Mesa Laboratories, Inc. (NASDAQ:MLAB), a global leader in the
design and manufacture of life science tools and critical quality
control solutions, today announced results for its second fiscal
quarter (“2Q25”) ended September 30, 2024 (amounts in thousands).
Second quarter FY 2025 compared to second quarter FY 2024:
- Revenues increased 8.8%
- Non-GAAP core organic revenues¹ decline was 2.8%
- Operating income increased 5,947% to $3,508
- Non-GAAP adjusted operating income excluding unusual
items² increased 18.9% and was 24.8% as a percentage of
revenues
We operate our business in four divisions: Sterilization and
Disinfection Control (“SDC”), Clinical Genomics (“CG”),
Biopharmaceutical Development (“BPD”), and Calibration Solutions
(“CS”).
Effective 4Q24 we changed our definition of non-GAAP adjusted
operating income³ (“AOI”) and non-GAAP adjusted operating
income excluding unusual items to also exclude depreciation
expense. Please see the reconciliation of those measures to GAAP
operating income (loss) below. All prior periods have been restated
to exclude depreciation expense from these non-GAAP measures.
Executive Commentary (amounts in thousands)
“The business continued its positive momentum in 2Q25 with
sequential growth in orders and reductions in inventory and debt
levels. Despite solid sequential order growth, sequential total
revenues growth contracted by 0.6% primarily due to an increase in
past due backlog in SDC which we expect to reduce over the next two
quarters. Year over year core organic growth contracted by 2.8% due
to shipment timing in SDC as well as year over year headwinds in
China which started to impact our CG division in 3Q24.
Profitability in our preferred metric of AOI margin percentage
excluding unusual items of 24.8% reflected our ongoing leverage of
the Mesa Way, our Lean approach to process improvement and
productivity growth. From a balance sheet perspective, solid
profitability and another step up in inventory turns enabled us to
repay $7,438 in debt during the second quarter which reduced our
total Net Leverage Ratio* to 3.26. We remain committed to drive
this ratio down below 3.0x” said Gary Owens, Chief Executive
Officer of Mesa.
“Overall revenues of $57,833 increased 8.8% compared to 2Q24
primarily due to 11% growth from the acquisition of GKE, partially
offset by an organic decline of 2.2% and currency exchange impacts
of 0.6%. The acquisition of GKE closed partially on October 16th of
2023 and completely on December 31st of 2023 and continues to
deliver revenues higher than initial expectations at acquisition
close. Biopharmaceutical capital spending in BPD continued to be
strong for the third consecutive quarter and sales funnels remain
solid. CG again delivered sequential growth as the core business
has stabilized despite ongoing headwinds from China’s economic
slowdown and the impact of its healthcare corruption campaign,
coupled with the disruption to the U.S. Laboratory Developed Test
(“LDT”) market highlighted in previous quarters. Both SDC and CS
showed strong sequential orders growth that will benefit 3Q25
sequential growth” added Mr. Owens.
“Profitability as measured by our primary metric of AOI
excluding unusual items grew by 18.9% versus the prior year to
$14,352, a 210 bps expansion when expressed as a percentage of
revenue. Versus prior year, gross profit percentage expanded by 90
bps but shrank by 40 bps when excluding the impact of non-cash
charges primarily due to mix.” added Mr. Owens.
“Looking forward, we are optimistic that solid sales funnels
will drive strong year over year growth in 3Q25 for BPD. In
addition, we expect continued sequential growth in 3Q25 for CG, CS
and SDC which when combined with BPD will result in strong organic
revenue growth in 3Q25 for the Company as a whole. Looking out
further, we will remain highly attuned to market shifts while
continuing to invest in our strategic initiatives driving long term
growth” concluded Mr. Owens.
* Total Net Leverage Ratio under our Credit Facility is defined
as the ratio of total debt minus unrestricted cash in excess of $10
million as compared to 12 months trailing EBITDA. EBITDA, a
non-GAAP metric, for purposes of this calculation, is defined as
net income plus the sum of interest expense, income tax expense,
depreciation, amortization, unusual or non-recurring non-cash
charges and stock compensation expense. In addition, EBITDA gives
effect to trailing 12 months pro-forma ownership of GKE and adds
back certain GKE acquisition expenses.
