What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-06 compared with 2025-08-05 · 198 added, 146 removed, 166 unchanged (67% of the section changed)

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The forward-looking statements in this Quarterly Report on Form 10-Q do not constitute guarantees of future performance.

Investors are cautioned that statements in this Quarterly Report on Form 10-Q which are not strictly historical statements, including, without limitation, express or implied statements or guidance regarding current or future financial performance and position;

Investors are cautioned that statements in this Quarterly Report on Form 10-Q that are not strictly historical statements, including, without limitation, express or implied statements or guidance regarding current or future financial performance and position;

results of acquisitions;

management ’ s strategy, plans and objectives for future operations or acquisitions, product development and sales;

and adequacy of capital resources and financing plans constitute forward-looking statements.

adequacy of capital resources and financing plans;

anticipated cost savings;

and the effect of tariffs and other developments in the regulatory environment and our responses thereto constitute forward-looking statements.

These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which the Company operates, and management ’ s beliefs and assumptions.

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conditions in the global economy and the particular markets we serve;

significant developments or uncertainties stemming from governmental actions, including changes in trade policies such as tariffs, and changes in medical device regulations;

significant developments or uncertainties stemming from governmental actions, including changes in trade policies such as tariffs, and changes in tax, medical device and other regulations;

the timely development and commercialization, and customer acceptance, of enhanced and new products and services;

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Such risks and uncertainties also include those listed in Item 1A.

“ Risk Factors ” in our Annual Report on Form 10-K for the year ended March 31, 2025 and in this report.

“ Risk Factors ” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025 and in this report.

The foregoing list sets forth many, but not all, of the factors that could impact our ability to achieve results described in any forward-looking statements.

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We offer products and services to help our customers ensure product integrity, increase patient and worker safety, and improve the quality of life throughout the world.

We have manufacturing operations in the United States and Europe, and our products are marketed by our sales personnel in North America, Europe and Asia Pacific, and by independent distributors throughout the world.

As of June 30, 2025, we managed our operations in four reportable segments, or divisions:

Sterilization and Disinfection Control, Biopharmaceutical Development, Calibration Solutions, and Clinical Genomics.

We have manufacturing operations in the United States and Europe, and our products are marketed by our sales personnel in North America, Europe and the APAC region, and by independent distributors throughout the world.

As of September 30, 2025, we managed our operations in four reportable segments, or divisions:

Sterilization and Disinfection Control, Biopharmaceutical Development ("BPD"), Calibration Solutions, and Clinical Genomics.

Each of our divisions is described further in "Results of Operations" below.

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We strive to create stakeholder value and further our purpose of Protecting the Vulnerable® by growing our business both organically and through acquisitions, by improving our operating efficiency, and by continuing to hire, develop and retain top talent.

We commit to our purpose of Protecting the Vulnerable® every day by taking a customer-focused approach to developing, building and delivering our products and services.

We serve a broad set of industries, in particular the pharmaceutical, healthcare and medical device sectors, in which the safety, quality and efficacy of products is critical.

We commit to our purpose every day by taking a customer-focused approach to developing, building and delivering our products and services.

We serve a broad set of industries, particularly the pharmaceutical, healthcare and medical device sectors, in which the safety, quality and efficacy of products is critical.

By delivering the highest quality products possible, we are committed to protecting the communities we serve.

Our continued growth will depend on our ability to (i) expand business with new and existing customers through ongoing commercial efforts, (ii) manage our costs and allocate resources to ensure continued profitability of our business, (iii) identify, consummate and integrate acquisitions successfully, and (iv) develop or acquire differentiated products and services.

We strive to maintain our profitability by improving the effectiveness of our sales force, by continuing to pursue cost reduction initiatives, and by taking a long-term strategic approach to investments in our business that we believe will support future commercial success.

Organic Revenues Growth

Organic revenues growth is driven by expansion of our customer base, increases in sales volumes, new product offerings and price increases, and may be affected positively or negatively by the impact of changes in foreign currency rates on our reported revenues.

Our ability to increase organic revenues is affected by general economic conditions, both domestic and international, customer capital spending trends, competition, currency exchange rates, and the introduction of new products.

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Inorganic Growth - Acquisitions

Over the past decade, we have consummated a number of acquisitions of businesses, technologies, or intangibles such as customer lists, as part of our growth strategy.

Over the past decade, we have consummated a number of acquisitions of businesses, technologies, and intangibles such as customer lists as part of our growth strategy.

Our acquisitions have allowed us to expand our product offerings and the industries we serve, globalize our company, and increase the scale at which we operate.

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Our ongoing goal is to maximize value in our businesses by implementing efficiencies in our manufacturing, commercial, engineering and administrative operations.

We achieve efficiencies using the Mesa Way , our customer-centric, lean-based system for continuously improving our operations.

We achieve efficiencies using the Mesa Way , our customer-centric, lean-based system for continuous improvement.

The Mesa Way is built on four key pillars:

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and "Always Learning" to continuously build knowledge and capabilities to drive long-term performance.

Our gross profit is affected by many factors, including the types of products and services sold and the geographical region in which we sell them, labor and product costs (including costs of transporting, importing and exporting goods, and associated tariffs), manufacturing efficiencies, foreign currency rates and price competition.

Our gross profit is affected by many factors, including the mix of products and services sold and the geographical regions in which we sell them, labor and product costs (including costs of transporting, importing and exporting goods, as well as associated tariffs), manufacturing efficiencies, foreign currency rates and price competition.

