Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

(Dollars in thousands, except per share amounts)

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The forward-looking statements in this Quarterly Report on Form 10-Q do not constitute guarantees of future performance. Investors are cautioned that statements in this Quarterly Report on Form 10-Q that are not strictly historical statements, including, without limitation, express or implied statements or guidance regarding current or future financial performance and position; results of acquisitions; management's strategy, plans and objectives for future operations or acquisitions, product development and sales; adequacy of capital resources and financing plans; anticipated cost savings; and the effect of tariffs and other developments in the regulatory environment and our responses thereto constitute forward-looking statements. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which the Company operates, and management's beliefs and assumptions. In addition, other written and oral statements that constitute forward-looking statements may be made by the Company or on the Company's behalf. Words such as "seek," "believe," "may," "intend," "could," "target," "expect," "anticipate," "plan," "estimate," "project," or variations of such words and similar expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated, including risks associated with: our ability to successfully grow our business, including as a result of acquisitions; the effect that acquisitions have on our operations; our ability to consummate acquisitions at our historical rate and at appropriate prices, and our ability to effectively integrate acquired businesses and achieve desired results; the market acceptance of our products; technological or market viability of our products; potential reduced demand for our products, including as a result of competitive factors; conditions in the global economy and the particular markets we serve; significant developments or uncertainties stemming from governmental actions, including changes in trade policies such as tariffs, and changes in tax, medical device and other regulations; the timely development and commercialization, and customer acceptance, of enhanced and new products and services; retirement of old products and customer migration to new products; the potential inaccuracy of projections of revenues, growth, operating results, profit margins, earnings, expenses, margins, tax rates, tax provisions, liquidity, cash flows, demand, and competition; the effects of actions taken to become more efficient or lower costs; supply chain challenges; cost pressures; laws regulating fraud and abuse in our industries, privacy and security of health and personal information; product liability; information security; outstanding claims, legal and regulatory proceedings; international business challenges including anti-corruption and sanctions laws and political developments; tax audits and assessments and other contingent liabilities; foreign currency exchange rates and fluctuations in those rates; general economic, industry, and capital markets conditions; the timing of any of the foregoing; and assumptions underlying any of the foregoing. Such risks and uncertainties also include those listed in Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025 and in this report. The foregoing list sets forth many, but not all, of the factors that could impact our ability to achieve results described in any forward-looking statements. We disclaim any obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

Overview

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

As of September 30, 2025, we managed our operations in four reportable segments, or divisions: Sterilization and Disinfection Control, Biopharmaceutical Development ("BPD"), Calibration Solutions, and Clinical Genomics. Each of our divisions is 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 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. We commit to our purpose every day by taking a customer-focused approach to developing, building and delivering our products and services. We serve a broad set of industries, particularly the pharmaceutical, healthcare and medical device sectors, in which the safety, quality and efficacy of products is critical. By delivering the highest quality products possible, we are committed to protecting the communities we serve.

Our continued growth will depend on our ability to (i) expand business with new and existing customers through ongoing commercial efforts, (ii) manage our costs and allocate resources to ensure continued profitability of our business, (iii) identify, consummate and integrate acquisitions successfully, and (iv) develop or acquire differentiated products and services. We strive to maintain our profitability by improving the effectiveness of our sales force, by continuing to pursue cost reduction initiatives, and by taking a long-term strategic approach to investments in our business that we believe will support future commercial success.

Organic Revenues Growth

Organic revenues growth is driven by expansion of our customer base, increases in sales volumes, new product offerings and price increases, and may be affected positively or negatively by the impact of changes in foreign currency exchange rates on our reported revenues. Our ability to increase organic revenues is affected by general economic conditions, both domestic and international, customer capital spending trends, competition, currency exchange rates, and the introduction of new products. Our policy is to price our products and services competitively and, where possible, we pass along cost increases to our customers in order to maintain our margins. We typically evaluate costs and pricing annually, with price increases effective January 1. We evaluate the need to increase prices at other times of the year in response to significant facts and circumstances that may arise, such as increases in the price of inputs to our products, or in response to changes in government or regulatory policies, for example, due to the imposition of tariffs.

Inorganic Growth - Acquisitions

Over the past decade, we have consummated a number of acquisitions of businesses, technologies, and intangibles such as customer lists as part of our growth strategy. Our 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®.

