Lakewood, Colorado, June 5, 2018 – Mesa Laboratories, Inc. (NASDAQ:MLAB) (we, us, our, “Mesa” or the “Company”) today reported record revenue and adjusted operating income for both the fourth quarter and Fiscal Year 2018.
Highlights for the quarter ended March 31, 2018 as compared to last year:
• Revenues increased 11 percent
• Net income increased 17 percent
• Non-GAAP adjusted operating income1 increased 23 percent
Revenues for the fourth quarter increased 11 percent to $26,881,000 as compared to $24,299,000 for the same quarter last year. Operating income for the fourth quarter increased 24 percent to $6,641,000 as compared to $5,340,000 for the same quarter last year. Net income for the fourth quarter increased 17 percent to $4,254,000 or $1.08 per diluted share of common stock as compared to $3,643,000 or $0.94 per diluted share of common stock in the same quarter last year. Operating and net income for the fourth quarter ended March 31, 2017 were impacted by unusual items consisting of a $268,000 expense, before tax, related to relocation costs associated with the consolidation of our current Sterilization and Disinfection Control facilities into our new building in Bozeman, Montana and a $580,000 expense, before tax, related to a reserve for slow moving inventory associated with a specific model of our Cold Chain Monitoring sensors.
Revenues for Fiscal Year 2018 increased three percent to $96,179,000 as compared to $93,665,000 last year. Operating income for Fiscal Year 2018 decreased 87 percent to $2,183,000 as compared to $16,313,000 last year. Net (loss) income for Fiscal Year 2018 decreased 126 percent to $(2,962,000) or $(0.79) per diluted share of common stock as compared to $11,183,000 or $2.91 per diluted share of common stock last year. Operating and net loss for Fiscal Year 2018 were impacted by unusual items consisting of $13,819,000, $1,916,000 and $842,000 expenses, before tax, related to the impairment of goodwill, reserve for Cold Chain Monitoring Division inventory and the Bozeman relocation costs discussed above, respectively. Net loss for Fiscal Year 2018 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 originally forecasted at the time the earn-out liability was booked in purchase accounting. Operating and net income for Fiscal Year 2017 were impacted by the same Bozeman relocation expenses ($725,000, before tax) and inventory reserve described above. Net income for Fiscal Year 2017 was also impacted by an unusual item consisting of a $450,000 expense (included in other expense, net), before tax, related to an increase in the same PCD earn-out liability discussed above.
On a non-GAAP basis, adjusted operating income (which excludes the non-cash impact of amortization of intangible assets, stock-based compensation and impairment losses on goodwill) for the fourth quarter increased 23 percent to $8,757,000 or $2.23 per diluted share of common stock as compared to $7,128,000 or $1.84 per diluted share of common stock for the same quarter last year. Adjusted operating income for Fiscal Year 2018 increased two percent to $24,603,000 or $6.53 per diluted share of common stock as compared to $24,174,000 or $6.29 per diluted share of common stock last year. Except for the impairment loss, adjusted operating income for the three months and years ended March 31, 2018 and 2017, were impacted by the same operating income items noted above.
“We are pleased with financial progress across the business this quarter and have made significant strides in improving the operating effectiveness of the company,” said Gary Owens, President and Chief Executive Officer. “Our Lean-based operating system, The Mesa Way!, is showing initial Commercial progress with increased revenues in all of our divisions for the fourth quarter (as compared to the same quarter last year), and, excluding the Cold Chain Packaging division, revenues up five and a half percent for the full year. The Mesa Way! continued to have a strong operational impact in the fourth quarter with inventories down 20 percent for the year
(excluding the reserve for Cold Chain Monitoring inventory noted above), on time deliveries to customers improving and gross profit margin percentage increasing 210 basis points when compared to the same quarter of Fiscal Year 2017.
• Sterilization and Disinfection Control (45 percent of revenues in Fiscal Year 2018), delivered strong growth with revenues up 13 percent in the quarter and 12 percent for the year versus the corresponding periods of Fiscal Year 2017. Fourth quarter gross profit margin percentage was essentially flat as compared to the same quarter in the prior year. The consolidation of operations into Bozeman, Montana remains on track and unusual
expenses associated with the relocation were substantially completed in the fourth quarter.
• Instruments revenues (35 percent of revenues in Fiscal Year 2018) bounced back strongly in the fourth quarter, increasing 10 percent versus the same quarter of Fiscal Year 2017 and enabling full year revenues to only decline one percent versus Fiscal Year 2017. Gross profit margin percentage declined 330 basis points in the quarter versus the same quarter prior year due to product and customer mix.
• Cold Chain Monitoring revenues (14 percent of revenues in Fiscal Year 2018) were up one percent in the quarter and three percent for the full year. Gross profit margin percentage in the quarter expanded significantly year over year to 50 percent, the strongest quarter of the year.
• Cold Chain Packaging (6 percent of revenues in Fiscal Year 2018) completed the inventory burn down at the division’s largest customer as expected, delivering increased revenues of 22 percent for the quarter, which was slightly better than expected. Full year revenues were down 27 percent year over year. Gross profit margin percentage in the quarter increased 140 basis points versus the same period in Fiscal Year 2017. Despite the
return to growth, the business remains highly exposed to flu vaccine related seasonality, resulting in fourth quarter revenues well below what is required to significantly improve division gross margin percentages.
During Fiscal Year 2018 we continued our sustainable growth strategy, delivering two percent organic growth and three percent inorganic growth when excluding Cold Chain Packaging. We have also successfully launched The Mesa Way!, renewed our executive leadership team and are at the very end of our infrastructure consolidation of the Sterilization and Disinfection Control Division. We enter Fiscal Year 2019 as a stronger company ready to drive proactive organic growth, improve our operational execution and continue investment 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, stock-based compensation and impairment losses on goodwill. 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.
Read the full Financial Summary here.