MOCON, Inc. (NASDAQ:MOCO), today reported financial results for the
three and nine-months ended September 30, 2016.
Highlights for the third quarter include:
- Overall revenue grew seven percent year-over-year and three
percent sequentially
- Gross profit was 57 percent of revenue; a two percentage point
improvement year-over-year and a one percentage point improvement
sequentially
- Net income was $2.0 million, or $0.34 per diluted share,
compared to $1.2 million, or $0.20 per diluted share in the third
quarter of 2015, a 70 percent increase
- Adjusted EBITDA was $3.4 million, or 21 percent of revenue
compared to 17 percent in the year-ago quarter
- Cash generated from operations was $4.5 million in the third
quarter
Commenting on the Company’s quarterly performance, MOCON’s
president and chief executive officer, Robert L. Demorest said,
“Overall, I am pleased with our strong third quarter results.
Revenue was up both on a year-over-year and sequential basis.
The cost reductions realized from our strategic organizational
realignment efforts significantly improved our operating income to
16 percent of revenue compared to 11 percent in the
year-ago-quarter. Going forward, we plan to modestly increase
our SG&A spending as we continue to strengthen our team. Our
search for a Senior Vice President of Sales and Marketing is
nearing completion.
Demorest added, “During the third quarter of 2016, our balance
sheet improved significantly resulting in cash generation levels
that allowed us to not only pay off our revolving line of credit,
but also to increase our overall cash balance by $1
million.”
2016 Revenue and Earnings Summary
Third quarter 2016 results compared to third quarter 2015:
- Revenue increased seven percent
- Revenue from foreign customers accounted for 68 percent of
total revenue compared to 61 percent
- Operating income was $2.6 million, or 16 percent of revenue
compared to $1.6 million, or 11 percent of revenue
- Net income was $2.0 million, or $0.34 per diluted share,
compared to net income of $1.2 million, or $0.20 per diluted
share
- Adjusted EBITDA was $3.4 million compared to $2.6 million (See
reconciliation to non-GAAP information below)
Nine months ended September 30, 2016 compared to the year ago
nine month period:
- Revenue increased two percent
- Revenue from foreign customers accounted for 66 percent of
total revenue for both of the nine month periods
- Net income was $3.2 million, or $0.56 per diluted share,
compared to net income of $2.7 million, or $0.46 per diluted
share
- Adjusted EBITDA was $7.6 million compared to $6.5 million (See
reconciliation to non-GAAP information below)
Revenue by Segment ($ in thousands)
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
Year-over-YearChange |
|
|
|
Year-over-YearChange |
|
|
2016 |
|
|
|
2015 |
|
|
$ |
|
% |
|
|
2016 |
|
|
|
2015 |
|
|
$ |
|
% |
Package Testing |
$ |
7,572 |
|
|
$ |
6,454 |
|
|
$ |
1,118 |
|
|
|
17 |
% |
|
$ |
21,903 |
|
|
$ |
19,684 |
|
|
$ |
2,219 |
|
|
|
11 |
% |
Permeation |
|
6,343 |
|
|
|
6,012 |
|
|
|
331 |
|
|
|
6 |
% |
|
|
17,110 |
|
|
|
18,080 |
|
|
|
(970 |
) |
|
|
-5 |
% |
Industrial Analyzers and Other |
|
2,145 |
|
|
|
2,556 |
|
|
|
(411 |
) |
|
|
-16 |
% |
|
|
7,408 |
|
|
|
7,667 |
|
|
|
(259 |
) |
|
|
-3 |
% |
Total Revenue |
$ |
16,060 |
|
|
$ |
15,022 |
|
|
$ |
1,038 |
|
|
|
7 |
% |
|
$ |
46,421 |
|
|
$ |
45,431 |
|
|
$ |
990 |
|
|
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from the Package Testing segment for the three and nine
months ended September 30, 2016 increased 17 percent and 11
percent, respectively, compared to the year-ago periods due to
strong demand for headspace, leak and related services across the
globe. There are increasingly more two income households in Europe
which is driving consumer trends toward convenience and sustainable
food packaging. In the U.S., growth in modified atmosphere
packaging technologies is being driven through overall market
expansion as food production lines are upgraded.
