MESA LABORATORIES INC /CO/ 10-K

Item 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Mesa Laboratories, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Mesa Laboratories, Inc. (the Company) as of March 31, 2024, the related consolidated statements of operations, comprehensive loss, stockholders' equity and cash flows for the year ended March 31, 2024, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2024, and the results of its operations and its cash flows for the year ended March 31, 2024, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of March 31, 2024, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Our report dated June 28, 2024 expressed an opinion that the Company had not maintained effective internal control over financial reporting as of March 31, 2024, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Valuation of Intangible Assets Acquired in the GKE Business Combination As described in Note 4 to the financial statements, the Company acquired 100% of the outstanding shares of GKE for consideration of $87.2M during the year ended March 31, 2024. The transaction was accounted for as a business combination using the acquisition method of accounting. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including intangible assets acquired primarily related to customer relationships and trademarks and trade name. The customer relationships were valued using a multi-period excess earnings income approach (a form of the income approach) that discounted expected future cash flows to fair value which utilize assumptions related to revenue projections, free cash flows and discount rates. The trademarks and trade name were valued using a relief from royalty method which utilizes assumptions related to revenue projections and royalty rates. We identified the fair value of these intangible assets as a critical audit matter because auditing management's significant assumptions, including revenue projections, free cash flows, royalty rates, attrition rates and discount rates, in developing the estimates required a high degree of auditor judgment and increased audit effort, including the use of valuation specialists to assist in performing related procedures and evaluating the audit evidence obtained. Our audit procedures related to the significant assumptions used by management in estimating the fair value of certain intangible assets included the following, among others: ● Assessing the reasonableness of management’s revenue projections and free cash flows by: ● Comparing the assumptions to the subsequent performance of the acquired company; ● Evaluating the consistency of the assumptions with external market and industry data, and; ● Comparing the revenue projections to historical company data to the extent practical. ● Evaluating the reasonableness of management’s selection of comparable entities with similar operations and economic characteristics used in the determination of significant assumptions. ● Evaluating the reasonableness of the selected attrition rates based on company specific and external market and industry data. ● With the assistance of our valuation specialists, we assessed the Company's valuation methodologies and significant assumptions by evaluating the reasonableness of the discount rates and royalty rates by comparing the underlying source information to publicly available market data and verifying the accuracy of the calculations. Page 27 Table of Contents Goodwill and Intangible Asset Impairments As described in Notes 1 and 6 to the financial statements, the Company recognized impairment losses on goodwill and intangible assets of $156.9M and $117.6M, respectively, during the year ended March 31, 2024. Management tests for goodwill impairment at the reporting unit level on an annual basis during the last quarter of its fiscal year as of January 1 st , or more frequently if facts, events and circumstance indicate it is more likely than not that the fair value of a given reporting unit is less than its carrying value. Management estimates fair values in connection with quantitative impairment evaluations based on discounted cash flow and market multiple models which utilize assumptions related to revenue projections, estimated gross margins, discount rates and market multiples. Based on management’s testing, the Company recognized $118.7M and $38.2M of goodwill impairment within the Company’s Clinical Genomics reporting unit and within reporting units within the Biopharmaceutical Development segment, respectively. Impairment assessments of finite-lived intangible assets are conducted if events or conditions indicate that the asset groups carrying amounts may not be recoverable. If impairment indicators are present, management determines whether the carrying value of the asset group is recoverable through undiscounted estimated future cash flows. If the asset group is determined not to be recoverable, management estimates the asset groups and individual assets fair value based on discounted cash flow and market multiples which utilize assumptions related to revenue projections, estimated gross margins, discount rates, attrition rates and royalty rates. Based on management’s testing, the Company identified $117.6M of intangible asset impairment within the Clinical Genomics segment. We identified goodwill and intangible asset impairment assessments as a critical audit matter because auditing management's assessments, including the significant assumptions, involved a high degree of auditor judgment and increased audit effort, including the use of valuation specialists to assist in performing related procedures and evaluating the audit evidence obtained. Our audit procedures related the goodwill and intangible asset impairment assessments included the following, among others: ● Assessing the reasonableness of management’s forecast of future revenues and gross margins by comparing the future revenue growth rates and gross margins to historical company data and evaluating consistency with external market and industry data. ● Evaluating the reasonableness of management’s selection of comparable entities with similar operations and economic characteristics. ● Evaluating the reasonableness of the selected attrition rates based on company specific and external market and industry data. ● With the assistance of our valuation specialists, we evaluated the reasonableness of the Company’s valuation methodologies and significant assumptions by: ● Evaluating the reasonableness of the discount rate, royalty rates and market multiples of comparable companies by comparing the underlying source information to publicly available market data and verifying the accuracy of the calculations. ● Evaluating the appropriateness of the valuation methods used by management, testing their mathematical accuracy, and evaluating the allocation of fair value methods used in the analysis. ● Evaluating the reasonableness of the valuation of the reporting units based on a market capitalization reconciliation. /s/ RSM US LLP We have served as the Company’s auditor since 2023. Los Angeles, California June 28, 2024 Page 28 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Mesa Laboratories, Inc. Opinion on the Internal Control Over Financial Reporting We have audited Mesa Laboratories, Inc.’s (the Company) internal control over financial reporting as of March 31, 2024, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, because of the effect of the material weaknesses described below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of March 31, 2024, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the accompanying consolidated balance sheet of Mesa Laboratories, Inc. as of March 31, 2024, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for the year ended March 31, 2024, and the related notes to the consolidated financial statements (collectively, the financial statements) of the Company, and our report dated June 28, 2024, expressed an unqualified opinion. As described in Management's Annual Report on Internal Control Over Financial Reporting, management has excluded GKE GmbH, SAL GmbH, and Beijing GKE Science & Technology Co. Ltd. (together, “GKE”) from its assessment of internal control over financial reporting as of March 31, 2024 because GKE was acquired by the Company in a business combination in the third quarter of fiscal year 2024. We have also excluded GKE from our audit of internal control over financial reporting. GKE consists of wholly owned subsidiaries whose total assets and net income represent approximately 25% and 4%, respectively, of the related consolidated financial statement amounts as of and for the year ended March 31, 2024. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management’s assessment. Management did not have adequate supervision and review controls over the complex accounting for significant and unusual transactions. Specifically, the supervision and review of the accounting for goodwill impairment and acquisitions, including the work performed by external advisors, was not designed to operate at a sufficient level of precision. Management did not have adequate supervision and review controls over the determination of the useful lives of recently acquired intangible assets. Specifically, management selected a useful life for an acquired asset that was not consistent with the economic life used to value the asset. Certain controls regarding user access and change management to the Company’s enterprise resource planning tool, a part of the information technology general controls (“ITGC”), were not operating effectively. This material weakness extended to automated and manual business process controls across the financial reporting and business transaction cycles which rely upon the affected ITGCs. These material weaknesses were considered in determining the nature, timing and extent of audit tests applied in our audit of the 2024 consolidated financial statements, and this report does not affect our report dated June 28, 2024 on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ RSM US LLP Los Angeles, California June 28, 2024 Page 29 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors of Mesa Laboratories, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Mesa Laboratories, Inc. (the “Company”) as of March 31, 2023, the related consolidated statements of operations, comprehensive (loss), stockholders' equity, and cash flows for each of the years in the two-year period ended March 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended March 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion The Company's management is responsible for these financial statements. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Plante & Moran, PLLC We served as the Company’s auditor from 1986 to 2023. Denver, Colorado May 30, 2023 Page 30 Table of Contents Mesa Laboratories, Inc. Consolidated Balance Sheets (In thousands, except share amounts) March 31, March 31, 2024 2023 ASSETS Current assets Cash and cash equivalents $ 28,214 $ 32,910 Accounts receivable, less allowances of $ 1,321 and $ 849 , respectively 39,055 42,551 Inventories 32,675 34,642 Prepaid expenses and other 9,408 8,872 Total current assets 109,352 118,975 Noncurrent assets Property, plant and equipment, net 31,766 28,149 Deferred tax asset 1,292 1,076 Other assets 10,538 10,373 Customer relationships, net 85,383 152,189 Intellectual property, net 15,701 46,400 Other intangibles, net 12,668 18,226 Goodwill 180,096 286,444 Total assets $ 446,796 $ 661,832 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 6,041 $ 6,134 Accrued payroll and benefits 9,935 9,433 Unearned revenues 15,478 15,694 Other accrued expenses 12,858 12,098 Total current liabilities 44,312 43,359 Noncurrent liabilities Deferred tax liability 19,780 34,028 Acquisition-related holdbacks 8,792 1,537 Other long-term liabilities 6,821 6,156 Credit facility 50,500 13,000 Convertible senior notes, net of debt issuance costs 171,198 170,272 Total liabilities 301,403 268,352 Stockholders’ equity Common stock, no par value; authorized 25,000,000 shares; issued and outstanding, 5,394,491 and 5,369,466 shares, respectively 343,642 332,076 (Accumulated deficit) retained earnings ( 183,494 ) 74,199 Accumulated other comprehensive (loss) ( 14,755 ) ( 12,795 ) Total stockholders’ equity 145,393 393,480 Total liabilities and stockholders’ equity $ 446,796 $ 661,832 See accompanying notes to consolidated financial statements. Page 31 Table of Contents Mesa Laboratories, Inc. Consolidated Statements of Operations (In thousands, except per share data) Year Ended March 31, 2024 2023 2022 Revenues Product $ 176,796 $ 180,520 $ 149,422 Service 39,391 38,560 34,913 Total revenues 216,187 219,080 184,335 Cost of revenues Cost of products 57,200 60,937 54,747 Cost of services 25,737 24,450 20,498 Total cost of revenues 82,937 85,387 75,245 Gross profit 133,250 133,693 109,090 Operating expense Selling 38,625 37,439 28,310 General and administrative, other than impairment of finite-lived intangible assets and goodwill 72,867 72,444 60,311 Research and development 19,300 20,490 15,767 Impairment of finite-lived intangible assets 117,641 - - Impairment of goodwill 156,892 - - Total operating expense 405,325 130,373 104,388 Operating (loss) income ( 272,075 ) 3,320 4,702 Nonoperating expense Interest expense and amortization of debt issuance costs 5,697 4,770 3,885 Other (income), net ( 2,124 ) ( 1,061 ) ( 2,757 ) Total nonoperating expense, net 3,573 3,709 1,128 (Loss) earnings before income taxes ( 275,648 ) ( 389 ) 3,574 Income tax (benefit) expense ( 21,402 ) ( 1,319 ) 1,703 Net (loss) income $ ( 254,246 ) $ 930 $ 1,871 Net (loss) earnings per share Basic $ ( 47.20 ) $ 0.17 $ 0.36 Diluted $ ( 47.20 ) $ 0.17 $ 0.35 Weighted-average common shares outstanding Basic 5,386 5,321 5,212 Diluted 5,386 5,361 5,335 See accompanying notes to consolidated financial statements. Page 32 Table of Contents Mesa Laboratories, Inc. Consolidated Statements of Comprehensive (Loss) (In thousands) Year Ended March 31, 2024 2023 2022 Net (loss) income $ ( 254,246 ) $ 930 $ 1,871 Other comprehensive (loss) Foreign currency translation adjustments ( 1,960 ) ( 16,461 ) ( 12,450 ) Comprehensive (loss) $ ( 256,206 ) $ ( 15,531 ) $ ( 10,579 ) See accompanying notes to consolidated financial statements. Page 33 Table of Contents Mesa Laboratories, Inc. Consolidated Statements of Stockholders’ Equity (In thousands, except share amounts) Common Stock Number of Shares Amount (Accumulated Deficit) Retained Earnings AOCI* Total March 31, 2021 5,140,568 $ 317,652 $ 72,459 $ 16,116 $ 406,227 Exercise of stock options and vesting of restricted stock units 128,337 8,027 - - 8,027 Tax withholding on restricted stock units ( 3,278 ) ( 875 ) - - ( 875 ) Dividends paid, $ 0.64 per share - - ( 3,339 ) - ( 3,339 ) Stock-based compensation expense - 11,391 - - 11,391 Foreign currency translation - - - ( 12,450 ) ( 12,450 ) Cumulative adjustment due to adoption of ASU 2020-06 - ( 22,735 ) 5,684 - ( 17,051 ) Net income - - 1,871 - 1,871 March 31, 2022 5,265,627 313,460 76,675 3,666 393,801 Exercise of stock options