What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-02-06 compared with 2022-11-03 · 424 added, 262 removed, 898 unchanged (43% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

(dollars in thousands, except share amounts)

September 30,

(in thousands, except share amounts)

Current assets:

75 unchanged sentences

(in thousands, except per share data)

Three Months Ended September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

$ 54,287  

13 unchanged sentences

27,660  

18,459  

General and administrative

5 unchanged sentences

15,486  

10,588  

Total operating expenses

7 unchanged sentences

Interest expense and amortization of debt discount

Other (income), net

( 603 )  

Other expense (income), net

( 1,189 )  

4 unchanged sentences

( 2,341 )  

Income tax provision (benefit)

( 112 )  

Net income (loss)

Income tax provision (benefit)

( 281 )  

( 431 )  

Net income (loss)

$ ( 2,060 )  

12 unchanged sentences

Mesa Laboratories, Inc.

Condensed Consolidated Statements of Comprehensive (Loss) Income

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)  

Three Months Ended September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

Net income (loss)

$ 1,306  

$ 3,720  

$ ( 132 )  

$ 5,715  

Other comprehensive (loss) income:

Other comprehensive income (loss):

Foreign currency translation adjustments

( 13,226 )  

( 6,503 )  

( 29,183 )  

Comprehensive (loss) income

$ ( 11,920 )  

$ ( 2,783 )  

$ ( 29,315 )  

$ 4,583  

Comprehensive income (loss)

See accompanying notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(in thousands)

Six Months Ended September 30,

Nine Months Ended December 31,

Cash flows from operating activities:

Net (loss) income

$ 3,655  

$ 5,715  

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

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

24,769  

Stock-based compensation expense

Non-cash interest and debt amortization

Deferred taxes

15,686  

Stock-based compensation expense

Amortization of step-up in inventory basis

( 359 )  

6 unchanged sentences

Accounts payable

( 1,339 )  

Accrued liabilities and taxes payable

3 unchanged sentences

15,464  

29,921  

Cash flows from investing activities:

Acquisitions, net of cash acquired

( 4,950 )  

Purchases of property, plant and equipment

3 unchanged sentences

Cash flows from financing activities:

Proceeds from the issuance of debt

70,000  

Payments of debt

2 unchanged sentences

Proceeds from the exercise of stock options

Payment of tax withholding obligation on vesting of restricted stock

( 909 )  

Payments of contingent consideration

Net cash (used in) provided by financing activities

( 28,936 )  

Effect of exchange rate changes on cash and cash equivalents

62,623  

Net (decrease) increase in cash and cash equivalents

Effect of exchange rate changes on cash and cash equivalents

( 1,305 )  

Net (decrease) in cash and cash equivalents

( 23,245 )  

5 unchanged sentences

$ 51,706  

Supplemental non-cash activity:

Contingent consideration as part of an acquisition

$ 1,500  

See accompanying notes to Condensed C onsolidated Fin ancial Statements.

12 unchanged sentences

31,690  

Tax withholding on vesting of restricted stock units

Dividends paid, $ 0.16 per share

12 unchanged sentences

42,014  

Tax withholding on vesting of restricted stock units

(3,051 )  

( 572 )  

Dividends paid, $ 0.16 per share

9 unchanged sentences

$ 374,236  

Exercise of stock options and vesting of restricted stock units

Tax withholding on vesting of restricted stock units

(1,757 )  

( 335 )  

Dividends paid, $ 0.16 per share

( 855 )  

Stock-based compensation expense

Foreign currency translation

11,345  

December 31, 2022

5,341,890  

$ 326,933  

$ 74,444  

$ ( 14,172 )  

$ 387,205  

Number of Shares

8 unchanged sentences

58,324  

Tax withholding on vesting of restricted stock units

( 747 )  

Dividends paid, $ 0.16 per share

12 unchanged sentences

24,340  

Tax withholding on vesting of restricted stock units

( 68 )  

Dividends paid, $ 0.16 per share

9 unchanged sentences

$ 399,417  

Exercise of stock options and vesting of restricted stock units

21,396  

Tax withholding on vesting of restricted stock units

Dividends paid, $ 0.16 per share

( 837 )  

Stock-based compensation expense

Foreign currency translation

( 6,165 )  

( 2,060 )  

December 31, 2021

5,244,628  

$ 308,208  

$ 79,302  

$ 8,819  

$ 396,329  

*Accumulated Other Comprehensive (Loss) Income.

13 unchanged sentences

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:

As of December 31, 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.

19 unchanged sentences

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. 

through June 30, 2022, 

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

1, 2022 through December 31, 2022. 

References to “fiscal year 2022”

2 unchanged sentences

Prior Period Reclassification

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.

Certain amounts presented for prior periods in Note 3.

"Revenue Recognition" have been reclassified.

Certain revenues related to the Biopharmaceutical Development division have been reclassified out of revenues from consumables and into revenues from hardware and services.