Historically, as we have integrated acquisitions into our business and taken advantage of manufacturing efficiencies, our gross profit percentages for some products have improved.

There are, however, differences in gross profit percentages between product lines, and ultimately our mix of revenues will continue to impact our overall gross profit.

We continuously pursue opportunities to improve the efficiency of our administrative functions, including through the use of process automation and artificial intelligence.

We continuously pursue opportunities to improve the efficiency of our administrative functions, including through increasing usage of process automation and artificial intelligence.

Hire, Develop, and Retain Top Talent

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We are a global company with multinational operations.

During the three months ended June 30, 2025, approximately 54% of our revenues were earned outside of the United States.

Our geographic and industry diversity presents both opportunities and challenges, including those associated with operating in varied economic environments, complying with increasing regulatory requirements including tariffs and reciprocal tariffs, navigating global labor trends and costs, adapting to technology changes in served markets, pursuing expansion opportunities in high-growth markets, and monitoring foreign currency impacts against the U.S.

During the six months ended September 30, 2025, approximately 53% of our revenues were earned outside of the United States.

Our geographic and industry diversity presents both opportunities and challenges, including those associated with operating in varied economic environments, complying with evolving regulatory requirements such as tariffs, navigating global labor trends and costs, adapting to technology changes in served markets, pursuing expansion opportunities in high-growth markets, and monitoring foreign currency impacts against the U.S.

dollar ("USD").

Our continued revenues growth will depend on our ability to (i) expand business with new and existing customers through ongoing commercial efforts, (ii) identify, consummate and integrate acquisitions successfully, and (iii) develop or acquire differentiated products and services.

During the first quarter of fiscal year 2026, our revenues increased 2.4% versus the comparable prior year period, primarily as a result of organic revenues growth in our Sterilization and Disinfection Control and Calibration Solutions divisions, partially offset by revenues declines in our Clinical Genomics and Biopharmaceutical Development divisions.

Gross profit as a percentage of revenues decreased 2.0 percentage points to 62.0% in the first quarter of fiscal year 2026 versus the comparable prior year period;

however, the direct impact of tariffs on our gross profit percentage for the first quarter of fiscal year 2026 was modest.

Operating expenses increased 7.0% for the three months ended June 30, 2025 versus the comparable prior year period.

Changes in global markets, including the weakening of the U.S.

dollar, current tariffs and inflationary pressures, and economic uncertainty during the three months ended June 30, 2025 have resulted in higher reported costs of revenues and operating expenses.

We expect that the impact of current tariffs will continue to apply upward pressure on our costs.

In future periods, we expect to partially offset the operating profit impact of the enacted tariff with price increases, supply chain adjustments, surcharges, and additional productivity and cost savings actions;

however, we cannot predict the impact rising costs will ultimately have on our operating profits.

We source parts and materials from vendors and sell to customers throughout the world.

Beginning in the first quarter of fiscal year 2026, the U.S.

implemented significant tariffs on imports from a wide range of countries, which prompted retaliatory tariffs by a number of countries, resulting in some cases in a cycle of further retaliatory tariffs by both the U.S.

and other countries.

In early April 2025, actions were taken by the U.S.

and certain other countries to delay the effective date of certain of these tariffs, but a number of the new tariffs remain in effect, including significant tariffs between the U.S.

In addition to changes in trade policy, there have been a number of international and domestic policy and regulatory changes in recent years that have resulted in uncertainty and in some cases, slower selling cycles for our instruments.

Our Sterilization and Disinfection Control and Calibration Solutions division benefited from strong commercial execution and increased orders in the first quarter of fiscal year 2026 compared to the same period in fiscal year 2025.

Both the Biopharmaceutical Development and Clinical Genomics divisions experienced challenges presented by changing global trade and regulatory environments, including the impact of tariffs and uncertainty regarding their duration and magnitude, which contributed to delays in customer purchasing decisions.

The strengthening of foreign currencies against the U.S.

dollar increases our reported revenues, gross profit margins, operating expenses and other income, and impacts the comparability of our results between periods.

Conversely, the strengthening of the U.S.

dollar against other major currencies would adversely impact our revenues and results of operations overall.

For the six months ended September 30, 2025, we realized revenue growth of 3.7% versus the comparable prior year period, driven by growth in our Calibration Solutions, Biopharmaceutical Development, and Sterilization and Disinfection Control divisions.

Our Clinical Genomics division experienced revenue declines due to trade tensions and unfavorable macroeconomic conditions in China, which continued to weaken demand for our Clinical Genomics products and services in that region.

We anticipate that challenges in China will persist through the end of fiscal year 2026 and will most likely continue into fiscal year 2027.

Despite challenges in China, Clinical Genomics has continued to execute its commercial strategy successfully in the Americas and Europe;

this geographic mix has resulted in improved gross profit percentages in the second quarter of fiscal 2026 versus the same quarter in the prior year.

Consolidated gross profit as a percentage of revenues decreased 1.0 percentage point, to 61.7%, in the first half of fiscal year 2026 versus the comparable prior year period.

The weakening of the U.S.

dollar versus the comparable prior year period and the impact of tariffs negatively impacted our consolidated gross profit as a percentage of revenues, with a particularly pronounced effect on our Biopharmaceutical Development division.

Excluding the impacts of exchange rate changes and tariffs, gross profit as a percentage of revenue would have been approximately 62.6% for the six months ended September 30, 2025, largely consistent with the prior year period.