and vesting of restricted stock units 108,737 6,997 - - 6,997 Tax withholding on restricted stock units ( 4,898 ) ( 919 ) - - ( 919 ) Dividends paid, $ 0.64 per share - - ( 3,406 ) - ( 3,406 ) Stock-based compensation expense - 12,538 - - 12,538 Foreign currency translation - - - ( 16,461 ) ( 16,461 ) Net income - - 930 - 930 March 31, 2023 5,369,466 332,076 74,199 ( 12,795 ) 393,480 Exercise of stock options and vesting of restricted stock units 30,418 358 - - 358 Tax withholding on restricted stock units ( 5,393 ) ( 728 ) - - ( 728 ) Dividends paid, $ 0.64 per share - - ( 3,447 ) - ( 3,447 ) Stock-based compensation expense - 11,936 - - 11,936 Foreign currency translation - - - ( 1,960 ) ( 1,960 ) Net (loss) - - ( 254,246 ) - ( 254,246 ) March 31, 2024 5,394,491 $ 343,642 $ ( 183,494 ) $ ( 14,755 ) $ 145,393 *Accumulated Other Comprehensive (Loss) Income. See accompanying notes to consolidated financial statements. Page 34 Table of Contents Mesa Laboratories, Inc. Consolidated Statements of Cash Flows (In thousands) Year Ended March 31, 2024 2023 2022 Cash flows from operating activities: Net (loss) income $ ( 254,246 ) $ 930 $ 1,871 Adjustments to reconcile net (loss) income to net cash from operating activities: Depreciation of property, plant and equipment 4,233 4,313 3,262 Amortization of acquisition-related intangibles 27,341 28,821 21,806 Stock-based compensation expense 11,936 12,538 11,391 Impairment loss on goodwill and finite-lived intangible assets 274,533 - - Non-cash interest and debt amortization 926 907 1,029 Deferred taxes ( 28,421 ) ( 3,494 ) 128 Amortization of step-up in inventory basis 1,229 - 7,462 Other 629 1,080 ( 534 ) Cash from changes in operating assets and liabilities: Accounts receivable, net 4,940 ( 2,121 ) ( 6,752 ) Inventories 2,563 ( 10,182 ) ( 1,045 ) Prepaid expenses and other assets 211 ( 510 ) ( 3,606 ) Accounts payable ( 97 ) ( 1,545 ) 1,370 Accrued liabilities and taxes payable ( 1,236 ) ( 3,360 ) 255 Unearned revenues ( 408 ) 606 2,586 Net cash provided by operating activities 44,133 27,983 39,223 Cash flows from investing activities: Acquisitions, net of cash acquired and holdback liabilities ( 78,739 ) ( 4,950 ) ( 300,793 ) Purchases of property, plant and equipment ( 2,567 ) ( 4,544 ) ( 4,432 ) Net cash (used in) investing activities ( 81,306 ) ( 9,494 ) ( 305,225 ) Cash flows from financing activities: Proceeds from the issuance of debt 71,000 - 70,000 Repayment of debt ( 33,500 ) ( 36,000 ) ( 21,000 ) Dividends paid ( 3,447 ) ( 3,406 ) ( 3,339 ) Proceeds from the exercise of stock options 358 6,997 8,027 Payment of tax withholding obligation on vesting of restricted stock ( 728 ) ( 919 ) ( 875 ) Other financing, net ( 847 ) - ( 237 ) Net cash provided by (used in) financing activities 32,836 ( 33,328 ) 52,576 Effect of exchange rate changes on cash and cash equivalents ( 359 ) ( 1,597 ) ( 1,093 ) Net (decrease) in cash and cash equivalents ( 4,696 ) ( 16,436 ) ( 214,519 ) Cash and cash equivalents at beginning of period 32,910 49,346 263,865 Cash and cash equivalents at end of period $ 28,214 $ 32,910 $ 49,346 Cash paid for: Income taxes $ 4,591 $ 1,356 $ 3,048 Interest $ 4,648 $ 3,485 $ 2,762 Supplemental non-cash activity: Acquisition-related consideration held back against potential indemnification losses $ 8,448 $ - $ - Contingent consideration from new acquisitions $ - $ 1,190 $ - See accompanying notes to consolidated financial statements. Page 35 Table of Contents Mesa Laboratories, Inc. Notes to Consolidated Financial Statements (dollar and share amounts in thousands, unless otherwise specified) Note 1. Description of Business and Summary of Significant Accounting Policies Description of Business In this Annual Report on Form 10 -K, Mesa Laboratories, Inc., a Colorado corporation, together with its subsidiaries is collectively referred to as “we,” “us,” “our,” the “Company,” or "Mesa." We are a global leader in the design and manufacture of life sciences tools and critical quality control solutions for regulated applications in the pharmaceutical, healthcare, and medical device industries. We offer products and services to help our customers ensure product integrity, increase patient and worker safety, and improve the quality of life throughout the world. We have manufacturing operations in the United States and Europe, and our products are marketed by our sales personnel in North America, Europe and Asia Pacific, and by independent distributors 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 March 31, 2024 , we managed our operations in four reportable segments, or divisions: ● Sterilization and Disinfection Control - manufactures and sells biological, chemical and cleaning indicators which are used to assess the effectiveness of sterilization, decontamination, disinfection and cleaning processes, including steam, hydrogen peroxide, ethylene oxide, radiation, and other processes in the medical device, pharmaceutical and healthcare industries. The division also provides testing and laboratory services, mainly to the dental and pharmaceutical industries. ● Clinical Genomics - develops, manufactures and sells highly sensitive, low-cost, high-throughput genetic analysis tools and related consumables and services that enable clinical research labs and contract research organizations to perform genomic testing for a broad range of research applications in several therapeutic areas, such as screenings for hereditary diseases, pharmacogenetics, oncology related applications, and toxicology research. ● Biopharmaceutical Development - develops, manufactures and sells automated systems for protein analysis (immunoassays) and peptide synthesis solutions. Protein analysis and peptide synthesis solutions accelerate the discovery, development, and manufacture of biotherapeutic therapies, among other applications. ● Calibration Solutions - develops, manufactures and sells quality control products using principles of advanced metrology to enable customers to measure and calibrate critical parameters in applications such as environmental and process monitoring, dialysis, gas flow, air quality and torque testing. Unallocated corporate expenses and other business activities are reported within Corporate and Other. Principles of Consolidation and Basis of Presentation Our Consolidated Financial Statements are 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 (“GAAP”), and include our accounts and those of our wholly owned subsidiaries after elimination of all intercompany accounts and transactions. Management Estimates The preparation of our Consolidated Financial Statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our Consolidated Financial Statements and accompanying notes. Actual results could differ from our estimates under different assumptions or conditions. Summary of Significant Accounting Policies Foreign Currency Exchange rate adjustments resulting from foreign currency transactions are recognized in net earnings, whereas effects resulting from the translation of financial statements are reflected as a component of accumulated other comprehensive income within stockholders’ equity. Assets and liabilities of subsidiaries operating outside the United States with a functional currency other than the U.S. dollar are translated into U.S. dollars at period end exchange rates, and revenue and expense accounts are translated at weighted average period rates. Fair Value Measurements Fair value is the price we would receive to sell an asset or pay to transfer a liability (exit price) in an orderly transaction between market participants. We determine fair value based on the following input hierarchy: Level 1: Quoted prices for identical assets or liabilities in active markets. Level 2: Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or that can be corroborated with observable market data. Level 3: Unobservable inputs supported by little or no market activity. Pricing models, discounted cash flow methodologies, and other similar techniques involving significant management judgment or estimation typically require unobservable inputs. Page 36 Table of Contents Assets recognized or disclosed at fair value in the Consolidated Financial Statements on a nonrecurring basis are measured at fair value if determined to be impaired or if purchased pursuant to our acquisition of a business, including items such as inventory, property and equipment, operating lease assets, goodwill, and other intangible assets. Fair values assigned to assets acquired and liabilities assumed in acquisitions, except deferred revenues and certain other exceptions as defined by applicable accounting guidance, are measured using Level 3 inputs. Revenue Recognition Our revenues come from product sales, which include consumables and hardware, and services, which include discrete and ongoing maintenance, calibration, and testing services. Revenues are recognized when or as we satisfy our performance obligations under the terms of a contract, which occurs when control of the promised products or services transfers to our customers. We recognize the amount of consideration we expect to receive in exchange for transferring products or services to our customers (the transaction price) as revenue. For all revenue contracts, prices are fixed at the time of purchase and no price protections or variables are offered. The significant majority of our revenues and related receivables are generated from contracts with customers that are 12 months or less in duration. We generally recognize revenues as follows: Product sales: Our performance obligations related to product sales generally consist of the promise to sell tangible goods to distributors or end users. Control of these goods is typically transferred upon shipment, at which time our obligation to the customer is satisfied and revenue is recognized. Purchase orders typically provide evidence of an arrangement for product sales. Products sold include an assurance-type warranty which is accounted for as part of accrued warranty expense. Services: We generate service revenues from discrete and ongoing maintenance, calibration, and testing services performed with respect to our physical products. For discrete services, our obligation to complete specified work is satisfied and revenue is recognized upon performance of the service. Obligations arising from ongoing service contracts in which we promise to stand ready to provide maintenance or other services on an as-needed basis for a certain period of time are satisfied by completing any services that are contractually required during the contract period, if requested by the customer, or simply by the passage of time if no services are requested. For ongoing service contracts, revenue is recognized on a straight-line basis over the life of the contract in a faithful depiction of our obligation to provide services over the contract period. Evidence of a service arrangement may be in the form of a formal contract or a purchase order. Collectability is reasonably assured through our customer review process, and payment is typically due within 60 days or less. We expense commission costs (typically our only significant incremental cost to obtain a contract) as incurred and to account for shipping and handling costs as fulfillment costs. The substantial majority of our contracts have original durations of one year or less, and we have elected not to disclose the expected timing or allocated transaction prices of future performance obligations such as obligations to perform maintenance and repair services. Additionally, we have elected to not assess whether a significant financing component exists when the period between when we perform our performance obligation and when the customer remits payment is one year or less. None of our contracts contained financing components as of or for the fiscal years ended March 31, 2024 or 2023 . Contracts with customers may contain multiple obligations. For such arrangements, the transaction price is allocated to each obligation based on the estimated relative standalone selling prices of the promised products or services underlying each obligation. Standalone selling prices are based on the price at which the product or service would be sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price considering available information such as market conditions and internally approved pricing guidelines. In limited circumstances, for obligations with highly variable or unobservable standalone selling prices, we may assign standalone prices to obligations based on the residual transaction price after all observable standalone selling prices have been determined. Discounts may be approved at the time of purchase and are included within a contract’s fixed transaction price. Discounts are typically allocated to obligations included in the contract based on the standalone values of such obligations. All expected and actual consideration from customers is included in the transaction price. Shipping and Handling Payments made by customers to us for shipping and handling costs are included in revenues on the Consolidated Statements of Operations, and our expenses are included in cost of revenues. We account for shipping and handling costs arising from contracts with customers as fulfillment costs. Shipping and handling for inventory and materials we purchase is included as a component of inventory on the Consolidated Balance Sheets and is expensed to cost of revenues when products are sold. Unearned Revenues Certain of our products may be sold with associated time-based service contracts whereby we provide repairs, technical support, parts, and various analytical or maintenance services. In the event these contracts are paid in advance by the customer, the associated amounts are recorded as an unearned revenue liability and recognized as revenue ratably over the term of the service period, generally one year. Prepayments from customers with respect to other products and services are likewise recorded as unearned revenue liabilities and are recognized to revenue when earned. Accrued Warranty Expense We typically provide assurance-type limited product warranties on our products and, accordingly, accrue for estimates of related warranty expenses. Accounts Receivable and Allowance for Credit Losses All trade accounts receivable are reported at net realizable value on the accompanying Consolidated Balance Sheets, adjusted for any write-offs and net of allowances for credit losses. Allowances for credit losses represent our best estimate and current expectation of future credit losses from trade accounts. We estimate credit losses based on historical information, current and expected future economic and market conditions, and reviews of the current status of customers’ trade accounts receivable. In circumstances in which we become aware of a specific customer’s inability to meet its financial obligations, a specific reserve is recorded against amounts due to reduce the recognized receivable to the amount reasonably expected to be collected. To mitigate credit risk, we consider the creditworthiness of new and existing