10-Q 1 mlab20231231_10q.htm FORM 10-Q mlab20231231_10q.htm
0000724004 MESA LABORATORIES INC /CO false --03-31 Q3 2024 1,363 849 22,574 19,768 0 0 25,000,000 25,000,000 5,394,043 5,394,043 5,369,466 5,369,466 0.16 0.16 0.16 0.16 0.16 0.16 Chief Executive Officer Gary Owens November 11, 2023 April 2, 2024 True False True False 5,000 5,000 Accumulated Other Comprehensive [(Loss) Income]. Unallocated corporate expenses and other business activities are reported within Corporate and Other. Intersegment revenues are not significant and are eliminated to arrive at consolidated totals. During the nine months ended December 31, 2022, the fiscal year 2020 PSUs vested and were distributed at 126% of target, based on actual performance results and completion of service conditions. Includes $1,727 of preliminary property, plant and equipment step up, which will be amortized based on the underlying assets' expected lives. During the period from October 16, 2023 to December 31, 2023, $83 of depreciation expense was recorded related to the property, plant and equipment fair value step up. Balances for PSUs are reflected at target. Acquired amortizable intangible assets are currently expected to be amortized on a straight line basis over a weighted average period of 7.4 years. The identified intangible assets will be amortized on a straight line basis over their useful lives, which approximates the pattern that the assets' economic benefits are expected to be consumed. Amortization expense for customer relationships, tradenames, and noncompete agreements will be expensed to general and administrative expense, and amortization expense for intellectual property will be expensed to cost of revenues. During the period from October 16, 2023 to December 31, 2023, $838 of amortization expense was recorded to general and administrative costs and $122 of amortization expense was recorded to cost of revenues in the Sterilization Disinfection Control division. Revenues from GKE GmbH and SAL GmbH are included in the Sterilization and Disinfection Control division beginning upon acquisition on October 16, 2023. Includes $1,507 of preliminary inventory step up, which we expect to amortize within approximately three fiscal quarters from the acquisition date. During the period from October 16, 2023 to December 31, 2023, $412 of inventory step up amortization was recorded to cost of revenues. Preliminary accounting for the fair value step up of GKE China's inventory is incomplete due to the recent closing date. 00007240042023-04-012023-12-31 xbrli:shares 00007240042024-01-29 thunderdome:item iso4217:USD 00007240042023-12-31 00007240042023-03-31 0000724004us-gaap:CustomerRelationshipsMember2023-12-31 0000724004us-gaap:CustomerRelationshipsMember2023-03-31 0000724004us-gaap:IntellectualPropertyMember2023-12-31 0000724004us-gaap:IntellectualPropertyMember2023-03-31 0000724004us-gaap:OtherIntangibleAssetsMember2023-12-31 0000724004us-gaap:OtherIntangibleAssetsMember2023-03-31 iso4217:USDxbrli:shares 00007240042023-10-012023-12-31 00007240042022-10-012022-12-31 00007240042022-04-012022-12-31 0000724004us-gaap:CommonStockMember2023-03-31 0000724004us-gaap:RetainedEarningsMember2023-03-31 0000724004us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-31 0000724004us-gaap:CommonStockMember2023-04-012023-06-30 00007240042023-04-012023-06-30 0000724004us-gaap:RetainedEarningsMember2023-04-012023-06-30 0000724004us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-04-012023-06-30 0000724004us-gaap:CommonStockMember2023-06-30 0000724004us-gaap:RetainedEarningsMember2023-06-30 0000724004us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-06-30 00007240042023-06-30 0000724004us-gaap:CommonStockMember2023-07-012023-09-30 00007240042023-07-012023-09-30 0000724004us-gaap:RetainedEarningsMember2023-07-012023-09-30 0000724004us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-07-012023-09-30 0000724004us-gaap:CommonStockMember2023-09-30 0000724004us-gaap:RetainedEarningsMember2023-09-30 0000724004us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-09-30 00007240042023-09-30 0000724004us-gaap:CommonStockMember2023-10-012023-12-31 0000724004us-gaap:RetainedEarningsMember2023-10-012023-12-31 0000724004us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-10-012023-12-31 0000724004us-gaap:CommonStockMember2023-12-31 0000724004us-gaap:RetainedEarningsMember2023-12-31 0000724004us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-31 0000724004us-gaap:CommonStockMember2022-03-31 0000724004us-gaap:RetainedEarningsMember2022-03-31 0000724004us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-31 00007240042022-03-31 0000724004us-gaap:CommonStockMember2022-04-012022-06-30 00007240042022-04-012022-06-30 0000724004us-gaap:RetainedEarningsMember2022-04-012022-06-30 0000724004us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-012022-06-30 0000724004us-gaap:CommonStockMember2022-06-30 0000724004us-gaap:RetainedEarningsMember2022-06-30 0000724004us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-30 00007240042022-06-30 0000724004us-gaap:CommonStockMember2022-07-012022-09-30 00007240042022-07-012022-09-30 0000724004us-gaap:RetainedEarningsMember2022-07-012022-09-30 0000724004us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-012022-09-30 0000724004us-gaap:CommonStockMember2022-09-30 0000724004us-gaap:RetainedEarningsMember2022-09-30 0000724004us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-09-30 00007240042022-09-30 0000724004us-gaap:CommonStockMember2022-10-012022-12-31 0000724004us-gaap:RetainedEarningsMember2022-10-012022-12-31 0000724004us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-10-012022-12-31 0000724004us-gaap:CommonStockMember2022-12-31 0000724004us-gaap:RetainedEarningsMember2022-12-31 0000724004us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-31 00007240042022-12-31 xbrli:pure 0000724004mlab:GkeAcquisitionMembermlab:GkeGmbhAndSalGmbhMember2023-10-16 0000724004mlab:GkeAcquisitionMembermlab:BeijingGkeScienceTechnologyCoLtdMember2023-10-16 0000724004mlab:GkeAcquisitionMember2023-10-162023-10-16 0000724004mlab:GkeAcquisitionMember2023-10-16 utr:Y 0000724004mlab:GkeAcquisitionMemberus-gaap:CustomerRelationshipsMember2023-10-162023-10-16 0000724004mlab:GkeAcquisitionMemberus-gaap:CustomerRelationshipsMember2023-10-16 0000724004mlab:GkeAcquisitionMemberus-gaap:IntellectualPropertyMember2023-10-162023-10-16 0000724004mlab:GkeAcquisitionMemberus-gaap:IntellectualPropertyMember2023-10-16 0000724004mlab:GkeAcquisitionMemberus-gaap:TradeNamesMember2023-10-162023-10-16 0000724004mlab:GkeAcquisitionMemberus-gaap:TradeNamesMember2023-10-16 0000724004mlab:GkeAcquisitionMemberus-gaap:NoncompeteAgreementsMember2023-10-162023-10-16 0000724004mlab:GkeAcquisitionMemberus-gaap:NoncompeteAgreementsMember2023-10-16 0000724004mlab:GkeAcquisitionMember2023-10-012023-12-31 0000724004mlab:GkeAcquisitionMember2023-04-012023-12-31 0000724004mlab:BelynticAcquisitionMember2022-11-172022-11-17 0000724004mlab:BelynticAcquisitionMember2022-11-17 0000724004us-gaap:OperatingSegmentsMembermlab:ConsumablesMembermlab:SterilizationAndDisinfectionControlMemberus-gaap:TransferredAtPointInTimeMember2023-10-012023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:ConsumablesMembermlab:ClinicalGenomicsMemberus-gaap:TransferredAtPointInTimeMember2023-10-012023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:ConsumablesMembermlab:BiopharmaceuticalDevelopmentMemberus-gaap:TransferredAtPointInTimeMember2023-10-012023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:ConsumablesMembermlab:CalibrationSolutionsMemberus-gaap:TransferredAtPointInTimeMember2023-10-012023-12-31 0000724004mlab:ConsumablesMemberus-gaap:TransferredAtPointInTimeMember2023-10-012023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:HardwareAndSoftwareMembermlab:SterilizationAndDisinfectionControlMemberus-gaap:TransferredAtPointInTimeMember2023-10-012023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:HardwareAndSoftwareMembermlab:ClinicalGenomicsMemberus-gaap:TransferredAtPointInTimeMember2023-10-012023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:HardwareAndSoftwareMembermlab:BiopharmaceuticalDevelopmentMemberus-gaap:TransferredAtPointInTimeMember2023-10-012023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:HardwareAndSoftwareMembermlab:CalibrationSolutionsMemberus-gaap:TransferredAtPointInTimeMember2023-10-012023-12-31 