Mesa Laboratories MLAB Form 10-Q filing Q1 FY2027

Overview

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 the Asia Pacific region, and by independent distributors throughout the world.

As of June 30, 2026, we managed our operations in four reportable segments, or divisions: Sterilization and Disinfection Control, Biopharmaceutical Development ("BPD"), Calibration Solutions, and Clinical Genomics. Each of our divisions is described further in "Results of Operations" below.

Corporate Strategy

We strive to create stakeholder value and further our purpose of Protecting the Vulnerable® by growing our business both organically and through acquisitions, by improving our operating efficiency, and by continuing to hire, develop and retain top talent. We commit to our purpose every day by taking a customer-focused approach to developing, building and delivering our products and services. We serve a broad set of industries, particularly the pharmaceutical, healthcare and medical device sectors, in which the safety, quality and efficacy of products is critical. By delivering the highest quality products possible, we are committed to protecting the communities we serve.

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Our continued growth will depend on our ability to (i) expand business with new and existing customers through ongoing commercial efforts, including in new geographic areas, (ii) manage our costs and allocate resources to ensure continued profitability, (iii) identify, consummate and integrate acquisitions successfully, and (iv) develop or acquire differentiated products and services. We strive to maintain our profitability by improving the effectiveness of our sales force, by continuing to pursue cost reduction initiatives, and by taking a long-term strategic approach to investments in our business that we believe will support future commercial success.

Organic Revenue Growth

Organic revenue growth is driven by expansion of our customer base, increases in sales volumes, new product offerings and price increases, and may be affected positively or negatively by the impact of changes in foreign currency exchange rates on our reported revenue. Our ability to increase organic revenue is affected by general domestic and global economic conditions, customer capital spending trends, currency exchange rates, competition, and the introduction of new products. Our policy is to price our products and services competitively and, where possible, we pass along cost increases to our customers in order to maintain our margins. We typically evaluate costs and pricing annually, with price increases effective January 1. We evaluate the need to increase prices at other times in response to significant facts and circumstances that may arise, such as increases in the price of inputs to our products, or in response to changes in government or regulatory policies, for example, due to the imposition of tariffs. We are actively pursuing opportunities to expand our customer base both domestically and internationally by fostering strong relationships with existing and new customers and distributors.

Inorganic Growth - Acquisitions

Over the past decade, we have consummated a number of acquisitions of businesses, technologies, and intangible assets such as customer lists as part of our growth strategy. Our acquisitions have allowed us to expand our product offerings and the industries we serve, globalize our company, and increase the scale at which we operate. In turn, this growth affords us the ability to improve our operating efficiency, extend our customer base, and further the pursuit of our purpose: Protecting the Vulnerable®.

Improving Our Operating Efficiency

Our ongoing goal is to maximize value in our businesses by implementing efficiencies in our manufacturing, commercial, engineering and administrative operations. We achieve efficiencies using a growth mindset. We continue to promote a culture that values learning, continuous improvement and accountability. We believe this culture strengthens our execution so that we can enhance customer outcomes and create long-term stakeholder value.

Our gross profit is affected by many factors, including the mix of products and services sold and the geographical regions in which we sell them, labor and product costs (including costs of transporting, importing and exporting goods, as well as associated tariffs), manufacturing efficiencies, foreign currency rates and price competition. Gross profit percentages differ among product lines, and ultimately our mix of revenue will impact our overall gross profit.

We continuously pursue opportunities to improve the efficiency of our administrative functions, including through increasing usage of process automation and artificial intelligence.

Hire, Develop, and Retain Top Talent

At the center of our organization are skilled people who are capable of taking on new challenges using a team-based approach. Indeed, it is our exceptional workforce that collaborates to continuously and sustainably improve our products, our services, and ourselves, resulting in long-term value creation for our stakeholders.

General Trends

Revenue increased 1.0% during the three months ended June 30, 2026 compared to the prior year period, driven by growth in the Calibration Solutions and Biopharmaceutical Development divisions, partially offset by lower revenue in the Sterilization and Disinfection Control division. Revenue in the Clinical Genomics division were essentially flat, as growth outside China offset continued weakness in that market. While revenue in China continued to decrease, the year-over-year reduction was significantly smaller than in the prior-year period following substantial revenue declines in recent fiscal years.

Gross profit as a percentage of revenue increased 2.9 percentage points compared with the prior year period. The improvement over the comparable prior year period was primarily driven by lower spend on third-party contracted labor and consultants, supply chain efficiency improvements, and favorable product mix, particularly in the Biopharmaceutical Development and Clinical Genomics divisions.

