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What changed in MESA LABORATORIES INC /CO/'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of MESA LABORATORIES INC /CO/'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+325 added−325 removedSource: 10-K (2024-06-28) vs 10-K (2023-05-30)

Top changes in MESA LABORATORIES INC /CO/'s 2024 10-K

325 paragraphs added · 325 removed · 224 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

67 edited+27 added−16 removed47 unchanged
Biggest changeThe remainder of sales are related to service and support agreements. We generate sales to end users through direct sales as well as through independent foreign distributors. Marketing activities include industry conferences, user meetings, educational webinars, and all forms of digital marketing, in addition to market sensing and capturing user requirements for new product roadmaps.
Biggest changeMarketing activities include industry conferences, user meetings, educational webinars, and all forms of digital marketing, in addition to market sensing and capturing user requirements for new product roadmaps. The Biopharmaceutical Development division’s market success is primarily dependent upon creating innovative, high quality products that customers choose based on available features, cost-effectiveness, and performance.
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 margins.
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.
Peptide Synthesis Our peptide synthesis solutions enable customers to automate the chemical synthesis of peptides used in the creation of peptide therapies, biomaterials, cosmetics, and general research. Our peptide synthesizers and related consumables, including our new peptide purification consumables line, facilitate the ability to efficiently produce more complex and longer peptides with higher purity.
Peptide Synthesis Our peptide synthesis solutions enable customers to automate the chemical synthesis of peptides used in the creation of peptide therapies, biomaterials, cosmetics, and general research. Our peptide synthesizers and related consumables, including our peptide purification consumables line, facilitate the ability to efficiently produce more complex and longer peptides with higher purity.
We see expanded opportunities in gas flow calibration as markets that heavily use and measure process gas are growing. There is competition in gas flow calibration; however, our products are distinguished by their unique dry piston technology and industry-leading accuracy and certifications.
We see expanded opportunities in gas flow calibration as markets that heavily use and measure process gas are growing. There is competition in gas flow calibration; however, our products are distinguished by their unique dry piston technology, accuracy and industry certifications.
Regulatory Matters Mesa's operations are global and are affected by complex state, federal and international laws relating to healthcare, environmental protection, antitrust, anti-corruption, marketing, fraud and abuse, import and export control, product safety and efficacy, employment, privacy, government contracts acquisition regulations, and other areas.
Regulatory Matters Our operations are global and are affected by complex state, federal and international laws relating to healthcare, environmental protection, antitrust, anti-corruption, marketing, fraud and abuse, import and export control, product safety and efficacy, employment, privacy, government contracts acquisition regulations, and other areas.
This product has a competitive advantage in the market because our particle separation cyclones utilize the “federal reference method” for the measurement of PM2.5 in ambient air and are sold to most manufacturers of ambient particulate measurement instrumentation.
This product has a competitive advantage in the market because our particle separation cyclones utilize the “federal reference method” for the measurement of PM2.5 in ambient air and are sold to many manufacturers of ambient particulate measurement instrumentation.
Manufacturing and Materials Most of the components, raw materials, and other supplies used in our product lines are available from a number of different suppliers. We generally maintain multiple sources of supply, but we are dependent on sole or limited sources for certain items.
Manufacturing and Materials Most of the components, raw materials, and other supplies used in our product lines are available from a number of different suppliers. We generally maintain multiple sources of supply, but we are dependent on sole or limited sources for certain items, particularly in our Biopharmaceutical Division.
We manage to leading indicators whenever possible, which drives us to proactively avoid problems before they are apparent to our customers. – E mpower Teams: We move decision making as close to the customer as possible and provide real-time communication forums to align the whole organization towards surpassing customer expectations. – S ustainably Improve: We leverage a common and proven set of lean-based tools to identify sources of opportunities, prioritize our biggest opportunities, and enable change to be embraced and implemented quickly. – A lways Learn: We ensure that improvements are sustained, enabling us to raise performance expectations and repeat the cycle of improvement.
We manage to leading indicators whenever possible, which drives us to proactively avoid problems before they are apparent to our customers. – E mpower Teams: We move decision making as close to the customer as possible and provide real-time communication forums to align the whole organization toward surpassing customer expectations. – S ustainably Improve: We leverage a common and proven set of lean-based tools to identify and prioritize opportunities and to enable change to be embraced and implemented. – A lways Learn: We ensure that improvements are maintained, enabling us to raise performance expectations and repeat the cycle of improvement.
Strategy We strive to create shareholder value and further our purpose of Protecting the Vulnerable® by growing our business both organically and through further strategic acquisitions, by improving our operating efficiency, and by continuing to hire, develop and retain top talent.
Strategy We strive to create stakeholder 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.
Our biological indicators are developed and manufactured according to ISO 11138 (Sterilization of health care products – Biological indicators) under a quality system that complies with ISO 13485:2016 (Medical devices – Quality management systems – Requirements for regulatory purposes and 21 CFR 820 (Quality system regulation).
Our biological indicators are developed and manufactured according to ISO 11138 (Sterilization of health care products – Biological indicators) and our chemical indicators are developed and manufactured according to ISO 11140 (Sterilization of health care products – Chemical indicators), under a quality system that complies with ISO 13485:2016 (Medical devices – Quality management systems – Requirements for regulatory purposes and, as applicable, 21 CFR 820 (Quality system regulation).
Our Segments We report our financial performance in four segments, or divisions: (1) Clinical Genomics, (2) Sterilization and Disinfection Control, (3) Biopharmaceutical Development, and (4) Calibration Solutions. Unallocated corporate expenses and other business activities are reported within Corporate and Other.
Page 1 Table of Contents Our Segments We report our financial performance in four segments, or divisions: (1) Sterilization and Disinfection Control, (2) Clinical Genomics, (3) Biopharmaceutical Development, and (4) Calibration Solutions. Unallocated corporate expenses and other business activities are reported within Corporate and Other.
Foreign countries also have laws regulating medical devices sold in those countries, which require additional resources for compliance. The time required to obtain approval from countries’ regulating bodies can be lengthy and resource consuming, particularly as each country’s requirements may differ.
Page 5 Table of Contents Foreign countries also have laws regulating medical devices sold in those countries, which require additional resources for compliance. The time required to obtain approval from countries’ regulating bodies can be lengthy and resource consuming, particularly as each country’s requirements may differ.
Page 5 Table of Contents Gas Flow Calibration and Air Sampling Equipment We manufacture a variety of instruments and equipment for gas flow calibration and environmental air sampling. Our gas flow calibration instruments provide the precise standards required by laboratories and industry for the design, development, manufacture, installation and calibration of various gas flow meters and air sampling devices.
Gas Flow Calibration and Air Sampling Equipment We manufacture a variety of instruments and equipment for gas flow calibration and environmental air sampling. Our gas flow calibration instruments provide the precise standards required by laboratories and industry for the design, development, manufacture, installation and calibration of various gas flow meters and air sampling devices.
Using Clinical Genomics’ MassARRAY® system and our proprietary consumables, including chips, panels, and chemical reagent solutions, our customers can analyze DNA samples for inherited genetic disease testing, pharmacogenetics, oncology testing, infectious disease testing, and other highly differentiated applications.
Using Clinical Genomics’ MassARRAY® system and our proprietary consumables, including chips, panels, and chemical reagent solutions, our customers can analyze DNA samples for inherited genetic disease testing, pharmacogenetics, oncology testing, infectious disease testing, doping and toxicology testing, and other highly differentiated applications for use in research.
Sterilization and Disinfection Control Our Sterilization and Disinfection Control division manufactures and sells biological, chemical and cleaning indicators used to assess the effectiveness of sterilization processes, including steam, gas, hydrogen peroxide, ethylene oxide, radiation, and other processes in the pharmaceutical, medical device, hospital, and dental industries.
Sterilization and Disinfection Control Our Sterilization and Disinfection Control division manufactures and sells biological, chemical and cleaning indicators used to assess the effectiveness of sterilization, decontamination, disinfection and cleaning processes, including steam, hydrogen peroxide, ethylene oxide, radiation, and other processes in the pharmaceutical, medical device, and healthcare industries.
Research and Development Research and development ("R&D") activities are primarily directed towards innovating new products and improving the quality and performance of our existing products or altering our current products to accommodate use of raw materials that are more readily available for purchase in our supply chain.
Research and Development Research and development ("R&D") activities are primarily directed towards innovating new products and improving the quality and performance of our existing products or altering our current products to accommodate use of raw materials that are more readily available for purchase in our supply chain. Other R&D efforts seek to improve manufacturing efficiencies.
To this end, we utilize a variety of channels to facilitate open and direct communication, including: (i) quarterly town hall meetings with our executive team; (ii) internally maintained websites; (iii) an anonymous whistleblower hotline that is advertised to our employees; and (iv) employee engagement surveys.
In addition to our engagement surveys, we utilize a variety of channels to facilitate open and direct communication with our employees, including: (i) quarterly town hall meetings with our executive team; (ii) internally maintained websites; and (iii) an anonymous whistleblower hotline that is advertised to our employees.
Page 3 Table of Contents Our Biopharmaceutical Development division develops and manufactures Gyrolab® xPand and Gyrolab xPlore™ hardware and software, as well as Gyrolab Bioaffy® consumable microfluidic disks (“CDs”), and Gyrolab kits and Rexxip® buffers for protein analysis in Uppsala, Sweden, while PurePep® Chorus, Sonata+ and Symphony® hardware and software for peptide synthesis are developed and manufactured in Tucson, Arizona.
Our Biopharmaceutical Development division develops and manufactures Gyrolab® xPand and Gyrolab xPlore™ hardware and software, as well as Gyrolab Bioaffy® consumable microfluidic disks (“CDs”), and Gyrolab kits and Rexxip® buffers for protein analysis in Uppsala, Sweden, while PurePep® Chorus and Symphony® instruments for peptide synthesis are developed and manufactured in Tucson, Arizona.
The Sterilization and Disinfection Control division also provides related testing services, mainly to the dental industry. Biological indicators contain spores of certain microorganisms that provide defined resistance to specified sterilization processes. In use, biological indicators are exposed to a sterilization process and then tested to determine the presence of surviving organisms.
The division also provides testing and laboratory services, mainly to the dental and pharmaceutical industries. Biological indicators contain spores of certain microorganisms that provide defined resistance to specified sterilization processes. In use, biological indicators are exposed to a sterilization process and then tested to determine the presence of surviving organisms.
Page 2 Table of Contents Clinical Genomics sells its products and services predominantly to clinical labs, including large specialty, reference, and pathology labs, as well as to a variety of academic, hospital, and government facilities. The majority of revenues are derived from customers in the United States and China.
Clinical Genomics sells its products and services predominantly to clinical research labs and contract research organizations, including large specialty, reference, and pathology labs, as well as to a variety of academic, hospital, and government facilities. The majority of revenues are derived from customers in the United States and China.
In addition, our reliance upon sole or limited sources of supply for certain materials, components and services could cause production interruptions, delays and inefficiencies . ” Page 6 Table of Contents Major Customers Typically, no individual customer represents more than 10% of our consolidated accounts receivable or revenues.
In addition, our reliance upon sole or limited sources of supply for certain materials, components and services could cause production interruptions, delays and inefficiencies . ” Major Customers No customer represented more than 10% of our accounts receivable or revenues for fiscal year 2024. Typically, no individual customer represents more than 10% of our consolidated accounts receivable or revenues.
Our Bozeman, Montana and Munich, Germany locations manufacture our Sterilization and Disinfection Control division products, which include, among others, our EZTest®, Apex®, and Simicon biological indicators and PCDs. Our Bozeman, Montana facility provides sterility assurance testing services to dental offices in the United States and Canada.
Our Bozeman, Montana and Waldems and Munich, Germany locations manufacture our Sterilization and Disinfection Control division products, which include, among others, our EZTest®, Apex®, GKE Clean-Record® Indicators, Simicon cleaning and disinfecting indicators, PCDs and other products. Our Bozeman, Montana facility provides sterility assurance testing services to dental offices in the United States and Canada.
The recent addition of the PurePep® EasyClean products, a green chemistry solution to purify peptides, adds a peptide consumables stream to our peptide synthesis business. Most of the products manufactured in Sweden are typically invoiced in U.S. dollars or euros, whereas the costs to produce the products are incurred in Swedish Krona.
Our PurePep® EasyClean products, a green chemistry solution to purify peptides, is a consumables product line within our peptide synthesis business. Most of the products manufactured in Sweden are typically invoiced in U.S. dollars or euros, whereas the costs to produce the products are incurred in Swedish krona.
Specific Calibration Solutions products are compliant under ISO 13485:2016, ISO 17025:2017, and certain 21 CFR 820 regulations. Our Biopharmaceutical Division’s Uppsala, Sweden and Tucson, Arizona facilities are ISO 9001:2015 certified. Clinical Genomics operates a quality management system which complies with the requirements of ISO 13485:2016.
Specific Calibration Solutions products are compliant under ISO 13485:2016, ISO 17025:2017, and certain 21 CFR 820 regulations. Our Biopharmaceutical Division’s Uppsala, Sweden and Tucson, Arizona facilities are ISO 9001:2015 certified. Clinical Genomics and GKE GmbH operate quality management systems which comply with the requirements of ISO 13485:2016.
Clinical Genomics Our Clinical Genomics division develops, manufactures and sells highly sensitive, low cost, high-throughput genetic analysis tools and related consumables and services that enable genetic analysis for a broad range of diagnostic and research applications in several therapeutic areas.
Clinical Genomics Our Clinical Genomics division develops, manufactures and sells highly sensitive, low-cost, high-throughput genetic analysis tools and related consumables and services that enable clinical research labs and contract research organizations to perform genomic testing for a broad range of research applications in several therapeutic areas.
The system's integrated software provides a user-friendly interface to generate reports that identify targets and review spectra. In addition to the MassARRAY® system and related consumable products, Clinical Genomics also sells services, including equipment maintenance contracts and custom laboratory services through which our scientists help customers develop specified assay designs.
The system's integrated software provides a user-friendly interface to generate reports that identify targets and review spectra. In addition to the MassARRAY® system and related consumable products, Clinical Genomics also sells services, including equipment maintenance contracts and custom laboratory services.
