What changed in this filing

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Item 1. Financial Statements

2024-08-05 compared with 2024-02-05 · 290 added, 315 removed, 347 unchanged (64% of the section changed)

9 unchanged sentences

31,767 32,675

Prepaid expenses and other

Prepaid expenses and other current assets

Total current assets

7 unchanged sentences

82,238 85,383

Intellectual property, net

45,753 46,400

Other intangibles, net

9 unchanged sentences

14,634 15,478

Term loan, current portion

Other accrued expenses

5 unchanged sentences

$ 19,689 19,780

Other long-term liabilities

Credit facility

Other noncurrent liabilities

Revolving line of credit

42,000 50,500

Term loan, noncurrent portion, net of discounts and debt issuance costs

Convertible senior notes, net of debt issuance costs

7 unchanged sentences

345,999 343,642

Retained earnings

(Accumulated deficit)

( 180,969 ) ( 183,494 )

7 unchanged sentences

Mesa Laboratories, Inc.

Condensed Consolidated Statements of Income

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

Three Months Ended December 31,

Nine Months Ended December 31,

Three Months Ended June 30,

$ 58,170 $ 50,645

Cost of revenues

20,921 19,462

37,249 31,183

Operating expense:

General and administrative

16,818 18,060

Research and development

Total operating expense

Operating (loss) income

31,669 31,847

Operating income (loss)

5,580 ( 664 )

Nonoperating expense:

Interest expense and amortization of debt issuance costs

Other (income) expense, net

Total nonoperating (income) expense, net

(Gain) on extinguishment of convertible senior notes

Other expense (income), net

2,030 ( 775 )

Total nonoperating expense, net

Earnings (loss) before income taxes

Income tax (benefit) expense

Earnings per share:

3,905 ( 937 )

Income tax expense (benefit)

Net income (loss)

$ 3,388 $ ( 549 )

Earnings (loss) per share:

$ 0.63 $ ( 0.10 )

$ 0.62 $ ( 0.10 )

Weighted-average common shares outstanding:

3 unchanged sentences

(in thousands)

Three Months Ended December 31,

Nine Months Ended December 31,

Three Months Ended June 30,

Net income (loss)

$ 3,388 $ ( 549 )

Other comprehensive income (loss):

Foreign currency translation adjustments

452 ( 6,661 )

Comprehensive income (loss)

$ 3,840 $ ( 7,210 )

See accompanying notes to Condensed Consolidated Financial Statements.

3 unchanged sentences

Number of Shares

Retained Earnings

(Accumulated Deficit) Retained Earnings

March 31, 2024

13 unchanged sentences

5,409,155 $ 345,999 $ ( 180,969 ) $ ( 14,303 ) $ 150,727

Exercise of stock options and vesting of restricted stock units

7,464 304 - - 304

Tax withholding on vesting of restricted stock units

( 18 ) ( 2 ) - - ( 2 )

Dividends paid, $ 0.16 per share

- - ( 862 ) - ( 862 )

Stock-based compensation expense

- 3,183 - - 3,183

Foreign currency translation

- - - ( 1,353 ) ( 1,353 )

- - ( 1,230 ) - ( 1,230 )

September 30, 2023

5,391,726 $ 337,869 $ 70,699 $ ( 20,809 ) $ 387,759

Exercise of stock options and vesting of restricted stock units

2,415 2 - - 2

Tax withholding on vesting of restricted stock units

( 98 ) ( 12 ) - - ( 12 )

Dividends paid, $ 0.16 per share

- - ( 862 ) - ( 862 )

Stock-based compensation expense

- 2,993 - - 2,993

Foreign currency translation

- - - 10,965 10,965

- - 2,116 - 2,116

December 31, 2023

5,394,043 $ 340,852 $ 71,953 $ ( 9,844 ) $ 402,961

Number of Shares

Retained Earnings

(Accumulated Deficit) Retained Earnings

March 31, 2023

13 unchanged sentences

5,384,280 $ 334,384 $ 72,791 $ ( 19,456 ) $ 387,719

Exercise of stock options and vesting of restricted stock units

42,014 2,778 - - 2,778

Tax withholding on vesting of restricted stock units

( 3,051 ) ( 572 ) - - ( 572 )

Dividends paid, $ 0.16 per share

- - ( 852 ) - ( 852 )

Stock-based compensation expense

- 4,371 - - 4,371

Foreign currency translation

- - - ( 13,226 ) ( 13,226 )

- - 1,306 - 1,306

September 30, 2022

5,336,271 $ 324,905 $ 74,848 $ ( 25,517 ) $ 374,236

Exercise of stock options and vesting of restricted stock units

7,376 307 - - 307

Tax withholding on vesting of restricted stock units

( 1,757 ) ( 335 ) - - ( 335 )

Dividends paid, $ 0.16 per share

- - ( 855 ) - ( 855 )

Stock-based compensation expense

- 2,056 - - 2,056

Foreign currency translation

- - - 11,345 11,345

- - 451 - 451

December 31, 2022

5,341,890 $ 326,933 $ 74,444 $ ( 14,172 ) $ 387,205

*Accumulated Other Comprehensive (Loss) Income.

*Accumulated Other Comprehensive Income (Loss).

See accompanying notes to Condensed Consolidated Financial Statements.

