Mesa Laboratories(MLAB) - 2024 Q4 - Annual Results

Executive Summary Mesa Labs achieved strategic milestones, reported mixed financial results with significant impairment charges, and outlined future growth initiatives Strategic Highlights Mesa Labs achieved several strategic milestones in 4Q24, including the acquisition of GKE China, expansion of its credit facility to repurchase convertible notes, restructuring within the Clinical Genomics division, and a significant reduction in inventory - Closed the acquisition of the GKE China entity on December 31, 2023[4] - Extended and expanded the bank credit facility to $200 million, enabling the repurchase of $75 million (43%) of outstanding 2025 Convertible Notes[4] - Executed a restructuring in the Clinical Genomics division to align cost structure with revenue headwinds[4] - Reduced inventory (excluding GKE) by 19.4% versus FY23 due to improved procurement and normalized supply chain[4] Financial Performance Overview (4Q24 & FY24) Mesa Labs reported a 6.0% revenue increase in 4Q24, driven by the GKE acquisition, despite a 3.5% core organic decline. For the full FY24, revenues decreased by 1.3% with a 5.4% core organic decline, largely due to headwinds in Biopharmaceutical Development and Clinical Genomics. Both periods saw significant operating losses due to a non-cash impairment charge Key Financial Highlights (4Q24 vs 4Q23) | Metric | 4Q24 | Change vs 4Q23 | | :------------------------------------- | :--------- | :--------------- | | Revenues | $58,904 | +6.0% | | Non-GAAP core organic revenues | - | -3.5% | | Operating (loss) | $(271,284) | N/A (included $274,533 impairment) | | Non-GAAP adjusted operating income excluding unusual items | - | +26.3% | | Non-GAAP adjusted operating income excluding unusual items (% of revenues) | 25.4% | N/A | Key Financial Highlights (FY24 vs FY23) | Metric | FY24 | Change vs FY23 | | :------------------------------------- | :--------- | :--------------- | | Revenues | $216,187 | -1.3% | | Non-GAAP core organic revenues | - | -5.4% | | Operating (loss) | $(272,075) | N/A (included $274,533 impairment) | | Non-GAAP adjusted operating income excluding unusual items | - | +0.7% | | Non-GAAP adjusted operating income excluding unusual items (% of revenues) | 23.4% | +50 bps | | Net (loss) per diluted share | $(47.20) | N/A | Profitability & Outlook Non-GAAP adjusted operating income (excluding unusual items) increased significantly in 4Q24 and slightly for the full year, driven by the GKE acquisition and cost control efforts. Looking ahead, Mesa Labs plans to deepen its presence in Asia Pacific, realize GKE synergies, and adapt its Clinical Genomics strategy to new FDA regulations, while maintaining a bias for organic growth - AOI excluding unusual items increased 26.3% to $14.9 million in 4Q24 and 0.7% to $50.5 million for FY24, with its percentage of revenues expanding by 50 bps for the full year[8][11][13] - Profit growth was primarily due to the GKE acquisition, offset by lower sales volumes and increased labor expenses, mitigated by cost control, lower variable compensation, and increased prices[8] - Key initiatives include deepening presence in Asia Pacific, realizing GKE synergies, and refining CG business strategy due to changes in FDA regulations for lab developed tests[9] - Company remains biased for organic growth, expanding sales and marketing by 80 bps as a percentage of revenues while also expanding AOI excluding unusual items percentages[9] Financial Results (GAAP & Non-GAAP) Mesa Labs reported increased 4Q24 revenues but a full-year decline, with both periods showing significant operating and net losses primarily due to a substantial non-cash impairment charge Fourth Quarter Fiscal Year 2024 In 4Q24, Mesa Labs reported total revenues of $58,904 thousand, a 6% increase year-over-year. However, the company recorded a significant operating loss of $(271,284) thousand and a net loss of $(254,583) thousand, or $(47.20) per diluted share, primarily due to a $274,533 thousand non-cash impairment charge. Non-GAAP core organic revenues decreased by 3.5% 4Q24 GAAP Financials | Metric | Amount (in thousands) | | :-------------------------- | :-------------------- | | Total Revenues | $58,904 | | Operating (loss) | $(271,284) | | Net (loss) | $(254,583) | | (Loss) per diluted share | $(47.20) | | Non-cash impairment charge | $274,533 | 4Q24 Non-GAAP Financials | Metric | Amount (in thousands) | Change vs 4Q23 | | :------------------------------------- | :-------------------- | :--------------- | | Core organic revenues | - | -3.5% | | AOI | $12,336 | +6.7% | | AOI per diluted share | $2.29 | - | | AOI excluding unusual items | $14,938 | +26.3% | Full Fiscal Year 2024 For the full fiscal year 2024, total revenues were $216,187 thousand, a 1.3% decrease compared to FY23. Similar to the quarter, the company reported a substantial operating loss of $(272,075) thousand and a net loss of $(254,246) thousand, or $(47.20) per diluted share, primarily due to the same $274,533 thousand non-cash impairment charge. Non-GAAP core organic revenues declined by 5.4% FY24 GAAP Financials | Metric | Amount (in thousands) | | :-------------------------- | :-------------------- | | Total Revenues | $216,187 | | Operating (loss) | $(272,075) | | Net (loss) | $(254,246) | | (Loss) per diluted share | $(47.20) | | Non-cash impairment charge | $274,533 | FY24 Non-GAAP Financials | Metric | Amount (in thousands) | Change vs FY23 | | :------------------------------------- | :-------------------- | :--------------- | | Core organic revenues | - | -5.4% | | AOI | $45,968 | -6.2% | | AOI per diluted share | $8.53 | - | | AOI excluding unusual items | $50,505 | +0.7% | Division Performance Mesa Labs' divisions showed mixed performance, with SDC and CS achieving organic growth, while BPD and CG faced declines and significant impairment charges due to market headwinds and restructuring Division Performance Overview Mesa Labs operates in four divisions: Sterilization and Disinfection Control (SDC), Clinical Genomics (CG), Biopharmaceutical Development (BPD), and Calibration Solutions (CS). The overall core organic revenues for total reportable segments decreased by 3.5% in 4Q24 and 5.4% for FY24 Division Revenues and Core Organic Growth (4Q24 & FY24) | Division | 4Q24 Revenues (in thousands) | FY24 Revenues (in thousands) | 4Q24 Core Organic Growth | FY24 Core Organic Growth | | :--------------------------------- | :--------------------------- | :--------------------------- | :----------------------- | :----------------------- | | SDC | $22,779 | $75,124 | 4.2% | 0.6% | | CG | $11,124 | $52,588 | (18.1)% | (14.2)% | | BPD | $12,186 | $40,712 | (2.6)% | (13.4)% | | CS | $12,815 | $47,763 | 1.4% | 6.6% | | Total reportable segments | $58,904 | $216,187 | (3.5)% | (5.4)% | Sterilization and Disinfection Control (SDC) SDC, representing 39% of 4Q24 revenues, reported $22,779 thousand in revenues for the quarter, with core organic growth of 4.2%. The GKE acquisition significantly boosted overall quarterly growth to 37.3%. Gross profit percentage contracted due to non-cash inventory step-up charges from GKE, but would have expanded absent these charges - SDC revenues were $22.8 million in 4Q24, representing 39% of total revenues[14] - Core organic revenues growth was 4.2% for 4Q24 and 0.6% for FY24[14] - The GKE acquisition drove overall quarterly growth to 37.3% and full-year growth to 16.3%, with GKE revenues trending slightly above expectations[14] - Gross profit percentage contracted by **49