Item 1. Financial Statements
Item 1 . Financial Statements
M esa Laboratories, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands, except share amounts)
September 30,
March 31,
2024
2024
ASSETS
Current assets:
Cash and cash equivalents
$ 24,337 $ 28,214
Accounts receivable, less allowance for credit losses of $ 1,026 and $ 1,321 , respectively
40,234 39,055
Inventories
29,738 32,675
Prepaid expenses and other current assets
13,669 9,408
Total current assets
107,978 109,352
Noncurrent assets:
Property, plant and equipment, net of accumulated depreciation of $ 25,656 and $ 22,519 respectively
32,073 31,766
Deferred tax asset
1,329 1,292
Other assets
20,142 10,538
Customer relationships, net
81,928 85,383
Other intangibles, net
26,895 28,369
Goodwill
183,753 180,096
Total assets
$ 454,098 $ 446,796
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$ 5,988 $ 6,041
Accrued payroll and benefits
9,185 9,935
Unearned revenues
14,412 15,478
Other accrued expenses
22,866 12,858
Term loan, current portion
3,750 -
Convertible senior notes, current portion, net of debt issuance costs
97,029 -
Total current liabilities
153,230 44,312
Noncurrent liabilities:
Deferred tax liability
$ 20,561 19,780
Other noncurrent liabilities
14,653 15,613
Revolving line of credit
35,500 50,500
Term loan, noncurrent portion, net of discounts and debt issuance costs
68,703 -
Convertible senior notes, noncurrent portion, net of debt issuance costs
- 171,198
Total liabilities
292,647 301,403
Stockholders’ equity:
Common stock, no par value; authorized 25,000,000 shares; issued and outstanding, 5,419,855 and 5,394,491 shares, respectively
349,529 343,642
(Accumulated deficit)
( 178,407 ) ( 183,494 )
Accumulated other comprehensive (loss)
( 9,671 ) ( 14,755 )
Total stockholders’ equity
161,451 145,393
Total liabilities and stockholders’ equity
$ 454,098 $ 446,796
See accompanying notes to Condensed C onsolidated Fi nancial Statements.
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Mesa Laboratories, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except per share data)
Three Months Ended September 30,
Six Months Ended September 30,
2024
2023
2024
2023
Revenues
$
57,833
$
53,165
$
116,003
$
103,810
Cost of revenues
22,378
21,056
43,299
40,518
Gross profit
35,455
32,109
72,704
63,292
Operating expense:
Selling
9,849
9,650
19,965
18,626
General and administrative
17,464
17,526
34,282
35,586
Research and development
4,634
4,993
9,369
9,804
Total operating expense
31,947
32,169
63,616
64,016
Operating income (loss)
3,508
( 60
)
9,088
( 724
)
Nonoperating expense:
Interest expense and amortization of debt issuance costs
3,018
905
5,860
1,953
(Gain) on extinguishment of convertible senior notes
-
-
( 3,197
)
-
Other (income) expense, net
( 3,322
)
360
( 1,292
)
( 415
)
Total nonoperating (income) expense, net
( 304
)
1,265
1,371
1,538
Earnings (loss) before income taxes
3,812
( 1,325
)
7,717
( 2,262
)
Income tax expense (benefit)
384
( 95
)
901
( 483
)
Net income (loss)
$
3,428
$
( 1,230
)
$
6,816
$
( 1,779
)
Earnings (loss) per share:
Basic
$
0.63
$
( 0.23
)
$
1.26
$
( 0.33
)
Diluted
$
0.63
$
( 0.23
)
$
1.25
$
( 0.33
)
Weighted-average common shares outstanding:
Basic
5,413
5,387
5,405
5,379
Diluted
5,471
5,387
5,448
5,379
See accompanying notes to Condensed Consolidated Financial Statements.
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Mesa Laboratories, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(unaudited)
(in thousands)
Three Months Ended September 30, Six Months Ended September 30,
2024
2023
2024
2023
Net income (loss)
$ 3,428 $ ( 1,230 ) $ 6,816 $ ( 1,779 )
Other comprehensive income (loss):
Foreign currency translation adjustments
4,632 ( 1,353 ) 5,084 ( 8,014 )
Comprehensive income (loss)
$ 8,060 $ ( 2,583 ) $ 11,900 $ ( 9,793 )
See accompanying notes to Condensed Consolidated Financial Statements.
