Mesa Labs Announces Second Quarter Results
LAKEWOOD, Colo., Nov. 07, 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 second fiscal quarter ("2Q25") ended September 30, 2024 (amounts in thousands).
Second quarter FY 2025 compared to second quarter FY 2024:
Revenues increased 8.8%
Non-GAAP core organic revenues¹ decline was 2.8%
Operating income increased 5,947% to $3,508
Non-GAAP adjusted operating income excluding unusual items² increased 18.9% and was 24.8% as a percentage of revenues
We operate our business in four divisions: Sterilization and Disinfection Control ("SDC"), Clinical Genomics ("CG"), Biopharmaceutical Development ("BPD"), and Calibration Solutions ("CS").
Effective 4Q24 we changed our definition of non-GAAP adjusted operating income³ ("AOI") and non-GAAP adjusted operating income excluding unusual items to also exclude depreciation expense. Please see the reconciliation of those measures to GAAP operating income (loss) below. All prior periods have been restated to exclude depreciation expense from these non-GAAP measures.
Executive Commentary (amounts in thousands)
"The business continued its positive momentum in 2Q25 with sequential growth in orders and reductions in inventory and debt levels. Despite solid sequential order growth, sequential total revenues growth contracted by 0.6% primarily due to an increase in past due backlog in SDC which we expect to reduce over the next two quarters. Year over year core organic growth contracted by 2.8% due to shipment timing in SDC as well as year over year headwinds in China which started to impact our CG division in 3Q24. Profitability in our preferred metric of AOI margin percentage excluding unusual items of 24.8% reflected our ongoing leverage of the Mesa Way, our Lean approach to process improvement and productivity growth. From a balance sheet perspective, solid profitability and another step up in inventory turns enabled us to repay $7,438 in debt during the second quarter which reduced our total Net Leverage Ratio* to 3.26. We remain committed to drive this ratio down below 3.0x" said Gary Owens, Chief Executive Officer of Mesa.
"Overall revenues of $57,833 increased 8.8% compared to 2Q24 primarily due to 11% growth from the acquisition of GKE, partially offset by an organic decline of 2.2% and currency exchange impacts of 0.6%. The acquisition of GKE closed partially on October 16th of 2023 and completely on December 31st of 2023 and continues to deliver revenues higher than initial expectations at acquisition close. Biopharmaceutical capital spending in BPD continued to be strong for the third consecutive quarter and sales funnels remain solid. CG again delivered sequential growth as the core business has stabilized despite ongoing headwinds from China's economic slowdown and the impact of its healthcare corruption campaign, coupled with the disruption to the U.S. Laboratory Developed Test ("LDT") market highlighted in previous quarters. Both SDC and CS showed strong sequential orders growth that will benefit 3Q25 sequential growth" added Mr. Owens.
"Profitability as measured by our primary metric of AOI excluding unusual items grew by 18.9% versus the prior year to $14,352, a 210 bps expansion when expressed as a percentage of revenue. Versus prior year, gross profit percentage expanded by 90 bps but shrank by 40 bps when excluding the impact of non-cash charges primarily due to mix." added Mr. Owens.
"Looking forward, we are optimistic that solid sales funnels will drive strong year over year growth in 3Q25 for BPD. In addition, we expect continued sequential growth in 3Q25 for CG, CS and SDC which when combined with BPD will result in strong organic revenue growth in 3Q25 for the Company as a whole. Looking out further, we will remain highly attuned to market shifts while continuing to invest in our strategic initiatives driving long term growth" concluded Mr. Owens.
* Total Net Leverage Ratio under our Credit Facility is defined as the ratio of total debt minus unrestricted cash in excess of $10 million as compared to 12 months trailing EBITDA. EBITDA, a non-GAAP metric, for purposes of this calculation, is defined as net income plus the sum of interest expense, income tax expense, depreciation, amortization, unusual or non-recurring non-cash charges and stock compensation expense. In addition, EBITDA gives effect to trailing 12 months pro-forma ownership of GKE and adds back certain GKE acquisition expenses.
Financial Results (unaudited, amounts in thousands, except per share data)
Total revenues were $57,833, an increase of 8.8% compared to 2Q24. Operating income increased 5,947% to $3,508. Net income was $3,428, an increase of 379% or $0.63 per diluted share of common stock. On a non-GAAP basis, core organic revenues decline was 2.8% and AOI increased 19.6% to $13,413 or $2.45 per diluted share of common stock compared to 2Q24. As detailed in the Unusual Items table below, AOI for 2Q25 and 2Q24 was negatively impacted by unusual items totaling $939 and $855, respectively. Excluding the unusual items for 2Q25 and 2Q24, AOI would have increased 18.9% to $14,352. A reconciliation of non-GAAP measures is provided in the tables below.