0000724004mlab:HardwareAndSoftwareMemberus-gaap:TransferredAtPointInTimeMember2023-10-012023-12-31 0000724004us-gaap:OperatingSegmentsMemberus-gaap:ServiceMembermlab:SterilizationAndDisinfectionControlMemberus-gaap:TransferredAtPointInTimeMember2023-10-012023-12-31 0000724004us-gaap:OperatingSegmentsMemberus-gaap:ServiceMembermlab:ClinicalGenomicsMemberus-gaap:TransferredAtPointInTimeMember2023-10-012023-12-31 0000724004us-gaap:OperatingSegmentsMemberus-gaap:ServiceMembermlab:BiopharmaceuticalDevelopmentMemberus-gaap:TransferredAtPointInTimeMember2023-10-012023-12-31 0000724004us-gaap:OperatingSegmentsMemberus-gaap:ServiceMembermlab:CalibrationSolutionsMemberus-gaap:TransferredAtPointInTimeMember2023-10-012023-12-31 0000724004us-gaap:ServiceMemberus-gaap:TransferredAtPointInTimeMember2023-10-012023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:SterilizationAndDisinfectionControlMember2023-10-012023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:ClinicalGenomicsMember2023-10-012023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:BiopharmaceuticalDevelopmentMember2023-10-012023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:CalibrationSolutionsMember2023-10-012023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:ConsumablesMembermlab:SterilizationAndDisinfectionControlMemberus-gaap:TransferredAtPointInTimeMember2022-10-012022-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:ConsumablesMembermlab:ClinicalGenomicsMemberus-gaap:TransferredAtPointInTimeMember2022-10-012022-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:ConsumablesMembermlab:BiopharmaceuticalDevelopmentMemberus-gaap:TransferredAtPointInTimeMember2022-10-012022-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:ConsumablesMembermlab:CalibrationSolutionsMemberus-gaap:TransferredAtPointInTimeMember2022-10-012022-12-31 0000724004mlab:ConsumablesMemberus-gaap:TransferredAtPointInTimeMember2022-10-012022-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:HardwareAndSoftwareMembermlab:SterilizationAndDisinfectionControlMemberus-gaap:TransferredAtPointInTimeMember2022-10-012022-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:HardwareAndSoftwareMembermlab:ClinicalGenomicsMemberus-gaap:TransferredAtPointInTimeMember2022-10-012022-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:HardwareAndSoftwareMembermlab:BiopharmaceuticalDevelopmentMemberus-gaap:TransferredAtPointInTimeMember2022-10-012022-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:HardwareAndSoftwareMembermlab:CalibrationSolutionsMemberus-gaap:TransferredAtPointInTimeMember2022-10-012022-12-31 0000724004mlab:HardwareAndSoftwareMemberus-gaap:TransferredAtPointInTimeMember2022-10-012022-12-31 0000724004us-gaap:OperatingSegmentsMemberus-gaap:ServiceMembermlab:SterilizationAndDisinfectionControlMemberus-gaap:TransferredAtPointInTimeMember2022-10-012022-12-31 0000724004us-gaap:OperatingSegmentsMemberus-gaap:ServiceMembermlab:ClinicalGenomicsMemberus-gaap:TransferredAtPointInTimeMember2022-10-012022-12-31 0000724004us-gaap:OperatingSegmentsMemberus-gaap:ServiceMembermlab:BiopharmaceuticalDevelopmentMemberus-gaap:TransferredAtPointInTimeMember2022-10-012022-12-31 0000724004us-gaap:OperatingSegmentsMemberus-gaap:ServiceMembermlab:CalibrationSolutionsMemberus-gaap:TransferredAtPointInTimeMember2022-10-012022-12-31 0000724004us-gaap:ServiceMemberus-gaap:TransferredAtPointInTimeMember2022-10-012022-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:SterilizationAndDisinfectionControlMember2022-10-012022-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:ClinicalGenomicsMember2022-10-012022-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:BiopharmaceuticalDevelopmentMember2022-10-012022-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:CalibrationSolutionsMember2022-10-012022-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:ConsumablesMembermlab:SterilizationAndDisinfectionControlMemberus-gaap:TransferredAtPointInTimeMember2023-04-012023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:ConsumablesMembermlab:ClinicalGenomicsMemberus-gaap:TransferredAtPointInTimeMember2023-04-012023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:ConsumablesMembermlab:BiopharmaceuticalDevelopmentMemberus-gaap:TransferredAtPointInTimeMember2023-04-012023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:ConsumablesMembermlab:CalibrationSolutionsMemberus-gaap:TransferredAtPointInTimeMember2023-04-012023-12-31 0000724004mlab:ConsumablesMemberus-gaap:TransferredAtPointInTimeMember2023-04-012023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:HardwareAndSoftwareMembermlab:SterilizationAndDisinfectionControlMemberus-gaap:TransferredAtPointInTimeMember2023-04-012023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:HardwareAndSoftwareMembermlab:ClinicalGenomicsMemberus-gaap:TransferredAtPointInTimeMember2023-04-012023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:HardwareAndSoftwareMembermlab:BiopharmaceuticalDevelopmentMemberus-gaap:TransferredAtPointInTimeMember2023-04-012023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:HardwareAndSoftwareMembermlab:CalibrationSolutionsMemberus-gaap:TransferredAtPointInTimeMember2023-04-012023-12-31 0000724004mlab:HardwareAndSoftwareMemberus-gaap:TransferredAtPointInTimeMember2023-04-012023-12-31 0000724004us-gaap:OperatingSegmentsMemberus-gaap:ServiceMembermlab:SterilizationAndDisinfectionControlMemberus-gaap:TransferredAtPointInTimeMember2023-04-012023-12-31 0000724004us-gaap:OperatingSegmentsMemberus-gaap:ServiceMembermlab:ClinicalGenomicsMemberus-gaap:TransferredAtPointInTimeMember2023-04-012023-12-31 0000724004us-gaap:OperatingSegmentsMemberus-gaap:ServiceMembermlab:BiopharmaceuticalDevelopmentMemberus-gaap:TransferredAtPointInTimeMember2023-04-012023-12-31 0000724004us-gaap:OperatingSegmentsMemberus-gaap:ServiceMembermlab:CalibrationSolutionsMemberus-gaap:TransferredAtPointInTimeMember2023-04-012023-12-31 0000724004us-gaap:ServiceMemberus-gaap:TransferredAtPointInTimeMember2023-04-012023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:SterilizationAndDisinfectionControlMember2023-04-012023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:ClinicalGenomicsMember2023-04-012023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:BiopharmaceuticalDevelopmentMember2023-04-012023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:CalibrationSolutionsMember2023-04-012023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:ConsumablesMembermlab:SterilizationAndDisinfectionControlMemberus-gaap:TransferredAtPointInTimeMember2022-04-012022-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:ConsumablesMembermlab:ClinicalGenomicsMemberus-gaap:TransferredAtPointInTimeMember2022-04-012022-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:ConsumablesMembermlab:BiopharmaceuticalDevelopmentMemberus-gaap:TransferredAtPointInTimeMember2022-04-012022-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:ConsumablesMembermlab:CalibrationSolutionsMemberus-gaap:TransferredAtPointInTimeMember2022-04-012022-12-31 0000724004mlab:ConsumablesMemberus-gaap:TransferredAtPointInTimeMember2022-04-012022-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:HardwareAndSoftwareMembermlab:SterilizationAndDisinfectionControlMemberus-gaap:TransferredAtPointInTimeMember2022-04-012022-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:HardwareAndSoftwareMembermlab:ClinicalGenomicsMemberus-gaap:TransferredAtPointInTimeMember2022-04-012022-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:HardwareAndSoftwareMembermlab:BiopharmaceuticalDevelopmentMemberus-gaap:TransferredAtPointInTimeMember2022-04-012022-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:HardwareAndSoftwareMembermlab:CalibrationSolutionsMemberus-gaap:TransferredAtPointInTimeMember2022-04-012022-12-31 0000724004mlab:HardwareAndSoftwareMemberus-gaap:TransferredAtPointInTimeMember2022-04-012022-12-31 