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(in thousands)

Nine Months Ended December 31,

Three Months Ended June 30,

Cash flows from operating activities:

Net income (loss)

$ 3,388 $ ( 549 )

Adjustments to reconcile net income to net cash from operating activities:

2 unchanged sentences

Stock-based compensation expense

Non-cash interest and debt amortization

Gain on extinguishment of convertible notes

Amortization of step-up in inventory basis

Cash from changes in operating assets and liabilities:

Accounts receivable, net

( 671 ) ( 1,244 )

Prepaid expenses and other assets

969 ( 2,448 )

Accounts payable

( 388 ) ( 539 )

Accrued liabilities and taxes payable

( 2,811 ) ( 3,217 )

Unearned revenues

( 919 ) ( 135 )

Net cash provided by operating activities

Cash flows from investing activities:

Acquisitions, net of cash acquired

Purchases of property, plant and equipment

( 891 ) ( 270 )

Net cash (used in) investing activities

( 891 ) ( 270 )

Cash flows from financing activities:

Proceeds from the issuance of debt

Proceeds from the issuance of debt, net

Repayment of debt

( 9,438 ) ( 8,000 )

Repurchase of convertible debt

Dividends paid

Proceeds from the exercise of stock options

Payment of tax withholding obligation on vesting of restricted stock

( 863 ) ( 859 )

Other financing, net

Net cash provided by (used in) financing activities

( 1,023 ) ( 660 )

Net cash (used in) financing activities

( 9,109 ) ( 9,519 )

Effect of exchange rate changes on cash and cash equivalents

Net (decrease) in cash and cash equivalents

( 175 ) ( 684 )

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

28,214 32,910

Cash and cash equivalents at end of period

Supplemental non-cash activity:

Acquisition-related consideration held back against potential indemnification losses

$ 28,472 $ 32,376

See accompanying notes to Condensed C onsolidated Fin ancial Statements.

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In this quarterly report on Form 10 -Q, 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 multinational 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 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.

1 unchanged sentence

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

As of December 31, 2023 , we managed our operations in four reportable segments, or divisions:

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

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

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

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

As of June 30, 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, sells and services automated systems for protein analysis (immunoassays) and peptide synthesis solutions.

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

Calibration Solutions - develops, manufactures and sells quality control products using principles of advanced metrology to measure or calibrate critical chemical or physical parameters in various dialysis, process monitoring, instrument monitoring, environmental monitoring, gas flow, environmental air quality, and torque applications, primarily in medical device manufacturing, pharmaceutical manufacturing, laboratory, and hospital environments.

Unallocated corporate expenses are reported within Corporate and Other.

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

Basis of Presentation

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References in this Quarterly Report to a particular “year” or “quarter” refer to our fiscal year or fiscal quarters, respectively.

Prior Period Reclassifications

Certain prior year amounts presented have been reclassified to conform with current presentation.

The reclassifications have not resulted in any changes to consolidated or segment amounts reported in the Consolidated Financial Statements for any periods presented in this Form 10 -Q.

Risks and Uncertainties

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

The global business environment continues to be impacted by cost pressure, the overall effects of economic uncertainty on customers' purchasing patterns, high interest rates, and other factors.

The global business environment continues to be impacted by cost pressures, the overall effects of economic uncertainty on customers' purchasing patterns, high interest rates, and other factors.

It is not possible to accurately predict the future impact of such events and circumstances.

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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 guidance is effective for public business entities for fiscal years beginning after December 31, 2023 ( our fiscal year 2025 ), with early adoption permitted.

We are currently assessing the effect the adoption of this standard will have on our financial statements.

The ASU is effective for fiscal years beginning after December 15, 2023 ( our fiscal year 2025 for annual periods), and interim periods within fiscal years beginning after December 15, 2024 ( our fiscal year 2026 for interim periods) on a retrospective basis.

We are currently assessing the effect the adoption of this standard will have on our consolidated financial statement disclosures.

In December 2023, the FASB issued ASU No.

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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 financial statements.

We are currently assessing the effect the adoption of this standard will have on our consolidated financial statement disclosures.

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.

Significant Transactions

Acquisition of GKE

In accordance with the sale and purchase agreement executed October 14, 2023, we acquired 100 % of the outstanding shares of GKE GmbH and SAL GmbH effective October 16, 2023, and upon approval by applicable Chinese regulators, we acquired 100 % of the outstanding shares of Beijing GKE Science & Technology Co.

(“GKE China,” and, together with GKE GmbH and SAL GmbH, “GKE”), effective December 31, 2023 ( the "GKE acquisition").

GKE primarily 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’s strength in chemical indicators and our Sterilization and Disinfection Control division’s strength in biologic indictors are complementary, as chemical and biologic indicators are used in the same sterility validation workflows.

GKE - Fiscal Year 2024 Acquisition

We acquired 100 % of the outstanding shares of GKE GmbH and SAL GmbH effective October 16, 2023, and upon approval by applicable Chinese regulators, effective December 31, 2023, we acquired 100 % of the outstanding shares of Beijing GKE Science & Technology Co.

(“GKE China.” Together with GKE GmbH and SAL GmbH, “GKE” or the "GKE acquisition").

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 cash consideration for the GKE acquisition was $ 88,789 , net of cash and financial liabilities and subject to customary purchase price adjustments, including working capital adjustments of approximately $ 1,000 expected to be paid to Mesa from the seller during the fourth quarter of fiscal year 2024.