Financial Results (unaudited, amounts in
thousands, except per share data)
Total revenues were $57,833, an increase of 8.8% compared to
2Q24. Operating income increased 5,947% to $3,508. Net income was
$3,428, an increase of 379% or $0.63 per diluted share of common
stock. On a non-GAAP basis, core organic revenues decline was 2.8%
and AOI increased 19.6% to $13,413 or $2.45 per diluted share of
common stock compared to 2Q24. As detailed in the Unusual Items
table below, AOI for 2Q25 and 2Q24 was negatively impacted by
unusual items totaling $939 and $855, respectively. Excluding the
unusual items for 2Q25 and 2Q24, AOI would have increased 18.9% to
$14,352. A reconciliation of non-GAAP measures is provided in the
tables below.
Division Performance
|
Revenues |
Organic Revenues Growth⁴ |
Core Organic Revenues Growth |
(Amounts in thousands) |
Three Months Ended September 30, 2024 |
Six Months Ended September 30, 2024 |
Three Months Ended September 30, 2024 |
Six Months Ended September 30, 2024 |
Three Months Ended September 30, 2024 |
Six Months Ended September 30, 2024 |
SDC |
$ |
22,205 |
$ |
45,162 |
(4.3)% |
0.1% |
(5.2)% |
(0.2)% |
CS |
|
12,262 |
|
24,063 |
8.2% |
5.6% |
8.2% |
5.4% |
BPD |
|
11,867 |
|
23,875 |
28.9% |
25.0% |
27.9% |
25.6% |
CG |
|
11,499 |
|
22,903 |
(26.0)% |
(20.8)% |
(26.5)% |
(20.8)% |
Total reportable segments |
$ |
57,833 |
$ |
116,003 |
(2.2)% |
0.1% |
(2.8)% |
0% |
|
|
|
|
|
|
|
Sterilization and Disinfection Control (38% of
revenues in 2Q25) revenues were $22,205 for the quarter which
resulted in core organic revenues decline of 5.2% versus prior
year. The acquisition of GKE drove overall quarterly growth to
30.0%. Orders, excluding GKE, increased 6% for the first six months
of the fiscal year with delivery timing negatively impacting
revenues for 2Q25 and, we anticipate, positively impacting 3Q25.
Gross profit percentage for the quarter contracted by 470 bps
versus the prior year primarily due to the impact of non-cash
inventory step-up purchase accounting charges from GKE and the
amortization of GKE’s intangible assets. Absent the impact of these
non-cash purchase accounting charges, gross profit percentage would
have contracted by 210 bps, driven primarily by volume declines and
increased costs in the legacy business. Beginning in the third
quarter of fiscal year 2025, the inventory step up will unwind and
we expect GKE's gross profit percentage to be in the low 70s, in
line with the rest of the division.
Calibration Solutions (21% of revenues in 2Q25)
revenues were $12,262 which resulted in core organic revenues
growth of 8.2% for the quarter. Year over year growth was driven
primarily by commercial momentum, particularly in our renal care
product lines which we expect to continue in the near term. Gross
profit percentage expanded by 220 bps primarily due to increased
revenues, pricing, and favorable product mix.
Biopharmaceutical Development (21% of revenues
in 2Q25) revenues were $11,867 which resulted in core organic
revenues growth of 27.9% for the quarter. The increase in revenues
was driven by increased biopharmaceutical spending on capital
equipment in North America and Europe which when combined, resulted
in an 109% increase in revenues from hardware and software versus
the same quarter prior year. Gross profit percentage expanded by 60
bps primarily due to increased revenues as well as favorable
product mix.
Clinical Genomics (20% of revenues in 2Q25)
revenues were $11,499 for the quarter, which resulted in a core
organic revenues decline of 26.5% for the quarter but an increase
of 0.8% sequentially compared to 1Q25. The year over year decrease
in revenues was driven primarily by headwinds in China and North
America as described above. Sequential growth for the second
consecutive quarter and improving sales funnels have us optimistic
that the turnaround plan is gaining traction. Gross profit
percentage expanded by 170 bps due to decreased amortization as a
result of impairment charges taken during 4Q24.
