Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis (“MD&A”) is intended to help investors understand Mesa, our operations and our present business environment. MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying notes thereto contained in this Annual Report on Form 10-K. Unless the context requires otherwise, the terms “Mesa,” “Company,” “we,” “its,” and “our” in this annual report refer to Mesa Laboratories, Inc. and its subsidiaries.
This section generally discusses our fiscal years ended March 31, 2026 and March 31, 2025 and year-to-year comparisons between fiscal year 2026 and fiscal year 2025. Discussions of fiscal year 2024 and year-to-year comparisons between fiscal year 2025 and fiscal year 2024 can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company's annual report for the fiscal year ended March 31, 2025 filed with the SEC on May 28, 2025.
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 APAC, and by independent distributors in these areas as well as throughout the rest of the world.
As of March 31, 2026, we managed our operations in four reportable segments, or divisions: Sterilization and Disinfection Control, Biopharmaceutical Development, Calibration Solutions and Clinical Genomics. Each of our divisions is described further in "Results of Operations" below. Unallocated corporate expenses and other business activities are reported within Corporate and Other.
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.
Organic Revenues Growth
Organic revenues growth is driven by the expansion of our customer base, increases in sales volumes, new product offerings, and price increases, and may be affected positively or negatively by changes in foreign currency rates. Our ability to increase organic revenues is affected by general economic conditions, both domestic and international, customer capital spending trends, competition, currency exchange rates, and the introduction of new products. Our policy is to price our products 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 of the year in response to changes in regulatory policy, such as the imposition of tariffs, or significant increases in the price of inputs to our products.
Inorganic Revenues Growth - Acquisitions
Over the past decade, we have consummated a number of acquisitions as part of our growth strategy. These 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®.
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Improving Our Operating Efficiency
Our ongoing goal is to maximize value in our businesses and those we acquire by implementing efficiencies in our manufacturing, commercial, engineering and administrative operations. We achieve efficiencies using the four pillars that make up the Mesa Way, our customer-centric, lean-based system for continuous improvement. The Mesa Way is built on four key pillars: "Measuring What Matters" based on our customers' perspectives to set high standards of performance; "Empowering Teams" to improve operationally and exceed customer expectations; "Sustainably Improving" using lean-based tools designed to help us identify and prioritize the best opportunities; and "Always Learning" to continuously build knowledge and capabilities to drive long-term performance.
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. Historically, as we have integrated acquisitions into our business and taken advantage of manufacturing efficiencies, our gross profit percentages for some products have improved. There are, however, differences in gross profit percentages between product lines, and ultimately our mix of revenues will continue to 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 highly talented people who are capable of taking on new challenges using a team-based approach. Indeed, it is our exceptionally talented 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
As a global company, our geographic and industry diversity presents both opportunities and challenges, including in relation to pursuing expansion opportunities in high-growth markets, operating in varied economic environments, complying with evolving regulatory requirements such as tariffs, navigating global labor trends and costs, adapting to technological changes in markets we serve, and monitoring the effects of foreign currency fluctuations against the U.S. dollar. During fiscal 2026, approximately 53% of our revenues were earned outside of the United States.
In fiscal year 2026, we announced a planned transition in executive leadership, with the appointment of Dr. Siddhartha Kadia as Chief Executive Officer effective in fiscal year 2027.
In fiscal year 2026, revenues grew 3.4% compared to fiscal 2025, driven primarily by growth in our Sterilization and Disinfection Control division, and to a lesser extent, our Calibration Solutions division. Revenues in our Biopharmaceutical Development division were largely consistent with fiscal year 2026. Our Clinical Genomics division experienced revenue declines, primarily due to unfavorable macroeconomic conditions in China and ongoing trade tensions, which have weakened demand for our Clinical Genomics products and services in that region. We expect these challenges to persist into fiscal year 2027; however, we anticipate that the related financial impact will be substantially smaller than in fiscal year 2026. In the Americas and Europe, Clinical Genomics continued to execute its product development and commercial strategy successfully in fiscal year 2026. Currency translation increased reported revenues by 2.2% in fiscal year 2026 compared to fiscal year 2025, primarily affecting the Sterilization and Disinfection Control and Biopharmaceutical Development divisions.
Consolidated gross profit as a percentage of revenues in fiscal year 2026 increased 0.9 percentage points in fiscal year 2026. The improvement was driven by a more favorable geographic revenue mix in the Clinical Genomics division, cost savings initiatives implemented in fiscal years 2025 and 2026, and higher sales on a partially-fixed cost base. These improvements were partially offset by unfavorable foreign currency translation and the impact of tariffs, which together reduced consolidated gross profit as a percentage of revenues by approximately 0.8 percentage points compared to the prior year, with a particularly pronounced effect in our Biopharmaceutical Development division. In addition, fiscal year 2025 results included GKE-related inventory step-up amortization expense, which negatively impacted gross profit margins in fiscal year 2025 and did not recur in fiscal year 2026.
Operating expense increased 3.9% in fiscal year 2026 compared to fiscal year 2025, while operating expense as a percentage of revenues remained largely consistent. The increase in operating expense was primarily driven by costs associated with the departure of our former CEO. Additionally, reported selling expense, general and administrative expense, and research and development expense increased due to the weakening of the U.S. dollar against the euro and Swedish krona in fiscal year 2026 compared to fiscal year 2025. Increases in operating expense were partially offset by lower professional services and consulting costs, as fiscal year 2025 included GKE integration costs.
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Changes in foreign currency exchange rates relative to the U.S. dollar affect our reported revenues, gross profit margins, and operating expenses and impact the comparability of our results between periods. A strengthening or weakening of the U.S. dollar can therefore influence reported financial results even when underlying operating performance is unchanged.
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 Consolidated Financial Statements and the notes thereto appearing in Item 8. Financial Statements and Supplementary Data.
Results by reportable segment are as follows:
Revenues Organic Revenues Growth (non-GAAP)(a) Gross Profit as a % of Revenues
Year ended March 31, Year ended March 31, Year ended March 31,
Our consolidated results of operations are as follows:
Year Ended March 31, Total Change
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.
Year Ended March 31, Total Change
Gross profit as a % of revenues 70.6 % 69.2 % 71.0 % 1.4 pt (1.8 pt)
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Sterilization and Disinfection Control revenues increased 8.7% in fiscal year 2026 compared to fiscal year 2025, primarily due to the weakening of the U.S. dollar and price increases during fiscal 2026, and to a lesser extent, higher sales volumes. Excluding the impact of foreign currency translation, revenues would have increased approximately 4.7% for fiscal year 2026. The Sterilization and Disinfection Control division’s backlog decreased by approximately $1.2 million in fiscal year 2026 as order fulfillments returned to normal levels.
Gross profit as a percentage of revenues in the Sterilization and Disinfection Control division increased 1.4 percentage points, primarily due to higher revenues on a partially-fixed cost base. Excluding the impact of foreign currency translation and $1.2 million of amortization of the non-cash inventory step-up related to the GKE acquisition recorded in fiscal year 2025, the Sterilization and Disinfection Control division's gross profit margin percentage would have increased approximately 0.8 percentage points in during fiscal year 2026 compared to fiscal year 2025.
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.
Year Ended March 31, Total Change
Gross profit as a % of revenues 58.7 % 61.4 % 62.4 % (2.7 pt) (1.0 pt)
Biopharmaceutical Development revenues were largely consistent in fiscal year 2026 compared to fiscal year 2025, as declines in our immunoassay product lines were partially offset by growth in our peptide product lines. The decline in immunoassays revenues relates primarily to commercial execution challenges, partially offset by the impact of foreign currency. Revenues were impacted to a lesser extent by shipping delays related to export controls that prevented the shipment of certain peptides systems in the second half of fiscal year 2026. Excluding the impacts of foreign currency translation and revenues from tariff recovery surcharges, Biopharmaceutical Development revenues would have declined approximately 3.9% compared to the prior year.
Biopharmaceutical Development's gross profit as a percentage of revenues decreased 2.7 percentage points during fiscal year 2026, primarily due to the impacts of foreign currency translation and tariffs. Excluding the impacts of foreign currency translation and tariffs, gross profit as a percentage of revenues for fiscal year 2026 would have been approximately consistent with fiscal year 2025.
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, environmental and process monitoring and torque testing, primarily in medical device manufacturing, pharmaceutical manufacturing, laboratory and hospital environments.
Year Ended March 31, Total Change
Gross profit as a % of revenues 59.7 % 59.2 % 57.7 % 0.5 pt 1.5 pt
Calibration Solutions revenues increased 3.5% for fiscal year 2026 compared to fiscal year 2025, primarily driven by price increases and ongoing commercial efforts to establish and renew contracts that incentivize utilization of our service offerings.
The Calibration Solutions division's gross profit as a percentage of revenues increased 0.5 percentage points in fiscal year 2026 compared to fiscal year 2025, primarily due to increased revenues on a partially fixed cost base and product mix, partially offset by an unfavorable tariff impact of 20 basis points.
