What changed in this filing

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Item 1. Financial Statements

2022-11-03 compared with 2022-08-04 · 428 added, 230 removed, 732 unchanged (47% of the section changed)

3 unchanged sentences

(dollars in thousands, except share amounts)

September 30,

Current assets:

2 unchanged sentences

$ 49,346  

Accounts receivable, less allowances of $ 1,035 and $ 630 , respectively

Accounts receivable, less allowance for doubtful accounts of $ 1,013 and $ 630 , respectively

41,809  

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(in thousands, except per share data)

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

$ 58,749  

$ 35,840  

$ 109,202  

$ 70,760  

Cost of revenues

22,363  

12,700  

41,475  

25,409  

36,386  

23,140  

67,727  

45,351  

Operating expenses:

19,223  

General and administrative

18,202  

11,683  

38,414  

23,102  

Research and development

10,689  

Total operating expenses

Operating (loss) income

32,391  

18,939  

68,326  

38,027  

Operating income (loss)

( 599 )  

Nonoperating expense (income):

Interest expense and amortization of debt discount

Other (income) expense, net

Total nonoperating expense

(Loss) earnings before income taxes

Income tax (benefit)

Net (loss) income

(Loss) earnings per share:

Other (income), net

( 603 )  

( 1,157 )  

( 799 )  

Total nonoperating expense (income)

( 342 )  

Earnings (loss) before income taxes

( 2,028 )  

Income tax provision (benefit)

( 1,896 )  

Net income (loss)

$ 1,306  

$ 3,720  

$ ( 132 )  

$ 5,715  

Earnings (loss) per share:

$ 0.25  

$ 0.71  

$ ( 0.02 )  

$ 1.10  

$ 0.24  

$ 0.70  

$ ( 0.02 )  

$ 1.07  

Weighted-average common shares outstanding:

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(in thousands)  

Three Months Ended June 30,

Net (loss) income

Three Months Ended September 30,

Six Months Ended September 30,

Net income (loss)

$ 1,306  

$ 3,720  

$ ( 132 )  

$ 5,715  

Other comprehensive (loss) income:

1 unchanged sentence

( 13,226 )  

( 6,503 )  

( 29,183 )  

Comprehensive (loss) income

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$ ( 2,783 )  

$ ( 29,315 )  

$ 4,583  

See accompanying notes to Condensed Consolidated Financial Statements.

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(in thousands)

Three Months Ended June 30,

Six Months Ended September 30,

Cash flows from operating activities:

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$ 5,715  

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization

16,189  

Stock-based compensation expense

10 unchanged sentences

Accounts payable

( 205 )  

Accrued liabilities and taxes payable

1 unchanged sentence

Unearned revenues

Net cash (used in) provided by operating activities

Net cash provided by operating activities

14,023  

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$ 380,431  

Exercise of stock options and vesting of restricted stock units

38,963  

Dividends paid, $ 0.16 per share

( 852 )  

Stock-based compensation expense

Foreign currency translation

( 13,226 )  

September 30, 2022

5,336,271  

$ 324,905  

$ 74,848  

$ ( 25,517 )  

$ 374,236  

Number of Shares

20 unchanged sentences

$ 399,003  

Exercise of stock options and vesting of restricted stock units

24,340  

Dividends paid, $ 0.16 per share

( 834 )  

Stock-based compensation expense

Foreign currency translation

( 6,503 )  

September 30, 2021

5,223,232  

$ 302,234  

$ 82,199  

$ 14,984  

$ 399,417  

*Accumulated Other Comprehensive (Loss) Income.

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We prefer markets in which we can establish a strong presence and achieve high gross profit margins.

As of June 30, 2022, we managed our operations in four reportable segments, or divisions:

Clinical Genomics - develops, manufactures, and sells highly sensitive, low-cost, high-throughput, genetic analysis tools used by labs to perform clinical genomic testing in several therapeutic areas, such as newborn screenings, pharmacogenetics, and oncology. 

Sterilization and Disinfection Control - manufactures and sells biological, cleaning, and chemical indicators which are used to assess the effectiveness of sterilization and disinfection processes in the hospital, dental, medical device, and pharmaceutical industries.

The division also provides testing and laboratory services, mainly to the dental industry.

As of September 

30, 2022, we managed our operations in four reportable segments, or divisions:

Clinical Genomics - develops, manufactures, and sells highly sensitive, low-cost, high-throughput genetic analysis tools used by clinical labs to perform genomic clinical testing in several therapeutic areas, such as screenings for hereditary diseases, pharmacogenetics and oncology related applications.

The division also provides testing and laboratory services, mainly to the dental industry. 

Biopharmaceutical Development 

- develops, manufactures, and sells automated systems for protein analysis (immunoassays) and peptide synthesis solutions.

Immunoassays and peptide synthesis solutions accelerate the discovery, development, and manufacture of biotherapeutic drugs. Customers include biopharmaceutical research, development, and manufacturing teams at biopharmaceutical companies and academic research and development laboratories. 

Immunoassays and peptide synthesis solutions accelerate the discovery, development, and manufacture of biotherapeutic drugs. 

Calibration Solutions 

- develops, manufactures, and sells quality control and calibration products used to measure or calibrate temperature, pressure, pH, humidity, and other such parameters for health and safety purposes, primarily in hospital, medical device manufacturing, pharmaceutical manufacturing, and various laboratory environments. 

- develops, manufactures, and sells quality control and calibration products used to measure or calibrate temperature, pressure, pH, humidity, and other chemical or physical parameters for health and safety purposes, primarily in hospital, medical device manufacturing, pharmaceutical manufacturing, and various laboratory environments. 

Non-reportable operating segments and unallocated corporate expenses are reported within Corporate and Other.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S.

GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission.

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and in accordance with accounting principles generally accepted in the United States (“U.S.

GAAP”) for interim financial information.

In the opinion of management, such unaudited information includes all adjustments, consisting of normal recurring adjustments necessary for the fair statement of our financial position and results of operations.

The results of operations for the interim periods are not necessarily indicative of results that may be achieved for the entire year. The year-end Condensed Consolidated Balance Sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.

We made no material changes to the application of our significant accounting policies that were disclosed in our Form 10 -K.

This quarterly report should be read in conjunction with the consolidated financial statements included in our annual report on Form 10 -K for the year ended 

March 31, 2022 .

Certain prior year amounts have been reclassified in order to conform to the current year presentation.

Our fiscal year ends on March 

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or “year-end”

mean our fiscal year and references to the first quarter of fiscal year 2023  refer to the period from April 1, 2022 

through June 30, 2022. 

mean our fiscal year, references to the first quarter of fiscal year 2023  refer to the period from April 1, 2022 

through June 30, 2022, and references to the second quarter of fiscal year 2023 refer to the period from July 1, 2022 through September 30, 2022. 

References to “fiscal year 2022”

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Prior Period Reclassification

Certain amounts presented in Note 3.

"Revenue Recognition" in prior periods of fiscal year 2022 have been reclassified out of revenues from consumables and into revenues from hardware and services.

These reclassifications have not resulted in any change to the Condensed Consolidated Financial Statements for the three months ended June 30, 2022 and 2021.

Certain amounts presented for prior periods related to the Biopharmaceutical Development division in Note 3.

"Revenue Recognition" have been reclassified out of revenues from consumables and into revenues from hardware and services.

These reclassifications have not resulted in any change to the Condensed Consolidated Financial Statements for and periods presented in this Form 10 -Q.

Risks and Uncertainties

The preparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the reporting date and revenues and expenses during the reporting periods.

These estimates represent management's judgement about the outcome of future events. Our estimates include, among others, asset reserve requirements as well as the amounts of future cash flows associated with certain assets and businesses that are used in assessing the risk of impairment.

