Mesa Laboratories Inc 10-Q for FY2023 Q2
Mesa Laboratories Inc /Co/ (MLAB)
About this 10-Q
Mesa Laboratories Inc filed this 10-Q on November 3, 2022, covering the quarter ended September 30, 2022 (FY2023 Q2).
Headline figures
Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $58.75M
- up 63.9% from $35.84M a year earlier
- Net income
- $1.31M
- down 64.9% from net income of $3.72M a year earlier
- Diluted EPS
- $0.24
- down 65.7% from $0.70 a year earlier
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
MESA LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction of | (I.R.S. Employer | |||
| incorporation or organization) | Identification number) | |||
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| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name on each exchange on which registered |
| The |
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.
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).
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.
| | 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
Indicate the number of shares outstanding of each of the Issuer’s classes of common stock, as of the latest practicable date:
There were
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| Condensed Consolidated Statements of Comprehensive (Loss) Income |
3 | |
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| 5 | ||
| 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 |
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| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
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| Exhibit 31.1 Certifications Pursuant to Rule 13a-14(a) |
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| Exhibit 31.2 Certifications Pursuant to Rule 13a-14(a) |
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| Exhibit 32.1 Certifications Pursuant to Rule 13a-14(b) and 18 U.S.C Section 1350 |
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| Exhibit 32.2 Certifications Pursuant to Rule 13a-14(b) and 18 U.S.C Section 1350 |
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Condensed Consolidated Balance Sheets
(unaudited)
(dollars in thousands, except share amounts)
| September 30, | March 31, | |||||||
| 2022 | 2022 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, less allowance for doubtful accounts of $ and $, respectively | ||||||||
| Inventories | ||||||||
| Prepaid expenses and other | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net of accumulated depreciation of $ and $, respectively | ||||||||
| Deferred tax asset | ||||||||
| Other assets | ||||||||
| Intangibles, net | ||||||||
| Goodwill | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued payroll and benefits | ||||||||
| Unearned revenues | ||||||||
| Other accrued expenses | ||||||||
| Total current liabilities | ||||||||
| Deferred tax liability | ||||||||
| Other long-term liabilities | ||||||||
| Credit Facility | ||||||||
| Convertible senior notes, net of discounts and debt issuance costs | ||||||||
| Total liabilities | ||||||||
| Stockholders’ equity: | ||||||||
| Common stock, par value; authorized shares; issued and outstanding, and shares, respectively | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive (loss) income | ( | ) | ||||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes to Condensed Consolidated Financial Statements.
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except per share data)
| Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Research and development | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating income (loss) | ( | ) | ||||||||||||||
| Nonoperating expense (income): | ||||||||||||||||
| Interest expense and amortization of debt discount | ||||||||||||||||
| Other (income), net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total nonoperating expense (income) | ( | ) | ||||||||||||||
| Earnings (loss) before income taxes | ( | ) | ||||||||||||||
| Income tax provision (benefit) | ( | ) | ||||||||||||||
| Net income (loss) | $ | $ | $ | ( | ) | $ | ||||||||||
| Earnings (loss) per share: | ||||||||||||||||
| Basic | $ | $ | $ | ( | ) | $ | ||||||||||
| Diluted | $ | $ | $ | ( | ) | $ | ||||||||||
| Weighted-average common shares outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
See accompanying notes to Condensed Consolidated Financial Statements.
Condensed Consolidated Statements of Comprehensive (Loss) Income
(unaudited)
(in thousands)
| Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Net income (loss) | $ | $ | $ | ( | ) | $ | ||||||||||
| Other comprehensive (loss) income: | ||||||||||||||||
| Foreign currency translation adjustments | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Comprehensive (loss) income | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
See accompanying notes to Condensed Consolidated Financial Statements.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
| Six Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation expense | ||||||||
| Non-cash interest and debt amortization | ||||||||
| Deferred taxes | ( | ) | - | |||||
| Other | ( | ) | ( | ) | ||||
| Cash (used in) provided by changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | ( | ) | ||||||
| Inventories | ( | ) | ( | ) | ||||
| Prepaid expenses and other assets | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Accrued liabilities and taxes payable | ( | ) | ( | ) | ||||
| Unearned revenues | ||||||||
| Net cash provided by operating activities | ||||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property, plant and equipment | ( | ) | ( | ) | ||||
| Net cash (used in) investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Payments of debt | ( | ) | ||||||
| Dividends | ( | ) | ( | ) | ||||
| Proceeds from the exercise of stock options | ||||||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ) | ||||||
| Net (decrease) increase in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
See accompanying notes to Condensed Consolidated Financial Statements.
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, 2022 | $ | $ | $ | $ | ||||||||||||||||
| Exercise of stock options and vesting of restricted stock units | - | - | ||||||||||||||||||
| Dividends paid, $ per share | - | - | ( | ) | - | ( | ) | |||||||||||||
| Stock-based compensation expense | - | - | - | |||||||||||||||||
| Foreign currency translation | - | - | - | ( | ) | ( | ) | |||||||||||||
| Net (loss) | - | - | ( | ) | - | ( | ) | |||||||||||||
| June 30, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Exercise of stock options and vesting of restricted stock units | - | - | ||||||||||||||||||
| Dividends paid, $ per share | - | - | ( | ) | - | ( | ) | |||||||||||||
| Stock-based compensation expense | - | - | - | |||||||||||||||||
| Foreign currency translation | - | - | - | ( | ) | ( | ) | |||||||||||||
| Net income | - | |||||||||||||||||||
| September 30, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common Stock | ||||||||||||||||||||
| Number of Shares | Amount | Retained Earnings | AOCI* | Total | ||||||||||||||||
| March 31, 2021 | $ | $ | $ | $ | ||||||||||||||||
| Exercise of stock options and vesting of restricted stock units | - | - | ||||||||||||||||||
| Dividends paid, $ per share | - | - | ( | ) | - | ( | ) | |||||||||||||
| Stock-based compensation expense | - | - | - | |||||||||||||||||
| Foreign currency translation | - | - | - | |||||||||||||||||
| Cumulative adjustment due to adoption of ASU No. 2020-06 | - | ( | ) | - | ( | ) | ||||||||||||||
| Net income | - | - | - | |||||||||||||||||
| June 30, 2021 | $ | $ | $ | $ | ||||||||||||||||
| Exercise of stock options and vesting of restricted stock units | - | - | ||||||||||||||||||
| Dividends paid, $ per share | - | - | ( | ) | - | ( | ) | |||||||||||||
| Stock-based compensation expense | - | - | - | |||||||||||||||||
| Foreign currency translation | - | - | - | ( | ) | ( | ) | |||||||||||||
| Net income | - | - | - | |||||||||||||||||
| September 30, 2021 | $ | $ | $ | $ | ||||||||||||||||
*Accumulated Other Comprehensive (Loss) Income.
See accompanying notes to Condensed Consolidated Financial Statements.
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 manufacturer, developer, and seller of life science tools and critical quality control products and services, many of which are sold into niche markets that are driven by regulatory requirements. 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 September 30, 2022, we managed our operations in four reportable segments, or divisions:
| ● | Clinical Genomics - develops, manufactures, and sells highly sensitive, low-cost, high-throughput genetic analysis tools used by clinical labs to perform genomic clinical testing in several therapeutic areas, such as screenings for hereditary diseases, pharmacogenetics and oncology related applications. | |
| ● | Sterilization and Disinfection Control - manufactures and sells biological, cleaning, and chemical indicators which are used to assess the effectiveness of sterilization and disinfection processes in the hospital, medical device, and pharmaceutical industries. The division also provides testing and laboratory services, mainly to the dental industry. |
| ● | 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 drugs. |
| ● | Calibration Solutions - develops, manufactures, and sells quality control and calibration products used to measure or calibrate temperature, pressure, pH, humidity, and other chemical or physical parameters for health and safety purposes, primarily in hospital, medical device manufacturing, pharmaceutical manufacturing, and various laboratory environments. |
Non-reportable operating segments and 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 the 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. We made no material changes to the application of our significant accounting policies that were disclosed in our 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, 2022.