Improving Our Operating Efficiency

Our ongoing goal is to maximize value in our businesses by implementing efficiencies in our manufacturing, commercial, engineering and administrative operations. We achieve efficiencies using the Mesa Way, our customer-centric, lean-based system for continuous improvement. The Mesa Way is built on four key pillars: "Measuring What Matters" based on our customers' perspectives and setting high standards of performance; "Empowering Teams" to improve operationally and to exceed customer expectations; "Sustainably Improving" using lean-based tools designed to help us identify and prioritize the best opportunities; and "Always Learning" to continuously build knowledge and capabilities to drive long-term performance.

Our gross profit is affected by many factors, including the mix of products and services sold and the geographical regions in which we sell them, labor and product costs (including costs of transporting, importing and exporting goods, as well as associated tariffs), manufacturing efficiencies, foreign currency rates and price competition. Historically, as we have integrated acquisitions into our business and taken advantage of manufacturing efficiencies, our gross profit percentages for some products have improved. There are, however, differences in gross profit percentages between product lines, and ultimately our mix of revenues will continue to impact our overall gross profit.

We continuously pursue opportunities to improve the efficiency of our administrative functions, including through increasing usage of process automation and artificial intelligence.

Hire, Develop, and Retain Top Talent

At the center of our organization are talented people who are capable of taking on new challenges using a team-based approach. Indeed, it is our exceptionally talented workforce that works together 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. During the six months ended September 30, 2025, approximately 53% of our revenues were earned outside of the United States. Our geographic and industry diversity presents both opportunities and challenges, including those associated with operating in varied economic environments, complying with evolving regulatory requirements such as tariffs, navigating global labor trends and costs, adapting to technology changes in served markets, pursuing expansion opportunities in high-growth markets, and monitoring foreign currency impacts against the U.S. dollar ("USD").

For the six months ended September 30, 2025, we realized revenue growth of 3.7% versus the comparable prior year period, driven by growth in our Calibration Solutions, Biopharmaceutical Development, and Sterilization and Disinfection Control divisions. Our Clinical Genomics division experienced revenue declines due to trade tensions and unfavorable macroeconomic conditions in China, which continued to weaken demand for our Clinical Genomics products and services in that region. We anticipate that challenges in China will persist through the end of fiscal year 2026 and will most likely continue into fiscal year 2027. Despite challenges in China, Clinical Genomics has continued to execute its commercial strategy successfully in the Americas and Europe; this geographic mix has resulted in improved gross profit percentages in the second quarter of fiscal 2026 versus the same quarter in the prior year.

Consolidated gross profit as a percentage of revenues decreased 1.0 percentage point, to 61.7%, in the first half of fiscal year 2026 versus the comparable prior year period. The weakening of the U.S. dollar versus the comparable prior year period and the impact of tariffs negatively impacted our consolidated gross profit as a percentage of revenues, with a particularly pronounced effect on our Biopharmaceutical Development division. Excluding the impacts of exchange rate changes and tariffs, gross profit as a percentage of revenue would have been approximately 62.6% for the six months ended September 30, 2025, largely consistent with the prior year period. While we have been successful at passing certain tariff surcharges on to our customers, in many cases, these incremental tariff surcharges are equal to or slightly less than the tariff costs we incur. We expect to realize improved tariff cost recovery in future periods.

To address our outlook for Clinical Genomics in China, mitigate margin pressures attributable to tariffs in our business units, and support strategic long-term growth, we adjusted our cost structure during the second quarter of our fiscal year 2026. Specifically, we have implemented headcount reductions and other cost savings initiatives that we expect to reduce our annualized costs by approximately $3.2 million, of which approximately $2.1 million will be realized by the Clinical Genomics division. The remainder will benefit other business units and corporate functions. We expect to reinvest approximately $0.9 million of the savings back into our Sterilization and Disinfection Control division, historically our most profitable division, to accelerate its growth. As a result of these efforts, we anticipate net annualized cost reductions of approximately $2.3 million, which will be realized starting in the third quarter of fiscal year 2026. We incurred approximately $0.85 million of severance expense in fiscal year 2026 in connection with these cost reductions.