Revenue from the Permeation segment for the three and nine
months ended September 30, 2016 increased by six percent and
declined by five percent compared to the year-ago periods,
respectively. The third quarter year-over-year growth was
driven by increased shipments to foreign destinations. The
year-to-date decline is driven by sales to destinations in the
U.S. Approximately $0.6 million of this decline is driven by
the sales force disruption experienced in the first half of 2016
and $0.4 million is driven by the sale of our odor and aroma
consulting business.
The Industrial Analyzers and Other segment declined by 16
percent and three percent year-over-year for the three and nine
months ended September 30, 2016, respectively. Shipments of
BevAlert systems vary from quarter-to-quarter which was the primary
driver in the third quarter revenue decline. The growth experienced
in the sensor and detector products during the first half of 2016
was offset by continued softness in the oil and gas exploration
markets throughout the year.
Gross Profit, Operating Income and Operating Expense
Commentary
For the three-months ended September 30, 2016 and
2015, gross profit was 57 percent and 55 percent of revenue, and
operating income was 16 percent and 11 percent of revenue,
respectively. For the nine months ended September 30, 2016,
realignment expenses were $903,000, or two percent of revenue.
The gross profit rate for our Package Testing
segment increased by four percentage points to 59 percent in the
current quarter, compared to 55 percent in the year ago period, due
to increased volumes and process improvement initiatives. The gross
profit rate for our Permeation segment increased to 61 percent from
59 percent as compared to the prior year quarter due to increased
volume in our products and service which offset a decline in margin
related to our consulting revenue. Our Industrial Analyzers
and Other segment gross profit rate for the current quarter
decreased by five percentage points to 42 percent compared to 47
percent in the prior year quarter due to reduced volume.
Selling, general and administrative (SG&A) expenses were 33
percent and 37 percent of revenue in the third quarters of 2016 and
2015 respectively. Cost reductions from the Company’s recent
realignment plans were partially offset by increased professional
fees, and new hires to support growth. The Company’s management
expects that SG&A expenses will modestly increase as several
open positions are filled. Research and development expenses were
seven percent and six percent of revenue in the third quarters of
2016 and 2015, respectively, which is in line with the Company’s
commitment to continued innovation.
Balance Sheet and Cash Flow Summary
- Cash and cash equivalents increased to $7.8 million at
September 30, 2016 compared to $6.3 million at December 31,
2015
- Days sales outstanding were 51 in the third quarter of 2016
compared to 60 in the second quarter of 2016
- Total debt was $0.1 million at September 30, 2016 compared to
$3.0 million at December 31, 2015
About MOCON
MOCON is a leading provider of detectors, instruments, systems
and consulting services to research laboratories, production
facilities, and quality control and safety departments in the
medical, pharmaceutical, food and beverage, packaging,
environmental, oil and gas and other industries worldwide.
See www.mocon.com for more information.
Use of Non-GAAP Financial Measures
MOCON supplements its financial statements to provide investors
with earnings before interest, taxes, depreciation and amortization
(“EBITDA”) and EBITDA plus share-based compensation, gain on sale
of business, realignment expenses, and foreign currency
transactional losses (“Adjusted EBITDA”), which are not calculated
in accordance with general accepted accounting principles (“GAAP”)
in the United States of America.
MOCON believes that these non-GAAP measures provide useful
information to the Company’s Board of Directors, management and
investors regarding certain trends relating to its financial
condition and operating performance. MOCON’s management uses these
non-GAAP measures to compare the Company's performance to that of
prior periods for trend analyses and planning purposes
The method MOCON uses to produce non-GAAP results is not
computed according to GAAP, is likely to differ from the methods
used by other companies and should not be regarded as a replacement
for corresponding GAAP measures. MOCON urges investors to review
the reconciliation of its non-GAAP financial measures to the
comparable GAAP financial measures that are included in this press
release.