While we have been successful at passing certain tariff surcharges on to our customers, in many cases, these incremental tariff surcharges are equal to or slightly less than the tariff costs we incur.

We expect to realize improved tariff cost recovery in future periods.

To address our outlook for Clinical Genomics in China, mitigate margin pressures attributable to tariffs in our business units, and support strategic long-term growth, we adjusted our cost structure during the second quarter of our fiscal year 2026.

Specifically, we have implemented headcount reductions and other cost savings initiatives that we expect to reduce our annualized costs by approximately $3.2 million, of which approximately $2.1 million will be realized by the Clinical Genomics division.

The remainder will benefit other business units and corporate functions.

We expect to reinvest approximately $0.9 million of the savings back into our Sterilization and Disinfection Control division, historically our most profitable division, to accelerate its growth.

As a result of these efforts, we anticipate net annualized cost reductions of approximately $2.3 million, which will be realized starting in the third quarter of fiscal year 2026.

We incurred approximately $0.85 million of severance expense in fiscal year 2026 in connection with these cost reductions.

Operating expenses increased 4.5% for the six months ended September 30, 2025 versus the comparable prior year period.

The increase was largely driven by higher personnel expense, including the impact of foreign-denominated personnel expenses translating into higher reported U.S.

dollar amounts, higher non-cash stock-based compensation, and approximately $0.8 million of operating severance expense, primarily related to the Clinical Genomics division.

In addition, the weaker U.S.

dollar versus the comparable prior year period caused expenses denominated in foreign currencies to translate into higher reported U.S.

dollar amounts in our financial statements.

Results of Operations

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The tables and discussion below should be read in conjunction with the accompanying unaudited Condensed Consolidated Financial Statements and the notes thereto appearing in Item 1.

Financial Statements (Unaudited) .

Financial Statements .

Results by reportable segment are as follows:

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Gross Profit as a % of Revenues

Three Months Ended June 30,

Three Months Ended September 30,

amounts in thousands, except percent data

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Clinical Genomics

Organic Revenues Growth (non-GAAP) (a)

Gross Profit as a % of Revenues

Six Months Ended September 30,

amounts in thousands, except percent data

Sterilization and Disinfection Control

Biopharmaceutical Development

Calibration Solutions

Clinical Genomics

Organic revenues growth is a non-GAAP measure of financial performance.

See "Non-GAAP Measures" below for further information and for a reconciliation of organic revenues growth to total revenues growth.

Organic revenues growth in our Sterilization and Disinfection Control division for the three months ended June 30, 2024 differed from total GAAP revenues growth due to the acquisition of GKE;

Organic revenues growth in our Sterilization and Disinfection Control division for the three and six months ended September 30, 2024 differed from total GAAP revenues growth due to the acquisition of GKE;

for all other amounts presented, GAAP revenues growth is equivalent to organic revenues growth.

Our unaudited condensed consolidated results of operations are as follows:

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

amounts in thousands, except percent data

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Sterilization and Disinfection Control products are disposable and are used on a routine basis.

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

amounts in thousands, except percent data

Gross profit as a % of revenues

The Sterilization and Disinfection Control division's revenues increased 10.7% for the three months ended June 30, 2025 versus the comparable prior year period.

Growth was driven by strong commercial execution resulting in increased sales volumes, and to a lesser extent, increased order fulfillments of our past due backlog as our manufacturing productivity increased, as well as the benefit of higher reported revenues as the euro strengthened against the U.S.

We reduced our past due backlog by approximately $0.8 million compared to March 31, 2025.

Gross profit as a percentage of revenues increased 3.7 percentage points for three months ended June 30, 2025, primarily as a result of a $0.8 million charge for non-cash inventory step-up amortization related to the GKE acquisition that was recorded in the comparable prior year period, and to a lesser extent, favorable foreign currency impacts.

Excluding the impact of non-cash inventory step-up amortization, gross profit as a percentage of revenue would have been 71.5% and 71.2% for the three months ended June 30, 2025 and 2024, respectively.

Revenues for the Sterilization and Disinfection Control division declined 0.4% for the three months ended September 30, 2025 versus the comparable prior year period.

The decrease was primarily driven by lower-than-expected order fulfillments for certain product lines.

Bookings were approximately 5% greater than revenues for the three months ended September 30, 2025.

For the six months ended September 30, 2025, the division’s revenues increased 5.2% versus the comparable prior year period.

Year-to-date growth was largely attributable to strong commercial execution and higher sales volumes during the first quarter of fiscal 2026.

Gross profit as a percentage of revenues decreased by 1.0 percentage point and increased by 1.5 percentage points for the three and six months ended September 30, 2025, respectively, versus the comparable prior year periods.

Excluding the impact of prior year inventory step-up amortization related to the GKE acquisition, gross profit as a percentage of revenues would have decreased by 3.1 and 1.2 percentage points for the three and six months ended September 30, 2025, respectively.

These declines were primarily driven by increased professional services expenses, as we invested in outside expertise to improve our production processes for this division and the impact of a weakening USD.

We expect to significantly decrease these outside professional services expenses during the second half of fiscal year 2026.

Biopharmaceutical Development

Our Biopharmaceutical Development division ("BPD") develops, manufactures, sells and services automated systems for protein analysis (immunoassays) and peptide synthesis solutions.

Our Biopharmaceutical Development division develops, manufactures, sells and services automated systems for protein analysis (immunoassays) and peptide synthesis solutions.

Immunoassays and peptide synthesis solutions accelerate the discovery, development and manufacture of biotherapeutic therapies, among other applications.