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Mesa Laboratories, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(unaudited)
(dollars in thousands, except per share data)
Common Stock
Number of Shares
Amount
(Accumulated Deficit) Retained Earnings
AOCI*
Total
March 31, 2024
5,394,491 $ 343,642 $ ( 183,494 ) $ ( 14,755 ) $ 145,393
Exercise of stock options and vesting of restricted stock units
20,858 - - - -
Tax withholding on vesting of restricted stock units
( 6,194 ) ( 571 ) - - ( 571 )
Dividends paid, $ 0.16 per share
- - ( 863 ) - ( 863 )
Stock-based compensation expense
- 2,928 - - 2,928
Foreign currency translation
- - - 452 452
Net income
- - 3,388 - 3,388
June 30, 2024
5,409,155 $ 345,999 $ ( 180,969 ) $ ( 14,303 ) $ 150,727
Exercise of stock options and vesting of restricted stock units
13,006 - - - -
Tax withholding on vesting of restricted stock units
( 2,306 ) ( 307 ) - - ( 307 )
Dividends paid, $ 0.16 per share
- - ( 866 ) - ( 866 )
Stock-based compensation expense
- 3,837 - - 3,837
Foreign currency translation
- - - 4,632 4,632
Net income
- - 3,428 - 3,428
September 30, 2024
5,419,855 $ 349,529 $ ( 178,407 ) $ ( 9,671 ) $ 161,451
Common Stock
Number of Shares
Amount
(Accumulated Deficit) Retained Earnings
AOCI*
Total
March 31, 2023
5,369,466
$
332,076
$
74,199
$
( 12,795
)
$
393,480
Exercise of stock options and vesting of restricted stock units
20,074
52
-
-
52
Tax withholding on vesting of restricted stock units
( 5,260
)
( 712
)
-
-
( 712
)
Dividends paid, $0.16 per share
-
-
( 859
)
-
( 859
)
Stock-based compensation expense
-
2,968
-
-
2,968
Foreign currency translation
-
-
-
( 6,661
)
( 6,661
)
Net (loss)
-
-
( 549
)
-
( 549
)
June 30, 2023
5,384,280
$
334,384
$
72,791
$
( 19,456
)
$
387,719
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
)
Net (loss)
-
-
( 1,230
)
-
( 1,230
)
September 30, 2023
5,391,726
$
337,869
$
70,699
$
( 20,809
)
$
387,759
*Accumulated Other Comprehensive Income (Loss).
See accompanying notes to Condensed Consolidated Financial Statements.
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M esa Laboratories, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
Six Months Ended September 30,
2024
2023
Cash flows from operating activities:
Net income (loss)
$
6,816
$
( 1,779
)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation of property, plant and equipment
2,922
1,825
Amortization of acquisition-related intangibles
8,611
14,405
Stock-based compensation expense
6,765
6,151
Gain on extinguishment of convertible notes
( 3,197
)
-
Amortization of step-up in inventory basis
1,232
-
Other
( 1,100
)
1,598
Cash from changes in operating assets and liabilities:
Accounts receivable, net
( 566
)
5,448
Inventories
( 44
)
( 184
)
Prepaid expenses and other assets
( 1,449
)
( 3,528
)
Accounts payable
( 189
)
( 1,307
)
Accrued liabilities and taxes payable
( 2,788
)
( 1,743
)
Unearned revenues
( 1,309
)
( 1,171
)
Net cash provided by operating activities
15,704
19,715
Cash flows from investing activities:
Purchases of property, plant and equipment
( 2,679
)
( 904
)
Net cash (used in) investing activities
( 2,679
)
( 904
)
Cash flows from financing activities:
Proceeds from the issuance of debt, net
73,465
-
Repayment of debt
( 16,875
)
( 13,000
)
Repurchase of convertible debt
( 71,250
)
-
Dividends paid
( 1,729
)
( 1,721
)
Other financing, net
( 1,330
)
( 358
)
Net cash (used in) financing activities
( 17,719
)
( 15,079
)
Effect of exchange rate changes on cash and cash equivalents
817
( 1,025
)
Net (decrease) increase in cash and cash equivalents
( 3,877
)
2,707
Cash and cash equivalents at beginning of period
28,214
32,910
Cash and cash equivalents at end of period
$
24,337
$
35,617
Supplemental non-cash activity:
Right of use assets obtained in exchange for lease liabilities
$
9,658
$
991
See accompanying notes to Condensed C onsolidated Fin ancial Statements.
