Mesa Labs Announces Third Quarter Results
- Non-GAAP adjusted operating income excluding unusual items increased by 7.3% compared to the previous quarter
- The Calibration Solutions division experienced a 12.9% organic growth in revenues
- Despite the challenging operating environment, gross profit as a percentage of revenues increased by 210 bps for the quarter
- GKE acquisition contributed $3,837 to revenues, with the full benefit expected in the upcoming quarter
- Revenues decreased by 1.5% for the third fiscal quarter of 2024
- Operating income decreased by 102%
- Organic declines in revenues were seen in the Clinical Genomics and Biopharmaceutical Development divisions
Insights
The reported decrease in revenue and operating income for Mesa Laboratories, Inc. highlights a challenging quarter, with a 1.5% revenue decline and a 102% decrease in operating income year-over-year. This performance is particularly concerning given the company's position in the critical life science tools and quality control solutions sector, which typically enjoys robust demand due to its essential role in healthcare and research.
From a financial perspective, the sequential improvement in adjusted operating income (AOI) is a positive sign, suggesting some resilience in the face of adverse conditions. The acquisition of GKE seems to have contributed positively, as indicated by the sequential growth in AOI. However, the core organic revenue decline of 9% raises questions about the underlying strength of the company's core business segments, independent of acquisitions.
The stock market typically reacts to both revenue trends and profitability metrics. The mixed results presented—revenue decline combined with a sequential increase in AOI—may lead to volatile stock performance as investors weigh short-term challenges against potential long-term benefits from strategic acquisitions like GKE.
Examining the divisional performance, it is evident that Mesa Laboratories is facing sector-specific headwinds. The Biopharmaceutical Development and Clinical Genomics divisions experienced significant organic revenue declines, which the company attributes to reduced capital equipment placements and the economic slowdown in China. The Calibration Solutions division, however, showed notable growth, which could indicate a strategic pivot or a more resilient market segment.
Understanding the gross profit percentage, which increased despite revenue declines, is crucial. This metric improvement suggests effective cost management and a favorable product mix, which could be a sign of efficient operations capable of weathering downturns. Nonetheless, the reliance on a single acquisition for a substantial part of the revenue cushion could be a point of concern for long-term sustainability.
Investors and stakeholders should monitor the company's ability to integrate GKE effectively and realize synergies that can lead to sustained growth, especially in light of the economic uncertainties that the CEO alludes to.
The performance of Mesa Laboratories in the life science sector, particularly during economic slowdowns, is indicative of broader industry trends. The gross profit margin increase in the Sterilization and Disinfection Control division, despite a core organic decline, may reflect an increased demand for quality control in healthcare settings, which could be a result of heightened regulatory scrutiny or evolving industry standards.
The negative impact of China's anti-corruption initiatives on the Clinical Genomics division is a reminder of the geopolitical and regulatory risks inherent in the global medical industry. Companies operating in this space must navigate complex international landscapes, where regulatory changes can have immediate and profound impacts on business performance.
For stakeholders, the emphasis on conservative spending and the strategic acquisition of GKE suggests a cautious approach aimed at maintaining profitability during uncertain times. The ability of Mesa Laboratories to leverage GKE's chemical indicators and healthcare channels could be critical in offsetting declines in other divisions and maintaining a competitive edge in the sterilization and disinfection market.
LAKEWOOD, Colo., Feb. 05, 2024 (GLOBE NEWSWIRE) -- 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 third fiscal quarter (“3Q24”) ended December 31, 2023.
Third quarter FY 2024 compared to third quarter FY 2023:
- Revenues decreased
1.5% but increased0.6% vs 2Q24 - Non-GAAP core organic revenues3 decreased
9% - Operating income decreased
102% - Non-GAAP adjusted operating income1 excluding unusual items decreased
6.8% but increased7.3% vs 2Q24 - Non-GAAP adjusted operating income excluding unusual items as a percentage of revenues increased sequentially to
22.4%
Executive Commentary (amounts in thousands)
“Revenues of
“Profitability as measured by our primary metric of non-GAAP adjusted operating income (“AOI”) excluding unusual items came in at
“We were pleased to add GKE to our Sterilization & Disinfection Control division as their high-quality chemical indicators and healthcare channels are highly complementary to our traditional strengths in biological indicators and life science channels. Looking ahead, with ongoing economic uncertainty, we will be conservative in deploying any increases in operating expenses,” concluded Mr. Owens.