Certain revenues related to the Clinical Genomics division have been reclassified out of revenues from hardware and into revenues from consumables.

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

1 unchanged sentence

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.

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.

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

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

Accordingly, actual results could differ from those estimates.

2 unchanged sentences

Significant Transactions

Belyntic GmbH

During the three months ended December 31, 2022, we acquired substantially all of the assets and certain liabilities of Belyntic GmbH’s peptide purification business (“the Belyntic acquisition”) for $ 6,450 , of which $ 4,950  was paid on the date of acquisition and the remainder will be paid upon approval of patent applications expected in the next 36 months.

The business complements our existing peptide synthesis business, part of the Biopharmaceutical Development segment, by adding a new consumables line.

During the third quarter of fiscal year 2023 ,  we prepared a preliminary analyses of the valuation of net assets acquired in the Belyntic acquisition.

This preliminary purchase price allocation is subject to revision as more detailed analyses are completed

Agena Bioscience, Inc

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

3 unchanged sentences

We funded the acquisition and transactions relating thereto with cash on hand and borrowings under the Credit Facility (as defined below). Of the cash consideration we paid, approximately $ 267,000 represented cash consideration to holders of Agena’s preferred and common stock, approximately $ 2,000 represented cash consideration paid for the settlement of Agena’s warrants, and approximately $ 31,800 represented cash consideration for the settlement of Agena's vested stock options as of the closing date.

Agena Preliminary Purchase Price Allocation

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.

Fair Value of Net Assets Acquired

The allocation of purchase price is based on the fair value of assets acquired and liabilities assumed as of the acquisition date, based on the final valuation of Agena.

We have made appropriate adjustments to deferred taxes and tax-related balances during the three months ended December 31.

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

40 unchanged sentences

after giving effect to certain pro forma adjustments. 

Three Months Ended September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

Pro forma total revenues

3 unchanged sentences

$ 163,733  

Pro forma net income

Pro forma net income (loss)

( 8,426 )  

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

For the three and nine  months ended December 31, 2022 , the pro forma financial information excludes $ 145  and $ 768  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.

1 unchanged sentence

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.

We evaluate revenues internally based primarily on operating segment and the nature of goods and services provided.

Hardware sales include physical products such as instruments used for molecular and genetic analysis, protein synthesizers, medical meters, wireless sensor systems, and data loggers.

Hardware sales 

be offered with accompanying perpetual or annual software licenses, which in some cases are required for the hardware to function.

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

Consumables are typically used on a 

2 unchanged sentences

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 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.

We offer service and maintenance contracts for our instruments, which may contain performance obligations satisfied:

over time, such as an obligation to perform repairs or replace parts as needed over a contractually-specified period of time;

upon completion of a discrete service, such as stand-alone maintenance services or discrete services within annual contracts;

or, in many cases, both.

Typically, revenue is recognized upon shipment of a product, upon completion of a discrete service, or over a period of time reflective of the performance obligation period in the applicable contract, depending on when our obligation to the customer is satisfied.

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 and six months ended September 30, 2022 and 2021 , respectively:

Three Months Ended September 30, 2022

The following tables present disaggregated revenues for the three and nine  months ended December 31, 2022  and 2021 , respectively:

Three Months Ended December 31, 2022

Clinical Genomics

2 unchanged sentences

Calibration Solutions

Discrete Revenues

$ 10,885  

4 unchanged sentences

16,333  

Contracted Revenues

Services and Software

Total Revenues

4 unchanged sentences

$ 54,287  

Three Months Ended September 30, 2021

Three Months Ended December 31, 2021

Clinical Genomics*

2 unchanged sentences

Calibration Solutions

Discrete Revenues

$ 10,221  

1 unchanged sentence

$ 4,099  

$ 26,927  

Hardware and Software

17,735  

Contracted Revenues

Services and Software

10,034  

Total Revenues

3 unchanged sentences

$ 11,624  

Six Months Ended September 30, 2022

$ 54,696  

Nine Months Ended December 31, 2022

Clinical Genomics

2 unchanged sentences

Calibration Solutions

Discrete Revenues

$ 34,815  

8 unchanged sentences

11,218  

Contracted Revenues

Services and Software

28,595  

Total Revenues

4 unchanged sentences

$ 163,489  

Six Months Ended September 30, 2021

Nine Months Ended December 31, 2021

Clinical Genomics*

2 unchanged sentences

Calibration Solutions

Discrete Revenues

$ 10,221  

2 unchanged sentences

$ 2,701  

$ 61,089  

Hardware and Software

1 unchanged sentence

20,608  

Contracted Revenues

Services and Software

39,945  

10,460  

24,422  

Total Revenues

3 unchanged sentences

$ 33,769  

$ 125,456  

*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 locations where services are performed, as follows:

Three Months Ended September 30,

Six Months Ended September 30,

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

Three Months Ended December 31,

Nine Months Ended December 31,

United States

21 unchanged sentences

$ 15,069  

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

Prior year liabilities recognized in revenues during the nine months ended December 31, 2022

Contract liabilities added during the nine months ended December 31, 2022, net of revenues recognized

Contract liabilities balance as of December 31, 2022

$ 16,233  

Contract liabilities primarily relate to service contracts with original expected service durations of 12 months or less and will be recognized to revenue as time passes.