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Clinical Genomics
The Clinical Genomics division develops, manufactures and sells highly sensitive, high-throughput genetic analysis tools and related consumables and services that enable clinical research labs and contract research organizations to perform genomic testing across a broad range of non-diagnostic applications in several therapeutic areas, including hereditary disease screenings, pharmacogenetics, oncology related applications and toxicology research.
Year Ended March 31, Total Change
Gross profit as a % of revenues 57.3 % 54.5 % 51.5 % 2.8 pt 3.0 pt
Clinical Genomics revenues decreased 3.6% in fiscal year 2026 compared to fiscal year 2025, driven primarily by lower sales to customers in China, reflecting ongoing macroeconomic and regulatory uncertainty as well as ongoing trade tensions. Excluding sales to China, revenues increased 9.2% in fiscal year 2026 compared to fiscal year 2025.
Clinical Genomics’ gross profit as a percentage of revenues increased 2.8 percentage points in fiscal year 2026 compared to fiscal year 2025, despite lower revenues. The increases in gross profit as a percentage of revenues were primarily attributable to manufacturing and supply chain efficiency improvements, lower personnel-related costs attributable to our cost mitigation efforts, and favorable geographic product mix, as sales outside of China typically generate higher margins. Gross profit as a percentage of revenues for fiscal year 2026 was also positively impacted by product mix, as higher-margin consumables represented a greater portion of the division's total revenues.
Operating Expense
Operating expense increased 3.9% in fiscal year 2026 compared to fiscal year 2025, while operating expense as a percentage of revenues remained largely consistent. Among other factors, operating expense increased due to the weakening of the U.S. dollar against the euro and Swedish krona in fiscal year 2026.
SellingExpense
Selling expense is driven primarily by labor costs, including salaries and commissions; accordingly, it may vary with sales levels.
Year Ended March 31, Total Change
As a percentage of revenues 16.4 % 17.3 % 17.9 % (0.9 pt) (0.6 pt)
Selling expense decreased 2.1% for fiscal year 2026 and decreased 0.9 percentage points as a percentage of revenues. The decrease was primarily attributable to lower commissions-related expense, partially offset by severance costs associated with our cost-savings initiatives. In the prior year, selling expense was somewhat elevated due to costs associated with a sales training initiative.
General and Administrative Expense
Labor costs, non-cash stock-based compensation and amortization of intangible assets drive the substantial majority of general and administrative expense.
Year Ended March 31, Total Change
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General and administrative expenses increased 7.3% in fiscal year 2026 and increased 1.2 percentage points as a percentage of revenues. The increase was primarily attributable to expenses associated with our former CEO’s departure, including accelerated stock-based compensation expense and severance. Higher expense related to estimated uncollectible accounts receivable, particularly related to customers in China, also contributed to the increase. These increases were partially offset by lower consulting and professional services expenses, as the prior year included consulting costs associated with integrating GKE into our enterprise resource planning system, and by lower amortization expense. Aggregate CEO transition costs were $6.7 million, including $3.7 million of non‐cash stock‐based compensation. Excluding these costs, general and administrative expenses would have declined 1.8% in fiscal year 2026.
No impairment losses were recorded in fiscal years 2026 or 2025.
Research and Development Expense
Research and development expense is predominantly comprised of labor costs and third-party consultants.
Year Ended March 31, Total Change
As a percentage of revenues 8.2 % 8.1 % 8.9 % 0.1 pt (0.8 pt)
Research and development expenses increased 4.0% in fiscal 2026 compared to 2025 and were flat as a percentage of revenues. The increase was primarily attributable to consulting services and purchases of supplies to support project-specific research and development activities, as well as severance costs, particularly within our Clinical Genomics division. These increases were partially offset by lower salaries and personnel-related costs associated with our cost-savings initiatives.
Nonoperating Expense, Net
Year Ended March 31, Total Change
(Gain) on extinguishment of convertible senior notes - (2,887 ) - (100.0 %) N/A
Interest expense decreased in fiscal year 2026 compared to fiscal year 2025 due to lower weighted‐average levels of outstanding interest‐bearing debt and a reduction in interest rates applicable to our floating‐rate debt. These decreases were partially offset by a higher interest rate associated with borrowings under the Credit Facility discussed below compared to our previously outstanding convertible notes ("the Notes"), which were settled during fiscal year 2026 using borrowings under the Credit Facility.
Other (income) expense, net primarily consists of gains and losses on foreign currency transactions. In particular, during fiscal year 2026, we recognized unrealized foreign currency gains of approximately $3.7 million related to an intercompany U.S. dollar-denominated loan issued in fiscal year 2024 to one of our wholly owned, euro-denominated subsidiaries.
Income Taxes
Year Ended March 31, Total Change
Our effective income tax rate was 44.1% for fiscal year 2026 compared to 133.1% for fiscal year 2025.
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The effective tax rate for fiscal year 2026 differed from the statutory federal rate of 21% primarily due to non-deductible executive compensation and taxes related to foreign operations, partially offset by a decrease to our valuation allowance. The effective tax rate for fiscal year 2025 differed from the statutory federal rate of 21% primarily due to increases in our valuation allowance related to our operations in the U.S. and Germany, as well as non-deductible executive compensation and varying applicable tax rates in foreign jurisdictions. See Note 12. “Income Taxes” within Item 8. Financial Statements and Supplementary Data) for a reconciliation of our income tax provision, including the impact of specific items on our overall effective income tax rate.
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.
Net Income (Loss)
Net income (loss) varies with the changes in revenues, gross profit, and operating expenses. Net income in fiscal year 2026 reflects, respectively, $18,017, $5,254, and $17,868 of non-cash amortization of intangible assets acquired in a business combination, non-cash depreciation, and non-cash stock-based compensation expense.
Non-GAAP Reconciliations
Adjusted operating income (which excludes the non-cash impact of amortization of finite-lived intangible assets acquired in a business combination, depreciation, stock-based compensation, and impairment of goodwill and finite-lived intangible assets) and organic revenues growth (reported revenues growth excluding the impact of revenues growth from recent acquisitions) are used by management as supplemental performance measures in order to compare current financial performance to historical performance, to assess the ability of our assets to generate cash, and to evaluate potential acquisitions.
Adjusted operating income and organic revenues growth should not be considered alternatives to, or more meaningful than, net income (loss), operating income (loss), reported revenues growth, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance or liquidity.
The following table sets forth our reconciliation of operating income (loss) to adjusted operating income, a non-GAAP measure:
Year Ended March 31,
Impairment losses on goodwill and finite-lived intangible assets - - 274,533
The following table sets forth our reconciliation of total revenues growth to organic revenues growth, a non-GAAP measure:
Total Revenues Growth Impact of Acquisitions Organic Revenues Growth (non-GAAP)
Year ended March 31, Year ended March 31, Year ended March 31,
Sterilization and Disinfection Control 8.7 % 24.4 % - % (19.7 %) 8.7 % 4.7 %
Biopharmaceutical Development (0.2 %) 19.7 % - % - % (0.2 %) 19.7 %
Calibration Solutions 3.5 % 8.3 % - % - % 3.5 % 8.3 %
Clinical Genomics (3.6 %) (10.5 %) - % - % (3.6 %) (10.5 %)
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Liquidity and Capital Resources
Our sources of liquidity include cash generated from operations, cash on hand and cash available from our Credit Facility (See Note 8. "Indebtedness" for a description of the Credit Facility). We believe these sources are sufficient to meet our ongoing operating needs, scheduled debt service obligations, dividend payments and anticipated capital expenditures. As of March 31, 2026 and 2025, we held cash of $26.9 million and $27.3 million, respectively.
Historically, our more significant uses of resources have included acquisitions, payments of debt principal and interest, capital expenditures, and quarterly dividends to shareholders. During fiscal year 2024, we acquired GKE for $87.2 million, net of cash acquired and financial liabilities assumed and inclusive of working capital adjustments. In April 2025, we paid a $9.6 million holdback related to the acquisition, consistent with previously accrued and disclosed amounts.
Working capital, defined as the amount by which current assets exceed current liabilities, was $44.4 million as of March 31, 2026, compared to negative working capital of $(61.3) million as of March 31, 2025. The prior year's negative working capital was due to the classification of $97.5 million of principal related to our Notes as a current liability. During fiscal year 2026, we settled the Notes using borrowings of $97.0 million under our revolving credit facility (the "Revolver"). The Revolver allows us to borrow up to $125.0 million, of which $84.5 million was outstanding as of March 31, 2026.
On October 10, 2025 we amended our Credit Facility to reduce the applicable interest rate spread above the SOFR base rate from 1.5%-3.5% to 1.25%-2.5%. We expect to incur approximately $8.8 million in cash interest expense over the next twelve months based on outstanding debt levels and interest rates in effect as of March 31, 2026. Required principal debt payments due on our term loan under the Credit Facility (the "Term Loan") within the next twelve months total $5.6 million.
