Maravai LifeSciences(MRVI) - 2025 Q2 - Quarterly Report

Forward-Looking Statements This report contains forward-looking statements subject to significant risks and uncertainties - Statements in this report are forward-looking, not strictly historical, and are identified by words such as "anticipate," "estimate," "expect," "project," "plan," "intend," "believe," "may," "will," "should," "can have," and "likely"[11] - Key risks and uncertainties that could cause actual results to differ materially include customer spending and demand, the realization of operational or financial benefits from organizational changes, significant fluctuations in operating results, uncertainty regarding CleanCap® revenue, geopolitical instability, competition, product performance, intellectual property protection, and financial structure (indebtedness and Tax Receivable Agreement)[11][14] - The company undertakes no obligation to update or revise any forward-looking statement unless required by law[13] PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents unaudited condensed consolidated financial statements and accompanying detailed notes Condensed Consolidated Balance Sheets The balance sheet shows a decrease in total assets and stockholders' equity, driven by lower cash and goodwill impairment Condensed Consolidated Balance Sheets | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Assets | | | | | Cash and cash equivalents | $269,907 | $322,399 | $(52,492) | | Accounts receivable, net | $27,882 | $38,520 | $(10,638) | | Inventory | $46,667 | $50,082 | $(3,415) | | Goodwill | $129,429 | $159,878 | $(30,449) | | Total assets | $896,966 | $1,008,244 | $(111,278) | | Liabilities | | | | | Total current liabilities | $69,682 | $56,971 | $12,711 | | Total liabilities | $428,983 | $431,035 | $(2,052) | | Stockholders' Equity | | | | | Total stockholders' equity | $467,983 | $577,209 | $(109,226) | Condensed Consolidated Statements of Operations The company reported a substantially increased net loss due to lower revenue and goodwill impairment Condensed Consolidated Statements of Operations | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenue | $47,397 | $69,423 | $94,247 | $133,602 | | Cost of revenue | $39,629 | $38,582 | $78,754 | $76,917 | | Goodwill impairment | $30,449 | $— | $42,884 | $— | | Loss from operations | $(66,278) | $(13,440) | $(115,440) | $(32,301) | | Net loss | $(69,837) | $(18,420) | $(122,690) | $(41,100) | | Net loss attributable to Maravai LifeSciences Holdings, Inc. | $(39,591) | $(9,789) | $(69,536) | $(21,867) | | Net loss per Class A common share, basic and diluted | $(0.27) | $(0.07) | $(0.48) | $(0.16) | Condensed Consolidated Statements of Comprehensive Loss Comprehensive loss increased significantly year-over-year, driven primarily by higher net loss Condensed Consolidated Statements of Comprehensive Loss | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss | $(69,837) | $(18,420) | $(122,690) | $(41,100) | | Foreign currency translation adjustments | $442 | $— | $1,016 | $— | | Total other comprehensive loss | $(69,395) | $(18,420) | $(121,674) | $(41,100) | | Total comprehensive loss attributable to Maravai LifeSciences Holdings, Inc. | $(39,341) | $(9,789) | $(68,962) | $(21,867) | Condensed Consolidated Statements of Changes in Stockholders' Equity Total stockholders' equity decreased significantly due to the net loss incurred during the period Condensed Consolidated Statements of Changes in Stockholders' Equity | Metric (in thousands) | December 31, 2024 | June 30, 2025 | Change | | :-------------------- | :---------------- | :------------ | :----- | | Total Stockholders' Equity | $577,209 | $467,983 | $(109,226) | | Net loss (6 months) | N/A | $(122,690) | N/A | | Stock-based compensation (6 months) | N/A | $17,192 | N/A | | Foreign currency translation adjustment (6 months) | N/A | $1,016 | N/A | Condensed Consolidated Statements of Cash Flows The company experienced a net decrease in cash, driven by cash used in operating and investing activities Condensed Consolidated Statements of Cash Flows | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(19,655) | $8,967 | | Net cash used in investing activities | $(26,365) | $(10,426) | | Net cash used in financing activities | $(6,434) | $(332) | | Net decrease in cash and cash equivalents | $(52,492) | $(1,791) | | Cash and cash equivalents, end of period | $269,907 | $573,171 | - Net cash used