Safe Harbor
This press release contains forward-looking statements that are
made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These
forward-looking statements include statements that can be
identified by words such as “will,” “may,” “expect,” “believe,”
“anticipate,” “estimate,” “continue,” “planned”, or other similar
expressions. All forward-looking statements speak only as of
the date of this press release. MOCON undertakes no
obligation to update or revise any forward-looking statement,
whether as a result of new information, future events or
otherwise. In addition to the risks and uncertainties of
ordinary business operations and conditions in the general economy
and the markets in which the Company competes, there are important
factors that could cause actual results to differ materially from
those anticipated by the forward-looking statements made in this
press release. These factors include, but are not limited to,
the Company’s ability to realize the cost savings associated with
the realignment plan implemented in 2015, fluctuations in foreign
currency exchange rates, the terms of MOCON’s credit agreement
including financial covenants included therein, dependence on
certain key industries, pricing and lack of availability of raw
materials, crude oil pricing impact on oil exploration activities,
and other factors set forth in the Company’s Annual Report on Form
10-K for the year ended December 31, 2015 and other documents
MOCON files with or furnishes to the Securities and Exchange
Commission.
MOCON's shares are traded on the NASDAQ Global Market
System under the symbol MOCO.MOCON is a registered
trademark of MOCON, Inc.; other trademarks are those of their
respective holders.
|
|
MOCON, INC. |
SUMMARY CONSOLIDATED FINANCIAL
DATA |
(in Thousands, Except Per Share
Data) |
|
|
|
|
|
|
|
|
STATEMENT OF
OPERATIONS DATA: (unaudited) |
|
|
|
|
|
|
|
|
Quarters Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2016 |
|
|
2015 * |
|
|
2016 |
|
|
2015* |
Revenue |
|
|
|
|
|
|
|
Products |
$ |
12,702 |
|
|
$ |
11,771 |
|
|
$ |
36,330 |
|
|
$ |
35,972 |
|
Services |
|
2,864 |
|
|
|
2,496 |
|
|
|
8,378 |
|
|
|
7,338 |
|
Consulting |
|
494 |
|
|
|
755 |
|
|
|
1,713 |
|
|
|
2,121 |
|
Total revenue |
|
16,060 |
|
|
|
15,022 |
|
|
|
46,421 |
|
|
|
45,431 |
|
Cost of
revenue |
|
|
|
|
|
|
|
Products |
|
5,416 |
|
|
|
5,237 |
|
|
|
15,471 |
|
|
|
16,020 |
|
Services |
|
1,077 |
|
|
|
1,010 |
|
|
|
3,545 |
|
|
|
3,074 |
|
Consulting |
|
369 |
|
|
|
457 |
|
|
|
1,332 |
|
|
|
1,515 |
|
Total cost of
revenue |
|
6,862 |
|
|
|
6,704 |
|
|
|
20,348 |
|
|
|
20,609 |
|
Gross profit |
|
9,198 |
|
|
|
8,318 |
|
|
|
26,073 |
|
|
|
24,822 |
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses |
|
5,331 |
|
|
|
5,618 |
|
|
|
17,339 |
|
|
|
17,596 |
|
Research and
development expenses |
|
1,134 |
|
|
|
886 |
|
|
|
3,635 |
|
|
|
3,081 |
|
Realignment
expenses |
|
153 |
|
|
|
190 |
|
|
|
903 |
|
|
|
318 |
|
Operating
income |
|
2,580 |
|
|
|
1,624 |
|
|
|
4,196 |
|
|
|
3,827 |
|
Other income
(expense), net |
|
(38 |
) |
|
|
(48 |
) |
|
|
236 |
|
|
|
90 |
|
Income before income
taxes |
|
2,542 |
|
|
|
1,576 |
|
|
|
4,432 |
|
|
|
3,917 |
|
Income tax
expense |
|
578 |
|
|
|
424 |
|
|
|
1,191 |
|
|
|
1,211 |
|
Net income |
$ |
1,964 |
|
|
$ |
1,152 |
|
|
$ |
3,241 |
|
|
$ |
