Item 1. Financial Statements
Item 1 . Financial Statements
M esa Laboratories, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands, except share amounts)
December 31,
March 31,
2024
2024
ASSETS
Current assets:
Cash and cash equivalents
$ 30,956 $ 28,214
Accounts receivable, less allowance for credit losses of $ 1,060 and $ 1,321 , respectively
38,647 39,055
Inventories
28,122 32,675
Prepaid expenses and other current assets
13,120 9,408
Total current assets
110,845 109,352
Noncurrent assets:
Property, plant and equipment, net of accumulated depreciation of $ 26,036 and $ 22,519 respectively
31,602 31,766
Deferred tax asset
1,242 1,292
Other assets
18,126 10,538
Customer relationships, net
73,797 85,383
Other intangibles, net
24,384 28,369
Goodwill
177,152 180,096
Total assets
$ 437,148 $ 446,796
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$ 4,087 $ 6,041
Accrued payroll and benefits
13,919 9,935
Unearned revenues
14,608 15,478
Other accrued expenses
22,351 12,858
Term loan, current portion
3,750 -
Convertible senior notes, current portion, net of debt issuance costs
97,163 -
Total current liabilities
155,878 44,312
Noncurrent liabilities:
Deferred tax liability
$ 18,800 19,780
Other noncurrent liabilities
12,453 15,613
Revolving line of credit
27,000 50,500
Term loan, noncurrent portion, net of discounts and debt issuance costs
67,803 -
Convertible senior notes, noncurrent portion, net of debt issuance costs
- 171,198
Total liabilities
281,934 301,403
Stockholders’ equity:
Common stock, no par value; authorized 25,000,000 shares; issued and outstanding, 5,433,603 and 5,394,491 shares, respectively
352,788 343,642
(Accumulated deficit)
( 180,952 ) ( 183,494 )
Accumulated other comprehensive (loss)
( 16,622 ) ( 14,755 )
Total stockholders’ equity
155,214 145,393
Total liabilities and stockholders’ equity
$ 437,148 $ 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 December 31,
Nine Months Ended December 31,
2024
2023
2024
2023
Revenues
$
62,840
$
53,473
$
178,843
$
157,283
Cost of revenues
23,086
20,071
66,385
60,589
Gross profit
39,754
33,402
112,458
96,694
Operating expense:
Selling
10,450
9,737
30,415
28,363
General and administrative
18,472
19,438
52,754
55,024
Research and development
5,053
4,294
14,422
14,098
Total operating expense
33,975
33,469
97,591
97,485
Operating income (loss)
5,779
( 67
)
14,867
( 791
)
Non-operating expense:
Interest expense and amortization of debt issuance costs
2,842
1,856
9,340
3,809
(Gain) on extinguishment of convertible senior notes
-
-
( 2,887
)
-
Other expense (income), net
5,154
( 3,869
)
2,914
( 4,284
)
Total non-operating expense (income), net
7,996
( 2,013
)
9,367
( 475
)
(Loss) earnings before income taxes
( 2,217
)
1,946
5,500
( 316
)
Income tax (benefit) expense
( 541
)
( 170
)
360
( 653
)
Net (loss) income
$
( 1,676
)
$
2,116
$
5,140
$
337
(Loss) earnings per share:
Basic
$
( 0.31
)
$
0.39
$
0.95
$
0.06
Diluted
$
( 0.31
)
$
0.39
$
0.94
$
0.06
Weighted-average common shares outstanding:
Basic
5,429
5,393
5,413
5,384
Diluted
5,429
5,396
5,464
5,394
See accompanying notes to Condensed Consolidated Financial Statements.
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Mesa Laboratories, Inc.
