MESA LABORATORIES INC /CO/

Mesa**** Laboratories, Inc.**

Notes to Condensed Consolidated Financial Statements

(unaudited)

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

Note*1***.Description of Business andSummary ofSignificantAccounting Policies**

Description of Business

In this quarterly report on Form10-Q, Mesa Laboratories, Inc., a Colorado corporation, together with its subsidiaries, is collectively referred to as “we,” “us,” “our,” the “Company,” or “Mesa.”

We are a global leader in the design and manufacture of life sciences tools and critical quality control solutions for regulated applications in the pharmaceutical, healthcare and medical device industries. We offer products and services to help our customers ensure product integrity, increase patient and worker safety, and improve the quality of life throughout the world. We have manufacturing operations in the United States and Europe, and our products are marketed by our sales personnel in North America, Europe and Asia Pacific, and by independent distributors throughout the world.

As of* June 30, 2025*, we managed our operations infour reportable segments, or divisions:

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information. In the opinion of management, such unaudited information includes all adjustments, consisting of normal recurring adjustments, necessary for the fair statement of our financial position and results of operations. The results of operations for interim periods arenot necessarily indicative of results that* maybe achieved for the entire year. The year-end Condensed Consolidated Balance Sheet data was derived from audited financial statements but doesnot* include all disclosures required by accounting principles generally accepted in the United States of America. The Condensed Consolidated Financial Statements include the accounts of Mesa and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. We madeno material changes to the application of our significant accounting policies disclosed in our annual report on Form10-K. This report should be read in conjunction with the consolidated financial statements included in our Annual Report on Form10-K for the year ended* March 31, 2025*.

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

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Risks and Uncertainties

The preparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the reporting date and revenues and expenses during the reporting periods. These estimates represent management's judgment about the outcome of future events. The global business environment continues to be impacted by cost pressures, the overall effects of economic uncertainty, regulatory changes, and other factors. Changes in, and the resulting effects of, potential government trade, stimulus or fiscal and monetary policies, interest rates, foreign currency values, supply chains, demand for goods and services, global or regional recession, or other circumstances cannot be reliably predicted. Actual results could differ from our estimates.

Recent Accounting Pronouncements

We have reviewed all recently issued accounting pronouncements and have concluded that, other than as described below, they are eithernot applicable to us or arenot expected to have a significant impact on our consolidated financial statements. We havenot adopted any new accounting standards in fiscal year2026.

Recently Issued Accounting Pronouncements

In* December 2023,the FASB issued ASUNo.* 2023-09, "Income Taxes (Topic740): Improvements to Income Tax Disclosures." ASUNo. 2023-09, which enhances the transparency, effectiveness and comparability of income tax disclosures by requiring consistent categories and greater disaggregation of information related to income tax rate reconciliations and the jurisdictions in which income taxes are paid. The guidance is effective for public business entities for fiscal years beginning after* December 15, 2024 (our fiscal year2026*), with early adoption and prospective or retrospective application permitted. Other than presentation of additional disaggregated data in our income tax footnote disclosures for annual periods, we donot expect the adoption of ASUNo. 2023-09 to have a material impact on our consolidated financial statements and disclosures.

In* November 2024,the FASB issued ASUNo.* 2024-03, "Expense Disaggregation Disclosures (Subtopic220-40): Disaggregation of Income Statement Expenses." ASUNo. 2024-03 requires that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. The ASU is effective for fiscal years beginning after* December 15, 2026 (our fiscal year2028* for annual periods) and interim periods within fiscal years beginning after* December 15, 2027 (our fiscal year2029* for interim periods), with early adoption and prospective or retrospective application permitted. We are currently assessing the effect the adoption of this standard will have on our consolidated financial statements and disclosures, and we currently expect to increase the level of disclosed detail once adopted.

Note2. Revenue

We develop, manufacture, market, sell and maintain life sciences tools and quality control instruments and related consumables.

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

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

Revenues from hardware and consumables are recognized upon transfer to the customer, typically at the point of shipment.