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Mesa Laboratories, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(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 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 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 and 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 September 30, 2024 , 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, decontamination, disinfection, and cleaning 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, 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
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information. In the opinion of management, such unaudited information includes all adjustments, consisting of normal recurring adjustments necessary for the fair statement of our financial position and results of operations. The results of operations for interim periods are not necessarily indicative of results that may be achieved for the entire year. The year-end Condensed Consolidated Balance Sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The Condensed Consolidated Financial Statements include the accounts of Mesa and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. We made no material changes to the application of our significant accounting policies disclosed in our annual report on Form 10 -K. This quarterly report should be read in conjunction with the consolidated financial statements included in our annual report on Form 10 -K for the year ended March 31, 2024 .
Our fiscal year ends on March 31. References in this Quarterly Report to a particular “year” or “quarter” refer to our fiscal year or fiscal quarters, respectively.
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. 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. Actual results could differ from our estimates.
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 financial statements 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 ( 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 do not expect the adoption of ASU 2023 - 07 to have a material impact 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 statement disclosures.
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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.
Note 2 . Significant Transactions
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. Ltd. (“GKE China” and 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.
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 acquired and inclusive of working capital adjustments. Of the total acquisition price, approximately $ 9,700 (at September 30, 2024 exchange rates) is being held back until April 2025 in accordance with the purchase agreement as security against potential indemnification losses ("GKE holdback"). 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 and six months ended September 30, 2024 , GKE's operations contributed the following amounts to our consolidated results of operations:
Three Months Ended
Six Months Ended
September 30, 2024
Revenues
$ 5,863 $ 12,117
Gross profit
3,733 7,553
Amortization of inventory step-up recorded in cost of revenues
454 1,232
Amortization of acquired intangibles recorded in cost of revenues
134 244
Amortization of acquired intangibles recorded in general and administrative expense
956 1,488
Note 3. 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 sales 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 and chemical 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 services. Such service 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 and six months ended September 30, 2024 and 2023 , respectively:
Three Months Ended September 30, 2024
Sterilization and Disinfection Control (1)
Clinical Genomics
Biopharmaceutical Development
Calibration Solutions
Total
Consumables
$ 19,473 $ 8,178 $ 3,826 $ 444 $ 31,921
Hardware and software
144 2,451 5,168 7,848 15,611
Services
2,588 870 2,873 3,970 10,301
Total revenues
$ 22,205 $ 11,499 $ 11,867 $ 12,262 $ 57,833
( 1 ) Revenues of $ 5,863 from GKE are included in the Sterilization and Disinfection Control division during the three months ended September 30, 2024 .
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Three Months Ended September 30, 2023
Sterilization and Disinfection Control
Clinical Genomics
Biopharmaceutical Development
Calibration Solutions
Total
Consumables
$ 14,749 $ 9,963 $ 4,187 $ 786 $ 29,685
Hardware and software
120 4,474 2,475 6,884 13,953
Services
2,211 1,112 2,545 3,659 9,527
Total revenues
$ 17,080 $ 15,549 $ 9,207 $ 11,329 $ 53,165
Six Months Ended September 30, 2024
Sterilization and Disinfection Control (1)
Clinical Genomics
Biopharmaceutical Development
Calibration Solutions
Total
Consumables
$ 39,869 $ 16,290 $ 7,748 $ 1,024 $ 64,931
Hardware and software
313 4,634 10,005 14,734 29,686
Services
4,980 1,979 6,122 8,305 21,386
Total revenues
$ 45,162 $ 22,903 $ 23,875 $ 24,063 $ 116,003
( 1 ) Revenues of $ 12,117 from GKE are included in the Sterilization and Disinfection Control division during the six months ended September 30, 2024 .
