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ML

MESA LABORATORIES INC /CO/ (MLAB)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY26 revenue was $59.54M (+2.4% YoY), while GAAP diluted EPS was $0.85; AOI margin excluding unusual items was 21.7%, below prior year’s 26.4% due to FX, tariffs, and low‑margin BPD shipments to China .
  • Versus S&P Global consensus, revenue modestly missed ($60.57M* vs $59.54M), but EPS (Primary/normalized) delivered a significant beat ($0.44* vs $1.88*); nonoperating income of $3.95M lifted EBT and net income despite lower operating income .
  • Management expects AOI margin to “meaningfully improve” in Q2 FY26 as ~$1.5M of BPD revenue deferred by tariff surcharge negotiations shifts into Q2 and backlog reduction continues, supporting H1 revenue goals .
  • Capital structure actions reduced dilution risk: Mesa repaid its 2025 converts and drew on its credit facility; Q2 interest expense is guided to ~$2.7M, with ~$3.1M or lower per quarter thereafter at current debt levels; net leverage was 3.16x at 6/30/25 with a sub‑3.0x target by Q3 FY26 .
  • Key stock reaction catalysts: durability of EPS strength despite margin pressure, tariff surcharge pass‑throughs, CG China headwinds vs ex‑China growth, and execution on AOI margin improvement in Q2 .

What Went Well and What Went Wrong

What Went Well

  • SDC delivered growth and margin improvement: revenue $25.41M with 7.5% core organic growth; gross margin +370 bps YoY aided by absence of prior‑year inventory step‑up . Quote: “Strong commercial execution… orders growth greater than revenues growth” and backlog reduction underway .
  • CG outside China grew 7.9% despite regulatory and macro issues in China; total CG revenue $10.30M with consumables strength and NPD/commercial initiatives underway .
  • Balance sheet strengthened vs March: equity rose to $172.50M (from $159.83M) and total assets to $435.74M; nonoperating income of $3.95M lifted EBT to $7.01M, driving net income +40% YoY to $4.74M .

What Went Wrong

  • AOI margin compressed: AOI excluding unusual items was 21.7% vs 26.4% in 1Q25; drivers were FX, tariff costs (~1% of revenue), and low‑margin BPD shipments to China .
  • BPD revenue timing and mix headwinds: revenue $11.49M (core organic −7.0%); ~$1.5M slipped to Q2; gross margin contracted ~1,140 bps on unfavorable mix and SEK appreciation vs USD .
  • CG China collapse: ~$1.8M contraction (−69% YoY), reducing China’s share of CG to ~8% in Q1 vs ~19% in FY25; divisional gross margin −420 bps on lower volumes .

Financial Results

MetricQ3 FY25Q4 FY25Q1 FY26
Revenue ($USD Thousands)$62,840 $62,135 $59,543
Operating Income ($USD Thousands)$5,779 $1,469 $3,064
Net (Loss) Income ($USD Thousands)$(1,676) $(7,114) $4,742
Diluted EPS ($USD)$(0.31) $(1.31) $0.85
AOI (Non-GAAP) ($USD Thousands)$14,515 $12,104 $12,902
AOI per Diluted Share ($USD)$2.67 $2.23 $2.32
AOI excl Unusual Items per Diluted Share ($USD)$2.72 $2.25 $2.32
AOI excl Unusual Items Margin (%)23.5% 19.7% 21.7%

Segment breakdown – Q1 FY26

SegmentRevenue ($USD Thousands)Organic Rev Growth (%)Core Organic Rev Growth (%)
SDC$25,410 10.7% 7.5%
BPD$11,486 (4.3%) (7.0%)
CS$12,350 4.7% 4.8%
CG$10,297 (9.7%) (10.7%)
Total$59,543 2.4% 0.4%

KPIs – Q1 FY26

KPIQ1 FY26
Core Organic Revenue Growth (%)0.4%
AOI excl Unusual Items Margin (%)21.7%
Total Net Leverage Ratio (x)3.16x
Tariffs as % of Revenue~1%
CG China Revenue Change−$1.8M (−69% YoY)
SDC Share of Total Revenue43%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue (H1 FY26)H1 FY26No prior quantitative guidanceExpect to meet H1 revenue goals; ~$1.5M BPD revenue deferred into Q2 New qualitative confirmation
AOI excl Unusual Items MarginQ2 FY26N/A“Meaningfully improve” in Q2 Raised qualitative outlook
Interest ExpenseQ2 FY26; thereafterN/A~$2.7M in Q2; ~$3.1M or lower per quarter thereafter at current debt levels New guidance
Net Leverage RatioBy Q3 FY263.01x at 3/31/25 ; 3.20x at 9/30/24 ; 3.16x at 6/30/25 Expect <3.0x no later than Q3 FY26 Target reiterated with timing
SDC Backlog ReductionFY26Reduce backlog in first two quarters FY26 Continue reducing past due backlog through FY26 Maintained/extended
BPD Gross Margin TrajectoryFY26Contracted in Q4 FY25 Expect mix to normalize; gross margin % to improve over FY26 Improved outlook
DividendQ2 FY26Regular dividend program$0.16 per share; payable Sept 15, 2025 Maintained

Earnings Call Themes & Trends

(No Q1 FY26 earnings call transcript found; Q&A not available this quarter.)