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

amounts in thousands, except percent data

Gross profit as a % of revenues

The Biopharmaceutical Development division's revenues decreased 4.3% for the three months ended June 30, 2025 versus the comparable prior year period.

The decline in revenues for the three months ended June 30, 2025 was driven by the timing of customer immunoassays order placements, including order delays as customers navigate purchasing decisions amid evolving macroeconomic uncertainty and tariff conditions, partially offset by higher reported revenues from the strengthening of the euro against the U.S.

While revenues from hardware, and to a lesser extent consumables, declined, revenues from services increased 3.5% for the three months ended June 30, 2025 versus the comparable prior year period.

Gross profit as a percentage of revenues for the Biopharmaceutical Development division decreased 11.4 percentage points for the three months ended June 30, 2025.

The decrease was primarily due to unfavorable product mix as higher-margin immunoassays revenues comprised approximately 68% of the division’s total revenues, versus approximately 76% in the comparable prior year period, and decreased revenues.

Additionally, a large percentage of the division’s cost of goods is denominated in Swedish krona, which appreciated approximately 12% against the U.S.

dollar for the three months ended June 30, 2025 versus the comparable prior year period.

We do not expect the peptides mix to remain at elevated levels throughout the rest of fiscal year 2026, and as a result, we anticipate gross margin percentage for the Biopharmaceutical Development division will improve.

Revenues for the Biopharmaceutical Development division increased 17.3% and 6.4%, respectively, for the three and six months ended September 30, 2025 versus the comparable prior year periods.

Increases in revenue were primarily driven by higher sales of Peptides instruments.

The Biopharmaceutical Development division's consumables revenues grew approximately 14% and 6%, respectively, for the three and six months ended September 30, 2025 versus the comparable prior year periods.

Gross profit as a percentage of revenue for the Biopharmaceutical Development division decreased 2.0 percentage points for the three months ended September 30, 2025 versus the comparable prior year period.

The decrease for the three months ended September 30, 2025 was primarily due to the impact of tariffs and foreign currency translation along with unfavorable product mix as higher-margin Immunoassays revenues comprised a lower portion of the division’s total revenues.

The 6.6 percentage point decrease for the six months ended September 30, 2025 versus the comparable prior year period was primarily due to unfavorable product mix, the impact of tariffs and foreign currency translation, and lower revenues on a partially fixed cost base.

Excluding the impact of tariffs and foreign currency translation, gross profit as a percentage of revenues would have been approximately 61.3% and 59.1%, respectively, for the three and six months ended September 30, 2025.

Calibration Solutions

The Calibration Solutions division develops, manufactures, sells and services quality control products using principles of advanced metrology to enable customers to measure and calibrate critical parameters in applications such as renal care, environmental and process monitoring, gas flow and torque testing.

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

amounts in thousands, except percent data

Gross profit as a % of revenues

The Calibration Solutions division's revenues increased 4.7% for the three months ended June 30, 2025 versus the comparable prior year period, primarily due to commercial efforts to renew contracts with larger customers that incentivized utilization of our service offerings, particularly in our renal care product line and, to a lesser extent, price increases.

The Calibration Solutions division's gross profit as a percentage of revenues decreased 4.4 percentage points for the three months ended June 30, 2025 versus the comparable prior year period, primarily due to increased labor costs, as we have hired additional employees to support future growth, and to a lesser extent as a result of increased manufacturing input costs, primarily due to tariffs, and product mix.

Revenues for the Calibration Solutions division increased 10.7% and 7.7% for the three and six months ended September 30, 2025, respectively, versus the comparable prior-year periods.

Growth was primarily driven by ongoing commercial efforts to renew contracts with larger customers that incentivize utilization of our service offerings, and to a lesser extent, by price increases.

Gross profit as a percentage of revenues increased by 1.9 percentage points for the three months ended September 30, 2025 versus the comparable prior-year period, primarily due to higher revenues on a partially fixed cost base, partially offset by increased manufacturing input costs, including the impact of tariffs.

For the six months ended September 30, 2025, gross profit as a percentage of revenues decreased 1.2 percentage points versus the comparable prior-year period, primarily due to increased personnel-related costs that we expect will support future growth, and to a lesser extent, due to increased manufacturing input costs, including the impact of tariffs.

Clinical Genomics

The Clinical Genomics division develops, manufactures and sells highly sensitive high-throughput genetic analysis tools and related consumables and services that enable clinical research labs and contract research organizations to perform genomic testing for a broad range of research applications in several therapeutic areas, such as screenings for hereditary diseases, pharmacogenetics, oncology related applications and toxicology research.

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

amounts in thousands, except percent data

Gross profit as a % of revenues

The Clinical Genomics division's revenues decreased 9.7% for the three months ended June 30, 2025 versus the comparable prior year period, primarily due to lower sales in China as a result of macroeconomic, regulatory and tariff uncertainty.

Decreases in China were partially offset by 18.6% increases in revenues in the United States, primarily from consumables, as we execute our new product development and commercial strategy.

While we anticipate revenues growth in the U.S.

and Europe in the remainder of the fiscal year, we expect revenues from China over the remainder of the fiscal year to continue to decrease compared to the prior year.

Gross profit percentage for the Clinical Genomics division decreased 4.2 percentage points for the three months ended June 30, 2025 versus the comparable prior year period, primarily due to lower revenues on a partially fixed cost base.

