Atrion Reports Second Quarter 2024 Results

Rhea-AI Summary

Atrion (NASDAQ: ATRI) reported its Q2 2024 results, showing revenue growth of 11% to $48.8 million. However, operating income decreased significantly to $0.5 million, largely due to a $5.0 million accrual for acquisition-related expenses. Excluding this accrual, adjusted operating income was $5.5 million, down 25% year-over-year. Diluted EPS fell to $0.23 from $3.73 in Q2 2023.

The company saw strong growth in MPS consoles (22%) and disposables (21%), along with recovery in fluid delivery products. Atrion continued to reduce inventories, which negatively impacted operating income but resulted in an 18% inventory reduction since December 31, 2023. As of June 30, 2024, Atrion remained debt-free with $23.2 million in cash and investments.

Positive

• Revenue growth of 11% to $48.8 million in Q2 2024
• MPS consoles sales up 22% and MPS disposables sales up 21%
• Recovery in fluid delivery products with double-digit revenue increases in certain product families
• 18% reduction in inventory levels since December 31, 2023
• Debt-free status maintained with $23.2 million in cash and investments

Negative

• Operating income decreased to $0.5 million from $7.4 million in Q2 2023
• Diluted EPS fell to $0.23 from $3.73 in Q2 2023
• Adjusted operating income (excluding merger accrual) down 25% year-over-year
• Halted production lines to reduce inventories, resulting in under-absorption of overhead
• $5.0 million accrual for acquisition-related expenses impacting operating income

Insights

Financial Analyst

Atrion's Q2 2024 results present a mixed picture. While revenues grew 11% to $48.8 million, operating income and net income declined significantly. The $5 million merger-related expense accrual heavily impacted profitability. Adjusting for this, operating income was still down 25%, indicating underlying challenges.

The 22% growth in MPS consoles and 21% in MPS disposables is encouraging. However, the deliberate production halt to reduce inventories, while necessary, negatively impacted margins. The 10% quarter-over-quarter and 18% year-to-date inventory reduction shows progress in addressing supply chain issues.

With $23.2 million in cash and investments and no debt, Atrion maintains a strong balance sheet. However, the sharp decline in EPS from $3.73 to $0.23 is concerning and warrants close monitoring of future quarters.

Supply Chain Expert

Atrion's Q2 results reflect ongoing supply chain challenges and strategic inventory management. The company's decision to halt some fluid delivery production lines is a calculated move to address inventory buildup from 2023's supply chain disruptions. This approach, while impacting short-term profitability through under-absorption of overhead, is important for long-term operational efficiency.

The 18% reduction in inventory levels since December 2023 indicates effective inventory management. However, the continued need for production halts suggests that supply chain normalization is still in progress. The recovery in fluid delivery products, with some families showing double-digit growth, is a positive sign of market demand returning to pre-disruption levels.

Moving forward, Atrion should focus on optimizing its production scheduling and forecasting to better align with demand patterns, potentially reducing the need for such drastic inventory corrections in the future.

Merger and Acquisition Specialist

The $5 million accrual for merger-related expenses significantly impacted Atrion's Q2 2024 results. This accrual is related to the announced merger with Nordson on May 28, 2024. While such expenses are common in M&A activities, their magnitude relative to Atrion's operating income is substantial.

Investors should note that merger-related expenses often continue beyond the initial announcement, potentially affecting future quarters. However, the strategic benefits of the Nordson merger, including potential synergies and market expansion, could outweigh these short-term costs.

The merger's progress and its impact on Atrion's operations and financials will be critical to monitor in upcoming quarters. Shareholders should pay close attention to integration plans, potential restructuring costs and any updates on expected synergies or cost savings from the merger.

ALLEN, Texas, Aug. 08, 2024 (GLOBE NEWSWIRE) -- Atrion Corporation (NASDAQ: ATRI) today announced its results for the second quarter ended June 30, 2024.

Revenues for the second quarter of 2024 totaled $48.8 million compared to $43.8 million for the same period in 2023. For the just ended quarter, operating income was $0.5 million, down $6.8 million from the comparable 2023 period, and net income was $0.4 million, down $6.2 million from the same period in 2023. Operating income was significantly impacted by the accrual of $5.0 million in acquisition-related expenses discussed below. Second quarter 2024 diluted earnings per share were $0.23 compared to $3.73 for the second quarter of 2023.