Operating expenses increased 4.5% for the six months ended September 30, 2025 versus the comparable prior year period. The increase was largely driven by higher personnel expense, including the impact of foreign-denominated personnel expenses translating into higher reported U.S. dollar amounts, higher non-cash stock-based compensation, and approximately $0.8 million of operating severance expense, primarily related to the Clinical Genomics division. In addition, the weaker U.S. dollar versus the comparable prior year period caused expenses denominated in foreign currencies to translate into higher reported U.S. dollar amounts in our financial statements.

Results of Operations

Our results of operations and period-over-period changes are discussed in the following section. The tables and discussion below should be read in conjunction with the accompanying unaudited Condensed Consolidated Financial Statements and the notes thereto appearing in Item 1. Financial Statements.

Results by reportable segment are as follows:

		Revenues								Organic Revenues Growth (non-GAAP) (a)								Gross Profit as a % of Revenues
		Three Months Ended September 30,								Three Months Ended September 30,								Three Months Ended September 30,
amounts in thousands, except percent data			2025				2024				2025				2024				2025				2024
Sterilization and Disinfection Control		$	22,107			$	22,205				(0.4	%)			(4.3	%)			67.3	%			68.3	%
Biopharmaceutical Development			13,920				11,867				17.3	%			28.9	%			58.4	%			60.4	%
Calibration Solutions			13,570				12,262				10.7	%			8.2	%			60.7	%			58.8	%
Clinical Genomics			11,140				11,499				(3.1	%)			(26.0	%)			54.7	%			51.4	%
Total		$	60,737			$	57,833				5.0	%			(2.2	%)			61.5	%			61.3	%

		Revenues								Organic Revenues Growth (non-GAAP) (a)								Gross Profit as a % of Revenues
		Six Months Ended September 30,								Six Months Ended September 30,								Six Months Ended September 30,
amounts in thousands, except percent data		2025				2024				2025				2024				2025				2024
Sterilization and Disinfection Control		$	47,517			$	45,162				5.2	%			0.1	%			69.5	%			68.0	%
Biopharmaceutical Development			25,406				23,875				6.4	%			25.0	%			56.8	%			63.4	%
Calibration Solutions			25,920				24,063				7.7	%			5.6	%			58.9	%			60.1	%
Clinical Genomics			21,437				22,903				(6.4	%)			(20.8	%)			53.7	%			54.1	%
Total		$	120,280			$	116,003				3.7	%			0.1	%			61.7	%			62.7	%

(a)

Organic revenues growth is a non-GAAP measure of financial performance. See "Non-GAAP Measures" below for further information and for a reconciliation of organic revenues growth to total revenues growth. Organic revenues growth in our Sterilization and Disinfection Control division for the three and six months ended September 30, 2024 differed from total GAAP revenues growth due to the acquisition of GKE; for all other amounts presented, GAAP revenues growth is equivalent to organic revenues growth.

Our unaudited condensed consolidated results of operations are as follows:

		Three Months Ended September 30,												Six Months Ended September 30,
amounts in thousands, except percent data		2025				2024				Total Change				2025				2024				Total Change
Revenues		$	60,737			$	57,833				5.0	%		$	120,280			$	116,003				3.7	%
Gross profit			37,331				35,455				5.3	%			74,270				72,704				2.2	%
Operating expense			32,607				31,947				2.1	%			66,482				63,616				4.5	%
Operating income			4,724				3,508				34.7	%			7,788				9,088				(14.3	%)
Net income		$	2,476			$	3,428				(27.8	%)		$	7,218			$	6,816				5.9	%

Reportable Segments

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 in the pharmaceutical, medical device and healthcare industries. 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.

		Three Months Ended September 30,												Six Months Ended September 30,
amounts in thousands, except percent data		2025				2024				Total Change				2025				2024				Total Change
Revenues		$	22,107			$	22,205				(0.4	%)		$	47,517			$	45,162				5.2	%
Gross profit			14,870				15,172				(2.0	%)			33,036				30,730				7.5	%
Gross profit as a % of revenues			67.3	%			68.3	%		(1.0 pt)					69.5	%			68.0	%		1.5 pt

Revenues for the Sterilization and Disinfection Control division declined 0.4% for the three months ended September 30, 2025 versus the comparable prior year period. The decrease was primarily driven by lower-than-expected order fulfillments for certain product lines. Bookings were approximately 5% greater than revenues for the three months ended September 30, 2025.

