MOCON, Inc. (NASDAQ:MOCO), today reported financial results for the
fourth quarter and year ended December 31, 2016.
Fourth Quarter 2016 Highlights:
- Double digit revenue growth year-over-year-- Package Testing
Segment increased 21 percent-- Permeation Segment declined by nine
percent-- Industrial Analyzers and Other Segment increased 37
percent
- Gross profit was 57 percent of revenue: a two-percentage point
improvement year-over-year
- Net income was $1.8 million, or $0.30 per diluted share,
compared to $0.3 million, or $0.05 per diluted share in the fourth
quarter of 2015
- Adjusted EBITDA was $2.9 million, or 17 percent of revenue
compared to $2.1 million, or 13 percent of revenue in the year-ago
quarter
Commenting on the company’s solid fourth quarter performance,
MOCON’s president and chief executive officer, Robert L. Demorest
said, “We are very pleased with our financial performance in the
fourth quarter of 2016. $16.9 million in revenue matches our
prior quarterly record that was set in the fourth quarter of
2014. At that time, the euro was much stronger than it is
today. We have continued to improve our product cost and
operating expense profile which has resulted in a significant
improvement in our bottom line results. Our adjusted EBITDA
increased for both the fourth quarter and full year to 17 percent
of revenue from 13 percent and 14 percent in the respective prior
year periods.”
2016 Revenue and Earnings Summary
Fourth quarter 2016 results compared to fourth quarter 2015:
- Revenue increased ten percent
- Revenue from foreign customers accounted for 65 percent for
both 2016 and 2015
- Operating income was $2.1 million, or 12 percent of revenue
compared to $0.5 million, or four percent of revenue
- Net income was $1.8 million, or $0.30 per diluted share,
compared to a net income of $0.3 million, or $0.05 per diluted
share
- Adjusted EBITDA was $2.9 million, or 17 percent of revenue,
compared to $2.1 million, or 13 percent of revenue (See
reconciliation to non-GAAP information below)
Full year 2016 results compared to full year 2015:
- Revenue increased four percent
- Revenue from foreign customers accounted for 66 percent for
both 2016 and 2015
- Operating income was $6.3 million, or ten percent of revenue
compared to $4.5 million, or seven percent of revenue
- Net income grew 68 percent and was $5.0 million, or $0.86 per
diluted share, compared to a net income of $3.0 million, or $0.51
per diluted share
- Adjusted EBITDA was $10.5 million, or 17 percent of revenue,
compared to $8.5 million, or 14 percent of revenue (See
reconciliation to non-GAAP information below)
Revenue and Gross Margin by Segment ($ in
thousands)
|
|
|
Three Months Ended December 31, |
|
|
|
|
Revenue |
|
|
Gross Margin as a % of
Revenue |
|
|
|
|
|
2016 |
|
|
2015 |
|
Growth % |
|
|
2016 |
|
|
2015 |
|
|
Package Testing |
|
$ |
8,354 |
|
$ |
6,899 |
|
21 |
% |
|
|
56 |
% |
|
|
54 |
% |
|
|
Permeation |
|
|
5,929 |
|
|
6,519 |
|
-9 |
% |
|
|
63 |
% |
|
|
59 |
% |
|
|
Industrial Analyzers and Other |
|
|
2,607 |
|
|
1,905 |
|
37 |
% |
|
|
45 |
% |
|
|
42 |
% |
|
|
Total Revenue |
|
$ |
16,890 |
|
$ |
15,323 |
|
10 |
% |
|
|
57 |
% |
|
|
55 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
|
Revenue |
|
|
Gross Margin as a % of
Revenue |
|
|
|
|
|
2016 |
|
|
2015 |
|
Growth % |
|
|
2016 |
|
|
2015 |
|
|
Package Testing |
|
$ |
30,257 |
|
$ |
26,583 |
|
14 |
% |
|
|
57 |
% |
|
|
54 |
% |
|
|
Permeation |
|
|
23,039 |
|
|
24,599 |
|
-6 |
% |
|
|
60 |
% |
|
|
59 |
% |
|
|
Industrial Analyzers and Other |
|
|
10,015 |
|
|
9,572 |
|
5 |
% |
|
|
45 |
% |
|
|
46 |
% |
|
|
Total Revenue |
|
$ |
63,311 |
|
$ |
60,754 |
|
4 |
% |
|
|
56 |
% |
|
|
55 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from the Package Testing segment for the fourth quarter
and year ended December 31, 2016 increased 21 percent and 14
percent, respectively, compared to the year-ago periods due to
strong demand for headspace analyzers, leak detection equipment and
related services across the globe. As discussed in the previous
quarter results, Europe is experiencing significant growth with
increased demand for convenience and sustainable food
packaging. In addition, the growth that the U.S. is
experiencing 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 fourth quarter and
year ended December 31, 2016 declined by nine and six percent
compared to the year-ago periods, respectively. The decline is
attributable to reduced US shipments primarily driven by orders
that were received too late within the quarter to be shipped before
December 31, 2016 as evidenced by an $800,000 increase in the
company’s Permeation backlog during the fourth quarter of 2016. In
addition, approximately $0.3 million and $0.6 million of the
year-over-year decline for the quarter and the year respectively,
was attributable to the sale of our odor and aroma consulting
business.
