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Atrion Reports Fourth Quarter And Full Year 2023 Results

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Atrion Corporation (NASDAQ: ATRI) reported its Q4 2023 results with revenues of $43.6 million, up $729 thousand, operating income of $6.7 million, down $2.1 million, and net income of $6.4 million, down $1.9 million. Full year 2023 revenues were $169.3 million, down $14.2 million, with net income at $19.4 million, down $15.6 million. The company faced challenges due to global supply chain issues impacting production and sales.
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  • None.
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  • Operating income decreased in Q4 2023 compared to the same period in 2022.
  • Net income declined significantly in both Q4 2023 and full year 2023 compared to the previous year.
  • The company's operating margin dropped to 13.3% in 2023, a significant decrease from the industry-leading 20% in previous years.
  • Global supply chain disruptions led to under-absorption of labor costs as sales slowed down.

Insights

From a financial standpoint, Atrion Corporation's Q4 and full-year 2023 results indicate a mixed performance, with a slight uptick in quarterly sales but a significant decline in annual revenue and net income. This divergence suggests that while the company may be seeing some recovery, the overall yearly performance was heavily impacted by external factors, specifically global supply chain issues. The reduction in operating margin to 13.3% from a consistent 20% benchmark is a critical point for investors, as it reflects a lower profitability that could affect the company's valuation.

Investors should note the under-absorption of labor costs due to slowed sales, which indicates fixed costs are not being effectively leveraged against revenue, pressuring profit margins. The mention of electronic component shortages impacting the MPS 3 cardiac surgery consoles is significant as it highlights the company's vulnerability to supply chain disruptions and how these can directly affect product availability and sales.

Furthermore, the change in customer ordering patterns, with OEM customers reducing orders after stockpiling in the previous year, demonstrates the challenges in forecasting demand in volatile markets. This could lead to more conservative future revenue projections and potential adjustments in inventory management strategies.

The supply chain dynamics described by Atrion's CEO underscore the broader challenges faced by many companies in the healthcare equipment sector. The electronic component shortages that affected Atrion's ability to meet customer demand for its cardiac surgery consoles are indicative of the ripple effects of global supply chain disruptions. This situation highlights the importance of supply chain resilience and the need for robust risk management strategies.

For Atrion, the shift in OEM customer behavior from over-ordering to 'right-sizing' inventories reflects a normalization process as supply chain pressures ease. However, it also suggests that Atrion may need to reassess its supply chain strategy to better adapt to changing market conditions and customer behaviors. The company's future success will likely depend on its ability to forecast demand more accurately and manage inventory levels to prevent overproduction and under-absorption scenarios.

Investors and stakeholders should be aware of the potential long-term implications, such as the need for Atrion to invest in supply chain optimization, which could include diversifying suppliers, increasing inventory buffers, or implementing more flexible manufacturing systems.

The healthcare equipment industry is highly competitive and Atrion's performance must be contextualized within this landscape. The 2% sales increase in Q4 suggests a potential stabilization in a segment of their market, but the significant year-over-year decline in net income and operating margin presents a concern for market competitiveness. It's important to analyze customer trends and market demand to understand the longer-term outlook for Atrion's product lines, especially the fluid delivery and cardiovascular products mentioned.

Given the company's historical performance and industry-leading operating margins, the current decline may affect investor perceptions and the company's market position. The competitive analysis should focus on how Atrion's challenges with supply chain and production levels compare to its peers. If competitors have managed these issues more effectively, Atrion could be at a disadvantage in terms of market share and pricing power.

Understanding the broader market response to global supply chain disruptions and inventory adjustments will be critical for predicting Atrion's recovery trajectory. Stakeholders should monitor industry trends, such as technological advancements and regulatory changes, that could influence product demand and the company's ability to adapt to market needs.

ALLEN, Texas, Feb. 29, 2024 (GLOBE NEWSWIRE) -- Atrion Corporation (NASDAQ: ATRI) today announced its results for the fourth quarter ended December 31, 2023 and the full year 2023.