For the six months ended September 30, 2025, the division's revenues increased 5.2% versus the comparable prior year period. Year-to-date growth was largely attributable to strong commercial execution and higher sales volumes during the first quarter of fiscal 2026.

Gross profit as a percentage of revenues decreased by 1.0 percentage point and increased by 1.5 percentage points for the three and six months ended September 30, 2025, respectively, versus the comparable prior year periods. Excluding the impact of prior year inventory step-up amortization related to the GKE acquisition, gross profit as a percentage of revenues would have decreased by 3.1 and 1.2 percentage points for the three and six months ended September 30, 2025, respectively. These declines were primarily driven by increased professional services expenses, as we invested in outside expertise to improve our production processes for this division and the impact of a weakening USD. We expect to significantly decrease these outside professional services expenses during the second half of fiscal year 2026.

Biopharmaceutical Development

Our Biopharmaceutical Development division develops, manufactures, sells and services 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.

		Three Months Ended September 30,												Six Months Ended September 30,
amounts in thousands, except percent data		2025				2024				Total Change				2025				2024				Total Change
Revenues		$	13,920			$	11,867				17.3	%		$	25,406			$	23,875				6.4	%
Gross profit			8,129				7,167				13.4	%			14,435				15,126				(4.6	%)
Gross profit as a % of revenues			58.4	%			60.4	%		(2.0 pt)					56.8	%			63.4	%		(6.6 pt)

Revenues for the Biopharmaceutical Development division increased 17.3% and 6.4%, respectively, for the three and six months ended September 30, 2025 versus the comparable prior year periods. Increases in revenue were primarily driven by higher sales of Peptides instruments.

The Biopharmaceutical Development division's consumables revenues grew approximately 14% and 6%, respectively, for the three and six months ended September 30, 2025 versus the comparable prior year periods.

Gross profit as a percentage of revenue for the Biopharmaceutical Development division decreased 2.0 percentage points for the three months ended September 30, 2025 versus the comparable prior year period. The decrease for the three months ended September 30, 2025 was primarily due to the impact of tariffs and foreign currency translation along with unfavorable product mix as higher-margin Immunoassays revenues comprised a lower portion of the division's total revenues. The 6.6 percentage point decrease for the six months ended September 30, 2025 versus the comparable prior year period was primarily due to unfavorable product mix, the impact of tariffs and foreign currency translation, and lower revenues on a partially fixed cost base. Excluding the impact of tariffs and foreign currency translation, gross profit as a percentage of revenues would have been approximately 61.3% and 59.1%, respectively, for the three and six months ended September 30, 2025.

Calibration Solutions

The 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 renal care, environmental and process monitoring, gas flow and torque testing.

		Three Months Ended September 30,												Six Months Ended September 30,
amounts in thousands, except percent data		2025				2024				Total Change				2025				2024				Total Change
Revenues		$	13,570			$	12,262				10.7	%		$	25,920			$	24,063				7.7	%
Gross profit			8,235				7,210				14.2	%			15,277				14,452				5.7	%
Gross profit as a % of revenues			60.7	%			58.8	%		1.9 pt					58.9	%			60.1	%		(1.2 pt)

Revenues for the Calibration Solutions division increased 10.7% and 7.7% for the three and six months ended September 30, 2025, respectively, versus the comparable prior-year periods. Growth was primarily driven by ongoing commercial efforts to renew contracts with larger customers that incentivize utilization of our service offerings, and to a lesser extent, by price increases.

Gross profit as a percentage of revenues increased by 1.9 percentage points for the three months ended September 30, 2025 versus the comparable prior-year period, primarily due to higher revenues on a partially fixed cost base, partially offset by increased manufacturing input costs, including the impact of tariffs. For the six months ended September 30, 2025, gross profit as a percentage of revenues decreased 1.2 percentage points versus the comparable prior-year period, primarily due to increased personnel-related costs that we expect will support future growth, and to a lesser extent, due to increased manufacturing input costs, including the impact of tariffs.

Clinical Genomics

The Clinical Genomics division develops, manufactures and sells highly sensitive 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.