TopicPrevious Mentions (Q4 FY25 and Q3 FY25)Current Period (Q1 FY26)Trend
Tariffs/macroAnticipated policy shifts; strong recurring mix mitigates short‑term tariff impacts Tariff surcharges delayed ~$1.5M BPD revenue; ~1% of revenue paid in tariffs; pass‑through via surcharges/price increases Headwind managed; timing shifting
FX impactsFX noted as risk; USD appreciation Material FX impact on margins and opex; SEK +12.4% vs USD affecting BPD Worsened FX headwind
CG China/regulatoryLDT disruptions; China weakness; court vacated LDT restrictions (may be appealed) China revenue −69% YoY (~$1.8M); ex‑China +7.9%; consumables strength China deteriorating; ex‑China improving
SDC execution/backlogStrong SDC; backlog reduction planned into H1 FY26 Orders > revenue growth; backlog reduction continuing through FY26; margin tailwind vs prior year Improving throughput/margins
BPD demand/mixStrong biopharma capex; mix pressure Revenue timing delays; unfavorable mix; expect normalization and margin improvement over FY26 Near‑term soft; improving outlook
Leverage/capital structureNet leverage 3.20x (Q3); 3.01x (Q4); debt paydown Converts repaid; revolver/term used; net leverage 3.16x; <3.0x targeted by Q3 De‑risking; path to sub‑3x
Commercial excellence/CRMSalesforce across divisions; bookings growth Continued traction; processes reinforced via “Mesa Way” initiatives Sustained execution

Management Commentary

  • “Negotiating final tariff surcharges in BPD resulted in approximately $1.5M of expected 1Q26 revenues shifting into 2Q26... We expect to meet our revenue goals for the first half of the fiscal year.” — Gary Owens, CEO .
  • “Profitability... was 21.7%... Gross profit percentage contracted by 200 bps... 40 bps associated with tariff‑related charges; remaining contraction primarily due to FX and strategically prioritized BPD shipments of low margin hardware to China.” — Gary Owens .
  • “We will continue to work diligently to counter the impact of tariffs on the bottom line through a combination of price increases or surcharges while prioritizing customer retention and topline growth.” — Gary Owens .
  • “The Mesa Way was in action this May in Breakthrough 7... accelerating New Product Development... Product Launches... Customer Prospecting... Manufacturing Scrap Reduction.” — Gary Owens .

Q&A Highlights

  • No earnings call transcript was available for Q1 FY26; therefore, Q&A themes and any guidance clarifications are not available this quarter (we searched transcripts and found none).

Estimates Context

Results vs S&P Global consensus (Q1 FY26):

MetricConsensusActualSurprise
Primary EPS ($)0.44*1.88*+1.44 (+331%)*
Revenue ($USD)60.57M*59.54M −$1.03M (−1.7%)*

Values retrieved from S&P Global.*

  • EPS beat likely reflects nonoperating income ($3.95M), which boosted EBT and net income despite lower operating income .
  • Revenue miss was modest, with ~$1.5M of BPD revenue expected to shift into Q2 due to tariff surcharge timing, implying stronger Q2 revenue trajectory .
  • Forward context: Net leverage expected to fall below 3.0x by Q3 FY26, and AOI margin to improve meaningfully in Q2—a setup for estimate revisions higher on profitability assumptions if execution on mix/FX/tariffs improves .

Key Takeaways for Investors

  • EPS quality beat vs consensus despite operating margin pressure; watch sustainability as FX/tariff/mix normalize and nonoperating items may not repeat .
  • Near‑term revenue/margin setup looks better: deferred BPD revenue into Q2, ongoing SDC backlog reduction, and AOI margin improvement expected in Q2 .
  • China remains a sizable CG headwind (−69% YoY; ~$1.8M) but ex‑China growth and consumables strength support divisional recovery; monitor regulatory developments and tariff dynamics .
  • Tariff pass‑through strategy (surcharges/price increases) and mix normalization should aid BPD gross margins over FY26; SEK strength remains a risk to watch .
  • Capital structure actions removed convert‑related dilution risk; interest expense path (~$2.7M in Q2; ~$3.1M or lower thereafter) and leverage trajectory (<3.0x by Q3) improve equity optionality .
  • Valuation hinges on confidence in AOI margin recovery and resilience of recurring consumables/services (~high mix); execution on “Mesa Way” process improvements is a differentiator .
  • Trading: Near‑term catalysts include Q2 AOI margin improvement and revenue recognition from deferred BPD orders; risks include FX volatility, tariff escalation, and continued CG China weakness .