For the fourth quarter of 2023 compared to the fourth quarter of 2022, revenues were $43.6 million, up $729 thousand, operating income was $6.7 million, down $2.1 million, and net income was $6.4 million, down $1.9 million. Fourth quarter 2023 diluted earnings per share were $3.65 compared to $4.70 for the fourth quarter of 2022.

Commenting on 2023 quarterly results compared to the comparable 2022 periods, David Battat, President and CEO, stated, “Looking at the 2023 and comparable 2022 quarters sequentially, we saw a continuous easing of revenue declines throughout the year, culminating with a 2% increase in sales in the fourth quarter. Operating income remained weighed down by lower production levels of fluid delivery and certain cardiovascular products.”

For the full year 2023 compared to the prior year, revenues were $169.3 million, down $14.2 million, net income was $19.4 million, down $15.6 million, and diluted earnings per share were $11.02 compared to $19.56. Mr. Battat observed, “2023 was a difficult year for the Company and our stockholders, with revenues down 8% and net income down 45%. Our operating margin for the year was 13.3%, the first time in 17 years we did not finish at or above an industry leading 20%. The confluence of two global supply chain issues greatly impacted our 2023 results. During the year, due to shortages of electronic components used in our MPS 3 cardiac surgery consoles, we were unable to meet all customer demand. Additionally, in 2022, our OEM customers placed orders with us in excess of their expected near-term needs to hedge against the risk of long-term global supply chain disruptions, leading to our record levels of revenues and operating income that year. As the global supply disruptions eased toward the end of 2022, these customers elected to right-size their inventories and greatly reduced their orders in 2023. The primary driver for the decline in operating margin was under-absorption of labor as sales slowed. Although we are always mindful about our operating expenses, we kept our teams intact to preserve their skills, reward their loyalty, and ensure that we had the talent necessary to respond to demand in 2024 and beyond.”

Mr. Battat added, “Our 2023 results do not reflect our efforts, initiatives, or new ideas. Against a challenging backdrop, our teams continued the hard work to ensure our future growth. Our MPS 3 console production is now at record levels to meet strong demand. Although 2023 OEM sales were deferred, we did not lose any major customers – in fact, every multi-year supply agreement that expired in 2023 was renewed for additional multi-year terms. More importantly, in 2023 our new product pipeline grew faster than at any point in our history. The OEM side of our business saw the launch of several new partnerships. We estimate that these partnerships alone will add tens of millions of dollars in new revenue by 2030—and this is in addition to organic growth of existing and new products already in our pipeline. Our factory expansion completed in 2023 provides the specialized infrastructure that was required to compete for these projects.”

Mr. Battat concluded, “For 2024, we expect a high single digit increase in revenue, returning us to, or near, the record level reached in 2022 as we introduce new technologies to the market and current customers achieve rightsized inventories. Increases in operating income will be challenging in the first half of the year as we fill orders from our own inventory and, as a result, under-absorb overhead. Operating income should improve in the second half of the year as our inventory depletion will require a resumption of idled production lines. We ended 2023 debt free and with cash and short- and long-term investments totaling $14.4 million.”

Atrion Corporation develops and manufactures products primarily for medical applications. The Company’s website is www.atrioncorp.com