Operating expenses decreased 5.6% compared with the prior year period, primarily due to lower stock-based compensation expense. Excluding stock-based compensation expense, operating expenses decreased 1.5% compared with the prior year period and were consistent as a percentage of revenue.

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For the three months ended June 30, 2026, revenue grew 1.0% and operating income increased approximately $4.0 million reflecting operating efficiencies and cost-containment initiatives implemented during the second quarter of fiscal year 2026. We generated $14.7 million of operating cash flows in the three months ended June 30, 2026, which enabled us to reduce outstanding debt by $8.7 million.

Results of Operations

Our results of operations and period-over-period changes are discussed in the following section. The tables and discussion below should be read in conjunction with the accompanying unaudited Condensed Consolidated Financial Statements and the notes thereto appearing in Item 1. Financial Statements.

Results by reportable segment are as follows:

Our unaudited condensed consolidated results of operations are as follows:

Reportable Segments

Sterilization and Disinfection Control

Our Sterilization and Disinfection Control division manufactures and sells biological, chemical and cleaning indicators used to assess the effectiveness of sterilization, decontamination, disinfection and cleaning processes in the pharmaceutical, medical device and healthcare industries. The division also provides sterility assurance testing and laboratory services, primarily to dental and pharmaceutical customers. Sterilization and Disinfection Control products are disposable and are used on a routine basis.

Revenue for the Sterilization and Disinfection Control division decreased 3.6% for the three months ended June 30, 2026 compared with the prior year period. The decrease was primarily attributable to fulfillment and delivery execution challenges that impacted the timing of customer shipments during the three months ended June 30, 2026.

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Gross profit as a percentage of revenue decreased for the three months ended June 30, 2026 versus the prior year period, primarily as a result of lower revenue on a partially fixed cost base and product mix, partially offset by a decrease in professional services expenses, as we engaged outside expertise in the prior year to improve our production processes.

Biopharmaceutical Development

Our Biopharmaceutical Development division 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 biologic therapies, among other applications.

Revenue for the Biopharmaceutical Development division increased 5.0% for the three months ended June 30, 2026 compared with the prior year period, primarily driven by higher immunoassays hardware and consumables sales volumes, and to a lesser extent, price increases. Sales volumes in the prior year period were negatively impacted by order delays as customers deferred purchasing decisions amid rapidly evolving tariff conditions and macroeconomic uncertainty.

Gross profit as a percentage of revenue for the Biopharmaceutical Development division increased 8.0 percentage points for the three months ended June 30, 2026 versus the comparable prior year period. The increase was primarily due to favorable product mix, as higher-margin immunoassays revenue represented a greater proportion of the division's total revenue and lower margin instruments represented a smaller portion of total peptides systems revenue. Efficiencies in our supply chain management and higher revenue on a partially fixed cost base also contributed to the increase.

Calibration Solutions

The Calibration Solutions division 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 renal care, gas flow, and environmental and process monitoring.

Revenue for the Calibration Solutions division increased 7.6% for the three months ended June 30, 2026 versus the comparable prior year period, primarily due to increased sales volumes across several product lines and the impact of price increases.

Gross profit as a percentage of revenue increased 3.5 percentage points for the three months ended June 30, 2026 versus the comparable prior year period, primarily due to higher revenue on a partially fixed cost base partially offset by unfavorable product mix.

Clinical Genomics

The Clinical Genomics division develops, manufactures and sells highly sensitive high-throughput genetic analysis instruments, consumables and related services that enable clinical research labs and contract research organizations to perform genomic testing across a broad range of applications in several therapeutic areas, including hereditary disease screenings, pharmacogenetics, oncology related applications and toxicology research.

Revenue in the Clinical Genomics division were essentially flat, as modest growth outside China offset continued weakness in that market. While revenue in China continued to decrease, the year-over-year reduction was significantly smaller than in the prior-year period following substantial revenue declines in recent fiscal years.

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Clinical Genomics’ gross profit as a percentage of revenue increased 7.9 percentage points for the three months ended June 30, 2026 versus the prior year period. The increase in gross profit as a percentage of revenue was primarily attributable to price increases and manufacturing and supply chain efficiency improvements.

Operating Expense

Operating expense decreased 5.6% for the three months ended June 30, 2026 versus the comparable prior year period. Operating expense as a percentage of revenue decreased 3.7 percentage points for the three months ended June 30, 2026 versus the prior year period.