We routinely evaluate opportunities for strategic acquisitions. Future material acquisitions may require us to obtain additional capital, assume additional third-party debt or incur other long-term obligations. While we believe that we have the ability to issue more equity or debt in the future in order to finance our acquisition and investment activities, such financing, may not be available on acceptable terms, if at all.
Dividends
We have paid regular quarterly dividends since 2003. We declared and paid dividends of $0.16 per share each quarter of the years ended March 31, 2026, 2025, and 2024.
In April 2026, our Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock, payable on June 15, 2026, to shareholders of record at the close of business on May 29, 2026.
Cash Flows
Our cash flows from operating, investing, and financing activities were as follows:
Year Ended March 31,
Net cash (used in) investing activities (3,250 ) (4,499 ) (81,306 )
Net cash (used in) provided by financing activities (41,854 ) (44,509 ) 32,836
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Cash flows from operating activities for the year ended March 31, 2026 provided $42.8 million, a decrease of $4.0 million versus the prior year. The decrease in cash flows from operating activities was primarily a result of:
These factors were partially offset by improved operating performance, including an $8.2 million increase in revenues compared to the prior year.
Cash used in investing activities decreased for fiscal year 2026 versus fiscal year 2025 as we invested in property, plant and equipment for our new leased facility in Sweden in the prior year. Financing activities resulted in a $41.9 million use of cash for fiscal year 2026. We borrowed a total of $107.5 million:
We repaid a total of $134.2 million:
● $97.5 million to settle the Notes;
● $33.0 million under the Revolver; and
● $3.7 million under the Term Loan.
Critical Accounting Policies and Estimates
Our Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States, which require management to make estimates, judgments and assumptions that affect the amounts reported in our Consolidated Financial Statements and accompanying notes. We believe the following are the more critical judgment areas in the application of accounting policies that currently affect our financial condition and results of operations. Management has discussed the development, selection and disclosure of critical accounting policies and estimates with the Audit Committee of our Board of Directors. While our estimates and assumptions are based on our knowledge of current events and circumstances and actions we may take in the future, actual results may ultimately differ from these estimates and assumptions. For a discussion of our significant accounting policies, see Note 1. “Description of Business and Summary of Significant Accounting Policies” in Item 8. Financial Statements and Supplementary Data.
Goodwill Impairment Testing
Management believes goodwill impairment testing is a critical accounting estimate. We test goodwill for impairment on an annual basis as of January 1st each year, or more frequently if events and circumstances indicate it is more likely than not that the fair value of a goodwill reporting unit is less than its carrying value. Events that could indicate impairment and trigger interim impairment tests include, but are not limited to, adverse current or expected economic, market, or industry-specific conditions (including a decline in our market capitalization), adverse changes or expected changes in business climate or operating performance, changes in legal or regulatory factors, and adverse actions or assessments by regulators. We monitor for indicators of impairment throughout the year and perform qualitative and quantitative impairment testing as necessary based on quarterly preliminary assessments of performance and other relevant circumstances.
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When we perform quantitative impairment testing either at our election, at least every five years, or because we believe a reporting unit is more likely than not impaired, we estimate the fair values of our reporting units primarily using a discounted cash flow approach, supplemented by market multiple analyses. These fair value measurements require the use of significant Level 3 inputs, including but not limited to discount rates, forecasted results including earnings before interest, taxes, depreciation and amortization (“EBITDA”), revenue, revenue growth rates, operating expenses, the identification of comparable public entities, and the selection of applicable market multiples. We develop these assumptions using internal expectations of future performance informed by historical results, available financial data such as backlog and customer orders, and our assessment of relevant facts and circumstances, leveraging expert input where appropriate. The use of these assumptions involves significant judgment, and there are inherent uncertainties associated with valuation estimates. Our assumptions and inputs are forward-looking, and could differ from actual future facts and conditions. Different assumptions from those used in our analyses could materially affect projected cash flows and the estimated fair values of our reporting units. We engage third-party valuation specialists to assist management in performing quantitative goodwill impairment analyses.
In fiscal year 2026 we elected to perform quantitative impairment testing for our Clinical Genomics reporting unit due to its sensitivity in prior impairment analyses and its operating performance during the year. We performed qualitative impairment testing for our other reporting units. Based on our fiscal 2026 impairment testing, we concluded that the fair values of all reporting units exceeded their respective carrying values, and no impairment losses have been incurred or recorded in fiscal year 2026.
Income Taxes, Valuation of Deferred Taxes
Our provision for income taxes requires the use of estimates in determining deferred tax items and related valuation allowances based on management’s interpretation and application of complex tax laws and accounting guidance. We establish allowances for uncertain tax positions for material, known tax exposures relating to deductions, transactions and other matters involving uncertainty as to the measurement and recognition of the item. While we believe that our allowances are adequate, issues raised by a tax authority may be finally resolved at an amount different than the related reserve and it is reasonably possible that our income tax provision in the current and/or future periods could materially increase or decrease.
Recent Accounting Standards and 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 8. Financial Statements and Supplementary Data.
Contractual Obligations
We are party to many contractual obligations that involve commitments to make payments to third parties in the ordinary course of business.
On a consolidated basis, at March 31, 2026, we had contractual obligations for open purchase orders of approximately $13.0 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 payments. For a description of our contractual obligations and other commercial commitments as of March 31, 2025, see our Annual Report on Form 10-K for the fiscal year ended March 31, 2025, filed with the SEC on May 28, 2025.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We have no derivative instruments and minimal exposure to commodity market risks.
Foreign Currency Exchange Rates
We face exchange rate risk from transactions with customers in countries outside the United States and from intercompany transactions between affiliates. Transactional exchange rate risk arises from the purchase and sale of goods and services in currencies other than our functional currency or the functional currency of the applicable subsidiary. We also face translational exchange rate risk related to the translation of financial statements of our foreign operations into U.S. dollars, our functional currency. Costs incurred and sales recorded by subsidiaries operating outside of the United States are translated into U.S. dollars using exchange rates effective during the respective period. As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar. Our Biopharmaceutical Development division is particularly susceptible to currency exposures since it incurs a substantial portion of its expenses in Swedish Krona, while most of its revenue contracts are in U.S. dollars and euros. Therefore, when the Swedish Krona strengthens or weakens against the U.S. dollar, operating profits are decreased or increased, respectively. The effect of a change in currency exchange rates on our international subsidiaries' assets and liabilities is reflected in the accumulated other comprehensive income component of stockholders’ equity.
A hypothetical 10 percent change in currency exchange rates compared to the U.S. dollar (U.S. dollar strengthening) would have resulted in an approximate estimated $1.1 million decrease in net income over a one-year period. Actual changes in market prices or rates will likely differ from hypothetical changes.
Interest Rates
Our Credit Facility bears interest at either a base rate or a SOFR rate, plus an applicable spread. Based on our interest rates and balances outstanding as of March 31, 2026, adjusted for future required principal payments, we estimate that if interest rates increased 1 percentage point, we would incur approximately $1.5 million of additional cash interest expense in the next twelve months than we would if current rates remain unchanged.
Inflation Risk
Inflation generally impacts us by increasing our costs of labor, materials, and freight. The rates of inflation experienced in recent years have not had a significant direct impact on our financial results, as inflationary cost increases have been largely offset by annual price increases. However, any price increases imposed may lead to declines in sales volume if competitors do not similarly adjust prices. Additionally, inflationary pressures may impact our customers' ability to purchase our products and services. We cannot reasonably estimate our ability to successfully recover any inflation cost increases into the future.
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Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Mesa Laboratories, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Mesa Laboratories, Inc. (and subsidiaries) (the “Company”) as of March 31, 2026 and 2025, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of March 31, 2026, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of March 31, 2026 and 2025, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2026, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the Management's Annual Report on Internal Control Over Financial Reporting included in Item 9A. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Fair Value of the Reporting Units for Goodwill Impairment Assessment
Critical Audit Matter Description
As described in Notes 1 and 6 to the consolidated financial statements the Company performs an annual impairment test for goodwill as of January 1, or more frequently if events or circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value. If the Company performs a quantitative assessment, the Company compares the fair value of a reporting unit with its carrying value and recognizes an impairment charge for the amount the carrying value exceeds the reporting unit’s fair value. During the annual goodwill impairment assessment, management performed a quantitative impairment analysis of the Clinical Genomics reporting unit goodwill and concluded the goodwill was not impaired. Management estimates the fair value of a reporting unit based on a combination of an income approach, that utilizes discounted cash flows specific to each reporting unit, and a market approach, that considers guideline public company market multiples. The Company’s consolidated goodwill balance was $186.9 million as of March 31, 2026.
The principal considerations for our determination that performing procedures relating to the goodwill impairment of the Clinical Genomics reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate; (ii) a high degree of audit effort and especially challenging and subjective auditor judgment in performing and evaluating management’s significant assumptions related to the forecasted results and the discount rate; and (iii) the audit effort involved the use of valuation professionals with specialized skill and knowledge.