Revenues for the Clinical Genomics division declined 3.1% and 6.4% for the three and six months ended September 30, 2025, respectively, versus the comparable prior year periods.

The decrease was driven primarily by lower sales to customers in China, reflecting ongoing macroeconomic and regulatory uncertainty and escalating trade tensions.

Excluding sales to China, revenues increased 16.2% and 12.1%, respectively, for the three and six months ended September 30, 2025 versus the comparable prior year periods.

While we anticipate continued revenues growth outside of China for the remainder of the fiscal year, we expect continued decreases in revenues from China over the same period, versus the comparable prior year periods.

Clinical Genomics’ gross profit as a percentage of revenue increased 3.3 percentage points for the three months ended September 30, 2025 versus the comparable prior year period, despite lower revenues.

The increase was primarily driven by favorable product mix, as consumables, which carry higher margins, represented a higher portion of total revenues, and by favorable geographic mix, as domestic sales tend to generate higher margins than sales in the APAC region.

Gross profit percentage decreased 0.4 percentage points for the six months ended September 30, 2025 versus the comparable prior year period.

The decline was primarily driven by lower revenues on a partially fixed cost base, and to a lesser extent, foreign currency impacts, partially offset by increased domestic and consumables sales.

Operating Expense

Operating expense increased 7.0% for the three months ended June 30, 2025 versus the comparable prior year period.

Reported selling, general and administrative, and research and development expenses increased due to the weakening of the U.S.

dollar against the euro and Swedish krona for the three months ended June 30, 2025 compared to the prior year period.

Operating expense increased 2.1% and 4.5%, respectively, for the three and six months ended September 30, 2025 versus the comparable prior year periods.

Among other factors, reported selling, general and administrative, and research and development expenses increased due to the weakening of the U.S.

dollar against the euro and Swedish krona for the three and six months ended September 30, 2025 versus the comparable prior year period.

Selling Expense

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accordingly, it may vary with sales levels.

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

amounts in thousands, except percent data

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As a percentage of revenues

Selling expense for the three months ended June 30, 2025 increased 8.1% versus the comparable prior year period.

The increase is primarily attributable to investments in additional personnel expenses in an effort to continue to drive higher organic growth.

Selling expense decreased 0.5% for the three months ended September 30, 2025 versus the comparable prior year period, primarily due to lower personnel and training costs, including lower commissions expense, partially offset by severance charges.

Selling expense increased 3.8% for the six months ended September 30, 2025, versus the comparable prior year period, primarily due to severance costs and investments in professional services to support lead-generation and marketing.

General and Administrative Expense

Labor costs, amortization of intangible assets, and non-cash stock-based compensation drive the substantial majority of our general and administrative expense.

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

amounts in thousands, except percent data

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As a percentage of revenues

General and administrative expense increased 6.8%, primarily due to higher personnel costs, including increased non-cash stock-based compensation resulting from an adjustment to performance-based awards to reflect achievement against targets through June 30, 2025.

Increases to stock-based compensation expense were partially offset by lower consulting and professional services expenses, as our prior year results included consulting costs related to integrating GKE into our enterprise resource planning system.

General and administrative expense increased 1.7% for the three months ended September 30, 2025 versus the comparable prior year period.

The increase was primarily driven by higher expense related to estimated uncollectible accounts receivable, particularly in China, and by increased personnel and benefits costs, including severance.

These increases were partially offset by lower professional services costs.

General and administrative expense increased 4.2% for the six months ended September 30, 2025 versus the comparable prior year period.

The increase was primarily attributable to higher personnel costs, including increased non-cash stock-based compensation resulting from an adjustment to performance-based awards to reflect achievement against targets through September 30, 2025.

Higher expense related to estimated uncollectible accounts receivable in China also contributed to the increase.

The increase was partially offset by lower consulting and professional services expenses, as our prior year results included consulting costs related to integrating GKE into our enterprise resource planning system.

Research and Development Expense

Research and development expense is predominantly comprised of labor costs and costs of third-party consultants.

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

amounts in thousands, except percent data

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As a percentage of revenues

Research and development expenses increased slightly for the three months ended June 30, 2025 versus the comparable prior year period, primarily as a result of purchases of supplies to support project-specific research and development activities.

Non-Operating (Income) Expense, Net

Three Months Ended June 30,

Research and development expenses increased 8.9% and 7.1% for the three and six months ended September 30, 2025, respectively, versus the comparable prior year periods.

The increases were primarily attributable to severance costs, particularly within our Clinical Genomics division, and purchases of supplies and consulting services to support project-specific research and development activities.

Non-Operating Expense (Income), Net

Three Months Ended September 30,

Six Months Ended September 30,

amounts in thousands, except percent data

Interest expense and amortization of debt issuance costs

(Gain) on extinguishment of convertible senior notes

Other (income) expense, net

Non-operating (income) expense, net

During the three months ended June 30, 2025, the U.S.

dollar weakened against the euro.

As a result, we recognized unrealized foreign currency gains of approximately $6.1 million from an intercompany U.S.

(Gain) on extinguishment of convertible notes

Other (income), net

Non-operating expense (income), net

Interest expense decreased for the three and six months ended September 30, 2025 compared to the prior year periods, primarily due to lower weighted average levels of outstanding interest-bearing debt and a reduction in interest rates applicable to our floating rate debt.

These decreases were partially offset by the settlement of $97.5 million principal on our Notes using $97.0 million in borrowings under the Revolver, which carries a higher interest rate than the Notes.