Of the total acquisition price approximately $ 9,500 , will be held back for a period of 18 months from the 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 7.

"Indebtedness").

We began operating GKE GmbH and SAL GmbH on October 16, 2023, and they are included as wholly owned subsidiaries in our consolidated financial statements beginning on that date.

GKE China is included as a wholly owned subsidiary in our Condensed Consolidated Balance Sheets as of December 31, 2023, and we began consolidating its results of operations beginning January 1, 2024.

Preliminary 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 Mesa.

The relief from royalty method was used to value our trade names and intellectual property, while the multi-period excess earnings method, a form of the income approach, was used to value our customer relationships.

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 preliminary 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.

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

If additional information about the fair value of assets acquired and liabilities assumed becomes available, we may further revise the preliminary purchase price allocation as soon as is practical, but will not do so more than one year from the acquisition date.

Only items identified as of the acquisition date are considered for subsequent adjustment.

Any such revisions or changes may be material.

The final valuation may include, but may not be limited to:

( 1 ) changes in allocations to intangible assets such as customer relationships, trade names, intellectual property, and non-compete agreements, as well as goodwill, ( 2 ) changes to inventory, ( 3 ) changes to deferred tax balances, ( 4 ) changes in our assessment of the purchase price, and ( 5 ) other changes to assets and liabilities.

The following table summarizes the allocation of the preliminary purchase price as of acquisition:

Life (in years)

Cash and cash equivalents

Accounts receivable (a)

Inventories (b)

Other current assets

Total current assets

Property, plant and equipment (c)

Other noncurrent assets

Intangible assets:

Customer relationships (e)

Intellectual property (e)

Tradenames (e)

Non-compete agreements (e)

Total assets acquired

Accounts payable

Other current liabilities

Deferred tax liabilities

Other long-term liabilities

Total liabilities assumed

Total purchase price, net of cash acquired and subject to adjustments for working capital

(a) Trade receivables are expected to be collected.

(b) Includes $1,507 of preliminary inventory step up, which we expect to amortize within approximately three fiscal quarters from the acquisition date.

During the period from October 16, 2023 to December 31, 2023, $412 of inventory step up amortization was recorded to cost of revenues.

Preliminary accounting for the fair value step up of GKE China's inventory is incomplete due to the recent closing date.

(c) Includes $1,727 of preliminary property, plant and equipment step up, which will be amortized based on the underlying assets' expected lives.

During the period from October 16, 2023 to December 31, 2023, $83 of depreciation expense was recorded related to the property, plant and equipment fair value step up.

(d) Acquired goodwill of $54,470, all of which is allocated to the Sterilization Disinfection Control division, represents the value expected to arise from expanded global 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 income tax purposes.

(e) Acquired amortizable intangible assets are currently expected to be amortized on a straight line basis over a weighted average period of 7.4 years.

The identified intangible assets will be amortized on a straight line basis over their useful lives, which approximates the pattern that the assets' economic benefits are expected to be consumed.

Amortization expense for customer relationships, tradenames, 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 to December 31, 2023, $838 of amortization expense was recorded to general and administrative costs and $122 of amortization expense was recorded to cost of revenues in the Sterilization Disinfection Control division.

Acquisition related costs, such as legal and advisory fees, and integration related costs of $ 770 and $ 1,275 for the three and nine months ended December 31, 2023, respectively, 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 Condensed Consolidated Statements of Income in general and administrative expenses.

GKE's operations contributed $ 3,837 to revenues and $ 565 of net income to our consolidated results during the three and nine months ended December 31, 2023.

It is impracticable for us to disclose interim pro-forma 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 requirements to close their accounting records on an annual cadence rather than on an interim basis, and certain interim financial information cannot be recreated for accurate financial results.

For example, prior to Mesa's ownership, GKE accounted for costs of goods sold at an unburdened rate and performed only annual inventory accounts.

We would be unable to retroactively establish costs of revenues in accordance with U.S.

GAAP given the unavailability of sufficient information for ending interim periods.

Additionally, all transactions occurring between the three GKE entities, which are substantial, were accounted for at arms-length prior to acquisition.

As presentation of pro-forma information would require extensive estimation and could not be sourced from sufficiently factual interim information reasonably aligned with U.S.

GAAP, we are unable to disclose pro-forma 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 $ 6,450 , of which $ 4,950 was paid on the date of acquisition.

The remaining $ 1,500 is due to the Belyntic sellers as patent applications are approved (see Note 11.

"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 fiscal year 2023 , we prepared an analysis of the valuation of net assets acquired in the Belyntic acquisition.

During the nine months ended December 31, 2023, based on a detailed financial analysis of the financial model, we recorded certain measurement period adjustments to reclassify amounts from intangible assets into goodwill.

Our preliminary purchase price allocation has been finalized as of December 31, 2023.

We finalized our purchase price accounting of GKE during fiscal year 2024.

Total cash 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 $ 9,200 (at June 30, 2024 exchange rates) is being held back for a period of 18 months from the 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.

During the three months ended June 30, 2024 , GKE's operations contributed $ 6,254 to our consolidated revenues and $ 3,820 to our gross profit, including $ 778 of inventory step-up amortization recorded to cost of revenues.