The Industrial Analyzers and Other segment increased by 37
percent and five percent year-over-year for the fourth quarter and
year ended December 31, 2016, respectively. Sensor revenue
sold primarily to OEM customers in the U.S. grew year-over-year by
27 percent and 36 percent in the fourth quarter and full year ended
December 31, 2016. The growth in analyzer sales is driven by
increased demand in environmental monitoring and worker safety
markets.
Gross Profit, Operating Income and Operating Expense
Commentary
For the three-months ended December 31, 2016 and
2015, gross profit was 57 percent and 55 percent of revenue, and
operating income was 12 percent and four percent of revenue,
respectively. For the year ended December 31, 2016 and
2015, gross profit was 56 percent and 55 percent of revenue, and
operating income was 10 percent and seven percent of revenue,
respectively.
The fourth quarter 2016 gross profit rate in the
Package Testing segment was 56 percent, a two-percentage point
increase when compared to the year-ago quarter. As the company had
experienced throughout the first nine months of 2016, the fourth
quarter increase was driven by revenue growth and process
improvement initiatives.
Despite the fact that revenue declined by nine percent, the
Permeation segment’s fourth quarter gross profit rate increased by
four percentage points year-over-year to 63 percent of
revenue. The increase was driven by the mix between product,
services and consulting. In the fourth quarter of 2016,
product revenue, which generates the highest gross margins in this
segment, comprised 81 percent of this segment’s revenue compared to
70 percent in the fourth quarter of 2015.
The Industrial Analyzers and Other segment gross profit rate for
the current quarter increased by three percentage points to 45
percent compared to 42 percent in the prior year quarter due to a
reduction in the cost to deliver services.
Selling, general and administrative (SG&A) expenses were 37
percent and 38 percent of revenue in the fourth quarters of 2016
and 2015, respectively. 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 eight percent of revenue in the fourth 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 $8.3 million at December
31, 2016 compared to $6.3 million at December 31, 2015
- Days sales outstanding were 57 in the fourth quarter of 2016
compared to 51 in the third quarter of 2016, primarily driven by a
$0.9 million sequential increase in revenue that was shipped toward
the end of the fourth quarter
- Total debt was $0.2 million at December 31, 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 December 31, |
|
Year Ended December 31, |
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
*2015 |
Revenue |
|
|
|
|
|
|
|
Products |
$ |
13,176 |
|
|
$ |
11,860 |
|
|
$ |
49,506 |
|
|
$ |
47,832 |
|
Services |
|
3,296 |
|
|
|
2,618 |
|
|
|
11,674 |
|
|
|
9,956 |
|
Consulting |
|
418 |
|
|
|
845 |
|
|
|
2,131 |
|
|
|
2,966 |
|
Total revenue |
|
16,890 |
|
|
|
15,323 |
|
|
|
63,311 |
|
|
|
60,754 |
|
Cost of
revenue |
|
|
|
|
|
|
|
Products |
|
5,726 |
|
|
|
5,289 |
|
|
|
21,198 |
|
|
|
21,308 |
|
Services |
|
1,248 |
|
|
|
1,131 |
|
|
|
4,793 |
|
|
|
4,205 |
|
Consulting |
|
332 |
|
|
|
502 |
|
|
|
1,663 |
|
|
|
2,017 |
|
Total cost of revenue |
|
7,306 |
|
|
|
6,922 |
|
|
|
27,654 |
|
|
|
27,530 |
|
Gross profit |
|
9,584 |
|
|
|
8,401 |
|
|
|
35,657 |
|
|
|
33,224 |
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses |
|
6,275 |
|
|
|
5,871 |
|
|
|
23,615 |
|
|
|
23,468 |
|
Research and
development expenses |
|
1,210 |
|
|
|
1,260 |
|
|
|
4,844 |
|
|
|
4,341 |
|
Realignment
expenses |
|
- |
|
|
|
731 |
|
|
|
903 |
|
|
|
1,049 |
|
Operating income |
|