We expect interest expense to increase for the remainder of fiscal year 2026 compared to fiscal year 2025, driven by the higher interest rate on debt outstanding under our Credit Facility compared with the Notes.

Other (income), net primarily consists of gains and losses on foreign currency transactions.

In particular, during the six months ended September 30, 2025, we recognized unrealized foreign currency gains of approximately $6.1 million related to an intercompany U.S.

dollar-denominated loan issued in fiscal year 2024 to one of our wholly owned, euro-denominated subsidiaries.

We incurred less interest expense during the three months ended June 30, 2025 versus the comparable prior year period primarily due to lower balances outstanding under our revolving line of credit in fiscal 2026, and to a lesser extent due to lower interest rates on our floating rate debt.

We expect interest expense to increase in each remaining quarter of fiscal year 2026 compared to the first quarter of 2026 as our convertible notes mature in August 2025 and will be replaced with a borrowings under our revolving line of credit that will bear interest at a higher rate.

The $2.9 million gain on extinguishment of the convertible notes reported in the first quarter of fiscal year 2025 was a result of the settlement of $75.0 million aggregate principal of the notes during that period.

Three Months Ended June 30,

The $2.9 million gain on extinguishment of the Notes reported in the first six months of fiscal year 2025 was a result of the partial repurchase of the Notes during that period.

No gain or loss was recognized upon final settlement of the Notes during the three months ended September 30, 2025, as the Notes had reached maturity and were settled in cash at the contractual principal amount.

Three Months Ended September 30,

Six Months Ended September 30,

amounts in thousands, except percent data

Income tax expense

Income tax (benefit) expense

Effective tax rate

Our effective income tax rate was 32.4% for three months ended June 30, 2025 compared to 13.2% for the three months ended June 30, 2024.

The change in the effective tax rate for three months ended June 30, 2025 compared to the prior year period is primarily due to prior year valuation allowance adjustments related to our operations in Germany and an increase in German statutory taxes in the current fiscal year.

The effective tax rate for the three months ended June 30, 2025 differed from the statutory federal rate of 21% primarily due to the valuation allowances previously established on the U.S.

deferred taxes and varying applicable tax rates in foreign jurisdictions.

Our future effective income tax rate depends on various factors, such as changes in tax laws, regulations, accounting principles, or interpretations thereof, and the geographic composition of our pre-tax income.

Our effective income tax rate was (23.9%) and 19.9%, respectively, for the three and six months ended September 30, 2025 compared to 10.1% and 11.7% for the prior year periods.

The effective tax rate for both the three and six months ended September 30, 2025 differed from the statutory federal rate of 21% primarily due to the impact of the valuation allowance on U.S.

deferred taxes, partially offset by the foreign rate differential.

The change in the effective tax rate for both the three and six months ended September 30, 2025 versus the comparable prior year periods is primarily due to prior year valuation allowance adjustments related to our operations in Germany and an increase in German statutory taxes in the current fiscal year.

Our future effective income tax rate depends on various factors, such as changes in tax laws including OBBBA, regulations, accounting principles, or interpretations thereof, and the geographic composition of our pre-tax income.

We carefully monitor these factors and adjust our effective income tax rate accordingly.

Net income varies with changes in revenues, gross profit, operating expense, and currency exchange rate fluctuations.

Net income included $4.6 million, $3.9 million and $1.4 million of non-cash amortization of intangible assets, stock-based compensation expense, and depreciation expense, respectively, and currency gains of $6.2 million for the three months ended June 30, 2025.

Net income included $9.1 million, $7.7 million and $2.7 million of non-cash amortization of intangible assets, stock-based compensation expense, and depreciation expense, respectively, for the six months ended September 30, 2025.

Liquidity and Capital Resources

Our sources of liquidity include cash generated from operations, cash and cash equivalents on hand, and cash available from borrowings under our Credit Facility.

We believe these sources of cash are sufficient to meet our ongoing operating requirements, scheduled debt service obligations, dividend payments and anticipated capital expenditures.

Our sources of liquidity include cash generated from operations, cash on hand, and cash available from borrowings under our Credit Facility.

We believe these sources are sufficient to meet our ongoing operating needs, scheduled debt service obligations, dividend payments and anticipated capital expenditures.

As of September 30, 2025 and March 31, 2025, we held $20.4 million and $27.3 million of cash, respectively.

Historically, our more significant uses of cash have included acquisitions, payments on debt principal and interest obligations, and quarterly dividends paid to shareholders.

In April 2025, we released a $9.6 million holdback payment related to the GKE acquisition.

This amount was previously withheld from GKE’s purchase price to cover potential post-closing adjustments and indemnification obligations.

Working capital is the amount by which current assets exceed current liabilities.

We had negative working capital of $(51.2) million and $(61.3) million as of June 30, 2025 and March 31, 2025, respectively.

Our negative working capital balances are primarily due to the classification of the $97.5 million remaining principal on our Notes, due August 15, 2025, as a current liability on our Condensed Consolidated Balance Sheets.

We held $21.3 million and $27.3 million in cash and cash equivalents as of June 30, 2025 and March 31, 2025, respectively.

We have an outstanding Revolver that allows us to borrow to up to $125.0 million.

During fiscal year 2024, we borrowed a total of $71.0 million under the Revolver to fund the majority of the GKE acquisition and since then we have borrowed against the revolver from time to time to fund general corporate needs.

As of June 30, 2025, $14.0 million remained outstanding.

Subsequent to June 30, 2025, we repaid an additional $3,000 on the Revolver.