Contract liabilities primarily relate to service contracts with original expected service durations of 12 months or less and will be recognized to revenue over time as our performance obligations are satisfied.

Fair Value Measurements

12 unchanged sentences

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

September 30, 2022

December 31, 2022

March 31, 2022

3 unchanged sentences

Fair Value (Level 2)

$ 170,044  

$ 157,191  

$ 169,365  

$ 185,438  

Assets recognized or disclosed at fair value in the unaudited condensed consolidated financial statements on a nonrecurring basis include items such as property and equipment, operating lease assets, goodwill, and other intangible assets.

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

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.

During the three months ended December 31, 2022, in response to the loss of a significant customer, we used Level 3 inputs to test the recoverability of the Clinical Genomics division’s intangible asset group and evaluate the division’s goodwill for impairment in response to the loss of a significant customer.

After considering all information available to us as of the date of testing, we concluded that no impairment is indicated. Fair values preliminarily assigned to assets acquired and liabilities assumed in the Belyntic acquisition were measured using Level 3 inputs, and are subject to change.

There were no transfers between the levels of the fair value hierarchy during the three and nine  months ended December 31, 2022  or 2021, respectively.

Supplemental Balance Sheets Information

Inventories consist of the following:

September 30, 2022

December 31, 2022

March 31, 2022

Raw materials

$ 20,122  

$ 14,172  

Work in process

Finished goods

11,645  

Total inventories

$ 33,739  

$ 24,606  

Prepaid expenses and other consist of the following:

September 30, 2022

December 31, 2022

March 31, 2022

Prepaid expenses

$ 3,450  

$ 2,871  

Prepaid income taxes

1 unchanged sentence

Total prepaid expenses and other

$ 11,950  

$ 9,142  

Accrued payroll and benefits consist of the following:

September 30, 2022

December 31, 2022

March 31, 2022

Bonus payable

$ 2,714  

$ 7,468  

Wages and paid-time-off payable

2 unchanged sentences

Total accrued payroll and benefits

$ 8,134  

$ 14,717  

Goodwill and Intangible Assets, Net

Finite-lived intangible assets consist of the following:

September 30, 2022

Intangible assets, the significant majority of which are finite-lived, consist of the following:

December 31, 2022

March 31, 2022

6 unchanged sentences

Customer relationships

$ 237,412  

$ ( 80,627 )  

$ 156,785  

$ 244,157  

$ ( 67,469 )  

$ 176,688  

Intellectual property

65,871  

( 17,732 )  

48,139  

65,893  

( 12,620 )  

53,273  

Other intangibles

24,745  

( 6,222 )  

18,523  

25,350  

( 5,194 )  

20,156  

$ 328,028  

$ ( 104,581 )  

$ 223,447  

$ 335,400  

$ ( 85,283 )  

$ 250,117  

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,

Three Months Ended December 31,

Nine Months Ended December 31,

Amortization in cost of revenues

Amortization in general and administrative expense

$ 1,695  

$ 1,227  

$ 5,094  

$ 1,877  

Amortization in general and administrative

16,479  

11,618  

$ 7,147  

$ 5,922  

$ 21,573  

$ 13,495  

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

16 unchanged sentences

( 32 )  

Goodwill related to Agena acquisition

September 30, 2022

Goodwill related to Belyntic acquisition

Measurement period adjustment - Agena acquisition

December 31, 2022

$ 135,784  

3 unchanged sentences

$ 285,809  

Goodwill acquired in the Biopharmaceutical Development division resulted from the Belyntic acquisition and is tax deductible.

 Indebtedness

7 unchanged sentences

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 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 was 4.9%  and 1.5% as of September 30, 2022 and March 31, 2022, respectively.

As of December 31, 2022 , we had $ 19,000 outstanding under the Credit Facility. 

On December 22, 2022, Mesa and the financial institutions amended the Credit Facility to replace references to the Eurodollar Rate with references to the Secured Overnight Financing Rate ("SOFR").

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

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. 

1 unchanged sentence

5.0  to 

1.0  for the period ended September 

30, 2022, except that we 

1.0  for the period ended December 31, 2022 , except that we 

have a leverage ratio of 

5 unchanged sentences

 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.

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.

December 31, 2022 , we were in compliance with all covenants.

Convertible Notes 

1 unchanged sentence

The net proceeds from the Notes, after deducting underwriting discounts and commissions and other related offering expenses payable by us, were approximately $167,056.