Condensed Consolidated Statements of Comprehensive (Loss) Income
(unaudited)
(in thousands)
Three Months Ended December 31,
Nine Months Ended December 31,
2024
2023
2024
2023
Net (loss) income
$
( 1,676
)
$
2,116
$
5,140
$
337
Other comprehensive (loss) income:
Foreign currency translation adjustments
( 6,951
)
10,965
( 1,867
)
2,951
Comprehensive (loss) income
$
( 8,627
)
$
13,081
$
3,273
$
3,288
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
Vesting of restricted stock units and exercise of stock options
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
Vesting of restricted stock units and exercise of stock options
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
Vesting of restricted stock units and exercise of stock options
13,780 23 - - 23
Tax withholding on vesting of restricted stock units
( 32 ) ( 3 ) - - ( 3 )
Dividends paid, $ 0.16 per share
- - ( 869 ) - ( 869 )
Stock-based compensation expense
- 3,239 - - 3,239
Foreign currency translation
- - - ( 6,951 ) ( 6,951 )
Net (loss)
- - ( 1,676 ) - ( 1,676 )
December 31, 2024
5,433,603 $ 352,788 $ ( 180,952 ) $ ( 16,622 ) $ 155,214
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
Vesting of restricted stock units and exercise of stock options
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
Vesting of restricted stock units and exercise of stock options
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
Vesting of restricted stock units and exercise of stock options
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
Net income
- - 2,116 - 2,116
December 31, 2023
5,394,043 $ 340,852 $ 71,953 $ ( 9,844 ) $ 402,961
*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)
Nine Months Ended December 31,
2024
2023
Cash flows from operating activities:
Net income
$
5,140
$
337
Adjustments to reconcile net income to net cash from operating activities:
Depreciation of property, plant and equipment
4,028
2,899
Amortization of acquisition-related intangibles
13,002
22,380
Stock-based compensation expense
10,004
9,144
Gain on extinguishment of convertible notes
( 2,887
)
-
Amortization of step-up in inventory basis
1,232
-
Foreign currency adjustments
2,492
( 3,128
)
Other
3,914
2,206
Cash from changes in operating assets and liabilities:
Accounts receivable, net
91
8,294
Inventories
( 539
)
217
Prepaid expenses and other assets
( 1,445
)
( 7,841
)
Accounts payable
( 1,919
)
( 1,656
)
Accrued liabilities and taxes payable
1,879
( 124
)
Unearned revenues
( 849
)
( 1,478
)
Net cash provided by operating activities
34,143
31,250
Cash flows from investing activities:
Acquisitions, net of cash acquired
-
( 79,700
)
Purchases of property, plant and equipment
( 3,492
)
( 2,032
)
Net cash (used in) investing activities
( 3,492
)
( 81,732
)
Cash flows from financing activities:
Proceeds from the issuance of debt, net
73,465
71,000
Repayment of debt
( 26,313
)
( 22,000
)
Repurchase of convertible debt
( 71,560
)
-
Dividends paid
( 2,598
)
( 2,583
)
Other financing, net
( 1,310
)
( 648
)
Net cash (used in) provided by financing activities
( 28,316
)
45,769
Effect of exchange rate changes on cash and cash equivalents
407
27
Net increase (decrease) in cash and cash equivalents
2,742
( 4,686
)
Cash and cash equivalents at beginning of period
28,214
32,910
Cash and cash equivalents at end of period
$
30,956
$
28,224
Supplemental non-cash activity:
Right of use assets obtained in exchange for lease liabilities
$
9,596
$
4,220
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 December 31, 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.
Prior Period Reclassifications
For the nine months ended December 31, 2024, certain prior period amounts in our unaudited Condensed Consolidated Statements of Operations related to cash interest payments on acquisition holdback liabilities and non-cash debt issuance cost amortization have been reclassified out of "Other expense (income), net" and into "Interest expense and amortization of debt issuance costs." Additionally, prior period third -party costs related to the repurchase of a portion of our convertible senior notes have been reclassified out of "Other expense (income), net" and are reflected within the "(Gain) on extinguishment of convertible senior notes." These reclassifications have not resulted in any change to "Non-operating expense (income), net" nor in any material change to other amounts presented in our unaudited condensed consolidated financial statements for the three and nine months ended December 31, 2024.
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, and other factors. Changes in, and the resulting effects of, potential governmental stimulus or fiscal and monetary policies, interest rates, foreign currency values, supply chains, demand for goods and services, a global or regional recession, or other circumstances cannot be reliably predicted. Actual results could differ from our estimates.
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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. Other than presentation changes to our segment footnote, we do not expect the adoption of ASU No. 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 and prospective or retrospective application permitted. Other than presentation of additional disaggregated data in our income tax footnote disclosures for annual periods, we do not expect the adoption of ASU No. 2023 - 09 to have a material impact on our consolidated financial statement.