Page 7 Table of Contents The manufacture and sale of medical devices is also regulated by some states. Although there is substantial overlap between state regulations and the regulations of the FDA, compliance with some state laws may require additional cost or effort; however, we do not anticipate that complying with state regulations will create any significant issues or burdens.
Although there is substantial overlap between state regulations and the regulations of the FDA, compliance with some state laws may require additional cost or effort; however, we do not anticipate that complying with state regulations will create any significant issues or burdens.
We also offer support agreements and provide annual sensor recalibrations. We have a strong, competitive position in North America but are not currently focused on international expansion. Key markets for our continuous monitoring systems are hospitals, pharmaceutical and medical device manufacturers, blood banks, pharmacies, and laboratory environments, all located in North America.
We also offer support agreements and provide annual sensor recalibrations. Page 3 Table of Contents We have a strong competitive position in North America but do not yet have meaningful presence in international markets. Key markets for our continuous monitoring systems are hospitals, pharmaceutical and medical device manufacturers, blood banks, pharmacies, and laboratory environments.
Customers that utilize our dialysate products include dialysis facilities, medical device manufacturers, and biomedical service companies. With technological advancements in dialysis machines that include built-in calibrators, we anticipate a reduction in sales of meters designed for clinicians. Refer to Item 1A.
Customers that utilize our dialysate products include dialysis facilities, medical device manufacturers, and biomedical service companies. With technological advancements in dialysis machines that include built-in calibrators, our meters designed for clinicians are subject to considerable competition in the market. Refer to Item 1A.
Backlog We define backlog as firm orders from customers for products and services where the order will be fulfilled within the next 12 months. Backlog as of March 31, 2023 and 2022 was approximately $38.1 million and $56.0 million, respectively. Approximately $9 million of the fiscal year end 2022 backlog related to Sema4.
Backlog We define backlog as firm orders from customers for products and services where the order will be fulfilled within the next 12 months. Backlog as of March 31, 2024 and 2023 was approximately $25.5 million and $38.1 million, respectively.
Risk Factors , “Foreign currency exchange rates may adversely affect our financial statements.” About one-third of our Biopharmaceutical Development revenues are from consumables used on a routine basis; sales of these products are less sensitive to general economic conditions. Approximately 45% of revenues are from more discretionary hardware purchases that are more sensitive to general economic conditions.
Risk Factors , “Foreign currency exchange rates may adversely affect our financial statements.” In our fiscal year 2024, about 42% of our Biopharmaceutical Development revenues were from consumables used on a routine basis; sales of these products are less sensitive to general economic conditions.
We continue to emphasize reviewing our supply base and designs for limited source suppliers that might affect our ability to supply critical products to our customers. We also continue to work with our suppliers to understand existing and potential future supply chain conditions.
We continue to emphasize reviewing our supply base and designs for limited source suppliers that might affect our ability to supply critical products to our customers. We also continue to work with our suppliers to understand existing and potential future supply chain conditions. See further discussion within Item 1A. Risk Factors, “We face numerous manufacturing and supply chain risks.
As of March 31, 2023, our Lakewood, Colorado and Hanover, Germany facilities manufacture our Calibration Solutions products, which include dialysate meters and consumables, continuous monitoring systems, data loggers, gas flow calibration and air sampling equipment, and torque testing systems represented largely by the DialyGuard®, ViewPoint®, DryCal®, DataTrace®, BGI, IBP Medical, Torquo®, and SureTorque® brands.
Generally, our Calibration Solutions products are used for quality control, safety validation, and regulatory compliance. Our Lakewood, Colorado and Hanover, Germany facilities manufacture our Calibration Solutions products, which include continuous monitoring systems, dialysate meters and consumables, data loggers, gas flow calibration and air sampling equipment, and torque testing systems represented largely by the DialyGuard®, ViewPoint®, DataTrace®, DryCal®, and BGI brands.
We consider our trade names, trademarks and brand names to be valuable in the marketing of our products in each segment. We do not believe that the loss of any one patent or other proprietary right would have a material adverse effect on our overall business or on any of our reporting segments.
We do not believe that the loss of any one patent or other proprietary right would have a material adverse effect on our overall business or on any of our reporting segments.
In addition, data loggers can be used to validate the proper operation of laboratory or manufacturing equipment, either during installation or for annual re-certifications. The products consist of individual data loggers, a personal computer (“PC”) interface, software, and various accessories. Customers typically purchase a large number of data loggers along with a single PC interface and software package.
They are used to measure temperature, humidity and pressure inside a process or a product during manufacture. In addition, data loggers can be used to validate the proper operation of laboratory or manufacturing equipment, either during installation or for annual re-certifications. The products consist of individual data loggers, a personal computer (“PC”) interface, software, and various accessories.
Our sterilization and disinfection control products are used in highly regulated industries and compete on the basis of quality, flexibility, cost effectiveness, and suitability for intended use. Biopharmaceutical Development Our Biopharmaceutical Development division develops, manufactures, and sells automated systems for protein analysis (immunoassays) and peptide synthesis solutions.
Our sterilization and disinfection control products are used in highly regulated industries and compete on the basis of quality, flexibility, cost effectiveness and suitability for intended use.
We also offer testing services in which customers return used dental sterilization spore strips to our microbiological laboratory for testing. Biological indicators and chemical indicators are often used together to monitor processes. Chemical indicators use a chemical change (generally determined by color) to assess the exposure to sterilization conditions.
We also offer testing services in which customers return used dental sterilization spore strips to our microbiological laboratory for testing. Chemical indicators use a chemical reaction, generally evaluated by a color change, to assess sterilization conditions. Type 1 process indicators measure whether direct exposure to a sterilization process has occurred.
Our cleaning indicator products are manufactured by inoculating a test soil onto a stainless-steel coupon. The test soil is designed to mimic the challenge of removing blood and tissue from surgical instruments and evaluates the effectiveness of our customers' cleaning processes.
Test soils and inks are designed to mimic the challenge of removing blood and tissue from surgical instruments and evaluates the effectiveness of our customers' cleaning processes.
We continue to evolve our talent acquisition process to focus on diversity for both external hires and succession planning. We make efforts to work with vendors and to consider candidates for employment from underrepresented categories.
Diversity and Inclusion We are committed to diversity and inclusion (“D&I”), and we are always working to improve in this area. We continue to evolve our talent acquisition process to focus on diversity. We make efforts to work with vendors and to consider candidates for employment from underrepresented categories.
A critical function of our systems is the ability to provide local alarms and notifications via e-mail, text, or telephone if established environmental conditions are exceeded.
Continuous monitoring systems consist of wireless sensors that are placed in controlled environments which communicate with cloud and local servers to transmit and store data continuously. A critical function of our systems is the ability to provide local alarms and notifications via e-mail, text, or telephone if established environmental conditions are exceeded.
Calibration Solutions Our Calibration Solutions division develops, manufactures, sells, and services quality control products using principles of advanced metrology to calibrate or measure critical chemical or physical parameters such as temperature, pressure, pH, and humidity for health and safety purposes, primarily in hospital, medical device manufacturing, pharmaceutical manufacturing, and various laboratory environments.
Calibration Solutions Our Calibration Solutions division develops, manufactures, sells and services quality control products using principles of advanced metrology to enable customers to measure and calibrate critical parameters in applications such as environmental and process monitoring, dialysis, gas flow, air quality, and torque testing, primarily in medical device manufacturing, pharmaceutical manufacturing, laboratory, and hospital environments.
In determining merit increases, we evaluate individual performance—including measuring an individual's contribution to company goals and performing semi-annual performance reviews—to align financial incentives with individual contributions. Our compensation package includes market-competitive pay, cash bonuses, stock-based compensation to certain levels of employees, health care and retirement benefits, paid time off, paid caregiver leave, and 401(K) matching, among other benefits.
Our compensation package includes market-competitive pay, cash bonuses, stock-based compensation to certain levels of employees, health care and retirement benefits, paid time off, paid caregiver leave, and 401(K) matching, among other benefits.
This includes ongoing compliance with the FDA’s current Good Manufacturing Practices regulations that require, among other things, the systematic control of design, manufacture, packaging, storage and transportation of products. Failure to comply with these practices renders the product adulterated and could subject us to an interruption of manufacturing and sales of these products, and possible regulatory action by the FDA.
Failure to comply with these practices renders the product adulterated and could subject us to an interruption of manufacturing and sales of these products, and possible regulatory action by the FDA.
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 and services in order to help our customers ensure product integrity, increase patient and worker safety, and improve the quality of life throughout the world.
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 and services. By delivering the highest quality products and services possible, we are committed to protecting the communities we serve.
We grow our revenues organically by expanding our customer base, increasing sales volumes, and implementing price increases, and inorganically through acquisitions. Page 1 Table of Contents Our acquisition strategy is focused on businesses that complement our existing portfolio and those that expand our presence further into life sciences tools and critical quality control solutions markets for regulated applications.
Our acquisition strategy is focused on businesses that complement our existing portfolio and those that expand our global presence further into life sciences tools and critical quality control solutions markets for regulated applications.
Protein analysis and peptide synthesis solutions accelerate the discovery, development, and manufacture of biological therapies, among other applications. Customers include biopharmaceutical research, development, and manufacturing teams at biopharmaceutical companies and their contract research organization partners, as well as academic research and development laboratories.
Customers include biopharmaceutical research, development, and manufacturing teams at biopharmaceutical companies and their contract research organization partners, as well as academic research and development laboratories.
In addition, the process of obtaining and protecting patents can be long and expensive. We also rely upon trade secrets, technical know-how and continuing technological innovation to develop and maintain our proprietary position. Our products and services are sold under various trade names, trademarks and brand names.
In addition, the process of preparing, applying for, obtaining and protecting patents and other intellectual property can be long and expensive, with no assurance that a patent or other intellectual property will ultimately issue. We rely upon trade secrets, technical know-how and continuing technological innovation to develop and maintain our proprietary position.
We will continue tracking and making efforts to improve our net promoter scores and employee engagement in the future. Available Information We are subject to the reporting and other information requirements of the Securities Exchange Act of 1934, as amended (“Exchange Act”).
Page 6 Table of Contents Available Information We are subject to the reporting and other information requirements of the Securities Exchange Act of 1934, as amended (“Exchange Act”).
We focus on improving our operating efficiency through the Mesa Way , which is our customer-centric, lean based system for continuously improving and operating a set of high-margin, niche businesses. As part of our ongoing commitment to empowerment, improvement, and learning, we launched an enhanced version of the Mesa Way during fiscal year 2023.
We focus on improving our operating efficiency through the Mesa Way , which is our customer-centric, lean based system for sustainably improving and operating the manufacturing and administrative aspects of our high-margin, niche businesses.
Corporate and Other Corporate and other consists of unallocated corporate expenses and other business activities. Other Matters Relating to our Business as a Whole Acquisitions Year ended March 31, 2023 Acquisition On November 17, 2022, we acquired substantially all of the assets and certain liabilities of Belyntic GmbH’s peptide purification business (“Belyntic” or the “Belyntic acquisition”).
Page 4 Table of Contents Year ended March 31, 2023 Acquisition On November 17, 2022, we acquired substantially all of the assets and certain liabilities of Belyntic GmbH’s peptide purification business (“Belyntic” or the “Belyntic acquisition”) for a total cash price of $6,450, of which $4,950 was paid on the date of acquisition.
Our Calibration Solutions products are manufactured by assembling the products from purchased components and calibrating the final products. Our Calibration Solutions division's commercial efforts focus on offering metrology products to our customers that are required to meet regulatory requirements and quality control standards. We generate sales through our direct sales personnel and independent distributors.
Our Calibration Solutions products are manufactured by assembling the products from purchased components and calibrating the final products. Service demand is driven by customers’ quality control and regulatory environments, which require products to be recalibrated or recertified periodically. We generate sales through our direct sales personnel and independent distributors.
Human Capital Management As a company, our vision is to Protect the Vulnerable® and we believe that our vision is achieved in large part through the strength of our workforce. Every day, our talented employees strive to implement lean based tools to find ways to continuously improve our products and services so that we may better serve our customers.
Every day, our talented employees strive to implement lean based tools to find ways to continuously improve our products and services so that we may better serve our customers and create value for all our stakeholders.
This iteration was developed by a cross-functional committee composed of employees from all job levels and divisions to help our employees engage deeply with Mesa’s vision and purpose. The Mesa Way is based on four pillars: – M easure what matters: We use “True North,” our customers’ perspectives, to measure what matters most and to set high standards for performance.
The Mesa Way is based on four pillars: – M easure what matters: We use our customers’ perspectives to measure what matters most and to set high standards for performance.
Cleaning indicators are used to assess the effectiveness of cleaning processes, including washer-disinfectors and ultrasonic cleaners in healthcare settings. Cleaning is the critical first step performed prior to disinfection and sterilization. Debris left on an instrument may interfere with microbial inactivation and can compromise disinfection or sterilization processes.
Type 6 emulating indicators respond to all critical process parameters for a specified sterilization cycle. Biological indicators and chemical indicators are often used together to monitor processes. Cleaning indicators are used to assess the effectiveness of cleaning processes, including in washer-disinfectors and ultrasonic cleaners in healthcare settings. Cleaning is the critical first step performed prior to disinfection and sterilization.
Where appropriate, we seek patent protection for inventions and developments made by our personnel that are incorporated into our products or otherwise fall within our fields of interest. There can be no assurance, however, that any patent will provide adequate protection for the technology, system, product, service or process it covers.
There can be no assurance, however, that any patent or other intellectual property will provide adequate protection for the technology, system, product, brand, service or process it covers.
The Biopharmaceutical Development division’s market success is primarily dependent upon creating innovative, high quality products that customers choose based on available features, cost-effectiveness, and performance. We believe we are one of the leading world-wide suppliers of protein analysis and peptide synthesis equipment to the biologics discovery and development markets.
We believe we are one of the leading world-wide suppliers of protein analysis and peptide synthesis equipment to the biologics discovery and development markets.
(“Agena” or “the Agena Acquisition”) for adjusted cash consideration of $300.8 million. Agena is a leading clinical genomics tools company that develops, manufactures, markets and supports proprietary instruments and related consumables that enable genetic analysis for a broad range of diagnostic and research applications.
Agena is a leading clinical genomics tools company that develops, manufactures, markets and supports proprietary instruments and related consumables that enable genetic analysis for a broad range of research applications. The acquisition of Agena moved our business toward the life sciences tools sector and expanded our market opportunities, particularly in Asia. Agena’s operations comprise our Clinical Genomics segment.