 The Notes mature on August 15, 2025, unless earlier repurchased or converted, and bear interest at a rate of 1.375 % payable semi-annually in arrears on February 15 and August 15 each year beginning on February 15, 2020. 

 The Notes mature on August 15, 2025, unless earlier repurchased or converted, and bear interest at a rate of 1.375 % payable semi-annually in arrears on February 15 and August 15 each year. 

Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election.

1 unchanged sentence

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 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 circumstances necessary for conversion were not met during the three months ended December 31, 2022 .

As of December 31, 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 

December 31, 2022 .

The net carrying amount of the Notes was as follows:

September 30, 2022

December 31, 2022

March 31, 2022

Principal outstanding

$ 172,500  

Unamortized debt issuance costs

( 2,456 )  

Net carrying value

$ 170,044  

$ 169,365  

We recognized interest expense on the Notes as follows:

Three Months Ended September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

Coupon interest expense at 1.375%

8 unchanged sentences

Stock-Based Compensation

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.

During the nine  months ended December 31, 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 September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

Stock-based compensation expense

6 unchanged sentences

( 1,855 )  

( 2,081 )  

Stock-based compensation expense, net of tax

2 unchanged sentences

$ 8,004  

$ 3,692  

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 six months ended September 30, 2022:

The following is a summary of stock option award activity for the nine months ended December 31, 2022 :

Stock Options

13 unchanged sentences

100.19  

Outstanding as of September 30, 2022

Outstanding as of December 31, 2022

$ 184.70  

$ 3,406  

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:

The stock options granted during the nine  months ended December 31, 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 nine months ended December 31, 2022 :

Time-Based Restricted Stock Units

19 unchanged sentences

202.00  

Outstanding as of September 30, 2022 (1)

Outstanding as of December 31, 2022 (1)

$ 210.44  

$ 267.97  

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

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. 

Balances for PSUs are reflected at target.

During the nine  months ended December 31, 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.

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.

Substantially all of the RSUs granted during the nine  months ended December 31, 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.

1 unchanged sentence

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 

During the nine  months ended December 31, 2022 , the Compensation Committee of the Board of Directors created a plan to award 

19  PSUs at target (the "FY23 PSUs") that are subject to both service and performance conditions to eligible employees.

1 unchanged sentence

Of the total FY23 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.

The awards will be marked-to-market each reporting period during the performance period. The quantity of shares that will be issued upon vesting will range from 

Based on actual performance through the nine months ended December 31, 2022, we reduced the number of awards expected to vest. 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.

The awards will be marked-to-market each reporting period during the performance period and have a fair value of $ 166.21 per share as of December 31, 2022. 

The quantity of shares that will be issued upon vesting will range from 

200 % of the targeted number of shares;

2 unchanged sentences

no  shares will vest.

During fiscal year 2020,  we awarded 

8  PSUs (the "FY 

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 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. 

During fiscal year 2022, we awarded 7  PSUs to key employees of Agena that are subject to both service and performance conditions.

Based on actual performance through the period ended December 31, 2022, the awards are not expected to vest. 

During fiscal year 2022, the Compensation Committee of the Board of Directors granted a special long-term equity award consisting of PSUs covering a target of 40 shares that is subject to both performance and service conditions to our Chief Executive Officer.

Based on actual performance through the period ended December 31, 2022, the award is estimated to vest at 93 %.

During the three months ended December 31, 2022, we adjusted our estimate of PSUs expected to vest under all outstanding plans based on actual results achieved through the performance period.

We recorded a cumulative effect release of ($ 1,427 ) during the period ($ 1,127  net of tax as well as $ 0.21  per basic and diluted share for both the three and nine months ended December 31, 2022), which is recorded in general and administrative and selling expense on our Condensed Consolidated Statements of Operations.

In the future, we expect non-cash stock based compensation expense to decrease approximately $ 392  per quarter as a result of our new estimate of performance share units expected to vest. 

Earnings  (Loss) Per Share

2 unchanged sentences

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 six  

months ended September 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 the three and six months ended September 30, 2022 and September 30, 2021. 

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 the three and nine  months ended December 31, 2022  and December 31, 2021 . 

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,

Three Months Ended December 31,

Nine Months Ended December 31,

Net income (loss) available for shareholders

1 unchanged sentence

$ 3,655  

$ ( 132 )  

$ 5,715  

Weighted average outstanding shares of common stock

13 unchanged sentences

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

Three Months Ended September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

Assumed conversion of the Notes

6 unchanged sentences

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 ( 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.

Our effective income tax rate was 76.5 % and 384.8 % for the three and 

nine  months ended December 31, 2022 , respectively, compared to 12.0 % and ( 1.0 %) for the three and nine months ended December 31, 2021. 