How We Addressed the Matter in Our Audit
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included evaluating the design and testing the operating effectiveness of internal controls related to the Company’s goodwill impairment assessment, including those relevant to the determination of the fair value of the reporting unit. Our audit procedures related to the Company’s goodwill impairment assessment for its Clinical Genomics reporting unit included the following, among others:
● Testing the Company’s process used to develop the estimates.
● Evaluating the significant assumptions used, including the reasonableness of:
● management’s selection of comparable entities.
/s/ Baker Tilly LLP
Los Angeles, California
June 2, 2026
We have served as the Company's auditor since 2024.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Mesa Laboratories, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows of Mesa Laboratories, Inc. and subsidiaries (the Company) for the year ended March 31, 2024, and the related notes (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the results of the Company’s operations and its cash flows for the year ended March 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ RSM US LLP
We served as the Company’s auditor from 2023 to 2024.
Los Angeles, California
June 28, 2024
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Mesa Laboratories, Inc.
Consolidated Balance Sheets
(In thousands, except share amounts)
ASSETS
Current assets
Prepaid expenses and other current assets 8,868 8,029
Noncurrent assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Convertible senior notes, current portion, net of debt issuance costs - 97,297
Noncurrent liabilities
Term loan, noncurrent portion, net of debt issuance costs 61,357 66,902
Commitments and Contingencies (Note 13)
Stockholders’ equity
Accumulated other comprehensive (loss) (3,356 ) (9,775 )
Total liabilities and stockholders’ equity $ 427,747 $ 433,348
See accompanying notes to consolidated financial statements.
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Mesa Laboratories, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
Year Ended March 31,
Revenues:
Cost of revenues:
Operating expense:
Impairment of finite-lived intangible assets - - 117,641
Impairment of goodwill - - 156,892
Nonoperating expense (income):
Interest expense and amortization of debt issuance costs 10,692 11,859 5,697
Gain on extinguishment of convertible senior notes - (2,887 ) -
Net earnings (loss) per share
Weighted-average common shares outstanding
See accompanying notes to consolidated financial statements.
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Mesa Laboratories, Inc.
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
Year Ended March 31,
Other comprehensive income (loss)
Foreign currency translation adjustments 6,419 4,980 (1,960 )
See accompanying notes to consolidated financial statements.
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Mesa Laboratories, Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands, except share amounts)
Common Stock
Number of Shares Amount (Accumulated Deficit) Retained Earnings AOCI* Total
Tax withholding on restricted stock units (5,393 ) (728 ) - - (728 )
Stock-based compensation expense - 11,936 - - 11,936
Foreign currency translation - - - (1,960 ) (1,960 )
Tax withholding on restricted stock units (8,596 ) (887 ) - - (887 )
Stock-based compensation expense - 13,142 - - 13,142
Foreign currency translation - - - 4,980 4,980
Vesting of restricted stock units 80,825 - - - -
Tax withholding on restricted stock units (11,315 ) (1,061 ) - - (1,061 )
Stock-based compensation expense - 17,868 - - 17,868
Foreign currency translation - - - 6,419 6,419
*Accumulated Other Comprehensive (Loss) Income.
See accompanying notes to consolidated financial statements.
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Mesa Laboratories, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Year Ended March 31,
Cash flows from operating activities:
Depreciation of property, plant and equipment 5,254 5,382 4,233
Non-cash interest expense and debt issuance cost amortization 682 990 926
Gain on extinguishment of convertible senior notes - (2,887 ) -
Amortization of step-up in inventory basis - 1,232 1,229
Impairment loss on goodwill and finite-lived intangible assets - - 274,533
Cash from changes in operating assets and liabilities:
Cash flows from investing activities:
Purchases of property, plant and equipment (3,250 ) (4,249 ) (2,567 )
Acquisition of customer lists - (250 ) -
Net cash (used in) investing activities (3,250 ) (4,499 ) (81,306 )
Cash flows from financing activities:
Repurchase of convertible note debt (97,500 ) (71,560 ) -
GKE acquisition holdback payment (9,555 ) - -
Proceeds from the exercise of stock options - 2,644 358
Net cash (used in) provided by financing activities (41,854 ) (44,509 ) 32,836
Effect of exchange rate changes on cash and cash equivalents 1,880 1,307 (359 )
Net (decrease) in cash and cash equivalents (393 ) (893 ) (4,696 )
Cash paid for:
See accompanying notes to consolidated financial statements.
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Mesa Laboratories, Inc.
Notes to Consolidated Financial Statements
(dollar and share amounts in thousands, unless otherwise specified)
Note 1.Basis of Presentation and Summary of Significant Accounting Policies
Nature of Operations
In this Annual Report on Form 10-K, Mesa Laboratories, Inc., a Colorado corporation, together with its subsidiaries is collectively referred to as “we,” “us,” “our,” the “Company,” or "Mesa."
We are a global leader in the design and manufacture of life sciences tools and critical quality control solutions for regulated applications in the pharmaceutical, healthcare and medical device industries. We offer products and services to help our customers ensure product integrity, increase patient and worker safety, and improve the quality of life throughout the world. We have manufacturing operations in the United States and Europe, and our products are marketed by our sales personnel in North America, Europe and APAC, and by independent distributors throughout the world.
As of March 31, 2026, we managed our operations in four reportable segments, or divisions:
Unallocated corporate expenses and other business activities are reported within Corporate and Other.
Principles of Consolidation and Basis of Presentation
Our Consolidated Financial Statements are prepared in accordance with the rules and regulations of the Securities and Exchange Commission and in accordance with accounting principles generally accepted in the United States (“GAAP”), and include our accounts and those of our wholly owned subsidiaries after elimination of all intercompany accounts and transactions.
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Management Estimates
The preparation of our Consolidated Financial Statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our Consolidated Financial Statements and accompanying notes. Actual results could differ from our estimates under different assumptions or conditions.
Summary of Significant Accounting Policies
Foreign Currency
Exchange rate adjustments resulting from foreign currency transactions are recognized in net income (loss), while the effects of translating the financial statements of foreign subsidiaries into U.S. dollars are reflected as a component of accumulated other comprehensive income within stockholders’ equity. Assets and liabilities of subsidiaries operating outside the United States with functional currencies other than the U.S. dollar are translated into U.S. dollars at period end exchange rates, and results of operations are translated using weighted average exchange rates for the period.
Fair Value Measurements
Fair value is the price we would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants. We determine fair value based on the following input hierarchy:
Level 1: Quoted prices for identical assets or liabilities in active markets.
Level 2: Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or that can be corroborated with observable market data.
Level 3: Unobservable inputs supported by little or no market activity. Pricing models, discounted cash flow methodologies, and other similar techniques involving significant management judgment or estimation typically require unobservable inputs.
Most assets and liabilities purchased in business acquisitions are measured, recognized and disclosed at fair value in the Consolidated Financial Statements on a non-recurring basis upon acquisition, or as applicable, during the measurement period. Additionally, assets such as property and equipment, operating lease assets, and goodwill and other intangible assets are measured and presented at fair value on a nonrecurring basis if impaired. Such fair value measurements require the use of Level 3 inputs.
See Note 3. “Fair Value Measurements” for further information.
Revenue Recognition
Our revenues are derived from sales of products and services. Product sales consist primarily of consumables and hardware, while services consist primarily of maintenance, calibration and testing services.
Revenues are recognized when or as we satisfy our performance obligations under the terms of a contract, which occurs when control of the promised products or services transfers to the customer. We recognize revenue in an amount that reflects the consideration we expect to receive in exchange for those products and services (the transaction price). For our revenue contracts, prices are fixed at the time of purchase, and price protections or other forms of variable consideration are not typically offered.
Product sales: Our performance obligations related to product sales generally consist of the promise to sell tangible goods to distributors or end customers. Revenues from consumables and hardware are recognized at the point in time when control transfers to the customer. Control of products sold in the United States and APAC typically transfers upon shipment, whereas control of products sold in Europe more typically transfers upon delivery to the customer site or when customers collect the good from our warehouse.
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Services: We generate service revenues from discrete and ongoing maintenance, calibration and testing services related to our physical products. For discrete services, our obligation to complete specified work is satisfied and revenue is recognized upon performance of the service. Obligations arising from ongoing service contracts, in which we promise to stand ready to provide maintenance or other services on an as-needed basis over a specified contract period, are satisfied by completing any services that are contractually required during the contract period, if requested by the customer, or by the passage of time if no services are requested. For ongoing service contracts, revenue is recognized on a straight-line basis over the contract term in a faithful depiction of our obligation to provide services over the contract period.
Purchase orders or formal contracts typically provide evidence of the existence and key terms of arrangements with customers with respect to sales of our products and services. Collectability is assessed through our customer review process and is considered reasonably assured. Payment terms typically require settlement within 60 days or less.
We expense commission costs, which are typically our only significant incremental cost to obtain a contract, as incurred. The substantial majority of our contracts have original durations of one year or less, and we have elected not to disclose the expected timing or allocated transaction prices of remaining performance obligations. Additionally, we have elected to not assess whether a significant financing component exists when the period between satisfaction of a performance obligation and customer payment is one year or less. None of our contracts contained significant financing components as of or for the fiscal years ended March 31, 2026, 2025 or 2024.
