Lakewood, Colorado, July 31, 2018 – Mesa Laboratories, Inc. (NASDAQ:MLAB) (we, us, our, “Mesa” or the “Company”) today reported record first quarter revenues and net income for the three months ended June 30, 2018.
Highlights for the quarter ended June 30, 2018 as compared to last year:
• Revenues increased 11 percent
• Net income increased 179 percent
• Non-GAAP adjusted operating income1 increased 78 percent
Revenues for the first quarter increased 11 percent to $25,142,000 as compared to $22,673,000 for the same quarter last year. Operating income for the quarter increased 140 percent to $4,764,000 as compared to $1,982,000 for the same quarter last year. Quarterly net income increased 179 percent to $4,230,000 or $1.06 per diluted share of common stock as compared to $1,517,000 or $0.39 per diluted share of common stock for the same quarter last year. Operating and net income for the first quarter last year, were impacted by unusual items consisting of a $522,000 expense, before tax, related to relocation costs associated with the consolidation of our Sterilization and Disinfection Control facilities into our new building in Bozeman, Montana and a $406,000 expense, before tax, related to a reserve for slow moving inventory associated with the discontinuance for sale of certain products due to the recent introduction of new or modified products and the consolidation of other product sets. Net income for the first quarter last year was also impacted by an unusual item consisting of a $300,000 expense (included in other expense, net), before tax, related to an increase in the PCD earn-out liability which resulted from higher revenues in the product line than were forecasted.
On a non-GAAP basis, adjusted operating income for the first quarter increased 78 percent to $7,363,000 or $1.84 per diluted share of common stock as compared to $4,126,000 or $1.05 per diluted share of common stock for the same quarter last year. Adjusted operating income for the first quarter last year was impacted by the first two items noted above. Excluding unusual items, first quarter non-GAAP adjusted operating income increased 46 percent, or $0.55 per diluted share of common stock versus the same quarter last year.
“We continued to make both financial progress and meaningful operating improvements by leveraging our Lean-based operating system, The Mesa Way!,” said Gary Owens, President and Chief Executive Officer. “We are beginning a cycle of improving commercial execution that has resulted in increased revenues across all of our divisions for the first quarter (as compared to the same quarter last year). Total revenues increased 11 percent in the quarter, with organic growth of four percent, driven primarily by the Cold Chain Packaging division. The Mesa Way! continued to have a strong manufacturing impact in 1Q19 as inventories were down an additional six percent versus 4Q18, on time deliveries to customers continued to improve and gross profit margin percentage increased 410 basis points when compared to the same quarter last year (100 basis points when excluding the impact of all unusual items in the first quarter last year).
• Sterilization and Disinfection Control (45 percent of revenues in 1Q19), delivered 11 percent growth in revenues in the quarter but disappointed with a four percent organic revenues decrease due primarily to an increased backlog related to the Bozeman manufacturing relocation. First quarter gross profit margin percentage was up 280 basis points versus the same quarter in the prior year, but essentially flat when excluding the impact of unusual items. The consolidation of operations into Bozeman, Montana is complete, and all unusual expenses associated with the relocation were ended in the prior fiscal year.
• Instruments (35 percent of revenues in 1Q19) revenues grew one percent versus the same quarter last year. Gross profit margin percentage increased 750 basis points, or 560 basis points when excluding unusual items in the first quarter last year. The increase was due to mix between the component products and product and service mix.
• Cold Chain Monitoring (13 percent of revenues in 1Q19) revenues were up ten percent in the quarter due to a trend of improving execution and particularly weak performance in the same quarter last year. Gross profit margin percentage increased 1480 basis points, or 730 basis points excluding unusual items. The increase was due to strong efficiency gains across the division.
• Cold Chain Packaging (seven percent of revenues in 1Q19) grew 90 percent in the quarter due to an increased order rate from the division’s largest customer, a trend we expect to continue through 3Q19. Gross profit margin percentage in the quarter decreased 550 basis points versus the same quarter last year due to customer mix. Despite the return to growth, the business inherently carries a lower gross margin percentage and continues to be impacted by seasonality on a quarter by quarter basis.
Looking ahead, with improving execution and more clarity on our growth-related drivers, we plan to accelerate our investment in sales and marketing capacity and research and development capabilities to continue to power our near and long-term organic growth. We also plan to continue to reinvest the majority of free cash flow in our acquisition program” 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 and stock-based compensation expense. 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.