We also offer maintenance, calibration and testing services. Services result in revenues recognized over time, for example, when we are obligated to perform labor and replace parts on an as-needed basis over a contractually specified period of time, or at a point in time, upon completion of a specific, discrete service.

We evaluate our revenues internally based on business division and the nature of goods and services provided.

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The following tables present disaggregated revenues for thethree months ended* June 30, 2025* and2024, respectively:

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

No foreign country exceeded10% of total revenues for thethree months ended* June 30, 2025*.

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, which are included within unearned revenues or other noncurrent liabilities in the accompanying unaudited Condensed Consolidated Balance Sheets. The significant majority of our revenues, related receivables and contract liabilities are generated from contracts with customers with original durations of12 months or less. Contract liabilities will be recognized as revenue as we satisfy our obligations under the terms of the contracts.

A summary of contract liabilities is as follows:

Note3. Fair Value Measurements

Our financial instruments consist primarily of cash and cash equivalents, trade accounts receivable, obligations under trade accounts payable, and debt. Due to their short-term nature, the carrying values for cash and cash equivalents, trade accounts receivable, and trade accounts payable approximate fair value; they are classified within Level1 of the fair value hierarchy.

The financial instruments that subject us to the highest concentrations of credit risk are cash and accounts receivable. We maintain relationships and cash deposits at multiple banking institutions across the world in an effort to diversify and reduce risk of loss. Concentration of credit risk with respect to accounts receivable is limited to customers to whom we make significant sales. No customers accounted for more than10% of total trade receivables as of* June 30, 2025*.

On* April 5, 2024,we entered into separate, privately negotiated purchase agreements with a limited number of holders of our 1.375% convertible notes due August 15, 2025 (the "Notes"), through which we repurchased $75,000 in aggregate principal amount of the Notes. See Note6.* "Indebtedness" for further information. As of* June 30, 2025*, we had remaining outstanding $97,500 aggregate principal amount of the Notes. We estimate the fair value of the Notes using Level2 inputs based on the last actively traded price or observable market input preceding the end of the reporting period. The fair value of the Notes is approximately correlated to our stock price.

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

The carrying amounts of our term loan and revolving line of credit (together, the "Credit Facility") approximate fair value due to the variable interest rate pricing on the debt, with the balance bearing an interest rate approximating current market rates.

There wereno nonrecurring fair value adjustments or transfers between the levels of the fair value hierarchy during thethree months ended* June 30, 2025*.

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Note4. Supplemental Information

Inventories consisted of the following:

Prepaid expenses and other current assets consisted of the following:

Accrued payroll and benefits consisted of the following:

In* June 2025we paid fiscal year2025* bonuses that were accrued as of* March 31, 2025.*

Other accrued expenses consisted of the following:

In* April 2025,*we remitted payment to the GKE sellers to settle the GKE acquisition holdback liability in full.

Depreciation expense was as follows:

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Note5. Goodwill and Intangible Assets, Net

Intangible assets other than goodwill consisted of the following:

Amortization expense for intangible assets was as follows:

For the following fiscal years ending* March 31,future amortization expense is estimated as follows, based on foreign currency exchange rates as of June 30, 2025:*

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

Note*6***.**** Indebtedness**

Credit Facility

Our senior secured credit agreement, as previously amended, includes:

We refer to the agreement in whole as the “Credit Facility.” The Credit Facility matures in* April 2029*and allows us to use proceeds from borrowings to redeem some or all of our Notes.

Amounts borrowed under the Credit Facility bear interest at either a base rate or a SOFR rate plus an applicable spread ranging from 1.5% to 3.5%, depending on our total net leverage ratio. The weighted average interest rate on borrowings under the Credit Facility as of* June 30, 2025* was 7.2%.

The financial covenants in the Credit Facility include a maximum leverage ratio of 4.0 to1.0 on each of the testing dates between* March 31, 2025and March 31, 2026and 3.5 to1.0* on each testing date thereafter. The Credit Facility also stipulates a minimum fixed charge coverage ratio of 1.25 to1.0 and a maximum senior net leverage ratio of 3.5 to1. Other covenants include restrictions on our ability to incur debt, grant liens, make fundamental changes to our business as defined in the contract, engage in certain transactions with affiliates, or conduct asset sales. As of* June 30, 2025*, we were in compliance with all covenants under the Credit Facility.