Financial Results (amounts in thousands, except per share data)
Total revenues were
As detailed in the Unusual Items table below, operating income for 3Q24 and 3Q23 was impacted by unusual items totaling
On a non-GAAP basis, core organic decline was
Division Performance
| | Revenues | Organic Revenues Growth2 | Core Organic Revenues Growth3 | |||||||||||||||||||||
| (Amounts in thousands) | Three Months Ended December 31, 2023 | Nine Months Ended December 31, 2023 | Three Months Ended December 31, 2023 | Nine Months Ended December 31, 2023 | Three Months Ended December 31, 2023 | Nine Months Ended December 31, 2023 | ||||||||||||||||||
| Sterilization and Disinfection Control | $ | 19,338 | $ | 52,345 | (4.8 | )% | 1.0 | % | (6.7 | )% | (0.6 | )% | ||||||||||||
| Clinical Genomics | 12,546 | 41,464 | (19.5 | )% | (14.6 | )% | (19.0 | )% | (13.1 | )% | ||||||||||||||
| Biopharmaceutical Development | 9,430 | 28,526 | (19.1 | )% | (18.2 | )% | (19.1 | )% | (17.4 | )% | ||||||||||||||
| Calibration Solutions | 12,159 | 34,948 | 12.9 | % | 8.6 | % | 12.9 | % | 8.7 | % | ||||||||||||||
| Total reportable segments | $ | 53,473 | $ | 157,283 | (8.6 | )% | (6.2 | )% | (9.0 | )% | (6.0 | )% | ||||||||||||
Sterilization and Disinfection Control (
Clinical Genomics (
Biopharmaceutical Development (
Calibration Solutions (
Use of Non-GAAP Financial Measures
Adjusted operating income, organic revenues growth and core organic revenues growth are non-GAAP measures that exclude or adjust for certain items, as detailed after the tables that accompany this press release under the heading “Supplemental Information Regarding Non-GAAP Financial Measures.” Reconciliations of GAAP to non-GAAP financial measures are provided in the tables that accompany this press release.
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 acquired in a business combination, stock-based compensation and impairment of goodwill and long-lived assets. A reconciliation between these non-GAAP measures and their GAAP counterparts is set forth below, along with additional information regarding their use.
2 Organic revenues growth, a non-GAAP measure, is reported revenues growth excluding the impact of acquisitions.
3 Core organic revenues growth, a non-GAAP measure, is reported revenues growth excluding the impact of acquisitions, currency translation and COVID related revenues.
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. 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. Any statements contained herein that are not statements of historical fact may be forward-looking statements, including statements 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 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; 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 lower 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; general economic, industry, and capital markets conditions; the timing of any of the foregoing; assumptions underlying any of the foregoing; and any other statements that address events or developments that Mesa intends or believes will or may occur in the future. Without limiting the foregoing, the words “expect,” “plan,” “seek,” “anticipate,” “intend,” “believe,” “could,” “should,” “estimate,” “target,” “may,” “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. These 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, that could cause our actual results to differ materially from those matters expressed or implied by these forward-looking statements. 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, 2023 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; CFO
1-303-987-8000
investors@mesalabs.com
Financial Summary (Unaudited except for the information as of March 31, 2023)
| Condensed Consolidated Statements of Income | ||||||||||||
| (Amounts in thousands, except per share data) | Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||
| Revenues | $ | 53,473 | $ | 54,287 | $ | 157,283 | $ | 163,489 | ||||
| Cost of revenues | 20,071 | 21,522 | 60,589 | 62,997 | ||||||||
| Gross profit | 33,402 | 32,765 | 96,694 | 100,492 | ||||||||
| Operating expenses | 33,469 | 29,363 | 97,485 | 97,689 | ||||||||
| Operating (loss) income | (67 | ) | 3,402 | (791 | ) | 2,803 | ||||||
| Nonoperating (income) expense | (2,013 | ) | 1,486 | (475 | ) | 2,915 | ||||||
| Earnings (loss) before income taxes | 1,946 | 1,916 | (316 | ) | (112 | ) | ||||||
| Income tax (benefit) expense | (170 | ) | 1,465 | (653 | ) | (431 | ) | |||||
| Net income | $ | 2,116 | $ | 451 | $ | 337 | $ | 319 | ||||
| Earnings per share (basic) | $ | 0.39 | $ | 0.08 | $ | 0.06 | $ | 0.06 | ||||
| Earnings per share (diluted) | 0.39 | 0.08 | 0.06 | 0.06 | ||||||||
| Weighted average common shares outstanding: | ||||||||||||
| Basic | 5,393 | 5,339 | 5,384 | 5,312 | ||||||||
| Diluted | 5,396 | 5,360 | 5,394 | 5,354 | ||||||||
| Consolidated Condensed Balance Sheets | ||||||
