10-Q

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form

10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission file

number 0-14902

MERIDIAN BIOSCIENCE, INC.

Incorporated under the laws of Ohio

31-0888197

(I.R.S. Employer Identification No.)

3471 River Hills Drive

Cincinnati, Ohio 45244

(513)

271-3700

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	VIVO	NASDAQ Global Select Market

Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class		Outstanding July 31, 2022
Common Stock, no par value		43,747,669

Table of Contents

MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

TABLE OF CONTENTS TO QUARTERLY REPORT ON FORM

10-Q


		Page(s)

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Operations Three and Nine Months Ended June 30, 2022 and 2021		1

	Condensed Consolidated Statements of Comprehensive Income (Loss) Three and Nine Months Ended June 30, 2022 and 2021		2

	Condensed Consolidated Statements of Cash Flows Nine Months Ended June 30, 2022 and 2021		3

	Condensed Consolidated Balance Sheets June 30, 2022 and September 30, 2021		4-5

	Condensed Consolidated Statements of Changes in Shareholders’ Equity Three and Nine Months Ended June 30, 2022 and 2021		6

	Notes to Condensed Consolidated Financial Statements		7-18

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		19-28

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		28

Item 4.	Controls and Procedures		28

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings		29

Item 1A.	Risk Factors		29

Item 6.	Exhibits		30

Signatures			31

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form

10-Q

contains forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil litigation for forward-looking statements accompanied by meaningful cautionary statements. Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, which may be identified by words such as “continues”, “estimates”, “anticipates”, “projects”, “plans”, “seeks”, “may”, “will”, “expects”, “intends”, “believes”, “signals”, “should”, “can” and similar expressions or the negative versions thereof and which also may be identified by their context. All statements that address operating performance or events or developments that Meridian Bioscience, Inc. (“Meridian” or “the Company”) expects or anticipates will occur in the future, including, but not limited to, statements relating to per share diluted net earnings, sales, product demand, net revenues, operating margin, other guidance and the impact of

COVID-19

on its business and prospects, are forward-looking statements. Such statements, whether expressed or implied, are based upon current expectations of the Company and speak only as of the date made. Specifically, Meridian’s forward-looking statements are, and will be, based on management’s then-current views and assumptions regarding future events and operating performance. Meridian assumes no obligation to publicly update or revise any forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. These statements are subject to various risks, uncertainties and other factors that could cause actual results to differ materially, including, without limitation, the following:

Table of Contents

Meridian’s operating results, financial condition and continued growth depends, in part, on its ability to introduce into the marketplace enhancements of existing products or new products that incorporate technological advances, meet customer requirements and respond to products developed by Meridian’s competition, its ability to effectively sell such products and its ability to successfully expand and effectively manage increased sales and marketing operations. While Meridian has introduced a number of internally developed products and acquired products, there can be no assurance that it will be successful in the future in introducing such products on a timely basis or in protecting its intellectual property, and unexpected or costly manufacturing costs associated with its introduction of new products or acquired products could cause actual results to differ from expectations. Meridian relies on proprietary, patented and licensed technologies. As such, the Company’s ability to protect its intellectual property rights, as well as the potential for intellectual property litigation, would impact its results. Ongoing consolidations of reference laboratories and formation of multi-hospital alliances may cause adverse changes to pricing and distribution. Recessionary pressures on the economy and the markets in which the Company’s customers operate, as well as adverse trends in buying patterns from customers, can change expected results. Costs and difficulties in complying with laws and regulations, including those administered by the United States Food and Drug Administration, and in complying with the ongoing investigation of the Department of Justice described in Meridian’s reports filed with the SEC, can result in unanticipated expenses and delays and interruptions to the sale of new and existing products, as can the uncertainty of regulatory approvals and the regulatory process. The international scope of Meridian’s operations, including changes in the relative strength or weakness of the U.S. dollar and general economic conditions in foreign countries, can impact results and make them difficult to predict. One of Meridian’s growth strategies is the acquisition of companies and product lines. There can be no assurance that additional acquisitions will be consummated or that, if consummated, will be successful and that the acquired businesses will be successfully integrated into Meridian’s operations. There may be risks that acquisitions may disrupt operations and may pose potential difficulties in employee retention, and there may be additional risks with respect to Meridian’s ability to recognize the benefits of acquisitions, including potential synergies and cost savings or the failure of acquisitions to achieve their plans and objectives. Meridian cannot predict the outcome of future goodwill impairment testing and the impact of possible goodwill impairments on Meridian’s earnings and financial results. Meridian cannot predict the possible impact of any modification or repeal of any of the provisions of current U.S. health care legislation, and any similar initiatives in other countries on Meridian’s results of operations. Efforts to reduce the U.S. federal deficit, breaches of Meridian’s information technology systems, trade wars, increased tariffs, and natural disasters and other events could have a materially adverse effect on Meridian’s results of operations and net revenues. The Company can make no assurances that a material weakness in its internal control over financial reporting will not be identified in the future, which if identified and not properly corrected, could materially and adversely affect its operations and result in material misstatements in its consolidated financial statements. Meridian also is subject to risks and uncertainties related to the proposed acquisition by SD Bioscensor, Inc., as well as disruptions to or reductions in business operations or prospects due to pandemics, epidemics, widespread health emergencies, or outbreaks of infectious diseases such as