customers, establish credit limits, and regularly review outstanding balances and payment histories. We may require pre-payments from customers under certain circumstances and may limit future purchases until payments are made on past due amounts. We do not believe our trade accounts receivable represent significant concentrations of credit risk due to our diversified portfolio of individual customers and geographical areas. Differences may arise between estimated and actual losses, which could materially affect the provision for credit losses and, therefore, net earnings. We recorded $ 790 , $ 736 , $ 304 and of expense associated with credit losses for the years ended March 31, 2024, 2023, and 2022, respectively. Cash Equivalents We classify any highly liquid investments with maturities of three months or less at the date of purchase as cash equivalents; no cash equivalents are included on our Consolidated Balance Sheets as of March 31, 2024 or 2023. Page 37 Table of Contents Inventories Inventories are stated at the lower of cost or net realizable value. Inventory is recorded to cost of products upon sale using a weighted average costing methodology. Inventories purchased as part of a business combination are recorded at fair value. Our work in process and finished goods inventories include the costs of raw materials, labor and overhead, which are estimated based on trailing twelve months of expense and standard labor hours for each product. We evaluate labor and overhead costs annually unless specific circumstances necessitate a mid-year evaluation for specific items. We monitor inventory costs relative to selling prices and perform physical cycle count procedures on inventories throughout the year to determine if a lower of cost or net realizable value reserve is necessary. We estimate and maintain an inventory reserve as needed for such matters as excess or obsolete inventory, shrinkage, and scrap. This reserve may fluctuate as our assumptions change due to new information, discrete events, or changes in our business such as entering new markets or discontinuing a specific product; however, once inventory is written down, a new cost basis is established that is not subsequently written back up in future fiscal years. Property, Plant and Equipment Property, plant and equipment are recorded at cost, less accumulated depreciation, except for assets acquired in acquisitions, which are recorded at fair value. Expenditures for major renewals and improvements that extend the life of the asset are capitalized, while expenditures for minor replacements, maintenance, and repairs are expensed as incurred. Depreciation is calculated using the straight-line method over the assets’ estimated useful lives. Upon asset retirement or disposal, accounts are relieved of cost and accumulated depreciation, and any related gain or loss is reflected in our results of operations. In some cases, particularly with respect to business consolidation or closure activities, accelerated depreciation may be required for the revised remaining useful lives of assets designated to be abandoned in the future. At least annually, we evaluate and adjust as necessary the estimated useful lives of property, plant and equipment. Any changes in estimated useful lives are recorded prospectively. Estimated useful lives of significant classes of depreciable assets are as follows: Category Useful Lives in Years Buildings and building improvements 40 (or less) Manufacturing equipment 7 (or less) Office, lab and other equipment, furniture and fixtures 7 (or less) Computer equipment 3 (or less) Leasehold improvements Lesser of the economic life or the remaining term in the respective lease Land is not depreciated and construction in progress is not depreciated until placed in service, at which time it is assigned a useful life consistent with the nature of the asset. Leases We determine whether contractual arrangements contain a lease at the inception of the arrangement. If a lease is identified in an arrangement, we recognize a right-of-use asset ("ROU") and liability on our Consolidated Balance Sheets and determine whether the lease should be classified as a finance or operating lease. We do not have any finance leases; our operating leases have remaining terms between two months and twelve years as of March 31, 2024. We do not recognize assets or liabilities for leases with original durations of less than 12 months, and our short-term leases are not material. A contract is a lease or contains one when ( 1 ) the contract contains an explicitly or implicitly identified asset and ( 2 ) the customer obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract in exchange for consideration. Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent our right to use an underlying asset and are based upon the calculation of operating lease liabilities, adjusted for prepayments. Adjustments would also be made for accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets, none of which are present in any of our current lease contracts. When readily determinable, the discount rate used to calculate the lease liability is the rate implicit in the lease, otherwise we use our incremental borrowing rate based on the information available at lease commencement. When we acquire a business, we generally retain the acquiree's classification of its leases, and we evaluate ROU assets and liabilities in accordance with ASC 842. Our leases typically contain rent escalations over the lease term. We recognize expense for these leases on a straight-line basis over the lease term. Lease expense is recorded in cost of revenues or selling, general and administrative, or research and development expense on our Consolidated Statements of Operations, depending on the nature of use of the underlying asset. Many of our leases include one or more renewal or termination options exercisable at our discretion, which are included in the determination of the lease term if we are reasonably certain to exercise the option. Renewal terms typically allow us to extend lease terms between 1 and 3 years. We have also entered into lease agreements that have variable payments related to certain indexes. Variable lease payments are recognized in the period in which those payments are incurred. All non-lease components are readily identifiable in our lease contract. We account for non-lease components separately from the lease component to which it is related. Acquired Intangible Assets, Impairment Testing Our goodwill and other intangible assets result from acquisitions of existing businesses. Intangible assets affect the amount of future amortization expense and possible impairment losses we may incur. Intangible assets with finite lives are amortized over their useful lives using the straight-line method, and amortization expense is recorded within cost of revenues or general and administrative expense in the Consolidated Statements of Operations. Impairment assessments are conducted if events or conditions indicate that the carrying value of an asset or asset group may not be recoverable. Events or conditions indicating potential impairment include but are not limited to changes in the competitive landscape, any internal decisions to pursue new or different technology strategies, losses of significant customers, or significant changes in business performance or in the markets and industries we serve, including adverse changes in the prices paid for our products or changes in the size of the markets for our products. If impairment indicators are present, we determine whether the carrying value of the underlying intangible asset or asset group is recoverable through undiscounted estimated future cash flows. If the asset or asset group is not found to be recoverable, we estimate the asset's fair value using Level 3 inputs and discounted cash flow models and recognize impairment losses as necessary. If the estimate of an intangible asset’s remaining useful life is changed in response to impairment testing, the remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life. Acquired intangible assets deemed to have finite lives are amortized on a straight-line basis over their useful lives, generally ranging from three to fifteen years. We determine the useful lives of finite intangible assets based on the specific facts and circumstances related to each asset, and we evaluate the appropriateness of assigned useful lives at least annually. Factors we consider when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, our long-term strategy for using the asset, any laws or other local regulations which could impact the useful life of the asset, and economic factors such as competition or specific market conditions. Page 38 Table of Contents Goodwill is not subject to amortization. We test goodwill for impairment as of January 1st each year, or more frequently if events and circumstances indicate it is more likely than not that the fair value of a given goodwill reporting unit is less than its carrying value. Events that could indicate impairment and that would trigger interim impairment testing include but are not limited to: adverse current or expected economic, market, or industry-specific conditions, including a decline in our market capitalization; sustained adverse changes or expected changes in business climate or in the operational performance of the business; adverse changes in legal factors; and adverse actions or assessments by a regulator. We monitor for indications of impairment throughout the year and perform qualitative and quantitative impairment tests as necessary based on quarterly preliminary assessments of our performance. Our annual impairment tests typically begin with a qualitative assessment, and further quantitative assessments are performed if we determine it is more likely than not that the fair value of a reporting unit is greater than the carrying amount. We also perform quantitative assessments of reporting units at least every five years, irrespective of whether any indicators exist that suggest a reporting unit may be impaired. The fair value measurements used in testing intangible assets for impairment are typically based on discounted cash flow projection and market multiple models, using Level 3 inputs. See “Fair Value Measurements” for a description of input levels. Significant assumptions include, among others, the weighted average cost of capital, expected revenues growth, expected cash outflows, and terminal growth rates. In certain cases, management uses other market information when available to estimate fair value. Impairment losses are recognized through earnings and represent excess carrying value over estimated fair value. During the fourth quarter of fiscal 2024, we recorded impairment losses related to goodwill and intangible assets totaling $ 274,533 in our Clinical Genomics and Biopharmaceutical Development divisions. See Note 6. “Goodwill and Intangible Assets, Net.” Research & Development Costs We conduct research and development activities for the purpose of developing new products and enhancing the functionality, effectiveness, reliability, and accuracy of existing products. Research and development costs are expensed as incurred. Research and development expense is predominantly comprised of labor costs and third -party consultants, but we may from time to time purchase in-process research and development with the intention of developing a saleable product. Convertible Debt Our convertible 1.375 % Convertible Senior Notes due 2025 (the "2025 Notes") do not have material embedded derivatives and are recorded as long-term liabilities in our Consolidated Balance Sheets as of March 31, 2024. When the 2025 Notes are within one year of maturity, or when the criteria necessary for conversion as described in Note 8. “Indebtedness” have been met, the 2025 Notes will be reclassified as short-term liabilities. We may settle the 2025 Notes in shares of common stock or in cash, as the case may be. We apply the if-converted method to calculate the potentially dilutive impact of the 2025 Notes on net (loss) earnings per share. Debt issuance costs are amortized to bring the carrying value of the 2025 Notes to face using the effective interest method over the life of the indenture governing the 2025 Notes. Stock-based Compensation We issue shares in the form of stock options and full-value awards as part of employee and non-employee director compensation pursuant the Amended and Restated Mesa Laboratories, Inc. 2021 Equity Incentive Plan (the "2021 Equity Plan"). Our shareholders approved an amendment to the 2021 Equity Plan during fiscal year 2024, increasing the number of shares that can be issued under the plan from 330 shares to 660 shares. Some shares are fully vested and outstanding under our Mesa Laboratories, Inc. 2014 Equity Plan. The Equity Plans are administered by the Compensation Committee of the Board of Directors, which has the authority to grant equity awards, or to delegate its authority under the plan to make grants (subject to certain legal and regulatory restrictions), including the authority to determine the individuals to whom awards will be granted, the type of awards and when the awards are to be granted, the number of shares to be covered by each award, the vesting schedule, and all other terms and conditions of the awards. For purposes of counting the shares remaining under the 2021 Equity Plan, each share underlying a stock option or a full value award counts as one share used. We issue new shares of common stock upon the exercise of stock options and the vesting of time-based restricted stock units ("RSUs") and performance-based RSUs ("PSUs"). Stock options and service-based stock awards generally vest equally over a three year term and stock options generally expire after six years. Awards granted to non-employee directors generally vest one year from the grant date. We recognize stock-based compensation expense based on the fair value of stock awards at the grant date and recognize the expense over the related service period using a straight-line vesting expense schedule. The 2021 Equity Plan includes retiree provisions which result in the acceleration of stock-based compensation for expense for retiree-eligible participants. Compensation expense related to employees eligible to retire at grant date or during the award term is recognized on a straight-line basis between the grant date and the date of retirement eligibility, and the applicable retirees retain full rights to the awards upon retirement as per the plan provisions. Expense for PSUs is recognized, net of estimated forfeitures, over the related service period using a straight-line vesting schedule when it is probable that performance goals will be achieved. Performance goals are determined by the Board of Directors and may include measures such as revenues growth and profitability targets. A portion of the PSUs include a market condition in the form of a relative total shareholder return "TSR" modifier, which adjusts the quantity of shares earned up or down by a maximum of 20% pursuant to a market-based