Data Loggers Our data loggers are self-contained, wireless, high precision instruments used in critical manufacturing and quality control processes in the pharmaceutical, medical device, food, and tool industries. They are used to measure temperature, humidity and pressure inside a process or a product during manufacture.
Risk Factors, “Changes to dialysis methods and equipment capabilities may decrease demand for our dialysis products and negatively impact our financial statements.” Data Loggers Our data loggers are self-contained, wireless, high precision instruments used in critical manufacturing and quality control processes in the pharmaceutical, medical device, food, and tool industries.
Continuous monitoring systems are used in controlled environments such as refrigerators, freezers, warehouses, laboratory incubators, clean rooms, and a number of other settings. Continuous monitoring systems consist of wireless sensors that are placed in controlled environments which communicate with cloud and local servers to transmit and store data continuously.
Continuous Monitoring Our continuous monitoring products are used to monitor various environmental parameters such as temperature, humidity, and differential pressure to ensure that critical storage and processing conditions are maintained. Continuous monitoring systems are used in controlled environments such as refrigerators, freezers, warehouses, laboratory incubators, clean rooms, and a number of other settings.
We serve a broad set of industries, particularly the pharmaceutical, healthcare and medical device verticals. Our revenues come from product sales, which include consumables and hardware; as well as services, which include discrete and ongoing maintenance, calibration, and testing services.
Our revenues come from product sales, which include consumables and hardware; as well as services, which include discrete and ongoing maintenance, calibration, and testing services. We grow our revenues organically by expanding our customer base and our product offerings, increasing sales volumes, and implementing price increases, as well as inorganically through acquisitions.
Employees As of March 31, 2023, we had 698 employees, of whom 272 are employed for manufacturing and quality assurance, 141 for research and development and engineering, 184 for sales and marketing, and 101 for administration. Our voluntary employee turnover decreased slightly during fiscal year 2023 compared to fiscal year 2022.
Employees As of March 31, 2024, we had 736 employees (approximately 500 in the U.S.), of whom 345 are employed for manufacturing and quality assurance, 103 for research and development and engineering, 196 for sales and marketing, and 92 for administration.
Our global cloud-based human capital management platform enables us to more accurately track employee representation and identify how we can better enhance our diversity around the world. We train managers annually on anti-discrimination and anti-harassment practices. Our executive officers have committed to help drive further D&I progress during our year ending March 31, 2024 and beyond.
Our global cloud-based human capital management platform enables us to more accurately track employee representation and identify how we can better enhance our diversity around the world. Employee Engagement We have established an engagement process where we leverage external expertise to develop a meaningful survey to assess what matters most to our employees.
As of March 31, 2023, 57% of our directors are from under-represented categories. Compensation and Benefits We are intentional in providing fair and equitable compensation to all of our employees. Our compensation and benefits are competitive to market and create incentives to attract and retain employees.
Total Rewards We are intentional in providing fair and equitable compensation to all of our employees. Our compensation and benefits are competitive to market and create incentives to attract and retain employees. In determining merit increases, we evaluate individual performance—including measuring an individual's contribution to company goals and performing semi-annual performance reviews—to align financial incentives with individual contributions.
Other R&D efforts seek to develop or improve software that will be sold, leased, or marketed in the future, and to improve manufacturing efficiencies. Intellectual Property We own numerous patents, trademarks, and other proprietary rights, each of which is important to the various facets of our business.
Intellectual Property We own numerous patents, trademarks, and other proprietary rights, many of which are important to the various facets of our business. Where appropriate, we seek patent or other intellectual property protection for inventions and developments made by our personnel that are incorporated into our products or otherwise fall within our fields of interest.
We have received permission from the FDA to market all of our products requiring such permission. Some of our facilities are subject to FDA regulations and inspections, which may be time-consuming and costly.
Some of our facilities are subject to FDA regulations and inspections, which may be time-consuming and costly. This includes ongoing compliance with the FDA’s current Good Manufacturing Practices regulations that require, among other things, the systematic control of design, manufacture, packaging, storage and transportation of products.
As our overall headcount has grown, we have continued to attract and retain high-performing, diverse employees at all levels of the organization. We will continue efforts to increase employee satisfaction and retention in the future. Diversity and Inclusion We are committed to diversity and inclusion (“D&I”), and we are always working to improve in this area.
As our overall headcount has grown, we have continued to attract and retain high-performing, diverse employees at all levels of the organization. Our voluntary employee turnover decreased approximately 6.8 percentage points during fiscal year 2024 compared to fiscal year 2023, signaling improved employee satisfaction and engagement. Talent We seek to attract, develop and retain the best talent throughout Mesa.
We have prepared a preliminary analysis of the valuation of net assets acquired in the Belyntic acquisition, which is subject to revision as more detailed analyses are completed. Year Ended March 31, 2022 Acquisition On October 20, 2021, we completed the acquisition of 100% of the outstanding shares of Agena Bioscience, Inc.
These PurePep® EasyClean products are an environmentally conscious chemistry solution to purify peptides. Year Ended March 31, 2022 Acquisition On October 20, 2021, we completed the acquisition of 100% of the outstanding shares of Agena Bioscience, Inc. (“Agena” or “the Agena acquisition”) for adjusted cash consideration of $300,793.
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General We are a multinational manufacturer, developer, and seller of life sciences tools and critical quality control solutions, many of which are sold into niche markets driven by regulatory requirements.
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General 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. Mesa offers products and services to help our customers ensure product integrity, increase patient and worker safety, and improve the quality of life throughout the world.
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Generally, our Calibration Solutions products are used for quality control, safety validation, and regulatory compliance.
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Type 2 specific-use indicators test under a specific procedure, such as testing for air removal in a pre-vacuum steam sterilization cycle. Type 3 single-variable indicators test a single critical variable in a sterilization process, for example, whether a given temperature has been attained.
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Page 4 Table of Contents The majority of our Calibration Solutions products have relatively long lifespans and their purchase by customers is discretionary, so sales are more sensitive to general economic conditions. Service demand is driven by customers’ quality control and regulatory environments, which require products to be recalibrated or recertified periodically.
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Type 4 multivariable indicators measure two or more critical variables in a sterilization process and change color only, for example, when exposed to a given temperature for a specified period of time in a steam sterilization process. Type 5 integrating indicators respond to all critical process parameters.
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Risk Factors, “Changes to dialysis methods and equipment capabilities may decrease demand for our dialysis products and negatively impact our financial statements.” Continuous Monitoring Our continuous monitoring products are used to monitor various environmental parameters such as temperature, humidity, and differential pressure to ensure that critical storage and processing conditions are maintained.
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Debris left on an instrument may interfere with microbial inactivation and can compromise disinfection or sterilization processes. Our cleaning indicator products are manufactured either by inoculating a test soil onto a stainless-steel coupon or printing an ink, imitating a test soil, onto a plastic substrate.
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We paid $4.95 million on the date of acquisition, and we expect to pay an additional $1.5 million based on the probable approval of pending patent applications expected within 36 months of the acquisition date. The business complements our existing peptide synthesis business, part of the Biopharmaceutical Development segment, by adding a new peptide purification consumables line.
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Page 2 Table of Contents Biopharmaceutical Development Our Biopharmaceutical Development division develops, manufactures, and sells automated systems for protein analysis (immunoassays) and peptide synthesis solutions. Protein analysis and peptide synthesis solutions accelerate the discovery, development, and manufacture of biological therapies, among other applications.
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The acquisition of Agena moved our business toward the life sciences tools sector and expanded our market opportunities, particularly in Asia. Agena’s operations comprise our Clinical Genomics segment. We finalized our valuation of the net assets acquired in the Agena Acquisition during fiscal year 2023.
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The division also sells service agreements to maintain instruments sold by the division.
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Our actions to mitigate the impact of supply chain disruptions, including pre-ordering components in higher than usual quantities and sourcing new vendors have been somewhat successful; however, raw materials shortages impacted our Calibrations Solutions division through most of fiscal year 2023. See further discussion within Item 1A. Risk Factors, “We face numerous manufacturing and supply chain risks.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAs described in "Part II, Item 9A — Controls and Procedures," we identified two material weaknesses in the design and operation of our internal control over financial reporting whereby (i) Management's review controls over fair value calculations including Management's preliminary valuation of the Belyntic Acquisition were insufficient, and (ii) Management's review controls over the qualitative assessment of goodwill impairment were insufficient to identify potential impairment triggers.
Biggest changeManagement concluded that as of March 31, 2024, our internal control over financial reporting was not effective. As described in "Part II, Item 9A — Controls and Procedures," we identified three material weaknesses in the design and operation of our internal control over financial reporting whereby: i.
Our strategic acquisitions and the continued organic expansion of our commercial sales operations have increased the scope and complexity of our business. As a result, we face challenges inherent in efficiently managing a more complex business with an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, and compliance programs.
Our strategic acquisitions and the organic expansion of our commercial sales operations have increased the scope and complexity of our business. As a result, we face challenges inherent in efficiently managing a more complex business with an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, and compliance programs.
These factors have adversely affected, and in the future could further adversely affect, our business and financial statements. Macroeconomic pressures in the markets in which we operate may adversely affect our financial results. Geopolitical issues around the world can impact macroeconomic conditions and could have a material adverse impact on our financial results.
These factors have adversely affected, and in the future could further adversely affect, our business and financial results. Geopolitical and macroeconomic pressures in the markets in which we operate may adversely affect our financial results. Geopolitical issues around the world can impact macroeconomic conditions and could have a material adverse impact on our financial results.
If audits result in payments or assessments different from our reserves, our future results may include unfavorable adjustments to our tax liabilities and our financial statements could be adversely affected.
If audits result in payments or assessments different from our reserves, our future results may include unfavorable adjustments to our tax liabilities and our financial results could be adversely affected.
If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner or prevent fraud, which may adversely affect investor confidence in our financial reporting and adversely affect our business and operating results and the market price for our common stock.
If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner or prevent fraud, which may adversely affect investor confidence in our financial reporting and adversely affect our business and operating results and the trading price for our common stock.
For example, trade tensions between the United States and China remain high, and each country has continued to impose significant tariffs on a wide range of goods imported from the other country. China accounted for approximately 12% of our sales during the year ended March 31, 2023.
For example, trade tensions between the United States and China remain high, and each country has continued to impose significant tariffs on a wide range of goods imported from the other country. China accounted for approximately 12% of our sales during the year ended March 31, 2024.
If we are unable to fully recover higher costs through price increases or offset these increases through cost reductions, or if there is a time delay between the increase in costs and our ability to recover or offset these costs, our margins and profitability could decline, and our financial statements could be adversely affected.
If we are unable to fully recover higher costs through price increases or offset these increases through cost reductions, or if there is a time delay between the increase in costs and our ability to recover or offset these costs, our margins and profitability could decline, and our financial results could be adversely affected.
Changes, potential changes or uncertainties in U.S. social, political, regulatory and economic conditions or laws and policies governing foreign trade, manufacturing, and development and investment in the territories and countries where we or our customers operate, or governing the health care system, can adversely affect our business and financial statements.
Changes, potential changes or uncertainties in U.S. social, political, regulatory and economic conditions or laws and policies governing foreign trade, manufacturing, and development and investment in the territories and countries where we or our customers operate, or governing the health care system, can adversely affect our business and financial results.
Our Dialyguard product line accounts for approximately one-third of the revenues and gross margin associated with our Calibration Solutions division. The majority of revenues in our Dialyguard business are associated with products used in dialysis clinics, while a smaller portion of our sales relate to in-home care.
Our Dialyguard product line accounts for approximately one-fourth of the revenues and one-third of the gross profit margin associated with our Calibration Solutions division. The majority of revenues in our Dialyguard business are associated with products used in dialysis clinics, while a smaller portion of our sales relate to in-home care.
As a result, the tax laws in the United States and other countries in which we do business could change on a prospective or retroactive basis, and any such changes could adversely affect our business and financial statements. Our business is subject to sales tax in numerous states.
As a result, the tax laws in the United States and other countries in which we do business could change on a prospective or retroactive basis, and any such changes could adversely affect our business and financial results. Our business is subject to sales tax in numerous states.
The health care industry and related industries that we serve have undergone, and are in the process of undergoing, significant changes in an effort to reduce costs, which could adversely affect our financial statements. Participants in the health care industry and related industries have implemented, and are implementing, significant changes in an effort to reduce costs.
The health care industry and related industries that we serve have undergone, and are in the process of undergoing, significant changes in an effort to reduce costs, which could adversely affect our financial results. Participants in the health care industry and related industries have implemented, and are implementing, significant changes in an effort to reduce costs.
Changes in accounting or regulatory requirements, or instability in the credit markets, or global crises that prevent travelling or other activities necessary for acquisitions could also adversely impact our ability to consummate acquisitions. Our acquisition of businesses could negatively impact our financial statements.
Changes in accounting or regulatory requirements, or instability in the credit markets, or global crises that prevent travelling or other activities necessary for acquisitions could also adversely impact our ability to consummate acquisitions. Our acquisition of businesses could negatively impact our financial results.
Certain of our businesses’ demand depends on customers’ capital spending budgets as well as government funding policies, and matters of public policy and government budget dynamics as well as product and economic cycles can affect the spending decisions of these entities.
Certain of our businesses’ demand depends on customers’ capital spending budgets as well as government funding policies and interest rates, and matters of public policy and government budget dynamics as well as product and economic cycles can affect the spending decisions of these entities.
The trading price of our common stock price may be volatile and could be subject to wide fluctuations in price in response to various factors, many of which are beyond our control, including: ● general economic, industry and market conditions; ● actions by institutional or other large stockholders; ● the depth and liquidity of the market for our common stock; ● volume and timing of orders for our products; ● developments generally affecting medical device companies; ● the announcement of new products or product enhancements by us or our competitors; ● changes in earnings estimates or recommendations by securities analysts; ● investor perceptions of us and our business, including changes in market valuations of medical device companies generally; and ● our results of operations and financial performance.