Six Months Ended September 30, 2023
Sterilization and Disinfection Control
Clinical Genomics
Biopharmaceutical Development
Calibration Solutions
Total
Consumables
$ 28,456 $ 18,732 $ 8,673 $ 1,295 $ 57,156
Hardware and software
201 7,901 5,166 13,962 27,230
Services
4,350 2,285 5,257 7,532 19,424
Total revenues
$ 33,007 $ 28,918 $ 19,096 $ 22,789 $ 103,810
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 September 30,
Six Months Ended September 30,
2024
2023
2024
2023
United States
$ 28,078 $ 27,073 $ 54,939 $ 53,610
China
7,390 7,529 13,949 13,642
Other
22,365 18,563 47,115 36,558
Total revenues
$ 57,833 $ 53,165 $ 116,003 $ 103,810
Other than China, no foreign country exceeded 10% of total revenues for the three and six months ended September 30, 2024 and 2023 .
Contract Balances
Our contracts have varying payment terms and conditions. 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 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
$ 15,686
Prior year liabilities recognized in revenues during the six months ended September 30, 2024
( 6,802 )
Contract liabilities added during the six months ended September 30, 2024, net of revenues recognized
5,636
Contract liabilities as of September 30, 2024
$ 14,520
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Note 4. Fair Value Measurements
Our financial instruments consist primarily of cash and cash equivalents, trade accounts receivable, obligations under trade accounts payable, and debt. Due to their short-term nature, the carrying values for 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 September 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. See Note 7. "Indebtedness" for further information. As of September 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:
September 30, 2024
March 31, 2024
Carrying Value
Fair Value (Level 2)
Carrying Value
Fair Value (Level 2)
Notes
$ 97,029 $ 94,148 $ 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.
We expect to pay approximately $ 9,700 (at September 30, 2024 exchange rates) for the GKE holdback in April 2025. We estimate the discounted fair value of consideration held back to be approximately $ 9,400 as of September 30, 2024 based on Level 3 inputs from the acquisition, including discount rate estimates. 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"), 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.
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. Fair values of such assets and liabilities require measurement using Level 3 inputs. We recorded no impairments during the three and six months ended September 30, 2024 or 2023 .
There were no transfers between the levels of the fair value hierarchy during the three months ended three and six months ended September 30, 2024 .
Note 5. Supplemental Information
Inventories consisted of the following:
September 30, 2024
March 31, 2024
Raw materials
$ 18,215 $ 18,335
Work in process
366 1,256
Finished goods
11,157 13,084
Total inventories
$ 29,738 $ 32,675
Prepaid expenses and other current assets consisted of the following:
September 30, 2024
March 31, 2024
Prepaid expenses
$ 3,674 $ 2,932
Deposits
1,666 1,898
Prepaid income taxes
4,407 1,237
Other current assets
3,922 3,341
Total prepaid expenses and other current assets
$ 13,669 $ 9,408
Accrued payroll and benefits consisted of the following:
September 30, 2024
March 31, 2024
Bonus payable
$ 4,224 $ 3,838
Wages and paid-time-off payable
2,404 3,072
Payroll related taxes
2,029 1,956
Other benefits payable
528 1,069
Total accrued payroll and benefits
$ 9,185 $ 9,935
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Other accrued expenses consisted of the following:
September 30, 2024
March 31, 2024
Accrued business taxes
$ 5,908 $ 5,557
Current operating lease liabilities
3,488 2,986
Income taxes payable
1,386 1,615
Current acquisition-related holdbacks
9,891 436
Other
2,193 2,264
Total other accrued expenses
$ 22,866 $ 12,858
The increase in other accrued expenses is primarily due to the reclassification of the held back GKE acquisition-related consideration from noncurrent liabilities.
Other noncurrent liabilities consisted of the following:
September 30, 2024
March 31, 2024
Noncurrent operating lease liabilities
$ 14,385 $ 6,613
Noncurrent acquisition-related holdbacks
160 8,792
Other
108 208
Total other noncurrent liabilities
$ 14,653 $ 15,613
The increase in operating lease liabilities is primarily attributable to new a new right-of-use leased facility associated with the manufacturing and administrative office facilities used by our Biopharmaceutical Development division in Uppsala, Sweden.