In November 2024, the Financial Accounting Board ("FASB" issued Accounting Standards Update ("ASU") No. 2024 - 03, "Expense Disaggregation Disclosures (Subtopic 220 - 40 ): Disaggregation of Income Statement Expenses." ASU No. 2024 - 03 requires that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. The ASU is effective for fiscal years beginning after December 15, 2026 ( our fiscal year 2028 for annual periods) and interim periods within fiscal years beginning after December 15, 2027 ( our fiscal year 2029 for interim periods), with early adoption and prospective or retrospective application permitted. 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.
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 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 biological indicators as chemical and biological 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 $ 9,000 (at December 31, 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 nine months ended December 31, 2024 , GKE's operations contributed the following amounts to our consolidated results of operations:
Three Months Ended
Nine Months Ended
December 31, 2024
Revenues
$ 6,854 $ 18,971
Gross profit
4,904 12,457
Amortization of inventory step-up recorded in cost of revenues
- 1,232
Amortization of acquired intangibles recorded in cost of revenues
131 375
Amortization of acquired intangibles recorded in general and administrative expense
935 2,423
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 single-use products 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.
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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. Services 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 of time, 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.
Table of Contents
The following tables present disaggregated revenues for the three and nine months ended December 31, 2024 and 2023 , respectively:
Three Months Ended December 31, 2024
Sterilization and Disinfection Control (1)
Clinical Genomics
Biopharmaceutical Development
Calibration Solutions
Total
Consumables
$ 20,991 $ 9,866 $ 4,909 $ 1,043 $ 36,809
Hardware and software
52 1,877 4,534 9,333 15,796
Services
2,464 924 2,794 4,053 10,235
Total revenues
$ 23,507 $ 12,667 $ 12,237 $ 14,429 $ 62,840
( 1 ) Revenues of $ 6,854 from GKE are included in the Sterilization and Disinfection Control division during the three months ended December 31, 2024 .
Three Months Ended December 31, 2023
Sterilization and Disinfection Control (1)
Clinical Genomics
Biopharmaceutical Development
Calibration Solutions
Total
Consumables
$ 16,832 $ 9,758 $ 4,080 $ 539 $ 31,209
Hardware and software
180 1,639 2,672 8,254 12,745
Services
2,326 1,149 2,678 3,366 9,519
Total revenues
$ 19,338 $ 12,546 $ 9,430 $ 12,159 $ 53,473
( 1 ) Revenues of $ 3,837 from GKE are included in the Sterilization and Disinfection Control division during the three months ended December 31, 2023, following the acquisition of GKE GmbH and SAL GmbH on October 16, 2023.
Nine Months Ended December 31, 2024
Sterilization and Disinfection Control (1)
Clinical Genomics
Biopharmaceutical Development
Calibration Solutions
Total
Consumables
$ 60,860 $ 26,156 $ 12,657 $ 2,067 $ 101,740
Hardware and software
365 6,511 14,539 24,067 45,482
Services
7,444 2,903 8,916 12,358 31,621
Total revenues
$ 68,669 $ 35,570 $ 36,112 $ 38,492 $ 178,843
( 1 ) Revenues of $ 18,971 from GKE are included in the Sterilization and Disinfection Control division during the nine months ended December 31, 2024 .
Nine Months Ended December 31, 2023
Sterilization and Disinfection Control (1)
Clinical Genomics
Biopharmaceutical Development
Calibration Solutions
Total
Consumables
$ 45,288 $ 28,490 $ 12,753 $ 1,834 $ 88,365
Hardware and software
381 9,540 7,838 22,216 39,975
Services
6,676 3,434 7,935 10,898 28,943
Total revenues
$ 52,345 $ 41,464 $ 28,526 $ 34,948 $ 157,283
( 1 ) Revenues of $ 3,837 from GKE are included in the Sterilization and Disinfection Control division during the nine months ended December 31, 2023, following the acquisition of GKE GmbH and SAL GmbH on October 16, 2023.
