Lakewood, Colorado, February 10, 2020 – Mesa Laboratories, Inc. (NASDAQ:MLAB)
(we, us, our, or “Mesa Labs”) today reported third quarter results for the three months
ended December 31, 2019.
Financial Results (amounts in thousands, except per share data)
In comparison to the same quarter in the prior year, third quarter revenues increased 19%
to $31,655, operating (loss) income decreased 356% to $(3,381) and net (loss) income
decreased 640% to $(4,630) or $(1.06) per diluted share of common stock. As detailed in
the Unusual Items table below, operating income for the three months ended December
31, 2019 and 2018 was impacted by unusual items totaling $8,636 and $3,669,
respectively. Excluding unusual items in both quarters, operating income would have
increased 5% to $5,255 as compared to the same quarter in the prior year.
For the nine months ended December 31, 2019, in comparison to the same period in the
prior year, revenues increased 9% to $83,479, operating income decreased 9% to $6,595
and net income decreased 50% to $3,029 or $0.69 per diluted share of common stock. As
detailed in the Unusual Items table below, operating income for the nine months ended
December 31, 2019 and 2018 was impacted by unusual items totaling $8,676 and $6,969,
respectively. Excluding unusual items for both nine-month periods, operating income
would have increased 8% to $15,271 as compared to the same nine-month period in the
prior year.
On a non-GAAP basis, in comparison to the same quarter in the prior year, third quarter
adjusted operating income1
(“AOI”) decreased 63% to $2,720 or $0.62 per diluted share
of common stock. In comparison to the same period in the prior year, adjusted operating
income for the nine months ended December 31, 2019 decreased 4% to $18,076 or $4.09
per diluted share of common stock. As detailed in the Unusual Items table below, AOI
for both the three and the nine months ended December 31, 2019 were impacted by
unusual items totaling $6,294 and $6,334, respectively while AOI for the nine months
ended December 31, 2018 was impacted by an unusual item totaling $3,330. Excluding
the unusual items for the third quarter and both the nine months ended December 31,
2019 and 2018, adjusted operating income would have increased 22% to $9,014 and 11%
to $24,410 for the three and nine months ended December 31, 2019, respectively as
compared to the same periods in the prior year.
Total revenues, excluding the Cold Chain Packaging division which we exited during the
quarter ended December 31, 2019 increased 28% and 14%, respectively, for the three and
nine months ended December 31, 2019. Organic revenues growth was 2% and 3%,
respectively ((5%) and (2%) including Packaging) for the quarter and nine months ended
December 31, 2019.
Division Performance
• Sterilization and Disinfection Control (37% of revenues in 3Q20) delivered lower
than desired total and organic growth equaling 1% for the quarter. However,
orders were strong as we built backlog in the quarter. Increased backlog was due
primarily to changing vendors for certain raw materials and the completion of
product level re-validation. All re-validation efforts were completed during the
quarter and as such, we expect to decrease the backlog during the fourth quarter.
Gross margin percentage increased 150 basis points primarily as a result of
operational efficiencies.
• Instruments (32% of revenues in 3Q20) had a solid quarter with organic revenues
growth of 2% and total growth of 7% driven by the acquisition of and strong
performance at IBP. Gross margin percentages expanded across nearly all
product lines enabling segment gross margin percentage to expand by 170 basis
points.
• Biopharmaceutical Development (18% of revenues in 3Q20) revenues and gross
margin percentage (excluding the impact of purchase accounting) performed in
line with expectations for the two months we owned Gyros Protein Technologies
Holding AB (“GPT”) in the quarter. We are still targeting between $37,000 to
$40,000 of revenues and gross margin percentages in the mid to high 60’s for the
first twelve months after the acquisition.
• Cold Chain Monitoring (13% of revenues in 3Q20) had a solid topline quarter
with revenues growth of 11% in total which included 6% organic growth. Gross
margin percentage, however, contracted by 910 basis points and as a result, we
are working to improve service utilization, mitigate sourcing cost increases, and
better align customer level pricing.