0000724004us-gaap:OperatingSegmentsMemberus-gaap:ServiceMembermlab:SterilizationAndDisinfectionControlMemberus-gaap:TransferredAtPointInTimeMember2022-04-012022-12-31 0000724004us-gaap:OperatingSegmentsMemberus-gaap:ServiceMembermlab:ClinicalGenomicsMemberus-gaap:TransferredAtPointInTimeMember2022-04-012022-12-31 0000724004us-gaap:OperatingSegmentsMemberus-gaap:ServiceMembermlab:BiopharmaceuticalDevelopmentMemberus-gaap:TransferredAtPointInTimeMember2022-04-012022-12-31 0000724004us-gaap:OperatingSegmentsMemberus-gaap:ServiceMembermlab:CalibrationSolutionsMemberus-gaap:TransferredAtPointInTimeMember2022-04-012022-12-31 0000724004us-gaap:ServiceMemberus-gaap:TransferredAtPointInTimeMember2022-04-012022-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:SterilizationAndDisinfectionControlMember2022-04-012022-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:ClinicalGenomicsMember2022-04-012022-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:BiopharmaceuticalDevelopmentMember2022-04-012022-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:CalibrationSolutionsMember2022-04-012022-12-31 0000724004country:US2023-10-012023-12-31 0000724004country:US2022-10-012022-12-31 0000724004country:US2023-04-012023-12-31 0000724004country:US2022-04-012022-12-31 0000724004country:CN2023-10-012023-12-31 0000724004country:CN2022-10-012022-12-31 0000724004country:CN2023-04-012023-12-31 0000724004country:CN2022-04-012022-12-31 0000724004mlab:OtherMember2023-10-012023-12-31 0000724004mlab:OtherMember2022-10-012022-12-31 0000724004mlab:OtherMember2023-04-012023-12-31 0000724004mlab:OtherMember2022-04-012022-12-31 0000724004us-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMember2023-04-012023-12-31 0000724004mlab:TheNotesMemberus-gaap:SeniorNotesMember2023-12-31 0000724004us-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:SeniorNotesMember2023-12-30 0000724004us-gaap:FairValueInputsLevel2Memberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:SeniorNotesMember2023-12-30 0000724004us-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:SeniorNotesMember2023-03-31 0000724004us-gaap:FairValueInputsLevel2Memberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:SeniorNotesMember2023-03-31 0000724004mlab:OtherLongtermLiabilitiesMembermlab:BelynticAcquisitionMember2022-11-17 0000724004mlab:OtherLongtermLiabilitiesMembermlab:BelynticAcquisitionMember2023-12-31 0000724004us-gaap:CostOfSalesMember2023-10-012023-12-31 0000724004us-gaap:CostOfSalesMember2022-10-012022-12-31 0000724004us-gaap:CostOfSalesMember2023-04-012023-12-31 0000724004us-gaap:CostOfSalesMember2022-04-012022-12-31 0000724004us-gaap:GeneralAndAdministrativeExpenseMember2023-10-012023-12-31 0000724004us-gaap:GeneralAndAdministrativeExpenseMember2022-10-012022-12-31 0000724004us-gaap:GeneralAndAdministrativeExpenseMember2023-04-012023-12-31 0000724004us-gaap:GeneralAndAdministrativeExpenseMember2022-04-012022-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:SterilizationAndDisinfectionControlMember2023-03-31 0000724004us-gaap:OperatingSegmentsMembermlab:ClinicalGenomicsMember2023-03-31 0000724004us-gaap:OperatingSegmentsMembermlab:BiopharmaceuticalDevelopmentMember2023-03-31 0000724004us-gaap:OperatingSegmentsMembermlab:CalibrationSolutionsMember2023-03-31 0000724004us-gaap:OperatingSegmentsMembermlab:SterilizationAndDisinfectionControlMember2023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:ClinicalGenomicsMember2023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:BiopharmaceuticalDevelopmentMember2023-12-31 0000724004us-gaap:OperatingSegmentsMembermlab:CalibrationSolutionsMember2023-12-31 0000724004mlab:SeniorSecuredCreditAgreementMembermlab:TheCreditFacilityTermLoanMembersrt:MaximumMember2021-03-05 0000724004mlab:SeniorSecuredCreditAgreementMembermlab:TheCreditFacilityTermLoanMembersrt:MaximumMember2023-10-05 0000724004us-gaap:RevolvingCreditFacilityMembermlab:SeniorSecuredCreditAgreementMember2021-03-05 0000724004mlab:SeniorSecuredCreditAgreementMembersrt:MaximumMembermlab:SwinglineLoanMember2021-03-05 0000724004us-gaap:LetterOfCreditMembermlab:SeniorSecuredCreditAgreementMembersrt:MaximumMember2021-03-05 0000724004mlab:SeniorSecuredCreditAgreementMembermlab:TheCreditFacilityTermLoanMembersrt:MinimumMember2021-03-05 0000724004mlab:SeniorSecuredCreditAgreementMember2021-03-052021-03-05 0000724004mlab:SeniorSecuredCreditAgreementMembersrt:MinimumMember2021-03-052021-03-05 0000724004mlab:SeniorSecuredCreditAgreementMember2023-12-31 0000724004mlab:SeniorSecuredCreditAgreementMembersrt:MaximumMember2021-03-052021-03-05 0000724004mlab:SeniorSecuredCreditAgreementMember2023-09-242023-12-31 0000724004mlab:SeniorSecuredCreditAgreementMember2023-10-012023-12-31 0000724004mlab:SeniorSecuredCreditAgreementMemberus-gaap:SubsequentEventMember2024-01-012024-01-31 0000724004mlab:TheNotesMemberus-gaap:SeniorNotesMember2019-08-12 0000724004mlab:TheNotesMemberus-gaap:SeniorNotesMember2019-08-122019-08-12 0000724004mlab:TheNotesMemberus-gaap:SeniorNotesMember2023-03-31 0000724004mlab:TheNotesMember2023-10-012023-12-31 0000724004mlab:TheNotesMember2022-10-012022-12-31 0000724004mlab:TheNotesMember2023-04-012023-12-31 0000724004mlab:TheNotesMember2022-04-012022-12-31 00007240042022-04-012023-03-31 0000724004us-gaap:RestrictedStockUnitsRSUMember2023-03-31 0000724004mlab:PerformanceStockUnitsMember2023-03-31 0000724004us-gaap:RestrictedStockUnitsRSUMember2023-04-012023-12-31 0000724004mlab:PerformanceStockUnitsMember2023-04-012023-12-31 0000724004us-gaap:RestrictedStockUnitsRSUMember2023-12-31 0000724004mlab:PerformanceStockUnitsMember2023-12-31 0000724004mlab:TheFy24PsusMembermlab:EligibleEmployeesMember2023-12-31 0000724004mlab:TheFy24PsusMembermlab:EligibleEmployeesMember2023-04-012023-12-31 0000724004mlab:TheFy24PsusMembersrt:MinimumMembermlab:EligibleEmployeesMember2023-04-012023-12-31 0000724004mlab:TheFy24PsusMembersrt:MaximumMembermlab:EligibleEmployeesMember2023-04-012023-12-31 0000724004us-gaap:EmployeeStockOptionMember2023-10-012023-12-31 0000724004us-gaap:EmployeeStockOptionMember2022-10-012022-12-31 0000724004us-gaap:EmployeeStockOptionMember2023-04-012023-12-31 0000724004us-gaap:EmployeeStockOptionMember2022-04-012022-12-31 0000724004us-gaap:RestrictedStockUnitsRSUMember2023-10-012023-12-31 0000724004us-gaap:RestrictedStockUnitsRSUMember2022-10-012022-12-31 0000724004us-gaap:RestrictedStockUnitsRSUMember2022-04-012022-12-31 0000724004mlab:AssumedConversionOfConvertibleDebtMember2023-10-012023-12-31 0000724004mlab:AssumedConversionOfConvertibleDebtMember2022-10-012022-12-31 0000724004mlab:AssumedConversionOfConvertibleDebtMember2023-04-012023-12-31 0000724004mlab:AssumedConversionOfConvertibleDebtMember2022-04-012022-12-31 0000724004mlab:StockAwardsThatWereAntidilutiveMember2023-10-012023-12-31 0000724004mlab:StockAwardsThatWereAntidilutiveMember2022-10-012022-12-31 0000724004mlab:StockAwardsThatWereAntidilutiveMember2023-04-012023-12-31 0000724004mlab:StockAwardsThatWereAntidilutiveMember2022-04-012022-12-31 0000724004mlab:StockAwardsSubjectToPerformanceConditionsMember2023-10-012023-12-31 0000724004mlab:StockAwardsSubjectToPerformanceConditionsMember2022-10-012022-12-31 0000724004mlab:StockAwardsSubjectToPerformanceConditionsMember2023-04-012023-12-31 0000724004mlab:StockAwardsSubjectToPerformanceConditionsMember2022-04-012022-12-31 0000724004mlab:OtherLongtermLiabilitiesMembermlab:BelynticAcquisitionMember2022-12-31 0000724004mlab:BelynticAcquisitionMember2023-10-012023-12-31 0000724004mlab:BelynticAcquisitionMemberus-gaap:SubsequentEventMember2024-01-17 0000724004us-gaap:OperatingSegmentsMember2023-10-012023-12-31 0000724004us-gaap:OperatingSegmentsMember2022-10-012022-12-31 0000724004us-gaap:OperatingSegmentsMember2023-04-012023-12-31 0000724004us-gaap:OperatingSegmentsMember2022-04-012022-12-31 0000724004us-gaap:CorporateNonSegmentMember2023-10-012023-12-31 0000724004us-gaap:CorporateNonSegmentMember2022-10-012022-12-31 0000724004us-gaap:CorporateNonSegmentMember2023-04-012023-12-31 0000724004us-gaap:CorporateNonSegmentMember2022-04-012022-12-31 0000724004mlab:GkeAcquisitionMember2023-12-31 0000724004mlab:GkeAcquisitionMember2023-12-312023-12-31
 