Use of Non-GAAP Financial Measures
Adjusted operating income, adjusted operating income excluding
unusual items, organic revenues growth and core organic revenues
growth are non-GAAP measures that exclude or adjust for certain
items, as detailed within the tables in “Supplemental Information
Regarding Non-GAAP Financial Measures.” As noted below, we now
include depreciation expense as a non-cash addback in the
definition of adjusted operating income as it better aligns with
presentations of other companies within our industry. All prior
period amounts have been restated to conform with the current
presentation.
¹ Core organic revenues growth, a non-GAAP measure, is defined
as reported revenues growth excluding the impact of acquisitions
and currency translation.
² The non-GAAP measures of adjusted operating income excluding
unusual items and adjusted operating income excluding unusual items
per diluted share are defined to exclude the non-cash impact of
amortization of intangible assets acquired in a business
combination, stock-based compensation, depreciation, impairment of
goodwill and long-lived assets and unusual items. Unusual items are
disclosed to highlight costs that are not ongoing and are incurred
as a direct result of a specific transaction, such as the
consummation of an acquisition, and are identified to allow
investors to understand the Company’s expectation on an ongoing
basis, following the completion of acquisition and integration
activities. A reconciliation of these non-GAAP measures to their
GAAP counterparts is set forth below, along with additional
information regarding their use.
³ 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 acquired
in a business combination, stock-based compensation, depreciation
and impairment of goodwill and long-lived assets. A reconciliation
of these non-GAAP measures to their GAAP counterparts is set forth
below, along with additional information regarding their use.
⁴ Organic revenues growth, a non-GAAP measure, is defined as
reported revenues growth excluding the impact of acquisitions.
About Mesa Laboratories, Inc.
Mesa is a global leader in the design and manufacture of life
science tools and critical quality control solutions for regulated
applications in the pharmaceutical, healthcare and medical device
industries. Mesa offers products and services to help our customers
ensure product integrity, increase patient and worker safety, and
improve the quality of life throughout the world.
For more information about Mesa, please visit its website at
www.mesalabs.com.
Forward Looking Statements
This press release contains forward-looking statements regarding
our future business expectations. Any statements contained herein
that are not statements of historical fact may be forward-looking
statements, including statements relating to future financial
results, business conditions and strategic initiatives. Words such
as “expect,” “seek,” “plan” “intend,” “anticipate,” “believe,”
“could,” “should,” “estimate,” “may,” “target,” “project,” and
similar expressions may also identify forward-looking statements.
However, the absence of these words or similar expressions does not
mean that a statement is not forward-looking. The forward-looking
statements are made based on expectations and beliefs concerning
future events affecting us and are subject to risks and
uncertainties relating to our operations and business environments,
all of which are difficult to predict and many of which are beyond
our control. Risks and uncertainties that could cause actual
results to differ materially from our historical experience and
present expectations or projections include those relating to: our
ability to successfully grow our business, including as a result of
acquisitions; the results on operations of acquisitions; our
ability to consummate acquisitions at our historical rate and at
appropriate prices; our ability to effectively integrate acquired
businesses and achieve desired results; the market acceptance of
our products; reduced demand for our products that adversely
impacts our future revenues, cash flows, results of operations and
financial condition; conditions in the global economy and the
particular markets we serve; significant developments or
uncertainties stemming from actions of the U.S. government,
including changes in U.S. trade policies and medical device
regulations; the timely development and commercialization, and
customer acceptance, of enhanced and new products and services; the
inherent uncertainty of projections of revenues, growth, operating
results, profit margins, expenses, earnings, margins, tax rates,
tax provisions, cash flows, liquidity, demand, and competition; the
effects of additional actions taken to become more efficient or
reduce costs; restructuring activities; laws regulating fraud and
abuse in the health care industry and the privacy and security of
health and personal information; outstanding claims, legal
proceedings, tax audits and assessments and other contingent
liabilities; foreign currency exchange rates and fluctuations in
those rates; and general economic, industry, and capital markets
conditions. These risks and uncertainties also include, but are not
limited to, those described in our filings with the Securities and
Exchange Commission including our Annual Report on Form 10-K for
the year ended March 31, 2024 and our subsequent Quarterly Reports
on Form 10-Q. We assume no obligation to update the information in
this press release.