• Cold Chain Packaging (0% percent of revenues in 3Q20) was exited fully in the
quarter with revenues contracting by 89% while gross margin percentage
contracted by 210 basis points.
Executive Commentary
“Operating performance was steady in the third quarter with year over year organic
revenues growth of 2% while gross margin percentage held essentially flat when
excluding Packaging and Biopharmaceutical Development from both figures. Cold
Chain Monitoring revenues continued solid growth in the quarter, but we are not growing
profitability in line with revenues in the way we had planned, and as a result, Cold Chain
Monitoring execution will remain an area of focus,” said CEO Gary Owens.
“The integration of GPT and its execution was on plan for the quarter. After three
months together we are excited about GPT’s growth prospects, our ability to provide
innovative solutions to the Biopharmaceutical Development market, the impact that The
Mesa Way can have on enabling the division’s growth, and the opportunity it opens for
expansion in the future,” 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 expense and impairment losses on goodwill and long-lived assets. 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, 2019)
Consolidated Condensed Statements of Operations
(Unaudited)
(Amounts in thousands, except per share data) Three Months
Ended
December 31,
Nine Months
Ended
December 31,
2019 2018 2019 2018
Revenues $ 31,655 $ 26,682 $ 83,479 $ 76,689
Cost of revenues 16,978 11,048 37,187 31,387
Gross profit 14,677 15,634 46,292 45,302
Impairment loss on goodwill and long-lived assets 276 3,669 298 3,669
Other operating expenses 17,782 10,645 39,399 34,411
Operating (loss) income (3,381) 1,320 6,595 7,222
Non-operating expense, net 1,822 372 2,774 568
(Loss) earnings before income taxes (5,203) 948 3,821 6,654
Income tax (benefit) expense (573) 90 792 572
Net (loss) income $ (4,630) $ 858 $ 3,029 $ 6,082
Earnings (loss) per share (basic) $ (1.06) $ 0.22 $ 0.73 $ 1.58
Earnings (loss) per share (diluted) (1.06) 0.21 0.69 1.51
Weighted average common shares outstanding:
Basic 4,367 3,855 4,142 3,840
Diluted 4,367 4,045 4,418 4,037
Consolidated Condensed Balance Sheets
(Amounts in thousands)
December 31,
2019
(Unaudited)
March 31,
2019
Cash and cash equivalents $ 73,979 $ 10,185
Other current assets 46,724 23,438
Total current assets 120,703 33,623
Property, plant and equipment, net 22,352 22,225
Other assets 280,412 100,919
Total assets $ 423,467 $ 156,767
Liabilities $ 189,296 $ 45,456
Stockholders’ equity 234,171 111,311
Total liabilities and stockholders’ equity $ 423,467 $ 156,767
Reconciliation of Non-GAAP Measures
(Unaudited)
(Amounts in thousands, except per share data) Three Months
Ended
December 31,
Nine Months
Ended
December 31,
2019 2018 2019 2018
Operating (loss) income $ (3,381) $ 1,320 $ 6,595 $ 7,222
Amortization of intangible assets 2,565 1,716 5,895 5,418
Stock-based compensation expense 3,260 695 5,310 2,424
Impairment loss on goodwill and long-lived assets 276 3,669 276 3,669
Adjusted operating income $ 2,720 $ 7,400 $ 18,076 $ 18,733
Adjusted operating income per share (basic) $ 0.62 $ 1.92 $ 4.36 $ 4.88
Adjusted operating income per share (diluted) 0.62 1.83 4.09 4.64
Weighted average common shares outstanding:
Basic 4,367 3,855 4,142 3,840
Diluted 4,367 4,045 4,418 4,037
Detail of Unusual Items (Unaudited)
As discussed above, operating (loss) income and adjusted operating income have been
impacted by various unusual items during the three and nine months ended December 31,
2019 and 2018. The following table provides detail of such items and reconciles the
impact on operating income as reported under GAAP and non-GAAP adjusted operating
income. (Amounts in thousands.)