measure of performance comparing Mesa's share price to a peer group over a three year period. Compensation expense on stock awards subject to performance conditions is recognized over the longer of the estimated performance goal attainment period or time vesting period. As of each reporting period, we estimate the number of PSUs expected to vest based on our current estimate of performance compared to the target metrics in the award documents and adjust for the relative TSR percentage, and if necessary, a cumulative-effect adjustment is recorded. The grant date fair value of the PSUs with a relative TSR modifier is determined using the Monte Carlo simulation valuation model. The fair value of RSUs and performance-based RSUs without a market condition are based on the closing price of Mesa's common stock on the award date, less the present value of expected dividends not received during the vesting period. RSUs we issue are equivalent to nonvested shares under the applicable accounting guidance. Page 39 Table of Contents The fair value of each granted stock option is estimated on the grant date using the Black-Scholes option pricing model. The assumptions used to calculate the fair value of granted options reflect market conditions and our historical experience. We estimate expected forfeitures using a dynamic forfeiture model based on company specific historical data when determining the amount of stock-based compensation costs to recognize each period. The expected life of options represents the estimated period of time until exercise and is based on historical experience of similar awards for similar subsets of our employee population, giving consideration to the contractual terms, vesting schedules, and expectations of future employee behavior. Expected stock price volatility is based on the historical volatility of our own stock price over the period of time commensurate with the expected life of the award. The risk-free rate is based on the United States Treasury yield curve in effect at the time of grant for the estimated life of the stock option. The dividend yield assumption is based on our anticipated cash dividend payouts. To date, we have identified no instances in which an adjustment to our observable market price would be required compared to the closing price of Mesa's common stock on the award date as an input to our fair value calculations. We allocate stock-based compensation expense to cost of revenues, selling, research and development, and general and administrative expense in the Consolidated Statements of Operations. Net (Loss) Earnings Per Share Basic net (loss) earnings per share (“EPS”) is computed by dividing net 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 EPS, except it includes the effects of potential dilution that could occur if dilutive securities vested, were exercised or converted. Potentially dilutive securities include stock options, RSUs and PSUs (collectively “stock awards”), as well as common shares underlying the 2025 Notes. Potentially dilutive securities are excluded from the calculation of diluted EPS in the event they are subject to performance conditions that have not yet been achieved or if they would otherwise be antidilutive. Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss; in such cases the inclusion of the potential common shares would have an antidilutive effect. See Note 10. “Net (Loss) Earnings per Share” for EPS calculations for the years ended March 31, 2024, 2023 and 2022 . Income Taxes Income tax expense includes U.S., state, local and international income taxes. Deferred tax assets and liabilities are recognized and reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the tax basis of existing assets and liabilities used for income tax purposes. The tax rate used to determine the deferred tax assets and liabilities is based on the enacted tax rate for the year and the manner in which the differences are expected to reverse. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized. From time to time, we engage in transactions in which the tax consequences may be subject to uncertainty, such as acquisitions. Significant judgment is required in assessing and estimating the tax consequences of these transactions. We prepare and file tax returns based on interpretation of tax laws and regulations. In the normal course of business, our tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax, interest and penalty assessments by these taxing authorities. In determining our income tax provision for financial reporting purposes, we establish a reserve for uncertain tax income positions unless we determine it is not more likely than not that such positions would be sustained upon examination, based on their technical merits. That is, for financial reporting purposes, we only recognize tax benefits taken on the tax return that we believe are more likely than not of being sustained. There is considerable judgment involved in determining whether positions taken on the tax return are more likely than not of being sustained. We adjust our tax reserve estimates periodically because of ongoing examinations by, and settlements with, the various taxing authorities, as well as changes in tax laws, regulations and interpretations. The consolidated income tax provision of any given year includes adjustments to prior year income tax accruals that are considered appropriate and any related estimated interest. Our policy is to recognize, when applicable, interest and penalties on uncertain income tax positions as part of general administrative expense. (See Note 12. “Income Taxes”). Acquisition Related Contingent Consideration Liabilit ies Acquisition related contingent consideration liabilities consist of estimated amounts due under various acquisition agreements and may be based on revenues growth, specified profitability growth metrics, or the attainment of milestones such as patent approvals. At each reporting period, we evaluate the expected future payments and any associated discount rates to determine the fair value of the contingent consideration. We adjust contingent consideration to fair value at each reporting period through general and administrative expenses in the Consolidated Statements of Operations. See Note 13. “Commitments and Contingencies” for information regarding existing contingent consideration liabilities as of March 31, 2024 . In addition to contingent consideration liabilities, we may hold back a portion of the purchase price related to an acquisition as security against potential indemnification losses. Such holdbacks relate to circumstances that existed as of the date of acquisition, and as such they are not considered contingencies; however, amounts ultimately paid related to holdbacks may differ from the estimates management makes upon acquisition, depending upon whether pre-acquisition liabilities are identified during the holdback period. Legal Contingencies We are party to various claims and legal proceedings that arise in the normal course of business. We record an accrual for legal contingencies when we determine it is probable we have incurred a liability and can reasonably estimate the amount of the loss (See Note 13. “Commitments and Contingencies”). Purchase Accounting for Acquisitions We account for all business combinations in which we obtain control over another entity using the acquisition method of accounting, which requires most assets (both tangible and intangible) and liabilities to be recorded at fair value at the date of acquisition. The excess of the purchase price over the fair value of acquired assets less liabilities is recognized as goodwill. We determine fair value using widely accepted valuation techniques, primarily discounted cash flow and market multiple analyses, which rely heavily on Level 3 inputs. These types of analyses require us to make and monitor assumptions and estimates regarding industry and economic factors, the profitability of future business strategies, discount rates and cash flow. For all material acquisitions, we engage external valuation specialists to aid management in preparing our fair value models. Certain adjustments to the assessed fair values of acquired assets or liabilities made subsequent to the acquisition date but within the measurement period are recorded as adjustments to goodwill. Any adjustments subsequent to the measurement period are recorded within earnings. We expense all acquisition related costs, such as legal and advisory fees, as incurred in general, and administrative expenses in the Consolidated Statements of Operations. Results of operations of acquired companies are included in our Consolidated Financial Statements from the date of the acquisition forward. If actual results are not consistent with our assumptions and estimates, or if our assumptions and estimates change due to new information, we may be exposed to additional losses. For the years ended March 31, 2024, 2023 and 2022 , we acquired businesses for total net purchase prices of $ 87,187 , $ 6,140 , and $ 300,793 , respectively. Page 40 Table of Contents Business Consolidation Costs We estimate liabilities for business closure activities by gathering detailed estimates of costs and, if applicable, asset sale proceeds, for each business consolidation initiative. For a typical business consolidation initiative, we estimate costs of employee severance, impairment of property and equipment and other assets including estimating net realizable value, if necessary, accelerated depreciation, termination payments for contracts and leases, and any other qualifying costs related to an exit plan. Such charges represent our best estimates; however, they require assumptions about plans that may change over time. The estimated costs are grouped by specific projects within the overall exit plan and are monitored at each reporting period. Any subsequent changes to the original estimates are recorded in current earnings. 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 judgment about the outcome of future events. It is not possible to accurately predict the future impact of such events and circumstances. However, we have reviewed the estimates used in preparing the financial statements and have identified the following factors that have a reasonable possibility of being materially affected in the near term: ● Estimates regarding the recoverability of deferred tax assets and estimates regarding cash needs and associated indefinite reinvestment assertions. ● Estimates of the net realizable value of inventory. ● Estimates regarding future financial performance and other inputs into fair value estimates related to impairment tests for goodwill and intangible assets that could result in additional future impairment losses. We do not believe that there are any significant risks that have not already been disclosed in the Consolidated Financial Statements. Recently Issued Accounting Pronouncements In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023 - 07, "Segment Reporting (Topic 280 ): Improvements to Reportable Segment Disclosures." ASU No. 2023 - 07 requires all annual disclosures currently required by Topic 280 to be included in interim periods and requires disclosure of significant segment expenses regularly provided to the chief operating decision maker ("CODM"), a description of other segment items by reportable segment, and applicable additional measures of segment profit or loss used by the CODM when allocating resources and assessing business performance. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis. We are currently assessing the effect the adoption of this standard will have on our consolidated financial statements. In December 2023, the FASB issued ASU No. 2023 - 09, "Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures." ASU No. 2023 - 09, which enhances the transparency, effectiveness and comparability of income tax disclosures by requiring consistent categories and greater disaggregation of information related to income tax rate reconciliations and the jurisdictions in which income taxes are paid. The guidance is effective for public business entities for fiscal years beginning after December 15, 2024 ( our fiscal year 2026 ), with early adoption permitted. We are currently assessing the effect the adoption of this standard will have on our consolidated financial statements. We have reviewed all recently issued accounting pronouncements and have concluded that, other than as described above, they are either not applicable to us or are not expected to have a significant impact on our consolidated financial statements. Recently Adopted Accounting Pronouncements There have been no accounting pronouncements applicable to us that we were required to adopt or that we have elected to adopt during fiscal year 2024. Note 2 . Revenue We develop, manufacture, market, sell and maintain life sciences tools and quality control instruments and related consumables. Hardware sales include physical products such as instruments used for molecular and genetic analysis, protein synthesizers, medical meters, wireless sensor systems, data loggers, and process challenge devices. Hardware may be offered with accompanying perpetual or annual software licenses, which in some cases are required for the hardware to function. Consumables are typically used on a one -time basis and require frequent replacement in our customers' operating cycles. Consumables sold by our Clinical Genomics and Biopharmaceutical Development divisions, 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 sold by our Sterilization and Disinfection Control division are used on a standalone basis. Revenues from hardware and consumables are recognized upon transfer to the customer, typically at the point of shipment. We also offer maintenance, calibration, and testing service contracts. These contracts result in revenues recognized over time, for example, when we are obligated to perform labor and replace parts on an as-needed basis over a contractually specified period, or at a point in time, upon completion of a specific, discrete service. In many cases, our contracts contain both revenues recognized over time and revenues recognized at a point in time. We evaluate our revenues internally based on business division and the nature of goods and services provided. The following tables present disaggregated revenues from contracts with customers for the years ended March 31, 2024, 2023 and 2022 : Year Ended March 31, 2024 Sterilization and Disinfection Control (1) Clinical Genomics Biopharmaceutical Development Calibration Solutions Total Consumables $ 65,459 $ 36,086 $ 17,086 $ 2,345 $ 120,976 Hardware and Software 549 12,254 12,993 30,024 55,820 Services 9,116 4,248 10,633 15,394 39,391 Total revenues $ 75,124 $ 52,588 $ 40,712 $ 47,763 $ 216,187 Page 41 Table of Contents Year Ended March 31, 2023 Sterilization and Disinfection Control Clinical Genomics Biopharmaceutical Development Calibration Solutions Total Consumables $ 55,605 $ 43,374 $ 15,800 $ 3,062 $ 117,841 Hardware and Software 692 13,347 22,079 26,561 62,679 Services 8,312 5,578 9,486 15,184 