The effective tax rate for both the three and nine  months ended December 31, 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 three and nine months ended December 31, 2022 was higher than the comparable prior year periods primarily due to lower windfall benefits on stock option exercises and the vesting of restricted stock units 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 September 30, 2022 , there were no material legal reserves recorded on the accompanying unaudited Condensed Consolidated Balance Sheets. 

As of December 31, 2022 , there were no material legal reserves recorded on the accompanying unaudited Condensed Consolidated Balance Sheets.

As part of the Belyntic acquisition, we have agreed to pay an additional $ 1,500  to the sellers if contractually specified patents related to the technology purchased are issued.

We believe that it is probable that the patents will be issued and we will pay the sellers in full within the next 36 months.

The liability is recorded in other long-term liabilities on the accompanying Condensed Consolidated Balance Sheets.

S egment Information

During fiscal year 2022, we realigned our financial reporting segments to reflect how management evaluates the business and allocates resources.

The acquisition of Agena expanded our presence further into the life sciences tools market and provided an impetus for the creation of our new Clinical Genomics reportable segment.

The strategic shift in our business also resulted in a change to the way we manage other business units, and as a result, our historical Instruments and Continuous Monitoring reportable segments have been combined to create Calibration Solutions.

Prior year amounts presented have been reclassified to conform to current year presentation.

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

Three Months Ended September 30,

Six Months Ended September 30,

The following tables set forth our segment information:

Three Months Ended December 31,

Nine Months Ended December 31,

Clinical Genomics

$ 15,585  

$ 16,485  

$ 48,525  

$ 16,485  

Sterilization and Disinfection Control

16,283  

13,831  

48,021  

43,014  

Biopharmaceutical Development

11,646  

12,756  

34,757  

32,188  

Calibration Solutions

10,773  

11,624  

32,186  

33,769  

Total revenues (a)

$ 54,287  

$ 54,696  

$ 163,489  

$ 125,456  

Clinical Genomics

$ 8,045  

$ 3,924  

$ 26,535  

$ 3,924  

Sterilization and Disinfection Control

11,614  

34,581  

31,859  

Biopharmaceutical Development

21,993  

20,061  

Calibration Solutions

17,411  

18,330  

Reportable segment gross profit

32,758  

28,727  

100,520  

74,174  

Corporate and Other (b)

( 100 )  

( 28 )  

$ 32,765  

$ 28,627  

$ 100,492  

$ 73,978  

Reconciling Items:

Operating expenses

29,363  

31,139  

97,689  

69,166  

Operating income (loss)

( 2,512 )  

Nonoperating expense (income), net

( 171 )  

Earnings (loss) before income taxes

$ 1,916  

$ ( 2,341 )  

$ ( 112 )  

$ 3,620  

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

2 unchanged sentences

not  provided with any other segment asset information.

September 30,

Clinical Genomics

$ 14,591  

$ 11,802  

Sterilization and Disinfection Control

2 unchanged sentences

Total inventories

$ 33,739  

$ 24,606  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

26 unchanged sentences

In addition, other written and oral statements that constitute forward-looking statements may be made by the Company or on the Company ’

Words such as “

expect, ”

Words such as  

seek, ” “

intend, ” “

could, ” “

believe, ” “

may, ”

intend, ” “

could, ” “

expect, ”

anticipate, ” “

estimate, ”

plan, ” “

target, ” “

estimate, ”

project, ”

16 unchanged sentences

demand, and competition;

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;

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

 supply chain challenges;

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

17 unchanged sentences

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:

As of December 31, 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. 

9 unchanged sentences

Our policy is to price our products competitively and, where possible, we pass along cost increases to our customers in order to maintain our margins.

We typically evaluate costs and pricing annually;

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.

We typically evaluate costs and pricing annually with price increases effective January 1;

however, as a result of high inflation in recent quarters, we implemented an additional mid-year price increase late in the second quarter of fiscal year 2023.

Inorganic Growth - Acquisitions

During the third quarter of fiscal year 2023, we completed the Belyntic acquisition for an aggregate purchase price of $6,450.

The acquisition provided a natural complement to our peptide synthesis business by adding a consumables product line.

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.

18 unchanged sentences

General Trends

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, particularly our Calibration Solutions division, 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 September 30, 2022.

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 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.

We are a global company, and a significant portion of our revenues and expenses are denominated in currencies other than the U.S.

dollar (“USD”).

Exchanges rates have been volatile throughout our fiscal year 2023 and a weakening or strengthening of foreign currencies against the USD increases or decreases our revenues and gross profit margins as well as impacting the comparability of our results between periods.

Currency exchange rates negatively impacted our reported revenues for the nine months ended December 31, 2022 as compared to the same period in the previous fiscal year.

Any further strengthening of the USD against major currencies would adversely impact our reported revenues, but would, to a lesser extent, positively impact our reported expenses for the remainder of the fiscal year;

conversely, 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.