The negative impacts associated with the ongoing novel coronavirus ("COVID- 19" ) global pandemic significantly lessened during fiscal year 2022.

The extent and duration of negative impacts in the future, which may include inflationary pressures and supply chain disruptions, are uncertain and may require changes to estimates.

Actual results could differ from those estimates.

These estimates represent management's judgement about the outcome of future events.

The business and economic uncertainty resulting from the novel coronavirus pandemic ("COVID- 19" ), supply chain challenges, cost pressure and the overall effects of the current high inflation environment on customers' purchasing patterns has made such estimates more difficult to calculate.

Accordingly, actual results could differ from those estimates.

Recently Issued Accounting Pronouncements

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Significant Transactions

Acquisition of Agena Bioscience, Inc.

On October 20, 2021, we completed the acquisition of Agena Bioscience, Inc.

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Agena Preliminary Purchase Price Allocation

During the three months ended June 30, 2022, we continued analyses of the valuation of net assets acquired in the Agena Acquisition.

During the 

three  months ended September 

30, 2022,  we continued analyses of the valuation of net assets acquired in the Agena Acquisition.

This preliminary purchase price allocation is subject to revision as more detailed analyses are completed with respect to prepaid taxes, tax accruals, and deferred tax positions.

The following table summarizes the allocation of the preliminary purchase price as of October 20, 2021:

The following table summarizes the allocation of the purchase price as of October 20, 2021:

Life (in years)

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Acquired Goodwill

Acquired goodwill of $ 135,880 , all of which is allocated to the Clinical Genomics reportable segment, represents the value expected to arise from the value of expanded market opportunities, expected synergies, and assembled workforce, 

Acquired goodwill of $ 136,260 , all of which is allocated to the Clinical Genomics reportable segment, represents the value expected to arise from expanded market opportunities, expected synergies, and assembled workforce, 

none of which qualify as amortizable intangible assets.

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after giving effect to certain pro forma adjustments. 

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

Pro forma total revenues

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$ 53,521  

Pro forma net income

$ 109,202  

$ 107,074  

Pro forma net income

The pro forma financial information includes adjustments that are directly attributable to the business combinations and are factually supportable. The pro forma adjustments include incremental amortization of intangible assets, additional stock-based compensation expense for key Agena employees, the removal of interest expense attributable to Agena’s external debt that was paid off as part of the acquisition, and the pro forma tax impact for such adjustments.

Cost savings or operating synergies expected to result from the acquisition are not included in the pro forma results.

For the three months ended June 30, 2022, the pro forma financial information excludes $ 356 of non-recurring acquisition-related expenses as well as costs associated with a performance share award granted to key employees of Agena that would have been fully expensed by the start of our first quarter 2022.

For the three and six  months ended September 30, 2022, the pro forma financial information excludes $ 267  and $ 623 of non-recurring acquisition-related expenses, respectively.

These pro forma results are illustrative only and not indicative of the actual results of operations that would have been achieved nor are they indicative of future results of operations.

Revenue Recognition

We develop, manufacture, market, sell, and maintain life sciences tools and quality control instruments and software, consumables, and services.

Sales of hardware and software, such as instruments used for molecular and genetic analysis, protein synthesizers, medical meters, wireless sensor systems, and data loggers, are generally driven by our acquisition of new customers, growth of existing customers, or customers replacing existing equipment.

We develop, manufacture, market, sell and maintain life sciences tools and quality control instruments and related software, consumables, and services.

Sales of hardware, such as instruments used for molecular and genetic analysis, protein synthesizers, medical meters, wireless sensor systems, and data loggers are generally driven by our acquisition of new customers, growth of existing customers, or customers replacing existing equipment.

Hardware sales 

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We also offer discrete and ongoing service and maintenance contracts on our instruments.

Our consumables, such as panels or reagents that are used for molecular and genetic analysis, are critical for the ongoing use of our instruments. In contrast, biological indicator test strips are used on a standalone basis.

Consumables are typically used on a 

one -time basis and require frequent replacement in our customers' operating cycles.

Consumables such as reagents used for molecular and genetic analysis or solutions used for protein synthesis are critical to the ongoing use of our instruments.

Consumables such as biological indicator test strips are used on a standalone basis.

We evaluate our revenues internally based on operating segment, the timing of revenue generation, and the nature of goods and services provided.

Typically, discrete revenue is recognized at the shipping point or upon completion of the service, while contracted revenue is recognized over a period of time reflective of the performance obligation period in the applicable contract.

Typically, discrete revenue is recognized upon shipment of a product or upon completion of a service, while contracted revenue is recognized over a period of time reflective of the performance obligation period in the applicable contract.

The significant majority of our revenues and related receivables are generated from contracts with customers that are 

12  months or less in duration.

The following tables present disaggregated revenues for the three months ended June 30, 2022 and 2021 , respectively:

Three Months Ended June 30, 2022

The following tables present disaggregated revenues for the three and six months ended September 30, 2022 and 2021 , respectively:

Three Months Ended September 30, 2022

Clinical Genomics

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$ 58,749  

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Clinical Genomics*

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$ 35,840  

Six Months Ended September 30, 2022

Clinical Genomics

Sterilization and Disinfection Control

Biopharmaceutical Development

Calibration Solutions

Discrete Revenues

$ 22,276  

$ 26,932  

$ 7,664  

$ 1,719  

$ 58,591  

Hardware and Software

10,812  

11,673  

30,641  

10,638  

Contracted Revenues

Services and Software

Total Revenues

$ 32,940  

$ 31,738  

$ 23,111  

$ 21,413  

$ 109,202  

Six Months Ended September 30, 2021

Clinical Genomics*

Sterilization and Disinfection Control

Biopharmaceutical Development

Calibration Solutions

Discrete Revenues

$ 24,861  

$ 7,489  

$ 1,812  

$ 34,162  

Hardware and Software

13,630  

22,210  

Contracted Revenues

Services and Software

Total Revenues

$ 29,183  

$ 19,432  

$ 22,145  

$ 70,760  

*Revenues in the Clinical Genomics division represent transactions subsequent to the Agena Acquisition on October 20, 2021. 

Revenues from external customers are attributed to individual countries based upon the locations to which the products are shipped or exported, or the location of service performed, as follows:

Three Months Ended June 30,

Revenues from external customers are attributed to individual countries based upon the locations to which the products are shipped or exported, or the locations where services are performed, as follows:

Three Months Ended September 30,

Six Months Ended September 30,

United States

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$ 37,839  

11,177  

20,280  

14,904  

37,914  

29,204  

Total revenues

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$ 35,840  

No foreign country exceeds 10% of total revenues.

$ 109,202  

$ 70,760  

Other than China, no  foreign country exceeds 10% of total revenues.

Contract Balances

5 unchanged sentences

$ 15,069  

Prior year liabilities recognized in revenues during the three months ended June 30, 2022

Contract liabilities added during the three months ended June 30, 2022, net of revenues recognized

Contract liabilities balance as of June 30, 2022

Prior year liabilities recognized in revenues during the six months ended September 30, 2022

Contract liabilities added during the six months ended September 30, 2022, net of revenues recognized

Contract liabilities balance as of September 30, 2022

$ 16,266  

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The estimated fair value and carrying value of the Notes were as follows:

June 30, 2022

September 30, 2022

March 31, 2022

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These assets are measured at fair value if determined to be impaired.

There were no transfers between the levels of the fair value hierarchy during the three months ended June 30, 2022 or 2021, respectively.

