Mesa Laboratories NASDAQ: MLAB reported first-quarter fiscal 2027 revenue growth of 1%, improved operating margins and continued debt reduction, while newly appointed President and CEO Siddhartha Kadia outlined plans to address fulfillment issues in its Sterilization and Disinfection Control business and accelerate product development in Biopharmaceutical Development.
Total first-quarter revenue was $60.1 million, up 1% from the prior-year period. Organic revenue also increased 1%, while core organic growth, excluding a 60-basis-point currency benefit, was 0.4%, according to Chief Financial Officer John Sakys.
“Mesa is a set of durable, regulation-embedded franchises with real and growing earnings power that had fixable execution problems,” Kadia said on his first earnings call as CEO. He said the company’s near-term emphasis will be on execution, capital reallocation and debt reduction rather than acquisitions.
Margins and Cash Flow Improved
Gross profit rose to $39 million, or 64.9% of revenue, from 62% a year earlier. Sakys attributed the roughly 290-basis-point improvement to lower spending on third-party contracted labor and consultants, supply-chain efficiencies and favorable product mix, partly offset by lower volume in Sterilization and Disinfection Control, or SDC.
Operating expenses declined 5.6% to $32 million, reflecting lower stock-based compensation and cost controls. GAAP operating income increased 129% to $7 million.
Adjusted operating income increased 16.5% to $15 million, or $2.61 per diluted share. Excluding a $382,000 legal settlement, adjusted operating income was $15.4 million, representing 25.6% of revenue, compared with 21.7% in the prior-year quarter.
GAAP net income was $2.8 million, or $0.49 per diluted share, down 40.3% from a year ago. Sakys said the decline was driven by a non-operating swing related primarily to unrealized foreign-currency gains and losses on an intercompany loan, rather than operating performance.
Cash flow from operating activities totaled $14.7 million, an increase of $12.8 million year over year. The company ended the quarter with $30.7 million in cash and cash equivalents and repaid $8.7 million of debt, reducing net leverage to 1.85 times. Mesa is targeting net leverage of roughly 1.5 to 1.75 times by the end of fiscal 2027.
SDC Delivery Reliability Remains a Focus
SDC, Mesa’s largest business and 41% of quarterly revenue, generated $24.5 million in sales, down 3.6% organically. Kadia said the shortfall reflected delivery reliability and fulfillment timing rather than weakened demand.
The company’s past-due backlog increased by about $1 million from its fiscal year-end level. Kadia said Mesa had reduced backlog substantially through a production push in the fourth quarter of fiscal 2026, but said the improvements had been episodic rather than embedded in standard operating processes.
“The problem is that we missed delivery dates on orders we already hold,” Kadia said. “That is a reliability problem, a promise-keeping problem.”
He said the company will maintain its internal quality release standards for products involving biological materials while working to reduce process variability and shorten cycle times. Mesa’s senior vice president of operations has been assigned to focus on the issue, Kadia said.
Despite the quarterly decline, SDC revenue increased from $93.4 million in fiscal 2025 to $101.6 million in fiscal 2026. On a trailing 12-month basis, SDC revenue stood at just over $100 million, up about 5% from a year earlier.
BPD, Calibration Solutions Show Growth
Biopharmaceutical Development, or BPD, posted 5% organic revenue growth to $12.1 million, following an almost 30% decline in the preceding quarter. Kadia said the result benefited in part from easier comparisons and catch-up orders that had been deferred because of export-control processing, cautioning that the quarter did not represent a completed turnaround.
Mesa has appointed a new general manager for BPD and is rebuilding the segment’s sales processes, pipeline discipline and commercial coverage. Kadia said the work is expected to take the better part of a year to become fully established.
The company also reprioritized its research and development portfolio to accelerate the next-generation Gyrolab automated immunoassay platform. Mesa now expects to launch the platform in fiscal 2028. Kadia said the company is not providing revenue expectations for the product at this stage, but expects BPD to grow for the full fiscal year.
Calibration Solutions revenue rose 7.6% organically to $13.3 million, supported by its recurring service-driven revenue base. Clinical Genomics revenue was essentially flat at $10.3 million. Revenue in China declined 7%, while the business outside China grew 0.6%.
Kadia said China continues to face structural market issues, though Mesa’s revenue exposure there has declined significantly over the past two years and is now below $3.5 million.
Guidance Expected in November
Mesa did not provide fiscal 2027 guidance on the call. Kadia said the company plans to issue full-year guidance with its second-quarter results in November, alongside first-half results.
He said first-quarter trends were consistent with Mesa’s internal plan and that management intends to reinvest some operating leverage in faster-growing, higher-return businesses. While the company may consider small distributor buyouts or tuck-in acquisitions later in the fiscal year, Kadia said the immediate priority is improving the performance of existing businesses and allocating resources toward SDC, BPD and Calibration Solutions.
About Mesa Laboratories (NASDAQ:MLAB)
Mesa Laboratories, Inc NASDAQ: MLAB is a global provider of instrumentation products designed for critical process monitoring, testing and calibration. Headquartered in Lakewood, Colorado, the company serves a diverse set of end markets including healthcare, pharmaceutical, food and beverage, energy and industrial sectors. With a focus on precision measurement and validation, Mesa Laboratories helps customers ensure regulatory compliance, product safety and operational efficiency across complex manufacturing and sterilization processes.
The company's product portfolio encompasses biological and chemical indicators for sterilization process validation, digital data loggers and sensors for environmental monitoring, and optical gas analyzers with sample-conditioning solutions for oil, gas and petrochemical applications.
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