2,099 |
|
|
|
539 |
|
|
|
6,295 |
|
|
|
4,366 |
|
Other income,
net |
|
135 |
|
|
|
3 |
|
|
|
371 |
|
|
|
93 |
|
Income before income taxes |
|
2,234 |
|
|
|
542 |
|
|
|
6,666 |
|
|
|
4,459 |
|
Income tax
expense |
|
475 |
|
|
|
276 |
|
|
|
1,666 |
|
|
|
1,487 |
|
Net income |
$ |
1,759 |
|
|
$ |
266 |
|
|
$ |
5,000 |
|
|
$ |
2,972 |
|
Net income per
common share: |
|
|
|
|
|
|
|
Basic |
$ |
0.30 |
|
|
$ |
0.05 |
|
|
$ |
0.86 |
|
|
$ |
0.52 |
|
Diluted |
$ |
0.30 |
|
|
$ |
0.05 |
|
|
$ |
0.86 |
|
|
$ |
0.51 |
|
Weighted
average common shares outstanding: |
|
|
|
|
|
|
|
Basic |
|
5,818 |
|
|
|
5,767 |
|
|
|
5,802 |
|
|
|
5,753 |
|
Diluted |
|
5,894 |
|
|
|
5,806 |
|
|
|
5,835 |
|
|
|
5,818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Our Statement of Operations for the year ended December 31,
2015 has been revised to correct a $470,000 overstatement of
revenue andcost of revenue which impacted our Permeation Products
and Services reporting segment. This immaterial revision had
no impact to ourreported gross profit, operating income or net
income per common share. |
|
|
|
|
|
CONDENSED
BALANCE SHEET DATA: (unaudited) |
|
|
|
|
|
December 31, 2016 |
|
December 31, 2015 |
|
Assets: |
|
|
|
|
Cash and marketable securities |
$ |
8,313 |
|
|
$ |
6,344 |
|
Accounts receivable, net |
|
10,726 |
|
|
|
8,786 |
|
Inventories |
|
6,728 |
|
|
|
7,790 |
|
Other current assets |
|
1,395 |
|
|
|
1,782 |
|
Total current assets |
|
27,162 |
|
|
|
24,702 |
|
Property, plant and equipment, net |
|
5,457 |
|
|
|
5,995 |
|
Goodwill, intangibles and other assets |
|
15,829 |
|
|
|
16,722 |
|
Total assets |
$ |
48,448 |
|
|
$ |
47,419 |
|
Liabilities and
Shareholders’ Equity: |
|
|
|
|
Notes payable, current |
|
83 |
|
|
|
65 |
|
Other current liabilities |
|
10,632 |
|
|
|
9,535 |
|
Total noncurrent liabilities |
|
1,282 |
|
|
|
4,348 |
|
Shareholders’ equity |
|
36,451 |
|
|
|
33,471 |
|
Total liabilities and shareholders’
equity |
$ |
48,448 |
|
|
$ |
47,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED
CASH FLOW DATA: (unaudited) |
|
December 31, 2016 |
|
|
|
December 31, 2015 |
|
|
Net cash
provided by operations |
$ |
7,283 |
|
|
$ |
6,372 |
|
Net cash
used in investing activities |
|
(343 |
) |
|
|
(1,683 |
) |
Net cash
used in financing activities |
|
(4,875 |
) |
|
|
(4,002 |
) |
Effect of
exchange rate changes |
|
(96 |
) |
|
|
(675 |
) |
Net
increase in cash |
|
1,969 |
|
|
|
12 |
|
Cash
beginning of year |
|
6,344 |
|
|
|
6,332 |
|
Cash end
of year |
$ |
8,313 |
|
|
$ |
6,344 |
|
|
MOCON, INC. |
|
|
|
NON-GAAP RECONCILIATION |
|
(in Thousands, Except Share
Data) |
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended December 31, |
|
Year Ended December 31, |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
Net
income |
$ |
1,759 |
|
|
$ |
266 |
|
|
$ |
5,000 |
|
|
$ |
2,972 |
|
|
Interest expense, net |
|
7 |
|
|
|
20 |
|
|
|
53 |
|
|
|
118 |
|
|
Income tax expense |
|
475 |
|
|
|
276 |
|
|
|
1,666 |
|
|
|
1,487 |
|
|
Depreciation and amortization |
|
634 |
|
|
|
627 |
|
|
|
2,551 |
|
|
|
2,460 |
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
2,875 |
|
|
|
1,189 |
|
|
|
9,270 |
|
|
|
7,037 |
|
|
Share-based compensation |
|
189 |
|
|
|
153 |
|
|
|
750 |
|
|
|
642 |
|
|
Gain on sale of business |
|
(201 |
) |
|
|
- |
|
|
|
(553 |
) |
|
|
- |
|
|
|
Realignment expenses |
|
- |
|
|
|
731 |
|
|
|
903 |
|
|
|
1,049 |
|
|
|
Foreign currency transaction loss
(gain) |
|
56 |
|
|
|
(23 |
) |
|
|
116 |
|
|
|
(209 |
) |
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
$ |
2,919 |
|
|
$ |
2,050 |
|
|
$ |
10,486 |
|
|
$ |
8,519 |
|
|
|
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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