in operating activities for the six months ended June 30, 2025, was $19.7 million, primarily due to a net loss of $122.7 million, partially offset by non-cash adjustments like depreciation, amortization, stock-based compensation, and goodwill impairment[28][286] - Net cash used in investing activities for the six months ended June 30, 2025, was $26.4 million, mainly due to cash paid for the acquisitions of Molecular Assemblies ($8.9 million) and Officinae Bio ($10.1 million), and property and equipment purchases ($8.1 million)[28][287] - Net cash used in financing activities for the six months ended June 30, 2025, was $6.4 million, primarily from tax payments for shares withheld under employee equity plans ($4.7 million) and principal repayments of long-term debt ($2.7 million)[28][288] Notes to Condensed Consolidated Financial Statements These notes provide crucial context to the financial statements, detailing accounting policies and key financial components 1. Organization and Significant Accounting Policies Maravai operates in two segments, Nucleic Acid Production and Biologics Safety Testing, and consolidates Topco LLC's results - Maravai operates in two principal businesses: Nucleic Acid Production (mRNA, oligonucleotides, CleanCap®) and Biologics Safety Testing (host cell protein, bioprocess impurity detection, viral clearance kits, custom antibody/assay development)[32] - The company consolidates Topco LLC's financial results, with non-controlling interests representing MLSH 1's portion (approximately 43.4% as of June 30, 2025)[33][57] - Revenue is recognized when control of promised goods or services is transferred to a customer, with the majority recognized at a single point in time[42][55] Segment Revenue | Segment Revenue (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change (%) | | :----------------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Nucleic Acid Production | $31,085 | $54,586 | (43.1)% | $59,835 | $100,602 | (40.5)% | | Biologics Safety Testing | $16,312 | $14,837 | 9.9% | $34,412 | $33,000 | 4.3% | - Recently issued ASUs (2023-09 for Income Tax Disclosures and 2024-03 for Expense Disaggregation Disclosures) are being evaluated for their impact on consolidated financial statements and disclosures, with effective dates for annual periods beginning after December 15, 2024, and December 15, 2026, respectively[75][76] 2. Acquisitions The company completed two acquisitions in Q1 2025 to expand its Nucleic Acid Production capabilities - Molecular Assemblies Acquisition (January 23, 2025): - Total purchase consideration: $11.2 million ($9.2 million cash, $2.0 million consideration payable) - Acquired assets: Inventory ($156k), prepaid expenses ($138k), property & equipment ($4.57 million), intangible assets ($3.2 million) - Goodwill: $3.4 million, allocated to Nucleic Acid Production segment, primarily for vertical supply integration synergies - Intangible assets: Developed technology ($3.2 million, 13-year useful life)[78][80][81][82] - Officinae Bio Acquisition (February 21, 2025): - Total purchase consideration: $15.1 million ($9.9 million cash, $4.8 million contingent consideration, $0.3 million consideration payable) - Acquired assets: Cash ($214k), intangible assets ($8.18 million) - Goodwill: $8.8 million, allocated to Nucleic Acid Production segment, for technology platform integration and assembled workforce synergies - Intangible assets: Developed technology ($8.1 million, 8-year useful life), Customer relationships ($80k, 6-year useful life)[86][87][90][91] 3. Goodwill and Intangible Assets The company recorded significant goodwill impairment charges due to lower projected revenues in the Nucleic Acid Production segment - Goodwill Impairment: - Total goodwill impairment for six months ended June 30, 2025: $42.9 million - Q1 2025: $12.4 million impairment for TriLink reporting unit (Nucleic Acid Production) due to lower demand in research/discovery products and slower mRNA clinical trial transitions - Q2 2025: $30.4 million impairment for Alphazyme reporting unit (Nucleic Acid Production) due to lower anticipated demand in enzyme products - Goodwill balance as of June 30, 2025: $129.4 million (down from $159.9 million at Dec 31, 2024)[94][97][100] - Intangible Assets: - No impairment for finite-lived intangible assets was recorded after recoverability evaluations - Total net intangible assets as of June 30, 2025: $193.1 million (down from $195.0 million at Dec 31, 2024) - Amortization expense for intangible assets: $13.0 million (6 months ended June 30, 2025) within cost of revenue, and $1.2 million within SG&A - Estimated future amortization expense for remaining six months of 2025: $14.4 million[101][102][104][106][107] 4. Fair Value Measurements The company measures cash equivalents at Level 1 and contingent consideration at Level 3 fair value - Cash and cash equivalents (money market funds) are classified as Level 1 fair value measurements[108] - Contingent consideration is classified as a Level 3 financial liability[108] - Alphazyme Contingent Consideration: Had no fair value as of June 30, 2025, as revenue targets for 2023 and 2024 were not met, and no payment is expected for 2025[109][110] - Officinae Contingent Consideration: Fair value of $4.8 million recognized at acquisition date, increasing to $4.94 million by June 30, 2025, due to present value changes[112][113][114] 5. Balance Sheet Components This note details the composition of inventory, accrued expenses, and other long-term liabilities Inventory | Inventory (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :--------------------- | :------------ | :---------------- | :----- | | Raw materials | $16,431 | $16,974 | $(543) | | Work-in-process | $10,519 | $10,050 | $469 | | Finished goods | $19,717 | $23,058 | $(3,341) | | Total inventory | $46,667 | $50,082 | $(3,415) | Accrued Expenses and Other Current Liabilities | Accrued Expenses and Other Current Liabilities (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :---------------------------------------------------------- | :------------ | :---------------- | :----- | | Employee related | $16,439 | $17,163 | $(724) | | Operating lease liabilities, current portion | $7,926 | $7,481 | $445 | | Accrued Alphazyme Retention Payments, current | $7,640 | $— | $7,640 | | Contingent consideration, current | $4,940 | $— | $4,940 | | Consideration payable (Molecular Assemblies) | $2,000 | $— | $2,000 | | Total accrued expenses and other current liabilities | $50,202 | $36,407 | $13,795 | Other Long-Term Liabilities | Other Long-Term Liabilities (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :--------------------------------------- | :------------ | :---------------- | :----- | | Operating lease liabilities, non-current | $37,750 | $41,381 | $(3,631) | | Accrued Alphazyme Retention Payments, non-current | $— | $6,580 | $(6,580) | | Acquisition related tax liability | $— | $4,082 | $(4,082) | | Total other long-term liabilities | $38,186 | $52,455 | $(14,269) | 6. Government Assistance The company completed its Cooperative Agreement with HHS, receiving the full $38.8 million award - TriLink has a Cooperative Agreement with the U.S. Department of Health and Human Services (HHS) to advance domestic manufacturing capabilities and expand production capacity for mRNA vaccines and therapeutics[118] - The award amount was $38.8 million, representing 50% of the construction and validation costs for the Flanders San Diego Facility[120] - The company received $0.7 million in reimbursements during the six months ended June 30, 2025, and had utilized and received the full award amount by the end of the first quarter of 2025[121] 7. Commitments and Contingencies The company has purchase obligations and is involved in legal proceedings which it intends to vigorously defend - Unconditional purchase obligations as of June 30, 2025, totaled $0.9 million, relating to the remaining six months of 2025 and the year ending December 31, 2026[123] - The company is involved in a Securities Class Action lawsuit (Nelson v. Maravai Lifesciences Holdings, Inc., et al.) filed March 3, 2025, alleging federal securities law violations[125] - Two purported stockholder derivative lawsuits (Mercer v. Martin, et al. and Husurianto v. Martin, et al.) were filed in June and July 2025, alleging breaches of fiduciary duties and Exchange Act violations[126] - The company intends to vigorously defend these legal actions and cannot reasonably estimate any potential loss or range of loss that may arise from them[127] 8. Long-Term Debt The company's long-term debt consists of a Term Loan with $297.0 million outstanding as of June 30, 2025 - The Credit Agreement provides for a $600.0 million Term Loan facility (maturing October 2027) and a $167.0 million revolving credit facility (maturing October 2029)[129] - As of June 30, 