Our fiscal year ends on March 31. References in this Quarterly Report to a particular “year” or “year-end” mean our fiscal year, references to the first quarter of fiscal year 2023 refer to the period from April 1, 2022 through June 30, 2022, and references to the second quarter of fiscal year 2023 refer to the period from July 1, 2022 through September 30, 2022. References to “fiscal year 2022” refer to the fiscal year ended March 31, 2022, and to “fiscal year 2023” refer to the fiscal year ending March 31, 2023.
Prior Period Reclassification
Certain amounts presented for prior periods related to the Biopharmaceutical Development division in Note 3. "Revenue Recognition" have been reclassified out of revenues from consumables and into revenues from hardware and services. These reclassifications have not resulted in any change to the Condensed Consolidated Financial Statements for and 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 judgement about the outcome of future events. The business and economic uncertainty resulting from the novel coronavirus pandemic ("COVID-19"), supply chain challenges, cost pressure and the overall effects of the current high inflation environment on customers' purchasing patterns has made such estimates more difficult to calculate. Accordingly, actual results could differ from those estimates.
Recently Issued Accounting Pronouncements
We have reviewed all recently issued accounting pronouncements and have concluded that 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
On October 20, 2021, we completed the acquisition of Agena Bioscience, Inc. (“Agena”) for $
We funded the acquisition and transactions relating thereto with cash on hand and borrowings under the Credit Facility (as defined below). Of the cash consideration we paid, approximately $
Agena Preliminary Purchase Price Allocation
During the three months ended September 30, 2022, we continued analyses of the valuation of net assets acquired in the Agena Acquisition. This preliminary purchase price allocation is subject to revision as more detailed analyses are completed with respect to prepaid taxes, tax accruals, and deferred tax positions.
The following table summarizes the allocation of the purchase price as of October 20, 2021:
| Life (in years) | Amount | ||||||
| Cash and cash equivalents | $ | ||||||
| Accounts receivable | |||||||
| Other current assets | |||||||
| Total current assets | |||||||
| Property, plant and equipment/noncurrent assets | |||||||
| Deferred tax asset | |||||||
| Intangible assets: | |||||||
| Goodwill | N/A | ||||||
| Customer relationships | |||||||
| Intellectual property | |||||||
| Tradenames | |||||||
| Total Assets acquired | $ | ||||||
| Accounts payable | |||||||
| Unearned revenues | |||||||
| Other current liabilities | |||||||
| Total current liabilities | |||||||
| Deferred tax liability | |||||||
| Other noncurrent liabilities | |||||||
| Total liabilities assumed | $ | ||||||
| Total purchase price, net of cash acquired | $ | ||||||
Acquired Goodwill
Acquired goodwill of $
Unaudited Pro Forma Information
The following unaudited pro forma financial information presents the combined results of operations of Mesa and Agena as if the acquisition had occurred on April 1, 2021 after giving effect to certain pro forma adjustments.
| Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Pro forma total revenues | $ | $ | $ | $ | ||||||||||||
| Pro forma net income | ||||||||||||||||
The pro forma financial information includes adjustments that are directly attributable to the business combinations and are factually supportable. The pro forma adjustments include incremental amortization of intangible assets, additional stock-based compensation expense for key Agena employees, the removal of interest expense attributable to Agena’s external debt that was paid off as part of the acquisition, and the pro forma tax impact for such adjustments. Cost savings or operating synergies expected to result from the acquisition are not included in the pro forma results. For the three and six months ended September 30, 2022, the pro forma financial information excludes $
Note 3. Revenue Recognition
We develop, manufacture, market, sell and maintain life sciences tools and quality control instruments and related software, consumables, and services.
Sales of hardware, such as instruments used for molecular and genetic analysis, protein synthesizers, medical meters, wireless sensor systems, and data loggers are generally driven by our acquisition of new customers, growth of existing customers, or customers replacing existing equipment. Hardware sales may be offered with accompanying perpetual or annual software licenses, which in some cases are required for the hardware to function. We also offer discrete and ongoing service and maintenance contracts on our instruments.
Consumables are typically used on a one-time basis and require frequent replacement in our customers' operating cycles. Consumables 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 are used on a standalone basis.
We evaluate our revenues internally based on operating segment, the timing of revenue generation, and the nature of goods and services provided. Typically, discrete revenue is recognized upon shipment of a product or upon completion of a service, while contracted revenue is recognized over a period of time reflective of the performance obligation period in the applicable contract. 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 six months ended September 30, 2022 and 2021, respectively:
| Three Months Ended September 30, 2022 | ||||||||||||||||||||
| Clinical Genomics | Sterilization and Disinfection Control | Biopharmaceutical Development | Calibration Solutions | Total | ||||||||||||||||
| Discrete Revenues | ||||||||||||||||||||
| Consumables | $ | $ | $ | $ | $ | |||||||||||||||
| Hardware and Software | ||||||||||||||||||||
| Services | ||||||||||||||||||||
| Contracted Revenues | ||||||||||||||||||||
| Services and Software | ||||||||||||||||||||
| Total Revenues | $ | $ | $ | $ | $ | |||||||||||||||
| Three Months Ended September 30, 2021 | ||||||||||||||||||||
| Clinical Genomics* | Sterilization and Disinfection Control | Biopharmaceutical Development | Calibration Solutions | Total | ||||||||||||||||
| Discrete Revenues | ||||||||||||||||||||
| Consumables | $ | $ | $ | $ | $ | |||||||||||||||
| Hardware and Software | ||||||||||||||||||||
| Services | ||||||||||||||||||||
| Contracted Revenues | ||||||||||||||||||||
| Services and Software | ||||||||||||||||||||
| Total Revenues | $ | $ | $ | $ | $ | |||||||||||||||
| Six Months Ended September 30, 2022 | ||||||||||||||||||||
| Clinical Genomics | Sterilization and Disinfection Control | Biopharmaceutical Development | Calibration Solutions | Total | ||||||||||||||||
| Discrete Revenues | ||||||||||||||||||||
| Consumables | $ | $ | $ | $ | $ | |||||||||||||||
| Hardware and Software | ||||||||||||||||||||
| Services | ||||||||||||||||||||
| Contracted Revenues | ||||||||||||||||||||
| Services and Software | ||||||||||||||||||||
| Total Revenues | $ | $ | $ | $ | $ | |||||||||||||||
| Six Months Ended September 30, 2021 | ||||||||||||||||||||
| Clinical Genomics* | Sterilization and Disinfection Control | Biopharmaceutical Development | Calibration Solutions | Total | ||||||||||||||||
| Discrete Revenues | ||||||||||||||||||||
| Consumables | $ | $ | $ | $ | $ | |||||||||||||||
| Hardware and Software | ||||||||||||||||||||
| Services | ||||||||||||||||||||
| Contracted Revenues | ||||||||||||||||||||
| Services and Software | ||||||||||||||||||||
| Total Revenues | $ | $ | $ | $ | $ | |||||||||||||||
*Revenues in the Clinical Genomics division represent transactions subsequent to the Agena Acquisition on October 20, 2021.
Revenues from external customers are attributed to individual countries based upon the locations to which the products are shipped or exported, or the locations where services are performed, as follows:
| Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| United States | $ | $ | $ | $ | ||||||||||||
| China | ||||||||||||||||
| Other | ||||||||||||||||
| Total revenues | $ | $ | $ | $ | ||||||||||||
Other than China, no foreign country exceeds 10% of total revenues.
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 other accrued expenses and 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, 2022 | $ | |||
| Prior year liabilities recognized in revenues during the six months ended September 30, 2022 | ( | ) | ||
| Contract liabilities added during the six months ended September 30, 2022, net of revenues recognized | ||||
| Contract liabilities balance as of September 30, 2022 | $ |
Contract liabilities primarily relate to service contracts with original expected service durations of 12 months or less and will be recognized to revenue as time passes.