Contracts with customers may contain multiple performance obligations. In such arrangements, the contract transaction price is allocated to each performance obligation based on the estimated relative standalone selling prices of the promised products or services. Standalone selling prices represent the price at which a product or service would be sold separately. If a standalone selling price is not directly observable, we estimate the standalone selling price using available information, including market conditions and internally approved pricing guidelines. In limited circumstances, for performance obligations with highly variable or unobservable standalone selling prices, we may assign standalone prices to obligations based on the residual transaction price after all observable standalone selling prices have been determined. Discounts may be approved at the time of purchase and are included within a contract’s fixed transaction price. Discounts are typically allocated to obligations included in the contract based on the standalone values of such obligations. All expected and actual consideration from customers is included in the transaction price.
See Note 2. “Revenue” for further information.
Shipping and Handling
Payments we receive from customers for shipping and handling are included in revenues in our Consolidated Statements of Operations, and the related shipping and handling expenses are included in cost of revenues. We account for shipping and handling costs arising from contracts with customers as fulfillment costs. Shipping and handling costs associated with inventory and materials we purchase are capitalized as a component of inventory on the Consolidated Balance Sheets and are expensed to cost of revenues when the related products are sold.
Unearned Revenues
Certain of our products may be sold with associated service contracts that require us to provide repairs, technical support, parts, and various analytical or maintenance services over a specified period of time, generally one year. When these contracts are paid in advance, the contract consideration is recorded as an unearned revenue liability and is recognized as revenue ratably over the service period. Customer prepayments related to other products and services are also recorded as unearned revenue liabilities and are recognized as revenue when earned.
Accrued Warranty Expense
We typically provide assurance-type limited product warranties on our products and, accordingly, accrue for estimates of related warranty expenses.
Accounts Receivable and Allowance for Credit Losses
Trade accounts receivable are reported at net realizable value on the accompanying Consolidated Balance Sheets, adjusted for allowances for credit losses and write-offs. Allowances for credit losses represent our best estimate of expected credit losses from trade accounts receivable. We estimate expected credit losses based on historical experience, current and expected economic and market conditions, and evaluations of the status of our customers’ outstanding receivable balances. When we become aware that a specific customer may be unable to meet its financial obligations, we record a specific allowance to reduce the carrying amount of the receivable to the amount reasonably expected to be collected. To mitigate credit risk, we assess the creditworthiness of new and existing customers, establish credit limits, and regularly review outstanding balances and payment histories. In certain circumstances, we may require customer prepayments or limit future purchases until past due amounts are settled.
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We do not believe our trade accounts receivable represent significant concentrations of credit risk due to our diversified customer base and geographic presence. Actual credit losses may differ from estimated amounts, which could materially affect the provision for credit losses and, therefore, net income (loss). We recorded $1,495, $218, and $790 of expense associated with credit losses for the years ended March 31, 2026, 2025, and 2024, respectively.
Cash Equivalents
We classify highly liquid investments with original maturities of three months or less at the date of purchase as cash equivalents. No cash equivalents are included on our Consolidated Balance Sheets as of March 31, 2026 or 2025.
Inventories
Inventories are stated at the lower of cost or net realizable value. Inventories are expensed to cost of revenues upon sale to customers using a weighted-average costing methodology. Inventories acquired in business combinations are recorded at acquisition date fair value. Our work-in-process and finished goods inventories include the costs of raw materials, labor and overhead. Labor and overhead costs involve estimates based on historical and budgeted costs, expected inflation, expected labor costs and expected standard productivity rates as inputs. The rates are evaluated annually unless specific circumstances require a more frequent review for particular items.
We monitor inventory costs relative to selling prices and perform physical cycle counts throughout the year to assess whether a lower of cost or net realizable value adjustment is necessary. We estimate and maintain inventory reserves for excess or obsolete inventory, shrinkage and scrap. These reserves may fluctuate as assumptions change due to new information, discrete events, or changes in our business, such as entering new markets or discontinuing specific products. Once inventory is written down, the reduced amount becomes the new cost basis and is not subsequently increased in future fiscal years.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost, net of accumulated depreciation, except for assets acquired in business acquisitions, which are recorded at acquisition-date fair value. Expenditures for major enhancements and improvements that extend the life of assets are capitalized, while expenditures for minor replacements, maintenance and repairs are expensed as incurred.
Depreciation is calculated using the straight-line method over our assets’ estimated useful lives. Upon asset retirement or disposal, the related gross carrying amount and accumulated depreciation are derecognized, and any related gain or loss is recognized in our results of operations. In certain circumstances, including business consolidation or facility closure activities, impairment losses or accelerated depreciation may be recorded to reflect revised estimates of remaining useful lives for assets designated to be retired from service.
We periodically evaluate and adjust as necessary the estimated useful lives of property, plant and equipment. Any changes in estimated useful lives are recorded prospectively. Estimated useful lives of significant classes of depreciable assets are as follows:
Category Useful Lives in Years
Buildings and building improvements 40 (or less)
Manufacturing equipment 10 (or less)
Office, lab and other equipment, furniture and fixtures 7 (or less)
Computer equipment 3 (or less)
Land is not depreciated. Construction in progress is not depreciated until placed in service, at which time it is assigned a useful life consistent with the applicable asset category.
Leases
We determine whether an arrangement is or contains a lease at contract inception. If a lease is identified, we classify the lease as either a finance or operating lease. We did not have any finance leases during any fiscal year presented herein. As of March 31, 2026, our operating leases have remaining terms ranging from one month to 11 years.
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A lease exists when a contract conveys the right to control the use of, and obtain substantially all the economic benefits from, use of an identified asset for a period of time in exchange for consideration. For our operating leases, we have elected to account for non-lease components together with the lease components to which they relate. Operating lease right-of-use ("ROU") assets and lease liabilities are recognized at lease commencement. We do not recognize ROU assets or lease liabilities for leases with original durations of less than 12 months, and our short-term leases are not material.
Operating lease liabilities represent the present value of capitalized lease payments not yet paid, discounted using the rate implicit in the lease when readily determinable or, otherwise, our incremental borrowing rate based on information available at lease commencement. ROU assets represent our right to use the underlying leased asset and are measured based on the related operating lease liability, adjusted for payments made prior to commencement, any initial direct costs incurred, and other such items as applicable. Adjustments to ROU assets would also be made for impairment losses, if necessary. In connection with business acquisitions, we generally retain the acquiree's classification of leases, and recognize ROU assets and liabilities in accordance with ASC 842.
Several of our leases contain fixed rent escalations over the lease term, which are recognized as lease expense on a straight-line basis over the lease term. Lease expense is recorded in cost of revenues or selling, general and administrative, or research and development expense in our Consolidated Statements of Operations, depending on the nature of use of the underlying asset.
Certain leases include one or more renewal or termination options exercisable at our discretion. Renewal periods are included in the lease term when we are reasonably certain to exercise the option. Renewal terms typically allow us to extend lease terms between one and three years.
We also have leases that include variable payments based on, for example, a pro-rata portion of actual maintenance costs incurred by the lessor. Such variable lease payments are recognized in the period in which those payments are incurred as lease costs.
See Note 5. “Leases” for further information.
Intangible Assets, Impairment Testing
Our goodwill and other intangible assets result primarily from business acquisitions. Intangible assets with finite lives affect future amortization expense. We could incur impairment losses associated with goodwill and other intangible assets.
We amortize finite-lived intangible assets, which generally have estimated useful lives ranging from three to fifteen years at the time of acquisition, using the straight-line method over their estimated useful lives. We estimate useful lives based on the specific facts and circumstances related to each asset, and we evaluate the appropriateness of assigned useful lives at least annually. Changes to remaining useful lives, if necessary, are accounted for prospectively. In determining useful lives, we consider factors such as contractual terms, historical performance, our long-term strategy for using the asset, applicable legal or regulatory constraints, and economic factors such as competition or specific market conditions. Amortization expense is recorded within cost of revenues or general and administrative expense in the Consolidated Statements of Operations.
Finite-lived intangibles are assessed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset group may not be recoverable. Events or conditions indicating potential impairment include, but are not limited to, adverse changes in business or market conditions, changes in the extent or manner in which the assets are used, internal strategic decisions, loss of significant customers, declines in business performance, adverse regulatory changes, or other events that could materially impact future cash flows. If impairment indicators are present, we assess recoverability by comparing the carrying value of the asset or asset group to the undiscounted estimated future cash flows expected to be generated from use of the asset or asset group. If the carrying value is not recoverable, we estimate fair value using discounted cash flow models and other valuation techniques utilizing Level 3 inputs. We recognize impairment losses for the excess of carrying value over estimated fair value as necessary.