We have experienced, and expect to continue to experience, inflation impacting the cost of raw materials, labor, and freight, as a result of global macroeconomic trends, including government mandated actions in response to the Coronavirus pandemic (“COVID-19”) and the conflict between Russia and Ukraine.

Our actions to mitigate the impact of supply chain disruptions and inflation, including pre-ordering components in higher than usual quantities, sourcing new vendors and increasing prices have been somewhat successful;

however, raw materials shortages have at times impacted our Calibrations Solutions division, in particular.

We experienced disruptions to our business in China resulting from government mandated shut-downs and restrictions during our fiscal year 2023.

Additionally, the Chinese government recently revoked many COVID-19 related restrictions and while these policy changes did not significantly impact our results of operations for our third fiscal quarter, it is possible that future quarters may be impacted.

The impact of COVID-19 has negatively impacted commercial execution in different ways throughout fiscal year 2023, and in some cases, has limited sales of Clinical Genomics consumables to existing customers and instruments to new customers.

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.

During the third quarter of fiscal year 2023, we were notified by Sema4 Holdings Corp.

("Sema4"), a customer of our Clinical Genomics division, that they are exiting the reproductive health screening business and as a result, they intend to significantly reduce the quantity of orders they place with us in the future.

Revenue from sales to Sema4 were approximately $8,200 during the first twelve months of our ownership of Agena. Following the notice, we evaluated our business operations and enacted several cost-cutting measures in the Clinical Genomics division, including a reduction-in-force, to preserve our financial model.

These actions are expected to generate more than $4,000 in future annualized savings.

Results of Operations

1 unchanged sentence

Financial Statements (in thousands, except percent data).

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 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:

Revenues from our reportable segments decreased 1% and increased 30% for the three and nine months ended December 31, 2022, respectively, as compared to the same periods in the prior year. 

The decrease in revenues for the three months ended December 31, 2022 was attributable to a 2.1% decline in organic revenues which resulted from both unfavorable changes in foreign currency rates and $1,500 of COVID-19 related revenues for the three months ended December 31, 2021.

Revenues growth for the nine months ended December 31, 2022 was primarily attributable to the acquisition of Agena, and to a lesser extent, organic revenues growth of 3.5%. 

Gross profit as a percentage of revenues increased seven and two percentage points for the three and nine months ended December 31, 2022, respectively, primarily as a result of the recognition of a $6,062 non-cash inventory step-up charge, as part of purchase accounting for the Agena acquisition during the three months ended December 31, 2021.

Results by reportable segment are as follows:

Organic Revenues Growth

Gross Profit as a % of Revenues

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

Three Months Ended December 31, 2022

Three Months Ended December 31, 2021

Three Months Ended December 31, 2022

Three Months Ended December 31, 2021

Three Months Ended December 31, 2022

Three Months Ended December 31, 2021

Clinical Genomics (*)

5 unchanged sentences

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

Nine Months Ended December 31, 2022

Nine Months Ended December 31, 2021

Nine Months Ended December 31, 2022

Nine Months Ended December 31, 2021

Nine Months Ended December 31, 2022

Nine Months Ended December 31, 2021

Clinical Genomics (*)

5 unchanged sentences

Our unaudited condensed consolidated results of operations are as follows:

Three Months Ended September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

Operating expenses

1 unchanged sentence

Net income (loss)

(¤) Not a meaningful comparison

Reportable Segments

1 unchanged sentence

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,

Three Months Ended December 31,

Nine Months Ended December 31,

Gross profit as a % of revenues

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.

Clinical Genomics revenues decreased 5% for the three months ended December 31, 2022 compared to the relevant prior year period, primarily as a result of a reduction in COVID-related revenues of $1,374 and adverse changes in foreign currency exchange rates, partially offset by a longer period of ownership of Agena in the third quarter of fiscal year 2023.

Clinical Genomics revenues increased 194% for the nine months ended December 31, 2022 compared to the relevant prior year period due to a significantly shorter period of ownership of Agena for the nine months ended December 31, 2021.

The loss of Sema4 is expected to result in a significant reduction of anticipated revenues for this division in future quarters.

However, our distribution partner Guangzhou Darui Biotechnology Co., Ltd.

recently received China's National Medical Products Administration approval for a Class III in vitro diagnostics ("IVD") panel covering hereditary deafness.

This is the first approved Class III IVD panel in China from our distribution partner program.

Gross profit percentage for the Clinical Genomics division increased 28% and 31% for the three and nine months ended December 31, 2022, respectively, compared to the relevant prior year periods due to the amortization of a $6,062 inventory step-up required by purchase accounting in the third quarter of fiscal year 2022.

We have taken actions to reduce our costs in this division which will help offset the loss of revenues from Sema4.  

Sterilization and Disinfection Control

1 unchanged sentence

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 September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

Gross profit as a % of revenues

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.