2025, the Term Loan had an outstanding balance of $297.0 million and an effective interest rate of 7.27% per annum[130][137] - There were no outstanding borrowings under the Revolving Credit Facility as of June 30, 2025, and the company was in compliance with all debt covenants[134][137] Future Principal Maturities | Future Principal Maturities (in thousands) | Amount | | :--------------------------------------- | :----- | | 2025 (remaining six months) | $2,720 | | 2026 | $5,440 | | 2027 | $288,800 | | Total long-term debt | $296,960 | 9. Net Loss Per Class A Common Share Attributable to Maravai LifeSciences Holdings, Inc. The company reported an increased net loss per Class A common share compared to the prior year Net Loss Per Class A Common Share | Metric (in thousands, except per share) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss attributable to Maravai LifeSciences Holdings, Inc. | $(39,591) | $(9,789) | $(69,536) | $(21,867) | | Weighted average Class A common shares outstanding | 144,236 | 135,842 | 143,833 | 134,088 | | Net loss per Class A common share, basic and diluted | $(0.27) | $(0.07) | $(0.48) | $(0.16) | - Potentially dilutive securities (restricted stock units, stock options, Class B common stock) were excluded from the computation of diluted net loss per share because their effect would have been anti-dilutive due to the reported net loss[141] 10. Income Taxes The company reported an income tax benefit with an effective tax rate lower than the statutory rate Income Tax Benefit and Effective Tax Rate | Metric (in thousands, except percentages) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Loss before income taxes | $(74,125) | $(20,855) | $(126,816) | $(43,264) | | Income tax benefit | $(4,288) | $(2,435) | $(4,126) | $(2,164) | | Effective tax rate | 5.8% | 11.7% | 3.3% | 5.0% | - The effective tax rates for the three and six months ended June 30, 2025, were 5.8% and 3.3% respectively, differing from the U.S. federal statutory rate of 21.0% primarily due to loss associated with non-controlling interest, the valuation allowance recorded against deferred tax assets, and the release of a previous uncertain tax position[143] - No tax distributions were made to Topco LLC's unit holders during the three and six months ended June 30, 2025[149] - The recently enacted One Big Beautiful Bill Act (OBBBA) on July 4, 2025, includes significant tax provisions that the company is currently assessing for impact on its consolidated financial statements[150] 11. Related Party Transactions The company has a Tax Receivable Agreement with related parties, but no payments were made in 2025 or 2024 - The company is a party to a Tax Receivable Agreement (TRA) with MLSH 1 and MLSH 2, which provides for payments of 85% of certain tax benefits realized by the company[152] - As of June 30, 2025, there was no current liability outstanding under the TRA[153] - The non-current liability under the TRA ($683.8 million as of December 31, 2024) was derecognized because it was not probable that the company would realize the remaining tax benefits based on estimates of future taxable income[154] - No payments were made to MLSH 1 or MLSH 2 pursuant to the TRA during the three and six months ended June 30, 2025, or 2024[155] 12. Segments The company operates in two segments, with Adjusted EBITDA as the key performance measure - The company operates in two reportable segments: Nucleic Acid Production (manufacturing and sale of highly modified nucleic acids) and Biologics Safety Testing (manufacturing and sale of host cell protein, bioprocess impurity detection, viral clearance kits, and associated services)[158] - Adjusted EBITDA is the profit or loss measure used by the Chief Operating Decision Maker (CODM) to allocate resources and evaluate segment performance, excluding certain non-cash and other adjustments not considered representative of ongoing operations[157] Adjusted EBITDA by Segment | Segment (in thousands) | 3 Months Ended June 30, 2025 (Adj. EBITDA) | 3 Months Ended June 30, 2024 (Adj. EBITDA) | 6 Months Ended June 30, 2025 (Adj. EBITDA) | 6 Months Ended June 30, 2024 (Adj. EBITDA) | | :--------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Nucleic Acid Production | $(7,270) | $17,453 | $(16,170) | $27,541 | | Biologics Safety Testing | $10,860 | $9,365 | $23,531 | $23,291 | | Total Adjusted EBITDA | $3,590 | $26,818 | $7,361 | $50,832 | 13. Subsequent