0001437749-25-024715
SEC filingMesa Laboratories reported mixed Q1 FY2026 results: revenue grew 2.4% but operating income fell 45% on tariffs and product mix, while net income increased 40% due to a $6.1M unrealized FX gain.
Mesa Laboratories reported Q1 FY2026 results for the three months ended June 30, 2025. Total revenue was $59.5 million, up 2.4% from $58.2 million in the same period last year. Growth was driven by the Sterilization and Disinfection Control division (up 10.7%) and Calibration Solutions (up 4.7%), partially offset by declines in Biopharmaceutical Development (down 4.3%) and Clinical Genomics (down 9.7%).
Gross profit decreased 0.8% to $36.9 million, with gross margin contracting 200 basis points to 62.0%. The margin decline reflects lower margins in Biopharmaceutical Development (down 11.4 points) and Clinical Genomics (down 4.2 points), partly offset by an improvement in Sterilization and Disinfection Control (up 3.7 points) which benefited from lapping a $0.8 million non-cash inventory step-up in the prior year.
Operating income fell 45.1% to $3.1 million, as operating expenses rose 7.0% to $33.9 million, driven by higher personnel costs, stock-based compensation, and foreign exchange impacts. Operating margin decreased to 5.1% from 9.6%.
Net income increased 40.0% to $4.7 million, primarily due to a $6.1 million unrealized foreign currency gain from an intercompany loan, compared to $1.7 million in other non-operating expense in the prior year. The prior year also included a $2.9 million gain on extinguishment of convertible notes. Basic EPS was $0.87 versus $0.63 last year.
As of June 30, 2025, total assets were $435.7 million, up from $433.3 million at March 31, 2025. Cash and cash equivalents declined to $21.3 million from $27.3 million, primarily due to a $9.6 million GKE acquisition holdback payment and debt repayments. The company had negative working capital of $51.2 million, mainly due to classification of $97.4 million in current convertible notes due August 2025. Total debt stood at $181.2 million (including convertible notes, term loan, and revolver), with a net debt to equity ratio of about 0.9x.
Operating cash flow was $1.9 million, down from $10.7 million in the prior year, reflecting lower operating income and higher working capital outflows (bonus payouts and inventory builds). Capital expenditures were $1.0 million, yielding free cash flow of $0.9 million. The company used $8.4 million in financing activities, including $7.4 million in debt repayments and the $9.6 million holdback, partly offset by $10.5 million in new borrowings. The company maintained a quarterly dividend of $0.16 per share ($0.9 million paid).
Management noted that tariffs and global trade uncertainty are creating headwinds, particularly for Clinical Genomics and Biopharmaceutical Development. They expect to partially offset tariff impacts with price increases, supply chain shifts, and cost actions. For the remainder of fiscal 2026, they anticipate:
The company continues to evaluate strategic acquisitions and may raise additional capital for such purposes. They warn of potential goodwill impairment for Clinical Genomics and Peptides reporting units.