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Goodwill is not amortized. We test goodwill for impairment at least annually as of January 1st, or more frequently if events or circumstances indicate it is more likely than not that the fair value of a goodwill reporting unit is less than its carrying value. Events that could indicate impairment and that could trigger interim impairment testing include, but are not limited to, adverse current or expected economic, market, or industry-specific conditions; sustained declines in our market capitalization; sustained adverse changes or expected changes in business climate or in the operating performance of the business; adverse legal or regulatory actions; or other factors that could adversely affect the fair value of a reporting unit. We monitor for indicators of impairment throughout the year. Our annual impairment tests may begin with a qualitative assessment, and quantitative testing is performed i) if we determine it is more likely than not that the fair value of a reporting unit is less than the carrying amount, ii) at least every five years, or iii) if we otherwise elect to perform quantitative assessments.
The fair value measurements used in testing goodwill and other intangible assets for impairment are estimated using a combination of income and market approaches, using Level 3 inputs. See “Fair Value Measurements” for a description of input levels. Significant assumptions include, among others, discount rates, forecasted results including EBITDA, revenue growth rates, cost assumptions, terminal growth rates, customer attrition rates (for customer relationships), royalty rates and technology obsolescence rates (for patents, tradenames and other intellectual property), the selection of comparable public entities, and applied market multiples. In certain cases, management uses other market information when available to estimate fair value. Impairment losses, when recognized, represent the excess of the carrying amount over estimated fair value and are recorded in earnings.
Based on qualitative and quantitative testing performed as of January 1, 2026, we do not believe our goodwill or other intangible assets were impaired as of March 31, 2026. During fiscal year 2024, we recorded impairment losses of $156,892 and $117,641 related to goodwill and long-lived intangible assets, respectively.
See Footnote 6. “Goodwill and Intangibles” for further information.
Research & Development Costs
We conduct research and development activities for the purpose of enhancing the functionality, effectiveness, reliability and accuracy of existing products and to develop new products. Research and development costs are expensed as incurred. Research and development expense is predominantly comprised of labor, third-party consultant costs, and project-related materials. From time to time, we may acquire in-process research and development with the intention of developing a saleable product.
Stock-based Compensation
We issue stock‐based awards in the form of full‐value awards and, in prior periods, stock options (collectively, “stock awards”) to employees and non‐employee directors pursuant to the Amended and Restated Mesa Laboratories, Inc.
2021 Equity Incentive Plan (the
“2021 Equity Plan”).
The 2021 Equity Plan is administered by the Compensation Committee of the Board of Directors, which has the authority to grant equity awards, or to delegate its authority under the plan to make grants (subject to certain legal and regulatory restrictions), including the authority to determine award recipients, the type and timing of awards to be granted, the number of shares underlying each award, vesting schedules and all other terms and conditions of the awards.
Under the 2021 Equity Plan, each share underlying a full value time-based award or stock option counts as one share against shares available for issuance. Performance-based awards count against shares available for issuance based on the maximum number of shares achievable under the award agreement unless or until a lower quantity is finalized. We issue new shares of common stock upon the vesting of time-based restricted stock units ("RSUs") and performance-based RSUs ("PSUs"), and upon exercise of stock options.
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RSUs and stock options generally vest in equal installments on the first, second, and third anniversaries of the grant date. Stock options generally expire after six years. PSUs vest upon achievement of specified performance conditions and completion of a requisite service period, generally three years. Awards granted to non‐employee directors generally vest one year from the grant date.
Stock‐based compensation expense is measured based on the grant‐date fair value of the award and is recognized over the longer of any requisite service or performance period using a straight‐line method, net of estimated forfeitures. We estimate expected forfeitures using a dynamic forfeiture model based on company-specific historical data. The 2021 Equity Plan includes retiree provisions which result in the acceleration of stock-based compensation expense. For retirement-eligible participants, compensation expense is recognized on a straight-line basis from the grant date through the date the participant becomes retirement-eligible, at which time the participant retains full rights to the awards in accordance with plan provisions. We record stock-based compensation expense in cost of revenues, selling, research and development, and general and administrative expense in the Consolidated Statements of Operations.
Certain PSUs include a total shareholder return ("TSR") market condition, which compares Mesa's share price to a peer group, generally over a three-year period. Achievement under the plan affects the number of awards that will vest. The TSR condition may function either as a standalone performance metric or as a modifier that adjusts the quantity of shares earned for company performance up or down by a maximum of 20%. The grant‐date fair value of these awards incorporates the effect of the market condition and is estimated using a Monte Carlo simulation valuation model utilizing Level 3 inputs. Compensation expense for TSR awards is not subsequently adjusted for changes in estimated performance outcomes, provided requisite service is rendered.
The fair values of RSUs and PSUs other than those that include a TSR condition are based on the closing price of Mesa's common stock on the award date, less the present value of expected dividends
not received during the vesting period. RSUs and PSUs we issue are equivalent to nonvested shares under applicable accounting guidance. Expense for PSUs with non-TSR performance conditions, such as cumulative revenues growth or profitability targets determined by the Board of Directors, is adjusted at each reporting period. At each reporting date, we estimate the number of non-TSR PSUs expected to vest based on our current estimate of the probable achievement of applicable performance targets specified in the award documents, and if necessary, we record a cumulative-effect adjustment.
Stock options, when granted, are valued using the Black-Scholes option pricing model.
No stock options were awarded in fiscal year
2026 or fiscal year
2025.
See Note
9. “Stock Transactions and Stock-Based Compensation” for further information.
Income Taxes
Income tax expense includes U.S., state, local and international income taxes. Deferred tax assets and liabilities are recognized and reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the tax basis of existing assets and liabilities used for income tax purposes. The tax rate used to determine the deferred tax assets and liabilities is based on the enacted tax rate for the year and the manner in which the differences are expected to reverse. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized.
From time to time, we engage in transactions in which the tax consequences may be subject to uncertainty, such as acquisitions. Significant judgment is required in assessing and estimating the tax consequences of these transactions. We prepare and file tax returns based on interpretation of tax laws and regulations. In the normal course of business, our tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax, interest and penalty assessments by these taxing authorities. In determining our income tax provision for financial reporting purposes, we establish allowances for uncertain tax income positions unless we determine it is not more likely than not that such positions would be sustained upon examination, based on their technical merits. That is, for financial reporting purposes, we only recognize tax benefits taken on the tax return that we believe are more likely than not to be sustained. There is considerable judgment involved in determining whether positions taken on the tax return are more likely than not to be sustained. We adjust our tax reserve estimates periodically because of ongoing examinations by, and settlements with, the various taxing authorities, as well as changes in tax laws, regulations and interpretations. The consolidated income tax provision in any given year includes adjustments to prior year income tax accruals that are considered appropriate and any related estimated interest. Our policy is to recognize, when applicable, interest and penalties on uncertain income tax positions as part of general administrative expense.
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See Note 12. “Income Taxes” for further information.
Net Earnings(Loss) Per Share
Basic net earnings (loss) per share (“EPS”) is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings (loss) per share (“diluted EPS”) is computed similarly to basic EPS, except it includes the effects of potential dilution that could occur if dilutive securities vested, were exercised, or were converted. Potentially dilutive securities in fiscal year 2026 include unvested RSUs and PSUs and outstanding stock options. In prior fiscal years, common shares underlying the Notes were also potentially dilutive. Potentially dilutive securities are excluded from the calculation of diluted EPS in the event they are subject to performance conditions that have not yet been achieved as of the reporting date or if they would otherwise be antidilutive. Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a net loss; in such cases the inclusion of the potential common shares would have an antidilutive effect. See Note 10. “Net Earnings (Loss) per Share” for EPS calculations for the years ended March 31, 2026, 2025 and 2024.
Weighted average outstanding shares includes awards that have not yet vested and are not yet legally outstanding, but for which all vesting criteria other than the passage of time have been satisfied. For example, this includes RSUs granted to retirement-eligible employees that are not subject to continued service requirements but have not yet vested.
Legal Contingencies
We are party to various claims and legal proceedings that arise in the normal course of business. We record an accrual for legal contingencies when we determine it is probable we have incurred a liability and can reasonably estimate the amount of the loss.
See Note 13. “Commitments and Contingencies” for further information.
Purchase Accounting for Acquisitions
We account for all business combinations in which we obtain control over another entity using the acquisition method of accounting, which requires most assets (both tangible and intangible) and liabilities to be recorded at fair value at the date of acquisition. The excess of the purchase price over the fair value of identifiable acquired assets less liabilities is recognized as goodwill. We determine fair value using widely accepted income and market valuation techniques, which rely heavily on Level 3 inputs. These types of analyses require us to make assumptions and estimates regarding industry and economic factors, the profitability of future business strategies, discount rates and cash flows. For all material acquisitions, we engage external valuation specialists to aid management in preparing fair value models. Certain adjustments to the assessed fair values of acquired assets or liabilities made subsequent to the acquisition date, but within a measurement period not to exceed one year, are recorded as adjustments to goodwill. Any adjustments subsequent to the measurement period are recorded within earnings. We expense acquisition-related costs, such as legal and advisory fees, as incurred in general, and administrative expenses in the Consolidated Statements of Operations.