Event The company announced a Corporate Realignment Plan to reduce operating costs by over $50.0 million annually - On August 11, 2025, the company announced a Corporate Realignment Plan, including a workforce reduction expected to impact approximately 25% of its workforce[168] - The Corporate Realignment Plan is designed to significantly reduce operating costs by more than $50.0 million annually[187] - The company estimates it will incur restructuring costs of approximately $8.0 million to $9.0 million, primarily for employee severance and benefits, with the majority expected in the second half of 2025[168] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an in-depth analysis of the company's financial condition and results of operations Overview Maravai reported significant revenue declines due to the absence of high-volume CleanCap® orders - Maravai provides critical products for drug therapies, diagnostics, novel vaccines, and human disease research, serving top global biopharmaceutical companies, emerging firms, and academic institutions[172] Revenue by Segment | Metric (in millions) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total Revenue | $47.4 | $69.4 | $94.2 | $133.6 | | Nucleic Acid Production Revenue | $31.1 | $54.6 | $59.8 | $100.6 | | Biologics Safety Testing Revenue | $16.3 | $14.8 | $34.4 | $33.0 | - The decrease in Nucleic Acid Production revenue was primarily due to the absence of high-volume CleanCap® sales for commercialized vaccine programs, which accounted for $24.4 million in Q2 2024 and $33.4 million in H1 2024[177][178] - Recent developments include the acquisitions of Molecular Assemblies ($11.2 million) and Officinae Bio ($15.1 million) in Q1 2025, executive leadership transition (new CEO and CFO in June 2025), and a Corporate Realignment Plan announced in August 2025 to reduce operating costs by over $50 million annually through workforce reductions (25% of employees)[184][185][186][187] Trends and Uncertainties The company faces significant headwinds from the absence of high-volume CleanCap® sales and geopolitical tensions - The company generated no revenue from high-volume CleanCap® orders for commercial phase vaccine programs during the three and six months ended June 30, 2025, and does not expect to generate such revenue for the remainder of 2025[192] - Revenue from high-volume CleanCap® sales represented approximately 35.2% of total revenues for Q2 2024 and 25.0% for H1 2024[192] - The absence of CleanCap® sales is expected to significantly decrease the company's revenue, profitability, and cash flows in 2025 compared to prior year periods[192] - Ongoing headwinds include general economic contraction in Asia (especially China) and geopolitical tensions, which may negatively impact future demand and revenues[193] - It is reasonably possible that estimates of undiscounted cash flows may change in the near term, potentially leading to a write-down of affected long-lived assets[194] How We Assess Our Business The company assesses its business performance using revenue and Adjusted EBITDA, a non-GAAP measure - The key measures used to assess business performance are revenue and Adjusted EBITDA[195] - Adjusted EBITDA is a non-GAAP financial measure defined as net loss adjusted for interest, provision for income taxes, depreciation, amortization, stock-based compensation expenses, and other non-cash/non-recurring items[196] - Adjusted EBITDA is used by management to evaluate financial performance and strategies, and by analysts/investors for industry comparisons[197] - Limitations of Adjusted EBITDA include not reflecting capital expenditures, working capital needs, income taxes, asset replacement costs, and the non-cash component of employee compensation expense[198] Components of Results of Operations This section details the components of the company's financial results, including revenue, costs, and operating expenses - Revenue is primarily generated from product sales and, to a lesser extent, service revenue, across the Nucleic Acid Production and Biologics Safety Testing segments[200] - Cost of revenue includes manufacturing costs, personnel, stock-based compensation, inventory write-downs, materials, labor, overhead, packaging, delivery, and allocated costs[204] - Selling, general and administrative expenses are expected to decrease in future periods due to the implementation of the Corporate Realignment Plan[206] - Research and