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, stock-based compensation and impairment
losses on goodwill and long-lived assets. We believe that excluding these non-cash
expenses provides the ability to better understand the operations of Mesa Labs.
Impact of unusual items on operating (loss) income
Three Months Ended
December 31,
Nine Months Ended
December 31,
2019 2018 2019 2018
Operating (loss) income as reported under GAAP $ (3,381) $ 1,320 $ 6,595 $ 7,222
Unusual items – before tax
Non-cash cost of revenues expense associated with the step up to fair value of
GPT inventory due to application of purchase accounting $ 5,134 $ — $ 5,134 $ —
Non-cash stock compensation expense true-up related to impact of GPT
acquisition on outstanding performance stock units 2,066 — 2,066 —
GPT acquisition costs 1,160 — 1,200 —
Non-cash impairment of goodwill and long-lived assets – packaging division 276 3,669 276 3,669
TCPA legal settlement — — — 3,300
Total Impact of unusual items on operating (loss) income – before tax 8,636 3,669 8,676 6,969
Operating income excluding unusual items $ 5,255 $ 4,989 $ 15,271 $ 14,191
Impact of unusual items on adjusted operating income
Three Months Ended
December 31,
Nine Months Ended
December 31,
2019 2018 2019 2018
Adjusted operating income as reported (non-GAAP) $ 2,720 $ 7,400 $ 18,076 $ 18,733
Unusual items – before tax
Non-cash cost of revenues expense associated with the step up to fair value of
GPT inventory due to application of purchase accounting $ 5,134 $ — $ 5,134 $ —
GPT acquisition costs 1,160 — 1,200 —
TCPA legal settlement — — — 3,330
Total impact of unusual items on adjusted operating income – before tax 6,294 — 6,334 3,330
Adjusted operating income excluding unusual items $ 9,014 $ 7,400 $ 24,410 $ 22,063
We provide non-GAAP adjusted operating income, non-GAAP adjusted operating
income per share amounts and adjusted operating income excluding unusual items 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, stockbased compensation expense and impairment losses on goodwill 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 operations. 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. Our non-GAAP
information may be different from the non-GAAP information provided by other
companies.
Forward Looking Statements
This press release may contain information that constitutes forward-looking statements.
Forward-looking statements are subject to risks and uncertainties that could cause actual
results to differ materially from our historical experience and present expectations or
projections. Generally, the words “expect,” “seek,” “anticipate,” “intend,” “plan,”
“believe,” “could,” “estimate,” “may,” “target,” “project,” and similar expressions
identify forward-looking statements. However, the absence of these words or similar
expressions does not mean that a statement is not forward-looking. Forward-looking
statements include statements relating to revenues and growth, operating results, profit
margin pressure, industry conditions, demand, competition, the effects of additional
actions taken to become more efficient or lower costs, risks related to the integration of
acquired businesses, changes in legal and regulatory matters, the ability to generate
additional cash flow, and any events or developments that we expect or anticipate will
occur in the future. Management believes that these forward-looking statements are
reasonable as and when made. Shareholders and other readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the date on
which they are made. We undertake no obligation to update publicly or revise any of the
forward-looking statements. These risks and uncertainties include, but are not limited to,
those described in our Annual Report on Form 10-K, as amended, for the year ended
March 31, 2019, and those included in our subsequent reports filed with the Securities
and Exchange Commission.
About Mesa Laboratories, Inc.
Mesa is a global technology innovator committed to solving some of the most critical
quality control 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, Biopharmaceutical
Development, Instruments and Cold Chain Monitoring) 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 the Company, please visit its website at www.mesalabs.com
CONTACT: Gary Owens.; President and CEO, or John Sakys; CFO, both of Mesa
Laboratories, Inc., +1-303-987-8000