38,560 Total revenues $ 64,609 $ 62,299 $ 47,365 $ 44,807 $ 219,080 Year Ended March 31, 2022 Sterilization and Disinfection Control Clinical Genomics (2) Biopharmaceutical Development Calibration Solutions Total Consumables $ 50,311 $ 22,271 $ 15,551 $ 3,675 $ 91,808 Hardware and Software 700 6,726 21,651 28,537 57,614 Services 8,033 3,843 8,377 14,660 34,913 Total revenues $ 59,044 $ 32,840 $ 45,579 $ 46,872 $ 184,335 ( 1 ) Beginning October 16, 2023, revenues of $ 8,214 from GKE GmbH and SAL GmbH are included in the Sterilization and Disinfection Control division. Revenues of $ 1,075 from GKE China are included in the Sterilization and Disinfection Control division beginning on January 1, 2024. ( 2 ) Revenues in the Clinical Genomics division represent transactions subsequent to the acquisition of Agena Bioscience, Inc. on October 20, 2021 . Contract Balances Our contracts have varying payment terms and conditions. Some customers prepay for products and services, resulting in either unearned revenues or customer deposits, called contract liabilities. Short-term contract liabilities are included within unearned revenues in the accompanying Consolidated Balance Sheets, and long-term contract liabilities are included within other long-term liabilities in the accompanying Consolidated Balance Sheets. The significant majority of our revenues and related receivables and contract liabilities are generated from contracts with customers with original expected durations of 12 months or less. Contract liabilities will be recognized to revenue as we satisfy our obligations under the terms of the contracts. A summary of contract liabilities is as follows: Contract liabilities as of March 31, 2023 $ 16,098 Prior year liabilities recognized in revenues during the year ended March 31, 2024 ( 9,557 ) Contract liabilities added during the year ended March 31, 2024, net of revenues recognized 9,145 Contract liabilities balance as of March 31, 2024 $ 15,686 Note 3. Fair Value Measurements Our financial instruments generally consist of cash and cash equivalents, trade accounts receivable, obligations under trade accounts payable, and debt. Due to their short-term nature, the carrying values of cash and cash equivalents, trade accounts receivable, and trade accounts payable approximate fair value; they are classified within Level 1 of the fair value hierarchy. The financial instruments that subject us to the highest concentration of credit risk are cash and accounts receivable. We maintain relationships and cash deposits at multiple banking institutions across the world in an effort to diversify and reduce risk of loss. Concentration of credit risk with respect to accounts receivable is limited to customers to whom we make significant sales. No customers accounted for more than 10% of total trade receivables as of March 31, 2024 . As of March 31, 2024, we had outstanding $ 172,500 aggregate principal of 1.375 % convertible senior notes due August 15, 2025, which we refer to as our 2025 Notes. We estimate the fair value of the 2025 Notes using Level 2 inputs based on the last actively traded price or observable market input preceding the end of the reporting period. The estimated fair value and carrying value of the 2025 Notes were as follows: March 31, 2024 March 31, 2023 Carrying Value Fair Value (Level 2) Carrying Value Fair Value (Level 2) 2025 Notes $ 171,198 $ 163,013 $ 170,272 $ 161,072 See Note 15. "Subsequent Events" for information related to our partial repurchase of the 2025 Notes in April 2024. The Belyntic acquisition obligates us to pay contingent consideration of up to $ 1,500 cash upon regulatory approval of certain patent applications (see Note 13. "Commitments and Contingencies"). We estimate the fair value of the remaining contingent consideration using Level 3 inputs and a probability-weighted outcome analysis based on our expectations of patent approval leveraging our historical experience and expert input, and we adjust the estimated fair value at each reporting period through earnings. The fair value of the remaining contingent consideration was $ 571 as of March 31, 2024, of which $ 436 is recorded in Other accrued expenses and $ 135 is recorded in acquisition-related holdbacks on the accompanying Consolidated Balance Sheets. Amounts recognized or disclosed at fair value in the consolidated financial statements on a nonrecurring basis include the initial recognition and disclosure of most assets and liabilities purchased in business acquisitions and any related measurement period adjustments (see Note 4. "Significant Transactions"). Additionally, assets such as property and equipment, operating lease assets, goodwill and other intangible assets are adjusted to fair value if determined to be impaired. We recorded $ 274,533 of non-cash impairment losses to goodwill and other intangible assets during the fiscal year ended March 31, 2024 ( see Note 6. "Goodwill and Intangible Assets, Net" for further information); no impairment losses were recorded during the years ended March 31, 2023 or March 31, 2022. Fair values of such assets and liabilities require measurement using Level 3 inputs. There were no transfers between the levels of the fair value hierarchy during the fiscal years ended March 31, 2024 and 2023 . Page 42 Table of Contents Note 4. Significant Transactions Acquisition of GKE We acquired 100 % of the outstanding shares of GKE GmbH and SAL GmbH effective October 16, 2023, on which date we began including the entities as wholly owned subsidiaries in our consolidated financial statements. Upon approval by applicable Chinese regulators, we acquired 100 % of the outstanding shares of Beijing GKE Science & Technology Co. Ltd. (“GKE China,” and, together with GKE GmbH and SAL GmbH, “GKE”), effective December 31, 2023 ( the "GKE acquisition"). GKE China is included as a wholly owned subsidiary in our Consolidated Balance Sheets as of December 31, 2023, and we began consolidating the results of its operations on January 1, 2024. GKE develops, manufactures and sells a highly competitive portfolio of chemical sterilization indicators, biologics, and process challenge devices to protect patient safety across global healthcare markets. GKE is included in our Sterilization and Disinfection Control ("SDC") division, and GKE's strengths in chemical indictors are complementary to SDC's strengths in biologic indicators, as chemical and biologic indicators are used in the same sterility validation workflows. Additionally, GKE’s healthcare-focused commercial capabilities in Europe and Asia greatly expand our reach in the healthcare markets in those geographies. We are working to obtain regulatory 510 (k) clearance on certain GKE products for sale in the United States, which would further expand organic revenues growth opportunities from the GKE business. Total consideration for the GKE acquisition was $ 87,187 , net of cash and financial liabilities and inclusive of working capital adjustments . Of the total acquisition price, approximately $ 9,300 at March 31, 2024 exchange rates is being held back for a period of 18 months from acquisition closing as security against potential indemnification losses. We funded the acquisition through a combination of cash on-hand and a total of $ 71,000 borrowed under our line of credit (See Note 8 . "Indebtedness"). Allocation of Purchase Price We accounted for the GKE acquisition as a business combination using the acquisition method of accounting. Under the acquisition method of accounting, the acquiree's identifiable assets acquired and liabilities assumed are recorded at their acquisition date fair values and are consolidated with those of the acquirer. The multi-period excess earnings method, a form of the income approach, was used to value acquired customer relationships, while the relief from royalty method was used to value acquired intellectual property and trade names. The non-compete agreements were valued using a probability-weighted estimate of the expected economic impact that would occur in the absence of the agreements. Significant judgments and estimates are required when performing valuations, including, among other assumptions, internal rates of return, revenue growth rates, customer attrition rates, and royalty rates, all of which are considered Level 3 inputs. We worked with external valuation experts to prepare the valuation using information obtained during due diligence and from professional valuation databases and other sources. These estimates were based on assumptions that we believe to be reasonable; however, actual results may differ from these estimates. The following table summarizes the allocation of the purchase price as of acquisition: Life (in years) Amount Cash and cash equivalents $ 4,191 Accounts receivable (a) 2,252 Inventories (b) 4,730 Other current assets 176 Total current assets 11,349 Property, plant and equipment (c) 3,398 Other noncurrent assets 3,041 Intangible assets: Customer relationships (d) 12 34,708 Intellectual property (d) 7 3,208 Trade names (d) 10 5,412 Non-compete agreements (d) 3 743 Goodwill (e) 48,850 Total assets acquired $ 110,709 Accounts payable 11 Deferred tax liability 13,901 Other current liabilities 2,746 Long-term liabilities 2,673 Total liabilities assumed 19,331 Total purchase price, net of cash acquired $ 87,187 (a) Accounts receivable are expected to be collected. The carrying value of accounts receivable at acquisition approximates fair value. (b) Includes $ 2,414 of inventory step-up, which we expect to amortize within approximately one year from the acquisition date. During the period from October 16, 2023 to March 31, 2024, $ 1,229 of inventory step-up amortization was recorded to cost of revenues. (c) Includes $ 2,353 of fixed asset step-up, which will be amortized based on the underlying assets' expected lives. During the period from October 16, 2023 to March 31, 2024, $ 365 of property, plant and equipment step-up was recorded to depreciation expense. (d) Acquired amortizable intangible assets are currently expected to be amortized on a straight-line basis over a weighted average period of 11.2 years. The identified intangible assets will be amortized on a straight-line basis over their useful lives, which approximates the pattern that assets' economic benefits are expected to be consumed. Amortization expense for customer relationships, trade names, and noncompete agreements will be expensed to general and administrative expense, and amortization expense for intellectual property will be expensed to cost of revenues. During the period from October 16, 2023 and March 31, 2024, $ 2,005 of amortization expense was recorded to general and administrative costs and $ 266 of amortization expense was recorded to cost of revenues in the Sterilization Disinfection Control division related to the GKE acquisition. Page 43 Table of Contents (e) Acquired goodwill of $48,850, all of which is allocated to the Sterilization Disinfection Control division, represents the value expected to arise from the benefits of expanded market opportunities, particularly in the healthcare industry, as well as expected synergies and GKE's assembled workforce, none of which qualify as amortizable intangible assets. The goodwill acquired is expected to be deductible for U.S. taxes with respect to GILTI; the goodwill is not expected to be deductible for foreign tax purposes. Acquisition related costs such as legal and advisory fees were approximately $ 835 during fiscal year 2024; these costs are not included as a component of consideration transferred, but are expensed in the periods in which the costs are incurred and are reflected on the Consolidated Statements of Operations in general and administrative expenses. GKE's operations contributed $ 9,289 to revenues and $ 1,046 of net income (including $ 2,271 of non-cash amortization expense related to acquired intangible assets and $ 1,229 of non-cash inventory step up expense) to our consolidated results during the twelve months ended March 31, 2024 . Supplemental unaudited pro-forma information Combined revenues from Mesa and GKE for fiscal years 2024 and 2023 would have been approximately $ 229,260 and $ 241,360 , respectively, had the GKE acquisition occurred at the beginning of our prior fiscal year on April 1, 2022. It is impracticable for us to disclose pro-forma net earnings information regarding the combined results of the operations of Mesa and GKE as if the acquisition had occurred at an earlier date. Prior to acquisition, GKE was a privately owned company with financial statements prepared on a statutory, rather than GAAP, basis, using a different fiscal year end than Mesa's. Certain financial information cannot be recreated for accurate financial results. For example, prior to Mesa's ownership, GKE accounted for inventory at an unburdened rate and performed only annual inventory counts, such that we cannot accurately estimate cost of goods sold. Additionally, all transactions occurring between the three GKE entities, which are substantial, were accounted for at arms-length prior to acquisition; we eliminated intercompany transactions from a revenue perspective above, but we do not have sufficient historical detail to eliminate intercompany cost of revenues accurately. As presentation of pro-forma net earnings information would require extensive estimation and could not be sourced from sufficiently factual information reasonably aligned with GAAP, it is impracticable for us to disclose pro-forma net earnings information. Belyntic, GmbH On November 17, 2022, we acquired substantially all of the assets and certain liabilities of Belyntic GmbH’s peptide purification business (“the Belyntic acquisition”) for a total cash price of $ 6,450 , of which $ 4,950 was paid on the date of acquisition. The remaining $ 1,500 becomes due to the Belyntic sellers as patent applications are approved (see Note 13 . "Commitments and Contingencies"). The business complements our existing peptide synthesis business, part of the Biopharmaceutical Development segment, by adding a new consumables line that can be used with the instruments we sell. The new PurePep® EasyClean products are an environmentally conscious chemistry solution to purify peptides. During the twelve months ended March 31, 2024, we recorded certain measurement period adjustments to reclassify amounts from intangible assets into goodwill. Our preliminary purchase price allocation was finalized as of December 31, 2023. Agena Bioscience, Inc. On October 20, 2021, we completed the acquisition of 100% of the outstanding shares of Agena Bioscience, Inc. (“Agena” or “the Agena acquisition”) for adjusted cash consideration of $ 300,793 . Agena is a leading clinical genomics tools company that develops, manufactures, markets and supports proprietary instruments and related consumables that enable genetic analysis for a broad range of research applications. The acquisition of Agena moved our business toward the life sciences tools sector and expanded our market opportunities, particularly in Asia. Agena’s operations comprise our Clinical Genomics segment. Note 