Mesa Labs Completes the Acquisition of GKE Science & Technology Co.

Rhea-AI Summary

Mesa Laboratories, Inc. (NASDAQ:MLAB) completed the acquisition of GKE-GmbH's sterilization indicators business and its accredited, independent testing lab SAL GmbH on October 16th, 2023. They also acquired GKE's Chinese sales entity, Beijing GKE Science & Technology Co. LTD ('GKE China') on December 31, 2023. The acquisitions are expected to add €19-€20 million of revenues over the next 12 months and deliver mid-single digit organic revenues growth over the next several years. Gross profit as a percentage of revenues is expected to be in line with their existing SDC business, and adjusted operating income as a percentage of revenues is projected to approach 37%-40% over the next 12 months.

Financial Analyst

The acquisition of GKE-GmbH's sterilization indicators business and the subsequent purchase of GKE's Chinese sales entity by Mesa Laboratories represents a strategic expansion of Mesa's global footprint in the life science tools and quality control solutions sector. The projected addition of €19-€20 million in revenue and an anticipated mid-single digit organic revenue growth over the next several years indicate a positive trajectory for Mesa's financial performance. The expected gross profit margins aligning with Mesa's existing SDC business suggest operational synergy and efficient integration of the new entities.

Furthermore, the forecasted adjusted operating income margin of 37%-40% is a significant figure, potentially reflecting a robust profitability post-acquisition. This margin is particularly noteworthy given that the average operating margin for medical equipment and supplies companies is typically around 12.5% according to industry standards. Mesa's performance in this regard could be indicative of strong management practices and a competitive advantage within their niche market. Stakeholders should monitor the realization of these financial projections closely, as they could have material implications for Mesa's stock valuation and overall market position.

Market Research Analyst

The sterilization indicators market is a critical component of the broader life science industry, ensuring the safety and efficacy of medical equipment and pharmaceutical products. Mesa Laboratories' acquisition of GKE and its Chinese counterpart signifies not only an expansion of Mesa's operational capabilities but also an increase in its influence within the global market. The integration of GKE's independent testing lab and sales network in China is poised to enhance Mesa's competitive edge by broadening its service offerings and geographical reach.

The emphasis on mid-single digit organic revenue growth implies that Mesa is focusing on sustainable growth, leveraging GKE's existing market presence rather than solely relying on aggressive expansion strategies. This approach could resonate well with investors who are increasingly mindful of long-term value creation and market stability. Additionally, the integration of these entities could facilitate Mesa's access to the burgeoning Chinese market, which is known for its rapidly growing healthcare sector. The success of this acquisition could serve as a bellwether for Mesa's ability to navigate international markets and implement effective cross-cultural business strategies.

Medical Research Analyst

From a medical research perspective, the acquisition of GKE's sterilization indicators business is a significant development in the realm of quality control for life sciences. Sterilization indicators are essential for validating the effectiveness of sterilization processes, which are crucial in preventing infection and ensuring patient safety in healthcare settings. Mesa Laboratories' expansion in this area could lead to advancements in sterilization technology and improved quality control measures.

The integration of GKE's accredited testing lab, SAL GmbH, into Mesa's portfolio is particularly noteworthy. Accredited labs are held to high standards of precision and reliability, which are paramount in the life sciences sector. This acquisition could enhance Mesa's research and development capabilities, potentially leading to innovative solutions that could benefit the medical community. The impact of such advancements could be far-reaching, potentially influencing regulatory standards and practices across the healthcare industry.

LAKEWOOD, Colo., Jan. 03, 2024 (GLOBE NEWSWIRE) -- Mesa Laboratories, Inc. (NASDAQ:MLAB) (“Mesa”, “we”, “us” or “our”), a global leader in the design and manufacturing of life science tools and critical quality control solutions, announced the completed acquisition of GKE-GmbH’s sterilization indicators business and its accredited, independent testing lab SAL GmbH on October 16^th, 2023.   Today, Mesa announced the completion of the acquisition of GKE’s Chinese sales entity, Beijing GKE Science & Technology Co. LTD (“GKE China”) effective December 31, 2023, which completes all related transactions. Together, the entities are referred to as “GKE.”