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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,
2024
2023
2024
2023
United States
$ 30,476 $ 25,595 $ 85,415 $ 79,205
China
6,322 4,942 20,271 18,584
Other
26,042 22,936 73,157 59,494
Total revenues
$ 62,840 $ 53,473 $ 178,843 $ 157,283
Other than China, no foreign country exceeded 10% of total revenues for the three and nine months ended December 31, 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 nine months ended December 31, 2024
( 9,069 )
Contract liabilities added during the nine months ended December 31, 2024, net of revenues recognized
8,083
Contract liabilities as of December 31, 2024
$ 14,700
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 December 31, 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 December 31, 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:
December 31, 2024
March 31, 2024
Carrying Value
Fair Value (Level 2)
Carrying Value
Fair Value (Level 2)
Notes
$ 97,163 $ 94,819 $ 171,198 $ 163,013
The carrying amounts of our term loan and revolving line of credit (together, the "Credit Facility") on the unaudited Condensed Consolidated Balance Sheets approximate 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 $ 9,000 (at December 31, 2024 exchange rates) for the GKE holdback in April 2025. We estimate the discounted fair value of consideration held back to be approximately $ 8,900 as of December 31, 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”). We are obligated to pay contingent consideration of up to $ 1,500 cash upon regulatory approval of certain patent applications. We estimate the fair value of the remaining contingent consideration is $ 675 , 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 nine months ended December 31, 2024 or 2023 .
There were no transfers between the levels of the fair value hierarchy during the three and nine months ended December 31, 2024 .
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Note 5. Supplemental Information
Inventories consisted of the following:
December 31, 2024
March 31, 2024
Raw materials
$ 16,584 $ 18,335
Work in process
400 1,256
Finished goods
11,138 13,084
Total inventories
$ 28,122 $ 32,675
Prepaid expenses and other current assets consisted of the following:
December 31, 2024
March 31, 2024
Prepaid expenses
$ 3,251 $ 2,932
Deposits
1,338 1,898
Prepaid income taxes
5,682 1,237
Other current assets
2,849 3,341
Total prepaid expenses and other current assets
$ 13,120 $ 9,408
Accrued payroll and benefits consisted of the following:
December 31, 2024
March 31, 2024
Bonus payable
$ 7,803 $ 3,838
Wages and paid-time-off payable
3,600 3,072
Payroll related taxes
1,954 1,956
Other benefits payable
562 1,069
Total accrued payroll and benefits
$ 13,919 $ 9,935
The increase in bonus payable is primarily due to our financial performance in fiscal year 2025 compared to fiscal year 2024.
Other accrued expenses consisted of the following:
December 31, 2024
March 31, 2024
Accrued business taxes
$ 5,505 $ 5,557
Current operating lease liabilities
3,535 2,986
Income taxes payable
1,364 1,615
Current acquisition-related holdbacks
9,531 436
Other
2,416 2,264
Total other accrued expenses
$ 22,351 $ 12,858
The increase in other accrued expenses is primarily due to the reclassification of held back Belyntic and GKE acquisition-related consideration from noncurrent liabilities.
Other noncurrent liabilities consisted of the following:
December 31, 2024
March 31, 2024
Noncurrent operating lease liabilities
$ 12,361 $ 6,613
Noncurrent acquisition-related holdbacks
- 8,792
Other
92 208
Total other noncurrent liabilities
$ 12,453 $ 15,613
The increase in operating lease liabilities is primarily attributable to the right of use asset associated with an operating lease for a facility used by our Biopharmaceutical Development for manufacturing and administrative purposes.
Three Months Ended December 31,
Nine Months Ended December 31,
2024
2023
2024
2023
Depreciation expense in cost of revenues
$ 610 $ 788 $ 2,376 $ 2,117
Depreciation expense in operating expense
496 286 1,652 782
Total depreciation expense
$ 1,106 $ 1,074 $ 4,028 $ 2,899
The increase in depreciation expense for the three and nine months ended December 31, 2024 is primarily due to GKE's operations, which included $ 225 and $ 850 of depreciation expense, respectively.
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Note 6. Goodwill and Intangible Assets, Net
Finite-lived intangible assets consisted of the following:
December 31, 2024
March 31, 2024
Gross Carrying Amount
Accumulated Amortization
Net Carrying Amount
Gross Carrying Amount
Accumulated Amortization
Net Carrying Amount
Customer relationships
$ 186,272 $ ( 112,475 ) $ 73,797 $ 189,911 $ ( 104,528 ) $ 85,383
Other intangibles
60,356 ( 35,972 ) 24,384 61,161 ( 32,792 ) 28,369
Total finite-lived intangible assets
$ 246,628 $ ( 148,447 ) $ 98,181 $ 251,072 $ ( 137,320 ) $ 113,752
Amortization expense for finite-lived intangible assets was as follows:
Three Months Ended December 31,
Nine Months Ended December 31,
2024
2023
2024
2023
Amortization in cost of revenues
$ 660 $ 1,883 $ 1,979 $ 5,367
Amortization in general and administrative
3,731 6,092 11,023 17,013
Total amortization expense
$ 4,391 $ 7,975 $ 13,002 $ 22,380
The decrease in amortization expense is attributable to impairment losses recorded during the fourth quarter of fiscal year 2024 related to intangible assets within our Clinical Genomics division.