Mesa Laboratories Contacts: Gary Owens; President and CEO, John
Sakys; CFO1-303-987-8000investors@mesalabs.com
Financial Summary (Unaudited except for the
information as of and for the year ended March 31, 2024)
|
Condensed Consolidated Statements of
Operations |
|
(Amounts in thousands, except per
share data) |
Three Months EndedSeptember
30, |
Six Months EndedSeptember 30, |
|
2024 |
2023 |
2024 |
2023 |
Revenues |
$ |
57,833 |
$ |
53,165 |
$ |
116,003 |
$ |
103,810 |
Cost of revenues |
|
22,378 |
|
21,056 |
|
43,299 |
|
40,518 |
Gross profit |
|
35,455 |
|
32,109 |
|
72,704 |
|
63,292 |
Operating expenses |
|
31,947 |
|
32,169 |
|
63,616 |
|
64,016 |
Operating income (loss) |
|
3,508 |
|
(60) |
|
9,088 |
|
(724) |
Nonoperating (income)
expense |
|
(304) |
|
1,265 |
|
1,371 |
|
1,538 |
Earnings (loss) before income
taxes |
|
3,812 |
|
(1,325) |
|
7,717 |
|
(2,262) |
Income tax expense
(benefit) |
|
384 |
|
(95) |
|
901 |
|
(483) |
Net income (loss) |
$ |
3,428 |
$ |
(1,230) |
$ |
6,816 |
$ |
(1,779) |
|
|
|
|
|
Earnings (loss) per share
(basic) |
$ |
0.63 |
$ |
(0.23) |
$ |
1.26 |
$ |
(0.33) |
Earnings (loss) per share
(diluted) |
|
0.63 |
|
(0.23) |
|
1.25 |
|
(0.33) |
|
|
|
|
|
Weighted average common shares
outstanding: |
|
|
|
|
Basic |
|
5,413 |
|
5,387 |
|
5,405 |
|
5,379 |
Diluted |
|
5,471 |
|
5,387 |
|
5,448 |
|
5,379 |
Consolidated Condensed Balance Sheets |
|
(Amounts in thousands) |
September 30, 2024 |
March 31, 2024 |
Cash and cash equivalents |
$ |
24,337 |
$ |
28,214 |
Other current assets |
|
83,641 |
|
81,138 |
Total current assets |
|
107,978 |
|
109,352 |
Noncurrent assets |
|
346,120 |
|
337,444 |
Total assets |
$ |
454,098 |
$ |
446,796 |
|
|
|
Liabilities |
$ |
292,647 |
$ |
301,403 |
Stockholders’ equity |
|
161,451 |
|
145,393 |
Total liabilities and stockholders’ equity |
$ |
454,098 |
$ |
446,796 |
Reconciliation of Non-GAAP Measures |
(Unaudited) |
|
GAAP Operating Income (Loss) to Non-GAAP Adjusted Operating
Income (“AOI”) |
|
(Amounts in thousands, except per share data) |
Three Months EndedSeptember
30, |
Six Months EndedSeptember
30, |
|
2024 |
2023 |
2024 |
2023 |
Operating income (loss) (GAAP) |
$ |
3,508 |
$ |
(60) |
$ |
9,088 |
$ |
(724) |
Amortization of intangible assets |
|
4,550 |
|
7,185 |
|
8,611 |
|
14,405 |
Stock-based compensation expense |
|
3,837 |
|
3,183 |
|
6,765 |
|
6,151 |
Depreciation expense |
|
1,518 |
|
911 |
|
2,922 |
|
1,825 |
AOI (non-GAAP) |
$ |
13,413 |
$ |
11,219 |
$ |
27,386 |
$ |
21,657 |
|
|
|
|
|
Unusual items – before tax |
|
|
|
|
Non-cash GKE inventory step-up¹ |
$ |
454 |
$ |
-- |
$ |
1,232 |
$ |
-- |
GKE integration costs² |
|
485 |
|
-- |
|
1,075 |
|
-- |
GKE acquisition costs³ |
|
-- |
|
505 |
|
-- |
|
505 |
Restructuring costs |
|
-- |
|
350 |
|
-- |
|
350 |
Total impact of unusual items on AOI – before tax |
$ |
939 |
$ |
855 |
$ |
2,307 |
$ |
855 |
|
|
|
|
|
AOI excluding unusual items (non-GAAP) |
$ |
14,352 |
$ |
12,074 |
$ |
29,693 |
$ |
22,512 |
|
|
|
|
|
AOI per share – basic (non-GAAP) |
$ |
2.48 |
$ |
2.08 |
$ |
5.07 |
$ |
4.03 |
AOI per share – diluted (non-GAAP) |
|
2.45 |
|
2.08 |
|
5.03 |
|
4.03 |
|
|
|
|
|
AOI excluding unusual items per share – basic (non -GAAP) |
|
2.65 |
|
2.24 |
|
5.49 |
|
4.19 |
AOI excluding unusual items per share – diluted (non-GAAP) |
|
2.62 |
|
2.24 |
|
5.45 |
|
4.19 |
|
|
|
|
|
Weighted average common shares outstanding: |
|
|
|
|
Basic |
|
5,413 |
|
5,387 |
|
5,405 |
|
5,379 |
Diluted |
|
5,471 |
|
5,387 |
|
5,448 |
|
5,379 |
|
¹ Non-cash cost of revenues expense associated with the step up to
fair value of GKE inventory due to application of purchase
accounting |
² GKE integration costs primarily consist of consulting costs for
the integration of the acquiree, including the implementation of