5. Leases We have operating leases for buildings and office equipment used in manufacturing and distribution, engineering, research and development, sales and marketing, and administration activities. The following table presents the lease balances within the Consolidated Balance Sheets related to our operating leases: Lease Assets and Liabilities Balance Sheet Location March 31, 2024 March 31, 2023 Operating lease ROU asset Other assets $ 9,671 $ 8,693 Current operating lease liabilities Other accrued expenses 2,986 2,868 Noncurrent operating lease liabilities Other long-term liabilities 6,613 5,752 The components of lease costs, the weighted average remaining lease term and the weighted average discount rate were as follows: Year Ended March 31, 2024 2023 Operating lease expense $ 3,453 $ 3,064 Variable lease expense 530 704 Total lease expense $ 3,983 $ 3,768 Weighted average remaining lease term in years 4.6 3.3 Weighted average discount rate 4.1 % 2.0 % Supplemental cash flow information related to leases was as follows: Year Ended March 31, 2024 2023 Cash paid for amounts included in the measurements of lease liabilities $ 3,392 $ 3,017 Operating lease assets obtained in exchange for operating lease obligations 4,265 1,426 Increases in operating lease right of use assets and lease liabilities are primarily due to the acquisition of GKE. Page 44 Table of Contents As of March 31, 2024 maturities of lease liabilities are as follows for future years ending March 31: 2025 $ 3,306 2026 2,721 2027 2,169 2028 444 2029 413 Thereafter 1,792 Future value of lease liabilities 10,845 Less: imputed interest 1,246 Present value of lease liabilities $ 9,599 The maturity schedule above does not include discounted future minimum lease payments for leases not yet commenced of approximately $ 7,633 for manufacturing, office and warehouse facilities used by our Biopharmaceutical Development division in Uppsala, Sweden. The lease has a term of 10 years and is expected to commence during the first quarter of fiscal year 2025. Note 6 . Goodwill and Intangible Assets, Net Goodwill Goodwill arises from the excess purchase price of acquired businesses over the fair value of acquired tangible and intangible assets, less assumed liabilities. Changes in the carrying amount of goodwill were as follows: Sterilization and Disinfection Control Clinical Genomics Biopharmaceutical Development Calibration Solutions Total March 31, 2022 $ 29,750 $ 135,914 $ 88,265 $ 37,237 291,166 Effect of foreign currency translation ( 191 ) 49 ( 7,381 ) ( 20 ) ( 7,543 ) Goodwill related to Belyntic acquisition - - 2,973 - 2,973 Measurement period adjustment, Agena acquisition - ( 152 ) - - ( 152 ) March 31, 2023 $ 29,559 $ 135,811 $ 83,857 $ 37,217 286,444 Effect of foreign currency translation 1,021 ( 130 ) ( 32 ) ( 6 ) 853 Impairment losses - ( 118,741 ) ( 38,151 ) - ( 156,892 ) Goodwill related to GKE acquisition 48,850 - - - 48,850 Measurement period adjustment, Belyntic Acquisition - - 841 - 841 March 31, 2024 $ 79,430 $ 16,940 $ 46,515 $ 37,211 $ 180,096 In the third quarter of fiscal year 2024, we completed the acquisition of GKE. See Note 4. “Significant Transactions” for further information. During the fourth quarter of our fiscal year ended March 31, 2024, we recorded consolidated goodwill impairment losses of $ 156,892 related to our Clinical Genomics and Biopharmaceutical Development divisions. For reporting units associated with our Clinical Genomics and Biopharmaceutical Development divisions, we performed quantitative impairment analyses over goodwill because declining revenues growth in both divisions indicated that the fair values of the businesses might have declined below their carrying values. We also performed quantitative impairment analyses on finite-lived intangible assets within those divisions. More information on the impairment losses is included in the “Impairment Losses” section below. We performed qualitative impairment tests over reporting units in our Sterilization and Disinfection Control and Calibration Solutions divisions and concluded that it was not more likely than not that the fair values of those businesses had declined below their carrying values. Finite-Lived Intangible Assets Other intangible assets were as follows: March 31, 2024 March 31, 2023 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relationships $ 189,911 $ ( 104,528 ) $ 85,383 $ 238,247 $ ( 86,058 ) $ 152,189 Intellectual property 41,602 ( 25,901 ) 15,701 65,950 ( 19,550 ) 46,400 Other intangibles 19,559 ( 6,891 ) 12,668 24,793 ( 6,567 ) 18,226 Total $ 251,072 $ ( 137,320 ) $ 113,752 $ 328,990 $ ( 112,175 ) $ 216,815 Page 45 Table of Contents Amortization expense for finite-lived intangible assets acquired in a business combination was as follows: Year Ended March 31, 2024 2023 2022 Amortization in cost of revenues $ 6,052 $ 6,796 $ 3,806 Amortization in general and administrative 21,289 22,025 18,000 Total $ 27,341 $ 28,821 $ 21,806 Other than amortization expense, the changes in finite-lived intangible assets from March 31, 2023 to March 31, 2024 primarily reflect impairment losses totaling $ 117,641 as further described below, additions of $ 44,071 related to purchase accounting for GKE as of the acquisition date, and foreign currency impacts. See Note 4. “Significant Transactions” for additional information related to our acquisition of GKE. All impairment losses related to finite-lived intangible assets were recorded in our Clinical Genomics division. Of the $ 117,641 impairment losses, $ 79,116 related to customer relationships, $ 28,531 related to patents and other technology-related propriety information, and $ 9,994 related to trademarks and trade names. In addition to testing definite-lived intangible assets for impairment in our Clinical Genomics and Biopharmaceutical Development divisions, we also quantitatively tested trademarks and trade names which were previously identified as indefinite-lived intangible assets in our Biopharmaceutical Development division. We concluded the trademarks and trade names were not impaired; however, as of our impairment testing date on January 1, 2024, we have assigned a useful life of 10 years from the original acquisition date to these assets in response to increased pressures and risks in the biopharmaceutical industry resulting from macroeconomic influences. The trademarks and trade names will now amortize through October 2029, resulting in additional expected non-cash amortization expense of approximately $ 700 per year. We reassessed the remaining useful lives of our intangible assets in conjunction with our impairment testing and made no further material changes to our expectations of the remaining useful lives of our intangible assets because, while the value of certain assets has diminished since acquisition, the expected duration of their usefulness has not changed in response to the macroeconomic and other factors leading to the impairment losses. The range of useful lives and weighted-average remaining useful lives of amortizable intangible assets as of March 31, 2024 were as follows: Approx. Est. Useful Weighted Avg. Life Remaining Life Description (Years) (Years) Customer Relationships 7 - 14 8.0 Intellectual Property 7 - 10 5.9 Other Intangibles 3 - 12 7.9 The following is estimated amortization expense for the years ending March 31: Amortization Year Expense 2025 $ 17,788 2026 16,988 2027 16,328 2028 15,735 2029 15,182 Impairment Losses In conjunction with our annual impairment testing, we engaged external valuation specialists to aid in performing recoverability tests, and ultimately fair value tests, over intangible assets in our Clinical Genomics division and both reporting units (Immunoassays and Peptides) of our Biopharmaceutical Development division. Fair value testing was performed by weighting Gordon Growth and Exit Multiple discounted cash flow models and guideline public company models ( one -year forward multiples), relying on unobservable Level 3 inputs, including but not limited to, discount rates, expected useful lives, applicable competitors, and anticipated revenues growth and margins. Inputs were established through discussions between Management and our valuation specialists and are based on internal expectations for future performance, market indicators, and reputable valuation research resources. Impairment losses are recorded in either Impairment of finite-lived intangible assets or Impairment of goodwill in the accompanying Consolidated Statements of Operations. As of the date of our annual goodwill impairment testing, January 1, 2024, the total fair values of the Clinical Genomics and Biopharmaceutical Development divisions were $58,900 and $ 119,000 , respectively. Impairment losses resulted in a 0% cushion between the fair and carrying values of our Clinical Genomics division and the Immunoassays reporting unit within our Biopharmaceutical Development division as of our January 1, 2024 impairment testing date. The fair value of the Peptides reporting unit within our Biopharmaceutical Development division exceeded carrying value by approximately 36 % as of our testing date, and no impairment losses were recorded for this reporting unit. The goodwill associated with each of Clinical Genomics, Immunoassays, and Peptides reporting units as of March 31, 2024 was $ 16,940 , $ 32,807 , and $ 13,708 , respectively. As such, the Clinical Genomics and Biopharmaceutical Development divisions are susceptible to further impairment losses in the future if actual results differ significantly from our estimates. Assumptions used in goodwill and intangible asset impairment tests include unobservable Level 3 inputs and estimates that are subject to uncertainty, such that there is a reasonable possibility that further impairment losses, which could be material to our consolidated financial statements, will occur in the Clinical Genomics and Biopharmaceutical Development divisions in the future. We monitor each of our divisions for indicators of impairment on a quarterly basis. Several changes to the Clinical Genomics division occurred during the fourth quarter of fiscal year 2024 that were incorporated into our impairment analyses and contributed to the recognized impairment loss. First, we enacted changes in our management structure, whereby a new General Manager was assigned to lead the division. Immediately, the new manager began restructuring the division, eliminating 17 positions. Additionally, new division management began to implement an updated business strategy, which resulted in a downward revision of financial expectations for the coming years, particularly the next 1.5 – 2 years, but which will better position the division to achieve sustainable long-term growth. Additionally, in the fourth quarter of 2024, we lost two individually immaterial customer contracts as continued economic difficulties resulted in their bankruptcy. These internal changes, coupled with difficult macroeconomic conditions described further below ultimately contributed to the impairment losses recorded related to the Clinical Genomics division. Throughout fiscal year 2024, we performed regular analyses comparing the results of the Biopharmaceutical Development division with our expectations at the time of purchase. Our analyses in the first three quarters of fiscal 2024 indicated that reporting units associated with the Biopharmaceutical Development division more likely than not were not impaired, in part because actual operating costs to date had been lower than were expected at acquisition. However, in the fourth quarter of fiscal year 2024, persistent difficult macroeconomic trends resulted in a downward revision of financial expectations for the coming years compared to when the division was acquired, ultimately resulting in a downward revision of previous forecasts of the division’s results, particularly after the division failed to meet our revenue expectations during the fourth quarter. Page 46 Table of Contents Conditions that negatively impacted both the Clinical Genomics and the Biopharmaceutical Development division included: ● significant increases in discount rates used to value the reporting units due elevated risk-free rates and macroeconomic risk in the market; ● macroeconomic factors, particularly in the biopharmaceutical and pharmaceutical markets, including decreased spending on capital equipment and consolidation of some served customers; ● continued uncertainty in the wider macroeconomic environment, including persistently elevated interest rates compared to when the acquisitions were consummated; and, ● macroeconomic uncertainty in China, which resulted in lower than expected capital equipment purchases; ● continuing high interest rates limiting our customers’ spend on capital equipment. The nature of our Sterilization and Disinfection Control and Calibration Solutions divisions makes them less sensitive to existing macroeconomic conditions, particularly since the product lines offered by these divisions do not require our customers to initially invest in high-dollar capital equipment to the same degree as in our Clinical Genomics and Biopharmaceutical Development divisions. Note 7. Supplemental Balance Sheet Information Significant changes in balance sheet amounts below are primarily attributable to the acquisition of GKE and related step-up amounts under purchase accounting. See Note 4. "Significant Transactions" for details. Inventories consisted of the following: March 31, 2024 March 31, 2023 Raw materials $ 18,335 $ 20,064 Work in process 1,256 617 Finished goods 13,084 13,961 Total inventories $ 32,675 $ 34,642 In addition to sales of existing inventories, higher non-cash scrap expense in fiscal year 2024 contributed to the overall decrease in inventories, partially offset by the GKE acquisition and inventory purchases to meet current production needs. Prepaid expenses and other consisted of the following: March 31, 2024 March 31, 2023 Prepaid expenses $ 2,932 $ 2,498 Deposits 1,898 1,376 Prepaid income taxes 1,237 953 Other current assets 3,341 4,045 Total prepaid expenses and other $ 9,408 $ 8,872 Property, plant and equipment consisted of the following: March 31, 2024 March 31, 2023 Land $ 889 $ 889 Buildings and building improvements 23,480 22,005 Manufacturing equipment 19,540 14,481 Computer equipment 3,613 4,413 Other 5,383 4,394 Construction in progress 1,380 1,735 Gross total 54,285 47,917 Accumulated depreciation ( 22,519 ) ( 19,768 ) Property, plant and equipment, net $ 31,766 $ 28,149 Depreciation expense was as follows: Year Ended March 31, 2024 2023 2022 Depreciation expense in Cost of revenues $ 3,031 $ 3,163 $ 2,243 Depreciation expense in Operating expense 1,202 1,150 1,019 Total depreciation expense $ 4,233 $ 4,313 $ 3,262 Accrued payroll and benefits consisted of the following: March 31, 2024 March 31, 2023 Bonus payable $ 3,838 $ 4,461 Wages and paid-time-off payable 3,072 2,329 Payroll related taxes 1,956 1,982 Other benefits payable 1,069 661 Total accrued payroll and benefits $ 9,935 $ 9,433 Page 47 Table of Contents Other accrued expenses consisted of the following: March 