The three GKE entities are expected to add €19-€20 million of revenues over the next 12 months and deliver mid-single digit organic revenues growth over the next several years. Excluding the impact of purchase accounting and integration expenses, we expect gross profit as a percentage of revenues to be in line with our existing SDC business and adjusted operating income¹ as a percentage of revenues to approach 37%-40% over the next 12 months.

About Mesa Laboratories, Inc.

Mesa is a global leader in the design and manufacturing of life science tools and critical quality control solutions for regulated applications in the pharmaceutical, healthcare and medical device industries. Mesa offers products and services to help our customers ensure product integrity, increase patient and worker safety, and improve the quality of life throughout the world.

¹ Non-GAAP Financial Measure

In this release, we refer to the non-GAAP financial measure of adjusted operating income (“AOI”), which is defined to exclude the non-cash impact of amortization of intangible assets, stock-based compensation expense, and impairment loss on goodwill and long-lived assets. We are unable to provide a reconciliation of forward-looking AOI because components of the calculation are inherently unpredictable and currently unknown.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws. Investors are cautioned that statements in this press release which are not strictly historical statements including, without limitation, express or implied statements or guidance regarding the expected effect of the acquisition of GKE on Mesa’s future financial performance, including revenue and income growth, the accretive nature and the timing of the accretive nature of the acquisition, expected synergies following the acquisition of GKE, customer adoption of GKE’s products, the expected expansion of Mesa’s product lines, the timing of the closing of the GKE China acquisition and other statements identified by words like “believe,” “expect,” “may,” “will,” “should,” “seek,” or “could” and similar expressions, constitute forward-looking statements. Such forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated, including, without limitation, risks associated with: the risk that the proposed acquisition may not be completed in a timely manner, or at all; the occurrence of any event, change or other circumstance that could give rise to the termination of the acquisition; our ability to integrate GKE’s business and personnel and to achieve expected synergies; our ability to maintain or expand GKE’s historical sales; our ability to accurately forecast the acquisition, related restructuring costs and allocation of the purchase price, goodwill and other acquired intangibles and other asset adjustments; the risk of any litigation relating to the transaction; and other risks detailed in Mesa’s most recent Annual Report on Form 10-K on file with the Securities and Exchange Commission and the other reports that Mesa periodically files with the Securities and Exchange Commission. Actual results may differ materially from those contemplated by these forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. These forward-looking statements reflect management’s current views and are based only on information currently available to us. Mesa does not undertake to update any of these forward-looking statements to reflect a change in its views or events or circumstances, whether as a result of new information or otherwise, that occur after the date hereof except as required by law.

For more information about the Company, please visit its website at www.mesalabs.com

What did Mesa Laboratories, Inc. (MLAB) acquire on October 16th, 2023?

Mesa Laboratories, Inc. acquired GKE-GmbH's sterilization indicators business and its accredited, independent testing lab SAL GmbH.

What entity did Mesa Laboratories, Inc. (MLAB) acquire on December 31, 2023?

Mesa Laboratories, Inc. acquired GKE's Chinese sales entity, Beijing GKE Science & Technology Co. LTD ('GKE China').

What are the expected revenues from the acquisitions over the next 12 months?

The acquisitions are expected to add €19-€20 million of revenues over the next 12 months.

What is the projected gross profit as a percentage of revenues over the next 12 months?

The gross profit as a percentage of revenues is expected to be in line with their existing SDC business.

What is the projected adjusted operating income as a percentage of revenues over the next 12 months?

The adjusted operating income as a percentage of revenues is projected to approach 37%-40% over the next 12 months.