CINCINNATI, April 30, 2019 (GLOBE NEWSWIRE) --
Meridian Bioscience, Inc. (VIVO) today
announced financial results for the second quarter and first six
months ended March 31, 2019.
Second Quarter 2019 Highlights:
Year-to-Date Fiscal 2019 Highlights:
Second Quarter 2019
Results
Total revenue for the second quarter of fiscal 2019 decreased 11%
to $50.2 million, compared to $56.5 million in the second quarter
of 2018. This decrease was driven by a 16% decrease in
Diagnostics business unit revenues from $39.8 million to $33.5
million, as a result of continued competitive pressures in a number
of our molecular products, particularly C. difficile,
weaker respiratory product demand, and volume and pricing declines
in certain gastrointestinal products. Life Science business
unit revenues were relatively flat at $16.7 million (a 2% increase
on a constant-currency basis compared to the second quarter of
2018), as growth in both Americas and EMEA was largely offset by
soft customer order activity in China.
Reported operating income for the second quarter of fiscal 2019 increased $2.2 million to $9.8 million from the second quarter of fiscal 2018. This increase resulted from a $7.4 million decrease in operating expenses including a $3.5 million decrease in acquisition, restructuring and litigation costs, more than offsetting the lower amount of gross profit from decreased revenues. Excluding the effects of the acquisition, restructuring and litigation costs in each period, operating income decreased 11% to $11.2 million. R&D spending was down in the quarter compared to second quarter of fiscal 2018, due to the timing of certain product development project expenses including clinical trial expenses incurred in the fiscal 2018 second quarter for the cCMV test, which launched this quarter. Sales and marketing expenses in the quarter were down due to fiscal 2018 organization streamlining initiatives, as well as lower sales commissions as a result of lower revenues. General and administrative expenses were down in the quarter, also due largely to the effects of organizational streamlining initiatives implemented in fiscal 2018, but also due to lower FDA Quality System remediation costs for the Billerica manufacturing facility and lower incentive compensation costs. Fiscal 2019 second quarter operating income in Diagnostics decreased 29%, due entirely to the decrease in revenues, as spending was down significantly. Operating income for the second quarter of fiscal 2019 was up 47% in Life Science, driven by the continued benefit of fiscal 2018 restructuring activities, including a lower-cost commercial organization.
Net earnings for the second quarter of fiscal 2019 totaled $7.1 million, or $0.17 per diluted share, as compared to $5.3 million, or $0.12 per diluted share, for the second quarter of fiscal 2018. On an adjusted basis (non-GAAP), earnings were $8.2 million, or $0.19 per diluted share, as compared to $8.9 million, or $0.21 per diluted share, for the second quarter of fiscal 2018, decreases of 8% and 10%, respectively. Adjusted basis excludes the effect of acquisition transaction and litigation costs in the fiscal 2019 quarter and restructuring and litigation costs in the fiscal 2018 quarter.
Jack Kenny, Chief Executive Officer, commented,
“While I am disappointed in our results for the second quarter for
both our Diagnostics and Life Science business units, I am excited
about the shift that our pending acquisition of GenePOC represents
for Meridian. The addition upon closing of GenePOC and its
revogeneâ„¢ molecular diagnostics platform is a critical step in our
strategy to invest in new products and technologies. We believe
this
transaction and other initiatives are necessary to stabilize our
Diagnostics business and re-position the Company for sustainable,
long-term growth. The suspension of our quarterly cash
dividend represents a change in our capital allocation philosophy
to support this strategy and increase re-investment in the
business. We recognize the near-term trends and competitive
pressures in our business and we have recently reorganized our
Diagnostics commercial organization as an additional step to help
address these pressures. For our Life Science business unit,
we are expecting customer order activity in China to improve over
the back half of the year, but not to previously expected
levels. Good growth performance this quarter in the Americas
and EMEA, however, are evidence that the Life Science business is
well-positioned, despite the recent unforeseen weakness in
China.â€
Fiscal 2019 First Half
Results
Total revenue for the first half of fiscal 2019 totaled $101.7
million, a 6% decrease from the $108.7 million achieved in fiscal
2018. This decrease reflects a decline of 9% (also 9% on a
constant-currency basis) to $70.2 million in Diagnostics, driven
largely by competitive pressures in molecular assays, particularly
C. difficile, volume and pricing declines in
gastrointestinal products, and volume declines in respiratory
assays. Revenues in the Life Science business unit were
relatively flat (up 2% on a constant-currency basis), reflecting
softness in customer order activity in China.
During the first half of fiscal 2019, operating income totaled $20.4 million, an increase of 30% or $4.6 million. This increase primarily resulted from lower expenses for restructuring and litigation activities. Excluding the effects of the acquisition, restructuring and litigation costs in each period, operating income increased 1% to $22.5 million compared to the first half of fiscal 2018, despite the decline in revenues. Operating expenses were broadly lower in all categories across both business units, which favorably affected operating income, despite the revenue decline in Diagnostics.