For the following fiscal years ending March 31, future amortization expense is estimated as follows, based on foreign currency exchange rates as of December 31, 2024:
Fiscal Year
Amortization Expense
Remainder of 2025
$ 4,278
2026
16,566
2027
15,921
2028
15,349
2029
14,815
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
( 1,994 ) ( 71 ) ( 849 ) ( 30 ) ( 2,944 )
December 31, 2024
$ 77,436 $ 16,869 $ 45,666 $ 37,181 $ 177,152
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.
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In conjunction with the amendment and restatement of the Credit Facility during the nine months ended December 31, 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 weighted average interest rate on borrowings under the Credit Facility as of December 31, 2024 was 7.5 %.
The financial covenants in the Credit Facility as amended include a maximum leverage ratio of 4.50 to 1.00 on each of the quarterly testing dates through December 31, 2024; 4.0 to 1.0 on each of the testing dates between March 31, 2025 and March 31, 2026; and 3.5 to 1.0 on each testing date thereafter. 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 December 31, 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 nine months ended December 31, 2024 , we made required quarterly principal payments on the Term Loan of $ 938 and $ 2,813 , respectively.
We are required to make quarterly principal payments on the Term Loan. For the following fiscal years ending March 31, future debt payments on the Term Loan are required as follows:
Fiscal Year
Amount
Remainder of 2025
$ 937
2026
3,750
2027
5,625
2028
5,625
2029
7,500
Thereafter
48,750
Total Principal Remaining
$ 72,187
The net carrying amount of the Term Loan was as follows:
December 31, 2024
March 31, 2024
Term Loan ( 7.5 % as of December 31, 2024)
$ 72,187 $ -
Less: discount and debt issuance costs
( 634 ) -
Less: current portion
( 3,750 ) -
Noncurrent portion
$ 67,803 $ -
Revolver
As of December 31, 2024 , the outstanding balance under the Revolver was $ 27,000 , and $ 98,000 was available for borrowing. Subsequent to December 31, 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 $ 1,278 and $ 321 as of December 31, 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 $ 2,887 in other income on the unaudited Condensed Consolidated Statements of Operations during the nine months ended December 31, 2024. As of December 31, 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 nine months ended December 31, 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 December 31, 2024 , the Notes were classified as a current liability on our unaudited Condensed Consolidated Balance Sheets. The if-converted value of the Notes did not exceed the principal balance as of December 31, 2024 .
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The net carrying amount of the Notes was as follows:
December 31, 2024
March 31, 2024
Principal outstanding
$ 97,500 $ 172,500
Unamortized debt issuance costs
( 337 ) ( 1,302 )
Net carrying value
$ 97,163 $ 171,198
We recognized interest expense on the Notes as follows:
Three Months Ended December 31,
Nine Months Ended December 31,
2024
2023
2024
2023
Coupon interest expense at 1.375%
$ 335 $ 593 $ 1,037 $ 1,779
Amortization of debt issuance costs
134 231 412 692
Total interest and amortization of debt issuance costs
$ 469 $ 824 $ 1,449 $ 2,471
The effective interest rate on the Notes is approximately 1.9 %.
Note 8. Stockholders' Equity
Stock-Based Compensation
During the nine months ended December 31, 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 nine months ended December 31, 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)
117 93.46 41 102.57
Awards forfeited
( 7 ) 123.42 -
-
Awards distributed
( 36 ) 169.40 ( 12 ) 302.06
Outstanding as of December 31, 2024
150 $ 106.44 85 $ 165.75
( 1 )
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 RSUs granted to employees during the nine months ended December 31, 2024 vest in equal installments on the first, second, and third anniversaries of the grant date. RSUs granted to non-employee directors during the nine months ended December 31, 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 nine months ended December 31, 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.