Three Months Ended September 30,
Six Months Ended September 30,
2024
2023
2024
2023
Depreciation expense in cost of revenues
$ 904 $ 655 $ 1,766 $ 1,329
Depreciation expense in operating expense
614 256 1,156 496
Total depreciation expense
$ 1,518 $ 911 $ 2,922 $ 1,825
The increase in depreciation expense for the three and six months ended September 30, 2024 is primarily due to GKE's operations, which included $ 321 and $ 625 of depreciation expense, respectively.
Note 6. Goodwill and Intangible Assets, Net
Finite-lived intangible assets consisted of the following:
September 30, 2024
March 31, 2024
Gross Carrying Amount
Accumulated Amortization
Net Carrying Amount
Gross Carrying Amount
Accumulated Amortization
Net Carrying Amount
Customer relationships
$ 194,931 $ ( 113,003 ) $ 81,928 $ 189,911 $ ( 104,528 ) $ 85,383
Other intangibles
62,320 ( 35,425 ) 26,895 61,161 ( 32,792 ) 28,369
Total finite-lived intangible assets
$ 257,251 $ ( 148,428 ) $ 108,823 $ 251,072 $ ( 137,320 ) $ 113,752
Amortization expense for finite-lived intangible assets was as follows:
Three Months Ended September 30,
Six Months Ended September 30,
2024
2023
2024
2023
Amortization in cost of revenues
$ 672 $ 1,756 $ 1,319 $ 3,484
Amortization in general and administrative
3,878 5,429 7,292 10,921
Total amortization expense
$ 4,550 $ 7,185 $ 8,611 $ 14,405
For the following fiscal years ending March 31, amortization expense is estimated as follows, based on foreign currency exchange rates as of September 30, 2024:
Fiscal Year
Amortization Expense
Remainder of 2025
$ 9,118
2026
17,586
2027
16,915
2028
16,301
2029
15,729
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The change in the carrying amount of goodwill was as follows:
Sterilization and Disinfection Control
Clinical Genomics
Biopharmaceutical Development
Calibration Solutions
Total
March 31, 2024
$ 79,430 $ 16,940 $ 46,515 $ 37,211 180,096
Effect of foreign currency translation
1,979 116 1,530 32 3,657
September 30, 2024
$ 81,409 $ 17,056 $ 48,045 $ 37,243 $ 183,753
Note 7 . Indebtedness
Credit Facility
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:
(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.
In conjunction with the amendment and restatement of the Credit Facility during the six months ended September 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 September 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 to our business as defined in the contract, engage in certain transactions with affiliates, or conduct asset sales. As of September 30, 2024 , we were in compliance with all covenants under the Credit Facility.
Term Loan
We borrowed $ 75,000 under the Term Loan on April 5, 2024, to fund the privately negotiated repurchases of a portion of the Notes (see “Convertible Notes” below). During the three and six months ended September 30, 2024 , we made required quarterly principal payments on the Term Loan of $ 937 and $ 1,875 , respectively.
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:
Fiscal Year
Amount
Remainder of 2025
$ 1,875
2026
3,750
2027
5,625
2028
5,625
2029
7,500
Thereafter
48,750
Total Principal Remaining
$ 73,125
The net carrying amount of the Term Loan was as follows:
September 30, 2024
March 31, 2024
Term Loan ( 8.4 % as of September 30, 2024)
$ 73,125 $ -
Less: discount and debt issuance costs
( 672 ) -
Less: current portion
( 3,750 ) -
Noncurrent portion
$ 68,703 $ -
The effective interest rate on the Term Loan at the time of borrowing was 8.13 %.
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Revolver
As of September 30, 2024 , the outstanding balance under the Revolver was $ 35,500 and $ 89,500 was available for borrowing. Subsequent to September 30, 2024 , we repaid an additional $ 4,500 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 related to the Revolver, including fees from the original debt issuance and all subsequent amendments and restatements, was $ 1,353 and $ 321 as of September 30, 2024 and March 31, 2024, respectively.