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. We measure our cash equivalents at fair value using quoted market prices in an active market, and we classify them 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. It is our policy to invest in highly liquid cash equivalent financial instruments with high credit ratings and to maintain low single issuer exposure (except U.S. treasuries). Concentration of credit risk with respect to accounts receivable is limited to customers to which we make significant sales. We reserve an allowance for potential write-offs of accounts receivable using historical collection experience and current and expected future economic and market conditions, but we have not written off any significant accounts to date. To manage credit risk, we consider the creditworthiness of new and existing customers, and we regularly review outstanding balances and payment histories. We may require pre-payments from customers under certain circumstances and may limit future purchases until payments are made on past due amounts.
We have outstanding $
| September 30, 2022 |
March 31, 2022 |
|||||||||||||||
| Carrying Value |
Fair Value (Level 2) |
Carrying Value |
Fair Value (Level 2) |
|||||||||||||
| Notes |
$ | $ | $ | $ | ||||||||||||
Assets recognized or disclosed at fair value in the unaudited condensed consolidated financial statements on a nonrecurring basis include items such as property and equipment, operating lease assets, goodwill, and other intangible assets. These assets are measured at fair value if determined to be impaired. Fair values assigned to assets acquired and liabilities assumed in the Agena Acquisition, except deferred revenues, were measured using Level 3 inputs. There were no transfers between the levels of the fair value hierarchy during the three and six months ended September 30, 2022 or 2021, respectively.
Note 5. Supplemental Balance Sheets Information
Inventories consist of the following:
| September 30, 2022 |
March 31, 2022 |
|||||||
| Raw materials |
$ | $ | ||||||
| Work in process |
||||||||
| Finished goods |
||||||||
| Total inventories |
$ | $ | ||||||
Prepaid expenses and other consist of the following:
| September 30, 2022 |
March 31, 2022 |
|||||||
| Prepaid expenses |
$ | $ | ||||||
| Deposits |
||||||||
| Prepaid income taxes |
||||||||
| Other current assets |
||||||||
| Total prepaid expenses and other |
$ | $ | ||||||
Accrued payroll and benefits consist of the following:
| September 30, 2022 |
March 31, 2022 |
|||||||
| Bonus payable |
$ | $ | ||||||
| Wages and paid-time-off payable |
||||||||
| Payroll related taxes |
||||||||
| Other benefits payable |
||||||||
| Total accrued payroll and benefits |
$ | $ | ||||||
Note 6. Goodwill and Intangible Assets, Net
Finite-lived intangible assets consist of the following:
| September 30, 2022 |
March 31, 2022 |
|||||||||||||||||||||||
| Gross Carrying Amount |
Accumulated Amortization |
Net Carrying Amount |
Gross Carrying Amount |
Accumulated Amortization |
Net Carrying Amount |
|||||||||||||||||||
| Customer relationships |
$ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Intellectual property |
( |
) | ( |
) | ||||||||||||||||||||
| Other intangibles |
( |
) | ( |
) | ||||||||||||||||||||
| Total |
$ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ||||||||||||||
Amortization expense for finite-lived intangible assets acquired in a business combination was as follows:
| Three Months Ended September 30, |
Six Months Ended September 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Amortization in cost of revenues |
$ | $ | $ | $ | ||||||||||||
| Amortization in general and administrative expense |
||||||||||||||||
| Total |
$ | $ | $ | $ | ||||||||||||
For the following fiscal years ending March 31, amortization expense is estimated as follows:
| Remainder of 2023 |
|
||
| 2024 |
|
||
| 2025 |
|
||
| 2026 |
|
||
| 2027 |
|
The change in the carrying amount of goodwill was as follows:
| Clinical Genomics | Sterilization and Disinfection Control | Biopharmaceutical Development | Calibration Solutions | Total | ||||||||||||||||
| March 31, 2022 | $ | $ | $ | $ | $ | |||||||||||||||
| Effect of foreign currency translation | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Goodwill related to Agena acquisition | ||||||||||||||||||||
| September 30, 2022 | $ | $ | $ | $ | $ | |||||||||||||||
Note 7. Indebtedness
Credit Facility
We maintain a senior credit facility (the “Credit Facility”) that includes 1) a revolving credit facility in an aggregate principal amount of up to $
Amounts borrowed under the Credit Facility bear interest at either a base rate or a Eurodollar rate, plus an applicable spread. The weighted average interest rate on borrowing under our line of credit was 4.9% and 1.5% as of September 30, 2022 and March 31, 2022, respectively. We are obligated to pay quarterly unused commitment fees of between
The financial covenants in the Credit Facility include a maximum leverage ratio of
In October 2022, we repaid $2,000 of the outstanding balance on our Credit Facility.
Convertible Notes
On August 12, 2019, we issued an aggregate principal amount of $
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, at our election. Our current intent is to settle conversions entirely in shares of common stock. We will reevaluate this policy from time to time as we receive conversion notices from note holders. The circumstances necessary for conversion were not met during the three months ended September 30, 2022. As of September 30, 2022, the Notes are classified as a long-term liability on our Condensed Consolidated Balance Sheets as the circumstances necessary for conversion were not satisfied as of the end of the period. The if-converted value of the Notes did not exceed the principal balance as of September 30, 2022.
The net carrying amount of the Notes was as follows:
| September 30, 2022 |
March 31, 2022 |
|||||||
| Principal outstanding |
$ | $ | ||||||
| Unamortized debt issuance costs |
( |
) | ( |
) | ||||
| Net carrying value |
$ | $ | ||||||
We recognized interest expense on the Notes as follows:
| Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Coupon interest expense at 1.375% | $ | $ | $ | $ | ||||||||||||
| Amortization of debt discounts and issuance costs | ||||||||||||||||
| Total interest and amortization of debt issuance costs | $ | $ | $ | $ | ||||||||||||
The effective interest rate on the notes is approximately
Note 8. Stockholders' Equity
Stock-Based Compensation
During the six months ended September 30, 2022, we issued stock options, restricted stock units ("RSUs") and performance-based restricted stock units ("PSUs") pursuant to the Mesa Laboratories, Inc. 2021 Equity Incentive Plan (the "2021 Equity Plan"), which authorizes the issuance of
Expense recognized related to stock-based compensation is as follows:
| Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Stock-based compensation expense | $ | $ | $ | $ | ||||||||||||
| Amount of income tax (benefit) recognized in earnings | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Stock-based compensation expense, net of tax | $ | $ | $ | $ | ||||||||||||
Stock-based compensation expense is included in cost of revenues, selling, general and administrative, and research and development expense in the accompanying unaudited Condensed Consolidated Statements of Operations.
The following is a summary of stock option award activity for the six months ended September 30, 2022:
| 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, 2022 | $ | $ | ||||||||||||||
| Awards granted | ||||||||||||||||
| Awards forfeited or expired | ( | ) | ||||||||||||||
| Awards exercised | ( | ) | ||||||||||||||
| Outstanding as of September 30, 2022 | $ | $ | ||||||||||||||
The stock options granted during the six months ended September 30, 2022 vest in equal installments on the first, second, and third anniversary of the grant date.
The following is a summary of RSU award activity for the six months ended September 30, 2022:
| 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, 2022(1) | $ | $ | ||||||||||||||
| Awards granted(1) | ||||||||||||||||
| Performance adjustment(2) | ||||||||||||||||
| Awards forfeited | ( | ) | ||||||||||||||
| Awards distributed(2) | ( | ) | ( | ) | ||||||||||||
| Outstanding as of September 30, 2022(1) | $ | $ | ||||||||||||||
| (1) | Balances for performance-based restricted stock units ("PSUs") are reflected at target. |
| (2) | During the six months ended September 30, 2022, the fiscal year 2020 PSUs vested and were distributed at 126% of target, based on actual performance results and completion of service conditions. |
The outstanding time-based RSUs vest and settle in shares of our common stock on a one-for-one basis. Substantially all of the RSUs granted during the six months ended September 30, 2022 vest in equal installments on the first, second, and third anniversary of the grant date. We recognize the expense relating to RSUs, net of estimated forfeitures, on a straight-line basis over the vesting period.