The trading price of our common stock price may be volatile and could be subject to wide fluctuations in price in response to various factors, many of which are beyond our control, including: ● general economic, industry and market conditions; ● actions by institutional or other large stockholders; ● the depth and liquidity of the market for our common stock; ● volume and timing of orders for our products; ● developments generally affecting life sciences tools companies; ● the announcement of new products or product enhancements by us or our competitors; ● changes in earnings estimates or recommendations by securities analysts; ● investor perceptions of us and our business, including changes in market valuations of life sciences tools companies generally; and ● our results of operations and financial performance.
Page 12 Table of Contents Any attacks, breaches or other disruptions or damage could interrupt our operations or the operations of our customers and partners, delay production and shipments, result in theft of our and our customers’ intellectual property and trade secrets, damage customer, business partner, and employee relationships, and our reputation, or result in defective products or services, legal claims and proceedings, liability and penalties under privacy laws and increased costs for security and remediation, each of which could adversely affect our business, reputation and financial statements.
Any attacks, breaches or other disruptions or damage could interrupt our operations or the operations of our customers and partners, delay production and shipments, result in theft of our and our customers’ intellectual property and trade secrets, damage customer, business partner, and employee relationships, and our reputation, or result in defective products or services, legal claims and proceedings, liability and penalties under privacy laws and increased costs for security and remediation, each of which could adversely affect our business, reputation and financial statements.
Any further significant changes to the tax system in the United States or in other jurisdictions (including changes in the taxation of international income as further described below) could adversely affect our financial statements.
Any further significant changes to the tax system in the United States or in other jurisdictions (including changes in the taxation of international income as further described below) could adversely affect our financial results.
In addition, in March 2022, we entered a sales agreement with Jefferies LLC ("Jefferies") to sell shares of our common stock, from time to time, with aggregate gross sales proceeds up to $150.0 million through an at-the-market equity offering program under which Jefferies will act as our sales agent.
In addition, in March 2022 we entered a sales agreement with Jefferies LLC ("Jefferies") to sell shares of our common stock, from time to time, with aggregate gross sales proceeds up to $150.0 million through an at-the-market equity offering program under which Jefferies acts as our sales agent.
Further, we may settle all or a portion of the 2025 Notes in shares or in cash, at our option. We include shares of common stock issuable upon conversion of the 2025 Notes in our diluted earnings per share to the extent such shares are not anti-dilutive.
Further, we may settle all or a portion of the 2025 Notes in shares or in cash. We include shares of common stock issuable upon conversion of the 2025 Notes in our diluted (loss) earnings per share to the extent such shares are not anti-dilutive.
Significant negative industry or economic trends, disruptions to our business, loss of major customers, strategic shifts in our business, inability to effectively integrate acquired businesses, unexpected significant changes or planned changes in use of our assets, changes in the structure of our business, divestitures, market capitalization declines, or increases in associated discount rates may impair our goodwill and other intangible assets.
Significant negative industry or economic trends, disruptions to our business, loss of key customers, strategic shifts in our business, inability to effectively integrate acquired businesses, unexpected significant changes or planned changes in use of our assets, changes in the structure of our business, divestitures, market capitalization declines, or increases in associated discount rates may further impair our goodwill and other intangible assets in the future.
Our ability to make required cash payments in connection with conversions of the 2025 Notes, repurchase the 2025 Notes in the event of a fundamental change, or to repay or refinance the 2025 Notes at maturity will depend on market conditions and our future performance, which is subject to economic, financial, competitive, and other factors beyond our control.
Our ability to make required cash payments in connection with conversions of the 2025 Notes, to repurchase the 2025 Notes in the event of a fundamental change, to repay or refinance the 2025 Notes, and/or to make required payments or refinance the Credit Facility at maturity will depend on market conditions and our future performance, which are subject to economic, financial, competitive, and other factors beyond our control.
Foreign currency exchange rates may adversely affect our financial statements. As a global company with substantial operations outside the U.S., sales and purchases in currencies other than the U.S. dollar expose us to fluctuations in foreign currencies relative to the U.S. dollar and may adversely affect our financial statements.
As a global company with substantial operations outside the U.S., sales and purchases in currencies other than the U.S. dollar expose us to fluctuations in foreign currencies relative to the U.S. dollar and may adversely affect our financial statements.
Regulatory agencies periodically inspect our manufacturing facilities to ascertain compliance with “good manufacturing practices” and can subject approved products to additional testing and surveillance programs. Page 17 Table of Contents Failure to comply with applicable regulatory requirements can, among other things, result in fines, suspension of regulatory approvals, product recalls, operating restrictions and criminal penalties.
Regulatory agencies periodically inspect our manufacturing facilities to ascertain compliance with “good manufacturing practices” and can subject approved products to additional testing and surveillance programs. Failure to comply with applicable regulatory requirements can, among other things, result in fines, suspension of regulatory approvals, product recalls, operating restrictions and criminal penalties.
Page 21 Table of Contents Our ability to use net operating losses and tax credit carryforwards and certain built-in losses to reduce future tax payments is limited by provisions of the Internal Revenue Code, and it is possible that certain transactions or a combination of certain transactions may result in material additional limitations on our ability to use our net operating loss and tax credit carryforwards.
Our ability to use net operating losses and tax credit carryforwards and certain built-in losses to reduce future tax payments is limited by provisions of the Internal Revenue Code, and it is possible that certain transactions or a combination of certain transactions may result in material additional limitations on our ability to use our net operating loss and tax credit carryforwards.
Further, defending against any such actions can be costly and time-consuming and may require significant personnel resources. Therefore, even if we are successful in defending against any such actions brought against us, our business may be negatively impacted. Off-label marketing of our products could result in substantial penalties.
Further, defending against any such actions can be costly and time-consuming and may require significant personnel resources. Therefore, even if we are successful in defending against any such actions brought against us, our business may be negatively impacted. Page 12 Table of Contents Off-label marketing of our products could result in substantial penalties.
Servicing our debt will require a significant amount of cash, and we may not have sufficient cash flow from our business or the ability to raise capital to repay our 1.375% convertible senior notes due August 15, 2025 (the “2025 Notes”) at maturity or repurchase the notes in the event of a fundamental change , or if we borrow under our credit facility, swingline loan, and letters of credit (together referred to as the "Credit Facility") or if we incur more debt.
Servicing our debt will require a significant amount of cash, and we may not have sufficient cash flow from our business or the ability to raise capital to repay the remaining principal amount of our 1.375% convertible senior notes due August 15, 2025 (the “2025 Notes”) at maturity or repurchase the notes in the event of a fundamental change , or to repay borrowings under our revolving credit facility, term loan, swingline loan, and letters of credit (together referred to as the "Credit Facility"), or if we incur more debt.
We have been a defendant in a number of lawsuits, and in the future are subject to the possibility of a variety of litigation and regulatory proceedings, including claims for damages arising out of the use of products or services and claims relating to intellectual property matters, employment matters, tax matters, commercial disputes, product liability, marketing matters, insurance coverage, competition and sales and trading practices, environmental matters, product retirement, personal injury, and acquisition or divestiture-related matters, as well as regulatory investigations or enforcement.
We have been a defendant in a number of lawsuits, and in the future may become a party to a variety of litigation and regulatory proceedings, including claims for damages arising out of the use of products or services and claims relating to intellectual property matters, employment matters, tax matters, commercial disputes, product liability, marketing matters, insurance coverage, competition and sales and trading practices, environmental matters, product retirement, personal injury, and acquisition or divestiture-related matters, as well as regulatory investigations or enforcement.
In addition, if the 2025 Notes have not previously been converted or repurchased due to a decline in our share price, we may be required to repay the 2025 Notes in cash.
In addition, if the 2025 Notes have not previously been converted or repurchased due to a decline in our share price, we may elect to repay or we may be required to repay the 2025 Notes in cash upon maturity.
All of the factors described above could adversely affect our business and financial results. The manufacture of many of our products is a highly exacting and complex process, and if we directly or indirectly encounter problems manufacturing products, our reputation, business and financial results could suffer.
All of the factors described above could adversely affect our business and financial results. Page 10 Table of Contents The manufacture of many of our products is a highly exacting and complex process, and if we directly or indirectly encounter problems manufacturing products, our reputation, business and financial results could suffer.
Slow or disrupted global economic growth, heightened inflation, volatility in the currency and credit markets, high levels of unemployment or underemployment, labor availability constraints, reduced levels of capital expenditures, changes or anticipation of potential changes in government fiscal, tax, trade and monetary policies, changes in capital requirements for financial institutions, government deficit reduction and budget negotiation dynamics, sequestration, austerity measures, sovereign debt defaults, and other challenges that adversely affect the global economy could adversely affect us and our distributors, customers and suppliers, including having the effect of: ● reducing demand for our products and services, limiting the financing available to our customers and suppliers, increasing order cancellations and resulting in longer sales cycles and slower adoption of new technologies; ● increasing the difficulty in collecting accounts receivable and the risk of excess and obsolete inventories; ● increasing price competition in our served markets; ● supply interruptions, which could disrupt our ability to produce our products; ● increasing the risk of impairment of goodwill and other long-lived assets, and the risk that we may not be able to fully recover the value of other assets such as tax assets; ● increasing the risk that counterparties to our contractual arrangements will become insolvent or otherwise unable to fulfill their contractual obligations, which could increase the risks identified above; and ● adversely impacting market sizes and growth rates.
Slow or disrupted global economic growth, heightened inflation, volatility in the currency and credit markets, labor availability constraints, reduced levels of capital expenditures, changes or anticipation of potential changes in government fiscal, tax, trade and monetary policies (including as a result of upcoming elections in the U.S.), changes in capital requirements for financial institutions, government deficit reduction and budget negotiation dynamics, sequestration or government shut-downs, austerity measures, sovereign debt defaults, continuing elevated interest rates, and other challenges that adversely affect the global economy could adversely affect us and our distributors, customers and suppliers, including by: ● reducing demand for our products and services, limiting the financing available to our customers and suppliers, increasing order cancellations and resulting in longer sales cycles and slower adoption of new technologies; ● increasing the difficulty in collecting accounts receivable and the risk of excess and obsolete inventories; ● increasing price competition in our served markets; ● supply interruptions, which could disrupt our ability to produce our products; ● increasing the risk of impairment of goodwill and other long-lived assets, and the risk that we may not be able to fully recover the value of other assets such as tax assets; ● increasing the risk that counterparties to our contractual arrangements will become insolvent or otherwise unable to fulfill their contractual obligations, which could increase the risks identified above; and ● adversely impacting market sizes and growth rates.
In order to compete effectively, we must maintain relationships with major customers, continue to grow our business by establishing relationships with new customers, develop new products and services to maintain and expand our brand recognition, and penetrate new markets, including in developing countries and high growth markets.
In order to compete effectively, we must maintain relationships with key customers, continue to grow our business by establishing relationships with new customers, develop new products and services to maintain and expand our brand recognition, and penetrate new markets, including in high growth markets.
Significant developments or uncertainties stemming from the U.S. administration, including changes in U.S. trade policies, tariffs and the reaction of other countries thereto could have an adverse effect on our business.
Page 9 Table of Contents Significant developments or uncertainties stemming from the U.S. administration, including changes in U.S. trade policies, tariffs and the reaction of other countries thereto could have an adverse effect on our business.
Technological advancements, such as dialysis machines that feature built-in dialysis calibration functionalities, have and may continue to adversely affect demand for our dialysis products. Page 14 Table of Contents We may be unable to efficiently manage our growth as a larger and more geographically diverse organization.
Technological advancements, such as dialysis machines that feature built-in dialysis calibration functionalities, have and may continue to adversely affect demand for our dialysis products. We may be unable to efficiently manage our growth as a larger and more geographically diverse organization.
Concern over climate change can also result in new or additional legal or regulatory requirements designed to reduce greenhouse gas emissions and/or mitigate the effects of climate change on the environment (such as taxation of, or caps on the use of, carbon-based energy).
Concern over climate change can also result in new or additional legal or regulatory requirements designed to reduce greenhouse gas emissions, mitigate the effects of climate change on the environment (such as taxation of, or caps on the use of, carbon-based energy) and/or increase disclosures with respect thereto.
Changes in our tax rates or exposure to additional income tax liabilities or assessments could affect our profitability. In addition, audits by tax authorities could result in additional tax payments for prior periods. We are subject to income taxes in the U.S. and in various non-U.S. jurisdictions.
Page 14 Table of Contents Changes in our tax rates or exposure to additional income tax liabilities or assessments could affect our profitability. In addition, audits by tax authorities could result in additional tax payments for prior periods. We are subject to income taxes in the U.S. and in various non-U.S. jurisdictions.
Even if we successfully innovate and develop new and enhanced products and services, we may incur substantial costs in doing so, and our profitability may suffer. Page 10 Table of Contents If we are unable to continue to hire and retain skilled personnel, we will have difficulty manufacturing and marketing our products.
Even if we successfully innovate and develop new and enhanced products and services, we may incur substantial costs in doing so, and our profitability may suffer. If we are unable to continue to hire and retain skilled personnel, we will have difficulty manufacturing and marketing our products.
International business risks have in the past and may in the future negatively affect our business and financial statements. A deterioration in diplomatic relations between the United States and any country where we conduct business could adversely affect our future operations and lead to a decline in profitability.
International business risks have in the past and may in the future negatively affect our business and financial statements. A deterioration in diplomatic relations between the United States and any country where we conduct business could adversely affect our future operations and lead to a decline in profitability. Our international operations are governed by the U.S.
If we cannot purchase sufficient products at competitive prices and of sufficient quality on a timely enough basis to meet increasing demand, we may not be able to satisfy market demand, product shipments may be delayed, our costs may increase, or we may breach our contractual commitments and incur liabilities.
If we cannot purchase sufficient products at competitive prices and of sufficient quality on a timely enough basis to meet demand, product shipments may be delayed, our costs may increase, or we may breach our contractual commitments and incur liabilities.
While our sales to Russia have historically produced an immaterial amount of revenues and profitability compared to the overall company, we cannot predict the impact that the conflict may have on future financial results. Violation of data privacy laws could adversely affect our business, reputation and financial statements.
While our sales to Russia, Ukraine and Israel have historically produced an immaterial amount of revenues and profitability compared to the overall company, we cannot predict the impact that the conflict or any other global conflict may have on future financial results. Violation of data privacy laws could adversely affect our business, reputation and financial statements.
Holders of the 2025 Notes also have the right to require us to repurchase all or a portion of their 2025 Notes upon the occurrence of a fundamental change (as defined in the applicable indenture governing the 2025 Notes) at a repurchase price equal to 100% of the principal amount of the 2025 Notes to be repurchased, plus accrued and unpaid interest.