Term Loan

We borrowed $75,000 under the Term Loan on* April 5, 2024,to fund the privately negotiated repurchases of a portion of our Notes (see “Convertible Notes” below). During thethree* months ended* June 30, 2025*, we made required quarterly principal payments on the Term Loan of $938.

We are required to make quarterly principal payments on the Term Loan. For the following fiscal years ending* March 31,*future debt payments on the Term Loan are required as follows:

The net carrying amount of the Term Loan was as follows:

We recognized interest expense on the Term Loan as follows:

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Revolver

As of* June 30, 2025*, the outstanding balance under the Revolver was $14,000, and $111,000 was available for borrowing. Subsequent to* June 30, 2025*, we repaid an additional$3,000 on the Revolver.

We are obligated to pay quarterly unused commitment fees of between 0.20% and 0.35% of the Revolver’s aggregate principal amount, based on our leverage ratio. In* July 2025,we paid $77 in unused commitment fees for thethree* months ended* June 30, 2025.*

The balance of unamortized customary lender fees related to the Revolver was $1,128 and $1,203 as of* June 30, 2025* and* March 31, 2025,*respectively.

Convert****ible Notes

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

On* April 5, 2024,we entered into separate, privately negotiated transactions with certain holders of the Notes to repurchase $75,000 aggregate principal amount of the Notes for an aggregate repurchase price of $71,250 in cash, plus accrued and unpaid interest of $160. We accounted for the partial repurchase of the Notes as a debt extinguishment, which resulted in the recognition of a gain on extinguishment of $2,887 in other income on the unaudited Condensed Consolidated Statements of Income during thethree* months ended* June**30,* 2024. As of* June 30, 2025*, $97,500 in aggregate principal amount of the Notes remained outstanding, which we intend to pay using a combination of cash on hand and a draw on our Revolver.

Upon conversion, we will pay or deliver, as the case* maybe, cash, shares of our common stock, or a combination of both. Under the terms of the indenture, the Notes became convertible April**15,* 2025, and will remain convertible until the close of business on thesecond scheduled trading day immediately preceding the maturity date (* August 13, 2025).No Notes have been converted as of the date of this filing. As of June 30, 2025*, the Notes were classified as a current liability on our unaudited Condensed Consolidated Balance Sheets. The if-converted value of the Notes didnot exceed the principal balance as of* June 30, 2025*.

The net carrying amount of the Notes was as follows:

We recognized interest expense on the Notes as follows:

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

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Note7. Stockholders' Equity

Stock-Based Compensation

During thethree months ended* June 30, 2025*, we issued time-based restricted stock units ("RSUs") and performance-based restricted stock units ("PSUs") pursuant to the Mesa Laboratories, Inc. Amended and Restated2021 Equity Incentive Plan, which authorizes the issuance of 660 shares of common stock to eligible participants. Stock-based compensation expense is included in cost of revenues, selling, general and administrative, and research and development expense in the accompanying unaudited Condensed Consolidated Statements of Income.

The following is a summary of RSU and PSU award activity for thethree months ended* June 30, 2025*:

Outstanding time-based RSUs vest and settle in shares of our common stock on aone-for-one basis. RSUs granted to employees during thethree months ended* June 30, 2025* vest in equal installments on* June 15, 2026,** June 13, 2027and June 13, 2028.*We generally recognize the expense relating to RSUs, net of estimated forfeitures, on a straight-line basis over the vesting period, or for time-based RSUs granted to participants who qualify as retirement-eligible under our plan, over a shortened service period.

We grant PSUs to certain key employees. The number of shares earned is determined at the end of each performance period based on our achievement of certain pre-defined targets in accordance with the related award agreement. Outstanding PSUs vest upon completion of service periods described in the award agreements. We recognize expense for PSUs based on the probable outcome of achieving performance targets on a straight-line basis over the service period.

During thethree months ended* June 30, 2025,the Compensation Committee of the Board of Directors approved a grant of 44 PSUs at target (“theFY26* PSUs”) to eligible employees. TheFY26 PSUs have a grant date fair value of $99.56 per unit and are subject to both service and market-based performance conditions. The service period and market performance measurement period is from* June**15,* 2025 through* June 15, 2028.The number of shares that will be earned based on market performance will range from 0% to 200% of the target number of shares. If the defined minimum targets arenot* met,no shares will vest.

As of* June 30, 2025,there were 134 shares subject to options outstanding, with a weighted average exercise price per share of $190.87 and a remaining contractual life of 2.8 years. Our Compensation Committee hasnot* granted options to any plan participants in the pasttwo fiscal years.

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Note*8***.**** Earnings PerShare**

The following table presents a reconciliation of the denominators used in the computation of basic and diluted earnings per share ("EPS"):

Potentially dilutive securities include stock options and unvested time and performance based RSUs (collectively "stock awards"), as well as common shares underlying our Notes. Stock awards are excluded from the calculation of diluted EPS if they are subject to performance or market conditions that havenot yet been achieved as of our reporting date, or if they are antidilutive.

The following potentially dilutive securities were excluded from the calculation of diluted EPS:

Shares underlying the Notes were excluded from the diluted EPS calculation for thethree months ended* June 30, 2025and2024* as the impact of the assumed conversion of the Notes calculated under the if-converted method was antidilutive.

Note*9***.**** Income Taxes**

We reported an income tax provision as follows:

For interim income tax reporting, we estimate our annual effective tax rate and apply this effective tax rate to our year-to-date pre-tax income. Each quarter, our estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. Additionally, the tax effects of significant unusual or infrequently occurring items are recognized as discrete items in the interim period in which the events occur. There is a potential for volatility in the effective tax rate due to several factors, including changes in the mix of the pre-tax income and the jurisdictions to which they relate, changes in tax laws and foreign tax holidays, settlement with taxing authorities, and foreign currency fluctuations.

The change in the effective tax rate forthree months ended* June 30, 2025* compared to the prior year period is primarily due to prior year valuation allowance adjustments related to our operations in Germany, as well as an increase in German statutory taxes in the current fiscal year. The effective tax rate for thethree months ended* June 30, 2025* differed from the statutory federal rate of 21% primarily due to the valuation allowances previously established on the U.S. deferred taxes and varying applicable tax rates in foreign jurisdictions.

In* July 2025,certain key elements of the Tax Cuts and Jobs Act that were previously temporary were made permanent, including100%* bonus depreciation, the expensing of domestic research costs, and the limitation on business interest expense deductions. Accounting Standards Codification Topic740, Income Taxes, requires the effects of enacted changes in tax laws and rates on deferred tax balances to be recognized in the period of enactment. We are currently evaluating the impact updated regulations will have on our Consolidated Financial Statements beginning in thesecond quarter of fiscal year2026.

Note*10***.**** Commitments andContingencies**

We are party to various legal proceedings arising in the ordinary course of business. As of* June 30, 2025*, we arenot party to any legal proceeding that management believes could have a material adverse effect on our unaudited consolidated financial position, results of operations, or cash flows.

Note11**.**** Segment Information**

Segment information is prepared on the same basis that our chief operating decision maker ("CODM"), our CEO, uses to manage our segments, evaluate financial results, and make key operating decisions. Ourfour reportable segments are organized primarily by the nature of the goods and services they sell. Our CODM uses segment revenues, organic revenues growth (non-GAAP), and gross profit to allocate resources and to assess segment performance. Monthly, the CODM reviews forecast-to-actual and prior-to-current period variances in segment revenue and in segment gross profit to inform decisions regarding capital and personnel deployment. Our CODM also reviews non-GAAP adjusted operating income, defined as operating income excluding non-cash items such as depreciation, amortization and stock-based compensation, to further manage operations.

The following tables set forth our segment information:

The following table sets forth inventories by reportable segment. Our CODM isnot provided with and doesnot regularly review any other segment asset information.

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