		Three Months Ended September 30,												Six Months Ended September 30,
amounts in thousands, except percent data		2025				2024				Total Change				2025				2024				Total Change
Revenues		$	11,140			$	11,499				(3.1	%)		$	21,437			$	22,903				(6.4	%)
Gross profit			6,097				5,906				3.2	%			11,522				12,396				(7.1	%)
Gross profit as a % of revenues			54.7	%			51.4	%		3.3 pt					53.7	%			54.1	%		(0.4 pt)

Revenues for the Clinical Genomics division declined 3.1% and 6.4% for the three and six months ended September 30, 2025, respectively, versus the comparable prior year periods. The decrease was driven primarily by lower sales to customers in China, reflecting ongoing macroeconomic and regulatory uncertainty and escalating trade tensions. Excluding sales to China, revenues increased 16.2% and 12.1%, respectively, for the three and six months ended September 30, 2025 versus the comparable prior year periods. While we anticipate continued revenues growth outside of China for the remainder of the fiscal year, we expect continued decreases in revenues from China over the same period, versus the comparable prior year periods.

Clinical Genomics' gross profit as a percentage of revenue increased 3.3 percentage points for the three months ended September 30, 2025 versus the comparable prior year period, despite lower revenues. The increase was primarily driven by favorable product mix, as consumables, which carry higher margins, represented a higher portion of total revenues, and by favorable geographic mix, as domestic sales tend to generate higher margins than sales in the APAC region. Gross profit percentage decreased 0.4 percentage points for the six months ended September 30, 2025 versus the comparable prior year period. The decline was primarily driven by lower revenues on a partially fixed cost base, and to a lesser extent, foreign currency impacts, partially offset by increased domestic and consumables sales.

Operating Expense

Operating expense increased 2.1% and 4.5%, respectively, for the three and six months ended September 30, 2025 versus the comparable prior year periods. Among other factors, reported selling, general and administrative, and research and development expenses increased due to the weakening of the U.S. dollar against the euro and Swedish krona for the three and six months ended September 30, 2025 versus the comparable prior year period.

Selling Expense

Selling expense is driven primarily by labor costs, including salaries and commissions; accordingly, it may vary with sales levels.

		Three Months Ended September 30,												Six Months Ended September 30,
amounts in thousands, except percent data		2025				2024				Total Change				2025				2024				Total Change
Selling expense		$	9,796			$	9,849				(0.5	%)		$	20,729			$	19,965				3.8	%
As a percentage of revenues			16.1	%			17.0	%		(0.9 pt)					17.2	%			17.2	%		- pt

Selling expense decreased 0.5% for the three months ended September 30, 2025 versus the comparable prior year period, primarily due to lower personnel and training costs, including lower commissions expense, partially offset by severance charges. Selling expense increased 3.8% for the six months ended September 30, 2025, versus the comparable prior year period, primarily due to severance costs and investments in professional services to support lead-generation and marketing.

General and Administrative Expense

Labor costs, amortization of intangible assets, and non-cash stock-based compensation drive the substantial majority of our general and administrative expense.

		Three Months Ended September 30,												Six Months Ended September 30,
amounts in thousands, except percent data		2025				2024				Total Change				2025				2024				Total Change
General and administrative expense		$	17,763			$	17,464				1.7	%		$	35,721			$	34,282				4.2	%
As a percentage of revenues			29.2	%			30.2	%		(1.0 pt)					29.7	%			29.6	%		0.1 pt

General and administrative expense increased 1.7% for the three months ended September 30, 2025 versus the comparable prior year period. The increase was primarily driven by higher expense related to estimated uncollectible accounts receivable, particularly in China, and by increased personnel and benefits costs, including severance. These increases were partially offset by lower professional services costs.

General and administrative expense increased 4.2% for the six months ended September 30, 2025 versus the comparable prior year period. The increase was primarily attributable to higher personnel costs, including increased non-cash stock-based compensation resulting from an adjustment to performance-based awards to reflect achievement against targets through September 30, 2025. Higher expense related to estimated uncollectible accounts receivable in China also contributed to the increase. The increase was partially offset by lower consulting and professional services expenses, as our prior year results included consulting costs related to integrating GKE into our enterprise resource planning system.

Research and Development Expense

Research and development expense is predominantly comprised of labor costs and costs of third-party consultants.