Additionally, amortization expense of $ 532 was recorded to general and administrative expense and $ 110 was recorded to cost of revenues related to intangibles acquired as part of the GKE acquisition during the three months ended June 30, 2024 .

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

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

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

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

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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.

Under our service contracts we perform labor and replace parts on an as-needed basis over a contractually specified period of time, or perform specific, discrete services.

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

The significant majority of our revenues and related receivables are generated from contracts with customers that are 12 months or less in duration.

The following tables present disaggregated revenues for the three and nine months ended December 31, 2023 and December 31, 2022 , respectively:

Three Months Ended December 31, 2023

Sterilization and Disinfection Control (1)

Clinical Genomics

Biopharmaceutical Development

Calibration Solutions

Hardware and Software

Total Revenues

( 1 ) Revenues from GKE GmbH and SAL GmbH are included in the Sterilization and Disinfection Control division beginning upon acquisition on October 16, 2023.

Three Months Ended December 31, 2022

Sterilization and Disinfection Control

Clinical Genomics

Biopharmaceutical Development

Calibration Solutions

Hardware and Software

Total Revenues

Nine Months Ended December 31, 2023

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 for the three months ended June 30, 2024 and 2023 , respectively:

Three Months Ended June 30, 2024

Sterilization and Disinfection Control (1)

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Calibration Solutions

$ 20,396 $ 8,112 $ 3,922 $ 580 $ 33,010

Hardware and software

169 2,183 4,837 6,886 14,075

2,392 1,109 3,249 4,335 11,085

Total revenues

( 1 ) Revenues from GKE GmbH and SAL GmbH are included in the Sterilization and Disinfection Control division beginning upon acquisition on October 16, 2023.

Nine Months Ended December 31, 2022

$ 22,957 $ 11,404 $ 12,008 $ 11,801 $ 58,170

( 1 ) Revenues of $ 6,254 from GKE are included in the Sterilization and Disinfection Control division during the three months ended June 30, 2024 .

Three Months Ended June 30, 2023

Sterilization and Disinfection Control

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Calibration Solutions

$ 13,707 $ 8,769 $ 4,486 $ 509 $ 27,471

Hardware and software

81 3,427 2,691 7,078 13,277

2,139 1,173 2,712 3,873 9,897

Total revenues

$ 15,927 $ 13,369 $ 9,889 $ 11,460 $ 50,645

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

Three Months Ended December 31,

Nine Months Ended December 31,

Three Months Ended June 30,

United States

$ 26,861 $ 26,537

24,750 17,995

Total revenues

Other than China, no foreign country exceeded 10% of total revenues for the three and nine months ended December 31, 2023 and 2022 .

$ 58,170 $ 50,645

Other than China, no foreign country exceeded 10% of total revenues for the three months ended June 30, 2024 and 2023 .

Contract Balances

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Some customers prepay for products and services, resulting in unearned revenues or customer deposits, called contract liabilities.

Short-term contract liabilities are included within unearned revenues in the accompanying Condensed Consolidated Balance Sheets, and long-term contract liabilities are included within Other long-term liabilities in the accompanying Condensed Consolidated Balance Sheets.

Short-term contract liabilities are included within unearned revenues in the accompanying unaudited Condensed Consolidated Balance Sheets, and long-term contract liabilities are included within other noncurrent liabilities in the accompanying unaudited Condensed Consolidated Balance Sheets.

The significant majority of our revenues and related receivables and contract liabilities are generated from contracts with customers with original 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, 2024

Prior year liabilities recognized in revenues during the nine months ended December 31, 2023

Contract liabilities added during the nine months ended December 31, 2023, net of revenues recognized

Contract liabilities balance as of December 31, 2023

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

Prior year liabilities recognized in revenues during the three months ended June 30, 2024

Contract liabilities added during the three months ended June 30, 2024, net of revenues recognized

Contract liabilities as of June 30, 2024

Fair Value Measurements

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they are classified within Level 1 of the fair value hierarchy.

Historically, the financial instruments that subject us to the highest concentration of credit risk are cash and cash equivalents and accounts receivable.

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 December 31, 2023 .

We have outstanding $ 172,500 aggregate principal amount of 1.375 % convertible senior notes due August 15, 2025 ( the "Notes").

We estimate the fair value of the Notes using Level 2 inputs based on the last actively traded price or observable market input preceding the end of the reporting period, and the fair value is approximately correlated to our stock price.

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

December 31, 2023

No customers accounted for more than 10% of total trade receivables as of June 30, 2024 .

On April 5, 2024, we entered into separate, privately negotiated purchase agreements with a limited number of holders of our 1.375 % convertible senior notes due August 15, 2025 ( the "Notes"), through which we repurchased $ 75,000 in aggregate principal amount of the Notes.

"Indebtedness" for further information.

As of June 30, 2024 , we had remaining outstanding $ 97,500 aggregate principal amount of the Notes.

We estimate the fair value of the Notes using Level 2 inputs based on the last actively traded price or observable market input preceding the end of the reporting period.

The fair value of the Notes is approximately correlated to our stock price.