Fair values assigned to assets acquired and liabilities assumed in the Agena Acquisition, except deferred revenues, were measured using Level 3 inputs. There were no transfers between the levels of the fair value hierarchy during the three and six  months ended September 30, 2022 or 2021, respectively.

Supplemental Balance Sheets Information

Inventories consist of the following:

June 30, 2022

September 30, 2022

March 31, 2022

Raw materials

$ 15,014  

$ 14,172  

Work in process

Finished goods

Inventories, net

$ 26,874  

$ 24,606  

Prepaid and other consist of the following:

June 30, 2022

Total inventories

Prepaid expenses and other consist of the following:

September 30, 2022

March 31, 2022

Prepaid expenses

$ 4,173  

$ 2,871  

Prepaid income taxes

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Total prepaid expenses and other

$ 15,666  

$ 9,142  

Accrued payroll and benefits consist of the following:

June 30, 2022

September 30, 2022

March 31, 2022

Bonus payable

$ 2,138  

$ 7,468  

Wages and paid-time-off payable

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Total accrued payroll and benefits

$ 9,401  

$ 14,717  

Goodwill and Intangible Assets, Net

Finite-lived intangible assets consist of the following:

June 30, 2022

September 30, 2022

March 31, 2022

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Other intangibles

Amortization expense for finite-lived intangible assets acquired in a business combination was $ 7,320  and $ 3,816 for the three months ended June 30, 2022 and 2021, respectively.

Amortization for technology intangibles is included in cost of revenues and amortization for other types of intangibles is expensed to general and administrative expense on the Statements of Operations.

Amortization expense for finite-lived intangible assets acquired in a business combination was as follows:

Three Months Ended September 30,

Six Months Ended September 30,

Amortization in cost of revenues

Amortization in general and administrative expense

For the following fiscal years ending March 31, amortization expense is estimated as follows:

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March 31, 2022

$ 135,914  

$ 29,750  

$ 88,265  

$ 37,237  

$ 291,166  

Effect of foreign currency translation

June 30, 2022

( 395 )  

( 894 )  

( 12,145 )  

( 106 )  

Goodwill related to Agena acquisition

September 30, 2022

$ 135,899  

$ 28,856  

$ 76,120  

$ 37,131  

$ 278,006  

 Indebtedness

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3 ) letters of credit in an aggregate stated amount 

not  exceeding $ 2,500  at any time and

matures in March, 2025.

not  exceeding $ 2,500 . 

The Credit Facility matures in March 2025.

The Credit Facility also provides for an incremental term loan or an increase in revolving commitments in an aggregate principal amount of at a minimum $ 25,000  and at a maximum $ 75,000 , subject to the satisfaction of certain conditions and lender considerations.

As of June 30, 2022, we had $ 47,000 outstanding under the Credit Facility. 

As of September 

30, 2022, we had $ 27,000 outstanding under the Credit Facility. 

Amounts borrowed under the Credit Facility bear interest at either a base rate or a Eurodollar rate, plus an applicable spread.

The weighted average interest rate on borrowing under our line of credit during the first quarter of fiscal year 2023  was 1.75 %.

The weighted average interest rate on borrowing under our line of credit was 4.9%  and 1.5% as of September 30, 2022 and March 31, 2022, respectively.

We are obligated to pay quarterly unused commitment fees of between 0.15 % and 0.35 % of the Credit Facility’s aggregate principal amount, based on our leverage ratio. 

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5.0  to 

1.0  for the period ended June 30, 2022, except that we 

1.0  for the period ended September 

30, 2022, except that we 

have a leverage ratio of 

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 Other covenants include restrictions on our ability to incur debt, grant liens, make fundamental changes, engage in certain transactions with affiliates, or conduct asset sales.

June 30, 2022 , we were in compliance with all covenants.

In July 2022, we repaid $12,000 of the outstanding balance on our Credit Facility.

September 30, 2022 , we were in compliance with all covenants.

In October 2022, we repaid $2,000  of the outstanding balance on our Credit Facility.

Convertible Notes 

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We will reevaluate this policy from time to time as we receive conversion notices from note holders.

The circumstances necessary for conversion were not met during the three months ended June 30, 2022 .

As of June 30, 2022 , the Notes are classified as a long-term liability on our Condensed Consolidated Balance Sheets as the circumstances necessary for conversion were not satisfied as of the end of the period. The if-converted value of the Notes did not exceed the principal balance as of 

June 30, 2022 .

The circumstances necessary for conversion were not met during the three months ended September 30, 2022 .

As of September 30, 2022 , the Notes are classified as a long-term liability on our Condensed Consolidated Balance Sheets as the circumstances necessary for conversion were not satisfied as of the end of the period. The if-converted value of the Notes did not exceed the principal balance as of 

September 30, 2022 .

The net carrying amount of the Notes was as follows:

June 30, 2022

September 30, 2022

March 31, 2022

Principal outstanding

$ 172,500  

Unamortized debt issuance costs

( 2,910 )  

Net carrying value

$ 169,590  

$ 169,365  

We recognized interest expense on the Notes as follows:

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

Coupon interest expense at 1.375%

$ 1,186  

Amortization of debt discounts and issuance costs

Total interest and amortization of debt issuance costs

$ 1,638  

$ 1,629  

The effective interest rate on the notes is approximately 1.9 %.

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Stock-Based Compensation

During the first quarter of fiscal year 2023, we issued stock options, restricted stock units ("RSUs") and performance-based restricted stock units ("PSUs") pursuant to the Mesa Laboratories, Inc.

During the six months ended September 30, 2022, we issued stock options, restricted stock units ("RSUs") and performance-based restricted stock units ("PSUs") pursuant to the Mesa Laboratories, Inc.

2021 Equity Incentive Plan (the "2021 Equity Plan"), which authorizes the issuance of 330 shares of common stock to eligible participants.

Expense recognized related to stock-based compensation is as follows: 

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

Stock-based compensation expense

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$ 2,039  

Amount of income tax (benefit) expense recognized in earnings

$ 7,803  

$ 4,236  

Amount of income tax (benefit) recognized in earnings

( 89 )  

( 719 )  

( 2,081 )  

Stock-based compensation expense, net of tax

$ 4,282  

$ 1,320  

$ 5,722  

Stock-based compensation expense is included in cost of revenues, selling, general and administrative, and research and development expense in the accompanying unaudited Condensed Consolidated Statements of Operations.

The following is a summary of stock option award activity for the three months ended June 30, 2022:

The following is a summary of stock option award activity for the six months ended September 30, 2022:

Stock Options

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( 42 )  

Outstanding as of June 30, 2022

101.34  

Outstanding as of September 30, 2022

$ 183.13  

The stock options granted during the three months ended June 30, 2022 vest in equal installments on the first, second, and third anniversary of the grant date.

The following is a summary of RSU award activity for the three months ended June 30, 2022:

$ 1,978  

The stock options granted during the six months ended September 

30, 2022 vest in equal installments on the first, second, and third anniversary of the grant date.

The following is a summary of RSU award activity for the six months ended September 30, 2022:

Time-Based Restricted Stock Units

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( 10 )  

Outstanding as of June 30, 2022 (1)

202.00  

Outstanding as of September 30, 2022 (1)

$ 214.47  

$ 265.39  

Balances for performance-based restricted stock units ("PSUs") are reflected at target.

During the three months ended June 30, 2022, the fiscal year 2020  PSUs vested and were distributed at 126% of target, based on actual performance results and completion of service conditions. 

During the six  months ended September 30, 2022, the fiscal year 2020  PSUs vested and were distributed at 126% of target, based on actual performance results and completion of service conditions. 

The outstanding time-based RSUs vest and settle in shares of our common stock on a 

one -for- one basis.

