Mesa Laboratories Guides to $250 Million Revenue and $40 Million Buyback

Mesa Laboratories (NASDAQ:MLAB) guided fiscal 2027 revenue to $250 million to $255 million, with adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $66 million to $68 million, alongside a share repurchase authorization of up to $40 million through December 2028. The guidance implies adjusted EBITDA growth of roughly 5% to 8% from about $63 million in fiscal 2026, on revenue growth of approximately 0% to 2%, Chief Executive Officer Siddhartha Kadia said.

Second-quarter revenue rose 2.6% to $62.3 million. Net income reached $4.3 million, or $0.75 per diluted share, compared with $0.45 per share a year earlier. Adjusted EBITDA increased 21.1% to $17.3 million, with its margin rising to 27.8% from 23.5%. The numbers flatter modestly, as management was the first to admit.

What drove the quarter?

Sterilization and Disinfection Control, or SDC, grew organic revenue 14.6%. Kadia cautioned that much of the increase reflected an easy comparison with the prior-year quarter, when delivery delays had caused past-due backlog to build. First-half growth was approximately 5%, which is closer to the underlying rate.

Manufacturing issues have been resolved on most product lines, but one key line, responsible for the largest share of past-due backlog, was only partially fixed. Past-due backlog remained roughly steady during the quarter and sat substantially lower than a year earlier.

"The durable fix is in place for most of the franchise. It is not yet in place for all of it," Kadia said. He added that the Food and Drug Administration inspected Mesa's Bozeman facility in September and issued no observations. A clean inspection is a quiet kind of good news.

Calibration Solutions organic revenue grew approximately 3.5%, following nearly 11% growth a year earlier. Biopharmaceutical Development organic revenue fell 8.2%, which Kadia attributed to export-control processing delays and shipments that missed the quarter's close by a few days. Those shipments were completed by mid-October and will be recorded in the third quarter, he said. Timing, not demand.

Kadia maintained that Biopharmaceutical Development would grow for the full year, and said the next-generation Gyrolab platform remains on track for a fiscal 2028 launch.

What does the Clinical Genomics restructuring change?

Clinical Genomics revenue declined 8.8% in the quarter, primarily because of the timing of consumables orders from a large customer, Kadia said. Mesa plans to focus the business on pharmacogenomics (the study of how genes affect drug response), oncology and customers that use its microarray at scale.

The company expects divisional revenue to decline as a result, but expects higher profitability in dollar terms as costs fall. Its three largest Clinical Genomics customers renewed contracts for terms of two to three and a half years. In response to an analyst's question, Kadia estimated that the three customers account for roughly 25% of the business. Concentration acknowledged, contracts secured.

The broader savings plan is expected to cut annualized operating costs by approximately $9.3 million. Mesa plans to reinvest about $4.3 million, producing an expected net annualized reduction of approximately $5 million. The actions should be substantially complete by the end of fiscal 2027, with the full benefit in the cost base by the end of fiscal 2028.

Chief Financial Officer John Sakys said Mesa expects $2.6 million to $3.4 million in pretax restructuring charges, primarily in the second half of this fiscal year. No restructuring charges were recorded in the second quarter, because the plan was approved after quarter-end. Orderly, if convenient.

How is the balance sheet positioned?

Mesa repaid $20.1 million of debt on a net basis in the first half and ended the quarter with $22.3 million in cash. Its net leverage ratio was 1.75 times, down from 1.85 times at the end of June. Sakys said the company repaid an additional $5 million of revolving debt after quarter-end.

Kadia said internal investment and maintaining a strong balance sheet remain priorities. Mesa also expects to bring a small number of distributors in-house and, once its earnings record is established, consider small acquisitions in its Quality Control businesses.

The board authorized the $40 million repurchase program through December 2028. Kadia said purchases would be opportunistic and would not come at the expense of the balance sheet. A buyback with an escape clause is the honest kind.

The full-year outlook incorporates lower Clinical Genomics revenue and reinvestment under the savings plan, and excludes restructuring charges. Mesa expects third-quarter revenue to be approximately flat year over year, mainly because of the Clinical Genomics changes.

Mesa Laboratories develops and manufactures products for quality control, monitoring and measurement in healthcare, pharmaceutical, industrial and other regulated applications, including sterilization assurance products such as biological indicators and related monitoring systems.