 



Table of Contents

 

United States

Securities and Exchange Commission

Washington, D.C. 20549

 


 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2023

or

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___ to ___

 

Commission File No: 0-11740

 


 

MESA LABORATORIES, INC.

(Exact name of registrant as specified in its charter)

 

 

Colorado

 

84-0872291

 
 

(State or other jurisdiction of

 

(I.R.S. Employer

 
 

incorporation or organization)

 

Identification number)

 
     
 

12100 West Sixth Avenue

   
 

Lakewood, Colorado

 

80228

 
 

(Address of principal executive offices)

 

(Zip Code)

 

 

Registrant’s telephone number, including area code: (303) 987-8000

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each classTrading SymbolName on each exchange on which registered
Common Stock, no par valueMLABThe Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒   No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒     No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes      No ☒

 

Indicate the number of shares outstanding of each of the Issuer’s classes of common stock, as of the latest practicable date:

 

There were 5,394,051 shares of the Issuer’s common stock, no par value, outstanding as of January 29, 2024.

 



 

 



 

Table of Contents

 

 

 

Part I. Financial Information

1
   
 

Item 1. Financial Statements (unaudited) 

1
 

Condensed Consolidated Balance Sheets

1
 

Condensed Consolidated Statements of Income

2
 

Condensed Consolidated Statements of Comprehensive Income (Loss)

3
 

Condensed Consolidated Statements of Stockholders’ Equity

4
  Condensed Consolidated Statements of Cash Flows 5
 

Notes to Condensed Consolidated Financial Statements

6
 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

15
 

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

22
 

Item 4.  Controls and Procedures

23
     

Part II. Other Information

24
   
 

Item 1.  Legal Proceedings

24
 

Item 1A.  Risk factors

24
 

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

24
  Item 5. Other Information 24
 

Item 6.  Exhibits

25
 

Signatures

26
 

Exhibit 31.1 Certifications Pursuant to Rule 13a-14(a)

 
 

Exhibit 31.2 Certifications Pursuant to Rule 13a-14(a)

 
 

Exhibit 32.1 Certifications Pursuant to Rule 13a-14(b) and 18 U.S.C Section 1350

 
 

Exhibit 32.2 Certifications Pursuant to Rule 13a-14(b) and 18 U.S.C Section 1350

 

 

 

 

Part I. Financial Information

 

Item 1. Financial Statements

 

Mesa Laboratories, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands, except share amounts)

 

  

December 31,

  

March 31,

 
  

2023

  

2023

 

ASSETS

        

Current assets:

        

Cash and cash equivalents

 $28,224  $32,910 

Accounts receivable, less allowance for doubtful accounts of $1,363 and $849, respectively

  36,023   42,551 

Inventories

  35,973   34,642 

Prepaid expenses and other

  18,135   8,872 

Total current assets

  118,355   118,975 

Noncurrent assets:

        

Property, plant and equipment, net of accumulated depreciation of $22,574 and $19,768 respectively

  31,775   28,149 

Deferred tax asset

  1,092   1,076 

Other assets

  11,590   10,373 

Customer relationships, net

  162,890   152,189 

Intellectual property, net

  45,753   46,400 

Other intangibles, net

  24,131   18,226 

Goodwill

  346,183   286,444 

Total assets

 $741,769  $661,832 
         

LIABILITIES AND STOCKHOLDERS’ EQUITY

        

Current liabilities:

        

Accounts payable

 $4,554  $6,134 

Accrued payroll and benefits

  9,380   9,433 

Unearned revenues

  14,357   15,694 

Other accrued expenses

  15,892   12,098 

Total current liabilities

  44,183   43,359 

Noncurrent liabilities:

        

Deferred tax liability

  44,340   34,028 

Other long-term liabilities

  17,320   7,693 

Credit facility

  62,000   13,000 

Convertible senior notes, net of debt issuance costs

  170,965   170,272 

Total liabilities

  338,808   268,352 

Stockholders’ equity:

        

Common stock, no par value; authorized 25,000,000 shares; issued and outstanding, 5,394,043 and 5,369,466 shares, respectively

  340,852   332,076 

Retained earnings

  71,953   74,199 

Accumulated other comprehensive (loss)

  (9,844)  (12,795)

Total stockholders’ equity

  402,961   393,480 

Total liabilities and stockholders’ equity

 $741,769  $661,832 

 

See accompanying notes to Condensed Consolidated Financial Statements.

 

 

 

 

Mesa Laboratories, Inc.

Condensed Consolidated Statements of Income

(unaudited)

(in thousands, except per share data)

 

   

Three Months Ended December 31,

   

Nine Months Ended December 31,

 
   

2023

   

2022

   

2023

   

2022

 
                                 

Revenues

  $ 53,473     $ 54,287     $ 157,283     $ 163,489  

Cost of revenues

    20,071       21,522       60,589       62,997  

Gross profit

    33,402       32,765       96,694       100,492  

Operating expense:

                               

Selling

    9,737       8,437       28,363       27,660  

General and administrative

    19,438       16,129       55,024       54,543  

Research and development

    4,294       4,797       14,098       15,486  

Total operating expense

    33,469       29,363       97,485       97,689  

Operating (loss) income

    (67 )     3,402       (791 )     2,803  

Nonoperating expense:

                               

Interest expense and amortization of debt issuance costs

    1,856       1,162       3,809       3,390  

Other (income) expense, net

    (3,869 )     324       (4,284 )     (475 )

Total nonoperating (income) expense, net

    (2,013 )     1,486       (475 )     2,915  

Earnings (loss) before income taxes

    1,946       1,916       (316 )     (112 )

Income tax (benefit) expense

    (170 )     1,465       (653 )     (431 )

Net income

  $ 2,116     $ 451     $ 337     $ 319  
                                 

Earnings per share:

                               

Basic

  $ 0.39     $ 0.08     $ 0.06     $ 0.06  

Diluted

  $ 0.39     $ 0.08     $ 0.06     $ 0.06  
                                 

Weighted-average common shares outstanding:

                               

Basic

    5,393       5,339       5,384       5,312  

Diluted

    5,396       5,360       5,394       5,354  

 

See accompanying notes to Condensed Consolidated Financial Statements.

 

 

 

Mesa Laboratories, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(unaudited)

(in thousands) 

 

   

Three Months Ended December 31,

   

Nine Months Ended December 31,

 
   

2023

   

2022

   

2023

   

2022

 
                                 

Net income

  $ 2,116     $ 451     $ 337     $ 319  

Other comprehensive income (loss):

                               

Foreign currency translation adjustments

    10,965       11,345       2,951       (17,838 )

Comprehensive income (loss)

  $ 13,081     $ 11,796     $ 3,288     $ (17,519 )

 

See accompanying notes to Condensed Consolidated Financial Statements.