PSUs vest upon completion of the service period described in the award agreement and based on achievement of the performance targets described in the award agreements. We recognize the expense relating to the performance-based RSUs based on the probable outcome of achievement of the performance targets on a straight-line basis over the service period.
During the six months ended September 30, 2022, the Compensation Committee of the Board of Directors created a plan to award
During fiscal year 2020, we awarded 8 PSUs (the "FY 20 PSUs") subject to both service and performance conditions to eligible employees. The FY 20 PSUs had a grant date fair value of $
Note 9. Earnings (Loss) Per Share
Basic earnings (loss) per share 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 earnings (loss) per share, except that it includes the potential dilution that could occur if dilutive securities were exercised. Potentially dilutive securities include stock options and both time and performance based RSUs (collectively “stock awards”), as well as common shares underlying the Notes. Stock awards are excluded from the calculation of diluted EPS if they are subject to performance conditions that have not yet been achieved or are antidilutive. Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would then have an antidilutive effect. There was no dilution in our diluted EPS calculation for the six months ended September 30, 2022 as we incurred a net loss and the effect would have been antidilutive.
The impact of the assumed conversion of the Notes calculated under the if-converted method was antidilutive, and as such, shares underlying the Notes were excluded from the diluted EPS calculation for the three and six months ended September 30, 2022 and September 30, 2021.
The following table presents a reconciliation of the denominators used in the computation of basic and diluted earnings (loss) per share:
| Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Net income (loss) available for shareholders | $ | $ | $ | ( | ) | $ | ||||||||||
| Weighted average outstanding shares of common stock | ||||||||||||||||
| Dilutive effect of stock options | ||||||||||||||||
| Dilutive effect of RSUs | ||||||||||||||||
| Fully diluted shares | ||||||||||||||||
| Basic earnings (loss) per share | $ | $ | $ | ( | ) | $ | ||||||||||
| Diluted earnings (loss) per share | $ | $ | $ | ( | ) | $ | ||||||||||
The following stock awards were excluded from the calculation of diluted EPS:
| Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Assumed conversion of the Notes | ||||||||||||||||
| Stock awards that were anti-dilutive | ||||||||||||||||
| Stock awards subject to performance conditions | ||||||||||||||||
| Total stock awards excluded from diluted EPS | ||||||||||||||||
Note 10. Income Taxes
For interim income tax reporting, we estimate our annual effective tax rate and apply this effective tax rate to our year-to-date pre-tax income. Each quarter, our estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. Additionally, the tax effects of significant unusual or infrequently occurring items are recognized as discrete items in the interim period in which the events occur. There is a potential for volatility in the effective tax rate due to several factors, including changes in the mix of the pre-tax income and the jurisdictions to which it relates, changes in tax laws and foreign tax holidays, settlement with taxing authorities, and foreign currency fluctuations.
Our effective income tax rate was (
Note 11. Commitments and Contingencies
We review the adequacy of our legal reserves on a quarterly basis and establish reserves for loss contingencies that are both probable and reasonably estimable. As of September 30, 2022, there were no material legal reserves recorded on the accompanying unaudited Condensed Consolidated Balance Sheets.
Note 12. Segment Information
During fiscal year 2022, we realigned our financial reporting segments to reflect how management evaluates the business and allocates resources. The acquisition of Agena expanded our presence further into the life sciences tools market and provided an impetus for the creation of our new Clinical Genomics reportable segment. The strategic shift in our business also resulted in a change to the way we manage other business units, and as a result, our historical Instruments and Continuous Monitoring reportable segments have been combined to create Calibration Solutions. Prior year amounts presented have been reclassified to conform to current year presentation. Our change in financial reporting segments has not resulted in any change to previously reported consolidated amounts.
| Three Months Ended September 30, |
Six Months Ended September 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Revenues: |
||||||||||||||||
| Clinical Genomics |
$ | $ | $ | $ | ||||||||||||
| Sterilization and Disinfection Control |
||||||||||||||||
| Biopharmaceutical Development |
||||||||||||||||
| Calibration Solutions |
||||||||||||||||
| Total revenues (a) |
$ | $ | $ | $ | ||||||||||||
| Gross profit |
||||||||||||||||
| Clinical Genomics |
$ | $ | $ | $ | ||||||||||||
| Sterilization and Disinfection Control |
||||||||||||||||
| Biopharmaceutical Development |
||||||||||||||||
| Calibration Solutions |
||||||||||||||||
| Reportable segment gross profit |
||||||||||||||||
| Corporate and Other (b) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Gross profit |
$ | $ | $ | $ | ||||||||||||
| Reconciling Items: |
||||||||||||||||
| Operating expenses |
||||||||||||||||
| Operating income (loss) |
( |
) | ||||||||||||||
| Nonoperating expense (income), net |
( |
) | ||||||||||||||
| Earnings (loss) before income taxes |
$ | $ | $ | ( |
) | $ | ||||||||||
| (a) |
Intersegment revenues are not significant and are eliminated to arrive at consolidated totals. |
| (b) |
Non-reportable operating segments and unallocated corporate expenses are reported within Corporate and Other. |
The following table sets forth inventories by reportable segment. Our chief operating decision maker is not provided with any other segment asset information.
| September 30, |
March 31, |
|||||||
| 2022 |
2022 |
|||||||
| Clinical Genomics |
$ | $ | ||||||
| Sterilization and Disinfection Control |
||||||||
| Biopharmaceutical Development |
||||||||
| Calibration Solutions |
||||||||
| Total inventories |
$ | $ | ||||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Dollars in thousands, except per share amounts)
Forward Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements in this Quarterly Report on Form 10-Q do not constitute guarantees of future performance. Investors are cautioned that statements in this Quarterly Report on Form 10-Q which are not strictly historical statements, including, without limitation, express or implied statements or guidance regarding current or future financial performance and position; potential impairment of future earnings; anticipated effects of, and future actions to be taken in response to, the COVID-19 pandemic; results of acquisitions; management’s strategy, plans and objectives for future operations or acquisitions, product development and sales; product research and development; regulatory approvals; selling, general and administrative expenditures; intellectual property; development and manufacturing plans; availability of materials and components; and adequacy of capital resources and financing plans constitute forward-looking statements. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which the Company operates, and management’s beliefs and assumptions. In addition, other written and oral statements that constitute forward-looking statements may be made by the Company or on the Company’s behalf. Words such as “expect,” “seek,” “intend,” “could,” “believe,” “may,” “anticipate,” “estimate,” “plan,” “target,” “project,” or variations of such words and similar expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated, including risks associated with: our ability to successfully grow our business, including as a result of acquisitions; the results that acquisitions have on our operations; our ability to consummate acquisitions at our historical rate and at appropriate prices, and our ability to effectively integrate acquired businesses and achieve desired results; the market acceptance of our products; technological or market viability of our products; reduced demand for our products, including as a result of competitive factors; conditions in the global economy and the particular markets we serve; significant developments or uncertainties stemming from governmental actions, including changes in trade policies and medical device regulations; the timely development and commercialization, and customer acceptance, of enhanced and new products and services; retirement of old products and customer migration to new products; projections of revenues, growth, operating results, profit margins, earnings, expenses, margins, tax rates, tax provisions, liquidity, cash flows, demand, and competition; the effects of additional actions taken to become more efficient or lower costs; the duration and impact of the COVID-19 pandemic and its adverse effects on our business; supply chain challenges; cost pressures and the overall effects of the current high inflation environment on customers’ purchasing patterns; laws regulating fraud and abuse in the health care industry and the privacy and security of health and personal information; product liability; information security; outstanding claims, legal and regulatory proceedings; international business challenges including anti-corruption and sanctions laws; tax audits and assessments and other contingent liabilities; foreign currency exchange rates and fluctuations in those rates; general economic, industry, and capital markets conditions, including rising interest rates and potential recessionary conditions; the timing of any of the foregoing; and assumptions underlying any of the foregoing. Such risks and uncertainties also include those listed in Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended March 31, 2022 and in this report. The foregoing list sets forth many, but not all, of the factors that could impact our ability to achieve results described in any forward-looking statements. We disclaim any obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.