Sterilization and Disinfection Control revenues increased 18% and 12% for the three and nine months ended December 31, 2022, respectively, compared to the relevant prior year periods, despite the USD strengthening against the euro. 

During the second and third quarters 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 first quarter of fiscal year 2023. The three and nine months ended December 31, 2022 also benefited from favorable product mix and to a lesser extent, price increases. 

Sterilization and Disinfection Control's gross profit percentage decreased one and two percentage points for the three and nine months ended December 31, 2022, respectively, compared to the relevant prior year periods as a result of foreign currency fluctuations negatively impacting our reported revenues, increased labor and benefit costs, including the cost of temporary headcount, and increased freight costs.

Biopharmaceutical Development

1 unchanged sentence

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

Three Months Ended September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

Gross profit as a % of revenues

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.

Biopharmaceutical Development revenues decreased 9% for the three months ended December 31, 2022 compared to the relevant prior year period, primarily due to unfavorable changes in foreign currency exchange rates.

Additionally, the division faced a difficult compare versus the prior year, which reported an anomalous 46% revenues growth, partially offset by price increases.

Biopharmaceutical Development revenues increased 8% for the nine months ended December 31, 2022 compared to the relevant prior year period primarily due to increased product adoption and price increases, partially offset by unfavorable changes in foreign currency exchange rates.

Biopharmaceutical Development's gross profit percentage decreased six percentage points for the three months ended December 31, 2022 compared to relevant prior year period as a result of foreign currency fluctuations negatively impacting our reported revenues and higher sales of peptide synthesis hardware at a lower gross profit percentage compared to the overall division margin percentages. Biopharmaceutical Development's gross profit percentage increased one percentage point for the nine months ended December 31, 2022 compared to the relevant prior year period as a result of higher revenues on a partially-fixed cost base, partially offset by unfavorable product mix and foreign currency fluctuations negatively impacting our reported revenues.

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 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,

Three Months Ended December 31,

Nine Months Ended December 31,

Gross profit as a % of revenues

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.

Calibration Solutions revenues decreased 7% and 5% for the three and nine months ended December 31, 2022, respectively, compared to the relevant prior year periods, primarily as a result of supply constraints limiting our ability to manufacture ordered quantities of certain products. Production difficulties continue to result in longer lead times for customer orders, which have negatively impacted the timing of new orders;

however, we anticipate that such difficulties will begin to abate in the fourth quarter of fiscal year 2023.

Calibration Solutions' gross profit percentage was essentially flat for the three and nine months ended December 31, 2022 compared to the three and nine months ended December 31, 2021.

Operating Expenses

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. 

Operating expenses decreased 6% and increased 41% for the three and nine months ended December 31, 2022, respectively, compared to the relevant prior year periods, primarily as a result of lower personnel costs and the Agena acquisition.

Operating expenses were favorably impacted by the strengthening of the USD during the three and nine months ended December 31, 2022. 

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

accordingly, it may vary with sales levels.

Three Months Ended September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

Selling expense

As a percentage of revenues

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.

Selling expense for the three months ended December 31, 2022 decreased 6% compared to the relevant prior year period, primarily as a result of lower personnel costs.

Selling expense for the nine months ended December 31, 2022 increased 50% compared to the relevant prior year period, primarily as a result of the Agena acquisition.

Excluding Agena, selling expense increased 7% for the nine months ended December 31, 2022 primarily as a result of increased travel and tradeshow costs as we continued to resume in-person meetings and events, higher stock-based compensation expense, and 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 September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

General and administrative expense

As a percentage of revenues

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.

General and administrative expenses decreased 5% for the three months ended December 31, 2022 compared to the relevant prior year period, primarily as a result of reduced stock-based compensation expense as we reduced the number of PSUs expected to vest. General and administrative expenses increased 36% for the nine months ended December 31, 2022 compared to the relevant prior year period, primarily as a result of the Agena acquisition, including intangible amortization expense of $7,321.

Excluding Agena, general and administrative expense increased 8% for the nine months ended December 31, 2022, primarily as a result of higher stock-based compensation expense, partially offset by lower intangible amortization expense as a result of the strengthening of the USD.

Research and Development

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

Three Months Ended September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

Research and development expense

As a percentage of revenues

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.

Research and development expenses decreased 7% for the three months ended December 31, 2022 compared to the relevant prior year period, primarily as a result of lower personnel costs and the benefit of a strong USD on research and development costs in Europe. Research and development expenses increased 46% for the nine months ended December 31, 2022 compared to the relevant prior year period, primarily due to the Agena acquisition.

Excluding the impact of Agena, research and development costs for the nine months ended December 31, 2022 increased relative to the prior year period primarily due our purchase of in process research and development technology that we are further developing in order to enhance a product offering in our Sterilization and Disinfection Control division.