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The following is a summary of stock option award activity for the nine months ended December 31, 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
( 15 ) 150.98
Awards exercised
( 1 ) 131.67
Outstanding as of December 31, 2024
178 $ 184.55 2.6 $ 287
Note 9 . (Loss) Earnings Per Share
The following table presents a reconciliation of the denominators used in the computation of basic and diluted (loss) earnings per share:
Three Months Ended December 31,
Nine Months Ended December 31,
2024
2023
2024
2023
Net (loss) income available for shareholders
$ ( 1,676 ) $ 2,116 $ 5,140 $ 337
Weighted average outstanding shares of common stock
5,429 5,393 5,413 5,384
Dilutive effect of stock options
- - - 1
Dilutive effect of RSUs
- 3 51 9
Fully diluted shares
5,429 5,396 5,464 5,394
Basic (loss) earnings per share
$ ( 0.31 ) $ 0.39 $ 0.95 $ 0.06
Diluted (loss) earnings per share
$ ( 0.31 ) $ 0.39 $ 0.94 $ 0.06
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 potentially dilutive awards were excluded from the calculation of diluted EPS:
Three Months Ended December 31,
Nine Months Ended December 31,
2024
2023
2024
2023
Assumed conversion of the Notes
344 608 354 608
Stock awards that were anti-dilutive
406 277 202 223
Total stock awards excluded from diluted EPS
750 885 556 831
Shares underlying the Notes were excluded from the diluted EPS calculation for the three and nine months ended December 31, 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 nine months ended December 31, 2024 (see Note 7. "Indebtedness").
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Note 10 . Income Taxes
We reported an income tax provision as follows:
Three Months Ended December 31,
Nine Months Ended December 31,
2024
2023
2024
2023
Income tax (benefit) expense
$ ( 541 ) $ ( 170 ) $ 360 $ ( 653 )
Effective tax rate 24.4 % ( 8.7 %) 6.5 % 206.6 %
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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 nine months ended December 31, 2024 compared to the prior year periods is primarily 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 nine months ended December 31, 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 December 31, 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 $ 9,000 (at December 31, 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 $ 8,900 in other accrued expenses in our unaudited Condensed Consolidated Balance Sheets as of December 31, 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 $ 675 as of December 31, 2024 . On January 2, 2025, a notice of allowance was issued for one of the two remaining pending patents, and we expect to pay the Belyntic sellers $ 563 for the patent within fiscal year 2025 or early in fiscal year 2026, depending upon the final approval date. We expect the other remaining pending patent will likely be approved within one year of December 31, 2024.
Note 12 . S egment Information
The following tables set forth our segment information:
Three Months Ended December 31,
Nine Months Ended December 31,
2024
2023
2024
2023
Revenues (a):
Sterilization and Disinfection Control (b)
$ 23,507 $ 19,338 $ 68,669 $ 52,345
Clinical Genomics
12,667 12,546 35,570 41,464
Biopharmaceutical Development
12,237 9,430 36,112 28,526
Calibration Solutions
14,429 12,159 38,492 34,948
Total revenues
$ 62,840 $ 53,473 $ 178,843 $ 157,283
Gross profit:
Sterilization and Disinfection Control (b)
$ 16,461 $ 13,951 $ 47,191 $ 38,018
Clinical Genomics
6,948 6,449 19,344 20,904
Biopharmaceutical Development
7,539 5,841 22,665 17,783
Calibration Solutions
8,806 7,212 23,258 20,050
Reportable segment gross profit
39,754 33,453 112,458 96,755
Corporate and other (c)
- ( 51 ) - ( 61 )
Gross profit
$ 39,754 $ 33,402 $ 112,458 $ 96,694
Reconciling items:
Operating expense
33,975 33,469 97,591 97,485
Operating income (loss)
5,779 ( 67 ) 14,867 ( 791 )
Non-operating expense (income), net
7,996 ( 2,013 ) 9,367 ( 475 )
(Loss) earnings before income taxes
$ ( 2,217 ) $ 1,946 $ 5,500 $ ( 316 )
(a)
Intersegment revenues are not significant and are eliminated to arrive at consolidated totals.
(b)
Includes post-acquisition GKE results during the three and nine months ended December 31, 2024 and 2023 beginning on October 16, 2023 for GKE GmbH and SAL GmbH, and beginning on January 1, 2024 for GKE China.
(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.
December 31,
March 31,
2024
2024
Sterilization and Disinfection Control
$ 5,728 $ 7,014
Clinical Genomics
10,709 11,813
Biopharmaceutical Development
5,853 6,304
Calibration Solutions
5,832 7,544
Total Inventories
$ 28,122 $ 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.