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

June 30, 2024

March 31, 2024

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Fair Value (Level 2)

$ 96,896 $ 92,016 $ 171,198 $ 163,013

The carrying amount of the term loan and revolving line of credit (together, the "Credit Facility") on the Condensed Consolidated Balance Sheets approximates fair value due to the variable interest rate pricing on the debt with the balance bearing an interest rate approximating current market rates.

For the GKE acquisition, we held back approximately $ 9,200 (at June 30, 2024 exchange rates) for a period of 18 months from the acquisition closing as security against potential indemnification losses.

We estimate the fair value of consideration held back to be $ 8,900 , using Level 3 inputs, and we adjust the estimated fair value at each reporting period through earnings.

During fiscal year 2023, we acquired substantially all of the assets and certain liabilities of Belyntic GmbH’s peptide purification business (“the Belyntic acquisition”).

The Belyntic acquisition obligates us to pay contingent consideration of up to $ 1,500 cash upon regulatory approval of certain patent applications (see Note 11.

"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 $ 1,067 as of December 31, 2023 and is recorded in other accrued expenses on the accompanying Condensed Consolidated Balance Sheets.

"Commitments and Contingencies"), of which $ 750 has not yet been paid.

We estimate the fair value of the remaining contingent consideration is $ 650 , 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.

Amounts recognized or disclosed at fair value in the unaudited condensed 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.

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 no impairments during the three and nine months ended December 31, 2023 or 2022 .

We recorded no impairments during the three months ended June 30, 2024 or June 30, 2023 .

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 three and nine months ended December 31, 2023 or 2022 .

Supplemental Balance Sheets Information

There were no transfers between the levels of the fair value hierarchy during the three months ended June 30, 2024 or June 30, 2023 .

Supplemental Information

Inventories consisted of the following:

December 31, 2023

June 30, 2024

March 31, 2024

Raw materials

$ 19,031 $ 18,335

Work in process

Finished goods

12,054 13,084

Total inventories

$ 31,767 $ 32,675

Prepaid expenses and other current assets consisted of the following:

December 31, 2023

June 30, 2024

March 31, 2024

Prepaid expenses

$ 3,928 $ 2,932

Prepaid income taxes

Other current assets

Total prepaid expenses and other

Total prepaid expenses and other current assets

$ 10,883 $ 9,408

Accrued payroll and benefits consisted of the following:

December 31, 2023

June 30, 2024

March 31, 2024

Bonus payable

$ 2,175 $ 3,838

Wages and paid-time-off payable

2 unchanged sentences

Total accrued payroll and benefits

$ 8,338 $ 9,935

Other accrued expenses consisted of the following:

December 31, 2023

June 30, 2024

March 31, 2024

Accrued business taxes

$ 5,268 $ 5,557

Current operating lease liabilities

Income taxes payable

Current acquisition-related holdbacks

Total other accrued expenses

$ 22,484 $ 12,858

The increase in other accrued expenses is primarily due to the reclassification of the GKE acquisition consideration held back to current from long term as of June 30, 2024.

Other noncurrent liabilities consisted of the following:

June 30, 2024

March 31, 2024

Noncurrent operating lease liabilities

$ 6,299 $ 6,613

Noncurrent acquisition-related holdbacks

Total other noncurrent liabilities

$ 6,581 $ 15,613

The decrease in other noncurrent liabilities is primarily due to the reclassification of the GKE acquisition consideration held back to current from long term as of June 30, 2024.

Three Months Ended June 30,

Depreciation expense in cost of revenues

Depreciation expense in operating expense

Total depreciation expense

$ 1,404 $ 914

$ 304 of the increase in depreciation expense is attributable to GKE.

Goodwill and Intangible Assets, Net

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

December 31, 2023

Finite-lived intangible assets consisted of the following:

June 30, 2024

March 31, 2024

6 unchanged sentences

Customer relationships

Intellectual property

$ 189,708 $ ( 107,470 ) $ 82,238 $ 189,911 $ ( 104,528 ) $ 85,383

Other intangibles

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

Three Months Ended December 31,

Nine Months Ended December 31,

61,140 ( 33,919 ) 27,221 61,161 ( 32,792 ) 28,369

Total finite-lived intangible assets

$ 250,848 $ ( 141,389 ) $ 109,459 $ 251,072 $ ( 137,320 ) $ 113,752

Amortization expense for finite-lived intangible assets was as follows:

Three Months Ended June 30,

Amortization in cost of revenues

$ 647 $ 1,728

Amortization in general and administrative

Total amortization expense

$ 4,061 $ 7,220

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

Amortization Expense

Remainder of 2025

5 unchanged sentences

March 31, 2024

$ 79,430 $ 16,940 $ 46,515 $ 37,211 180,096

Effect of foreign currency translation

Goodwill related to GKE acquisition

Measurement period adjustment, Belyntic Acquisition

December 31, 2023

Goodwill in the Biopharmaceutical Development division related to the Belyntic acquisition and goodwill in the Sterilization and Disinfection Control division related to the GKE acquisition are expected to be tax deductible.

( 494 ) ( 24 ) 150 ( 6 ) ( 374 )

June 30, 2024

$ 78,936 $ 16,916 $ 46,665 $ 37,205 $ 179,722

Credit Facility

On October 5, 2023, we amended the terms of our four -year senior credit facility (the “Credit Facility”) to increase the maximum principal amount available to us from $ 75,000 to $ 125,000 .