Commenting on the results for the second quarter of 2024 compared to the prior year period, David Battat, President and CEO, stated, “We were pleased to see strong revenue growth of 11%. Adjusting for the accrual of expenses relating to the merger with Nordson Corporation announced May 28, 2024, operating income was $5.5 million, down 25% from the prior year period. Our MPS consoles showed particularly strong growth, with sales up 22% and MPS disposables sales up 21%. We saw continued recovery in our fluid delivery products, with certain product families showing double-digit revenue increases compared to the prior year period. We continued to halt some fluid delivery production lines to reduce inventories accumulated as the result of the supply chain disruptions in 2023. While this halt resulted in under-absorption of overhead and negatively impacted operating income, the value of inventories declined 10% from the first to the second quarters of this year and are 18% lower than they were December 31, 2023.”

Mr. Battat concluded, “As of June 30, 2024, cash and short- and long-term investments totaled $23.2 million. We remain debt free.”

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

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 June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Revenues	$	48,773			$	43,838			$	96,107			$	83,831
Cost of goods sold		32,926				26,584				67,909				51,496
Gross profit		15,847				17,254				28,198				32,335
Operating expenses		15,313				9,875				24,522				20,486
Operating income		534				7,379				3,676				11,849
Interest and dividend income		388				127				544				367
Other investment income (loss)		(542	)			98				(651	)			(623	)
Other income		23				29				37				39
Interest expense		--				(27	)			--				(27	)
Income before income taxes		403				7,606				3,606				11,605
Income tax provision		(1	)			(1,043	)			(412	)			(1,557	)
Net income	$	402			$	6,563			$	3,194			$	10,048
Income per basic share	$	0.23			$	3.73			$	1.81			$	5.71
Weighted average basic shares outstanding		1,761				1,760				1,761				1,761
Income per diluted share	$	0.23			$	3.73			$	1.81			$	5.70
Weighted average diluted shares outstanding		1,763				1,761				1,762				1,762

ATRION CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands)
	June 30,			Dec 31,
ASSETS	2024			2023
	(Unaudited)
Current assets:
Cash and cash equivalents	$	11,462		$	3,565
Short-term investments		6,124			2,691
Total cash and short-term investments		17,586			6,256
Accounts receivable		26,555			23,029
Inventories		67,641			82,307
Prepaid expenses and other		7,480			3,173
Total current assets		119,262			114,765
Long-term investments		5,624			8,165
Property, plant and equipment, net		122,905			125,347
Other assets		12,563			12,548
	$	260,354		$	260,825
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities		17,537			12,621
Other non-current liabilities		3,944			5,315
Stockholders’ equity		238,873			242,889
	$	260,354		$	260,825

ATRION CORPORATION NON-GAAP FINANCIAL INFORMATION (In thousands)

This release includes a reference to non-GAAP operating income that excludes merger-related expenses accrued in the second quarter of 2024. This financial measure is not prepared in accordance with GAAP. The operating income excluding the merger accrual is calculated by increasing operating income by the amount of the merger-related expenses.

We believe that this non-GAAP measure provides insight into our operating income performance. However, this non-GAAP financial measure may not be comparable to similarly titled non-GAAP financial measures used by other companies. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for GAAP financial measures. and are supplemental to the comparable GAAP measures.

Reconciliation to the most directly comparable GAAP measure is provided in the table below.

	Three Months Ended June 30,
	2024			2023			Change
Revenues	$	48,773		$	43,838		11	%
Cost of goods sold		32,926			26,584
Gross profit		15,847			17,254
Operating income		534			7,379
Add: merger accrual		5,000			-
Operating income excluding merger accrual		5,534			7,379		(25	%)

FAQ

What was Atrion's revenue for Q2 2024?

Atrion (ATRI) reported revenue of $48.8 million for Q2 2024, representing an 11% increase from $43.8 million in Q2 2023.

How did Atrion's earnings per share (EPS) change in Q2 2024?

Atrion's (ATRI) diluted earnings per share (EPS) decreased to $0.23 in Q2 2024, compared to $3.73 in Q2 2023.

What impacted Atrion's operating income in Q2 2024?

Atrion's (ATRI) operating income was significantly impacted by a $5.0 million accrual for acquisition-related expenses related to the merger with Nordson announced on May 28, 2024.

How much cash and investments did Atrion have as of June 30, 2024?

As of June 30, 2024, Atrion (ATRI) reported $23.2 million in total cash and short-term and long-term investments.

What was the performance of Atrion's MPS product line in Q2 2024?

Atrion (ATRI) reported strong growth in its MPS product line, with MPS console sales up 22% and MPS disposables sales up 21% in Q2 2024 compared to the prior year period.