All of the RSUs granted during the three months ended June 30, 2022 

vest in equal installments on the first, second, and third anniversary of the grant date.

Substantially all of the RSUs granted during the six months ended September 

30, 2022  vest in equal installments on the first, second, and third anniversary of the grant date.

We recognize the expense relating to RSUs, net of estimated forfeitures, on a straight-line basis over the vesting period.

PSUs vest upon completion of the service period described in the award agreement and based on achievement of the financial targets described in the award agreements.

We recognize the expense relating to the performance-based RSUs based on the probable outcome of achievement of the financial targets on a straight-line basis over the service period. 

During the three months ended June 30, 2022, the Compensation Committee of the Board of Directors created a plan to award 

PSUs vest upon completion of the service period described in the award agreement and based on achievement of the performance targets described in the award agreements.

We recognize the expense relating to the performance-based RSUs based on the probable outcome of achievement of the performance targets on a straight-line basis over the service period. 

During the six months ended September 

30, 2022, the Compensation Committee of the Board of Directors created a plan to award 

19  PSUs at target (the "FY 23 PSUs") that are subject to both service and performance conditions to eligible employees.

The performance period for the FY 23 PSUs is from April 1, 2022 until March 31, 2023 and the service period is from April 1, 2022 until March 31, 2025.

Of the FY 23 PSUs, 13 vest based on our achievement of specific performance criteria during fiscal year 2023 and they have a grant date fair value of $ 185.57 .

Of the total FY 23 PSUs granted, 13 vest based on our achievement of specific performance criteria during fiscal year 2023 and they have a grant date fair value of $ 185.57 .

The remaining 6 awards will be settled in shares of our common stock, but they are subject to performance criteria that are subjective and as such do not have a grant date.

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20  PSUs") subject to both service and performance conditions to eligible employees.

20  PSUs had a grant date fair value of $ 202.00  per share and vested during the three months ended June 30, 2022.  

Based on actual performance targets achieved, the awards vested at 126 % of target, resulting in a total of 10 awards distributed. 

20  PSUs had a grant date fair value of $ 202.00  per share and vested during the six months ended September 

  Based on actual performance targets achieved, the awards vested at 126 % of target, resulting in a total of 10 awards distributed. 

Earnings  (Loss) Per Share

Basic (loss) earnings per share is computed by dividing net (loss) income by the weighted-average number of common shares outstanding during the reporting period.

Diluted (loss) earnings per share (“diluted EPS”) is computed similarly to basic (loss) earnings per share, except that it includes the potential dilution that could occur if dilutive securities were exercised.

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the reporting period.

Diluted earnings (loss) per share (“diluted EPS”) is computed similarly to basic earnings (loss) per share, except that it includes the potential dilution that could occur if dilutive securities were exercised.

Potentially dilutive securities include stock options and both time and performance based RSUs (collectively “stock awards”), as well as common shares underlying the Notes.

Stock awards are excluded from the calculation of diluted EPS if they are subject to performance conditions that have not yet been achieved or are antidilutive. Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would then have an antidilutive effect. There was no  dilution in our diluted EPS calculation for the 

three months ended 

June 30, 2022 

as we incurred a net loss and the effect would have been antidilutive.

The impact of the assumed conversion of the Notes calculated under the if-converted method was antidilutive, and as such, shares underlying the Notes were excluded from the diluted EPS calculation for three months ended June 30, 2022 and June 30, 2021. 

The following table presents a reconciliation of the denominators used in the computation of basic and diluted (loss) earnings per share:

Three Months Ended June 30,

Net (loss) income available for shareholders

no  dilution in our diluted EPS calculation for the six  

months ended September 30, 2022 as we incurred a net loss and the effect would have been antidilutive.

The following table presents a reconciliation of the denominators used in the computation of basic and diluted earnings (loss) per share:

Three Months Ended September 30,

Six Months Ended September 30,

Net income (loss) available for shareholders

$ 1,306  

$ 3,720  

$ ( 132 )  

$ 5,715  

Weighted average outstanding shares of common stock

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Fully diluted shares

Basic (loss) earnings per share

Basic earnings (loss) per share

$ 0.25  

$ 0.71  

Diluted (loss) earnings per share

$ ( 0.02 )  

$ 1.10  

Diluted earnings (loss) per share

$ 0.24  

$ 0.70  

$ ( 0.02 )  

$ 1.07  

The following stock awards were excluded from the calculation of diluted EPS:

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

Assumed conversion of the Notes

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There is a potential for volatility in the effective tax rate due to several factors, including changes in the mix of the pre-tax income and the jurisdictions to which it relates, changes in tax laws and foreign tax holidays, settlement with taxing authorities, and foreign currency fluctuations.

Our effective income tax rate was ( 73.4 %) for the three months ended June 30, 2022 

and ( 40.7 %) for the three months ended June 30, 2021. 

The effective tax rate for the three months ended June 30, 2022 differed from the statutory federal rate of 21 % primarily due to the share-based payment awards for employees and the effect of income generated in foreign jurisdictions  The effective tax rate for the first three months of 2023 was higher than the same period in 2022 primarily due to the share based compensation and the effect of income in foreign jurisdictions.

Our effective income tax rate was ( 93.5 %) for the 

six months ended September 30, 2022, and 4.1 % for the six months ended September 30, 2021. 

The effective tax rate for the 

six months ended September 

30, 2022 differed from the statutory federal rate of 21 % primarily due to the share-based payment awards for employees and the effect of income generated in foreign jurisdictions. 

The effective tax rate for the first six  months of 2023 was lower than the same period in 2022 primarily due to the share based compensation and the effect of income in foreign jurisdictions.

Commitments and Contingencies

We review the adequacy of our legal reserves on a quarterly basis and establish reserves for loss contingencies that are both probable and reasonably estimable.

As of June 30, 2022 , there were no material legal reserves recorded on the accompanying unaudited Condensed Consolidated Balance Sheets. 

As of September 30, 2022 , there were no material legal reserves recorded on the accompanying unaudited Condensed Consolidated Balance Sheets. 

S egment Information

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Our change in financial reporting segments has not resulted in any change to previously reported consolidated amounts.

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

Clinical Genomics

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Operating expenses

Operating (loss) income

Nonoperating (income) expense, net

(Loss) earnings before income taxes

Operating income (loss)

Nonoperating expense (income), net

Earnings (loss) before income taxes

Intersegment revenues are not significant and are eliminated to arrive at consolidated totals.

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not  provided with any other segment asset information.

September 30,

Clinical Genomics

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expect, ”

seek, ” “

intend, ” “

seek, ”

could, ” “

believe, ” “

may, ”

anticipate, ” “

could, ”

estimate, ”

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

the duration and impact of the COVID-19 pandemic and its adverse effects on our business;

significant developments or uncertainties stemming from governmental actions, including changes in  

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demand, and competition;

the effects of additional actions taken to become more efficient or lower costs ;

restructuring activities ;

the effects of additional actions taken to become more efficient or lower costs ; 

the duration and impact of the COVID-19 pandemic and its adverse effects on our business;

supply chain challenges;

cost pressures and the overall effects of the current high inflation environment on customers ’

purchasing patterns;

laws regulating fraud and abuse in the health care industry and the privacy and security of health and personal information;

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foreign currency exchange rates and fluctuations in those rates;

general economic, industry, and capital markets conditions ;

general economic, industry, and capital markets conditions, including rising interest rates and potential recessionary conditions ;

the timing of any of the foregoing ;

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We are a multinational manufacturer, developer, and seller of life science tools and quality control products and services, many of which are sold into niche markets that are driven by regulatory requirements. 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 in these areas as well as throughout the rest of the world.