Statements in this press release that are forward looking are based upon current expectations and actual results or future events may differ materially.  Such statements include, but are not limited to, Atrion's expectations regarding revenue from new partnerships, organic growth of existing and new products in the Company’s pipeline, and 2024 revenues and operating income levels. Words such as "expects," "believes," "anticipates," "forecasts," "intends," "should", "plans," "will" and variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements contained herein involve numerous risks and uncertainties, and there are a number of factors that could cause actual results or future events to differ materially, including, but not limited to, the following: the risk that COVID-19 leads to further material delays and cancellations of, or reduced demand for, procedures in which our products are utilized; curtailed or delayed capital spending by hospitals and other healthcare providers; disruption to our supply chain; closures of our facilities; delays in training; delays in gathering clinical evidence; diversion of management and other resources to respond to COVID-19; the impact of global and regional economic and credit market conditions on healthcare spending; the risk that COVID-19 further disrupts local economies and causes economies in our key markets to enter prolonged recessions; changing economic, market and business conditions; acts of war or terrorism; the effects of governmental regulation; the impact of competition and new technologies; slower-than-anticipated introduction of new products or implementation of marketing strategies; implementation of new manufacturing processes or implementation of new information systems; our ability to protect our intellectual property; changes in the prices of raw materials; changes in product mix; intellectual property and product liability claims and product recalls; the ability to attract and retain qualified personnel; and the loss of, or any material reduction in sales to, any significant customers. In addition, assumptions relating to budgeting, marketing, product development and other management decisions are subjective in many respects and thus susceptible to interpretations and periodic review which may cause us to alter our marketing, capital expenditures or other budgets, which in turn may affect our results of operations and financial condition. The foregoing list of factors is not exclusive, and other factors are set forth in the Company's filings with the Securities and Exchange Commission. The forward-looking statements in this press release are made as of the date hereof, and we do not undertake any obligation, and disclaim any duty, to supplement, update or revise such statements, whether as a result of subsequent events, changed expectations or otherwise, except as required by applicable law.    

Contact: Cindy Ferguson
Vice President and Chief Financial Officer
(972) 390-9800


ATRION CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
 
 Three Months Ended
December 31,
 Twelve Months Ended
December 31,
  2023   2022   2023   2022 
Revenues$43,584  $42,855  $169,326  $183,506 
Cost of goods sold 27,267   24,681   106,938   107,602 
Gross profit 16,317   18,174   62,388   75,904 
Operating expenses 9,653   9,369   39,809   36,217 
Operating income 6,664   8,805   22,579   39,687 
        
Interest and dividend income 119   349   806   988 
Other investment income (loss) 505   (366)  (900)  (150)
Other income --   --   39   92 
Interest expense (25)  --   (149)  -- 
Income before income taxes 7,263   8,788   22,375   40,617 
Income tax provision (839)  (466)  (2,964)  (5,609)
Net income$6,424  $8,322  $19,411  $35,008 
        
Income per basic share$3.65  $4.70  $11.02  $19.59 
        
Weighted average basic shares outstanding 1,760   1,770   1,761   1,787 
        
        
Income per diluted share$3.65  $4.70  $11.02  $19.56 
        
Weighted average diluted shares outstanding 1,761   1,771   1,761   1,790 

        


ATRION CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
 December 31, December 31,
ASSETS 2023  2022
    
Current assets:   
Cash and cash equivalents$3,565 $4,731
Short-term investments 2,691  21,152
Total cash and short-term investments 6,256  25,883
Accounts receivable 23,029  23,951
Inventories 82,307  65,793
Prepaid expenses and other 3,173  3,770
Total current assets 114,765  119,397
      
Long-term investments 8,165  8,669
      
Property, plant and equipment, net 125,347  123,754
Other assets 12,548  12,892
    
 $260,825 $264,712
    
    
LIABILITIES AND STOCKHOLDERS’ EQUITY   
    
Current liabilities 12,621  18,098
Line of credit --  --
Other non-current liabilities 5,315  7,073
Stockholders’ equity 242,889  239,541
    
 $260,825 $264,712

FAQ

What were Atrion Corporation's (ATRI) revenues for Q4 2023?

Atrion Corporation reported revenues of $43.6 million for Q4 2023.

How did Atrion Corporation's (ATRI) operating income change in Q4 2023 compared to Q4 2022?

Atrion Corporation's operating income decreased by $2.1 million in Q4 2023 compared to Q4 2022.

What was Atrion Corporation's (ATRI) net income for the full year 2023?

Atrion Corporation's net income for the full year 2023 was $19.4 million, down $15.6 million from the previous year.

What factor contributed to the decline in Atrion Corporation's (ATRI) operating margin in 2023?

Global supply chain disruptions and under-absorption of labor costs due to slowed sales contributed to the decline in Atrion Corporation's operating margin in 2023.

Atrion Corp

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Medical Instruments & Supplies
Surgical & Medical Instruments & Apparatus
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United States of America
ALLEN