| (Amounts in thousands) | December 31, 2023 | March 31, 2023 | ||||
| Cash and cash equivalents | $ | 28,224 | $ | 32,910 | ||
| Other current assets | 90,131 | 86,065 | ||||
| Total current assets | 118,355 | 118,975 | ||||
| Property, plant and equipment, net | 31,775 | 28,149 | ||||
| Other assets | 591,639 | 514,708 | ||||
| Total assets | $ | 741,769 | $ | 661,832 | ||
| Liabilities | $ | 338,808 | $ | 268,352 | ||
| Stockholders’ equity | 402,961 | 393,480 | ||||
| Total liabilities and stockholders’ equity | $ | 741,769 | $ | 661,832 | ||
| Reconciliation of Non-GAAP Measures | ||||||||||||
| (Unaudited) | ||||||||||||
| (Amounts in thousands, except per share data) | Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||
| Operating (loss) income (GAAP) | $ | (67 | ) | $ | 3,402 | $ | (791 | ) | $ | 2,803 | ||
| Amortization of intangible assets | 7,975 | 7,147 | 22,380 | 21,573 | ||||||||
| Stock-based compensation expense | 2,993 | 2,056 | 9,144 | 9,859 | ||||||||
| Adjusted operating income (non-GAAP) | $ | 10,901 | $ | 12,605 | $ | 30,733 | $ | 34,235 | ||||
| Adjusted operating income per share (basic) | $ | 2.02 | $ | 2.36 | $ | 5.71 | $ | 6.44 | ||||
| Adjusted operating income per share (diluted) | $ | 2.02 | $ | 2.35 | $ | 5.70 | $ | 6.39 | ||||
| Weighted average common shares outstanding: | ||||||||||||
| Basic | 5,393 | 5,339 | 5,384 | 5,312 | ||||||||
| Diluted | 5,396 | 5,360 | 5,394 | 5,354 | ||||||||
| Organic and Core Organic Revenues Growth (Unaudited) | ||||||
| Three Months Ended December 31, 2023 | Nine Months Ended December 31, 2023 | |||||
| Total revenues growth | (1.5 | )% | (3.8 | )% | ||
| Impact of acquisitions | (7.1 | )% | (2.4 | )% | ||
| Organic revenues growth | (8.6 | )% | (6.2 | )% | ||
| Currency translation | (0.6 | )% | (0.1 | )% | ||
| COVID related revenues | 0.2 | % | 0.3 | % | ||
| Core organic revenues growth | (9.0 | )% | (6.0 | )% | ||
Detail of Unusual Items (Unaudited)
As discussed above, operating income and adjusted operating income were impacted by various unusual items during the three and nine months ended December 31, 2023 and 2022. 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.)
| Impact of unusual items on operating income | Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||
| Operating (loss) income (GAAP) | $ | (67 | ) | $ | 3,402 | $ | (791 | ) | $ | 2,803 | |||
| Unusual items – before tax | |||||||||||||
| Non-cash cost of revenues expense associated with the step up to fair value of GKE inventory due to application of purchase accounting | $ | 412 | $ | -- | $ | 412 | $ | -- | |||||
| GKE acquisition/integration costs | 770 | -- | 1,275 | -- | |||||||||
| Restructuring costs | (102 | ) | -- | 248 | -- | ||||||||
| Agena/Belyntic acquisition/integration costs | -- | 251 | -- | 874 | |||||||||
| Total Impact of unusual items on operating income – before tax | 1,080 | 251 | 1,935 | 874 | |||||||||
| Operating income excluding unusual items | $ | 1,013 | $ | 3,653 | $ | 1,144 | $ | 3,677 | |||||
| Impact of unusual items on adjusted operating income | Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||
| Adjusted operating income (non-GAAP) | $ | 10,901 | $ | 12,605 | $ | 30,733 | $ | 34,235 | |||||
| Unusual items – before tax | |||||||||||||
| Non-cash cost of revenues expense associated with the step up to fair value of GKE inventory due to application of purchase accounting | $ | 412 | $ | -- | $ | 412 | $ | -- | |||||
| GKE acquisition/integration costs | 770 | -- | 1,275 | -- | |||||||||
| Restructuring costs | (102 | ) | -- | 248 | -- | ||||||||
| Agena/Belyntic acquisition/integration costs | -- | 251 | -- | 874 | |||||||||
| Total impact of unusual items on adjusted operating income – before tax | 1,080 | 251 | 1,935 | 874 | |||||||||
| Adjusted operating income excluding unusual items | $ | 11,981 | $ | 12,856 | $ | 32,668 | $ | 35,109 | |||||
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, organic revenues growth, and 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 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.
- 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 the 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.
Our management recognizes that items such as amortization of intangible assets, stock-based compensation 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 upon the GAAP consolidated statements of income. 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.
FAQ
What was the percentage change in revenues for Mesa Laboratories for the third fiscal quarter of 2024?
How did the Sterilization and Disinfection Control division perform in the third quarter of 2024?
What was the impact of the GKE acquisition on Mesa Laboratories' revenues?
What was the percentage change in revenues for the Calibration Solutions division in the third quarter of 2024?
How did the Clinical Genomics division perform in the third quarter of 2024?