We prefer markets in which we can establish a strong presence and achieve high gross profit margins. As of June 30, 2022, we managed our operations in four reportable segments, or divisions:

Clinical Genomics, Sterilization and Disinfection Control, Biopharmaceutical Development, and Calibration Solutions. Each of our divisions are described further in "Results of Operations" below. Non-reportable operating segments and unallocated corporate expenses are reported within Corporate and Other.

We prefer markets in which we can establish a strong presence and achieve high gross profit margins. 

As of September 30, 2022, we managed our operations in four reportable segments, or divisions:

Clinical Genomics, Sterilization and Disinfection Control, Biopharmaceutical Development, and Calibration Solutions. Each of our divisions are described further in "Results of Operations" below. 

Corporate Strategy

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

We serve a broad set of industries, in particular the pharmaceutical, healthcare services, and medical device verticals, that require dependable quality control and calibration solutions to ensure the safety and efficacy of the products they use. By delivering the highest quality products possible, we are committed to protecting people, the environment, and end products.

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

 By delivering the highest quality products possible, we are committed to protecting people, the environment, and end products.

Organic Revenues Growth

Organic revenues growth is primarily driven by the expansion of our customer base, increases in sales volumes, price increases, and changes in foreign currency rates.

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

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

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We typically evaluate costs and pricing annually;

however as a result of high inflation in recent quarters, we have elected to put through additional price increases which will take effect during the second quarter of our fiscal year 2023.

Gross profit is affected by many factors including our product mix, manufacturing efficiencies, costs of products and labor, foreign currency rates, and price competition.

Historically, as we have integrated our acquisitions 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 the mix of sales will continue to impact our overall gross profit.

however, as a result of high inflation in recent quarters, we increased prices late in the second quarter of fiscal year 2023, and we expect to realize these price increases beginning in the third quarter of fiscal year 2023.

Inorganic Growth - Acquisitions

During the third quarter of fiscal year 2022, we completed the acquisition of Agena for an aggregate net purchase price of $300,793. Agena is a leading clinical genomics tools company that develops, manufactures, and sells highly sensitive, low-cost, high-throughput, genetic analysis tools used by clinical labs to perform genomic clinical testing in several therapeutic areas, such as newborn screenings, pharmacogenetics and oncology.

 The acquisition of Agena accelerated our strategic trajectory towards higher growth applications within the regulated segments of the life sciences tools market. 

During the third quarter of fiscal year 2022, we completed the acquisition of Agena for an aggregate net purchase price of $300,793. Agena is a leading clinical genomics tools company that develops, manufactures, and sells highly sensitive, low-cost, high-throughput genetic analysis tools used by clinical labs to perform genomic clinical testing in several therapeutic areas, such as screenings for hereditary diseases, pharmacogenetics and oncology related applications.

The acquisition of Agena accelerated our strategic trajectory towards higher growth applications within the regulated segments of the life sciences tools market. 

Over the past decade, we have consummated a number of acquisitions as part of our growth strategy. 

The acquisitions of these businesses have allowed us to expand our product offerings, globalize our company, and increase the scale at which we operate, which in turn affords us the ability to improve our operating efficiency, extend our customer base, and further the pursuit of our purpose: Protecting the Vulnerable®.

These acquisitions have allowed us to expand our product offerings, globalize our company, and increase the scale at which we operate, which in turn affords us the ability to improve our operating efficiency, extend our customer base, and further the pursuit of our purpose: Protecting the Vulnerable®.

Improving Our Operating Efficiency

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and Always Learning so that performance continuously improves. 

Gross profit is affected by many factors including our product mix, manufacturing efficiencies, costs of products and labor, foreign currency rates, and price competition.

Historically, as we have integrated our acquisitions 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 the mix of sales will continue to impact our overall gross profit.

Hire, Develop, and Retain Top Talent

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COVID-19 has caused or exacerbated broad market phenomena such as supply chain disruptions, inflation, and wage pressure to which we are susceptible.

While supply chain constraints continue to impact all of our divisions and particularly our Calibration Solutions and Biopharmaceutical Development divisions, we expect that constraints will abate somewhat over the remainder of fiscal year 2023.

We continue to work with our suppliers to understand the existing and potential future impacts to our supply chain and are taking actions in an effort to mitigate such impacts, including pre-ordering components in higher quantities than usual, which has resulted in increased raw materials balances on our consolidated balance sheets as of June 30, 2022.

We have also experienced labor shortages and inflationary pressures due to labor market conditions, impacting all of our divisions, but particularly our Sterilization and Disinfection Control division.

It is possible that labor shortages in our Sterilization and Disinfection Control Division may continue to impact our ability to manufacture product on preferred timelines during the remainder of fiscal year 2023 which could directly impact our revenues and related gross profit. 

We continue to actively monitor the COVID-19 pandemic, including the spread of variants of the virus and the potential impacts that the virus may have on our employees, our customers, and our supply chain.

Conditions related to the COVID-19 pandemic have generally improved during the first quarter of our fiscal year 2023;

While supply chain constraints continue to impact all of our divisions, particularly our Calibration Solutions division, we expect that constraints will abate somewhat over the remainder of fiscal year 2023.

We have also experienced labor shortages and inflationary pressures due to labor market conditions, impacting all of our divisions, particularly our Sterilization and Disinfection Control division. 

Conditions related to the COVID-19 pandemic have continued to improve during the second quarter of our fiscal year 2023;

however, there has been significant variation in business impact by geography.

For example, late in fiscal year 2022, an increase in COVID-19 cases in certain parts of China resulted in the re-imposition of government mandated shut-downs and restrictions, which impacted our operations in China, particularly our Clinical Genomics division.

Such regulatory restrictions have negatively impacted commercial execution, limiting sales of Clinical Genomics consumables to existing customers and instruments to new customers. As stay-at-home and quarantine mandates have eased to some extent, we expect an eventual return to normalized activity levels.

The continued impact of COVID-19 remains highly uncertain because of the speed with which the situation continues to evolve, the global breadth of its spread, the range of governmental and community responses thereto and the diversity of our geographic reach and business offerings. Even after the COVID-19 pandemic has largely subsided as a public health matter, we may experience material adverse impacts to our business as a result of the pandemic's adverse impact on the global economy, in-person collaboration and sales efforts, and our customers’

For example, late in fiscal year 2022 and continuing through May 2022, an increase in COVID-19 cases in certain parts of China resulted in the re-imposition of government mandated shut-downs and restrictions, which impacted our operations in China, particularly our Clinical Genomics division.

Such regulatory restrictions negatively impacted commercial execution in the first quarter of fiscal year 2023, limiting sales of Clinical Genomics consumables to existing customers and instruments to new customers.

During the second quarter of fiscal year 2023, China experienced additional intermittent shut-downs and restrictions; however, our operations were not significantly impacted.

The extent to which these restrictions may recur in the future and the resulting impact to us will depend upon the prevalence of COVID-19 in the impacted regions of China.

Even after the COVID-19 pandemic has largely subsided as a public health matter, we may experience material adverse impacts to our business as a result of the pandemic's adverse impact on the global economy, in-person collaboration and sales efforts, and our customers’

changed purchasing behaviors and confidence.

Currency exchange rates negatively impacted our reported sales for the three and six months ended September 30, 2022, primarily due to the strengthening of the U.S.

dollar ("USD") against the euro, the Swedish Krona ("SEK") and the Chinese Yuan Renminbi. 

Any further strengthening of the USD against major currencies would adversely impact our reported revenues, but would positively impact our expenses for the remainder of the fiscal year, and any weakening of the U.S.

dollar against major currencies would positively impact our reported revenues but would negatively impact our expenses for the remainder of the fiscal year.