		Three Months Ended September 30,												Six Months Ended September 30,
amounts in thousands, except percent data		2025				2024				Total Change				2025				2024				Total Change
Research and development expense		$	5,048			$	4,634				8.9	%		$	10,032			$	9,369				7.1	%
As a percentage of revenues			8.3	%			8.0	%		0.3 pt					8.3	%			8.1	%		0.2 pt

Research and development expenses increased 8.9% and 7.1% for the three and six months ended September 30, 2025, respectively, versus the comparable prior year periods. The increases were primarily attributable to severance costs, particularly within our Clinical Genomics division, and purchases of supplies and consulting services to support project-specific research and development activities.

Non-Operating Expense (Income), Net

		Three Months Ended September 30,												Six Months Ended September 30,
amounts in thousands, except percent data		2025				2024				Total Change				2025				2024				Total Change
Interest expense and amortization of debt issuance costs		$	2,862			$	3,018				(5.2	%)		$	5,060			$	5,860				(13.7	%)
(Gain) on extinguishment of convertible notes			-				-				N/A				-				(2,887	)			(100.0	%)
Other (income), net			(137	)			(3,322	)			(95.9	%)			(6,283	)			(1,602	)			292.2	%
Non-operating expense (income), net		$	2,725			$	(304	)			(996.4	%)		$	(1,223	)		$	1,371				(189.2	%)

Interest expense decreased for the three and six months ended September 30, 2025 compared to the prior year periods, primarily due to lower weighted average levels of outstanding interest-bearing debt and a reduction in interest rates applicable to our floating rate debt. These decreases were partially offset by the settlement of $97.5 million principal on our Notes using $97.0 million in borrowings under the Revolver, which carries a higher interest rate than the Notes. We expect interest expense to increase for the remainder of fiscal year 2026 compared to fiscal year 2025, driven by the higher interest rate on debt outstanding under our Credit Facility compared with the Notes.

Other (income), net primarily consists of gains and losses on foreign currency transactions. In particular, during the six months ended September 30, 2025, we recognized unrealized foreign currency gains of approximately $6.1 million related to an intercompany U.S. dollar-denominated loan issued in fiscal year 2024 to one of our wholly owned, euro-denominated subsidiaries.

The $2.9 million gain on extinguishment of the Notes reported in the first six months of fiscal year 2025 was a result of the partial repurchase of the Notes during that period. No gain or loss was recognized upon final settlement of the Notes during the three months ended September 30, 2025, as the Notes had reached maturity and were settled in cash at the contractual principal amount.

Income Taxes

		Three Months Ended September 30,												Six Months Ended September 30,
amounts in thousands, except percent data		2025				2024				Total Change				2025				2024				Total Change
Income tax (benefit) expense		$	(477	)		$	384				(224.2	%)		$	1,793			$	901				99.0	%
Effective tax rate			(23.9	%)			10.1	%		(34.0 pt)					19.9	%			11.7	%		8.2 pt

Our effective income tax rate was (23.9%) and 19.9%, respectively, for the three and six months ended September 30, 2025 compared to 10.1% and 11.7% for the prior year periods. The effective tax rate for both the three and six months ended September 30, 2025 differed from the statutory federal rate of 21% primarily due to the impact of the valuation allowance on U.S. deferred taxes, partially offset by the foreign rate differential.

The change in the effective tax rate for both the three and six months ended September 30, 2025 versus the comparable prior year periods is primarily due to prior year valuation allowance adjustments related to our operations in Germany and an increase in German statutory taxes in the current fiscal year.

Our future effective income tax rate depends on various factors, such as changes in tax laws including OBBBA, regulations, accounting principles, or interpretations thereof, and the geographic composition of our pre-tax income. We carefully monitor these factors and adjust our effective income tax rate accordingly.

Net Income

Net income varies with changes in revenues, gross profit, operating expense, and currency exchange rate fluctuations. Net income included $9.1 million, $7.7 million and $2.7 million of non-cash amortization of intangible assets, stock-based compensation expense, and depreciation expense, respectively, for the six months ended September 30, 2025.

Liquidity and Capital Resources

Our sources of liquidity include cash generated from operations, cash on hand, and cash available from borrowings under our Credit Facility. We believe these sources are sufficient to meet our ongoing operating needs, scheduled debt service obligations, dividend payments and anticipated capital expenditures. As of September 30, 2025 and March 31, 2025, we held $20.4 million and $27.3 million of cash, respectively.