COVID-19,

including, without limitation, related supply chain interruptions. In addition to the factors described in this paragraph, as well as those factors identified from time to time in the Company’s filings with the Securities and Exchange Commission, Part I, Item 1A Risk Factors of the Company’s most recent Annual Report on Form

10-K

contains a list and description of uncertainties, risks and other matters that may affect the Company. Readers should carefully review these forward-looking statements and risk factors, and not place undue reliance on the Company’s forward-looking statements.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(dollar and share amounts in thousands, except per share data)


	Three Months Ended June 30,						Nine Months Ended June 30,
	2022			2021			2022			2021
NET REVENUES	$	67,771		$	63,511		$	267,343		$	241,692
COST OF SALES		31,043			26,400			112,979			85,261

GROSS PROFIT		36,728			37,111			154,364			156,431

OPERATING EXPENSES
Research and development		6,043			6,083			17,928			17,799
Selling and marketing		8,178			6,209			23,433			19,770
General and administrative		13,149			11,964			46,364			36,827
Acquisition and transaction related costs		4,227			300			4,295			300
Litigation and select legal costs		11,812			438			12,601			2,695
Change in fair value of acquisition consideration		—			(3,563	)		—			(5,505	)

Total operating expenses		43,409			21,431			104,621			71,886

OPERATING INCOME (LOSS)		(6,681	)		15,680			49,743			84,545
OTHER INCOME (EXPENSE)
Interest income		2			—			5			15
Interest expense		(256	)		(444	)		(969	)		(1,450	)
RADx grant income		—			—			—			1,000
Other, net		333			59			905			(1,515	)

Total other income (expense), net		79			(385	)		(59	)		(1,950	)

EARNINGS (LOSS) BEFORE INCOME TAXES		(6,602	)		15,295			49,684			82,595

INCOME TAX PROVISION		736			3,626			12,930			17,845

NET EARNINGS (LOSS)	$	(7,338	)	$	11,669		$	36,754		$	64,750

BASIC EARNINGS (LOSS) PER COMMON SHARE	$	(0.17	)	$	0.27		$	0.84		$	1.50
DILUTED EARNINGS (LOSS) PER COMMON SHARE	$	(0.16	)	$	0.26		$	0.83		$	1.47
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC		43,586			43,334			43,526			43,226
EFFECT OF DILUTIVE STOCK OPTIONS AND RESTRICTED SHARE UNITS		888			763			704			780

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED		44,474			44,097			44,230			44,006

ANTI-DILUTIVE SECURITIES:
Common share options and restricted share units		79			190			188			180

The accompanying notes are an integral part of these condensed consolidated financial statements.

Page 1

Table of Contents

MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(dollar amounts in thousands)


	Three Months Ended June 30,						Nine Months Ended June 30,
	2022			2021			2022			2021
NET EARNINGS (LOSS)	$	(7,338	)	$	11,669		$	36,754		$	64,750
Other comprehensive income (loss):
Foreign currency translation adjustment		(5,166	)		41			(7,044	)		3,421
Reclassification of realized gain on cash flow hedge		—			—			(935	)		—
Unrealized gain on cash flow hedge		216			9			2,201			469
Reclassification of amortization of gain on cash flow hedge		—			—			—			(154	)
Income taxes related to items of other comprehensive income (loss)		(53	)		(2	)		(310	)		(68	)

Other comprehensive income (loss), net of tax		(5,003	)		48			(6,088	)		3,668

COMPREHENSIVE INCOME (LOSS)	$	(12,341	)	$	11,717		$	30,666		$	68,418

The accompanying notes are an integral part of these condensed consolidated financial statements.

Page 2

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MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(dollar amounts in thousands)


	Nine Months Ended June 30,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings	$	36,754		$	64,750
Non-cash items included in net earnings:
Depreciation of property, plant and equipment		5,009			4,729
Amortization of intangible assets		7,433			6,453
Stock-based compensation		5,006			3,170
Deferred income taxes		2,248			(35	)
Estimated litigation costs		10,000			—
Change in fair value of acquisition consideration		—			(5,505	)
Change in the following:
Accounts receivable		7,933			(2,363	)
Inventories		4,473			(11,831	)
Prepaid expenses and other current assets		(1,401	)		(1,965	)
Accounts payable and accrued expenses		4,800			(2,252	)
Income taxes payable		(1,515	)		(2,317	)
Other, net		(366	)		(448	)

Net cash provided by operating activities		80,374			52,386

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment		(5,138	)		(16,407	)
Acquisition, net of cash acquired and holdback		(3,750	)		—
Payment of acquisition consideration holdback		—			(5,000	)

Net cash used in investing activities		(8,888	)		(21,407	)

CASH FLOWS FROM FINANCING ACTIVITIES
Payment on revolving credit facility		(35,000	)		(18,824	)
Payment of deferred financing costs		(404	)		—
Proceeds from exercise of stock options		2,438			2,939
Employee taxes paid upon stock option exercises and net share settlemen

SEC Form 10-Q filed by Meridian Bioscience Inc.