Convert ible Notes
On August 12, 2019, we issued an aggregate principal amount of $ 172,500 of Notes. The net proceeds from the Notes, after deducting underwriting discounts and commissions and other related offering expenses payable by us, were approximately $ 167,056 . The Notes mature on August 15, 2025, unless earlier repurchased or converted, and bear interest at a rate of 1.375 % payable semi-annually in arrears on February 15 and August 15 each year. 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 Condensed Consolidated Statements of Operations during the six months ended September 30, 2024. As of September 30, 2024 , $ 97,500 in aggregate principal amount of the Notes remained outstanding, which we intend to pay using a combination of cash on hand and a draw on our Revolver.
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 or six months ended September 30, 2024 . The Notes will become convertible 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. As of September 30, 2024 , the Notes were classified as a current liability on our Condensed Consolidated Balance Sheets. The if-converted value of the Notes did not exceed the principal balance as of September 30, 2024 .
The net carrying amount of the Notes was as follows:
September 30, 2024
March 31, 2024
Principal outstanding
$ 97,500 $ 172,500
Unamortized debt issuance costs
( 471 ) ( 1,302 )
Net carrying value
$ 97,029 $ 171,198
We recognized interest expense on the Notes as follows:
Three Months Ended September 30,
Six Months Ended September 30,
2024
2023
2024
2023
Coupon interest expense at 1.375%
$ 335 $ 593 $ 702 $ 1,186
Amortization of debt issuance costs
133 231 278 461
Total interest and amortization of debt issuance costs
$ 468 $ 824 $ 980 $ 1,647
The effective interest rate on the Notes is approximately 1.9 %.
Note 8. Stockholders' Equity
Stock-Based Compensation
During the six months ended September 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. Stock-based compensation expense is included in cost of revenues, selling, general and administrative, and research and development expense in the accompanying unaudited Condensed Consolidated Statements of Operations.
The following is a summary of RSU and PSU award activity for the six months ended September 30, 2024 :
Time-Based Restricted Stock Units
Performance-Based Restricted Stock Units
Number of Shares
Weighted- Average Grant Date Fair Value per Share
Number of Shares
Weighted- Average Grant Date Fair Value per Share
Outstanding as of March 31, 2024
76 $ 157.83 56 $ 240.96
Awards granted (1)
111 93.05 41 102.57
Awards forfeited
( 4 ) 137.89 -
-
Awards distributed
( 34 ) 165.50 - -
Outstanding as of September 30, 2024
149 $ 108.40 97 $ 181.85
( 1 )
Balances for PSUs granted are reflected at target.
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Outstanding time-based RSUs vest and settle in shares of our common stock on a one -for- one basis. The majority of RSUs granted to employees during the six months ended September 30, 2024 vest in equal installments on the first, second, and third anniversaries of the grant date. RSUs granted to non-employee directors during the six months ended September 30, 2024 vest one year from 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. The number of shares earned is determined at the end of each performance period based on Mesa's achievement of certain pre-defined targets per the related award agreement. The outstanding PSUs vest upon completion of the service period described in the award agreement. We recognize the expense relating to the performance-based RSUs based on the probable outcome of achievement of the performance targets on a straight-line basis over the service period.
During the six months ended September 30, 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.
The following is a summary of stock option award activity for the six months ended September 30, 2024 :
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, 2024
194 $ 181.89 3.2 $ 26
Awards granted
- -
Awards forfeited or expired
( 14 ) 147.90
Awards exercised
- -
Outstanding as of September 30, 2024
180 $ 184.42 2.9 $ 229
Note 9 . 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 September 30,
Six Months Ended September 30,
2024
2023
2024
2023
Net income (loss) available for shareholders
$ 3,428 $ ( 1,230 ) $ 6,816 $ ( 1,779 )
Weighted average outstanding shares of common stock
5,413 5,387 5,405 5,379
Dilutive effect of RSUs
58 - 43 -
Fully diluted shares
5,471 5,387 5,448 5,379
Basic earnings (loss) per share
$ 0.63 $ ( 0.23 ) $ 1.26 $ ( 0.33 )
Diluted earnings (loss) per share
$ 0.63 $ ( 0.23 ) $ 1.25 $ ( 0.33 )
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.