Historically, our more significant uses of cash have included acquisitions, payments on debt principal and interest obligations, and quarterly dividends paid to shareholders.

Working capital, defined as the amount by which current assets exceed current liabilities, was $49.1 million as of September 30, 2025, compared to negative working capital of $(61.3) million as of March 31, 2025. The prior period's negative working capital was due to the classification of $97.5 million in principal related to our Notes as a current liability. During the three months ended September 30, 2025, we settled the Notes using a draw of $97.0 million on our Revolver. The Revolver allows us to borrow to up to $125.0 million, and $106.0 million was outstanding as of September 30, 2025. Subsequent to quarter end, we repaid $2.0 million on the Revolver.

On October 10, 2025 we amended our Credit Facility to reduce the applicable interest rate spread above the SOFR base rate from 1.5%-3.5% to 1.25%-2.5%. This rate reduction represents annual cost savings of approximately $0.6 million at debt levels outstanding under our Credit Facility as of September 30, 2025. We expect to incur approximately $11.6 million in cash interest expense over the next twelve months. Required principal debt payments due on our Term Loan within the next twelve months total $4.7 million.

We routinely evaluate opportunities for strategic acquisitions. Future material acquisitions may require us to obtain additional capital, assume third-party debt or incur other long-term obligations. We believe that we have the ability to issue more equity or debt in the future in order to finance our acquisition and investment activities; however, additional equity or debt financing, or other transactions, may not be available on acceptable terms, if at all.

Dividends

We have paid regular quarterly dividends since 2003. We paid dividends of $0.16 per share during the three months ended September 30, 2025, as well as each quarter of fiscal years 2026 and 2025.

In October 2025, we announced that our Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock, payable on December 15, 2025, to shareholders of record at the close of business on November 28, 2025.

Goodwill Impairment Testing

We perform qualitative analyses at least quarterly to identify potential indicators of impairment and to assess whether it is more likely than not that any of our five goodwill reporting units (Sterilization and Disinfection Control, Immunoassays (BPD), Peptides (BPD), Calibration Solutions, and Clinical Genomics) is impaired. As of September 30, 2025, we concluded that our reporting units are not impaired. However, future impairment losses could result from adverse economic, market, or industry-specific conditions; unfavorable actual or anticipated adverse changes in the business climate or in our operational performance; adverse developments in legal or regulatory environments; declines in our market capitalization; failure to achieve forecasted cash flows; or any combination of these or other similar factors.

Our Clinical Genomics and Peptides reporting units remain particularly sensitive to significant changes in key valuation assumptions, and therefore carry a heightened risk of future impairment losses. The valuation of our reporting units for impairment testing purposes requires significant management judgment and the use of unobservable Level 3 inputs, including discount rates, forecasted results for earnings before interest, taxes, depreciation and amortization ("EBITDA"), revenue growth rates, operating expense projections, the identification of comparable public entities, and applied market multiples.

We continue to monitor the impact of macroeconomic challenges, demand for our products and services, and tariffs with respect to China. Depending on the persistence and magnitude of adverse factors, it is reasonably possible our Clinical Genomics and Peptides reporting units could incur impairment losses in the future. As of our most recent annual impairment test on January 1, 2025, the estimated fair values of the Clinical Genomics and Peptides reporting units exceeded their carrying values by approximately 40% and 20%, respectively. As of September 30, 2025, the carrying values of goodwill and finite-lived intangible assets associated with our Clinical Genomics reporting unit were $17.1 million and $8.6 million, respectively. The carrying values of goodwill and finite-lived intangible assets associated with our Peptides reporting unit were $13.7 million and $0.8 million, respectively.

Cash Flows

Our cash flows from operating, investing and financing activities were as follows:

		Six Months Ended September 30,
amounts in thousands			2025				2024
Net cash provided by operating activities		$	10,115			$	16,014
Net cash (used in) investing activities			(2,101	)			(2,679	)
Net cash (used in) financing activities			(16,310	)			(18,029	)

Cash flows from operating activities provided $10.1 million for the six months ended September 30, 2025, a decrease of $5.9 million versus the comparable prior year period. The decrease in cash flows from operating activities was primarily a result of:

●		higher cash payments in the first quarter of fiscal year 2026 to settle accrued bonuses and commissions from the end of fiscal year 2025; and
●		increased inventory purchases, including for finished goods warehoused in international locations as part of our tariff mitigation strategy.