31, 2024 March 31, 2023 Accrued business taxes $ 5,557 $ 5,941 Current operating lease liabilities 2,986 2,868 Income taxes payable 1,615 992 Other 2,700 2,297 Total other accrued expenses $ 12,858 $ 12,098 Note 8 . Indebtedness Credit Facility On March 5, 2021, we entered into a four -year senior secured credit agreement that included 1 ) a revolving credit facility in an aggregate principal amount of up to $ 75,000 (the "Revolver"), 2 ) a swingline loan in an aggregate principal amount not exceeding $ 5,000 , and 3 ) letters of credit in an aggregate stated amount not exceeding $ 2,500 at any time. The agreement also provided 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. On October 5, 2023, we amended the terms of our four -year senior credit facility to increase the maximum principal amount available to us under the Revolver from $ 75,000 to $ 125,000 . We refer to the agreement in whole as the “Credit Facility.” Subsequent to the end of fiscal year 2024, on April 5, 2024, we further amended and restated the terms of the Credit Facility. The amended Credit Facility has been modified to: (i) Extend the maturity of the Credit Facility to April 2029; (ii) Allow proceeds from the Credit Facility to be used to redeem some or all of the Company’s 2025 Notes; (iii) Include a $75,000 senior secured term loan facility (the “Term Loan”), which is subject to principal amortization payments; and (iv) Make certain changes to the financial covenants. Amounts borrowed under the Credit Facility bear interest at either a base rate or a SOFR rate plus an applicable spread ranging from 1.5 % to 3.5 %, depending on our total net leverage ratio. The interest rate on borrowings under our line of credit as of March 31, 2024 was 7.2 %. We are obligated to pay quarterly unused commitment fees of between 0.20 % and 0.35 % of the Revolver’s aggregate principal amount, based on our leverage ratio. We incurred unused commitment fees of $ 164 and $ 107 for the years ended March 31, 2024, and March 31, 2023, respectively. The balance of unamortized customary lender fees was $ 321 and $ 312 as of March 31, 2024 and 2023, respectively. During the second quarter of fiscal year 2024, we borrowed a total of $ 71,000 under the Revolver to fund the majority of the GKE acquisition, and repaid $ 20,500 against that outstanding balance during the third and fourth quarters of fiscal year 2024. As of March 31, 2024, the outstanding balance under our Credit Facility was $ 50,500 . Subsequent to March 31, 2024, we repaid an additional $ 7,500 on our line of credit. We borrowed $ 75,000 under the Term Loan on April 5, 2024 at a rate of 8.4 % as of the borrowing date, largely to fund the repurchase of a portion of the 2025 Notes. See Note 15. "Subsequent Events." The financial covenants in the Credit Facility as amended include a maximum leverage ratio of 4.50 to 1.00 for the first five testing dates on which the line of credit is outstanding; 4.0 to 1.0 on each of the sixth, seventh, eighth, and ninth testing dates; and 3.5 to 1.0 on each testing date following the ninth testing date. The Credit Facility also stipulates a minimum fixed charge coverage ratio of 1.25 to 1.0 and a minimum senior net leverage ratio of 3.5 to 1. 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. As of March 31, 2024, we were in compliance with all required covenants under the terms of the Credit Facility, both before and after the amendment and restatement. Convertible Notes On August 12, 2019, we issued an aggregate principal amount of $ 172,500 of 2025 Notes. The 2025 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 2025 Notes are initially convertible at a conversion rate of 3.5273 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $ 283.50 per share of common stock. Noteholders may convert their 2025 Notes at their option only in the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ended on December 31, 2019 ( and only during such calendar quarter), if the last reported sale price per share of our common stock exceeds 130 % of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (ii) during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day; (iii) upon the occurrence of certain corporate events or distributions on our common stock, including certain distributions, the occurrence of a fundamental change (as defined in the indenture governing the 2025 Notes) or a transaction resulting in the Company’s common stock converting into other securities or property or assets; and (iv) at any time from, and including, April 15, 2025 until the close of business on the second scheduled trading day immediately before the maturity date. 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. The if-converted value of the 2025 Notes did not exceed the principal balance as of March 31, 2024. Immediately following completion of the amendment of the Credit Facility, on April 5, 2024, we entered into separate, privately negotiated purchase agreements (the “Purchase Agreements”) with a limited number of holders of our outstanding 2025 Notes. Pursuant to the Purchase Agreements, we purchased $ 75,000 in aggregate principal amount of the 2025 Notes for an aggregate cash purchase price of approximately $ 71,410 , including accrued and unpaid interest. See Note 15. "Subsequent Events." Page 48 Table of Contents Debt issuance costs related to the 2025 Notes are comprised of commissions payable to the initial purchasers of $ 5,175 and third party offering costs of $ 255 . The debt issuance costs are being amortized to interest expense using the effective interest method over the six -year contractual term of the 2025 Notes. The net carrying amount of the 2025 Notes was as follows: March 31, 2024 March 31, 2023 Principal outstanding $ 172,500 $ 172,500 Unamortized debt issuance costs ( 1,302 ) ( 2,228 ) Net carrying value $ 171,198 $ 170,272 We recognized interest expense on the 2025 Notes as follows: Year Ended March 31, 2024 2023 2022 Coupon interest expense at 1.375% $ 2,372 $ 2,372 $ 2,372 Amortization of debt issuance costs 926 907 890 Total $ 3,298 $ 3,279 $ 3,262 The effective interest rate of the liability component of the 2025 Notes is approximately 1.9 %. As of March 31, 2024, the 2025 Notes, net of unamortized debt issuance costs are classified as a long-term liability on our Consolidated Balance Sheets as the circumstances necessary for conversion were not satisfied as of the end of the period and the private repurchases contemplated by the Purchase Agreements had not yet occurred. The circumstances necessary for voluntary conversion were not met during fiscal year 2024. Note 9 . Stock Transactions and Stock-Based Compensation (dollars and shares in thousands, except per share values) Stock-Based Compensation We issue shares in the form of stock options, RSUs and PSUs to employees and non-employee directors pursuant to the 2021 Equity Plan, and we have awards outstanding under the 2014 Equity Plan. The 2021 Equity Plan authorizes the issuance of 660 shares of common stock to eligible participants, and there were 373 shares available for future grants under the plan as of March 31, 2024. Under the 2014 Equity Plan, 1,100 shares of common stock were authorized and reserved for eligible participants, all of which have been issued and 77 of which remain outstanding as of March 31, 2024. Stock-based compensation expense recognized in the Consolidated Financial Statements was as follows: Year Ended March 31, 2024 2023 2022 Stock-based compensation expense $ 11,936 $ 12,538 $ 11,391 Amount of income tax expense (benefit) recognized in earnings 2,718 ( 1,169 ) ( 4,055 ) Stock-based compensation expense, net of tax $ 14,654 $ 11,369 $ 7,336 Stock Options We use the Black-Scholes option-pricing model to estimate the fair value of stock option awards granted. The weighted average assumptions utilized in the model were as follows: Year Ended March 31, 2024 2023 2022 Weighted-average value at grant date $ 130.07 $ 185.60 $ 268.81 Expected life (years) 3.52 3.52 3.52 Expected dividend yield 0.07 % 0.07 % 0.06 % Volatility 37.82 % 37.29 % 38.82 % Risk-free interest rate 4.16 % 3.55 % 0.46 % Using the assumptions in the tables above, the weighted-average Black-Scholes fair value per share at grant date for the years ended March 31, 2024, 2023 and 2022 were $ 42.76 , $ 58.94 and $ 76.02 , respectively. These fair values are before the estimated effect of forfeitures, which reduces the amount of expense recorded in our Consolidated Statements of Operations. Page 49 Table of Contents Stock option activity under the 2021 Equity Plan and 2014 Equity Plan as of March 31, 2024 , and changes for the year then ended, are presented below (shares and dollars in thousands, except per-share data): Stock Options Shares Subject to Options Weighted- Average Exercise Price per Share Weighted-Average Remaining Contractual Life (Years) Aggregate Intrinsic Value Outstanding as of March 31, 2023 163 $ 200.62 3.3 $ 1,643 Awards granted 56 130.07 Awards forfeited or expired ( 23 ) 192.15 Awards exercised or distributed ( 2 ) 132.40 24 Outstanding as of March 31, 2024 194 $ 181.89 3.2 $ 26 Exercisable awards as of March, 31, 2024 109 $ 197.63 2.0 $ - Exercisable awards and awards expected to vest, March 31, 2024 187 $ 183.16 3.2 $ 23 The total intrinsic value of stock options exercised during the years ended March 2023 and March 2022 was $ 6,902 , and $ 15,209 , respectively. Unrecognized stock-based compensation expense for stock options expected to vest as of March 31, 2024 was $ 2,388 and is expected to be recognized over a weighted average period of 1.8 years. The total fair value of options vested was $ 2,749 , $ 2,763 , and $ 2,856 during the years ended March 31, 2024, 2023 and 2022 , respectively. Time-Based Restricted Stock Units (RSUs) RSU activity under the 2021 Equity Plan was as follows (shares and dollars in thousands, except per-share data): Time-Based Restricted Stock Units Number of Shares Weighted- Average Grant Date Fair Value per Share Weighted- Average Remaining Contractual Life (Years) Aggregate Intrinsic Value Nonvested at March 31, 2023 57 $ 209.27 1.0 $ 9,993 Awards granted 55 133.30 Awards forfeited or expired ( 8 ) 166.78 Awards distributed ( 28 ) 212.22 3,658 Nonvested as of March 31, 2024 76 $ 157.83 1.0 $ 8,325 Expected to vest 69 $ 158.85 1.8 $ 7,540 For the years ended March 31, 2023 and 2022, the weighted average fair values per RSU granted were $ 187.21 and $ 274.55 , respectively. Unrecognized stock-based compensation expense for RSUs that we have determined are probable of vesting was $ 6,317 as of March 31, 2024 and is expected to be recognized over a weighted average period of 1.7 years. The total fair value of RSUs vested was $ 5,881 , $ 6,751 , and $ 5,320 during the years ended March 31, 2024, 2023 and 2022 , respectively. The total intrinsic value of time-based RSUs distributed during the years ended March 31, 2023 and March 2022 was $ 5,004 and $ 5,320 , respectively. Performance-Based Restricted Stock Units (PSUs) We grant performance-based RSUs to certain key employees. Vesting of the awards is contingent upon meeting certain service conditions, as well as meeting certain performance and/or market conditions. PSU activity under the 2021 Equity Plan was as follows (shares and dollars in thousands, except per-share data): Performance-Based Restricted Stock Units Number of Shares Weighted- Average Grant Date Fair Value per Share Weighted- Average Remaining Contractual Life (Years) Aggregate Intrinsic Value Nonvested at March 31, 2023 at target 44 $ 286.02 3.5 $ 7,958 Awards granted 32 132.29 Performance adjustment ( 19 ) 177.84 Awards forfeited or expired at target ( 1 ) 132.29 Nonvested as of March 31, 2024 at target 56 $ 240.96 2.6 $ 6,142 Expected to vest 55 $ 243.67 2.4 $ 5,984 Page 50 Table of Contents For the years ended March 31, 2023 and 2022, the average fair value per PSU granted was $ 182.14 and $ 302.15 , respectively. Unrecognized stock-based compensation expense for PSUs that we have determined probable of vesting was $ 5,703 as of March 31, 2024 and is expected to be recognized over a weighted average period of 2.4 years. Total fair value of PSUs vested was $ 1,926 and $ 5,671 during the years ended March 31, 2023 and 2022, respectively. There were no PSUs vested or distributed during the year ended March 31, 2024. The total intrinsic value of PSUs distributed during the years ended March 31, 2023 and 2022 was $ 1,776 and $ 7,549 , respectively. During the year ended March 31, 2024, the Compensation Committee of the Board of Directors created a plan to award to eligible employees 32 PSUs (the "FY24 PSUs") at target that are subject to service, performance, and market conditions. The performance period for the FY24 PSUs is from April 1, 2023 through March 31, 2024, and the service period is from June 21, 2023 through June 21, 2026 . Based on actual performance during the performance period, 15 of the FY24 PSUs are expected to vest, net of estimated forfeitures. In addition, the quantity of shares earned based on company performance will be adjusted up or down by a maximum of 20% pursuant to a market-based measure of performance comparing Mesa’s share price to a peer group over the period from April 1, 2023 until March 31, 2026. On October 28, 2021, the Compensation Committee of the Board of Directors granted a special long-term equity award consisting of performance stock units covering a target of 40 shares that is subject to both performance and service conditions to our Chief Executive Officer. The performance period of the award was the three -year period from April 1, 2021 through March 31, 2024. The service periods commence on October 28, 2021 and end on each of October 27, 2024, October 27, 2025, and October 27, 2026, on which dates eligible PSUs will vest and be distributed. The performance metrics are cumulative GAAP revenues over the performance period and cumulative adjusted operating income over the performance period. Based on actual performance through the period ended March 31, 2024 , 35 shares are expected to vest. During the year ended March 31, 2024 , we adjusted our estimate of PSUs expected to vest under all outstanding plans based on actual results achieved through applicable performance periods. We recorded a cumulative effect release of ($ 812 ) during the period (approximately $ 640 , net of estimated tax as well as $ 0.12 per basic and diluted share) , which is recorded in general and administrative expense on our Consolidated Statements of Operations. In the future, we expect non-cash stock-based compensation expense of approximately $ 934 per quarter related to outstanding PSUs following our new estimate of performance share units expected to vest. In November 2005, our Board of Directors approved a program to repurchase up to 300 shares of our outstanding common stock. Under the program, shares of common stock may be purchased from time to time in the open market at prevailing prices or in negotiated transactions off the market. Shares of common stock repurchased will be cancelled and repurchases of shares of common stock will be funded