Holders of the 2025 Notes also have the right to require us to repurchase all or a portion of their 2025 Notes upon the occurrence of a fundamental change (as defined in the applicable indenture governing the 2025 Notes) at a repurchase price equal to 100% of the principal amount of the 2025 Notes to be repurchased, plus accrued and unpaid interest, which could adversely affect our liquidity.
The supply chains for our businesses were impacted in fiscal year 2023 and could also be disrupted in the future by supplier capacity constraints, supplier bankruptcy or exiting of the business for other reasons, decreased availability of key raw materials or commodities and external events such as natural disasters, pandemics or other public health problems, war, terrorist actions, governmental actions and legislative or regulatory changes.
The supply chains for our businesses could be disrupted in the future by supplier capacity constraints, supplier bankruptcy or exiting of the business for other reasons, decreased availability of key raw materials or commodities and external events such as natural disasters, public health problems, war, terrorist actions, governmental actions and legislative or regulatory changes.
Page 22 Table of Contents In addition, our ability to repurchase or to pay cash upon conversion or at maturity of the 2025 Notes may be limited by law or regulatory authority. Our failure to repurchase Notes following a fundamental change as required by the applicable indenture would constitute a default under such indenture.
In addition, our ability to repurchase or to pay cash upon conversion or at maturity of the 2025 Notes may be limited by law or regulatory authority. Our failure to repurchase Notes following a fundamental change as required by the applicable indenture would constitute a default under the indenture governing the Notes.
Any charges relating to such impairments would adversely affect our financial statements in the periods recognized. Page 20 Table of Contents The loss of key customers, or reductions in their demand for our products and services, could have a significant negative impact on our revenues, results of operations, and financial position.
Any additional losses relating to such impairments would adversely affect our financial statements in the periods recognized. The loss of key customers, or reductions in their demand for our products and services, could have a significant negative impact on our revenues, results of operations, and financial position.
Our failure to compete effectively or pricing pressures resulting from competition may adversely impact our results of operations. Changing industry trends may affect our results of operations.
Our failure to compete effectively or pricing pressures resulting from competition may adversely impact our results of operations. Page 7 Table of Contents Changing industry trends may affect our results of operations.
Page 13 Table of Contents In addition, transportation costs have increased, which may reduce our gross profit margins unless and until we are able to pass the cost increases along to our customers.
In addition, transportation costs have increased, which may reduce our gross profit margins unless and until we are able to pass the cost increases along to our customers.
We may become involved in this type of litigation in the future. Any securities litigation claims brought against us could result in substantial expense and the diversion of management’s attention from our business.
We may become involved in this type of litigation in the future. Any securities litigation claims brought against us could result in substantial expense and the diversion of management’s attention from our business. Item 1B. Unresolved Staff Comments None.
A continued shortage of components or other key materials that comprise the components could cause a significant disruption to our production schedule and have a substantial adverse effect on our financial condition or results of operations.
A shortage of components or key materials that comprise components used in our products could cause a significant disruption to our production schedule and have a substantial adverse effect on our financial condition or results of operations.
Changes in accounting standards could affect our reported financial results. New accounting standards or pronouncements that may become applicable from time to time, or changes in the interpretation of existing standards and pronouncements, could have a significant effect on our reported results of operations for the affected periods.
Changes in accounting standards could affect our reported financial results. New accounting standards or pronouncements that may become applicable from time to time, or changes in the interpretation of existing standards and pronouncements, could have a significant effect on our reported results of operations for the affected periods. We have identified material weaknesses in our internal control over financial reporting.
Promising acquisitions are difficult to identify and execute for a number of reasons, including high valuations, competition among prospective buyers, the availability of affordable funding in the capital markets, and the need to satisfy applicable closing conditions.
Promising acquisitions are difficult to identify and execute for a number of reasons, including high valuations, competition among prospective buyers, the availability of affordable funding in the capital markets, and the need to satisfy applicable closing conditions and obtain applicable antitrust and other regulatory approvals on acceptable terms.
The existence of these material weaknesses and of any other ineffective controls over our financial reporting could have negative impacts including one or more of the following: ● Restatement of previously filed financial statements; ● Failure to meet our reporting deadlines (which among other consequences would result in a default of our convertible Notes due 2025); ● Loss of investor confidence; ● Restrict our ability to access capital markets; ● Require us to expend significant resources to correct the deficiencies; ● Negative impact on the trading price of our common stock.
The existence of these material weaknesses and of any other ineffective controls over our financial reporting could have negative impacts including one or more of the following: ● Restatement of previously filed financial statements; ● Failure to meet our reporting deadlines (which among other consequences could result in a default of our outstanding debt obligations); ● Loss of investor confidence; ● Restrictions our ability to access capital markets; ● Expenditure of significant resources to correct the deficiencies; ● Negative impact on the trading price of our common stock.
For example, the ultimate impact of the conflict in Ukraine on fuel prices, inflation, the global supply chain and other macroeconomic conditions is unknown and could materially adversely affect global economic growth, disrupting discretionary spending habits and generally decreasing demand for our products and services.
For example, the ultimate impact of military conflicts (such as the conflict between Russia and Ukraine or the conflict in Israel and the surrounding areas) on fuel prices, inflation, the global supply chain and other macroeconomic conditions is unknown and could materially adversely affect global economic growth, disrupting discretionary spending habits and generally decreasing demand for our products and services.
A default under the indenture or agreements governing our future indebtedness could have a material adverse effect on our business, results of operations, and financial condition.
A default under the indenture or agreements governing our future indebtedness, or failure to make required payments related to any of our indebtedness, could have a material adverse effect on our business, results of operations, and financial condition.
Even if we compete effectively, we may be required to reduce prices for our products and services resulting in decreased profit margins. The markets for our current and potential products are competitive.
We face competition and if we are unable to compete effectively, we may experience decreased demand and market share resulting in decreased revenues. Even if we compete effectively, we may be required to reduce prices for our products and services resulting in decreased profit margins. The markets for our current and potential products are competitive.
If the FDA disagrees with our determinations and requires us to submit new 510(k) notifications, we may be required to cease marketing or to recall the modified product until we obtain clearance, and we may be subject to significant regulatory fines or penalties.
If the FDA disagrees with our determinations and requires us to submit new 510(k) notifications, we may be required to cease marketing or to recall the modified product until we obtain clearance, and we may be subject to significant regulatory fines or penalties. Changes in governmental regulations may reduce demand for our products or services or increase our expenses.
In addition, the stock market in general, and the Nasdaq Stock Market and the market for products and devices sold into the medical and healthcare industries in particular, have experienced substantial price and volume volatility that is often seemingly unrelated to the operating performance of particular companies, including recently in connection with the ongoing COVID-19 pandemic, the conflict in Ukraine and increased inflation and interest rates in the United States, which have resulted in decreased stock prices for many companies notwithstanding the lack of a fundamental change in their underlying business models or prospects.
In addition, the stock market in general, and the Nasdaq Stock Market and the market for products and devices sold into the pharmaceutical, medical and healthcare industries in particular, have experienced substantial price and volume volatility that is often seemingly unrelated to the operating performance of particular companies, which have resulted in decreased stock prices for many companies notwithstanding the lack of a fundamental change in their underlying business models or prospects.
Our international operations subject us to a wide range of risks. Our operations and sales outside of the United States have increased as a result of our strategic acquisitions and the continued expansion of our commercial organization.
Our operations and sales outside of the United States have increased as a result of our strategic acquisitions and the continued expansion of our commercial organization.
In addition, some products or software we sell to customers may connect to our systems for maintenance or other purposes, and we sell software as a service and cloud-based platforms.
In addition, some products or software we sell to customers may connect to our systems for maintenance or other purposes.
Demand for our products and services is also sensitive to changes in customer order patterns, which may be affected by announced price changes, marketing or promotional programs, new product introductions, the timing of industry conferences, changes in distributor or customer inventory levels, or other factors.
Demand for our products and services is also sensitive to changes in customer order patterns, which may be affected by announced price changes, marketing or promotional programs, new product introductions, changes in distributor or customer inventory levels, or other factors. Any of these factors could adversely affect our growth and results of operations in any given period.
We expect our remediation efforts to be effective, however, we can provide no assurance that they will be or that additional material weaknesses will not arise in the future.
See "Part II, Item 9A — Controls and Procedures," for our remediation plans. We expect our remediation efforts to be effective, however, we can provide no assurance that they will be or that additional material weaknesses will not arise in the future.
We may not be able to secure such financing on favorable terms, or at all. In addition, future acquisitions may require the issuance or sale of additional equity or debt securities, which may result in dilution to our stockholders. Page 16 Table of Contents Legal, Regulatory, Compliance, and Reputational Risks We are subject to lawsuits and regulatory proceedings.
We may not be able to secure such financing on favorable terms, or at all. In addition, future acquisitions may require the issuance of additional equity securities, which may result in dilution to our stockholders, or the issuance of debt securities, which may subject us to financial risks and limits on our operations.
If the payment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the 2025 Notes or to pay cash upon conversion or at maturity. Additional stock issuances could result in significant dilution to our stockholders.
If the payment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay indebtedness as required. Page 15 Table of Contents Additional stock issuances could result in significant dilution to our stockholders.
We develop, configure and market our products and services to meet customer needs created by these regulations. These regulations are complex, change frequently, have tended to become more stringent over time and may be inconsistent across jurisdictions.
These regulations are complex, change frequently, have tended to become more stringent over time and may be inconsistent across jurisdictions.
Any such new or additional legal or regulatory requirements may increase the costs associated with, or disrupt, sourcing, manufacturing and distribution of our products, which may adversely affect our business and financial statements.
Any such new or additional legal or regulatory requirements may increase the costs associated with, or disrupt, sourcing, manufacturing and distribution of our products, which may adversely affect our business and financial statements. Acquisition Risks Any inability to consummate acquisitions at our historical rate and at appropriate prices could negatively impact our growth rate and stock price.
Adverse changes in our relationships with these distributors and other partners, or adverse developments in their financial condition, performance or purchasing patterns, could adversely affect our business and financial statements. The levels of inventory maintained by our distributors and other channel partners, and changes in those levels, can also negatively impact our results of operations in any given period.
The levels of inventory maintained by our distributors and other channel partners, and changes in those levels, can also negatively impact our results of operations in any given period. In addition, the consolidation of distributors could adversely impact our business and financial statements. We cannot directly control the actions of our distributors.
We do not enter into hedging arrangements to mitigate any foreign currency exposure. We may be required to recognize impairment charges for our goodwill and other intangible assets. As of March 31, 2023, the net carrying value of our goodwill and other intangible assets totaled $503.3 million.
We do not enter into hedging arrangements to mitigate any foreign currency exposure. Page 13 Table of Contents We may be required to recognize additional impairment losses for our goodwill and other intangible assets.
Our growth depends in part on the growth of the markets which we serve, and visibility into our markets is limited (particularly for markets into which we sell through distribution). Any decline or lower than expected growth in our served markets could diminish demand for our products and services, which would adversely affect our financial statements.
Any decline or lower than expected growth in our served markets could diminish demand for our products and services, which would adversely affect our financial results.
The indemnification provisions of acquisition agreements by which we have acquired companies may not fully protect us and as a result we may face unexpected liabilities , or we may have acquisition agreements with no indemnification protection at all.
We incurred such a charge as of March 31, 2024 as described below in “We may be required to recognize additional impairment losses for our goodwill and other intangible assets.” The indemnification provisions of acquisition agreements by which we have acquired companies may not fully protect us and as a result we may face unexpected liabilities , or we may have acquisition agreements with no indemnification protection at all.
If we fail to remedy any deficiencies or maintain the adequacy of our internal controls, we could be subject to regulatory scrutiny, civil or criminal penalties or shareholder litigation. In addition, failure to maintain adequate internal controls could result in financial statements that do not accurately reflect our operating results or financial condition.
The implementation of these systems represents a change in our internal control over financial reporting. If we fail to remedy any deficiencies or maintain the adequacy of our internal controls, we could be subject to regulatory scrutiny, civil or criminal penalties or shareholder litigation.
In addition, the consolidation of distributors could adversely impact our business and financial statements. We cannot directly control the actions of our distributors. Our distributors may not comply with export laws, or follow the terms of the distribution agreements which require compliance with export laws, which could have legal or financial implications for us.
Our distributors may not comply with export laws or follow the terms of the distribution agreements which require compliance with export laws, which could have legal or financial implications for us. Our international operations subject us to a wide range of risks.
Page 18 Table of Contents Changes in governmental regulations may reduce demand for our products or services or increase our expenses. We compete in markets in which we and our customers must comply with federal, state, and other jurisdictional regulations, such as regulations governing health and safety, food and drugs, privacy and electronic communications.
We compete in markets in which we and our customers must comply with federal, state, and other jurisdictional regulations, such as regulations governing health and safety, food and drugs, privacy and electronic communications. We develop, configure and market our products and services to meet customer needs created by these regulations.
We incurred significant indebtedness in the amount of $172.5 million in the form of the 2025 Notes which mature on August 15, 2025, unless earlier converted. We also have a revolving Credit Facility and could borrow additional amounts under that at any time, incurring more debt.
We also have a Credit Facility, under which we have incurred significant indebtedness, and under which we could borrow additional amounts under that at any time, incurring more debt. At our option, we may settle the 2025 notes in shares of our common stock, cash, or a combination thereof.
A failure to comply with these regulations could result in suspension of these contracts, criminal, civil and administrative penalties or debarment. Page 19 Table of Contents Financial and Tax Risks We have identified material weaknesses in our internal control over financial reporting.
A failure to comply with these regulations could result in suspension of these contracts, criminal, civil and administrative penalties or debarment. Financial and Tax Risks Foreign currency exchange rates may adversely affect our financial statements.
Our success depends largely upon the continued service of our management and manufacturing employees and our ability to attract, retain and motivate manufacturing and management personnel, some of whom we are recruiting for in-person positions in competitive labor markets, particularly Bozeman, Montana.
Our success depends largely upon the continued service of our employees and our ability to attract, retain and motivate personnel, some of whom work in competitive labor markets, particularly Bozeman, Montana. Loss of key personnel or our inability to hire and retain personnel could materially adversely affect our manufacturing efforts, harm our ability to meet compliance requirements, and increase backlog.