Net earnings totaled $15.2 million, or $0.35 per diluted share, for the first half of fiscal 2019, as compared to $11.6 million, or $0.27 per diluted share, for the same period in fiscal 2018. On an adjusted basis, earnings were $16.8 million, or $0.39 per diluted share, increases of 9% and 8%, respectively, over fiscal 2018’s adjusted earnings of $15.4 million, or $0.36 per diluted share. Adjusted earnings exclude the effect of acquisition transaction and litigation costs in the first half of fiscal 2019, and restructuring and litigation costs, and certain one-time tax effects of the tax reform act, in the same period in fiscal 2018 period (see non-GAAP financial measure reconciliation below).
Tax Reform Impact
Our net earnings for both fiscal year-to-date
periods include the effects of the tax reform act signed into law
during December 2017. The fiscal 2019 year-to-date period reflects
the lower U.S. federal tax rate of 21% being fully phased-in, and
the first six months of fiscal 2018 includes: (i) a benefit of $1.7
million ($0.04 per diluted share) primarily related to the
re-measurement of U.S. net deferred tax liabilities based on the
new federal rate;
and (ii) a charge of $0.9 million ($0.02 per diluted share) for the
mandatory U.S. repatriation transition tax. The effective tax
rate for both the second quarter and first six months of fiscal
2019 was 23%.
Cash Dividend Matters
As part of the Company’s regular evaluation of its capital allocation, upon evaluation of earnings, cash flow requirements and future business developments, including the pending acquisition of the business of GenePOC Inc., and other factors deemed relevant, the Board of Directors, at its discretion, suspended the Company’s quarterly cash dividend effective immediately. This action was taken in order to deploy cash into new product development activities for the revogene™ molecular diagnostics platform among other investments and to preserve capital resources and liquidity for general corporate purposes.
Fiscal 2019 Guidance Including Effects of
the Pending Acquisition
The Company provided revised guidance for full year fiscal 2019 in
its press release dated April 2, 2019. Excluding amortization
expense, the Company expects the transaction to add approximately
$4 million - $5 million in operating expenses in fiscal 2019.
The Company currently estimates that the transaction will be
dilutive to full year fiscal 2019 EPS by approximately $0.10 to
$0.12 per share, based on current purchase accounting
estimates.
Financial Condition
The Company’s financial condition remains sound. At March 31,
2019, cash and equivalents were $66.1 million and the Company had
100% borrowing capacity under its $30.0 million commercial bank
credit facility. The Company’s bank-debt obligations totaled
$47.9 million as of March 31, 2019.
In connection with the pending acquisition of GenePOC, the Company also expects to execute a new five-year $125 million revolving credit facility that would replace its existing $30 million credit facility. The new credit facility is expected to be secured by substantially all of the Company’s assets and include certain restrictive financial covenants. The Company expects to use this new facility and cash on-hand to repay the existing term loan outstanding at March 31, 2019 and fund the closing payment for the acquisition of GenePOC.
Conference Call
Information
Jack Kenny, Chief Executive Officer, and Eric Rasmussen, Chief
Financial Officer, will host a conference call on Tuesday, April
30, 2019 beginning at 10:00 a.m. Eastern Time to discuss the second
quarter financial results and answer questions.
To participate in the live call by telephone from the U.S., dial (866) 443-5802, or from outside the U.S., dial (513) 360-6924, and enter the audience pass code 3893028. A replay will be available for 14 days beginning at 1:00p.m. Eastern Time on April 30, 2019 by dialing (855) 859-2056 or (404) 537-3406 and entering pass code 3893028.
INTERIM UNAUDITED OPERATING
RESULTS
(In Thousands, Except per Share Data)
The following table sets forth the unaudited comparative results of Meridian on a U.S. GAAP basis for the interim periods of fiscal 2019 and fiscal 2018.
| Three Months Ended | Six Months Ended | |||||||||||||
| March 31, | March 31, | |||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||
| Net revenues | $ | 50,248 | $ | 56,451 | $ | 101,728 | $ | 108,734 | ||||||
| Cost of sales | 20,910 | 21,882 | 40,818 | 42,155 | ||||||||||
| Gross profit | 29,338 | 34,569 | 60,910 | 66,579 | ||||||||||
| Operating expenses | ||||||||||||||
| Research and development | 3,816 | 4,491 | 7,700 | 8,895 | ||||||||||
| Selling and marketing | 6,911 | 8,647 | 14,474 | 17,461 | ||||||||||
| General and administrative | 7,388 | 8,842 | 16,286 | 18,090 | ||||||||||
| Acquisition and restructuring costs | 785 | 3,458 | 872 | 4,192 | ||||||||||
| Litigation costs | 603 | 1,453 | 1,192 | 2,202 | ||||||||||
| Total operating expenses | 19,503 | 26,891 | 40,524 | 50,840 | ||||||||||
| Operating income | 9,835 | 7,678 | 20,386 | 15,739 | ||||||||||
| Other expense, net | (588 | ) | (454 | ) | (663 | ) | (857 | ) | ||||||
| Earnings before income taxes | 9,247 | 7,224 | 19,723 | 14,882 | ||||||||||
| Income tax provision | 2,153 | 1,936 | 4,523 | 3,292 | ||||||||||
| Net earnings | $ | 7,094 | $ | 5,288 | $ | 15,200 | $ | 11,590 | ||||||
| Net earnings per basic common share | $ | 0.17 | $ | 0.12 | $ | 0.36 | $ | 0. | ||||||