Including the current portion of our Term Loan and the Notes, principal debt payments due within the next twelve months total $101.7 million.

We plan to fund the amounts due using a combination of cash on hand, draws against our Revolver, which had $111.0 million available as of June 30, 2025, and cash generated from operating activities until maturity.

Based on applicable interest rates and debt balances outstanding as of June 30, 2025, we expect to incur approximately $12.3 million in cash interest expense over the next twelve months, adjusted for scheduled principal payments and anticipated borrowings under the Credit Facility to settle the Notes.

Working capital, defined as the amount by which current assets exceed current liabilities, was $49.1 million as of September 30, 2025, compared to negative working capital of $(61.3) million as of March 31, 2025.

The prior period's negative working capital was due to the classification of $97.5 million in principal related to our Notes as a current liability.

During the three months ended September 30, 2025, we settled the Notes using a draw of $97.0 million on our Revolver.

The Revolver allows us to borrow to up to $125.0 million, and $106.0 million was outstanding as of September 30, 2025.

Subsequent to quarter end, we repaid $2.0 million on the Revolver.

On October 10, 2025 we amended our Credit Facility to reduce the applicable interest rate spread above the SOFR base rate from 1.5%-3.5% to 1.25%-2.5%.

This rate reduction represents annual cost savings of approximately $0.6 million at debt levels outstanding under our Credit Facility as of September 30, 2025.

We expect to incur approximately $11.6 million in cash interest expense over the next twelve months.

Required principal debt payments due on our Term Loan within the next twelve months total $4.7 million.

We routinely evaluate opportunities for strategic acquisitions.

Future material acquisitions may require us to obtain additional capital, assume additional third-party debt or incur other long-term obligations.

Future material acquisitions may require us to obtain additional capital, assume third-party debt or incur other long-term obligations.

We believe that we have the ability to issue more equity or debt in the future in order to finance our acquisition and investment activities;

however, additional equity or debt financing, or other transactions, may not be available on acceptable terms, if at all.

We may from time to time repurchase or take other steps to reduce our debt.

These actions may include retirements or refinancing of outstanding debt through tender offers, privately negotiated transactions, or otherwise.

The amount of debt that may be retired, if any, could be material.

Retirement would be decided at the sole discretion of our Board of Directors and would depend on market conditions, our cash position and other considerations.

We have paid regular quarterly dividends since 2003.

We paid dividends of $0.16 per share during the three months ended June 30, 2025, as well as each quarter of fiscal year 2025.

In July 2025, we announced that our Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock, payable on September 15, 2025, to shareholders of record at the close of business on August 29, 2025.

We paid dividends of $0.16 per share during the three months ended September 30, 2025, as well as each quarter of fiscal years 2026 and 2025.

In October 2025, we announced that our Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock, payable on December 15, 2025, to shareholders of record at the close of business on November 28, 2025.

Goodwill Impairment Testing

We perform analyses at least quarterly to identify potential impairment indicators and to assess whether it is more likely than not that any of our five goodwill reporting units (Sterilization and Disinfection Control, Immunoassays (BPD), Peptides (BPD), Calibration Solutions, and Clinical Genomics) is impaired.

As of June 30, 2025, we concluded that our reporting units are not impaired;

however, adverse economic, market or industry-specific conditions (including declines in our market capitalization), adverse or expected adverse changes in the business climate or in our operational performance, adverse changes in legal or regulatory environments, failure to achieve forecasted cash flows, or any combination of these or other such factors could result in future impairment losses in our reporting units in the future.

Our Clinical Genomics and Peptides reporting units remain particularly sensitive to significant changes in assumptions and therefore have a heightened risk of future impairment losses.

The valuation of our reporting units for impairment testing purposes relies on significant management judgment and the use of unobservable Level 3 inputs, including discount rates, forecasted results such as earnings before interest, taxes, depreciation and amortization (“EBITDA”), revenue growth rates, operating expense projections, the identification of comparable public entities, and applied market multiples.

We continue to monitor the impact of tariffs imposed in calendar year 2025.

Depending on the persistence and magnitude of the tariffs and other factors, it is reasonably possible our Clinical Genomics and Peptides reporting units will incur impairment losses in the future.

We perform qualitative analyses at least quarterly to identify potential indicators of impairment and to assess whether it is more likely than not that any of our five goodwill reporting units (Sterilization and Disinfection Control, Immunoassays (BPD), Peptides (BPD), Calibration Solutions, and Clinical Genomics) is impaired.

As of September 30, 2025, we concluded that our reporting units are not impaired.

However, future impairment losses could result from adverse economic, market, or industry-specific conditions;

unfavorable actual or anticipated adverse changes in the business climate or in our operational performance;

adverse developments in legal or regulatory environments;

declines in our market capitalization;

failure to achieve forecasted cash flows;

or any combination of these or other similar factors.

Our Clinical Genomics and Peptides reporting units remain particularly sensitive to significant changes in key valuation assumptions, and therefore carry a heightened risk of future impairment losses.

The valuation of our reporting units for impairment testing purposes requires significant management judgment and the use of unobservable Level 3 inputs, including discount rates, forecasted results for earnings before interest, taxes, depreciation and amortization (“EBITDA”), revenue growth rates, operating expense projections, the identification of comparable public entities, and applied market multiples.

We continue to monitor the impact of macroeconomic challenges, demand for our products and services, and tariffs with respect to China.

Depending on the persistence and magnitude of adverse factors, it is reasonably possible our Clinical Genomics and Peptides reporting units could incur impairment losses in the future.