Overview
We are a multinational manufacturer, developer, and seller of life science tools and quality control products and services, many of which are sold into niche markets that are driven by regulatory requirements. 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 September 30, 2022, we managed our operations in four reportable segments, or divisions: Clinical Genomics, Sterilization and Disinfection Control, Biopharmaceutical Development, and Calibration Solutions. Each of our divisions are described further in "Results of Operations" below.
Corporate Strategy
We strive to create shareholder 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. As a business, we commit to our purpose of Protecting the Vulnerable® every day by taking a customer-focused approach to developing, building, and delivering our products. We serve a broad set of industries, in particular the pharmaceutical, healthcare services, and medical device verticals, in which the safety, quality, and efficacy of products is critical. By delivering the highest quality products possible, we are committed to protecting people, the environment, and end products.
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, 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; however, as a result of high inflation in recent quarters, we increased prices late in the second quarter of fiscal year 2023, and we expect to realize these price increases beginning in the third quarter of fiscal year 2023.
Inorganic Growth - Acquisitions
During the third quarter of fiscal year 2022, we completed the acquisition of Agena for an aggregate net purchase price of $300,793. Agena is a leading clinical genomics tools company that develops, manufactures, and sells highly sensitive, low-cost, high-throughput genetic analysis tools used by clinical labs to perform genomic clinical testing in several therapeutic areas, such as screenings for hereditary diseases, pharmacogenetics and oncology related applications. The acquisition of Agena accelerated our strategic trajectory towards higher growth applications within the regulated segments of the life sciences tools market.
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, globalize our company, and increase the scale at which we operate, which in turn affords us the ability to improve our operating efficiency, extend our customer base, and further the pursuit of our purpose: Protecting the Vulnerable®.
Improving Our Operating Efficiency
We maximize value in both our existing 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, which is our customer-centric, lean-based system for continuously improving and operating a set of high-margin, niche businesses. The Mesa Way is focused on: Measuring What Matters using our customers' perspective and setting high standards for performance; Empowering Teams to improve operationally and exceed customer expectations; Steadily Improving using lean-based tools designed to help us identify the root cause of opportunities and prioritize the biggest opportunities; and Always Learning so that performance continuously improves.
Gross profit is affected by many factors including our product mix, manufacturing efficiencies, costs of products and labor, foreign currency rates, and price competition. Historically, as we have integrated our acquisitions 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 the mix of sales will continue to impact our overall gross profit.
Hire, Develop, and Retain Top Talent
At the center of our organization are talented people who are capable of taking on new challenges using a team approach. It is our exceptionally talented workforce that works together and uses our lean-based tool set to find ways to continuously improve our products, our services, and ourselves, resulting in long-term value creation for our shareholders.
General Trends
COVID-19 has caused or exacerbated broad market phenomena such as supply chain disruptions, inflation, and wage pressure to which we are susceptible. While supply chain constraints continue to impact all of our divisions, particularly our Calibration Solutions division, we expect that constraints will abate somewhat over the remainder of fiscal year 2023. We continue to work with our suppliers to understand the existing and potential future impacts to our supply chain and are taking actions in an effort to mitigate such impacts, including pre-ordering components in higher quantities than usual, which has resulted in increased raw materials balances on our consolidated balance sheets as of September 30, 2022. We have also experienced labor shortages and inflationary pressures due to labor market conditions, impacting all of our divisions, particularly our Sterilization and Disinfection Control division.
Conditions related to the COVID-19 pandemic have continued to improve during the second quarter of our fiscal year 2023; however, there has been significant variation in business impact by geography. For example, late in fiscal year 2022 and continuing through May 2022, an increase in COVID-19 cases in certain parts of China resulted in the re-imposition of government mandated shut-downs and restrictions, which impacted our operations in China, particularly our Clinical Genomics division. Such regulatory restrictions negatively impacted commercial execution in the first quarter of fiscal year 2023, limiting sales of Clinical Genomics consumables to existing customers and instruments to new customers. During the second quarter of fiscal year 2023, China experienced additional intermittent shut-downs and restrictions; however, our operations were not significantly impacted. The extent to which these restrictions may recur in the future and the resulting impact to us will depend upon the prevalence of COVID-19 in the impacted regions of China. Even after the COVID-19 pandemic has largely subsided as a public health matter, we may experience material adverse impacts to our business as a result of the pandemic's adverse impact on the global economy, in-person collaboration and sales efforts, and our customers’ changed purchasing behaviors and confidence.
Currency exchange rates negatively impacted our reported sales for the three and six months ended September 30, 2022, primarily due to the strengthening of the U.S. dollar ("USD") against the euro, the Swedish Krona ("SEK") and the Chinese Yuan Renminbi. Any further strengthening of the USD against major currencies would adversely impact our reported revenues, but would positively impact our expenses for the remainder of the fiscal year, and any weakening of the U.S. dollar against major currencies would positively impact our reported revenues but would negatively impact our expenses for the remainder of the fiscal year.
Results of Operations
Our results of operations and period-over-period changes are discussed in the following section. The tables and discussion below should be read in conjunction with the accompanying Unaudited Condensed Consolidated Financial Statements and the notes thereto appearing in Item 1. Financial Statements (in thousands, except percent data).
Revenues from our reportable segments increased 64% and 54% for the three and six months ended September 30, 2022, respectively, compared to the relevant prior year period. Revenues growth was primarily attributable to the acquisition of Agena; however, organic revenues growth was 12% and 8% for the three and six months ended September 30, 2022, respectively. Gross profit as a percentage of revenues decreased three percentage and two percentage points for the three and six months ended September 30, 2022, respectively, compared to the three and six months ended September 30, 2021, primarily as a result of foreign currency impacts on revenues, inflationary pressures, continued supply chain constraints, and product mix. Results by reportable segment are as follows:
| Revenues |
Organic Revenues Growth |
Gross Profit as a % of Revenues |
||||||||||||||||||||||
| Three Months Ended September 30, 2022 |
Three Months Ended September 30, 2021 |
Three Months Ended September 30, 2022 |
Three Months Ended September 30, 2021 |
Three Months Ended September 30, 2022 |
Three Months Ended September 30, 2021 |
|||||||||||||||||||
| Clinical Genomics (*) |
$ | 18,435 | $ | - | N/A | N/A | 58 | % | N/A | |||||||||||||||
| Sterilization and Disinfection Control |
16,964 | 14,033 | 21 | % | 21 | % | 72 | % | 75 | % | ||||||||||||||
| Biopharmaceutical Development |
12,144 | 10,555 | 15 | % | 16 | % | 62 | % | 63 | % | ||||||||||||||
| Calibration Solutions |
11,206 | 11,252 | - | % | 1 | % | 54 | % | 54 | % | ||||||||||||||
| Mesa's reportable segments |
$ | 58,749 | $ | 35,840 | 12 | % | 12 | % | 62 | % | 65 | % | ||||||||||||
| Revenues |
Organic Revenues Growth |
Gross Profit as a % of Revenues |
||||||||||||||||||||||
| Six Months Ended September 30, 2022 |
Six Months Ended September 30, 2021 |
Six Months Ended September 30, 2022 |
Six Months Ended September 30, 2021 |
Six Months Ended September 30, 2022 |
Six Months Ended September 30, 2021 |
|||||||||||||||||||
| Clinical Genomics (*) |
$ | 32,940 | $ | - | N/A | N/A | 56 | % | N/A | |||||||||||||||
| Sterilization and Disinfection Control |
31,738 | 29,183 | 9 | % | 19 | % | 72 | % | 75 | % | ||||||||||||||
| Biopharmaceutical Development |
23,111 | 19,432 | 19 | % | 29 | % | 63 | % | 58 | % | ||||||||||||||
| Calibration Solutions |
21,413 | 22,145 | (3 | %) | 0 | % | 55 | % | 55 | % | ||||||||||||||
| Mesa's reportable segments |
$ | 109,202 | $ | 70,760 | 8 | % | 14 | % | 62 | % | 64 | % | ||||||||||||
(*) Revenues in the Clinical Genomics division represent transactions subsequent to the Agena Acquisition on October 20, 2021.