Nonoperating Expense 

Three Months Ended September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

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,

(¤) Not a meaningful comparison

Nonoperating expense for the three and nine months ended December 31, 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 for the three and nine months ended December 31, 2022 compared to the relevant prior year periods due to interest expense on the Credit Facility, which had a weighted average balance of $36,839 during the nine months ended December 31, 2022 compared with a weighted average balance of $17,993 for the nine months ended December 31, 2021, partially offset by net foreign currency gains in the three and nine months ended December 31, 2021. 

Three Months Ended December 31,

Nine Months Ended December 31,

Income tax provision (benefit)

Effective tax rate

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 effective income tax rate was 76.5% and 384.8% for the three and nine months ended December 31, 2022, respectively, and 12.0% and (1.0%) for the three and nine months ended December 31, 2021, respectively. The effective tax rate for the nine months ended December 31, 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 nine months ended December 31, 2022 was higher than the same period in fiscal year 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.

1 unchanged sentence

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).

Net income (loss) varies with changes in revenues, gross profit, and operating expenses (and included $21,573 and $9,859 of non-cash amortization of intangible assets acquired in business combinations and stock-based compensation expense, respectively, for the nine months ended December 31, 2022).

Liquidity and Capital Resources

4 unchanged sentences

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

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.

We had working capital of $72,568 and $76,263 as of December 31, 2022 and March 31, 2022, respectively.

As of December 31, 2022, and March 31, 2022, we had $26,101 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 December 31, 2022, $172,500 in aggregate principal Notes was outstanding and $19,000 was 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 $150,000.

We routinely evaluate opportunities for strategic acquisitions. Future material acquisitions may require that we obtain additional capital, assume additional third-party debt or incur other long-term obligations.

4 unchanged sentences

We have paid regular quarterly dividends since 2003.

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.

We declared and paid dividends of $0.16 per share during each of the quarters ended June 30, 2022, September 30, 2022, and December 31, 2022, as well as each quarter of fiscal year 2022.

In January 2023, we announced that our Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock, payable on March 15, 2023, to shareholders of record at the close of business on February 28, 2023.

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

Six Months Ended September 30,

Nine Months Ended December 31,

Net cash provided by operating activities

1 unchanged sentence

Net cash (used in) provided by financing activities

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.

Cash flows from operating activities for the nine months ended December 31, 2022 provided $15,464.

Net income and non-cash adjustments totaled $34,588 for the nine months ended December 31, 2022 compared to $32,838 for the nine months ended December 31, 2021.

Adjustments to working capital accounts used $16,207 more cash in the nine months ended December 31, 2022 as compared to the nine months ended December 31, 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 lower for the nine months ended December 31, 2022 compared to the nine months ended December 31, 2021, due to the Agena acquisition during fiscal year 2022, partially offset by the Belyntic acquisition in fiscal year 2023. Cash used by financing activities primarily resulted from $30,000 repaid on our Credit Facility during the nine months ended December 31, 2022.

Contractual Obligations and Other Commercial Commitments

1 unchanged sentence

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, 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. 

On a consolidated basis, as of December 31, 2022, we had contractual obligations for open purchase orders of approximately $19,441 for routine purchases of supplies and inventory, which are payable in less than one year.

Open purchase orders have decreased, in part, due to our previously taken steps to mitigate risks in supply by increasing our stock of certain critical raw materials. 

As part of the Belyntic acquisition, we have agreed to pay $1,500 to the sellers if contractually specified patents related to the 

technology purchased are issued.

We believe that it is probable that the patents will be issued and we will pay the sellers in full within the next 36 months.

The liability is recorded in other long-term liabilities on the accompanying Condensed Consolidated Balance Sheets.

Critical Accounting Policies and Estimates

3 unchanged sentences

Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position are discussed in our Annual Report on Form 10-K for the year ended March 31, 2022, in the Critical Accounting Policies and Estimates section of Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations .

Management's Discussion and Analysis of Financial Condition and Results of Operations . Although we believe that our estimates, assumptions, and judgements are reasonable, they are based upon information presently available.

Actual results may differ significantly from these estimates under different assumptions, judgments, or conditions.

Acquired Intangible Assets

After considering all information available to us as of the date of testing, we concluded that no impairment is indicated. 

Fair values assigned to intangible assets acquired in the Belyntic acquisition were measured using Level 3 inputs.

Quantitative and Qualitative Disclosures a bout Market Risk

7 unchanged sentences

We do not hedge exposure to exchange rates.

Our Credit Facility bears interest at either a base rate or a Eurodollar rate, plus an applicable spread.

Based on the balance currently outstanding against our line of credit, if interest rates increased by 75 basis points, we would incur approximately $203 of additional interest expense per year. 

Our Credit Facility bears interest at either a base rate or a SOFR rate, plus an applicable spread.

Based on the balance currently outstanding against our line of credit, if interest rates increased by 75 basis points, we would incur approximately $143 of additional interest expense per year. 

We have no derivative instruments.

1 unchanged sentence

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