development costs are also expected to decrease in future periods as a result of the Corporate Realignment Plan[208] - Goodwill impairment of $30.4 million and $42.9 million was recorded for the three and six months ended June 30, 2025, respectively[210] Results of Operations Financial results show significant declines in revenue and net income, driven by lower CleanCap® sales and goodwill impairment Comparison of Results | Metric (in thousands, except per share) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change (%) | | :------------------------------------ | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Revenue | $47,397 | $69,423 | (31.7)% | $94,247 | $133,602 | (29.5)% | | Cost of revenue | $39,629 | $38,582 | 2.7% | $78,754 | $76,917 | 2.4% | | Selling, general and administrative | $38,575 | $40,556 | (4.9)% | $78,139 | $81,441 | (4.1)% | | Research and development | $4,882 | $4,924 | (0.9)% | $9,770 | $9,956 | (1.9)% | | Goodwill impairment | $30,449 | $— | * | $42,884 | $— | * | | Loss from operations | $(66,278) | $(13,440) | 393.1% | $(115,440) | $(32,301) | 257.4% | | Net loss | $(69,837) | $(18,420) | 279.1% | $(122,690) | $(41,100) | 198.5% | | Net loss per Class A common share | $(0.27) | $(0.07) | | $(0.48) | $(0.16) | | | Adjusted EBITDA (Non-GAAP) | $(10,410) | $12,989 | | $(20,959) | $20,784 | | - Nucleic Acid Production revenue decreased by 43.1% for Q2 2025 and 40.5% for H1 2025 year-over-year, primarily due to the absence of high-volume CleanCap® orders for commercial phase vaccine programs[224][227] - Biologics Safety Testing revenue increased by 9.9% for Q2 2025 and 4.3% for H1 2025 year-over-year, driven by strength in Host Cell Protein (HCP) kits and associated HCP qualification services, and increased demand for MockV viral clearance kits[225][228] - Gross profit margin decreased significantly to 16.4% for both Q2 and H1 2025, from 44.4% and 42.4% in the respective prior-year periods, mainly due to increased excess and obsolete inventory reserve and higher fixed facility costs as a percentage of sales[231][233] - Selling, general and administrative expenses decreased by 4.9% for Q2 2025 and 4.1% for H1 2025 year-over-year, primarily due to a decrease in stock-based compensation expense (related to forfeitures from the Executive Leadership Transition) and facilities expense, partially offset by increased professional service fees and severance payments[235][236] Relationship with GTCR, LLC Entities affiliated with GTCR, LLC control a majority of the company's voting power - Investment entities affiliated with GTCR, LLC collectively controlled approximately 51% of the voting power of the company's common stock as of June 30, 2025[260] - The company is a party to a Tax Receivable Agreement (TRA) with MLSH 1 (primarily owned by GTCR) and MLSH 2, which provides for payments of 85% of certain tax benefits[262] - No current liability was outstanding under the TRA as of June 30, 2025, and no payments were made under the TRA during the three and six months ended June 30, 2025, or 2024[263][265] - The non-current TRA liability was derecognized as it was determined not probable that the company would generate sufficient future taxable income to utilize the related tax benefits[264] Liquidity and Capital Resources The company's liquidity is supported by cash from operations and long-term debt, despite increased cash usage Overview The company expects existing cash and operational cash flow to be sufficient for the next 12 months - The company's operations have been financed primarily from cash flow from operations, borrowings under long-term debt agreements, and sales of Class A common stock[268] - As of June 30, 2025, the company had cash and cash equivalents of $269.9 million[266] - The company believes its cash on hand, cash generated from operations, and continued access to credit facilities will be sufficient to satisfy cash requirements over the next 12 months and beyond[269] - No probable future payments are expected under the Tax Receivable Agreement (TRA) relating to the purchase of LLC Units, as a valuation allowance has been recorded against deferred tax assets, indicating insufficient future taxable income to utilize related tax benefits[270][271] Credit Agreement The company was in compliance with all covenants under its Credit Agreement as of June 30, 2025 - The Credit Agreement provides for a $600.0 million Term Loan facility (maturing October 2027) and a $167.0 million Revolving Credit Facility (maturing October 2029)[274] - As of June 30, 2025, $297.0 million was outstanding under the Term Loan, bearing an effective interest rate of 7.27% per annum[275] - There were no outstanding borrowings under the Revolving Credit Facility as of June 30, 2025[275] - The company was in compliance with all covenants under the Credit Agreement as of June 30, 2025[280] Tax Receivable Agreement The TRA liability remains derecognized due to the unlikelihood of realizing sufficient future taxable income - The Tax Receivable Agreement (TRA) provides for the payment by the company to MLSH 1 and MLSH 2 of 85% of certain tax benefits realized[281] - As of June 30, 2025, there was no current liability outstanding under the TRA[282] - The non-current portion of the TRA liability remains derecognized as it was determined not probable that the company will generate sufficient future taxable income to utilize the related tax benefits[284] - Payments under the TRA, if required, are generally due within 125 days after the extended due date of the U.S. federal income tax return, with interest accruing from the due date[282] Cash Flows The company experienced a net decrease in cash of $52.5 million for the first half of 2025 Cash Flow Summary | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(19,655) | $8,967 | | Net cash used in investing activities | $(26,365) | $(10,426) | | Net cash used in financing activities | $(6,434) | $(332) | | Net decrease in cash and cash equivalents | $(52,492) | $(1,791) | - Net cash used in operating activities for H1 2025 was $19.7 million, primarily due to a net loss of $122.7 million, partially offset by non-cash adjustments (depreciation, amortization, stock-based compensation, goodwill impairment)[286] - Net cash used in investing activities for H1 2025 was $26.4 million, mainly for the acquisitions of Molecular Assemblies ($8.9 million) and Officinae Bio ($10.1 million), and property and equipment purchases ($8.1 million)[287] - Net cash used in financing activities for H1 2025 was $6.4 million, primarily from tax payments for shares withheld under employee equity plans ($4.7 million) and principal repayments of long-term debt ($2.7 million)[288] Capital Expenditures Capital expenditures totaled $7.4 million for the first half of 2025, with future plans under review - Capital expenditures for the six months ended June 30, 2025, totaled $7.4 million, net of $0.7 million in government funding under the Cooperative Agreement[289] - The company is currently evaluating its plans for capital expenditures for the year ending December 31, 2025, in connection with the Corporate Realignment Plan[289] Contractual Obligations and Commitments Total contractual obligations and commitments amounted to $386.6 million as of June 30, 2025 Contractual Obligations Summary | Obligation (in thousands) | Total | < 1 year | 1-3 years | 4-5 years | 5+ years | | :------------------------ | :--------- | :--------- | :--------- | :--------- | :--------- | | Operating leases | $52,251 | $10,848 | $18,545 | $18,252 | $4,606 | | Finance leases | $29,494 | $3,478 | $7,272 | $7,715 | $11,029 | | Debt obligations | $296,960 | $5,440 | $291,520 | $— | $— | | Unconditional purchase obligations | $940 | $788 | $152 | $— | $— | | Contingent consideration (Officinae) | $4,940 | $4,940 | $— | $— | $— | | Consideration payable (Molecular) | $2,000 | $2,000 | $— | $— | $— | | Total | $386,585 | $27,494 | $317,489 | $25,967 | $15,635 | - Contingent payments for Alphazyme (up to $25.0 million) and retention payments ($9.3 million, with $7.6 million accrued as of June 30, 2025) are not included in the table as their payment is not currently determinable or probable[294] Critical Accounting Policies and Estimates The company's financial statements rely on significant judgments, particularly for goodwill impairment - A quantitative goodwill impairment test was performed on the Alphazyme reporting unit in Q2 2025 due to lower projected revenues, resulting in a $30.4 million impairment charge[299] - Determining the fair value of intangible assets acquired in business combinations requires significant judgment and estimates, including valuation methodologies, assumptions about future net cash flows, discount rates, and market participants[301][302] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to interest rate risk from variable-rate