through existing cash reserves. There were no repurchases of our shares of common stock under this plan during the years ended March 31, 2024, 2023 or 2022. As of March 31, 2024 , we have repurchased 162 shares under this plan. Under applicable law, Colorado corporations are not permitted to retain treasury stock. The price paid for repurchased shares is allocated between common stock and retained earnings based on management’s estimate of the original sales price of the underlying shares. Note 10 . Net (Loss) Earnings Per Share (dollars and shares in thousands, except per share values) The following table presents a reconciliation of the denominators used in the computation of basic and diluted net (loss) earnings per share: Year Ended March 31, 2024 2023 2022 Net (loss) earnings available for shareholders $ ( 254,246 ) $ 930 $ 1,871 Weighted average outstanding shares of common stock 5,386 5,321 5,212 Dilutive effect of stock options - 26 100 Dilutive effect of unvested stock awards - 14 23 Fully diluted shares 5,386 5,361 5,335 Basic (loss) earnings per share $ ( 47.20 ) $ 0.17 $ 0.36 Diluted (loss) earnings per share $ ( 47.20 ) $ 0.17 $ 0.35 The impact of the assumed conversion of the 2025 Notes calculated under the if-converted method was anti-dilutive, and as such shares underlying the 2025 Notes were excluded from the diluted EPS calculation for the fiscal years ended March 31, 2024, 2023, and 2022. The following stock awards were excluded from the calculation of diluted EPS: Year Ended March 31, 2024 2023 2022 Assumed conversion of convertible debt 608 608 608 Stock awards that were anti-dilutive 268 154 40 Total stock awards excluded from diluted EPS 876 762 648 Note 11 . Employee Benefit Plan s We adopted the Mesa Laboratories, Inc. 401 (K) Retirement Plan effective January 1, 2000. Under this plan, we match 100 % of the first 4 % of eligible pay contributed by each eligible employee, and contributions vest immediately. Participation is voluntary, and employees are eligible on the first day of the month following their start date. Our contribution obligations to the Mesa Laboratories, Inc. 401 (K) retirement plan were $ 2,078 , $ 1,768 and $ 1,185 during the years ended March 31, 2024, 2023 and 2022 , respectively. Page 51 Table of Contents Note 12 . Income Taxes Provision for Income Taxes Earnings before income taxes were as follows: Year Ended March 31, 2024 2023 2022 Domestic $ ( 233,853 ) $ 1,887 $ 4,579 Foreign ( 41,795 ) ( 2,276 ) ( 1,005 ) Total (loss) earnings before income taxes $ ( 275,648 ) $ ( 389 ) $ 3,574 The components of our provision for income taxes were as follows: Year Ended March 31, 2024 2023 2022 Current tax provision: U.S. Federal $ 3,002 $ 593 $ ( 83 ) U.S. State 1,678 538 286 Foreign 2,330 1,070 1,372 Total current tax expense 7,010 2,201 1,575 Deferred tax provision: U.S. Federal ( 20,387 ) ( 1,432 ) 1,707 U.S. State ( 1,853 ) ( 210 ) 337 Foreign ( 6,172 ) ( 1,878 ) ( 1,916 ) Total deferred tax (benefit) expense ( 28,412 ) ( 3,520 ) 128 Total income tax (benefit) expense $ ( 21,402 ) $ ( 1,319 ) $ 1,703 A reconciliation of our income tax provision and the amounts computed by applying statutory rates to earnings before income taxes was as follows (percentages may not perfectly sum due to rounding): Year Ended March 31, 2024 2023 2022 Amount % Amount % Amount % (Loss)/ income before income taxes $ ( 275,648 ) $ ( 389 ) $ 3,574 Federal income taxes at statutory rates ( 57,886 ) 21.0 % ( 82 ) 21.0 % 751 21.0 % State income taxes, net of federal benefit ( 2,508 ) 0.9 % ( 1,075 ) 276.3 % 628 17.6 % Compensation adjustments 2,738 ( 1.0 %) 1,506 ( 387.1 %) ( 16 ) ( 0.4 %) Research and development credit ( 1,093 ) 0.4 % ( 1,010 ) 259.6 % ( 495 ) ( 13.9 %) Return to provision adjustment ( 182 ) 0.1 % ( 125 ) 32.1 % ( 68 ) ( 1.9 %) Subpart F, GILTI, & FDII ( 412 ) 0.1 % ( 127 ) 32.6 % 6 0.2 % Foreign rate differential ( 566 ) 0.2 % ( 313 ) 80.5 % ( 152 ) ( 4.3 %) Permanent difference 479 ( 0.2 %) 33 ( 8.5 %) 64 1.8 % Goodwill impairment 32,594 ( 11.8 %) - - % - - % Valuation allowance 5,398 ( 2.0 %) ( 126 ) 32.4 % 304 8.5 % Interest reserve adjustment - - % - - % 668 18.7 % Other 36 - % - - % 13 0.4 % Total income tax (benefit) expense $ ( 21,402 ) 7.8 % $ ( 1,319 ) 339.1 % $ 1,703 47.6 % Effective income tax rate 7.76 % 339.07 % 47.65 % Page 52 Table of Contents Deferred Tax Assets and Liabilities Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets (liabilities) were as follows: March 31, 2024 March 31, 2023 Deferred tax assets: Capitalized research expenditures $ 5,116 $ 3,124 Credits 2,528 4,769 Allowances and reserves 3,033 2,376 Stock compensation deductible differences 1,346 1,384 Operating lease liabilities 2,182 1,850 Inventories 668 1,348 Net operating loss 6,633 6,945 Other 187 149 Net deferred tax assets, gross 21,693 21,945 Valuation allowance ( 5,975 ) ( 582 ) Net deferred tax assets, net 15,718 21,363 Deferred tax liabilities: Operating lease right-of-use assets ( 2,120 ) ( 1,811 ) Goodwill and intangible assets ( 28,694 ) ( 49,781 ) Property, plant and equipment ( 2,813 ) ( 2,502 ) Other ( 579 ) ( 221 ) Total deferred tax liabilities ( 34,206 ) ( 54,315 ) Deferred tax asset/(liabilities) ( 18,488 ) ( 32,952 ) Valuation Allowance In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. In evaluating the need for a valuation allowance, management takes into account various factors, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, and results of recent operations. Based on this evaluation, the Company has concluded that a valuation allowance is necessary on its U.S. and certain German operations and do not expect to fully realize its deferred tax assets as of March 31, 2024. The following table summarizes the changes in our valuation allowance for deferred tax assets: Year Ended March 31, 2024 2023 2022 Beginning balance $ 582 $ 708 $ 404 Additions charged to income tax expense and other accounts 5,398 567 304 Deductions from reserves ( 5 ) ( 693 ) - Ending balance $ 5,975 $ 582 $ 708 Net Operating Loss Credit and Carryforwards As of March 31, 2024, the Company had U.S. and Foreign net operating loss (“NOL”) carryforwards consisting of the following: March 31, 2024 Expiration Date Pre-2018 federal NOL carryforwards $ - N/A Post-2018 federal NOL carryforwards - Indefinite State NOL carryforwards 8,709 March 31, 2035 Foreign NOL carryforwards 22,595 Indefinite As of March 31, 2024, the Company had U.S. tax credit carryforwards consisting of the following: March 31, 2024 Expiration Date Federal research tax credit carryforwards $ - N/A State research tax credits carryforwards 3,181 March 31, 2036 Federal foreign tax credit carryforwards 15 March 31, 2037 Undistributed earnings in foreign subsidiaries For the year ended March 31, 2024, provisions have not been made for income taxes on $55,794 of undistributed earnings that were deemed permanently reinvested in foreign subsidiaries at March 31, 2024. Determination of the amount of unrecognized deferred income tax liabilities on these earnings is not practicable because such liability, if any, depends on certain circumstances existing if and when remittance occurs. A deferred tax liability will be recognized if and when the Company no longer plans to permanently reinvest these undistributed earnings. Page 53 Table of Contents Uncertain Tax Positions Uncertain tax positions, if ever recognized in the financial statements, would be recorded in the consolidated statements of operations as part of the income tax provision. A reconciliation of the beginning and ending amount of unrecognized tax benefits, exclusive of interest and penalties, included in the deferred tax liability on the accompanying Consolidated Balance Sheets of the Company is as follows: Year Ended March 31, 2024 2023 2022 Beginning balance $ 92 $ 1,329 $ 64 (Decrease) increase related to prior period tax positions (92 ) ( 1,272 ) 1,179 Increases related to current period tax positions - 35 86 Ending balance $ - $ 92 $ 1,329 As of March 31, 2024, the Company has not recorded any gross unrecognized tax benefits. The Company recognizes interest and penalties accrued on uncertain income tax positions in other expense and general and administrative expense, respectively. Interest and penalties included in other long-term liabilities on the accompanying Consolidated Balance Sheets of the Company were $ 0 for each of the years ended March 31, 2024, 2023 and 2022. The Company does not expect a material change in unrecognized tax benefits or interest in the next 12 months. The Company files income tax returns in the U.S. various states and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. The following tax years remain subject to examination: Significant Jurisdictions Open Years U.S. Federal 2020 - 2022 U.S. States 2019 - 2022 Foreign 2016 - 2022 Note 13. Commitments and Contingencies We are party to various legal proceedings arising in the ordinary course of business. As of March 31, 2024 , we are not party to any legal proceeding that management believes could have a material adverse effect on our consolidated financial position, results of operations, or cash flows. As part of the Belyntic acquisition, we agreed to pay the sellers a contingency based upon approval of contractually specified patents. The estimated fair value of the probable remaining contingent consideration was $ 571 as of March 31, 2024. As part of the GKE acquisition , we have agreed to pay the GKE sellers approximately $ 9,300 (at March 31, 2024 exchange rates) 18 months following the acquisition date, pending adjustments for potential indemnification losses that may arise. See Note 15. "Subsequent Events" for further information on debt commitments incurred subsequent to the end of fiscal year 2024. Note 14. Segment Data Segment information is prepared on the same basis that our chief operating decision maker, our CEO, uses to manage our segments, evaluate financial results, and make key operating decisions. Our four reportable segments are organized primarily by the nature of the goods and services they sell. We evaluate the performance of our operating segments based on revenues, organic revenues growth, and gross profit. The accounting policies of the operating segments are the same as those described in Note 1 . "Description of Business and Summary of Significant Accounting Policies." The following tables set forth our segment information: Year Ended March 31, 2024 2023 2022 Revenues (a): Sterilization and Disinfection Control (b) $ 75,124 $ 64,609 $ 59,044 Clinical Genomics 52,588 62,299 32,840 Biopharmaceutical Development 40,712 47,365 45,579 Calibration Solutions 47,763 44,807 46,872 Total revenues $ 216,187 $ 219,080 $ 184,335 Gross profit: Sterilization and Disinfection Control (b) $ 53,302 $ 46,520 $ 43,720 Clinical Genomics 27,078 32,485 11,941 Biopharmaceutical Development 25,400 30,340 28,605 Calibration Solutions 27,547 24,388 24,989 Reportable segment gross profit 133,327 133,733 109,255 Corporate and Other (c) ( 77 ) ( 40 ) ( 165 ) Gross profit $ 133,250 $ 133,693 $ 109,090 Reconciling items: Operating expenses 405,325 130,373 104,388 Operating (loss) income ( 272,075 ) 3,320 4,702 Nonoperating expense, net 3,573 3,709 1,128 (Loss) earnings before income taxes $ ( 275,648 ) $ ( 389 ) $ 3,574 Page 54 Table of Contents (a) Intersegment revenues are not significant and are eliminated to arrive at consolidated totals. (b) Includes GKE results beginning at acquisition. (c) Unallocated corporate expenses and other business activities are reported within Corporate and Other. The following table sets forth depreciation and amortization expense recorded in costs of revenues and included in the determination of gross profit above. Increases in the Sterilization and Disinfection Control division are primarily attributable to the GKE acquisition. Year Ended March 31, 2024 2023 2022 Sterilization and Disinfection Control $ 1,469 $ 818 $ 860 Clinical Genomics 5,385 6,808 3,093 Biopharmaceutical Development 1,563 1,435 1,615 Calibration Solutions 280 366 390 Unallocated 386 532 91 Total depreciation and amortization expense in Cost of revenues $ 9,083 $ 9,959 $ 6,049 The following table sets forth net inventories by reportable segment. Our chief operating decision maker is not provided with any other segment asset information. The increase in inventories in our Sterilization and Disinfection Control division is primarily due to the GKE acquisition. March 31, March 31, 2024 2023 Sterilization and Disinfection Control $ 7,014 $ 3,492 Clinical Genomics 11,813 13,985 Biopharmaceutical Development 6,304 8,384 Calibration Solutions 7,544 8,781 Total inventories $ 32,675 $ 34,642 The following table sets forth a summary of long-lived assets by geographic area. Long-lived assets exclude goodwill and intangible assets acquired in a business combination and deferred tax assets. The increase in long-lived assets in Germany is primarily due to the GKE acquisition. As of March 31, 2024 2023 United States $ 32,229 $ 34,729 Germany 7,596 931 Other 2,479 2,862 Total long-lived assets $ 42,304 $ 38,522 Revenues from external customers are attributed to individual countries based upon locations to which the product is shipped or exported, as follows: Year Ended March 31, 2024 2023 2022 United States $ 106,395 $ 117,281 $ 99,068 China 24,933 25,797 16,518 Other 84,859 76,002 68,749 Total revenues $ 216,187 $ 219,080 $ 184,335 Increases in revenues from countries other than the United States and China are primarily attributable to the acquisition of GKE. No customer accounts for 10% or more of our consolidated revenues. No foreign country other than China exceeds 10% of total revenues. Note 15 . Subsequent Events On April 5, 2024, we entered into separate, privately negotiated purchase agreements with a limited number of holders of our outstanding 2025 Notes. Pursuant to these purchase agreements, on April 11, 2024, we repurchased $ 75,000 in aggregate principal amount of the 2025 Notes for an aggregate cash purchase price of approximately $ 71,250 , plus accrued and unpaid interest of $ 160 . We are currently evaluating the appropriate accounting treatments for the repurchase, which will be recorded and disclosed in our upcoming Condensed Consolidated Financial Statements and the Notes thereto for the period ended June 30, 2024. Under terms of our Credit Facility as amended on April 5, 2024, ( see Note. 8 "Indebtedness"), we borrowed $ 75,000 under the Term Loan effective April 5, 2024 at a rate of 8.4 % as of the borrowing date, largely to fund the repurchase of a portion of our 2025 Notes as described above. We will be required to make quarterly principal payments on the $75,000 term loan borrowings as follows: $ 938 each quarter from June 30, 2024 to March 31, 2026; $ 1,406 each quarter from June 30, 2026 to March 31, 2028; and $ 1,875 from June 30, 2028 to March 31, 2029. The remaining unpaid balance of $ 48,750 will be due at maturity in April 2029; however, we anticipate that we will have the ability to refinance the debt at that time if necessary. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Page 55 Table of Contents