The following stock awards were excluded from the calculation of diluted EPS:
Three Months Ended September 30,
Six Months Ended September 30,
2024
2023
2024
2023
Assumed conversion of the Notes
344 608 358 608
Stock awards that were anti-dilutive
218 282 213 255
Total stock awards excluded from diluted EPS
562 890 571 863
Shares underlying the Notes were excluded from the diluted EPS calculation for the three and six months ended September 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 during the six months ended September 30, 2024 (see Note 7. "Indebtedness").
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Note 10 . Income Taxes
We reported an income tax provision as follows:
Three Months Ended September 30,
Six Months Ended September 30,
2024
2023
2024
2023
Income tax expense (benefit)
$ 384 $ ( 95 ) $ 901 $ ( 483 )
Effective tax rate 10.1 % 7.2 % 11.7 % 21.4 %
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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. Each quarter, our estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. Additionally, the tax effects of significant unusual or infrequently occurring items are recognized as discrete items in the interim period in which the events occur. 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.
The change in the effective tax rate for both the three and six months ended September 30, 2024 compared to the prior year periods is primary due to the valuation allowance established on the US deferred taxes during fiscal year 2024. The effective tax rate for both the three and the six months ended September 30, 2024 differed from the statutory federal rate of 21 % primarily due to the valuation allowance established on the US deferred taxes during fiscal year 2024.
Note 11 . Commitments and Contingencies
We are party to various legal proceedings arising in the ordinary course of business. As of September 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.
We expect to pay approximately $ 9,700 (at September 30, 2024 exchange rates) for the GKE holdback in April 2025, pending adjustments for potential indemnification losses that may arise. The liability is recorded at its discounted fair value of $ 9,400 in other accrued expenses on our unaudited Condensed Consolidated Balance Sheets as of September 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 September 30, 2024 .
Note 12 . S egment Information
The following tables set forth our segment information:
Three Months Ended September 30,
Six Months Ended September 30,
2024
2023
2024
2023
Revenues (a):
Sterilization and Disinfection Control (b)
$ 22,205 $ 17,080 $ 45,162 $ 33,007
Clinical Genomics
11,499 15,549 22,903 28,918
Biopharmaceutical Development
11,867 9,207 23,875 19,096
Calibration Solutions
12,262 11,329 24,063 22,789
Total revenues
$ 57,833 $ 53,165 $ 116,003 $ 103,810
Gross profit:
Sterilization and Disinfection Control (b)
$ 15,172 $ 12,476 $ 30,730 $ 24,067
Clinical Genomics
5,906 7,727 12,396 14,455
Biopharmaceutical Development
7,167 5,509 15,126 11,942
Calibration Solutions
7,210 6,407 14,452 12,838
Reportable segment gross profit
35,455 32,119 72,704 63,302
Corporate and other (c)
- ( 10 ) - ( 10 )
Gross profit
$ 35,455 $ 32,109 $ 72,704 $ 63,292
Reconciling items:
Operating expense
31,947 32,169 63,616 64,016
Operating income (loss)
3,508 ( 60 ) 9,088 ( 724 )
Nonoperating expense, net
( 304 ) 1,265 1,371 1,538
Earnings (loss) before income taxes
$ 3,812 $ ( 1,325 ) $ 7,717 $ ( 2,262 )
(a)
Intersegment revenues are not significant and are eliminated to arrive at consolidated totals.
(b)
Includes post-acquisition GKE results during the three and six months ended September 30, 2024 .
(c) Unallocated corporate expenses are reported within corporate and other.
The following table sets forth inventories by reportable segment. Our chief operating decision maker is not provided with and does not regularly review any other segment asset information.
September 30,
March 31,
2024
2024
Sterilization and Disinfection Control
$ 5,920 $ 7,014
Clinical Genomics
11,459 11,813
Biopharmaceutical Development
6,001 6,304
Calibration Solutions
6,358 7,544
Total inventories
$ 29,738 $ 32,675
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.