Diluted |
|
4,046 |
|
|
3,935 |
|
4,029 |
|
3,934 |
Consolidated Condensed Balance Sheets
|
(Amounts in
thousands) |
September 30, 2018(Unaudited) |
March 31, 2018 |
Cash and cash
equivalents |
$ |
5,625 |
$ |
5,469 |
Other current
assets |
|
27,966 |
|
26,519 |
Total current
assets |
|
33,591 |
|
31,988 |
Property, plant and
equipment, net |
|
23,235 |
|
23,593 |
Other assets |
|
103,462 |
|
108,520 |
Total
assets |
$ |
160,288 |
$ |
164,101 |
|
|
|
Liabilities |
$ |
53,385 |
$ |
64,740 |
Stockholders’
equity |
|
106,903 |
|
99,361 |
Total
liabilities and stockholders’ equity |
$ |
160,288 |
$ |
164,101 |
Reconciliation of Non-GAAP Measures |
(Unaudited) |
(Amounts in thousands,
except per share data) |
Three Months Ended September 30, |
Six Months Ended September 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Operating income |
$ |
1,138 |
$ |
3,648 |
$ |
5,902 |
$ |
5,630 |
Amortization of
intangible assets |
|
1,842 |
|
1,624 |
|
3,702 |
|
3,228 |
Stock-based
compensation expense |
|
990 |
|
445 |
|
1,729 |
|
985 |
Adjusted operating
income |
$ |
3,970 |
$ |
5,717 |
$ |
11,333 |
$ |
9,843 |
|
|
|
|
|
Adjusted operating
income per share (basic) |
$ |
1.03 |
$ |
1.52 |
$ |
2.96 |
$ |
2.62 |
Adjusted operating
income per share (diluted) |
|
0.98 |
|
1.45 |
|
2.81 |
|
2.50 |
|
|
|
|
|
Weighted average common
shares outstanding: |
|
|
|
|
Basic |
|
3,850 |
|
3,764 |
|
3,833 |
|
3,754 |
Diluted |
|
4,046 |
|
3,935 |
|
4,029 |
|
3,934 |
The non-GAAP measures of adjusted operating income and adjusted
operating income per share presented in the reconciliation above
are defined to exclude the non-cash impact of amortization of
intangible assets and stock-based compensation. We believe that
excluding these non-cash expenses provides the ability to better
understand the operations of the Company.
We provide non-GAAP adjusted operating income and non-GAAP
adjusted operating income per share amounts in order to provide
meaningful supplemental information regarding our operational
performance. Our management uses non-GAAP measures to evaluate the
performance of our business and to compensate employees. This
information facilitates management's internal comparisons to our
historical operating results as well as to the operating results of
our competitors. Since management finds this measure to be useful,
we believe that our investors can benefit by evaluating both
non-GAAP and GAAP results.
Our management recognizes that items such as amortization of
intangible assets and stock-based compensation expense can have a
material impact on our operating and net income. To gain a complete
picture of all effects on our profit and loss from any and all
events, management does (and investors should) rely upon the GAAP
consolidated statements of income. The non-GAAP numbers focus
instead upon our core operating business.
Readers are reminded that non-GAAP measures are merely a
supplement to, and not a replacement for, or superior to financial
measures prepared according to GAAP. They should be evaluated in
conjunction with the GAAP financial measures. It should be noted as
well that our non-GAAP information may be different from the
non-GAAP information provided by other companies.
About Mesa Laboratories, Inc.
Mesa is a global technology innovator committed to solving some
of the most critical quality control and analytical challenges in
the pharmaceutical, healthcare, industrial safety, environmental
and food and beverage industries. Mesa offers products and
services through four divisions (Sterilization and Disinfection
Control, Instruments, Cold Chain Monitoring and Cold Chain
Packaging) which help its customers ensure product integrity,
increase patient and worker safety, and design innovative solutions
that improve the quality of life throughout the world.
Forward Looking StatementsThis press release may contain
information that constitutes "forward-looking statements."
Generally, the words "believe," “will”, “estimate,” "expect,"
"project," “anticipate,” “intend” and similar expressions identify
forward-looking statements, which generally are not historical in
nature. However, the absence of these words or similar expressions
does not mean that a statement is not forward-looking. All
statements that address operating performance, events or
developments that we expect or anticipate will occur in the future
— including statements relating to revenues growth and statements
expressing general views about future operating results — are
forward-looking statements. Management believes that these
forward-looking statements are reasonable as and when made.
However, caution should be taken not to place undue reliance on any
such forward-looking statements because such statements speak only
as of the date when made. We undertake no obligation to publicly
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as
required by law. In addition, forward-looking statements are
subject to certain risks and uncertainties that could cause actual
results to differ materially from our historical experience and
present expectations or projections. These risks and uncertainties
include, but are not limited to, those described in our Annual
Report on Form 10-K for the year ended March 31, 2018, and those
described from time to time in our subsequent reports filed with
the Securities and Exchange Commission.
CONTACT: Gary Owens.; President and CEO, or John Sakys; CFO,
both of Mesa Laboratories, Inc., +1-303-987-8000
For more information about the Company, please visit its website
at www.mesalabs.com
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