Our unaudited condensed consolidated results of operations are as follows:
| Three Months Ended September 30, |
Percentage |
Six Months Ended September 30, |
Percentage |
|||||||||||||||||||||
| 2022 |
2021 |
Change |
2022 |
2021 |
Change |
|||||||||||||||||||
| Revenues |
$ | 58,749 | $ | 35,840 | 64 | % | $ | 109,202 | $ | 70,760 | 54 | % | ||||||||||||
| Gross profit |
36,386 | 23,140 | 57 | % | 67,727 | 45,351 | 49 | % | ||||||||||||||||
| Operating expenses |
32,391 | 18,939 | 71 | % | 68,326 | 38,027 | 80 | % | ||||||||||||||||
| Operating income (loss) |
3,995 | 4,201 | (5 | %) | (599 | ) | 7,324 | (108 | %) | |||||||||||||||
| Net income (loss) |
$ | 1,306 | $ | 3,720 | (65 | %) | $ | (132 | ) | $ | 5,715 | (102 | %) | |||||||||||
Reportable Segments
Clinical Genomics
The Clinical Genomics division develops, manufactures, and sells highly sensitive, low-cost, high-throughput genetic analysis tools used by clinical labs to perform genomic clinical testing in several therapeutic areas, such as screenings for hereditary diseases, pharmacogenetics and oncology related applications.
| Three Months Ended September 30, |
Percentage |
Six Months Ended September 30, |
Percentage |
|||||||||||||||||||||
| 2022 |
2021 |
Change |
2022 |
2021 |
Change |
|||||||||||||||||||
| Revenues |
$ | 18,435 | $ | - | N/A | $ | 32,940 | $ | - | N/A | ||||||||||||||
| Gross profit |
10,641 | - | N/A | 18,490 | - | N/A | ||||||||||||||||||
| Gross profit as a % of revenues |
58 | % | N/A | N/A | 56 | % | N/A | N/A | ||||||||||||||||
Revenues for the Clinical Genomics division were $18,435 for the second quarter of fiscal year 2023. China’s government-mandated shutdowns and restrictions in response to the COVID-19 pandemic were largely lifted beginning in May 2022, and as a result, revenues in the Clinical Genomics division reached a more normal level in the second quarter of fiscal year 2023. Of the revenues reported, $179 represent revenues from COVID-19 related sales. Revenues in the Clinical Genomics division for the second quarter of fiscal year 2023 represented an increase of 27% compared to the first quarter of fiscal year 2023.
Revenues for the Clinical Genomics division were $32,940 for the six months ended September 30, 2022. Revenues were negatively impacted by China's government-mandated shutdowns, which began in late fiscal year 2022 and continued through May 2022. These restrictions negatively impacted commercial execution in the first quarter of fiscal year 2023, limiting sales of Clinical Genomics consumables to existing customers and instruments to new customers. Of the revenues reported in the current year period, $374 represent revenues from COVID-19 related sales.
Gross profit for the Clinical Genomics division was $10,641 and $18,490 for the three and six months ended September 30, 2022, respectively. Gross profit as a percentage of revenues for the three months ended September 30, 2022 benefitted from higher revenues to cover a partially-fixed cost base. Gross profit percentage of revenues for the six months ended September 30, 2022 benefitted from higher revenues in the second quarter of fiscal year 2023, partially offset by the negative impact of China's government-mandated shutdowns in the beginning of the first quarter of fiscal year 2023.
Sterilization and Disinfection Control
Our Sterilization and Disinfection Control division manufactures and sells biological, cleaning, and chemical indicators which are used to assess the effectiveness of sterilization and disinfection processes in the hospital, medical device, and pharmaceutical industries. The division also provides testing and laboratory services, mainly to the dental industry. Sterilization and disinfection control products are disposable and are used on a routine basis.
| Three Months Ended September 30, |
Percentage |
Six Months Ended September 30, |
Percentage |
|||||||||||||||||||||
| 2022 |
2021 |
Change |
2022 |
2021 |
Change |
|||||||||||||||||||
| Revenues |
$ | 16,964 | $ | 14,033 | 21 | % | $ | 31,738 | $ | 29,183 | 9 | % | ||||||||||||
| Gross profit |
12,199 | 10,486 | 16 | % | 22,967 | 21,914 | 5 | % | ||||||||||||||||
| Gross profit as a % of revenues |
72 | % | 75 | % | (3 | %) | 72 | % | 75 | % | (3 | %) | ||||||||||||
Sterilization and Disinfection Control revenues increased 21% and 9% for the three and six months ended September 30, 2022, respectively, compared to the relevant prior year periods, despite a significant strengthening of the USD against the euro. During the second quarter of fiscal year 2023, we added temporary and permanent manufacturing headcount at our Bozeman Montana facility, which enabled us to fulfill a higher volume of customer orders compared to the three months ended June 30, 2022. While we were able add capacity to our manufacturing workforce during the second quarter of fiscal year 2023, it is possible that this division will experience labor shortages in the future which could impact the division's gross profits. The three and six months ended September 30, 2022 also benefited from favorable product mix and to a lesser extent, price increases.
Sterilization and Disinfection Control's gross profit percentage decreased three percentage points for the three and six months ended September 30, 2022 compared to the relevant prior year periods as a result of foreign currency fluctuations negatively impacting our reported revenues, and increased labor and labor-related costs.
Biopharmaceutical Development
Our Biopharmaceutical Development division 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 drugs.
| Three Months Ended September 30, |
Percentage |
Six Months Ended September 30, |
Percentage |
|||||||||||||||||||||
| 2022 |
2021 |
Change |
2022 |
2021 |
Change |
|||||||||||||||||||
| Revenues |
$ | 12,144 | $ | 10,555 | 15 | % | $ | 23,111 | $ | 19,432 | 19 | % | ||||||||||||
| Gross profit |
7,557 | 6,601 | 14 | % | 14,634 | 11,293 | 30 | % | ||||||||||||||||
| Gross profit as a % of revenues |
62 | % | 63 | % | (1 | %) | 63 | % | 58 | % | 5 | % | ||||||||||||
Biopharmaceutical Development revenues increased 15% and 19% for the three and six months ended September 30, 2022, respectively, compared to the relevant prior year periods, primarily due to increased product adoption, and price increases, partially offset by unfavorable changes in foreign currency exchange rates. The increase for the six months ended September 30, 2022 resulted in part from the fact that some COVID-19 related restrictions were still in place during the first quarter of fiscal year 2022. Increases in revenues were partially offset by unfavorable changes in foreign exchange rates.
Biopharmaceutical Development's gross profit percentage decreased one percentage point for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 as a result of foreign currency impacts, unfavorable product mix and higher labor and materials costs. Biopharmaceutical Development's gross profit percentage increased five percentage points for the six months ended September 30, 2022 compared to the six months ended September 30, 2021 as a result of higher revenues on a partially-fixed cost base, partially offset by foreign currency impacts.
Calibration Solutions
The Calibration Solutions division designs, manufactures, and markets quality control and calibration products used to measure or calibrate temperature, pressure, pH, humidity, and other chemical or physical parameters for health and safety purposes, primarily in hospital, medical device manufacturing, pharmaceutical, and laboratory environments.
| Three Months Ended September 30, |
Percentage |
Six Months Ended September 30, |
Percentage |
|||||||||||||||||||||
| 2022 |
2021 |
Change |
2022 |
2021 |
Change |
|||||||||||||||||||
| Revenues |
$ | 11,206 | $ | 11,252 | - | % | $ | 21,413 | $ | 22,145 | (3 | %) | ||||||||||||
| Gross profit |
6,007 | 6,128 | (2 | %) | 11,671 | 12,240 | (5 | %) | ||||||||||||||||
| Gross profit as a % of revenues |
54 | % | 54 | % | - | % | 55 | % | 55 | % | - | % | ||||||||||||
Calibration Solutions revenues were essentially flat for the three months ended September 30, 2022 relative to the prior year period, primarily due to our ability to overcome certain global supply chain issues which allowed us to begin to fill previously-backlogged orders in certain of our product classes. During the six months ended September 30, 2022, revenues decreased 3% compared to the prior year period primarily as a result of supply constraints limiting our ability to manufacture ordered quantities of certain products.
Calibration Solutions' gross profit percentage was essentially flat for the three and six months ended September 30, 2022 as compared to the three and six months ended September 30, 2021.
Operating Expenses
Operating expenses increased 71% and 80% for the three and six months ended September 30, 2022, respectively, compared to the three and six months ended September 30, 2021 primarily as a result of the Agena Acquisition and as our overall business grew. Operating expenses were favorably impacted by the strengthening of the USD during the three and six months ended September 30, 2022.
Selling
Selling expense is driven primarily by labor costs, including salaries and commissions; accordingly, it may vary with sales levels.
| Three Months Ended September 30, |
Percentage |
Six Months Ended September 30, |
Percentage |
|||||||||||||||||||||
| 2022 |
2021 |
Change |
2022 |
2021 |
Change |
|||||||||||||||||||
| Selling expense |
$ | 9,200 | $ | 4,643 | 98 | % | $ | 19,223 | $ | 9,501 | 102 | % | ||||||||||||
| As a percentage of revenues |
16 | % | 13 | % | 3 | % | 18 | % | 13 | % | 5 | % | ||||||||||||
Selling expense for the three and six months ended September 30, 2022 increased 98% and 102%, respectively, compared to the relevant prior year periods, primarily as a result of the acquisition of Agena. Excluding Agena, selling expense increased 15% and 16% for the three and six months ended September 30, 2022, respectively, primarily as a result of increased travel and tradeshow costs as we continued to resume in-person meetings and events, as well as higher professional services costs as we made improvements to our corporate website.
General and Administrative
Labor costs, including non-cash stock-based compensation, and amortization of intangible assets drive the substantial majority of our general and administrative expense.
| Three Months Ended September 30, |
Percentage |
Six Months Ended September 30, |
Percentage |
|||||||||||||||||||||
| 2022 |
2021 |
Change |
2022 |
2021 |
Change |
|||||||||||||||||||
| General and administrative expense |
$ | 18,202 | $ | 11,683 | 56 | % | $ | 38,414 | $ | 23,102 | 66 | % | ||||||||||||
| As a percentage of revenues |
31 | % | 33 | % | (2 | %) | 35 | % | 33 | % | 2 | % | ||||||||||||
General and administrative expenses increased 56% and 66% for the three and six months ended September 30, 2022, respectively, compared to the relevant prior year periods, primarily as a result of the Agena Acquisition. Included in both increases is the amortization of intangible assets associated with the Agena acquisition of $2,398 and $4,888 for the three and six months ended September 30, 2022, respectively. Excluding Agena, general and administrative expense increased 15% and 24% for the three and six months ended September 30, 2022, respectively primarily as a result of higher stock-based compensation expense, and to a lesser extent, increased labor and labor related expenses and Agena integration expenses, partially offset by lower amortization expense due to favorable currency exchange rates.
Research and Development
Research and development expense is predominantly comprised of labor costs and costs of third-party consultants.
| Three Months Ended September 30, |
Percentage |
Six Months Ended September 30, |
Percentage |
|||||||||||||||||||||
| 2022 |
2021 |
Change |
2022 |
2021 |
Change |
|||||||||||||||||||
| Research and development expense |
$ | 4,989 | $ | 2,613 | 91 | % | $ | 10,689 | $ | 5,424 | 97 | % | ||||||||||||
| As a percentage of revenues |
8 | % | 7 | % | 1 | % | 10 | % | 8 | % | 2 | % | ||||||||||||
Research and development expenses increased 91% and 97% for the three and six months ended September 30, 2022, respectively, relative to the relevant prior year periods, primarily as a result of the acquisition of Agena. Excluding the impact of Agena, research and development costs for the three months ended September 30, 2022 increased 2% relative to the prior year period primarily due to increased labor and labor related costs. For the six months ended September 30, 2022, research and development costs increased 13% excluding the impact of Agena, primarily as a result of our purchase of in process research and development technology that we intend to further develop in order to enhance a product offering in our Sterilization and Disinfection Control division.
Nonoperating Expense
| Three Months Ended September 30, |
Percentage |
Six Months Ended September 30, |
Percentage |
|||||||||||||||||||||
| 2022 |
2021 |
Change |
2022 |
2021 |
Change |
|||||||||||||||||||
| Nonoperating expense (income) |
$ | 611 | (342 | ) | (279 | %) | $ | 1,429 | $ | 1,363 | 5 | % | ||||||||||||
Nonoperating expense for the three and six months ended September 30, 2022 is composed primarily of interest expense and amortization of the debt discount associated with the Notes and the Credit Facility as well as gains and losses on foreign currency transactions. Nonoperating expense was higher during the three and six months ended September 30, 2022 compared to the three and six months ended September 30, 2021 due to interest expense on the Credit Facility, which had an average balance of $38,000 during the six months ended September 30, 2022 compared with no balance throughout the first six months of fiscal year 2022. In addition, we recorded net foreign currency gains in the three and six months ended September 30, 2021.
Income Taxes
| Three Months Ended September 30, |
Percentage |
Six Months Ended September 30, |
Percentage |
|||||||||||||||||||||
| 2022 |
2021 |
Change |
2022 |
2021 |
Change |
|||||||||||||||||||
| Income tax provision (benefit) |
$ | 2,078 | $ | 823 | 152 | % | $ | (1,896 | ) | $ | 246 | (871 | %) | |||||||||||
| Effective tax rate |
61.4 | % | 18.1 | % | 43 | % | 93.5 | % | 4.1 | % | 89 | % | ||||||||||||
Our effective income tax rate was 61.4% and (93.5%) for the three and six months ended September 30, 2022, respectively, and 18.1% and 4.1% for the three and six months ended September 30, 2021, respectively. The effective tax rate for the six months ended September 30, 2022 differed from the statutory federal rate of 21% primarily due to the share-based payment awards for employees and the effect of income generated in foreign jurisdictions. The effective tax rate for the six months ended September 30, 2022 was lower than the same period in 2022 primarily due to the share-based compensation and the effect of income in foreign jurisdictions.
Our future effective income tax rate depends on various factors, such as changes in 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 changes in revenues, gross profit, and operating expenses (and included $14,426 and $7,803 of non-cash amortization of intangible assets acquired in business combinations and stock-based compensation expense, respectively, for the six months ended September 30, 2022).
Liquidity and Capital Resources
Our sources of liquidity include cash generated from operations, cash and cash equivalents on hand, cash available from our Credit Facility and the Open Market Sale AgreementSM, described below, working capital, and potential additional equity and debt offerings. We believe that cash flows from operating activities and potential cash provided by borrowings from our Credit Facility or funds from our Open Market Sale AgreementSM, when necessary, will be sufficient to meet our ongoing operating requirements, scheduled interest payments on debt, dividend payments, and anticipated capital expenditures. We currently expect to settle the Notes in shares of our common stock, but we may re-finance the debt, depending on conditions in the market and the share price of our common stock.
Our more significant uses of resources have historically included acquisitions, payments of debt and interest obligations, long-term capital expenditures, and quarterly dividends to shareholders. Working capital is the amount by which current assets exceed current liabilities. We had working capital of $74,754 and $76,263 as of September 30, 2022 and March 31, 2022, respectively. As of September 30, 2022, and March 31, 2022, we had $32,377 and $49,346, respectively, of cash and cash equivalents. We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
As of September 30, 2022, $172,500 in aggregate principal Notes was outstanding and $27,000 was outstanding under the Credit Facility. In October 2022, we repaid $2,000 of the amount outstanding under the Credit Facility.
In April 2022, we entered into an Open Market Sale AgreementSM pursuant to which we may issue and sell, from time to time, shares of our common stock with an aggregate value of up to $150 million.