As of our most recent annual impairment test on January 1, 2025, the estimated fair values of the Clinical Genomics and Peptides reporting units exceeded their carrying values by approximately 40% and 20%, respectively.

As of June 30, 2025, the carrying values of goodwill and other intangible assets associated with our Clinical Genomics reporting unit were $17.1 million and $8.9 million, respectively.

The carrying values of goodwill and other intangible assets associated with our Peptides reporting unit were $13.7 million and $0.8 million, respectively, as of June 30, 2025.

Our cash flows from operating, investing and financing activities were as follows (in thousands):

Three Months Ended June 30,

As of September 30, 2025, the carrying values of goodwill and finite-lived intangible assets associated with our Clinical Genomics reporting unit were $17.1 million and $8.6 million, respectively.

The carrying values of goodwill and finite-lived intangible assets associated with our Peptides reporting unit were $13.7 million and $0.8 million, respectively.

Our cash flows from operating, investing and financing activities were as follows:

Six Months Ended September 30,

amounts in thousands

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Net cash (used in) financing activities

Cash flows from operating activities provided $1.9 million, for the three months ended June 30, 2025, a decrease of $8.8 million versus the comparable prior year period.

Cash flows from operating activities provided $10.1 million for the six months ended September 30, 2025, a decrease of $5.9 million versus the comparable prior year period.

The decrease in cash flows from operating activities was primarily a result of:

lower gross margins,

higher cash payments in the first quarter of fiscal year 2026 to settle accrued bonus and commissions that were accrued at the end of fiscal year 2025;

increased cash spent on inventory as we purchase finished goods and warehouse them in international locations as part of our tariff strategy.

Cash used in investing activities increased modestly for the three months ended June 30, 2025 compared to the prior year period as we invested in property, plant and equipment across several manufacturing sites.

Cash used in financing activities resulted in a $8.4 million use of cash for the three months ended June 30, 2025.

We borrowed $10.5 million under the Revolver largely to fund a $9.6 million payment of the GKE acquisition-related holdback and for other general corporate needs.

We repaid $7.4 million of principal on our debt in the three months ended June 30, 2025, compared to $9.4 million in the prior year period.

higher cash payments in the first quarter of fiscal year 2026 to settle accrued bonuses and commissions from the end of fiscal year 2025;

increased inventory purchases, including for finished goods warehoused in international locations as part of our tariff mitigation strategy.

These uses of cash were partially offset by higher collections on accounts receivable, driven by increased revenues.

Cash used in investing activities decreased for the six months ended September 30, 2025 versus the comparable prior year period as we invested in property, plant and equipment for our new leased facility in Sweden in the prior year.

Cash used in financing activities resulted in a $16.3 million use of cash for the six months ended September 30, 2025.

$10.5 million under the Revolver, largely to fund a $9.6 million payment of the GKE acquisition-related holdback;

$97.0 million under the Revolver, to settle the Notes upon maturity in August 2025.

$97.5 million to settle the Notes;

$11.5 million under the Revolver;

$1.9 million under the Term Loan.

Recent Accounting Pronouncements

4 unchanged sentences

We are party to contractual obligations that involve commitments to remit payments to third parties in the ordinary course of business.

On a consolidated basis, as of June 30, 2025, we had contractual obligations for open purchase orders of approximately $14.2 million for routine purchases of supplies and inventory, of which the substantial majority are payable in less than one year.

On a consolidated basis, as of September 30, 2025, we had contractual obligations for open purchase orders of approximately $11.8 million for routine purchases of supplies and inventory, of which the substantial majority are payable in less than one year.

See "Liquidity and Capital Resources" for information related to future required debt and other payments.

For a description of our contractual obligations and other commercial commitments as of March 31, 2025, see our Annual Report on Form 10-K for the fiscal year ended March 31, 2025, filed with the Securities and Exchange Commission on May 28, 2025.

For a description of our contractual obligations and other commercial commitments as of March 31, 2025, see our Annual Report on Form 10-K for the fiscal year ended March 31, 2025.

Critical Accounting Estimates

7 unchanged sentences

In addition to financial measures prepared in accordance with generally accepted accounting principles, we present organic revenues growth, defined as reported revenues growth excluding revenues from recent acquisitions, as a supplemental non-GAAP financial measure.

We believe this measure facilitates comparability between current and prior period information and provides insight into Mesa’s short-term and long-term performance and growth trends.

We believe this measure facilitates comparability between current and prior period information and provides insight into our short-term and long-term performance and growth trends.

We use organic revenues growth internally for forecasting, evaluating operating performance, comparing current and historical revenue results, and informing financial and operating decision-making, including for compensation-setting purposes.

3 unchanged sentences

Organic Revenues Growth (non-GAAP)

Three Months Ended June 30,

Three Months Ended September 30,

Sterilization and Disinfection Control

3 unchanged sentences

Total Company

Total Revenues Growth

Impact of Acquisitions

Organic Revenues Growth (non-GAAP)

Six Months Ended September 30,

Sterilization and Disinfection Control

Biopharmaceutical Development

Calibration Solutions

Clinical Genomics

Total Company

Quantitative and Qualitative Disclosures a bout Market Risk

For information regarding our exposure to certain market risks, see Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," of our Annual Report on Form 10-K for the year ended March 31, 2025.

There were no material changes to our market risk exposure during the three months ended June 30, 2025.

There were no material changes to our market risk exposure during the three months ended September 30, 2025.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis