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SEC filingMesa Laboratories' H1 revenue grew 3.7% to $120.3M, but operating income fell 14.3% due to higher costs; net income rose 5.9% aided by a $6.1M foreign currency gain.
For the six months ended September 30, 2025 (H1 fiscal 2026), Mesa Laboratories reported total revenue of $120.3 million, a 3.7% increase compared to $116.0 million in the prior year period. Gross profit rose 2.2% to $74.3 million, with gross margin declining to 61.7% from 62.7%, pressured by tariffs, unfavorable product mix, and a weaker U.S. dollar. Operating income fell 14.3% to $7.8 million as operating expenses grew 4.5% to $66.5 million, driven by higher personnel costs, stock-based compensation, and severance. Net income increased 5.9% to $7.2 million, benefiting from a $6.1 million unrealized foreign currency gain on an intercompany loan. Earnings per share (basic) rose to $1.32 from $1.26.
Quarterly performance (Q2 fiscal 2026) showed stronger revenue growth of 5.0% to $60.7 million, with operating income surging 34.7% to $4.7 million, partially reflecting cost controls and lower prior-year expenses. Net income declined 27.8% to $2.5 million, largely due to a $3.3 million prior-year gain in other income.
Total assets as of September 30, 2025 were $430.4 million, down slightly from $433.3 million at March 31, 2025. Cash and cash equivalents decreased from $27.3 million to $20.4 million, primarily due to debt repayments and a $9.6 million GKE acquisition holdback payment. Working capital improved significantly to $49.1 million from negative $61.3 million, as the convertible notes matured and were settled using revolver borrowings. Total debt rose to $175.5 million (up from $178.0 million), with the revolver balance increasing to $106.0 million. The term loan balance stood at $69.4 million, with scheduled quarterly payments. The company amended its credit facility in October 2025, reducing the interest rate spread from 1.5%-3.5% to 1.25%-2.5%, saving approximately $0.6 million annually.
Operating cash flow was $10.1 million for H1, down from $16.0 million in the prior year, due to higher bonus payments and inventory buildup. Capital expenditures totaled $2.1 million, resulting in free cash flow of $8.0 million. Financing activities used $16.3 million, including $97.5 million to settle convertible notes, partially offset by $107.5 million in new borrowings. The company paid $1.8 million in dividends. Despite lower operating cash flow, the company maintained liquidity through its $125.0 million revolver, with $19.0 million available at quarter end.
Management attributed revenue growth to strong commercial execution in Sterilization and Disinfection Control and Calibration Solutions. Biopharmaceutical Development saw 17.3% Q2 revenue growth driven by Peptides instrument sales. Clinical Genomics continued to face headwinds in China, with revenue down 3.1% in Q2, although excluding China, revenue grew 16.2%. The company implemented headcount reductions and cost savings in Q2, expecting $2.3 million in net annualized savings starting in Q3 fiscal 2026. Management anticipates China challenges will persist through fiscal 2026 and into fiscal 2027. Tariff impacts on margins are expected to improve with better cost recovery. The company remains focused on organic growth, acquisitions, and operational efficiency.
Segment Performance: All four operating segments reported gross profit margins above 50%. Sterilization and Disinfection Control maintained the highest gross margin at 69.5% for H1, improving 150 bps year-over-year. Biopharmaceutical Development's margin declined significantly to 56.8% from 63.4%, impacted by tariffs, currency, and product mix. Clinical Genomics margin improved 330 bps in Q2 to 54.7% due to favorable mix. Non-operating items: Interest expense decreased 13.7% to $5.1 million due to lower rates and debt levels, though expected to increase in the second half. Tax rate: The effective tax rate was 19.9% for H1, up from 11.7% due to changes in German taxes and the impact of the One Big Beautiful Bill Act, which reduced current U.S. taxes. Goodwill and intangibles: Goodwill increased to $188.5 million from $181.8 million due to foreign currency translation. Amortization expense totaled $9.1 million. The company flagged heightened impairment risk for Clinical Genomics and Peptides reporting units. Stock-based compensation: Expenses were $7.7 million, up from $6.8 million. Dividends: Quarterly dividend of $0.16 per share maintained.