Results of Operations

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Financial Statements (in thousands, except percent data).

Revenues from our reportable segments increased 44% for the three months ended June 30, 2022.

Revenues from our reportable segments increased 64% and 54% for the three and six months ended September 30, 2022, respectively, compared to the relevant prior year period.

Revenues growth was primarily attributable to the acquisition of Agena;

however, organic revenues growth was 3% for the three months ended June 30, 2022. Gross profit as a percentage of revenues decreased two percentage points for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 primarily as a result of continued supply chain constraints, wage and other inflationary pressures, and impacts of government-imposed lockdowns related to the COVID-19 pandemic. Results by reportable segment are as follows:

however, organic revenues growth was 12% and 8% for the three and six months ended September 30, 2022, respectively. Gross profit as a percentage of revenues decreased three percentage and two percentage points for the three and six months ended September 30, 2022, respectively, compared to the three and six months ended September 30, 2021, primarily as a result of foreign currency impacts on revenues, inflationary pressures, continued supply chain constraints, and product mix. Results by reportable segment are as follows:

Organic Revenues Growth

Gross Profit as a % of Revenues

Three Months Ended June 30, 2022

Three Months Ended June 30, 2021

Three Months Ended June 30, 2022

Three Months Ended June 30, 2021

Three Months Ended June 30, 2022

Three Months Ended June 30, 2021

Three Months Ended September 30, 2022

Three Months Ended September 30, 2021

Three Months Ended September 30, 2022

Three Months Ended September 30, 2021

Three Months Ended September 30, 2022

Three Months Ended September 30, 2021

Clinical Genomics (*)

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Mesa's reportable segments

Organic Revenues Growth

Gross Profit as a % of Revenues

Six Months Ended September 30, 2022

Six Months Ended September 30, 2021

Six Months Ended September 30, 2022

Six Months Ended September 30, 2021

Six Months Ended September 30, 2022

Six Months Ended September 30, 2021

Clinical Genomics (*)

Sterilization and Disinfection Control

Biopharmaceutical Development

Calibration Solutions

Mesa's reportable segments

(*) Revenues in the Clinical Genomics division represent transactions subsequent to the Agena Acquisition on October 20, 2021. 

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,

Operating expenses

Operating (loss) income

Net (loss) income

Operating income (loss)

Net income (loss)

Reportable Segments

Clinical Genomics

The Clinical Genomics division, created following the Agena Acquisition, develops, manufactures, and sells highly sensitive, low-cost, high-throughput, genetic analysis tools used by clinical labs to perform genomic clinical testing in several therapeutic areas, such as screenings for hereditary diseases, pharmacogenetics and oncology related applications.

Three Months Ended June 30,

The Clinical Genomics division develops, manufactures, and sells highly sensitive, low-cost, high-throughput genetic analysis tools used by clinical labs to perform genomic clinical testing in several therapeutic areas, such as screenings for hereditary diseases, pharmacogenetics and oncology related applications.

Three Months Ended September 30,

Six Months Ended September 30,

Gross profit as a % of revenues

Clinical Genomics revenues were negatively impacted by the government-imposed shutdowns in parts of China due to the COVID-19 pandemic, which began at the end of fiscal year 2022 and continued throughout the majority of the first quarter of fiscal year 2023.

Shut-downs in China limited our sales efforts and decreased sales of consumables as laboratory customers were closed, limiting usage of our products.

As these government-imposed shutdowns become less frequent, we expect to see a recovery to more normal demand.

Of the revenues reported, $195 represents revenues from COVID-19 related sales.

Clinical Genomics gross profit was $7,849 for the three months ended June 30, 2022 and was significantly impacted by lower than expected revenues due to the government-imposed shutdowns in China related to the COVID-19 pandemic.

The decreased revenues impacted gross profit as a percentage of revenues as lower revenues were available to cover our partially fixed cost base.

Revenues for the Clinical Genomics division were $18,435 for the second quarter of fiscal year 2023.

China’s government-mandated shutdowns and restrictions in response to the COVID-19 pandemic were largely lifted beginning in May 2022, and as a result, revenues in the Clinical Genomics division reached a more normal level in the second quarter of fiscal year 2023.

Of the revenues reported, $179 represent revenues from COVID-19 related sales.

Revenues in the Clinical Genomics division for the second quarter of fiscal year 2023 represented an increase of 27% compared to the first quarter of fiscal year 2023.

Revenues for the Clinical Genomics division were $32,940 for the six months ended September 30, 2022.

Revenues were negatively impacted by China's government-mandated shutdowns, which began in late fiscal year 2022 and continued through May 2022. These restrictions negatively impacted commercial execution in the first quarter of fiscal year 2023, limiting sales of Clinical Genomics consumables to existing customers and instruments to new customers.

Of the revenues reported in the current year period, $374 represent revenues from COVID-19 related sales. 

Gross profit for the Clinical Genomics division was $10,641 and $18,490 for the three and six months ended September 30, 2022, respectively. Gross profit as a percentage of revenues for the three months ended September 30, 2022 benefitted from higher revenues to cover a partially-fixed cost base.

Gross profit percentage of revenues for the six months ended September 30, 2022 benefitted from higher revenues in the second quarter of fiscal year 2023, partially offset by the negative impact of China's government-mandated shutdowns in the beginning of the first quarter of fiscal year 2023.

Sterilization and Disinfection Control

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The division also provides testing and laboratory services, mainly to the dental industry. 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,

Gross profit as a % of revenues

Sterilization and Disinfection Control revenues decreased 2% for the three months ended June 30, 2022 primarily due to the strengthening of the U.S.

dollar ("USD") against the euro and labor shortages which impacted our ability to manufacture products on desired timelines, partially offset by favorable product mix and to a lesser extent price increases.

Sterilization and Disinfection Control's gross profit percentage decreased two percentage points for the three months ended June 30, 2022 as a result of lower revenues due to the strengthening of the USD against the euro and increased labor and labor-related costs.

Sterilization and Disinfection Control revenues increased 21% and 9% for the three and six months ended September 30, 2022, respectively, compared to the relevant prior year periods, despite a significant strengthening of the USD against the euro. During the second quarter of fiscal year 2023, we added temporary and permanent manufacturing headcount at our Bozeman Montana facility, which enabled us to fulfill a higher volume of customer orders compared to the three months ended June 30, 2022.

While we were able add capacity to our manufacturing workforce during the second quarter of fiscal year 2023, it is possible that this division will experience labor shortages in the future which could impact the division's gross profits. The three and six months ended September 30, 2022 also benefited from favorable product mix and to a lesser extent, price increases. 

Sterilization and Disinfection Control's gross profit percentage decreased three percentage points for the three and six months ended September 30, 2022 compared to the relevant prior year periods as a result of foreign currency fluctuations negatively impacting our reported revenues, and increased labor and labor-related costs.

Biopharmaceutical Development

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

Immunoassays and peptide synthesis solutions accelerate the discovery, development, and manufacturing of biotherapeutic drugs. 

Three Months Ended June 30,

Immunoassays and peptide synthesis solutions accelerate the discovery, development, and manufacture of biotherapeutic drugs. 

Three Months Ended September 30,

Six Months Ended September 30,

Gross profit as a % of revenues

Biopharmaceutical Development revenues increased 24% for the three months ended June 30, 2022 primarily due to increased sales of both consumables and services, as well as price increases and an easier compare to the first quarter of fiscal year 2022. Increases in revenues were partially offset by unfavorable changes in foreign exchange rates.

Biopharmaceutical Development's gross profit percentage increased 12 percentage points for the first quarter of fiscal year 2023 compared to the first quarter of fiscal year 2022 as a result of a favorable change in foreign exchange rates applied to costs recorded in Swedish Krona ("SEK"), favorable product mix of peptide synthesis solutions, and production efficiencies resulting from increased revenues, partially offset by higher labor and material costs.