As of December 31, 2023 , the Credit Facility includes 1 ) a revolving credit facility in an amended aggregate principal amount of up to $ 125,000 , 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 .

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

The Credit Facility matures in March 2025.

The financial covenants in the Credit Facility include a maximum leverage ratio of 4.5 to 1.0 for the period ended December 31, 2023 , except that we may have a leverage ratio of 5.75 to 1.0 for a period of four consecutive quarters following a permitted acquisition, including the permitted GKE acquisition consummated during the three months ended December 31, 2023.

The Credit Facility also stipulates a minimum fixed charge coverage ratio of 1.25 to 1.0.

On March 5, 2021, we entered into a four -year senior secured credit agreement that included 1 ) a revolving credit facility with an aggregate principal amount of up to $ 75,000 (the "Revolver"), 2 ) a swingline loan with an aggregate principal amount not exceeding $ 5,000 , and 3 ) letters of credit with 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 with a minimum aggregate principal amount of $ 25,000 and a maximum amount of $ 75,000 , subject to the satisfaction of certain conditions and lender considerations.

We refer to the agreement in whole as the “Credit Facility.”

On October 5, 2023, we amended the terms of the Credit Facility to increase the maximum principal amount available to us under the Revolver from $ 75,000 to $ 125,000 .

On April 5, 2024, we further amended and restated the terms of the Credit Facility to:

Extend the maturity of the Credit Facility to April 2029;

Allow proceeds from the Credit Facility to be used to redeem some or all of the Company’s 2025 Notes;

Include a $75,000 senior secured term loan facility (the “Term Loan”), which is subject to principal amortization payments;

Make certain changes to the financial covenants.

In conjunction with the amendment and restatement of the Credit Facility during the three months ended June 30, 2024, we incurred $ 1,987 of customary lender fees and debt issuance costs paid to third parties, of which $ 1,242 is related to the Revolver and $ 745 is related to the Term Loan.

The fees are being amortized to interest expense through maturity.

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 June 30, 2024 was 8.4 %.

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 amounts under the Revolver are 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 December 31, 2023 , we were in compliance with all covenants.

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

The interest rate on borrowings under our line of credit as of December 31, 2023 was 7.2 %.

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

During the three months ended December 31, 2023, we borrowed a total of $ 71,000 under the facility to fund the majority of the acquisition of GKE.

"Significant Transactions" for further information.

We paid $ 9,000 against the Credit Facility during our third fiscal quarter, and as of December 31, 2023 , $ 62,000 remained outstanding.

We paid an additional $ 4,000 on the outstanding balance in January 2024.

As of June 30, 2024, we were in compliance with all covenants under the Credit Facility.

We borrowed $ 75,000 under the Term Loan on April 5, 2024, to fund the repurchase of a portion of the Notes (see “Convertible Notes” below).

During the three months ended June 30, 2024, we made a required quarterly principal payment on the Term Loan of $ 937 .

We are required to make quarterly principal payments on the Term Loan.

For the following fiscal years ending March 31, debt payments on the Term Loan are required as follows:

Remainder of 2025

Total Principal Remaining

The net carrying amount of the Term Loan was as follows:

June 30, 2024

March 31, 2024

Term Loan (8.4% as of June 30, 2024)

discount and debt issuance costs

current portion

Noncurrent portion

The effective interest rate on the Term Loan at the time of borrowing was 8.13 %.

As of June 30, 2024, the outstanding balance under the Revolver was $ 42,000 and $ 83,000 was available for borrowing.

Subsequent to June 30, 2024, we repaid an additional $ 3,500 on the Revolver.

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.

The balance of unamortized customary lender fees, including fees related to the April 5, 2024 amendment and restatement, was $ 1,428 and $ 321 as of June 30, 2024 and March 31, 2024, respectively.

Convert ible Notes

3 unchanged sentences

The Notes are initially convertible, subject to certain conditions, 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.

On April 5, 2024, we entered into separate, privately negotiated transactions with certain holders of the Notes to repurchase $ 75,000 aggregate principal amount of the Notes for an aggregate repurchase price of $ 71,250 in cash, plus accrued and unpaid interest of $ 160 .

We accounted for the partial repurchase of the Notes as a debt extinguishment, which resulted in the recognition of a gain on extinguishment of $ 3,197 in other income on the statements of operations during the three months ended June 30, 2024.

As of June 30, 2024, $ 97,500 in aggregate principal amount of the Notes remained outstanding.

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 circumstances necessary for conversion were not met during the three and nine months ended December 31, 2023 .

As of December 31, 2023 , the Notes were classified as a long-term liability on our Condensed Consolidated Balance Sheets.

The if-converted value of the Notes did not exceed the principal balance as of December 31, 2023 .

The circumstances necessary for conversion were not met during the three months ended June 30, 2024 .

As of June 30, 2024 , the Notes were classified as a noncurrent liability on our Condensed Consolidated Balance Sheets.

The if-converted value of the Notes did not exceed the principal balance as of June 30, 2024 .