 

 

 

Mesa Laboratories, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

(dollars in thousands, except per share data)

 

 

 

  

Common Stock

             
  

Number of Shares

  

Amount

  

Retained Earnings

  

AOCI*

  

Total

 

March 31, 2023

  5,369,466  $332,076  $74,199  $(12,795) $393,480 

Exercise of stock options and vesting of restricted stock units

  20,074   52   -   -   52 

Tax withholding on vesting of restricted stock units

  (5,260)  (712)  -   -   (712)

Dividends paid, $0.16 per share

  -   -   (859)  -   (859)

Stock-based compensation expense

  -   2,968   -   -   2,968 

Foreign currency translation

  -   -   -   (6,661)  (6,661)

Net (loss)

  -   -   (549)  -   (549)

June 30, 2023

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

Exercise of stock options and vesting of restricted stock units

  7,464   304   -   -   304 

Tax withholding on vesting of restricted stock units

  (18)  (2)  -   -   (2)

Dividends paid, $0.16 per share

  -   -   (862)  -   (862)

Stock-based compensation expense

  -   3,183   -   -   3,183 

Foreign currency translation

  -   -   -   (1,353)  (1,353)

Net (loss)

  -   -   (1,230)  -   (1,230)

September 30, 2023

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

Exercise of stock options and vesting of restricted stock units

  2,415   2   -   -   2 

Tax withholding on vesting of restricted stock units

  (98)  (12)  -   -   (12)

Dividends paid, $0.16 per share

  -   -   (862)  -   (862)

Stock-based compensation expense

  -   2,993   -   -   2,993 

Foreign currency translation

  -   -   -   10,965   10,965 

Net income

  -   -   2,116   -   2,116 

December 31, 2023

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

 

 

  

Common Stock

             
  

Number of Shares

  

Amount

  

Retained Earnings

  

AOCI*

  

Total

 

March 31, 2022

  5,265,627  $313,460  $76,675  $3,666  $393,801 

Exercise of stock options and vesting of restricted stock units

  31,690   1,438   -   -   1,438 

Tax withholding on vesting of restricted stock units

  (9)  (2)  -   -   (2)

Dividends paid, $0.16 per share

  -   -   (843)  -   (843)

Stock-based compensation expense

  -   3,432   -   -   3,432 

Foreign currency translation

  -   -   -   (15,957)  (15,957)

Net (loss)

  -   -   (1,438)  -   (1,438)

June 30, 2022

  5,297,308  $318,328  $74,394  $(12,291) $380,431 

Exercise of stock options and vesting of restricted stock units

  42,014   2,778   -   -   2,778 

Tax withholding on vesting of restricted stock units

  (3,051)  (572)  -   -   (572)

Dividends paid, $0.16 per share

  -   -   (852)  -   (852)

Stock-based compensation expense

  -   4,371   -   -   4,371 

Foreign currency translation

  -   -   -   (13,226)  (13,226)

Net income

  -   -   1,306   -   1,306 

September 30, 2022

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

Exercise of stock options and vesting of restricted stock units

  7,376   307   -   -   307 

Tax withholding on vesting of restricted stock units

  (1,757)  (335)  -   -   (335)

Dividends paid, $0.16 per share

  -   -   (855)  -   (855)

Stock-based compensation expense

  -   2,056   -   -   2,056 

Foreign currency translation

  -   -   -   11,345   11,345 

Net income

  -   -   451   -   451 

December 31, 2022

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

 

*Accumulated Other Comprehensive (Loss) Income.

 

See accompanying notes to Condensed Consolidated Financial Statements.

 

 

 

Mesa Laboratories, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

 

 

   

Nine Months Ended December 31,

 
   

2023

   

2022

 

Cash flows from operating activities:

               

Net income

  $ 337     $ 319  

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

               

Depreciation of property, plant and equipment

    2,899       3,196  

Amortization of acquisition-related intangibles

    22,380       21,573  

Stock-based compensation expense

    9,144       9,859  

Non-cash interest and debt amortization

    692       679  

Other

    (1,614 )     (1,038 )

Cash from changes in operating assets and liabilities:

               

Accounts receivable, net

    8,294       (1,979 )

Inventories

    217       (9,191 )

Prepaid expenses and other assets

    (7,841 )     (2,312 )

Accounts payable

    (1,656 )     (1,339 )

Accrued liabilities and taxes payable

    (124 )     (5,221 )

Unearned revenues

    (1,478 )     918  

Net cash provided by operating activities

    31,250       15,464  

Cash flows from investing activities:

               

Acquisitions, net of cash acquired

    (79,700 )     (4,950 )

Purchases of property, plant and equipment

    (2,032 )     (3,518 )

Net cash (used in) investing activities

    (81,732 )     (8,468 )

Cash flows from financing activities:

               

Proceeds from the issuance of debt

    71,000       -  

Repayment of debt

    (22,000 )     (30,000 )

Dividends paid

    (2,583 )     (2,550 )

Proceeds from the exercise of stock options

    358       4,523  

Payment of tax withholding obligation on vesting of restricted stock

    (726 )     (909 )

Other financing, net

    (280 )     -  

Net cash provided by (used in) financing activities

    45,769       (28,936 )

Effect of exchange rate changes on cash and cash equivalents

    27       (1,305 )

Net (decrease) in cash and cash equivalents

    (4,686 )     (23,245 )

Cash and cash equivalents at beginning of period

    32,910       49,346  

Cash and cash equivalents at end of period

  $ 28,224     $ 26,101  

 

Supplemental non-cash activity:                
Acquisition-related consideration held back against potential indemnification losses  

9,526

     $ -  

 

See accompanying notes to Condensed Consolidated Financial Statements.

 

 

Mesa Laboratories, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

(dollar and share amounts in thousands, unless otherwise specified)

 

 

 

Note 1. Description of Business and Summary of Significant Accounting Policies

 

Description of Business

 

In this quarterly report on Form 10-Q, Mesa Laboratories, Inc., a Colorado corporation, together with its subsidiaries, is collectively referred to as “we,” “us,” “our,” the “Company,” or “Mesa.”

 

We are a multinational leader in the design and manufacture of life sciences tools and critical quality control solutions for regulated applications in the pharmaceutical, healthcare, and medical device industries. We offer products and services to help our customers ensure product integrity, increase patient and worker safety, and improve the quality of life throughout the world. We have manufacturing operations in the United States and Europe, and our products are marketed by our sales personnel in North America, Europe, and Asia Pacific, and by independent distributors in these areas as well as throughout the rest of the world. We prefer markets in which we can establish a strong presence and achieve high gross profit margins.

 

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

 

 Sterilization and Disinfection Control - manufactures and sells biological, chemical, and cleaning indicators used to assess the effectiveness of sterilization and disinfection processes in the pharmaceutical, healthcare, medical device, and dental industries. The division also provides testing and laboratory services, mainly to the dental industry. 
 

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

 

Biopharmaceutical Development - develops, manufactures and sells automated systems for protein analysis (immunoassays) and peptide synthesis solutions. Immunoassays and peptide synthesis solutions accelerate the discovery, development, and manufacture of biotherapeutic therapies, among other applications. 

 

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

 

Unallocated corporate expenses are reported within Corporate and Other.

 

Basis of Presentation

 

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information. In the opinion of management, such unaudited information includes all adjustments, consisting of normal recurring adjustments necessary for the fair statement of our financial position and results of operations. The results of operations for interim periods are not necessarily indicative of results that may be achieved for the entire year. The year-end Condensed Consolidated Balance Sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The Condensed Consolidated Financial Statements include the accounts of Mesa and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. We made no material changes to the application of our significant accounting policies disclosed in our annual report on Form 10-K. This quarterly report should be read in conjunction with the consolidated financial statements included in our annual report on Form 10-K for the year ended  March 31, 2023.

 

Our fiscal year ends on March 31. References in this Quarterly Report to a particular “year” or “quarter” refer to our fiscal year or fiscal quarters, respectively.

 

Prior Period Reclassifications

 

Certain prior year amounts presented have been reclassified to conform with current presentation. The reclassifications have not resulted in any changes to consolidated or segment amounts reported in the Consolidated Financial Statements for any periods presented in this Form 10-Q.

 

Risks and Uncertainties

 

The preparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the reporting date and revenues and expenses during the reporting periods. These estimates represent management's judgment about the outcome of future events. The global business environment continues to be impacted by cost pressure, the overall effects of economic uncertainty on customers' purchasing patterns, high interest rates, and other factors. It is not possible to accurately predict the future impact of such events and circumstances. Actual results could differ from our estimates.

 

Recently Issued Accounting Pronouncements

 

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures." ASU No. 2023-07 requires all annual disclosures currently required by Topic 280 to be included in interim periods and requires disclosure of significant segment expenses regularly provided to the chief operating decision maker ("CODM"), a description of other segment items by reportable segment, and applicable additional measures of segment profit or loss used by the CODM when allocating resources and assessing business performance. The guidance is effective for public business entities for fiscal years beginning after December 31, 2023 (our fiscal year 2025), with early adoption permitted. We are currently assessing the effect the adoption of this standard will have on our financial statements.

 

Page 6

 

In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." ASU No. 2023-09, which enhances the transparency, effectiveness and comparability of income tax disclosures by requiring consistent categories and greater disaggregation of information related to income tax rate reconciliations and the jurisdictions in which income taxes are paid. The guidance is effective for public business entities for fiscal years beginning after December 15, 2024 (our fiscal year 2026), with early adoption permitted. We are currently assessing the effect the adoption of this standard will have on our financial statements.