Operational Risks A significant disruption in, or breach in security of, our information technology systems or data could adversely affect our business, reputation and financial statements.
Any alleged or actual violations of these laws may subject us to government investigations and significant criminal or civil sanctions and other liabilities, and negatively affect our reputation. Page 8 Table of Contents Operational Risks A significant disruption in, or breach in security of, our information technology systems or data could adversely affect our business, reputation and financial statements.
Our failure to maintain appropriate environmental, social, and governance ("ESG") practices and disclosures could result in reputational harm, a loss of customer and investor confidence, and adverse business and financial results. Governments, investors, customers, and employees are enhancing their focus on ESG practices and disclosures, and expectations in this area are rapidly evolving and increasing.
In addition, failure to maintain adequate internal controls could result in financial statements that do not accurately reflect our operating results or financial condition. Our failure to maintain appropriate environmental, social, and governance ("ESG") practices and disclosures could result in reputational harm, a loss of customer and investor confidence, and adverse business and financial results.
Our international operations, which often involve customer relationships with foreign governments, create the risk that there may be unauthorized payments or offers of payments made by employees, consultants, or distributors. Any alleged or actual violations of these laws may subject us to government investigations and significant criminal or civil sanctions and other liabilities, and negatively affect our reputation.
Foreign Corrupt Practices Act and similar anti-corruption laws outside the United States. Global enforcement of anti-corruption laws has increased in recent years. Our international operations, which often involve customer relationships with foreign governments, create the risk that there may be unauthorized payments or offers of payments made by employees, consultants, or distributors.
Some of these distributors and other partners also sell our competitors’ products or compete with us directly, and if they favor competing products for any reason, they may fail to market our products effectively.
Some of these distributors and other partners also sell our competitors’ products or compete with us directly. Adverse changes in our relationships with these distributors and other partners, or adverse developments in their financial condition, performance or purchasing patterns, could adversely affect our business and financial statements.
Removed
Page 9 Table of Contents Inflationary conditions in recent periods have resulted in the U.S. Federal Reserve and other financial regulatory bodies implementing increases in interest rates, and these increases have slowed global growth and made a recession more likely.
Added
Our growth depends in part on the growth of the markets which we serve, and visibility into our markets is limited (particularly for markets into which we sell through distribution). Our quarterly revenues and profits depend substantially on the volume and timing of orders received during the quarter, which are difficult to forecast.
Removed
Any of these factors could adversely affect our growth and results of operations in any given period. We face competition and if we are unable to compete effectively, we may experience decreased demand and market share resulting in decreased revenues.
Added
For example, the Inflation Reduction Act of 2022 may subject certain products to government-established pricing, potentially impose rebates and subject manufacturers who fail to adhere to the government's interpretation of the law to penalties.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties As of March 31, 2023, we owned two facilities and both are material to our business: one in Lakewood, Colorado and the other in Bozeman, Montana. Both facilities are used for manufacturing, engineering, research and development, marketing, and administration. Two of our four segments use the properties: Sterilization and Disinfectant Control and Calibration Solutions.
Biggest changeItem 2. Properties As of March 31, 2024, we owned two facilities and both are material to our business: one in Lakewood, Colorado and the other in Bozeman, Montana. Both facilities are used for manufacturing and distribution, engineering, research and development, sales and marketing, and administration activities.
Removed
We have eleven leased facilities which are individually immaterial.
Added
Two of our four segments use the properties: Sterilization and Disinfection Control and Calibration Solutions. We have fourteen leased facilities used by our Sterilization and Disinfection Control (international), Clinical Genomics, and Biopharmaceutical Development divisions. The leased facilities are used for manufacturing, research and development, administration, and all other such business activities.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePage 24 Table of Contents Set forth below is a line graph comparing, for the period March 31, 2018 through March 31, 2023, the cumulative total shareholder return on our common stock against the cumulative total return of (a) the S&P Composite Stock Index (b) the S&P Small Cap 600, and (c) a self-selected peer group, comprised of the following companies: Danaher Corp., Inc., Repligen Corp., Steris Corp., Utah Medical Products, Inc., Cantel Medical Corp., Fortive Corp., Merit Medical Systems, Inc., Mettler Toledo International, Inc., Transcat Inc., Elector-Sensors, Inc., Medtronic, P.L.C, and Illumina, Inc.
Biggest changePage 17 Table of Contents Set forth below is a line graph comparing, for the period March 31, 2020 through March 31, 2024, the cumulative total shareholder return on our common stock against the cumulative total return of (a) the S&P Composite Stock Index (b) the S&P Small Cap 600, and (c) a self-selected peer group, comprised of the following companies: Danaher Corp., Repligen Corp., Steris Corp., Utah Medical Products, Inc., Fortive Corp., Merit Medical Systems, Inc., Transcat Inc., Electro-Sensors, Inc., Onto Innovation Inc., Metler-Toledo International Inc., and Illumina, Inc.
The graph shows the value on March 31 of each year, assuming an original investment of $100 in each and reinvestment of cash dividends. Item 6. Reserved
The graph shows the value on March 31 of each year, assuming an original investment of $100 in each on March 31, 2020 and reinvestment of cash dividends. Item 6. Reserved
During the year ended March 31, 2023, we did not sell any equity securities that were not registered under the Securities Act of 1933, as amended. 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.
During the year ended March 31, 2024, we did not sell any equity securities that were not registered under the Securities Act of 1933, as amended. 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.
This plan will continue until the maximum is reached or the plan is terminated by further action of the Board of Directors. We made no repurchases of our common stock during the years ended March 31, 2023, March 31, 2022, or March 31, 2021. As of March 31, 2023, 137,514 shares remained available to repurchase pursuant to the repurchase plan.
This plan will continue until the maximum is reached or the plan is terminated by further action of the Board of Directors. We made no repurchases of our common stock during the years ended March 31, 2024, March 31, 2023, or March 31, 2022. As of March 31, 2024, 137,514 shares remained available to repurchase pursuant to the repurchase plan.
At this time, we expect to continue paying dividends commensurate with our historical practice. As of March 31, 2023, there were 60 holders of record of our common stock. This amount does not include “street name” holders or beneficial holders of our common stock, who holder their shares through banks, brokers or other financial institutions.
At this time, we expect to continue paying dividends commensurate with our historical practice. As of March 31, 2024, there were 60 holders of record of our common stock. This amount does not include “street name” holders or beneficial holders of our common stock, who hold their shares through banks, brokers or other financial institutions.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. Reserved 25 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 25 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 35 Item 8. Financial Statements and Supplementary Data 36 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 67 Item 9A. Controls and Procedures 68
Biggest changeItem 6. Reserved 18 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 18 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 26 Item 8. Financial Statements and Supplementary Data 27 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 55 Item 9A. Controls and Procedures 56

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changePage 31 Table of Contents The following table sets forth our reconciliation of adjusted operating income, a non-GAAP measure, to operating income: Year Ended March 31, 2023 2022 2021 Operating income $ 3,320 $ 4,702 $ 12,358 Amortization of intangible assets acquired in a business combination 28,821 21,806 14,513 Stock-based compensation 12,538 11,391 9,268 Adjusted Operating Income $ 44,679 $ 37,899 $ 36,139 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 Agreement SM described below, working capital, and potential additional equity and debt offerings.
Biggest changeThe following table sets forth our reconciliation of operating (loss) income to adjusted operating income, a non-GAAP measure: Year Ended March 31, 2024 2023 2022 Operating (loss) income $ (272,075 ) $ 3,320 $ 4,702 Amortization of intangible assets acquired in a business combination 27,341 28,821 21,806 Depreciation of long-lived assets 4,233 4,313 3,262 Stock-based compensation 11,936 12,538 11,391 Impairment losses on goodwill and finite-lived intangible assets 274,533 - - Adjusted Operating Income (non-GAAP) $ 45,968 $ 48,992 $ 41,161 The following table sets forth our reconciliation of total revenues growth to organic revenues growth, a non-GAAP measure: Total Revenues Growth Impact of Acquisitions Organic Revenues Growth (non-GAAP) Year Ended March 31, 2024 Year Ended March 31, 2023 Year Ended March 31, 2024 Year Ended March 31, 2023 Year Ended March 31, 2024 Year Ended March 31, 2023 Sterilization and Disinfection Control 16.3 % 9.4 % (14.4 %) - % 1.9 % 9.4 % Clinical Genomics (15.6 %) 89.7 % - % (102.6 %) (15.6 %) (12.9 %) Biopharmaceutical Development (14.3 %) 3.9 % - % (0.1 %) (14.3 %) 3.8 % Calibration Solutions 6.6 % (4.4 %) - % - % 6.6 % (4.4 %) Total Company (1.3 %) 18.8 % (4.3 %) (18.2 %) (5.6 %) 0.6 % 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 Agreement SM described below, and potential additional equity and debt offerings.
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, as well as by independent distributors in these areas and throughout the rest of the world. We prefer markets in which we can establish a strong presence and achieve high gross profit margins.
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.
Selling Selling expense is driven primarily by labor costs, including salaries and commissions; accordingly, it may vary with sales levels.
Selling Expense Selling expense is driven primarily by labor costs, including salaries and commissions; accordingly, it may vary with sales levels.
Tax benefits and deficiencies associated with share-based payment awards to our employees have caused and, in the future, may cause large fluctuations in our realized effective tax rate based on timing, volume, and nature of stock options exercised under our share-based payment program.
Tax benefits and deficiencies associated with share-based payment awards to our employees have caused and, in the future, may cause large fluctuations in our realized effective tax rate based on timing, volume, and the nature of stock options exercised under our share-based payment program.
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 Agreement SM , when necessary, will be sufficient to meet our ongoing short-term and long-term operating requirements, scheduled interest payments on debt, dividend payments, and anticipated capital expenditures.
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 Agreement SM , when necessary, will be sufficient to meet our ongoing short-term and long-term operating requirements, scheduled principal and interest payments on debt, dividend payments, and anticipated capital expenditures.
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.
We believe 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.
The excess of the purchase price over the fair value of assets less liabilities is recognized as goodwill. We determine fair value using widely accepted valuation techniques, primarily discounted cash flow and market multiple analyses.
The excess of the purchase price over the fair value of acquired assets less liabilities is recognized as goodwill. We determine fair value using widely accepted valuation techniques, primarily discounted cash flow and market multiple analyses.
As of March 31, 2023, 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. Unallocated corporate expenses and other business activities are reported within Corporate and Other.
As of March 31, 2024, we managed our operations in four reportable segments, or divisions: Sterilization and Disinfection Control, Clinical Genomics, Biopharmaceutical Development, and Calibration Solutions. Each of our divisions are described further in "Results of Operations" below. Unallocated corporate expenses and other business activities are reported within Corporate and Other.
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.
Corporate Strategy We strive to create stakeholder 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.
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; Sustainably 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.
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; Sustainably Improving using lean-based tools designed to help us identify and prioritize the biggest opportunities; and Always Learning so that performance continuously improves.
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 We are a global company, with multinational operations.
It is our exceptionally talented workforce that works together and uses our lean-based tool set to find ways to continuously and sustainably improve our products, our services, and ourselves, resulting in long-term value creation for our stakeholders. General Trends We are a global company with multinational operations.
Dividends We have paid regular quarterly dividends since 2003. We declared and paid dividends of $0.16 per share each quarter of the years ended March 31, 2023, 2022, and 2021.
Dividends We have paid regular quarterly dividends since 2003. We declared and paid dividends of $0.16 per share each quarter of the years ended March 31, 2024, 2023, and 2022.
By delivering the highest quality products possible, we are committed to protecting the communities we serve. Page 25 Table of Contents 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.
By delivering the highest quality products possible, we are committed to protecting the communities we serve. 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.
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.
For a description of our contractual obligations and other commercial commitments as of March 31, 2023, see our Annual Report on Form 10-K for the fiscal year ended March 31, 2023, filed with the Securities and Exchange Commission on May 30, 2023.
Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended March 31, 2022, filed on May 31, 2022, for a comparison of results of operations for the years ended March 31, 2022 and March 31, 2021.
Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended March 31, 2023, filed on May 30, 2023, for a comparison of results of operations for the years ended March 31, 2023 and March 31, 2022.
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®.
These acquisitions have allowed us to expand our product offerings and the industries we serve, globalize our company, and increase the scale at which we operate. In turn, this growth affords us the ability to improve our operating efficiency, extend our customer base, and further the pursuit of our purpose: Protecting the Vulnerable®.
Financial Statements and Supplementary Data . Purchase Accounting for Acquisitions We account for all business combinations in which we obtain control over another entity using the acquisition method of accounting, which requires most assets (both tangible and intangible) and liabilities (including any applicable contingent consideration) to be recognized at fair value at the date of acquisition.
Financial Statements and Supplementary Data . Purchase Accounting for Acquisitions We account for all business combinations in which we obtain control over another entity using the acquisition method of accounting, which requires most assets (both tangible and intangible) and liabilities to be recognized at fair value at the date of acquisition.
In April 2023, our Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock, payable on June 15, 2023, to shareholders of record at the close of business on May 31, 2023.
In April 2024, our Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock, payable on June 14, 2024, to shareholders of record at the close of business on May 31, 2024.
Critical Accounting Policies and Estimates Our Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States, which require management to make estimates, judgments, and assumptions that affect the amounts reported in our Consolidated Financial Statements and accompanying notes.
Page 24 Table of Contents Critical Accounting Policies and Estimates Our Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States, which require management to make estimates, judgments, and assumptions that affect the amounts reported in our Consolidated Financial Statements and accompanying notes.
In April 2022, we entered into an Open Market Sale Agreement SM pursuant to which we may issue and sell, from time to time, shares of our common stock with an aggregate value of up to $150,000. We did not sell any shares under this agreement during fiscal year 2023. We routinely evaluate opportunities for strategic acquisitions.
In April 2022, we entered into an Open Market Sale Agreement SM pursuant to which we may issue and sell, from time to time, shares of our common stock with an aggregate value of up to $150,000. We have not sold any shares under this agreement to date. We routinely evaluate opportunities for strategic acquisitions.
Page 34 Table of Contents Contractual Obligations We are party to many contractual obligations that involve commitments to make payments to third parties in the ordinary course of business.