The net carrying amount of the Notes was as follows:

December 31, 2023

June 30, 2024

March 31, 2024

6 unchanged sentences

We recognized interest expense on the Notes as follows:

Three Months Ended December 31,

Nine Months Ended December 31,

Three Months Ended June 30,

Coupon interest expense at 1.375%

$ 593 $ 593 $ 1,779 $ 1,779

Amortization of debt issuance costs

231 227 692 679

Total interest and amortization of debt issuance costs

$ 824 $ 820 $ 2,471 $ 2,458

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

1 unchanged sentence

Stock-Based Compensation

During the nine months ended December 31, 2023 , we issued stock options, restricted stock units ("RSUs") and performance-based restricted stock units ("PSUs") pursuant to the Mesa Laboratories, Inc.

During the three months ended June 30, 2024 , we issued time-based restricted stock units ("RSUs") and performance-based restricted stock units ("PSUs") pursuant to the Mesa Laboratories, Inc.

Amended and Restated 2021 Equity Incentive Plan, which authorizes the issuance of 660 shares of common stock to eligible participants.

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

Three Months Ended December 31,

Nine Months Ended December 31,

Three Months Ended June 30,

Stock-based compensation expense

Amount of income tax expense (benefit) recognized in earnings

$ 2,928 $ 2,968

Stock-based compensation expense, net of tax

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

The following is a summary of stock option award activity for the nine months ended December 31, 2023 :

$ 2,928 $ 2,096

The following is a summary of stock option award activity for the three months ended June 30, 2024 :

Stock Options

4 unchanged sentences

Outstanding as of March 31, 2024

194 $ 181.89 3.2 $ 26

Awards granted

Awards forfeited or expired

( 13 ) 147.07

Awards exercised

Outstanding as of December 31, 2023

The stock options granted during the nine months ended December 31, 2023 vest in equal installments on the first, second, and third anniversary of the grant date.

The following is a summary of RSU and PSU award activity for the nine months ended December 31, 2023 :

Outstanding as of June 30, 2024

181 $ 184.42 3.1 $ -

The following is a summary of RSU and PSU award activity for the three months ended June 30, 2024 :

Time-Based Restricted Stock Units

5 unchanged sentences

Outstanding as of March 31, 2024

76 $ 157.83 56 $ 240.96

Awards granted (1)

101 89.82 41 102.57

Awards forfeited

( 2 ) 154.69 - -

Awards distributed

Outstanding as of December 31, 2023 (1)

Balances for PSUs are reflected at target.

( 21 ) 182.89 - -

Outstanding as of June 30, 2024

154 $ 109.69 97 $ 181.85

Balances for PSUs granted are reflected at target.

Outstanding time-based RSUs vest and settle in shares of our common stock on a one -for- one basis.

The majority of the RSUs granted to employees during the nine months ended December 31, 2023 vest in equal installments on the first, second, and third anniversary of the grant date.

RSUs granted to certain executives during the nine months ended December 31, 2023 vest in equal installments on September 1, 2024, June 21, 2025 and June 21, 2026.

RSUs granted to non-employee directors during the nine months ended December 31, 2023 vest one year from the grant date.

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

The RSUs granted to employees during the three months ended June 30, 2024 vest in equal installments on the first, second, and third anniversary of the grant date.

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

We grant PSUs to certain key employees.

2 unchanged sentences

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

During the nine months ended December 31, 2023 , the Compensation Committee of the Board of Directors created a plan to award 32 PSUs at target with a grant date fair value of $ 132.29 that are subject to service, performance, and market conditions to eligible employees.

The service period is from June 21, 2023 through June 21, 2026.

The company performance conditions will be measured for the period from April 1, 2023 through March 31, 2024.

The quantity of shares that will be earned based upon company performance will range from 0 % to 200 % of the targeted number of shares; if the defined minimum targets are not met, then no shares will vest for performance.

In addition, the number of PSUs 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.

Earnings Per Share

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

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

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

Stock awards are excluded from the calculation of diluted EPS if they are subject to performance conditions that have not yet been achieved or if they are antidilutive.

Diluted EPS does not consider the impact of potentially dilutive securities in periods in which there is a loss because the inclusion of the potential common shares would have an antidilutive effect in such cases.

Shares underlying the Notes were excluded from the diluted EPS calculation for the three and nine months ended December 31, 2023 and December 31, 2022 as the impact of the assumed conversion of the Notes calculated under the if-converted method was antidilutive.

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

Three Months Ended December 31,

Nine Months Ended December 31,

Net income available for shareholders

During the three months ended June 30, 2024, the Compensation Committee of the Board of Directors created a plan to award 41 PSUs at target (“the FY25 PSUs”) to eligible employees.

Of the 41 PSUs granted, 23 PSUs have a grant date fair value of $ 89.82 and are subject to service and company financial performance conditions.

The financial performance measurement period is from April 1, 2024 through March 31, 2027.

The remaining 18 PSUs have a grant date fair value of $ 119.54 and are subject to service and market conditions, with the market performance period measured from June 18, 2024 through June 18, 2027.

The service period for all of the FY25 PSUs is from June 18, 2024 through June 18, 2027.

The quantity of shares that will be earned based upon either company financial performance or market performance will range from 0 % to 200 % of the targeted number of shares; if the defined minimum targets are not met, then no shares will vest.

Earnings (Loss) Per Share

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

Three Months Ended June 30,

Net income (loss) available for shareholders

$ 3,388 $ ( 549 )

Weighted average outstanding shares of common stock

2 unchanged sentences

Fully diluted shares

Basic earnings per share

Diluted earnings per share

Basic earnings (loss) per share

$ 0.63 $ ( 0.10 )

Diluted earnings (loss) per share

$ 0.62 $ ( 0.10 )

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

Stock awards are excluded from the calculation of diluted EPS if they are subject to performance conditions that have not yet been achieved or if they are antidilutive.