Biopharmaceutical Development revenues increased 15% and 19% for the three and six months ended September 30, 2022, respectively, compared to the relevant prior year periods, primarily due to increased product adoption, and price increases, partially offset by unfavorable changes in foreign currency exchange rates.

The increase for the six months ended September 30, 2022 resulted in part from the fact that some COVID-19 related restrictions were still in place during the first quarter of fiscal year 2022.  Increases in revenues were partially offset by unfavorable changes in foreign exchange rates.

Biopharmaceutical Development's gross profit percentage decreased one percentage point for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 as a result of foreign currency impacts, unfavorable product mix and higher labor and materials costs.

Biopharmaceutical Development's gross profit percentage increased five percentage points for the six months ended September 30, 2022 compared to the six months ended September 30, 2021 as a result of higher revenues on a partially-fixed cost base, partially offset by foreign currency impacts.

Calibration Solutions

The Calibration Solutions division designs, manufactures, and markets quality control and calibration products used to measure or calibrate temperature, pressure, pH, humidity, and other such parameters for health and safety purposes, primarily in hospital, medical device manufacturing, pharmaceutical, and laboratory environments.

Three Months Ended June 30,

The Calibration Solutions division designs, manufactures, and markets quality control and calibration products used to measure or calibrate temperature, pressure, pH, humidity, and other chemical or physical parameters for health and safety purposes, primarily in hospital, medical device manufacturing, pharmaceutical, and laboratory environments.

Three Months Ended September 30,

Six Months Ended September 30,

Gross profit as a % of revenues

Calibration Solutions division revenues decreased 6% for the three months ended June 30, 2022 primarily as a result of supply constraints limiting our ability to manufacture ordered quantities of certain products, partially offset by price increases and increased calibration hardware sales.

The Calibration Solutions division's gross profit percentage decreased one percentage point during the three months ended June 30, 2022.

Costs in this division increased somewhat from the first quarter of 2022 to the first quarter of 2023, partially offset by a favorable product mix.

Calibration Solutions revenues were essentially flat for the three months ended September 30, 2022 relative to the prior year period, primarily due to our ability to overcome certain global supply chain issues which allowed us to begin to fill previously-backlogged orders in certain of our product classes.

During the six months ended September 30, 2022, revenues decreased 3% compared to the prior year period primarily as a result of supply constraints limiting our ability to manufacture ordered quantities of certain products.

Calibration Solutions' gross profit percentage was essentially flat for the three and six months ended September 30, 2022 as compared to the three and six months ended September 30, 2021.

Operating Expenses

Operating expenses increased 88% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 primarily as a result of the Agena Acquisition and as our overall business grew.

Operating expenses increased 71% and 80% for the three and six months ended September 30, 2022, respectively, compared to the three and six months ended September 30, 2021 primarily as a result of the Agena Acquisition and as our overall business grew.

Operating expenses were favorably impacted by the strengthening of the USD during the three and six months ended September 30, 2022. 

Selling expense is driven primarily by labor costs, including salaries and commissions;

accordingly, it may vary with sales levels.

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

Selling expense

As a percentage of revenues

Selling expense for the three months ended June 30, 2022 increased 106% primarily as a result of the acquisition of Agena.

Excluding the impact of Agena, selling expense increased 17% for the three months ended June 30, 2022, primarily as a result of professional services costs as we made improvements to our corporate website, as well as increased travel and tradeshow costs as we continued to resume in-person meetings and events.

Selling expense for the three and six months ended September 30, 2022 increased 98% and 102%, respectively, compared to the relevant prior year periods, primarily as a result of the acquisition of Agena.

Excluding Agena, selling expense increased 15% and 16% for the three and six months ended September 30, 2022, respectively, primarily as a result of increased travel and tradeshow costs as we continued to resume in-person meetings and events, as well as higher professional services costs as we made improvements to our corporate website.

General and Administrative

Labor costs, including non-cash stock-based compensation, and amortization of intangible assets 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,

General and administrative expense

As a percentage of revenues

General and administrative expenses increased 77% for the three months ended June 30, 2022 primarily as a result of the acquisition of Agena, including $2,490 of amortization of intangibles associated with intangibles acquired in the Agena Acquisition.

Excluding the impact of Agena, general and administrative expenses increased 33% for the three months ended June 30, 2022.

Excluding Agena, the increase in general and administrative costs for the first quarter of fiscal year 2023 was a result of higher stock-based compensation expense, increased labor and labor-related expenses, and costs associated with the implementation of our enterprise resource planning tool for Agena, partially offset by lower legal expenses.

General and administrative expenses increased 56% and 66% for the three and six months ended September 30, 2022, respectively, compared to the relevant prior year periods, primarily as a result of the Agena Acquisition. 

Included in both increases is the amortization of intangible assets associated with the Agena acquisition of $2,398 and $4,888 for the three and six months ended September 30, 2022, respectively.

Excluding Agena, general and administrative expense increased 15% and 24% for the three and six months ended September 30, 2022, respectively primarily as a result of higher stock-based compensation expense, and to a lesser extent, increased labor and labor related expenses and Agena integration expenses, partially offset by lower amortization expense due to favorable currency exchange rates.

Research and Development

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,

Research and development expense

As a percentage of revenues

Research and development expenses increased 103% for the three months ended June 30, 2022 primarily as a result of the acquisition of Agena.

Excluding the impact of Agena, research and development costs for the three months ended June 30, 2022 increased 23% primarily as a result of our purchase of in process research and development technology that we intend to further develop in order to enhance a product offering in our Sterilization and Disinfection Control division.

Research and development expenses increased 91% and 97% for the three and six months ended September 30, 2022, respectively, relative to the relevant prior year periods, primarily as a result of the acquisition of Agena.

Excluding the impact of Agena, research and development costs for the three months ended September 30, 2022 increased 2% relative to the prior year period primarily due to increased labor and labor related costs.

For the six months ended September 30, 2022, research and development costs increased 13% excluding the impact of Agena, primarily as a result of our purchase of in process research and development technology that we intend to further develop in order to enhance a product offering in our Sterilization and Disinfection Control division.

Nonoperating Expense 

Three Months Ended June 30,

Nonoperating (income) expense

Nonoperating expense for the three months ended June 30, 2022 is composed primarily of interest expense and amortization of the debt discount associated with the Notes and net gains on foreign currency transactions.

Nonoperating expense was lower in the first quarter of fiscal year 2023 compared to the first quarter of fiscal year 2022 as the USD strengthened against the SEK and the euro resulting in realized and unrealized gains that partially offset interest expense and amortization of debt discount on the Notes and the Credit Facility.

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

Nonoperating expense (income)

Nonoperating expense for the three and six months ended September 30, 2022 is composed primarily of interest expense and amortization of the debt discount associated with the Notes and the Credit Facility as well as gains and losses on foreign currency transactions.

Nonoperating expense was higher during the three and six months ended September 30, 2022 compared to the three and six months ended September 30, 2021 due to interest expense on the Credit Facility, which had an average balance of $38,000 during the six months ended September 30, 2022 compared with no balance throughout the first six months of fiscal year 2022.

In addition, we recorded net foreign currency gains in the three and six months ended September 30, 2021. 

Three Months Ended September 30,

Six Months Ended September 30,

Income tax provision (benefit)

Effective tax rate

Our effective income tax rate was (73.4%) for the three months ended June 30, 2022 and (40.7%) for the three months ended June 30, 2021. The effective tax rate for the three months ended June 30, 2022 differed from the statutory federal rate of 21% primarily due to the share-based payment awards for employees and the effect of income generated in foreign jurisdictions 

The effective tax rate for the first quarter of our fiscal year 2023 was higher than the same period in 2022 primarily due to the share based compensation and the effect of income in foreign jurisdictions.