Results of operations of acquired companies are included in our Consolidated Financial Statements from the date of the acquisition forward. If actual results are not consistent with our assumptions and estimates, or if our assumptions and estimates change due to new information, we may be exposed to losses. We did not acquire any businesses in fiscal year 2026 or 2025. In the year ended March 31, 2024, we acquired businesses for total net purchase prices of $87,187.
See Note 4. “Significant Transactions” for further information.
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 are based on management’s judgment regarding future events and circumstances, the outcomes of which are inherently uncertain. Actual results may differ from those estimates.
We have evaluated the estimates used in preparing the consolidated financial statements and identified the following areas for which there is a reasonable possibility that estimates could be materially affected in the near term:
● Estimates of the net realizable value of inventory and accounts receivable.
We do not believe that there are any significant risks that have not already been disclosed in the accompanying Consolidated Financial Statements.
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Recently Adopted Accounting Pronouncements
For the year ended March 31, 2026, we adopted Accounting Standards Update (“ASU”) 2023‐09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires public business entities to provide enhanced disclosures related to the reconciliation of the effective tax rate to the statutory federal, state, and foreign income tax rates, including disaggregation of individual reconciling items when their impact exceeds specified quantitative thresholds. The ASU also requires disaggregated disclosure of income taxes paid (net of refunds received) by federal, state, and foreign jurisdictions, and further disaggregation for specific jurisdictions when amounts exceed defined thresholds. In addition, certain reconciling items must be disaggregated based on their nature, determined by reference to the item’s fundamental characteristics, including the underlying transaction or event that gave rise to the reconciling item and the activity with which it is associated. ASU 2023‐09 eliminates the previous requirement to disclose information about unrecognized tax benefits that have a reasonable possibility of significantly increasing or decreasing within the 12 months following the reporting date. We adopted ASU 2023-09 on a prospective basis, which resulted in the new disclosure requirements presented in Note 12,Income Taxes.
Recently Issued Accounting Pronouncements
In November 2024, the FASB issued ASU 2024-03, "Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses." ASU 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 intend to adopt the standard on a prospective basis and are currently assessing the effect the adoption will have on our consolidated financial statement disclosures.
In July 2025, the FASB issued ASU 2025-05,Financial Instruments—Credit Losses (Topic 326): Improvements to the Measurement of Credit Losses for Receivables and Contract Assets. ASU 2025-05 introduces a practical expedient that removes the requirement to incorporate macroeconomic forecasts into theestimation of expected credit losses. The guidance is effective for fiscal years beginning after December 15, 2025, including interim periods within those fiscalyears. Prospective adoption is required, and early adoption is permitted. We intend to early adopt ASU 2025-05 for our fiscal year beginning April 1, 2026,including interim periods. Upon adoption, we plan to elect the practical expedient allowing us to assume conditions at the balance sheet date will remainunchanged for the remaining life of the asset. We do not expect adoption to have a material impact on our consolidated financial statements or relateddisclosures.
In September 2025, the FASB issued ASU 2025-06,Intangibles—Goodwill and Other (Topic 350): Internal-Use Software. ASU 2025-06 modernizes accounting for costs incurred in the development of internal-use software by eliminating the requirement to evaluate distinct development stages. The guidance is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years. ASU 2025-06 permits prospective, retrospective or modified retrospective adoption. Early adoption is permitted as of the beginning of an entity's annual reporting period. We intend to early adopt ASU 2025-06 prospectively for our fiscal year beginning April 1, 2026, including interim periods. We do not expect the guidance to have a material impact on our consolidated financial statements or related 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. Revenue
We develop, manufacture, market, sell and maintain life sciences tools and quality control instruments and related consumables.
Hardware sales include physical products such as instruments used for molecular and genetic analysis, protein synthesizers, medical meters, wireless sensor systems, data loggers, and process challenge devices. Hardware may be offered with accompanying perpetual or annual software licenses, which in some cases are required for the hardware to function.
Consumables are single-use products requiring 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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We also offer maintenance, calibration and testing service contracts.
We disclose revenues consistently with how management evaluates the business, i.e., based on business unit and the nature of goods and services provided.
The following tables present disaggregated revenues from contracts with customers for the years ended March 31, 2026, 2025 and 2024:
Contract Balances
Our contracts have varying payment terms and conditions. Some customers prepay for products and services, resulting in either unearned revenues or customer deposits, called contract liabilities. Short-term contract liabilities are included within unearned revenues in the accompanying Consolidated Balance Sheets, and long-term contract liabilities are included within other long-term liabilities in the accompanying Consolidated Balance Sheets. The significant majority of our revenues and related receivables and contract liabilities are generated from contracts with customers with original expected durations of twelve 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 balance as of March 31, 2026 $ 14,723
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Note 3. Fair Value Measurements
Our financial instruments generally consist of cash and cash equivalents, trade accounts receivable, obligations under trade accounts payable and debt. Due to their short-term nature, the carrying values of cash and cash equivalents, trade accounts receivable and trade accounts payable approximate fair value; they are classified within Level 1 of the fair value hierarchy.
The financial instruments that subject us to the highest concentrations of credit risk are cash and accounts receivable. We maintain relationships and cash deposits at multiple banking institutions across the world in an effort to diversify and reduce risk of loss. Concentration of credit risk with respect to accounts receivable is limited to customers to whom we make significant sales. No customers accounted for more than 10% of total trade receivables as of March 31, 2026.
The carrying amounts of our Credit Facility on the Consolidated Balance Sheets approximate fair value due to the variable interest rate pricing on the debt, with the principal balances bearing an interest rate approximating current market rates.
On August 15, 2025, our outstanding 1.375% convertible notes matured. No balances remained outstanding related to the Notes as of March 31, 2026. See Note 8. "Indebtedness" for further information. While outstanding, we estimated 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 was approximately correlated to our stock price.
Carrying Value Fair Value (Level 2)
There were no nonrecurring fair value adjustments or transfers between the levels of the fair value hierarchy during the fiscal years ended March 31, 2026 and 2025.
Note 4. Significant Transactions
Acquisition of GKE, Fiscal year 2024
We acquired 100% of the outstanding shares of GKE GmbH and SAL GmbH effective October 16, 2023, and effective December 31, 2023, we acquired 100% of the outstanding shares of Beijing GKE Science & Technology Co. Ltd.
GKE develops, manufactures and sells a portfolio of chemical sterilization indicators, biologics and process challenge devices to support sterility validation and protect patient safety across global healthcare markets. GKE is included in our Sterilization and Disinfection Control ("SDC") division. GKE's strengths in chemical indicators complement SDC's portfolio of biological indicators, as chemical and biological indicators may be used in the same sterility validation workflows. Additionally, GKE’s healthcare-focused commercial capabilities in Europe and APAC expand our reach in those markets.
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 acquired and financial liabilities assumed and inclusive of working capital adjustments. We funded the acquisition through a combination of cash on hand and a total of $71,000 borrowed under our line of credit.
During fiscal year 2026, we paid the GKE sellers $9,555 to settle an acquisition-related holdback.
GKE's operations contributed $9,289 to revenues and $1,046 of net income (including $2,271 of non-cash amortization expense related to acquired intangible assets and $1,229 of non-cash inventory step up expense) to our consolidated results during the twelve months ended March 31, 2024.
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Supplemental unaudited pro-forma information
Combined revenues from Mesa and GKE for fiscal year2024 would have been approximately $229,260 had the GKE acquisition occurred at the beginning of the earliest period presented, on April 1, 2023.
It is impracticable for us to disclose pro-forma net earnings information regarding the combined results of the operations of Mesa and GKE as if the acquisition had occurred at an earlier date. Prior to acquisition, GKE was a privately owned company with financial statements prepared on a statutory, rather than GAAP, basis, using a different fiscal year end than Mesa's. Certain financial information cannot be recreated for accurate financial results. For example, prior to Mesa's ownership, GKE accounted for inventory at an unburdened rate and performed only annual inventory counts, such that we cannot accurately estimate cost of goods sold. Additionally, all transactions occurring between the three GKE entities, which are substantial, were accounted for at arms-length prior to acquisition; we eliminated intercompany transactions from a revenue perspective above, but we do not have sufficient historical detail to eliminate intercompany cost of revenues accurately. As presentation of pro-forma net earnings information would require extensive estimation and could not be sourced from sufficiently factual information reasonably aligned with GAAP, it is impracticable for us to disclose pro-forma net earnings information.