 

We have reviewed all recently issued accounting pronouncements and have concluded that, other than as described above, they are either not applicable to us or are not expected to have a significant impact on our consolidated financial statements.

 

 

Note 2. Significant Transactions

 

Acquisition of GKE

In accordance with the sale and purchase agreement executed October 14, 2023, we acquired 100% of the outstanding shares of GKE GmbH and SAL GmbH effective October 16, 2023, and upon approval by applicable Chinese regulators, we acquired 100% of the outstanding shares of Beijing GKE Science & Technology Co. Ltd. (“GKE China,” and, together with GKE GmbH and SAL GmbH, “GKE”), effective December 31, 2023 (the "GKE acquisition"). GKE primarily develops, manufactures and sells a highly competitive portfolio of chemical sterilization indicators, biologics, and process challenge devices to protect patient safety across global healthcare markets. GKE’s strength in chemical indicators and our Sterilization and Disinfection Control division’s strength in biologic indictors are complementary, as chemical and biologic indicators are used in the same sterility validation workflows. Additionally, GKE’s healthcare-focused commercial capabilities in Europe and Asia greatly expand our reach in the healthcare markets in those geographies. We are working to obtain regulatory 510(k) clearance on certain GKE products for sale in the United States, which would further expand organic revenues growth opportunities from the GKE business. 

 

Total cash consideration for the GKE acquisition was $88,789, net of cash and financial liabilities and subject to customary purchase price adjustments, including working capital adjustments of approximately $1,000 expected to be paid to Mesa from the seller during the fourth quarter of fiscal year 2024. Of the total acquisition price approximately $9,500, will be held back for a period of 18 months from the acquisition closing as security against potential indemnification losses. We funded the acquisition through a combination of cash on-hand and a total of $71,000 borrowed under our line of credit (See Note 7. "Indebtedness"). We began operating GKE GmbH and SAL GmbH on October 16, 2023, and they are included as wholly owned subsidiaries in our consolidated financial statements beginning on that date. GKE China is included as a wholly owned subsidiary in our Condensed Consolidated Balance Sheets as of December 31, 2023, and we began consolidating its results of operations beginning January 1, 2024.

 

Preliminary Allocation of Purchase Price

We accounted for the GKE acquisition as a business combination using the acquisition method of accounting. Under the acquisition method of accounting, the acquiree's identifiable assets acquired and liabilities assumed are recorded at their acquisition date fair values and are consolidated with those of Mesa. The relief from royalty method was used to value our trade names and intellectual property, while the multi-period excess earnings method, a form of the income approach, was used to value our customer relationships. The non-compete agreements were valued using a probability-weighted estimate of the expected economic impact that would occur in the absence of the agreements. Significant judgments and estimates are required when performing valuations, including, among other assumptions, internal rates of return, revenue growth rates, customer attrition rates, and royalty rates, all of which are considered Level 3 inputs. We worked with external valuation experts to prepare the preliminary valuation using information obtained during due diligence and from professional valuation databases and other sources. These estimates were based on assumptions that we believe to be reasonable; however, actual results  may differ from these estimates.

 

This preliminary purchase price allocation is subject to revision as more detailed analyses are completed. If additional information about the fair value of assets acquired and liabilities assumed becomes available, we  may further revise the preliminary purchase price allocation as soon as is practical, but will not do so more than one year from the acquisition date. Only items identified as of the acquisition date are considered for subsequent adjustment. Any such revisions or changes  may be material. The final valuation may include, but may not be limited to: (1) changes in allocations to intangible assets such as customer relationships, trade names, intellectual property, and non-compete agreements, as well as goodwill, (2) changes to inventory, (3) changes to deferred tax balances, (4) changes in our assessment of the purchase price, and (5) other changes to assets and liabilities. 

 

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

 

  

Life (in years)

  

Amount

 

Cash and cash equivalents

     $4,192 

Accounts receivable (a)

      2,252 

Inventories (b)

      3,823 

Other current assets

      188 

Total current assets

      10,455 

Property, plant and equipment (c)

      2,772 

Other noncurrent assets

      3,030 

Intangible assets:

        

Goodwill (d)

      54,470 

Customer relationships (e)

  7   26,876 

Intellectual property (e)

  7   3,524 

Tradenames (e)

  10   6,049 

Non-compete agreements (e)

  3   743 

Total assets acquired

     $107,919 

Accounts payable

      11 

Other current liabilities

      2,491 

Deferred tax liabilities

      9,763 

Other long-term liabilities

      2,673 

Total liabilities assumed

      14,938 

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

     $88,789 
(a)Trade receivables are expected to be collected. 
(b)Includes $1,507 of preliminary inventory step up, which we expect to amortize within approximately three fiscal quarters from the acquisition date. During the period from October 16, 2023 to December 31, 2023, $412 of inventory step up amortization was recorded to cost of revenues. Preliminary accounting for the fair value step up of GKE China's inventory is incomplete due to the recent closing date. 

 

Page 7

 
(c)Includes $1,727 of preliminary property, plant and equipment step up, which will be amortized based on the underlying assets' expected lives. During the period from October 16, 2023 to December 31, 2023, $83 of depreciation expense was recorded related to the property, plant and equipment fair value step up. 
(d)Acquired goodwill of $54,470, all of which is allocated to the Sterilization Disinfection Control division, represents the value expected to arise from expanded global market opportunities, particularly in the healthcare industry, as well as expected synergies and GKE's assembled workforce, none of which qualify as amortizable intangible assets. The goodwill acquired is expected to be deductible for income tax purposes.
(e)Acquired amortizable intangible assets are currently expected to be amortized on a straight line basis over a weighted average period of 7.4 years. The identified intangible assets will be amortized on a straight line basis over their useful lives, which approximates the pattern that the assets' economic benefits are expected to be consumed. Amortization expense for customer relationships, tradenames, and noncompete agreements will be expensed to general and administrative expense, and amortization expense for intellectual property will be expensed to cost of revenues. During the period from October 16, 2023 to December 31, 2023, $838 of amortization expense was recorded to general and administrative costs and $122 of amortization expense was recorded to cost of revenues in the Sterilization Disinfection Control division. 

 

Acquisition related costs, such as legal and advisory fees, and integration related costs of $770 and $1,275 for the three and nine months ended  December 31, 2023, respectively, are not included as a component of consideration transferred, but are expensed in the periods in which the costs are incurred and are reflected on the Condensed Consolidated Statements of Income in general and administrative expenses.

 

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

 

It is impracticable for us to disclose interim pro-forma information regarding the combined results of the operations of Mesa and GKE as if the acquisition had occurred at an earlier date. Prior to acquisition, GKE was a privately owned company with requirements to close their accounting records on an annual cadence rather than on an interim basis, and certain interim financial information cannot be recreated for accurate financial results. For example, prior to Mesa's ownership, GKE accounted for costs of goods sold at an unburdened rate and performed only annual inventory accounts. We would be unable to retroactively establish costs of revenues in accordance with U.S. GAAP given the unavailability of sufficient information for ending interim periods. Additionally, all transactions occurring between the three GKE entities, which are substantial, were accounted for at arms-length prior to acquisition. As presentation of pro-forma information would require extensive estimation and could not be sourced from sufficiently factual interim information reasonably aligned with U.S. GAAP, we are unable to disclose pro-forma information.   

 

Belyntic GmbH

On November 17, 2022, we acquired substantially all of the assets and certain liabilities of Belyntic GmbH’s peptide purification business (“the Belyntic acquisition”) for $6,450, of which $4,950 was paid on the date of acquisition. The remaining $1,500 is due to the Belyntic sellers as patent applications are approved (see Note 11. "Commitments and Contingencies"). The business complements our existing peptide synthesis business, part of the Biopharmaceutical Development segment, by adding a new consumables line that can be used with the instruments we sell. The new PurePep® EasyClean products are an environmentally conscious chemistry solution to purify peptides.

 

During fiscal year 2023, we prepared an analysis of the valuation of net assets acquired in the Belyntic acquisition. During the nine months ended December 31, 2023, based on a detailed financial analysis of the financial model, we recorded certain measurement period adjustments to reclassify amounts from intangible assets into goodwill. Our preliminary purchase price allocation has been finalized as of December 31, 2023. 

 

 

Note 3. Revenue

 

We develop, manufacture, market, sell and maintain life sciences tools and quality control instruments and related consumables. We evaluate revenues internally primarily based on operating segment and the nature of goods and services provided.

 

Hardware sales include physical products such as instruments used for molecular and genetic analysis, protein synthesizers, medical meters, wireless sensor systems, and data loggers. Hardware sales  may be offered with accompanying perpetual or annual software licenses, which in some cases are required for the hardware to function.