Contractual Obligations We are party to many contractual obligations that involve commitments to make payments to third parties in the ordinary course of business.
Income Taxes Year Ended March 31, Percentage Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Income tax (benefit) expense $ (1,319 ) $ 1,703 $ (971 ) (177 %) (275 %) Effective tax rate 339 % 48 % (42 %) 291 % 90 % Our income tax rate varies based upon many factors, but in general we anticipate that on a go-forward basis, our effective tax rate will be approximately 26%, plus or minus the impact of excess tax benefits and deficiencies associated with share-based payment awards to employees (please see Note 12.
Income Taxes Year Ended March 31, Percentage Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Income tax (benefit) expense $ (21,402 ) $ (1,319 ) $ 1,703 1,523 % (177 %) Effective tax rate 8 % 339 % 48 % (331 %) 291 % Our income tax rate varies based upon many factors, but in general we anticipate that on a go-forward basis, our effective tax rate will be approximately 25%, plus or minus the impact of excess tax benefits and deficiencies associated with share-based payment awards to employees (please see Note 12.
However, our diversity in industry, geography, and product and service offerings may limit the impact of changes in specific industry trends or local economic changes to a single geographic area on our consolidated operating results.
However, our diversity in industry, geography, and product and service offerings may limit the impact of changes in specific industry trends or local economic changes in our consolidated operating results.
Calibration Solutions The Calibration Solutions division develops, manufactures and sells quality control products using principles of advanced metrology to measure or calibrate critical chemical or physical parameters in various dialysis, process monitoring, instrument monitoring, environmental monitoring, gas flow, environmental air quality, and torque applications, primarily in hospital, medical device manufacturing, pharmaceutical manufacturing, and laboratory environments.
Calibration Solutions The Calibration Solutions division develops, manufactures and sells quality control products using principles of advanced metrology to enable customers to measure and calibrate critical parameters in applications such as environmental and process monitoring, dialysis, gas flow, air quality and torque testing, primarily in medical device manufacturing, pharmaceutical manufacturing, laboratory, and hospital environments.
Adjusted operating income should not be considered an alternative to, or more meaningful than, net income, operating income, cash flow from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance or liquidity.
Adjusted operating income and organic revenues growth should not be considered alternatives to, or more meaningful than, net (loss) income, operating (loss) income, reported revenues growth, cash flow from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance or liquidity.
Events that would indicate impairment and trigger interim impairment assessments include but are not limited to: current economic and market conditions, including a decline in market capitalization; a significant adverse change in legal factors; business climate or operational performance of the business; and an adverse action or assessment by a regulator.
Events that would indicate impairment and trigger interim impairment assessments include but are not limited to: adverse current or expected economic, market, or industry-specific conditions, including a decline in our market capitalization; adverse changes or expected changes in business climate or in the operational performance of the business; adverse changes in legal factors; and adverse actions or assessments by a regulator.
Non-GAAP reconciliation Adjusted operating income (which excludes the non-cash impact of amortization of intangible assets acquired in a business combination, stock-based compensation and impairment of goodwill and long-lived assets) is used by management as a supplemental performance measure in order to compare current financial performance to historical performance, assess the ability of our assets to generate cash, and evaluate potential acquisitions.
Non-GAAP Reconciliations Adjusted operating income (which excludes the non-cash impact of amortization of finite-lived intangible assets acquired in a business combination, depreciation, stock-based compensation, and impairment of goodwill and finite-lived intangible assets) and organic revenues growth (reported revenues growth excluding the impact of revenues growth from recent acquisitions) are used by management as supplemental performance measures in order to compare current financial performance to historical performance, to assess the ability of our assets to generate cash, and to evaluate potential acquisitions.
If impairment indicators are present, we determine whether the carrying value of the underlying intangible asset is recoverable through undiscounted estimated future cash flows. If the asset is not found to be recoverable, we estimate the asset's fair value using Level 3 inputs and record an impairment to write down the asset's carrying value to the estimated fair value.
If impairment indicators are present, we determine whether the carrying value of the underlying intangible asset or asset group is recoverable through undiscounted estimated future cash flows. If the asset or asset group is not found to be recoverable, we estimate the asset's fair value using Level 3 inputs and discounted cash flow models and recognize impairment losses as necessary.
We test goodwill and indefinite lived intangible assets for impairment on an annual basis during the fourth quarter of each year, or more frequently if events and circumstances indicate it is more likely than not that the fair value of the respective asset is less than its carrying value.
We test goodwill for impairment on an annual basis during the fourth quarter of each year as of January 1st, or more frequently if events and circumstances indicate it is more likely than not that the fair value of a given goodwill reporting unit is less than its carrying value.
Page 32 Table of Contents Cash Flows Our cash flows from operating, investing, and financing activities were as follows: Year Ended March 31, 2023 2022 2021 Net cash provided by operating activities $ 27,983 $ 39,223 $ 37,073 Net cash (used in) investing activities (9,494 ) (305,225 ) (1,992 ) Net cash (used in) provided by financing activities (33,328 ) 52,576 146,228 Cash flows from operating activities for the year ended March 31, 2023 provided $27,983.
Cash Flows Our cash flows from operating, investing, and financing activities were as follows: Year Ended March 31, 2024 2023 2022 Net cash provided by operating activities $ 44,133 $ 27,983 $ 39,223 Net cash (used in) investing activities (81,306 ) (9,494 ) (305,225 ) Net cash provided by (used in) financing activities 32,836 (33,328 ) 52,576 Cash flows from operating activities for the year ended March 31, 2024 provided $44,133.
Our more significant uses of resources have historically included acquisitions, payments on 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 $75,616 and $76,263 on March 31, 2023 and 2022, respectively.
Page 23 Table of Contents Our more significant uses of resources have historically included acquisitions, payments on debt principal and interest obligations, long-term capital expenditures, and quarterly dividends to shareholders. We had $28,214 and $32,910 of cash and cash equivalents as of March 31, 2024 and 2023, respectively. Working capital is the amount by which current assets exceed current liabilities.
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.
Clinical Genomics The Clinical Genomics division develops, manufactures and sells highly sensitive, low-cost, high-throughput genetic analysis tools and related consumables and services that enable clinical research labs and contract research organizations to perform genomic testing for a broad range of research applications in several therapeutic areas, such as screenings for hereditary diseases, pharmacogenetics, oncology related applications, and toxicology research.
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.
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 the manufacturing and administrative aspects of our high-margin, niche businesses.
During our fiscal year 2023, approximately 46% of our revenues were derived from revenues earned outside of the United States. Since Mesa serves a number of industries across a variety of global markets, we may be affected by world-wide, regional, or industry-specific economic or political factors.
During our fiscal year 2024, approximately 51% of our revenues were earned outside of the United States. Since we serve a number of industries across a variety of global markets, we may be affected by world-wide, regional, or industry-specific economic or political factors, trends and costs associated with a global labor force, and increasing regulation.
On a consolidated basis, at March 31, 2023, we had contractual obligations for open purchase orders of approximately $17,270 for routine purchases of supplies and inventory, of which the substantial majority are payable in less than one year.
On a consolidated basis, at March 31, 2024, we had contractual obligations for open purchase orders of approximately $18,400 for routine purchases of supplies and inventory, of which the substantial majority are payable in less than one year. See "Liquidity and Capital Resources" for information related to future required debt payments.
Any adjustments subsequent to the measurement period are recorded within earnings. We expense all costs as incurred related to an acquisition in selling, general, and administrative expenses. Results of operations of the acquired company are included in our Consolidated Financial Statements from the date of the acquisition forward.
We expense all costs as incurred related to an acquisition, such as legal and advisory fees, in general and administrative expenses. Results of operations of acquired companies are included in our Consolidated Financial Statements from the date of the acquisition forward.
We have evaluated our risk from concentration of cash deposits and taken appropriate steps to mitigate such risk. We maintain relationships and cash deposits at multiple banking institutions across the world in an effort to diversify and reduce risk of loss.
We maintain relationships and cash deposits at multiple banking institutions across the world in an effort to diversify and reduce risk of loss related to concentrations of cash deposits.
We determine the probability of achievement of future levels of performance by comparing the relevant performance level with our internal estimates of future performance. Those estimates are based on a number of assumptions, and different assumptions may result in different conclusions regarding the probability of achieving future levels of performance relevant to the payout levels for the awards.
Those estimates are based on a number of assumptions, and different assumptions may result in different conclusions regarding the probability of achieving future levels of performance relevant to the payout levels for the awards. Valuations for awards containing market conditions are prepared using a lattice model.
A weakening or strengthening of foreign currencies against the United States dollar ("USD") increases or decreases our reported revenues, gross profit margins, and operating expenses, and impacts the comparability of our results between periods. Overall, currency exchange rates negatively impacted our reported revenues for fiscal year 2023 compared to fiscal year 2022.
A weakening or strengthening of foreign currencies against the United States dollar ("USD") increases or decreases our reported revenues, gross profit margins, and operating expenses, and impacts the comparability of our results between periods. Results of Operations Our results of operations and year-over-year changes are discussed in the following section.
If actual results are not consistent with our assumptions and estimates, or if our assumptions and estimates change due to new information, we may be exposed to an impairment charge in the future.
If actual results are not consistent with our assumptions and estimates, or if our assumptions and estimates change due to new information, we may be exposed to further impairment losses, as described under "Acquired Intangible Assets, Impairment Testing" below.
We actively monitor trends affecting industries that we operate in, including monitoring key competitors and customers, as well as staying abreast of changes to local economies and how they may affect our divisions. Page 26 Table of Contents Exchange rates were volatile throughout fiscal year 2023.
We actively monitor trends affecting industries we operate in, including by monitoring key competitors and customers and by staying abreast of changes to local economies and how they may affect our operations.
Nonoperating Expense Year Ended March 31, Percentage Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Nonoperating expense $ 3,709 1,128 10,055 229 % (89 %) Nonoperating expense for fiscal year 2023 is composed primarily of interest expense and amortization of the debt discount associated with the 2025 Notes and the Credit Facility as well as gains and losses on foreign currency transactions.
Page 22 Table of Contents Nonoperating Expense, Net Year Ended March 31, Percentage Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Nonoperating expense, net $ 3,573 3,709 1,128 (4 %) 229 % Nonoperating expense, net for fiscal year 2024 is composed primarily of interest expense and amortization of the debt issuance costs associated with the 2025 Notes and the Credit Facility.
Stock- b ased Compensation We recognize compensation expense for equity awards over the vesting period based on the fair value of the awards. We use the Black-Scholes valuation model to estimate the fair value of our stock options. The Black-Scholes model requires assumptions to be made regarding our stock price volatility, the expected life of awards, and expected dividend rates.
Page 25 Table of Contents Stock- b ased Compensation We recognize compensation expense for equity awards over the vesting period based on the fair value of the awards at grant date. We use the Black-Scholes-Merton valuation model ("Black-Scholes") to estimate the fair value of our stock options.
Year Ended March 31, Percentage Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Revenues $ 64,609 $ 59,044 $ 53,119 9 % 11 % Gross profit 46,520 43,720 39,870 6 % 10 % Gross profit as a % of revenues 72 % 74 % 75 % (2 %) (1 %) Page 28 Table of Contents Sterilization and Disinfection Control revenues increased 9% for fiscal year 2023 compared to fiscal year 2022, despite the USD strengthening against the euro which resulted in lower reported revenues derived from sales in Europe.
Year Ended March 31, Percentage Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Revenues $ 75,124 $ 64,609 $ 59,044 16 % 9 % Gross profit 53,302 46,520 43,720 15 % 6 % Gross profit as a % of revenues 71 % 72 % 74 % (1 %) (2 %) Sterilization and Disinfection Control revenues increased 16% for fiscal year 2024 compared to fiscal year 2023.
Impairment assessments are conducted if events or conditions indicate that asset carrying amounts may not be recoverable, including changes in the competitive landscape, any internal decisions to pursue new or different technology strategies, losses of significant customers, or significant changes in the marketplace, including adverse changes in the prices paid for our products or changes in the size of the market for our products.
Events or conditions indicating potential impairment include but are not limited to changes in the competitive landscape, any internal decisions to pursue new or different technology strategies, losses of significant customers, or significant changes in business performance or in the markets and industries we serve, including adverse changes in the prices paid for our products or changes in the size of the markets for our products.
Biopharmaceutical Developmen t 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 therapies, among other applications.
Immunoassays and peptide synthesis solutions accelerate the discovery, development, and manufacture of biotherapeutic therapies, among other applications.
If, after this qualitative assessment, we determine it is more likely than not that the fair value is greater than the carrying amount, no further quantitative testing is necessary. A quantitative assessment is performed if the qualitative assessment results in a more-likely-than-not determination or if a qualitative assessment is not performed.
Our annual impairment tests typically begin with a qualitative assessment, and further quantitative assessments are performed if we determine it is more likely than not that the fair value is greater than the carrying amount.
The volatility assumption and the expected life assumptions are based on our historical data. The compensation expense related to performance share awards is based in part on the estimated probability of achieving performance goals associated with particular levels of payout for performance shares.
Compensation expense related to performance share awards is based in part on the estimated probability of achieving performance goals associated with particular levels of payout. We determine the probability of achievement of future levels of performance by comparing the relevant performance level with our internal estimates of future performance.
These types of analyses require us to make and monitor assumptions and estimates regarding industry and economic factors, the profitability of future business strategies, discount rates and cash flow. Certain adjustments to the assessed fair values of acquired assets or liabilities made subsequent to the acquisition date but within a one-year measurement period are recorded as adjustments to goodwill.
Certain adjustments to the assessed fair values of acquired assets or liabilities made subsequent to the acquisition date but within a one-year measurement period are recorded as adjustments to goodwill. Any adjustments subsequent to the measurement period are recorded within earnings.
Page 33 Table of Contents Intangible assets with finite lives are amortized over their useful lives using the straight-line method and amortization expense is recorded within cost of products or selling, general and administrative expense in the Consolidated Statements of Income.
Intangible assets with finite lives are amortized over their useful lives using the straight-line method, and amortization expense is recorded within cost of revenues or general and administrative expense in the Consolidated Statements of Operations. Impairment assessments over finite-lived intangibles are conducted if events or conditions indicate that asset carrying amounts may not be recoverable.
If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life. We continue to believe that our finite lived intangible assets are recoverable as of March 31, 2023.