Division Performance
Revenues
Organic Revenues Growth⁴
Core Organic Revenues Growth
(Amounts in thousands)
Three Months Ended September 30, 2024
Six Months Ended September 30, 2024
Three Months Ended September 30, 2024
Six Months Ended September 30, 2024
Three Months Ended September 30, 2024
Six Months Ended September 30, 2024
SDC
$
22,205
$
45,162
(4.3)%
0.1%
(5.2)%
(0.2)%
CS
12,262
24,063
8.2%
5.6%
8.2%
5.4%
BPD
11,867
23,875
28.9%
25.0%
27.9%
25.6%
CG
11,499
22,903
(26.0)%
(20.8)%
(26.5)%
(20.8)%
Total reportable segments
$
57,833
$
116,003
(2.2)%
0.1%
(2.8)%
0%
Sterilization and Disinfection Control (38% of revenues in 2Q25) revenues were $22,205 for the quarter which resulted in core organic revenues decline of 5.2% versus prior year. The acquisition of GKE drove overall quarterly growth to 30.0%. Orders, excluding GKE, increased 6% for the first six months of the fiscal year with delivery timing negatively impacting revenues for 2Q25 and, we anticipate, positively impacting 3Q25. Gross profit percentage for the quarter contracted by 470 bps versus the prior year primarily due to the impact of non-cash inventory step-up purchase accounting charges from GKE and the amortization of GKE's intangible assets. Absent the impact of these non-cash purchase accounting charges, gross profit percentage would have contracted by 210 bps, driven primarily by volume declines and increased costs in the legacy business. Beginning in the third quarter of fiscal year 2025, the inventory step up will unwind and we expect GKE's gross profit percentage to be in the low 70s, in line with the rest of the division.
Calibration Solutions (21% of revenues in 2Q25) revenues were $12,262 which resulted in core organic revenues growth of 8.2% for the quarter. Year over year growth was driven primarily by commercial momentum, particularly in our renal care product lines which we expect to continue in the near term. Gross profit percentage expanded by 220 bps primarily due to increased revenues, pricing, and favorable product mix.
Biopharmaceutical Development (21% of revenues in 2Q25) revenues were $11,867 which resulted in core organic revenues growth of 27.9% for the quarter. The increase in revenues was driven by increased biopharmaceutical spending on capital equipment in North America and Europe which when combined, resulted in an 109% increase in revenues from hardware and software versus the same quarter prior year. Gross profit percentage expanded by 60 bps primarily due to increased revenues as well as favorable product mix.
Clinical Genomics (20% of revenues in 2Q25) revenues were $11,499 for the quarter, which resulted in a core organic revenues decline of 26.5% for the quarter but an increase of 0.8% sequentially compared to 1Q25. The year over year decrease in revenues was driven primarily by headwinds in China and North America as described above. Sequential growth for the second consecutive quarter and improving sales funnels have us optimistic that the turnaround plan is gaining traction. Gross profit percentage expanded by 170 bps due to decreased amortization as a result of impairment charges taken during 4Q24.
Use of Non-GAAP Financial Measures
Adjusted operating income, adjusted operating income excluding unusual items, organic revenues growth and core organic revenues growth are non-GAAP measures that exclude or adjust for certain items, as detailed within the tables in "Supplemental Information Regarding Non-GAAP Financial Measures." As noted below, we now include depreciation expense as a non-cash addback in the definition of adjusted operating income as it better aligns with presentations of other companies within our industry. All prior period amounts have been restated to conform with the current presentation.
¹ Core organic revenues growth, a non-GAAP measure, is defined as reported revenues growth excluding the impact of acquisitions and currency translation.
² The non-GAAP measures of adjusted operating income excluding unusual items and adjusted operating income excluding unusual items per diluted share are defined to exclude the non-cash impact of amortization of intangible assets acquired in a business combination, stock-based compensation, depreciation, impairment of goodwill and long-lived assets and unusual items. Unusual items are disclosed to highlight costs that are not ongoing and are incurred as a direct result of a specific transaction, such as the consummation of an acquisition, and are identified to allow investors to understand the Company's expectation on an ongoing basis, following the completion of acquisition and integration activities. A reconciliation of these non-GAAP measures to their GAAP counterparts is set forth below, along with additional information regarding their use.
³ 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, depreciation and impairment of goodwill and long-lived assets. A reconciliation of these non-GAAP measures to their GAAP counterparts is set forth below, along with additional information regarding their use.
⁴ Organic revenues growth, a non-GAAP measure, is defined as reported revenues growth excluding the impact of acquisitions.
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. Any statements contained herein that are not statements of historical fact may be forward-looking statements, including statements relating to future financial results, business conditions and strategic initiatives. Words such as "expect," "seek," "plan" "intend," "anticipate," "believe," "could," "should," "estimate," "may," "target," "project," and similar expressions may also identify forward-looking statements. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. The 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. Risks and uncertainties that could cause actual results to differ materially from our historical experience and present expectations or projections include those relating to: our ability to successfully grow our business, including as a ...