 

Consumables are typically used on a one-time basis and require frequent replacement in our customers' operating cycles. Consumables sold by our Clinical Genomics and Biopharmaceutical Development divisions, such as reagents used for molecular and genetic analysis or solutions used for protein synthesis, are critical to the ongoing use of our instruments. Consumables such as biological indicator test strips sold by our Sterilization and Disinfection Control Division are used on a standalone basis.

 

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

 

Typically, revenue is recognized upon shipment of a product, upon completion of a discrete service, or over a period of time reflective of the performance period in the applicable contract, depending on when our obligation to the customer is satisfied. The significant majority of our revenues and related receivables are generated from contracts with customers that are 12 months or less in duration.

 

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

 

   

Three Months Ended December 31, 2023

 
   

Sterilization and Disinfection Control (1)

   

Clinical Genomics

   

Biopharmaceutical Development

   

Calibration Solutions

   

Total

 
                                         

Consumables

  $ 16,832     $ 9,758     $ 4,080     $ 539     $ 31,209  

Hardware and Software

    180       1,639       2,672       8,254       12,745  

Services

    2,326       1,149       2,678       3,366       9,519  

Total Revenues

  $ 19,338     $ 12,546     $ 9,430     $ 12,159     $ 53,473  

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

 

Page 8

 
   

Three Months Ended December 31, 2022

 
   

Sterilization and Disinfection Control

   

Clinical Genomics

   

Biopharmaceutical Development

   

Calibration Solutions

   

Total

 
                                         

Consumables

  $ 14,307     $ 10,885     $ 3,584     $ 553     $ 29,329  

Hardware and Software

    95       3,371       5,844       7,023       16,333  

Services

    1,881       1,329       2,218       3,197       8,625  

Total Revenues

  $ 16,283     $ 15,585     $ 11,646     $ 10,773     $ 54,287  

 

   

Nine Months Ended December 31, 2023

 
   

Sterilization and Disinfection Control (1)

   

Clinical Genomics

   

Biopharmaceutical Development

   

Calibration Solutions

   

Total

 

Consumables

  $ 45,288     $ 28,490     $ 12,753     $ 1,834     $ 88,365  

Hardware and Software

    381       9,540       7,838       22,216       39,975  

Services

    6,676       3,434       7,935       10,898       28,943  

Total Revenues

  $ 52,345     $ 41,464     $ 28,526     $ 34,948     $ 157,283  

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

 

   

Nine Months Ended December 31, 2022

 
   

Sterilization and Disinfection Control

   

Clinical Genomics

   

Biopharmaceutical Development

   

Calibration Solutions

   

Total

 
                                         

Consumables

  $ 41,239     $ 34,815     $ 11,248     $ 2,272     $ 89,574  

Hardware and Software

    619       9,349       16,656       18,696       45,320  

Services

    6,163       4,361       6,853       11,218       28,595  

Total Revenues

  $ 48,021     $ 48,525     $ 34,757     $ 32,186     $ 163,489  

 

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

 

   

Three Months Ended December 31,

   

Nine Months Ended December 31,

 
   

2023

   

2022

   

2023

   

2022

 

United States

  $ 25,595     $ 28,645     $ 79,205     $ 88,756  

China

    4,942       7,482       18,584       18,659  

Other

    22,936       18,160       59,494       56,074  

Total revenues

  $ 53,473     $ 54,287     $ 157,283     $ 163,489  

 

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

 

Contract Balances

Our contracts have varying payment terms and conditions. Some customers prepay for products and services, resulting in unearned revenues or customer deposits, called contract liabilities. Short-term contract liabilities are included within unearned revenues in the accompanying Condensed Consolidated Balance Sheets, and long-term contract liabilities are included within Other long-term liabilities in the accompanying Condensed Consolidated Balance Sheets.

 

A summary of contract liabilities is as follows:

 

Contract liabilities as of March 31, 2023

  $ 16,098  

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

    (6,858 )

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

    5,478  

Contract liabilities balance as of December 31, 2023

  $ 14,718  

 

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

 

Page 9

 
 

Note 4. Fair Value Measurements

 

Our financial instruments consist primarily of cash and cash equivalents, trade accounts receivable, obligations under trade accounts payable, and debt. Due to their short-term nature, the carrying values for cash and cash equivalents, trade accounts receivable, and trade accounts payable approximate fair value; they are classified within Level 1 of the fair value hierarchy. 

 

Historically, the financial instruments that subject us to the highest concentration of credit risk are cash and cash equivalents and accounts receivable. We maintain relationships and cash deposits at multiple banking institutions across the world in an effort to diversify and reduce risk of loss. Concentration of credit risk with respect to accounts receivable is limited to customers to whom we make significant sales. No customers accounted for more than 10% of total trade receivables as of December 31, 2023.

 

We have outstanding $172,500 aggregate principal amount of 1.375% convertible senior notes due  August 15, 2025 (the "Notes"). We estimate the fair value of the Notes using Level 2 inputs based on the last actively traded price or observable market input preceding the end of the reporting period, and the fair value is approximately correlated to our stock price.

 

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

 

   

December 31, 2023

   

March 31, 2023

 
   

Carrying Value

   

Fair Value (Level 2)

   

Carrying Value

   

Fair Value (Level 2)

 

Notes

  $ 170,965     $ 158,916     $ 170,272     $ 161,072  

 

The Belyntic acquisition obligates us to pay contingent consideration of up to $1,500 cash upon regulatory approval of certain patent applications (see Note 11. "Commitments and Contingencies"). We estimate the fair value of the remaining contingent consideration using Level 3 inputs and a probability-weighted outcome analysis based on our expectations of patent approval, leveraging our historical experience and expert input, and we adjust the estimated fair value at each reporting period through earnings. The fair value of the remaining contingent consideration was $1,067 as of December 31, 2023 and is recorded in other accrued expenses on the accompanying Condensed Consolidated Balance Sheets.

 

Amounts recognized or disclosed at fair value in the unaudited condensed consolidated financial statements on a nonrecurring basis include the initial recognition and disclosure of most assets and liabilities purchased in business acquisitions and any related measurement period adjustments. Additionally, assets such as property and equipment, operating lease assets, goodwill and other intangible assets are adjusted to fair value if determined to be impaired. We recorded no impairments during the three and nine months ended December 31, 2023 or 2022. Fair values of such assets and liabilities require measurement using Level 3 inputs.

 

There were no transfers between the levels of the fair value hierarchy during the three and nine months ended December 31, 2023 or 2022.

 

 

Note 5. Supplemental Balance Sheets Information

 

Inventories consisted of the following:

 

   

December 31, 2023

   

March 31, 2023

 

Raw materials

  $ 19,169     $ 20,064  

Work in process

    1,155       617  

Finished goods

    15,649       13,961  

Total inventories

  $ 35,973     $ 34,642  

 

Prepaid expenses and other current assets consisted of the following: 

 

   

December 31, 2023

   

March 31, 2023

 

Prepaid expenses

  $ 3,271     $ 2,498  

Deposits

    2,143       1,376  

Prepaid income taxes

    8,176       953  

Other current assets

    4,545       4,045  

Total prepaid expenses and other

  $ 18,135     $ 8,872  

 

Accrued payroll and benefits consisted of the following:

 

   

December 31, 2023

   

March 31, 2023

 

Bonus payable

  $ 3,757     $ 4,461  

Wages and paid-time-off payable

    3,150       2,329  

Payroll related taxes

    1,998       1,982  

Other benefits payable

    475       661  

Total accrued payroll and benefits

  $ 9,380     $ 9,433  

 

Page 10

 

Other accrued expenses consisted of the following: 

 

   

December 31, 2023

   

March 31, 2023

 

Accrued business taxes

  $ 6,744     $ 5,941  

Current operating lease liabilities

    3,135       2,868  

Income taxes payable

    1,809       992  

Other

    4,204       2,297  

Total other accrued expenses

  $ 15,892     $ 12,098  

 

 

Note 6. Goodwill and Intangible Assets, Net

 

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

 

   

December 31, 2023

   

March 31, 2023

 
   

Gross Carrying Amount

   

Accumulated Amortization

   

Net Carrying Amount

   

Gross Carrying Amount

   

Accumulated Amortization

   

Net Carrying Amount

 

Customer relationships

  $ 265,408     $ (102,518 )   $ 162,890     $ 238,247     $ (86,058 )   $ 152,189  

Intellectual property

    71,169       (25,416 )     45,753       65,950       (19,550 )     46,400  

Other intangibles

    31,867       (7,736 )     24,131       24,793       (6,567 )     18,226  

Total

  $ 368,444     $ (135,670 )   $ 232,774     $ 328,990     $ (112,175 )   $ 216,815  