Our effective income tax rate was 61.4% and (93.5%) for the three and six months ended September 30, 2022, respectively, and 18.1% and 4.1% for the three and six months ended September 30, 2021, respectively. The effective tax rate for the six months ended September 30, 2022 differed from the statutory federal rate of 21% primarily due to the share-based payment awards for employees and the effect of income generated in foreign jurisdictions. The effective tax rate for the six months ended September 30, 2022 was lower than the same period in 2022 primarily due to the share-based compensation and the effect of income 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.

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

Net Income 

Net income for the three months ended June 30, 2022 varied with the changes in revenues, gross profit, and operating expenses (and included $7,320 and $3,432 of non-cash amortization of intangible assets acquired in a business combination and stock-based compensation expense, respectively).

Net Income (Loss) 

Net income (loss) varies with changes in revenues, gross profit, and operating expenses (and included $14,426 and $7,803 of non-cash amortization of intangible assets acquired in business combinations and stock-based compensation expense, respectively, for the six months ended September 30, 2022).

Liquidity and Capital Resources

Our sources of liquidity include cash generated from operations, cash and cash equivalents on hand, cash available from our Credit Facility and our Open Market Sale Agreement SM , working capital and potential additional equity and debt offerings. We believe that cash flows from operating activities and potential cash provided by borrowings from our Credit Facility or funds from our Open Market Sale Agreement SM , when necessary, will be sufficient to meet our ongoing operating requirements, scheduled interest payments on debt, dividend payments, and anticipated capital expenditures.

Our sources of liquidity include cash generated from operations, cash and cash equivalents on hand, cash available from our Credit Facility and the Open Market Sale Agreement SM , described below, working capital, and potential additional equity and debt offerings. 

We believe that cash flows from operating activities and potential cash provided by borrowings from our Credit Facility or funds from our Open Market Sale Agreement SM , when necessary, will be sufficient to meet our ongoing operating requirements, scheduled interest payments on debt, dividend payments, and anticipated capital expenditures.

We currently expect to settle the Notes in shares of our common stock, but we may re-finance the debt, depending on conditions in the market and the share price of our common stock. 

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

We had working capital of $84,000 and $76,263 as of June 30, 2022 and March 31, 2022, respectively.

As of June 30, 2022, and March 31, 2022, we had $43,747 and $49,346, respectively, of cash and cash equivalents. We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

As of June 30, 2022, $172,500 in aggregate principal Notes was outstanding and $47,000 was outstanding under the Credit Facility.

In July 2022, we repaid $12,000 of the amount outstanding under the Credit Facility.

We had working capital of $74,754 and $76,263 as of September 30, 2022 and March 31, 2022, respectively.

As of September 30, 2022, and March 31, 2022, we had $32,377 and $49,346, respectively, of cash and cash equivalents. We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

As of September 30, 2022, $172,500 in aggregate principal Notes was outstanding and $27,000 was outstanding under the Credit Facility.

In October 2022, we repaid $2,000 of the amount outstanding under the Credit Facility.

In April 2022, we entered into an Open Market Sale Agreement SM  pursuant to which we may issue and sell, from time to time, shares of our common stock with an aggregate value of up to $150 million.

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We have paid regular quarterly dividends since 2003.

We declared and paid dividends of $0.16 per share during the quarter ended June 30, 2022, as well as each quarter of fiscal year 2022.

In July 2022, we announced that our Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock, payable on September 15, 2022, to shareholders of record at the close of business on August 31, 2022.

We declared and paid dividends of $0.16 per share during each of the quarters ended June 30, 2022 and September 30, 2022, as well as each quarter of fiscal year 2022.

In October 2022, we announced that our Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock, payable on December 15, 2022, to shareholders of record at the close of business on November 30, 2022.

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

Three Months Ended June 30,

Net cash (used in) provided by operating activities

Six Months Ended September 30,

Net cash provided by operating activities

Net cash (used in) investing activities

Net cash (used in) provided by financing activities

Cash flows from operating activities for the three months ended June 30, 2022 used $2,811.

Of the amount of cash used, $10,233 related to net decreases working capital accounts, $4,972 represented net loss for the first quarter of 2023, partially offset by amortization and stock-based compensation expense.

Cash used in working capital during the first quarter of fiscal year 2023 included:

payment of bonuses accrued at year end, higher inventory as we work to manage supply chain constraints by increasing our stock of raw materials inventory, as well as payments made for prepaid insurance policies and other annual renewals.  In the first quarter of fiscal year 2022, changes in operating assets and liabilities represented $1,430 as our cash bonus paid was smaller, and more receivables were collected during the quarter.

Cash used in investing activities was lower during the three months ended June 30, 2022 compared to the three months ended June 30, 2021, due to less purchases of property, plant, and equipment during the period.

Cash used by financing activities primarily resulted from $2,000 repaid on our Credit Facility during the quarter.

Cash flows from operating activities for the six months ended September 30, 2022 provided $7,746.

Net loss, and non cash adjustments totaled $22,768 for the six months ended September 30, 2022 compared to $19,019 for the six months ended September 30, 2021.

Adjustments to working capital accounts used $10,026 more cash in the six months ended September 30, 2022 compared to the six months ended September 30, 2021, primarily due to lower collections on trade receivables and higher spend on inventory as we built supplies to mitigate supply chain risk. Cash used in investing activities was higher during the six months ended September 30, 2022 compared to the six months ended September 30, 2021, due to increased purchases of property, plant, and equipment as we completed the renovation of our Lakewood, Colorado manufacturing facility during fiscal year 2023. Cash used by financing activities primarily resulted from $22,000 repaid on our Credit Facility during the six months ended September 30, 2022.

Contractual Obligations and Other Commercial Commitments

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For a description of our contractual obligations and other commercial commitments as of March 31, 2022, see our Annual Report on Form 10-K for the fiscal year ended March 31, 2022, filed with the Securities and Exchange Commission on May 31, 2022.  

On a consolidated basis, at June 30, 2022, we had contractual obligations for open purchase orders of approximately $24,081 for routine purchases of supplies and inventory, which are payable in less than one year.

On a consolidated basis, as of September 30, 2022, we had contractual obligations for open purchase orders of approximately $24,331 for routine purchases of supplies and inventory, which are payable in less than one year.

Open purchase orders continue to increase as we take proactive steps to mitigate risks in supply by increasing our orders of certain critical raw materials. 

Off-Balance Sheet Arrangements

As of June 30, 2022, we had no off-balance sheet arrangements or obligations.

Critical Accounting Policies and Estimates

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We face currency exposures in our global operations as a result of various factors including intercompany currency denominated loans, selling our products in various currencies, purchasing raw materials and equipment in various currencies, and tax exposures not denominated in the functional currency.

These exposures have increased as we have continued to expand internationally, including the acquisition of Gyros Protein Technologies Holding AB, which conducts a substantial portion of its business expenses in Swedish Krona, and the acquisition of Agena, which conducts a portion of its business in euros and a portion in Chinese Yuan.

These exposures have increased as we have continued to expand internationally, including the acquisition of Gyros Protein Technologies Holding AB, which incurs a substantial portion of its business expenses in Swedish Krona, and the acquisition of Agena, which conducts a portion of its business in euros and a portion in Chinese Yuan Renminbi.

Fluctuations in exchange rates have and may continue to adversely affect our results of operations, financial position, and cash flows.

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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 1. Financial Statements