Selling Expense

Selling expense is driven primarily by labor costs, including salaries and commissions; accordingly, it may vary with sales levels.

Selling expense decreased 9.7% for the three months ended June 30, 2026 versus the prior year period, primarily due to lower personnel costs, and to a lesser extent, lower professional services as we continue to realize the benefits of previously announced cost-reduction initiatives.

General and Administrative Expense

Labor costs, amortization of intangible assets, and non-cash stock-based compensation drive the substantial majority of our general and administrative expense.

General and administrative expense decreased 3.2% for the three months ended June 30, 2026 compared with the prior year period, primarily as a result of lower stock-based compensation expense, as the prior year period included expense related to certain multi-year equity awards granted to our former CEO. The decrease was partially offset by higher personnel costs attributable to inflation and costs incurred to settle a litigation matter.

Research and Development Expense

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

Research and development expense decreased 5.2% for the three months ended June 30, 2026 compared to the prior year period, primarily due to lower personnel costs resulting from cost-saving initiatives implemented during the second quarter of the prior fiscal year.

Non-Operating Expense (Income), Net

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Interest expense increased for the three months ended June 30, 2026 compared to the prior year period, primarily reflecting the replacement of the Notes with borrowings under our Credit Facility, which carries a higher interest rate. The increase was partially offset by lower weighted‑average levels of outstanding interest‑bearing debt. We repaid the Notes using $97.0 million of borrowings under the Credit Facility’s Revolver in the second quarter of fiscal year 2026.

Other expense (income), net primarily consists of gains and losses on foreign currency transactions. During the prior year period, the U.S. dollar weakened significantly against the euro, resulting in unrealized foreign currency gains of approximately $6.1 million from an intercompany U.S. dollar-denominated loan issued in fiscal year 2024 to one of our wholly owned, euro-denominated subsidiaries.

Income Taxes

Our effective income tax rate was 35.0% and 32.4%, respectively, for the three months ended June 30, 2026 and 2025. The effective tax rate for the three months ended June 30, 2026 and 2025 differed from the statutory federal rate of 21% primarily due to the impact of the valuation allowance on U.S. deferred taxes.

Our future effective income tax rate depends on various factors, such as changes in the realizability of deferred tax assets, tax laws, regulations, accounting principles, or interpretations thereof, and the geographic composition of our pre-tax income. We carefully monitor these factors and adjust our effective income tax rate accordingly. We currently expect a reasonable possibility of a favorable impact on our effective tax rate within the next 12 months from a potential partial release of the U.S. valuation allowance, although the timing and amount remain subject to our ongoing assessment and other factors affecting the tax rate.

Net Income

Net income varies with changes in revenue, gross profit, operating expense, and currency exchange rate fluctuations. Net income included $4.4 million, $2.4 million and $1.3 million of non-cash amortization of intangible assets, stock-based compensation expense, and depreciation expense, respectively, for the three months ended June 30, 2026.

Liquidity and Capital Resources

Our sources of liquidity include cash generated from operations, cash on hand, and cash available from borrowings under our Credit Facility. We believe these sources of cash are sufficient to meet our ongoing operating needs, scheduled debt service obligations, dividend payments and anticipated capital expenditures. As of June 30, 2026 and March 31, 2026, we held $30.7 million and $26.9 million of cash, respectively.

Historically, our more significant uses of cash have included acquisitions, payments on debt principal and interest obligations, and quarterly dividends paid to shareholders.

Working capital, defined as the amount by which current assets exceed current liabilities, was $45.5 million as of June 30, 2026, compared to working capital of $44.4 million as of March 31, 2026.

The Revolver provides borrowing capacity of up to $125.0 million, of which $77.3 million was outstanding as of June 30, 2026. Subsequent to June 30, 2026, we repaid an additional $4.0 million of outstanding Revolver borrowings. Based on debt outstanding and interest rates in effect as of June 30, 2026, we expect to incur approximately $7.9 million of cash interest expense over the next twelve months. Required principal debt payments due on our Term Loan within the next twelve months total $5.6 million.

We believe that we have the ability to issue more equity or debt in the future in order to finance our investment activities; however, additional equity or debt financing, or other transactions, may not be available on acceptable terms, if at all.

Dividends

We have paid regular quarterly dividends since 2003. We paid dividends of $0.16 per share during the three months ended June 30, 2026 and 2025.

In July 2026, we announced that our Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock, payable on September 15, 2026, to shareholders of record at the close of business on August 31, 2026.