 

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

 

   

Three Months Ended December 31,

   

Nine Months Ended December 31,

 
   

2023

   

2022

   

2023

   

2022

 

Amortization in cost of revenues

  $ 1,883     $ 1,695     $ 5,367     $ 5,094  

Amortization in general and administrative

    6,092       5,452       17,013       16,479  

Total

  $ 7,975     $ 7,147     $ 22,380     $ 21,573  

 

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

 

Remainder of 2024

  $ 8,389  

2025

    32,663  

2026

    31,857  

2027

    31,200  

2028

    30,587  

 

The change in the carrying amount of goodwill was as follows:

 

   

Sterilization and Disinfection Control

   

Clinical Genomics

   

Biopharmaceutical Development

   

Calibration Solutions

   

Total

 

March 31, 2023

  $ 29,559     $ 135,811     $ 83,857     $ 37,217       286,444  

Effect of foreign currency translation

    2,460       (55 )     2,009       14       4,428  

Goodwill related to GKE acquisition

    54,470       -       -       -       54,470  

Measurement period adjustment, Belyntic Acquisition

    -       -       841       -       841  

December 31, 2023

  $ 86,489     $ 135,756     $ 86,707     $ 37,231     $ 346,183  

 

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

 

Note 7. Indebtedness

 

Credit Facility

On October 5, 2023, we amended the terms of our four-year senior credit facility (the “Credit Facility”) to increase the maximum principal amount available to us from $75,000 to $125,000. As of  December 31, 2023, the Credit Facility includes 1) a revolving credit facility in an amended aggregate principal amount of up to $125,0002) a swingline loan in an aggregate principal amount not exceeding $5,000, and 3) letters of credit in an aggregate stated amount not exceeding $2,500. The Credit Facility also provides for an incremental term loan or an increase in revolving commitments in an aggregate principal amount of at a minimum $25,000 and at a maximum $75,000, subject to the satisfaction of certain conditions and lender considerations. The Credit Facility matures in March 2025.

 

The financial covenants in the Credit Facility include a maximum leverage ratio of 4.5 to 1.0 for the period ended December 31, 2023, except that we  may have a leverage ratio of 5.75 to 1.0 for a period of four consecutive quarters following a permitted acquisition, including the permitted GKE acquisition consummated during the three months ended December 31, 2023. The Credit Facility also stipulates a minimum fixed charge coverage ratio of 1.25 to 1.0. Other covenants include restrictions on our ability to incur debt, grant liens, make fundamental changes, engage in certain transactions with affiliates, or conduct asset sales. As of  December 31, 2023, we were in compliance with all covenants.

 

Amounts borrowed under the Credit Facility bear interest at either a base rate or a SOFR rate plus an applicable spread. The interest rate on borrowings under our line of credit as of December 31, 2023 was 7.2%. We are obligated to pay quarterly unused commitment fees of between 0.15% and 0.35% of the Credit Facility’s aggregate principal amount, based on our leverage ratio. 

 

Page 11

 

During the three months ended December 31, 2023, we borrowed a total of $71,000 under the facility to fund the majority of the acquisition of GKE. See Note 2. "Significant Transactions" for further information. We paid $9,000 against the Credit Facility during our third fiscal quarter, and as of December 31, 2023, $62,000 remained outstanding. We paid an additional $4,000 on the outstanding balance in January 2024. 

 

Convertible Notes 

On August 12, 2019, we issued an aggregate principal amount of $172,500 of Notes. The net proceeds from the Notes, after deducting underwriting discounts and commissions and other related offering expenses payable by us, were approximately $167,056. The Notes mature on August 15, 2025, unless earlier repurchased or converted, and bear interest at a rate of 1.375% payable semi-annually in arrears on February 15 and August 15 each year. The Notes are initially convertible, subject to certain conditions, at a conversion rate of 3.5273 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $283.50 per share of common stock. 

 

Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock. The circumstances necessary for conversion were not met during the three and nine months ended December 31, 2023. As of December 31, 2023, the Notes were classified as a long-term liability on our Condensed Consolidated Balance Sheets. The if-converted value of the Notes did not exceed the principal balance as of  December 31, 2023.

 

The net carrying amount of the Notes was as follows:

 

  

December 31, 2023

  

March 31, 2023

 

Principal outstanding

 $172,500  $172,500 

Unamortized debt issuance costs

  (1,535)  (2,228)

Net carrying value

 $170,965  $170,272 

 

We recognized interest expense on the Notes as follows:

 

  

Three Months Ended December 31,

  

Nine Months Ended December 31,

 
  

2023

  

2022

  

2023

  

2022

 

Coupon interest expense at 1.375%

 $593  $593  $1,779  $1,779 

Amortization of debt issuance costs

  231   227   692   679 

Total interest and amortization of debt issuance costs

 $824  $820  $2,471  $2,458 

 

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

 

 

Note 8. Stockholders' Equity

 

Stock-Based Compensation

During the nine months ended December 31, 2023, we issued stock options, restricted stock units ("RSUs") and performance-based restricted stock units ("PSUs") pursuant to the Mesa Laboratories, Inc. Amended and Restated 2021 Equity Incentive Plan, which authorizes the issuance of 660 shares of common stock to eligible participants.

 

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

 

   

Three Months Ended December 31,

   

Nine Months Ended December 31,

 
   

2023

   

2022

   

2023

   

2022

 

Stock-based compensation expense

  $ 2,993     $ 2,056     $ 9,144     $ 9,859  

Amount of income tax expense (benefit) recognized in earnings

    210       226       727       (1,855 )

Stock-based compensation expense, net of tax

  $ 3,203     $ 2,282     $ 9,871     $ 8,004  

 

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

 

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

 

   

Stock Options

 
   

Shares Subject to Options

   

Weighted- Average Exercise Price per Share

   

Weighted-Average Remaining Contractual Life (Years)

   

Aggregate Intrinsic Value

 

Outstanding as of March 31, 2023

    163     $ 200.62       3.3     $ 1,643  

Awards granted

    53       131.67                  

Awards forfeited or expired

    (17 )     208.03                  

Awards exercised

    (2 )     132.40                  

Outstanding as of December 31, 2023

    197     $ 182.12       3.5     $ -  

 

Page 12

 

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

 

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

 

   

Time-Based Restricted Stock Units

   

Performance-Based Restricted Stock Units

 
   

Number of Shares

   

Weighted- Average Grant Date Fair Value per Share

   

Number of Shares

   

Weighted- Average Grant Date Fair Value per Share

 

Outstanding as of March 31, 2023(1)

    57     $ 209.27       44     $ 286.02  

Awards granted(1)

    54       134.03       32       132.29  

Awards forfeited

    (5 )     171.83       -       -  

Awards distributed

    (27 )     212.36       -       -  

Outstanding as of December 31, 2023(1)

    79     $ 158.94       76     $ 223.07  

 

(1)

Balances for PSUs are reflected at target.

 

Outstanding time-based RSUs vest and settle in shares of our common stock on a one-for-one basis. The majority of the RSUs granted to employees during the nine months ended December 31, 2023 vest in equal installments on the first, second, and third anniversary of the grant date. RSUs granted to certain executives during the nine months ended  December 31, 2023 vest in equal installments on September 1, 2024, June 21, 2025 and June 21, 2026. RSUs granted to non-employee directors during the nine months ended December 31, 2023 vest one year from the grant date. We recognize the expense relating to RSUs, net of estimated forfeitures, on a straight-line basis over the vesting period.

 

We grant PSUs to certain key employees. The number of shares earned is determined at the end of each performance period based on Mesa's achievement of certain pre-defined targets per the related award agreement. The outstanding PSUs vest upon completion of the service period described in the award agreement. We recognize the expense relating to the performance-based RSUs based on the probable outcome of achievement of the performance targets on a straight-line basis over the service period. 

 

During the nine months ended December 31, 2023, the Compensation Committee of the Board of Directors created a plan to award 32 PSUs at target with a grant date fair value of $132.29 that are subject to service, performance, and market conditions to eligible employees. The service period is from June 21, 2023 through June 21, 2026. The company performance conditions will be measured for the period from April 1, 2023 through  March 31, 2024. The quantity of shares that will be earned based upon company performance will range from 0% to 200% of the targeted number of shares; if the defined minimum targets are not met, then no shares will vest for performance. In addition, the number of PSUs earned based on company performance will be adjusted up or down by a maximum of 20% pursuant to a market-based measure of performance comparing Mesa’s share price to a peer group over the period from April 1, 2023 until March 31, 2026. 

 

 

Note 9. Ear