We routinely evaluate opportunities for strategic acquisitions. Future material acquisitions may require that we obtain additional capital, assume additional third-party debt or incur other long-term obligations. 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; however, additional equity or debt financing, or other transactions, may not be available on acceptable terms, if at all.
We may from time to time repurchase or take other steps to reduce our debt. These actions may include retirements or refinancing of outstanding debt, privately negotiated transactions or otherwise. The amount of debt that may be retired, if any, could be material and would be decided at the sole discretion of our Board of Directors and would depend on market conditions, our cash position, and other considerations.
Dividends
We have paid regular quarterly dividends since 2003. We declared and paid dividends of $0.16 per share during each of the quarters ended June 30, 2022 and September 30, 2022, as well as each quarter of fiscal year 2022.
In October 2022, we announced that our Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock, payable on December 15, 2022, to shareholders of record at the close of business on November 30, 2022.
Cash Flows
Our cash flows from operating, investing, and financing activities were as follows (in thousands):
| Six Months Ended September 30, |
||||||||
| 2022 |
2021 |
|||||||
| Net cash provided by operating activities |
$ | 7,746 | $ | 14,023 | ||||
| Net cash (used in) investing activities |
(1,864 | ) | (1,591 | ) | ||||
| Net cash (used in) provided by financing activities |
(20,053 | ) | 1,423 | |||||
Cash flows from operating activities for the six months ended September 30, 2022 provided $7,746. Net loss, and non cash adjustments totaled $22,768 for the six months ended September 30, 2022 compared to $19,019 for the six months ended September 30, 2021. Adjustments to working capital accounts used $10,026 more cash in the six months ended September 30, 2022 compared to the six months ended September 30, 2021, primarily due to lower collections on trade receivables and higher spend on inventory as we built supplies to mitigate supply chain risk. Cash used in investing activities was higher during the six months ended September 30, 2022 compared to the six months ended September 30, 2021, due to increased purchases of property, plant, and equipment as we completed the renovation of our Lakewood, Colorado manufacturing facility during fiscal year 2023. Cash used by financing activities primarily resulted from $22,000 repaid on our Credit Facility during the six months ended September 30, 2022.
Contractual Obligations and Other Commercial Commitments
We are party to many contractual obligations that involve commitments to make payments to third parties in the ordinary course of business. For a description of our contractual obligations and other commercial commitments as of March 31, 2022, see our Annual Report on Form 10-K for the fiscal year ended March 31, 2022, filed with the Securities and Exchange Commission on May 31, 2022.
On a consolidated basis, as of September 30, 2022, we had contractual obligations for open purchase orders of approximately $24,331 for routine purchases of supplies and inventory, which are payable in less than one year. Open purchase orders continue to increase as we take proactive steps to mitigate risks in supply by increasing our orders of certain critical raw materials.
Critical Accounting Policies and Estimates
Critical accounting estimates are those that we believe are both significant and require us to make difficult, subjective, or complex judgments, often because we need to estimate the effect of inherently uncertain matters. These estimates are based on historical experience and various other factors that we believe to be appropriate under the circumstances. Actual amounts and results could differ from these estimates made by management. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position are discussed in our Annual Report on Form 10-K for the year ended March 31, 2022, in the Critical Accounting Policies and Estimates section of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Our reporting currency is U.S. dollars, and the functional currency of each of our material foreign subsidiaries is its respective local currency. Our operations include activities outside of the U.S. and we have currency risk on the transactions in other currencies and translation adjustments resulting from the conversion of our international financial results into the U.S. dollar. We face currency exposures in our global operations as a result of various factors including intercompany currency denominated loans, selling our products in various currencies, purchasing raw materials and equipment in various currencies, and tax exposures not denominated in the functional currency. These exposures have increased as we have continued to expand internationally, including the acquisition of Gyros Protein Technologies Holding AB, which incurs a substantial portion of its business expenses in Swedish Krona, and the acquisition of Agena, which conducts a portion of its business in euros and a portion in Chinese Yuan Renminbi. Fluctuations in exchange rates have and may continue to adversely affect our results of operations, financial position, and cash flows. We do not hedge exposure to exchange rates.
Our Credit Facility bears interest at either a base rate or a Eurodollar rate, plus an applicable spread. Based on the balance currently outstanding against our line of credit, if interest rates increased by 75 basis points, we would incur approximately $203 of additional interest expense per year.
We have no derivative instruments. We have minimal exposure to commodity market risks.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Exchange Act) that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As of September 30, 2022, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting
The Agena Acquisition was completed on October 20, 2021, and the financial results of Agena are included in our Condensed Consolidated Financial Statements as of March 31, 2022 and for the period then ended, and as of September 30, 2022 and for the six months then ended. During the time since acquisition, we have assessed the control environment of Agena and made certain changes to Agena's internal controls over financial reporting, including design changes that were required as we brought Agena onto our enterprise resource planning tool. We now consider Agena to be included in the scope of our assessment of internal controls over financial reporting.
See Note 11. “Commitments and Contingencies” within Item 1. Financial Statements for information regarding any legal proceedings in which we may be involved.
During the first and second quarters of fiscal year 2023, there were no material changes from the risk factors described in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended March 31, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The following table provides information about the Company's purchases of equity securities for the periods indicated:
| Total Number of Shares Purchased(1) |
Average Price Paid Per Share |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2) |
Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs |
|||||||||||||
| July 2022 |
1,097 | 203.83 | - | 162,486 | ||||||||||||
| August 2022 |
- | - | - | 162,486 | ||||||||||||
| September 2022 |
1,954 | 178.42 | - | 162,486 | ||||||||||||
| Total |
3,051 | 187.56 | - | 162,486 | ||||||||||||
| (1) |
Shares purchased during the period were transferred to the Company from employees in satisfaction of minimum tax withholding obligations associated with the vesting of restricted stock awards during the period. |
| (2) |
On November 7, 2005, our Board of Directors adopted a share repurchase plan which allows for the repurchase of up to 300,000 of our common shares; however, no shares have been purchased under the plan in the last three fiscal years. This plan will continue until the maximum is reached or the plan is terminated by further action of the Board of Directors. |
+ Filed herewith
* Furnished herewith
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
MESA LABORATORIES, INC.
(Registrant)
| DATED: November 3, 2022 | BY: | /s/ Gary M. Owens. Gary M. Owens Chief Executive Officer |
| DATED: November 3, 2022 | BY: | /s/ John V. Sakys John V. Sakys Chief Financial Officer |
Exhibit 31.1 Certifications Pursuant to Rule 13a-14(a)
I, Gary M. Owens, certify that:
|
1. |
I have reviewed this quarterly report on Form 10-Q of Mesa Laboratories, Inc.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 3, 2022 |
/s/ Gary M. Owens Gary M. Owens Chief Executive Officer |
Exhibit 31.2 Certifications Pursuant to Rule 13a-14(a)
I, John V. Sakys, certify that:
|
1. |
I have reviewed this quarterly report on Form 10-Q of Mesa Laboratories, Inc.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 3, 2022 |
/s/ John V. Sakys John V. Sakys Chief Financial Officer |
Exhibit 32.1 Certifications Pursuant to Rule 13a-14(b) and 18 U.S.C Section 1350
In connection with the Quarterly Report of Mesa Laboratories, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended September 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gary M. Owens, Chief Executive Officer of the Company, certify, pursuant to Rule 13a-14(b) and 18 U.S.C. § 1350, that:
|
(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: November 3, 2022 |
/s/ Gary M. Owens Gary M. Owens Chief Executive Officer |
Exhibit 32.2 Certifications Pursuant to Rule 13a-14(b) and 18 U.S.C Section 1350
In connection with the Quarterly Report of Mesa Laboratories, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John V. Sakys, Chief Financial Officer of the Company, certify, pursuant to Rule 13a-14(b) and 18 U.S.C. § 1350, that:
|
(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: November 3, 2022 |
/s/ John V. Sakys John V. Sakys Chief Financial Officer |