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Goodwill Impairment Testing

We perform qualitative analyses at least quarterly to identify potential indicators of impairment and to assess whether it is more likely than not that any of our five goodwill reporting units (Sterilization and Disinfection Control, Immunoassays (BPD), Peptides (BPD), Calibration Solutions, and Clinical Genomics) is impaired. As of June 30, 2026, we concluded that there were no indicators of impairment for any of our reporting units.

Cash Flows

Our cash flows from operating, investing and financing activities were as follows:

Cash flows from operating activities provided $14.7 million for the three months ended June 30, 2026, an increase of $12.8 million versus the prior year period. The increase was primarily driven by a $6.3 million increase in collections from customers across several of our businesses as well as improved operating performance, including a $4.0 million increase in operating income.

Cash used in investing activities decreased for the three months ended June 30, 2026 versus the prior year period as we invested in property, plant and equipment for our new leased facility in Sweden in the prior year. Cash used in financing activities resulted in a $10.5 million use of cash for the three months ended June 30, 2026, including:

• Repayment of net $7.3 million in principal under the Revolver
• Repayment of $1.4 million in principal under the Term Loan

Higher debt repayments compared to the prior year period were supported by increased cash generated from operations.

Recent Accounting Pronouncements

For a discussion of the new accounting standards impacting the Company, refer to Note 1. “Description of Business and Summary of Significant Accounting Policies” in Item 1. Financial Statements (Unaudited).

Contractual Obligations and Other Commercial Commitments

We are party to contractual obligations that involve commitments to remit payments to third parties in the ordinary course of business. On a consolidated basis, as of June 30, 2026, we had contractual obligations for open purchase orders of approximately $12.5 million for routine purchases of supplies and inventory, of which the substantial majority are payable in less than one year.

See "Liquidity and Capital Resources" for information related to future required debt and other payments. For a description of our contractual obligations and other commercial commitments as of March 31, 2026, see our Annual Report on Form 10-K for the fiscal year ended March 31, 2026.

Critical Accounting Estimates

Critical accounting estimates are those that we consider both significant to the preparation of our financial statements and that require complex, subjective, or highly judgmental assessments. These estimates often involve assumptions about inherently uncertain matters and are based on our historical experience, as well as other factors we believe to be appropriate under the circumstances. The accounting estimates that require significant management judgment and are deemed critical to our results of operations or financial position are discussed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2026 in “Critical Accounting Policies and Estimates” in Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. While we believe our estimates, assumptions and judgements are reasonable, actual results may differ materially from these estimates.

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I****tem 3. Quantitative and Qualitative Disclosures about Market Risk

For information regarding our exposure to certain market risks, see Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," of our Annual Report on Form 10-K for the fiscal year ended March 31, 2026. There were no material changes to our market risk exposure during the three months ended June 30, 2026.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Exchange Act) that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

As of June 30, 2026, we conducted an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting

During the three months ended June 30, 2026, there have been no changes to our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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Part II. Other Information

Item 1. Legal Proceedings

See Note 10. “Commitments and Contingencies” within Item 1. Financial Statements for information regarding any material legal proceedings in which we may be involved.

Item 1A. Risk Factors

During the three months ended June 30, 2026, there were no material changes to the risk factors described in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the fiscal year ended March 31, 2026.

I****tem 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table provides information about the Company's purchases of equity securities for the periods indicated:

(1) Shares purchased during the period were transferred to the Company from employees in satisfaction of minimum tax withholding obligations associated with the vesting of restricted stock awards during the period.

(2) On November 7, 2005, our Board of Directors adopted a share repurchase plan which allows for the repurchase of up to 300,000 of our common shares; however, no shares have been purchased under the plan in any period presented herein. This plan will continue until the maximum is reached or the plan is terminated by further action of the Board of Directors.

Item 5. Other Information

During the quarter ended March 31, 2026, each of Chief Financial Officer John V. Sakys, Senior Vice President of Continuous Improvement Brian Archbold, and Chief Accounting Officer Lyndsey Crennen entered into a written plan for the sale of Mesa's securities intended to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c) (each, a "Rule 10b5-1 trading arrangement"). Each Rule 10b5-1 trading arrangement was adopted on March 12, 2026 solely to satisfy tax withholding obligations arising from the vesting of equity awards and expired on June 30, 2026. The Rule 10b5-1 trading arrangements provided for the sale of approximately 4,095, 3,695 and 554 shares of Mesa's common stock for Messrs. Sakys and Archbold and Ms. Crennen, respectively.

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Item 6. Exhibits

• Filed herewith

• Furnished herewith

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Signatures