the enterprise resource planning tool. |
³ GKE acquisition costs primarily consist of legal services related
to the stock purchase agreement, professional services for due
diligence procedures and quality of earnings report and various
other consultants |
|
Organic and Core Organic Revenues Growth
(Unaudited)
|
Three Months EndedSeptember 30, 2024 |
Six Months EndedSeptember 30, 2024 |
Total revenues
growth |
8.8% |
11.7% |
Impact of acquisitions |
(11.0)% |
(11.6)% |
Organic revenues
growth(non-GAAP) |
(2.2)% |
0.1% |
Currency translation |
(0.6)% |
(0.1)% |
Core organic revenues
growth(non-GAAP) |
(2.8)% |
0.0% |
|
|
|
Supplemental Information Regarding Non-GAAP Financial
Measures
In addition to the financial measures prepared in accordance
with generally accepted accounting principles (GAAP), we provide
non-GAAP adjusted operating income, non-GAAP adjusted operating
income per share amounts, non-GAAP adjusted operating income
excluding unusual items, non-GAAP adjusted operating income
excluding unusual items per share amounts, non-GAAP organic
revenues growth, and non-GAAP core organic revenues growth in order
to provide meaningful supplemental information regarding our
operational performance. We believe that the use of these non-GAAP
financial measures, in addition to GAAP financial measures, helps
investors to gain a better understanding of our operating results,
consistent with how management measures and forecasts its operating
performance, especially when comparing such results to previous
periods and to the performance of our competitors. Such measures
are also used by management in their financial and operating
decision-making and for compensation purposes. 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 GAAP and
non-GAAP results.
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 acquired in a business combination, stock-based
compensation, depreciation and impairment of goodwill and
long-lived assets. To calculate adjusted operating income, we
exclude, as applicable:
- Impairments of long-lived assets as such charges are outside of
our normal operations and in most cases are difficult to accurately
forecast.
- Stock-based compensation expense as it is a non-cash charge and
costs calculated for this expense vary in accordance with the stock
price on the date of grant.
- Depreciation expense as it is a non-cash charge.
- The expense associated with the amortization of
acquisition-related intangible assets as a significant portion of
the purchase price for acquisitions may be allocated to intangible
assets that have lives of up to 20 years. Exclusion of amortization
expense allows comparisons of operating results that are consistent
over time for both our newly acquired and long-held businesses and
with both acquisitive and non-acquisitive peer companies.
The non-GAAP measures of adjusted operating income and adjusted
operating income per share presented in the reconciliation above
are defined as Adjusted Operating Income less unusual items that
are not on-going and are related to a specific transaction. We
exclude these unusual items as they are outside of normal
operations and are not on-going.
Our management recognizes that items such as amortization of
intangible assets, stock-based compensation expense, depreciation
expense and impairment losses on goodwill and long-lived assets 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 on the GAAP
consolidated statements of operations. The non-GAAP numbers focus
instead on 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. Our non-GAAP
information may be different from the non-GAAP information provided
by other companies.
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