Note 5. Leases
We have operating leases for buildings and office equipment used in manufacturing and distribution, engineering, research and development, sales and marketing, and administration activities. The following table presents the lease balances within the Consolidated Balance Sheets related to our operating leases:
Operating lease ROU asset Other assets $ 17,500 $ 16,382
Current operating lease liabilities Other accrued expenses 3,687 3,523
The components of lease costs, the weighted average remaining lease term and the weighted average discount rate were as follows:
Year Ended March 31,
Weighted average remaining lease term in years 7.6 6.8 4.6
Weighted average discount rate 6.7 % 6.2 % 4.1 %
Supplemental cash flow information related to leases was as follows:
Year Ended March 31,
As of March 31, 2026 maturities of lease liabilities are as follows for future years ending March 31:
Future value of lease liabilities 22,497
Less: imputed interest (5,148 )
Present value of lease liabilities $ 17,349
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Note 6. Goodwill and IntangibleAssets, Net
Goodwill
Goodwill arises from the excess purchase price of acquired businesses over the fair value of acquired tangible and intangible assets, less assumed liabilities. Changes in the carrying amount of goodwill were as follows:
Finite-Lived Intangible Assets
Intangible assets other than goodwill consisted of the following:
Amortization expense for intangible assets was as follows:
Year Ended March 31,
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The range of useful lives and weighted-average remaining useful lives of amortizable intangible assets as of March 31, 2026 were as follows:
Approx. Est. Useful Weighted Avg.
Life Remaining Life
Description (Years) (Years)
Customer Relationships 5 - 12 6.6
Other Intangibles 7 - 12 5.0
Estimated future amortization expense for the fiscal years ending March 31 is presented below, based on foreign currency exchange rates in effect as of March 31, 2026:
Fiscal Year Amortization Expense
During fiscal year 2024, we recorded goodwill impairment losses totaling $156,892, consisting of $118,741 in our Clinical Genomics division and $38,151 in our Biopharmaceutical Development division. In addition, we recorded impairments of other intangible assets in our Clinical Genomics division totaling $117,641. These impairment losses were primarily driven by increases in the weighted average cost of capital, which reduced the estimated fair value of the related businesses, as well as downward revisions to expected future financial performance during fiscal year 2024.
Note 7. Supplemental Information
Inventories consisted of the following:
Prepaid expenses and other consisted of the following:
Total prepaid expenses and other $ 8,868 $ 8,029
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Property, plant and equipment consisted of the following:
Total property, plant and equipment, net $ 30,613 $ 32,333
Depreciation expense was as follows:
Year Ended March 31,
Depreciation expense in cost of revenues $ 3,113 $ 3,160 $ 3,031
Accrued payroll and benefits consisted of the following:
Wages and paid-time-off payable 3,333 3,672
Total accrued payroll and benefits $ 19,006 $ 17,858
Other accrued expenses consisted of the following:
Current operating lease liabilities 3,687 3,523
GKE acquisition holdback - 9,315
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Note 8. Indebtedness
Credit Facility
Our secured credit agreement matures in April 2029 and includes:
We refer to the agreement in whole as the “Credit Facility.”
Borrowings under our Credit Facility bear interest at a SOFR rate or a base rate, plus an applicable spread that varies with our total net leverage ratio. On October 10, 2025 we amended the Credit Facility to reduce the range of the spread from 1.5% - 3.0% to 1.25% - 2.50%.
The weighted average interest rate on borrowings under the Credit Facility as of March 31, 2026 was 5.9%.
The financial covenants in the Credit Facility include a maximum leverage ratio of 4.00 to 1.00 on each of the quarterly 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. 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 March 31, 2026, we were in compliance with all required covenants under the terms of the Credit Facility.
Term Loan
We are required to make quarterly principal payments on the Term Loan. During the year ended March 31, 2026, we made required principal payments on the Term Loan of $3,750. For the fiscal years ending March 31, required future principal debt payments on the Term Loan are as follows:
Fiscal Year Amount
Total principal remaining $ 67,500
Unamortized debt issuance costs related to the Term Loan are reflected as a discount to the debt’s carrying value in our Consolidated Balance Sheets and are being amortized to interest expense through maturity. The net carrying amount of the Term Loan was as follows:
Less: debt issuance costs (518 ) (598 )
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Revolver
As of March 31, 2026, the outstanding balance under our Revolver was $84,500, and $40,500 was available for borrowing.
We are obligated to pay quarterly unused commitment fees of between 0.20% and 0.35% of the Revolver’s aggregate principal amount, based on our leverage ratio. We incurred unused commitment fees of $157 and $269 for the years ended March 31, 2026, and March 31, 2025, respectively.
The balance of unamortized customary lender fees related to the Revolver was $1,018 and $1,203 as of March 31, 2026 and 2025, respectively. The lender fees are being amortized to interest expense through maturity.
Convertible Notes
On August 12, 2019, we issued an aggregate principal amount of $172,500 of Notes bearing interest at a rate of 1.375%. Debt issuance costs related to the Notes, consisting of $2,925 of commissions payable to the initial purchasers and $152 of third-party offering costs, were recorded as a reduction to the carrying amount of the Notes and amortized to interest expense over the life of the Notes.
During fiscal year 2025, we repurchased $75,000 principal amount of the Notes in privately negotiated transactions, which resulted in the recognition of a gain on extinguishment of $2,887 recorded in other income for the year ended March 31, 2025.
The Notes matured on August 15, 2025. Upon maturity, we settled the remaining aggregate principal balance of $97,500, as well as $670 of accrued interest, in cash by drawing $97,000 under our Revolver and using $1,170 of cash on hand.
The historical net carrying amount of the Notes was as follows:
Principal outstanding $ 97,500
Unamortized debt issuance costs (203 )
Net carrying value $ 97,297
We recognized interest expense on the Notes as follows:
Year Ended March 31,
Amortization of debt issuance costs 203 546 926
Note 9. Stock Transactions and Stock-Based Compensation
(dollars and shares in thousands, except per share values)
Stock-Based Compensation
On August 22, 2025, our shareholders approved an amendment to the 2021 Equity Plan that increased the number of shares authorized for issuance from 660 shares to 1,156 shares, an increase of 496 shares. There were 537 shares available for future grants under the 2021 Equity Plan as of March 31, 2026.
Stock-based compensation expense recognized in the Consolidated Financial Statements was as follows:
Year Ended March 31,
Amount of income tax expense recognized in earnings 2,616 2,068 2,718
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Time-Based Restricted Stock Units (RSUs)
RSU activity under the 2021 Equity Plan was as follows (shares and dollars in thousands, except per-share data):
Time-Based Restricted Stock Units
Awards forfeited or expired (15 ) 97.38
For the years ended March 31, 2025 and 2024, the weighted average fair values per RSU granted was $94.30 and $133.30, respectively. Unrecognized stock-based compensation expense for RSUs that we have determined are probable of vesting was $6,749 as of March 31, 2026 and is expected to be recognized over a weighted average period of 1.9 years.
The following table summarizes RSU valuation information:
Year Ended March 31,
Performance-Based Restricted Stock Units (PSUs)
We grant performance-based RSUs to certain key employees. Vesting of the awards is contingent upon meeting certain service conditions, as well as meeting certain performance and/or market conditions.
PSU activity under the 2021 Equity Plan was as follows (shares and dollars in thousands, except per-share data):
Performance-Based Restricted Stock Units
Performance adjustment(1) (3 ) 132.29
Awards forfeited or expired - -
For the years ended March 31, 2025 and 2024, the average fair value per PSU granted was $102.57 and $132.29, respectively. Unrecognized stock-based compensation expense for PSUs that we have determined probable of vesting was $2,200 as of March 31, 2026 and is expected to be recognized over a weighted average period of 1.8 years. The total fair value of PSUs vested was $4,289 and $3,492 during the years ended March 31, 2026 and 2025, respectively. There were no PSUs vested or distributed during the fiscal year 2024.
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During the year ended March 31, 2026, the Compensation Committee of the Board of Directors created a plan to award 44 PSUs at target (“the FY26 PSUs”) to eligible employees. The FY26 PSUs are subject to market-based performance conditions measured relative to a selected peer index and service conditions. The market performance measurement period and service period is from June 15,2025 through June 15, 2028. The number of shares that will be earned is based on market performance and will range from 0% to 200% of the target number of shares. If defined minimum targets are not met, no shares will vest.
In October 2021, the Compensation Committee of the Board of Directors granted a special long-term equity award consisting of performance stock units subject to both performance and service conditions to our former CEO. Based on actual achievement of the performance metrics as of the performance period ended March 31, 2024, 23 shares were distributed in fiscal years 2026 and 2025. The remaining 12 shares will vest on October 27, 2026. The unamortized expense associated with the remaining awards was recorded in full in fiscal year 2026 in conjunction with our former CEO’s departure.
Stock Options
During the years ended March 31, 2026 and 2025 there were no options granted. We used the Black-Scholes option-pricing model to estimate the fair value of stock option awards granted in the year ended March 31, 2024. Our weighted‐average assumptions included an expected life of 3.52 years, expected volatility of 37.8%, a risk‐free interest rate of 4.16%, and an expected dividend yield of 0.07%. The weighted‐average Black-Scholes grant date fair value per option granted in fiscal 2024 was $42.76.
Stock option activity was as follows (shares and dollars in thousands, except per-share data):
Stock Options
Awards granted - - -