2,706 |
|
Net income per
common share: |
|
|
|
|
|
|
|
Basic |
$ |
0.34 |
|
|
$ |
0.20 |
|
|
$ |
0.56 |
|
|
$ |
0.47 |
|
Diluted |
$ |
0.34 |
|
|
$ |
0.20 |
|
|
$ |
0.56 |
|
|
$ |
0.46 |
|
Weighted
average common shares outstanding: |
|
|
|
|
|
|
|
Basic |
|
5,823 |
|
|
|
5,753 |
|
|
|
5,769 |
|
|
|
5,748 |
|
Diluted |
|
5,859 |
|
|
|
5,808 |
|
|
|
5,793 |
|
|
|
5,826 |
|
|
|
|
|
|
|
|
|
* Our Statement of Operations for the three and nine-months
ended September 30, 2015 has been revised to correct a $470,000
overstatement of revenue and cost of revenue which impacted our
Permeation Products and Services reporting segment. This
immaterial revision had no impact to our reported gross profit,
operating income or net income per common share. |
|
CONDENSED
BALANCE SHEET DATA: (unaudited) |
|
|
|
|
September 30, 2016 |
|
December 31, 2015 |
Assets: |
|
|
|
Cash and marketable securities |
$ |
7,803 |
|
|
$ |
6,344 |
|
Accounts receivable, net |
|
9,074 |
|
|
|
8,786 |
|
Inventories |
|
7,359 |
|
|
|
7,790 |
|
Other current assets |
|
1,423 |
|
|
|
1,782 |
|
Total current assets |
|
25,659 |
|
|
|
24,702 |
|
Property, plant and equipment, net |
|
5,427 |
|
|
|
5,995 |
|
Goodwill, intangibles and other assets, net |
|
16,297 |
|
|
|
16,722 |
|
Total assets |
$ |
47,383 |
|
|
$ |
47,419 |
|
Liabilities and
Shareholders’ Equity: |
|
|
|
Notes payable, current |
$ |
58 |
|
|
$ |
65 |
|
Other current liabilities |
|
10,103 |
|
|
|
9,535 |
|
Total noncurrent liabilities |
|
1,190 |
|
|
|
4,348 |
|
Shareholders’ equity |
|
36,032 |
|
|
|
33,471 |
|
Total liabilities and shareholders’ equity |
$ |
47,383 |
|
|
$ |
47,419 |
|
|
|
|
|
CONDENSED CASH
FLOW DATA: (unaudited) |
September 30, 2016 |
|
September 30, 2015 |
|
|
|
|
|
|
Net cash
provided by operations |
$ |
5,978 |
|
|
$ |
4,417 |
|
|
Net cash
provided by (used in) investing activities |
|
(28 |
) |
|
|
(1,144 |
) |
|
Net cash used
in financing activities |
|
(4,637 |
) |
|
|
(2,816 |
) |
|
Effect of
exchange rate changes |
|
146 |
|
|
|
(376 |
) |
|
Net increase in
cash |
|
1,459 |
|
|
|
81 |
|
|
Cash beginning
of year |
|
6,344 |
|
|
|
6,332 |
|
|
Cash end of
year |
$ |
7,803 |
|
|
$ |
6,413 |
|
|
|
|
|
|
|
MOCON, INC. |
NON-GAAP RECONCILIATION |
(in Thousands) |
|
|
|
|
|
|
|
|
|
Quarters Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
Net
income |
$ |
1,964 |
|
|
$ |
1,152 |
|
|
$ |
3,241 |
|
|
$ |
2,706 |
|
Interest expense,
net |
|
8 |
|
|
|
31 |
|
|
|
49 |
|
|
|
97 |
|
Income tax
expense |
|
578 |
|
|
|
424 |
|
|
|
1,191 |
|
|
|
1,211 |
|
Depreciation and
amortization |
|
530 |
|
|
|
614 |
|
|
|
1,917 |
|
|
|
1,834 |
|
|
|
|
|
|
|
|
|
EBITDA |
|
3,080 |
|
|
|
2,221 |
|
|
|
6,398 |
|
|
|
5,848 |
|
Share-based
compensation |
|
185 |
|
|
|
167 |
|
|
|
561 |
|
|
|
488 |
|
Gain on sale of
business |
|
- |
|
|
|
- |
|
|
|
(352 |
) |
|
|
- |
|
Realignment
expenses |
|
153 |
|
|
|
190 |
|
|
|
903 |
|
|
|
318 |
|
Foreign currency
transaction loss (gain) |
|
23 |
|
|
|
17 |
|
|
|
60 |
|
|
|
(186 |
) |
|
|
|
|
|
|
|
|
Adjusted EBITDA |
$ |
3,441 |
|
|
$ |
2,595 |
|
|
$ |
7,570 |
|
|
$ |
6,468 |
|
|
|
|
|
|
|
|
|
MOCON, Inc. Company Contacts:
Elissa Lindsoe, CFO
763-493-6370 / www.mocon.com
Or
Steven Hooser, Investor Relations
Three Part Advisors, LLC
(214) 872-2710
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