Emergent BioSolutions(EBS) - 2025 Q2 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements Unaudited condensed consolidated financial statements for Emergent BioSolutions Inc. as of June 30, 2025, detailing financial position and performance Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $1,417.1 million due to cash, while liabilities decreased, boosting stockholders' equity Condensed Consolidated Balance Sheet Highlights (in millions) | Balance Sheet Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $267.3 | $99.5 | | Accounts receivable, net | $79.8 | $154.5 | | Inventories, net | $338.6 | $311.7 | | Total current assets | $719.5 | $598.7 | | Total assets | $1,417.1 | $1,389.7 | | Liabilities & Equity | | | | Total current liabilities | $127.1 | $162.4 | | Debt | $667.8 | $663.7 | | Total liabilities | $880.9 | $906.9 | | Total stockholders' equity | $536.2 | $482.8 | Condensed Consolidated Statements of Operations The company reported a significantly reduced net loss in Q2 2025 and achieved net income for H1 2025, primarily due to lower operating expenses Statement of Operations Summary (in millions) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $140.9 | $254.7 | $363.1 | $555.1 | | Income (loss) from operations | $1.6 | $(203.5) | $51.5 | $(163.7) | | Net income (loss) | $(12.0) | $(283.1) | $56.0 | $(274.1) | | Diluted EPS | $(0.22) | $(5.38) | $0.99 | $(5.23) | Condensed Consolidated Statements of Cash Flows Net cash from operating activities significantly improved to $95.2 million for H1 2025, leading to a $165.4 million increase in total cash Cash Flow Summary - Six Months Ended June 30 (in millions) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $95.2 | $(15.1) | | Net cash provided by (used in) investing activities | $76.7 | $(15.4) | | Net cash used in financing activities | $(6.8) | $(10.2) | | Net change in cash, cash equivalents and restricted cash | $165.4 | $(40.7) | Notes to Condensed Consolidated Financial Statements Detailed notes cover the company's business structure, divestitures, restructuring, debt, legal proceedings, and segment re-evaluation - The company completed the sale of its Baltimore-Bayview drug substance manufacturing facility to Syngene for $36.5 million, recognizing a pre-tax gain of $7.9 million[52][53] - The company has undertaken multiple organizational restructuring plans since January 2023 to reduce operating costs, resulting in workforce reductions and facility closures[57][58][59] - Total debt as of June 30, 2025, was $700.0 million, consisting of a $250.0 million term loan and $450.0 million in senior unsecured notes[72] - The company settled a securities class action lawsuit for $40.0 million, of which $30.0 million was paid from insurance proceeds[116] - Effective Q1 2025, the company re-evaluated its structure and now has two reportable segments: Commercial Products and MCM Products[132] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance and condition, noting Q2 2025 revenue decline but improved net loss from reduced expenses and strengthened liquidity Results of Operations Q2 2025 total revenues fell 45%, but operating expenses decreased 70%, leading to operating income, with H1 2025 also showing improved operating results Q2 2025 vs Q2 2024 Performance (in millions) | Metric | Q2 2025 | Q2 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $140.9 | $254.7 | $(113.8) | (45)% | | Commercial Product Sales | $67.5 | $120.0 | $(52.5) | (44)% | | MCM Product Sales | $58.4 | $63.4 | $(5.0) | (8)% | | Total Operating Expenses | $139.3 | $458.2 | $(318.9) | (70)% | | Income (loss) from operations | $1.6 | $(203.5) | $205.1 | 101% | | Net income (loss) | $(12.0) | $(283.1) | $271.1 | 96% | H1 2025 vs H1 2024 Performance (in millions) | Metric | H1 2025 | H1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $363.1 | $555.1 | $(192.0) | (35)% | | Commercial Product Sales | $112.8 | $238.5 | $(125.7) | (53)% | | MCM Product Sales | $215.0 | $218.8 | $(3.8) | (2)% | | Total Operating Expenses | $311.6 | $718.8 | $(407.2) | (57)% | | Income (loss) from operations | $51.5 | $(163.7) | $215.2 | 131% | | Net income (loss) | $56.0 | $(274.1) | $330.1 | 120% | Reportable Segment Results Segment results show Commercial Product revenue decline, MCM Products decrease, and 'All other revenues' fall due to a prior-year settlement - Commercial Product segment revenue decreased 44% in Q2 2025, driven by lower sales of OTC NARCAN and an unfavorable price/volume mix[197][198] - MCM Products segment revenue decreased 8% in Q2 2025, with a 70% decrease in Anthrax MCM sales partially offset by a 127% increase in Smallpox MCM sales due to timing of government orders[200][201][202] - Services revenues (part of 'All other revenues') decreased 93% in Q2 2025, primarily due to a one-time $50.0 million arbitration settlement with Janssen recognized in Q2 2024[208] Financial Condition, Liquidity and Capital Resources Liquidity significantly improved with cash increasing to $267.3 million and working capital rising, supported by a $50.0 million share repurchase program Financial Condition Summary (in millions) | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $267.3 | $99.5 | | Total working capital | $592.4 | $436.3 | | Debt | $667.8 | $663.7 | - The company authorized a $50.0 million share repurchase program in March 2025, with $6.9 million used to repurchase 1.1 million shares in Q2 2025, leaving $43.1 million available[251] - The company had $100.0 million of unused capacity under its Revolving Loans as of June 30, 2025[262] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rates on variable-rate debt and foreign currency exchange rate fluctuations - The company's primary market risks are interest rate risk on its floating-rate debt and foreign currency exchange rate risk[265] - A hypothetical 1% increase in the eurocurrency rate as of June 30, 2025, would increase annual interest expense by approximately $2.5 million[267] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control - Management concluded that disclosure controls and procedures were effective as of June 30, 2025[269] - No material changes to internal control over financial reporting occurred during the three months ended June 30, 2025[270] Part II. Other Information Item 1. Legal Proceedings This section refers to Note 16 of the financial statements for details on legal proceedings - For information on legal proceedings, the report directs readers to Note 16 of the Condensed Consolidated Financial Statements[271] Item 1A. Risk Factors Updates the company's risk factors, highlighting potential negative impacts from recent divestitures and the 2025 Share Repurchase Program - The company highlights risks associated with its recent divestitures, including retained liabilities, potential indemnification obligations, and the possibility of not realizing the full expected benefits from the sales[272][273][274] - There is a risk that the 2025 Share Repurchase Program may not be fully utilized or may not enhance long-term stockholder value, and its suspension could negatively impact the stock price[278][279] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details the company's share repurchase activity under the 2025 Share Repurchase Program, including shares repurchased and remaining funds Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2025 | 200,000 | $5.01 | | May 2025 | 478,681 | $6.25 | | June 2025 | 441,500 | $6.48 | | Total | 1,120,181 | | Item 5. Other Information Director Kathryn Zoon adopted a Rule 10b5-1 trading arrangement for the potential sale of 24,286 shares of common stock - On May 16, 2025, Director Kathryn Zoon adopted a Rule 10b5-1 trading plan for the sale of up to 24,286 shares of common stock, expiring May 15, 2026[287][288]