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

Three Months Ended December 31,

Nine Months Ended December 31,

Three Months Ended June 30,

Assumed conversion of the Notes

Stock awards that were anti-dilutive

Stock awards subject to performance and market conditions

Total stock awards excluded from diluted EPS

Shares underlying the Notes were excluded from the diluted EPS calculation for the three months ended June 30, 2024 and 2023 as the impact of the assumed conversion of the Notes calculated under the if-converted method was antidilutive.

The decrease in assumed conversion of the Notes is related to the partial repayment of the Notes that occurred in the three months ended June 30, 2024 ( see Note 7.

"Indebtedness").

We reported an income tax provision as follows:

Three Months Ended June 30,

Income tax expense (benefit) $ 517 $ ( 388 )

For interim income tax reporting, we estimate our annual effective tax rate and apply this effective tax rate to our year-to-date pre-tax income.

2 unchanged sentences

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

Our effective income tax rate was ( 8.7 )% and 207.5 % for the three and nine months ended December 31, 2023, respectively, compared to 76.5 % and 384.8 % for the three and nine months ended December 31, 2022, respectively.

The effective tax rate for the three and nine months ended December 31, 2023 differed from the statutory federal rate of 21 % primarily due to the share-based payment awards for employees and the effect of income generated in foreign jurisdictions.

The change in our effective tax rate for the three and nine months ended December 31, 2023 compared to the prior periods is primarily due to lower windfall benefits on stock option exercises.

Our effective income tax rate was 13 % for the three months ended June 30, 2024 compared to 41 % for the three months ended June 30, 2023.

The effective tax rate for the three months ended June 30, 2024 differed from the statutory federal rate of 21 % primarily due to the valuation allowance established related to subsidiaries based in the United States during the fiscal year ended March 31, 2024.

Commitments and Contingencies

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

As of December 31, 2023 , there were no material legal reserves recorded on the accompanying unaudited Condensed Consolidated Balance Sheets.

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

During the three months ending December 31, 2023, a subset of the patents was issued by the European Patent Office and we remitted $ 188 to the Belyntic sellers.

An additional subset of the patents was issued in January 2024, for which we will pay the Belyntic sellers an additional $ 563 during the fourth quarter of fiscal year 2024.

We believe it is probable the remaining patents will be issued and we will pay the sellers in full within the next 12 months.

As part of the GKE acquisition consummated during the three months ended December 31, 2023, we have agreed to pay the GKE sellers approximately $ 9,500 of the acquisition price approximately 18 months following the acquisition date, pending adjustments for potential indemnification losses that may arise.

The liability is recorded as in Other long-term liabilities in our Condensed Consolidated Balance Sheets as of December 31, 2023.

We are party to various legal proceedings arising in the ordinary course of business.

As of June 30, 2024 , we are not party to any legal proceeding that management believes could have a material adverse effect on our unaudited consolidated financial position, results of operations, or cash flows.

As part of the GKE acquisition , we agreed to pay the GKE sellers approximately $ 9,200 (at June 30, 2024 exchange rates) 18 months following the acquisition date, pending adjustments for potential indemnification losses that may arise.

The liability is recorded at its fair value of $ 8,900 in other accrued expenses on our unaudited Condensed Consolidated Balance Sheets as of June 30, 2024.

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 $ 650 as of June 30, 2024 .

S egment Information

The following tables set forth our segment information:

Three Months Ended December 31,

Nine Months Ended December 31,

Sterilization and Disinfection Control

Three Months Ended June 30,

Revenues (a):

Sterilization and Disinfection Control (b)

$ 22,957 $ 15,927

Clinical Genomics

11,404 13,369

Biopharmaceutical Development

Calibration Solutions

Total revenues (a)

11,801 11,460

Total revenues

$ 58,170 $ 50,645

Gross profit:

Sterilization and Disinfection Control

Sterilization and Disinfection Control (b)

$ 15,558 $ 11,591

Clinical Genomics

1 unchanged sentence

Calibration Solutions

Reportable segment gross profit

Corporate and Other (b)

$ 37,249 $ 31,183

Reconciling items:

Operating expense

Operating (loss) income

Nonoperating (income) expense, net

31,669 31,847

Operating income (loss)

5,580 ( 664 )

Nonoperating expense, net

Earnings (loss) before income taxes

$ 3,905 $ ( 937 )

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

Unallocated corporate expenses are reported within Corporate and Other.

Includes post-acquisition GKE results during the three months ended June 30, 2024 .

The following table sets forth inventories by reportable segment.

1 unchanged sentence

Sterilization and Disinfection Control

$ 6,465 $ 7,014

Clinical Genomics

12,156 11,813

Biopharmaceutical Development

1 unchanged sentence

Total inventories

Inventories from GKE total $ 4,077 as of December 31, 2023, net of $ 412 fair value amortization step-up recorded during the three months ended December 31, 2023.

GKE inventories are included in our Sterilization and Disinfection Control division.

$ 31,767 $ 32,675

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

What changed 10-Q

Item 1. Financial Statements