These uses of cash were partially offset by higher collections on accounts receivable, driven by increased revenues.

Cash used in investing activities decreased for the six months ended September 30, 2025 versus the comparable prior year period as we invested in property, plant and equipment for our new leased facility in Sweden in the prior year. Cash used in financing activities resulted in a $16.3 million use of cash for the six months ended September 30, 2025. We borrowed:

●		$10.5 million under the Revolver, largely to fund a $9.6 million payment of the GKE acquisition-related holdback; and
●		$97.0 million under the Revolver, to settle the Notes upon maturity in August 2025.

We repaid:

●		$97.5 million to settle the Notes;
●		$11.5 million under the Revolver; and
●		$1.9 million under the Term Loan.

Recent Accounting Pronouncements

For a discussion of the new accounting standards impacting the Company, refer to Note 1. "Description of Business and Summary of Significant Accounting Policies" in Item I. Financial Statements (Unaudited).

Contractual Obligations and Other Commercial Commitments

We are party to contractual obligations that involve commitments to remit payments to third parties in the ordinary course of business. On a consolidated basis, as of September 30, 2025, we had contractual obligations for open purchase orders of approximately $11.8 million 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 and other payments. For a description of our contractual obligations and other commercial commitments as of March 31, 2025, see our Annual Report on Form 10-K for the fiscal year ended March 31, 2025.

Critical Accounting Estimates

Critical accounting estimates are those that we consider both significant to the preparation of our financial statements and that require complex, subjective, or highly judgmental assessments. These estimates often involve assumptions about inherently uncertain matters and are based on our historical experience, as well as other factors we believe to be appropriate under the circumstances. For example, we incorporate expert input when developing estimates used in the valuation of reporting units for goodwill impairment testing. The accounting estimates that require significant management judgment and are deemed critical to our results of operations or financial position are discussed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025, in "Critical Accounting Policies and Estimates" in Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. While we believe our estimates, assumptions and judgements are reasonable, actual results may differ materially from these estimates.

Non-GAAP Measures

In addition to financial measures prepared in accordance with generally accepted accounting principles, we present organic revenues growth, defined as reported revenues growth excluding revenues from recent acquisitions, as a supplemental non-GAAP financial measure. We believe this measure facilitates comparability between current and prior period information and provides insight into our short-term and long-term performance and growth trends. We use organic revenues growth internally for forecasting, evaluating operating performance, comparing current and historical revenue results, and informing financial and operating decision-making, including for compensation-setting purposes.

A reconciliation of organic revenues growth to total revenues growth is as follows:

		Total Revenues Growth								Impact of Acquisitions								Organic Revenues Growth (non-GAAP)
		Three Months Ended September 30,								Three Months Ended September 30,								Three Months Ended September 30,
		2025				2024				2025				2024				2025				2024
Sterilization and Disinfection Control			(0.4	%)			30.0	%			-	%			(34.3	%)			(0.4	%)			(4.3	%)
Biopharmaceutical Development			17.3	%			28.9	%			-	%			-	%			17.3	%			28.9	%
Calibration Solutions			10.7	%			8.2	%			-	%			-	%			10.7	%			8.2	%
Clinical Genomics			(3.1	%)			(26.0	%)			-	%			-	%			(3.1	%)			(26.0	%)
Total Company			5.0	%			8.8	%			-	%			(11.0	%)			5.0	%			(2.2	%)

		Total Revenues Growth								Impact of Acquisitions								Organic Revenues Growth (non-GAAP)
		Six Months Ended September 30,
		2025				2024				2025				2024				2025				2024
Sterilization and Disinfection Control			5.2	%			36.8	%			-	%			(36.7	%)			5.2	%			0.1	%
Biopharmaceutical Development			6.4	%		25.0		%			-	%		-		%			6.4	%			25.0	%
Calibration Solutions			7.7	%		5.6		%			-	%		-		%			7.7	%			5.6	%
Clinical Genomics			(6.4	%)		(20.8		%)			-	%		-		%			(6.4	%)			(20.8	%)
Total Company			3.7	%		11.7		%			-	%		(11.6		%)			3.7	%			0.1	%