debt and foreign currency risk from international sales - The company's primary exposure to interest rate risk is associated with its variable-rate long-term debt, with $297.0 million outstanding under the Term Loan as of June 30, 2025[305] - A hypothetical 100 basis point increase or decrease in overall interest rates would have changed interest expense by approximately $0.8 million for the three months and $1.5 million for the six months ended June 30, 2025[306] - Substantially all of the company's revenue is denominated in U.S. dollars, even for international sales (approximately 35.4% for Q2 2025 and 36.4% for H1 2025)[308] - The company has not entered into any hedging arrangements with respect to foreign currency risk to date, but will reassess its approach as international operations grow[308] Item 4. Controls and Procedures Management concluded disclosure controls were not effective due to material weaknesses in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective at a reasonable assurance level as of June 30, 2025, due to material weaknesses in internal control over financial reporting[309] - Material weaknesses identified include ineffective controls over the revenue process (timing of revenue recognition, segregation of duties, accounting for product revenue, pricing approvals) and ineffective controls over key inputs and assumptions for goodwill impairment assessment[311] - Remediation plans are in progress, including remediating existing revenue process controls, designing new pricing authorization controls, reviewing order entry data, monitoring work order activity, and enhancing management review controls for goodwill impairment inputs and assumptions[312][317] PART II - OTHER INFORMATION Item 1. Legal Proceedings Current legal proceedings are not expected to have a material adverse effect on the company's financial condition - The company is involved in various legal proceedings and subject to claims arising in the normal course of business[319] - As of the date of this report, none of such loss contingencies, either individually or in the aggregate, are expected to have a material adverse effect on the company's consolidated financial position, results of operations, or cash flows[319] Item 1A. Risk Factors Material changes to risk factors relate to recent organizational changes, including executive transitions and restructuring - Material changes to risk factors relate to recent organizational changes, including changes to the executive management team and the Corporate Realignment Plan[320][321] - Risks associated with the Corporate Realignment Plan (organizational restructuring and workforce reduction impacting approximately 25% of employees) include not realizing expected operational or financial benefits, higher than anticipated restructuring charges, and unintended consequences such as adverse impacts on revenues, employee attrition, and morale[322][323] - Executive management transitions can lead to loss of institutional knowledge, changes in strategic goals, uncertainty, higher attrition, business disruption, and negative impacts on financial performance[324] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report during the period Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report during the period Item 4. Mine Safety Disclosures This item is not applicable to the company Item 5. Other Information No insider trading arrangements were adopted or terminated by directors or officers during the quarter - None of the company's directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" during the three months ended June 30, 2025[329] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including organizational and employment documents - Exhibits include the Amended and Restated Certificate of Incorporation and Bylaws[330] - Employment agreements for the new Chief Executive Officer (Bernd Brust) and Chief Financial Officer (Rajesh Asarpota) are filed[330] - Forms of Restricted Stock Unit Grant Notice, Stock Option Grant Notice, and Performance Stock Unit Grant Notice are included[330] - Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 and Section 1350 of the Sarbanes-Oxley Act of 2002 are filed[330] Signatures The report was duly signed by the company's Chief Financial Officer on August 11, 2025 - The report was signed by Rajesh Asarpota, Chief Financial Officer of Maravai LifeSciences Holdings, Inc., on August 11, 2025[334]