If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life. Goodwill is not subject to amortization.
Acquired Intangible Assets Our business acquisitions typically result in the recognition of goodwill and other intangible assets, which affect the amount of future period amortization expense and possible impairment charges we may incur.
For the fiscal years ended March 31, 2024, 2023 and 2022, we acquired businesses for total net purchase prices of $87,187, $6,140, and $300,793, respectively. Acquired Intangible Assets, Impairment Testing Our business acquisitions typically result in the recognition of goodwill and other intangible assets, which affect the amount of future period amortization expense and impairment losses we may incur.
Year Ended March 31, Percentage Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Revenues $ 62,299 $ 32,840 $ - 90 % N/A Gross profit 32,485 11,941 - 172 % N/A Gross profit as a % of revenues 52 % 36 % N/A 16 % N/A Revenues in the Clinical Genomics division represent revenues from October 20, 2021 until March 31, 2023.
Year Ended March 31, Percentage Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Revenues $ 52,588 $ 62,299 $ 32,840 (16 %) 90 % Gross profit 27,078 32,485 11,941 (17 %) 172 % Gross profit as a % of revenues 51 % 52 % 36 % (1 %) 16 % Clinical Genomics revenues decreased 16% in fiscal year 2024 compared to fiscal year 2023, largely due to the loss of Sema4 as a customer in the third quarter of fiscal year 2023, as well as China's economic slowdown.
Year Ended March 31, Percentage Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Revenues $ 47,365 $ 45,579 $ 33,892 4 % 34 % Gross profit 30,340 28,605 21,035 6 % 36 % Gross profit as a % of revenues 64 % 63 % 62 % 1 % 1 % Biopharmaceutical Development's revenues increased 4% for fiscal year 2023 compared to fiscal year 2022.
Year Ended March 31, Percentage Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Revenues $ 40,712 $ 47,365 $ 45,579 (14 %) 4 % Gross profit 25,400 30,340 28,605 (16 %) 6 % Gross profit as a % of revenues 62 % 64 % 63 % (2 %) 1 % Biopharmaceutical Development's revenues decreased 14% for fiscal year 2024 compared to fiscal year 2023, primarily due to continued softening demand for capital equipment, including our instruments, in the biopharmaceutical industry, with some abatement during the fourth quarter of fiscal year 2024.
Research and Development Research and development expense is predominantly comprised of labor costs and third-party consultants.
"Goodwill and Intangible Assets, Net" in Item 8. Financial Statements and Supplementary Data for further information. Research and Development Expense Research and development expense is predominantly comprised of labor costs and third-party consultants.
Net Income Net income for the year ended March 31, 2023 varied with the changes in revenues, gross profit, and operating expenses (including, respectively, $28,821 and $12,538 of non-cash amortization of intangible assets acquired in a business combination, and stock-based compensation expense).
Net (Loss) Income Net (loss) income varies with the changes in revenues, gross profit, and operating expenses. Net loss in fiscal year 2024 reflects, respectively, $274,533, $27,341, $4,233, and $11,936 of non-cash impairment losses on goodwill and finite-lived intangible assets, non-cash amortization of intangible assets acquired in a business combination, non-cash depreciation, and non-cash stock-based compensation expense.
Year Ended March 31, Percentage Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Revenues $ 44,807 $ 46,872 $ 46,926 (4 %) - % Gross profit 24,388 24,989 26,112 (2 %) (4 %) Gross profit as a % of revenues 54 % 53 % 56 % 1 % (3 %) Calibration Solutions' revenues decreased 4% for fiscal year 2023 compared to fiscal year 2022, primarily as a result of supply constraints limiting our ability to manufacture ordered quantities of certain products, partially offset by slightly higher service revenues as our service technicians had access to client facilities for substantially all of fiscal year 2023, and the benefit of modest price increases.
Year Ended March 31, Percentage Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Revenues $ 47,763 $ 44,807 $ 46,872 7 % (4 %) Gross profit 27,547 24,388 24,989 13 % (2 %) Gross profit as a % of revenues 58 % 54 % 53 % 4 % 1 % Calibration Solutions revenues increased 7% for fiscal year 2024 compared to fiscal year 2023, largely due to the abatement of production difficulties and supply constraints that limited our ability to manufacture ordered quantities of certain products during the first three quarters of fiscal year 2023.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in thousands, unless specified) Overview We are a multinational manufacturer, developer, and seller of life sciences tools and critical quality control products and services, many of which are sold into niche markets driven by regulatory requirements.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in thousands, unless specified) Overview 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.
Financial Statements and Supplementary Data (in thousands, except percent data). Refer to Item 7.
The tables and discussion below should be read in conjunction with the accompanying Consolidated Financial Statements and the notes thereto appearing in Item 8. Financial Statements and Supplementary Data (in thousands, except percent data). Refer to Item 7.
Year Ended March 31, Percentage Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Selling expense $ 37,439 $ 28,310 18,480 32 % 53 % As a percentage of revenues 17 % 15 % 14 % 2 % 1 % Selling expense increased 32% for the year ended March 31, 2023.
Year Ended March 31, Percentage Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Selling expense $ 38,625 $ 37,439 28,310 3 % 32 % As a percentage of revenues 18 % 17 % 15 % 1 % 2 % Selling expense increased 3% for fiscal year 2024, primarily as a result of increased marketing efforts and implementation of a new customer management software in certain divisions, partially offset by lower commissions on lower revenues and lower recruiting and training costs in fiscal 2024.
Biopharmaceutical Development's gross profit percentage increased one percentage point during the year ended March 31, 2023 as a result of higher revenues on a partially-fixed cost base, partially offset by unfavorable product mix and foreign currency fluctuations negatively impacting our reported revenues.
Biopharmaceutical Development's gross profit percentage decreased two percentage points during fiscal year 2024 as a result of lower overall revenues on a partially fixed cost base, partially offset by favorable product mix.
We also had $32,910 and $49,346 of cash and cash equivalents as of March 31, 2023 and 2022, respectively. As of March 31, 2023, $172,500 was outstanding under the 2025 Notes and $13,000 was outstanding under the Credit Facility. In April 2023, we paid an additional $3,000 on our Credit Facility.
We had working capital of $65,040 and $75,616 on March 31, 2024 and 2023, respectively. As of March 31, 2024, aggregate principal of $172,500 was outstanding under our 2025 Notes and $50,500 was outstanding under the Credit Facility.
The division also provides testing and laboratory services, mainly to the dental industry.
The division also provides testing and laboratory services, mainly to the dental and pharmaceutical industries. Sterilization and Disinfection Control products are disposable and are used on a routine basis.
“Income Taxes” within Item 8. Financial Statements and Supplementary Data ) and purchase price accounting for any future acquisitions.
“Income Taxes” within Item 8. Financial Statements and Supplementary Data ) and purchase price accounting for any future acquisitions. The change in our effective tax rate during fiscal year 2024 is primarily due to impairment losses recorded in fiscal year 2024 and the related tax impacts and resulting valuation allowance established.
Cash used in investing activities was lower during the year ended March 31, 2023 compared to the year ended March 31, 2022 due to cash expended on the Agena Acquisition fiscal year 2022, partially offset by the Belyntic Acquisition in fiscal year 2023. Cash used in financing activities primarily resulted from our repayment of $36,000 on our Credit Facility.
Cash provided by financing activities primarily resulted from a $71,000 draw on the Credit Facility partially offset by $33,500 repaid on previously outstanding balances and on the drawn amount, compared to $36,000 repaid on the Credit Facility in fiscal year 2023.
We typically evaluate costs and pricing annually with price increases effective January 1; however, as a result of high inflation in recent quarters, we implemented an additional mid-year price increase late in the second quarter of fiscal year 2023. Inorganic Revenues Growth - Acquisitions During the third quarter of fiscal year 2023, we completed the Belyntic acquisition.
We typically evaluate costs and pricing annually with price increases effective January 1. Inorganic Revenues Growth - Acquisitions Over the past decade, we have consummated a number of acquisitions as part of our growth strategy.
Year Ended March 31, Percentage Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Research and development expense $ 20,490 $ 15,767 $ 10,388 30 % 52 % As a percentage of revenues 9 % 9 % 8 % - % 1 % Page 30 Table of Contents Research and development expenses for the year ended March 31, 2023 increased 30%.
Year Ended March 31, Percentage Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Research and development expense $ 19,300 $ 20,490 $ 15,767 (6 %) 30 % As a percentage of revenues 9 % 9 % 9 % - % - % Research and development expenses for fiscal year 2024 decreased 6% compared to fiscal year 2023, primarily due to our cost containment efforts in fiscal year 2024, including a reduction in force related to our Biopharmaceutical Development division during the second quarter of fiscal year 2024, lower third-party consulting costs, and lower bonus accruals in fiscal year 2024.
Further, travel-related costs increased as we continued to resume in-person meetings, tradeshows, and sales events. Increases were partially offset by lower commissions and bonus expense. General and Administrative Labor costs, non-cash stock-based compensation, and amortization of intangible assets drive the substantial majority of general and administrative expense.
Excluding the GKE acquisition, selling expense would have increased 2% in fiscal year 2024 compared to fiscal year 2023. Page 21 Table of Contents General and Administrative Expense Labor costs, non-cash stock-based compensation and amortization of intangible assets drive the substantial majority of general and administrative expense.
Removed
We paid $4,950 on the date of acquisition, and we expect to pay an additional $1,500 of contingent consideration based on the probable approval of pending patent applications expected within 36 months of the acquisition date. The acquisition provided a natural complement to our peptide synthesis business by adding a consumables product line.
Added
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.
Removed
During the third quarter of fiscal year 2022, we completed the acquisition of Agena for an aggregate net purchase price of $300,793.
Added
During fiscal year 2024, we completed the acquisition of GKE. GKE develops, manufactures and sells a highly competitive portfolio of chemical sterilization indicators, biologics, and process challenge devices to protect patient safety across global healthcare markets.
Removed
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.
Added
Page 18 Table of Contents Improving Our Operating Efficiency We maximize value in our existing businesses and those we acquire by implementing efficiencies in our manufacturing, commercial, engineering, and administrative operations.
Removed
Generally, the USD strengthening against major currencies adversely impacts our reported revenues, but to a lesser extent, positively impacts our reported expenses; conversely, the weakening of the U.S. dollar against major currencies positively impacts our reported revenues but negatively impacts our reported expenses.
Added
Overall, supply chain disruptions, labor shortages and resulting manufacturing difficulties that impacted business operations in fiscal year 2023 largely abated during fiscal year 2024, facilitating organic revenues growth in our Sterilization and Disinfection and Calibration Solutions divisions.
Removed
The ultimate impact to gross profit as a percentage of revenue depends on the magnitude of changes in foreign currencies. Inflation was significant in the regions that we operate in during fiscal year 2023.
Added
During fiscal year 2024, we completed the acquisition of GKE, which develops, manufactures and sells a highly competitive portfolio of chemical sterilization indicators, biologics, and process challenge devices to protect patient safety across global healthcare markets. GKE’s healthcare-focused commercial capabilities in Europe and Asia greatly expand our reach in the healthcare markets in those geographies.
Removed
Current and future inflationary effects may continue to be impacted by a variety of macroeconomic forces, including, but not limited to: supply chain disruptions, government fiscal policies, changes in interest rates, and changing demand for goods and services.
Added
We are working to obtain regulatory 510(k) clearance on certain GKE products for sale in the United States, which would further expand organic revenues growth opportunities from the GKE business. We began consolidating the results of GKE's operations into our financial statements in the third quarter of our fiscal year.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+1 added−0 removed4 unchanged
Biggest changeThe rates of inflation experienced in recent years have not had a significant impact on our financial statements as inflationary cost increases have been offset by annual price increases. However, any price increases imposed may lead to declines in sales volume if competitors do not similarly adjust prices.
Biggest changeInflation Risk Inflation generally impacts us by increasing our costs of labor, materials, and freight. The rates of inflation experienced in recent years have not had a significant direct impact on our financial results, as inflationary cost increases have been offset by annual price increases.
The effect of a change in currency exchange rates on our international subsidiaries' assets and liabilities is reflected in the accumulated other comprehensive income component of stockholders’ equity. To the extent material, we have discussed the impact of the change in foreign currency within Item 7.
The effect of a change in currency exchange rates on our international subsidiaries' assets and liabilities is reflected in the accumulated other comprehensive income component of stockholders’ equity.
Based on our interest rate and balance outstanding as of March 31, 2023, we estimate that if interest rates increased 1 percentage point, we would incur approximately $130 of additional interest expense per year. Inflation Risk Inflation generally impacts us by increasing our costs of labor, materials, and freight.
Based on our interest rate and balances outstanding as of March 31, 2024, we estimate that if interest rates increased 1 percentage point, we would incur approximately $505 of additional interest expense per year.
Interest Rates During our year ended March 31, 2021, we entered into the Credit Facility which bears interest at either a base rate or a SOFR rate, plus an applicable spread.
Actual changes in market prices or rates may differ from hypothetical changes. Interest Rates Our Credit Facility bears interest at either a base rate or a SOFR rate, plus an applicable spread.
We cannot reasonably estimate our ability to successfully recover any impact of inflation cost increases into the future. Page 35 Table of Contents
However, any price increases imposed may lead to declines in sales volume if competitors do not similarly adjust prices. Additionally, inflationary pressures may impact our customers' ability to purchase our products and services. We cannot reasonably estimate our ability to successfully recover any inflation cost increases into the future. Page 26 Table of Contents
"Results of Operations." A hypothetical 10 percent increase in currency exchange rates compared to the U.S. dollar (U.S. dollar strengthening) would result in an estimated $875 after tax reduction in net earnings over a one-year period. Actual changes in market prices or rates may differ from hypothetical changes.
A hypothetical 10 percent increase in currency exchange rates compared to the U.S. dollar (U.S. dollar strengthening) would have resulted in an estimated $410 after tax decrease in net loss over a one-year period, excluding the impact of non-recurring impairment losses recorded in the euro, Swedish krona, and Chinese yuan in fiscal year 2024.
Added
Our risk with respect to interest rates has increased subsequent to the end of fiscal year 2024 due to our additional borrowings under the Credit Facility's term loan of $75,000 as of April 5, 2024, with an interest rate of 8.4% as of the date of the borrowing.

Other MLAB 10-K year-over-year comparisons