Maravai LifeSciences(MRVI) - 2023 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2023, highlighting a significant revenue decrease and a shift to net loss due to reduced demand for COVID-19 related products Condensed Consolidated Statements of Operations Highlights (Unaudited) | Financial Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $68.9M | $242.7M | $147.9M | $487.0M | | (Loss) Income from Operations | $(11.6)M | $180.7M | $(9.1)M | $348.1M | | Net (Loss) Income | $(11.9)M | $156.7M | $(13.3)M | $303.6M | | Diluted EPS | $(0.05) | $0.53 | $(0.05) | $1.03 | Condensed Consolidated Balance Sheets Highlights (Unaudited) | Balance Sheet Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $699.3M | $847.9M | | Total Assets | $2,264.4M | $2,282.3M | | Total Current Liabilities | $74.9M | $110.1M | | Total Liabilities | $1,366.8M | $1,377.1M | | Total Stockholders' Equity | $897.6M | $905.2M | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $104.3M | $326.6M | | Net cash used in investing activities | $(93.9)M | $(243.2)M | | Net cash used in financing activities | $(62.3)M | $(83.9)M | | Net decrease in cash and cash equivalents | $(52.0)M | $(0.6)M | Notes to Condensed Consolidated Financial Statements (unaudited) The notes provide detailed information supporting the financial statements, covering business segments, the Alphazyme acquisition, asset balances, financial instrument fair values, debt structure, and Tax Receivable Agreement details - The company operates in two principal businesses: Nucleic Acid Production, which includes mRNA and CleanCap® technology, and Biologics Safety Testing[30] - On January 18, 2023, the company completed the acquisition of Alphazyme, LLC, an OEM provider of molecular biology enzymes, for a total purchase consideration of $75.3 million[76][77] - As of June 30, 2023, the liability under the Tax Receivable Agreement (TRA) with related parties MLSH 1 and MLSH 2 was $677.4 million, with payments of $42.6 million made under the TRA during the first six months of 2023[149][150] Revenue by Segment (Six Months Ended June 30) | Segment | 2023 Revenue | 2022 Revenue | | :--- | :--- | :--- | | Nucleic Acid Production | $114.7M | $448.9M | | Biologics Safety Testing | $33.2M | $38.1M | | Total | $147.9M | $487.0M | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the significant 69.6% year-over-year revenue decline for the first six months of 2023, primarily due to a sharp drop in demand for COVID-19 related products and reduced R&D spending by early-stage biotech customers, leading to a net loss - Revenue from COVID-19 related products and services dropped from 71.8% of total revenue in H1 2022 to 18.6% in H1 2023, with management expecting further substantial declines in this area[170] - The company is experiencing headwinds from lower R&D investment in early-stage biotechnology companies and economic contraction in Asia, particularly China, which may continue to negatively impact revenue[172][173] Revenue Comparison (Six Months Ended June 30) | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $147.9M | $487.0M | (69.6)% | | Nucleic Acid Production Revenue | $114.7M | $448.9M | (74.4)% | | Biologics Safety Testing Revenue | $33.2M | $38.1M | (12.9)% | Adjusted EBITDA Reconciliation (Six Months Ended June 30) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net (Loss) Income | $(13.3)M | $303.6M | | Adjusted EBITDA | $32.9M | $375.5M | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate exposure from its variable-rate long-term debt, partially mitigated by an interest rate cap agreement, with foreign currency risk currently minimal - The company has $535.8 million of outstanding variable-rate debt as of June 30, 2023, where a hypothetical 100 basis point change in interest rates would impact interest expense by approximately $2.7 million for the six-month period[276] - An interest rate cap agreement with a notional amount of $500.0 million is in place to hedge a portion of the variable interest rate risk, expiring in January 2025[275] - Foreign currency risk is limited as all revenue is denominated in U.S. dollars, despite approximately 49.4% of revenue in H1 2023 coming from international sales[278] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2023[279] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[280] PART II - OTHER INFORMATION Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business, financial condition, or results of operations - As of the filing date, the company is not a party to any legal proceedings anticipated to have a material adverse impact[282] Risk Factors This section updates the company's risk factors, emphasizing its dependence on customer spending and the negative impact of reduced R&D funding for early-stage biotechnology companies due to capital market declines - A key business risk is the dependency on the level of customer spending, which is influenced by factors outside the company's control, such as R&D budgets and access to capital[284][285] - Recent declines and uncertainties in the capital markets have limited access to funding for early-stage biotech customers, causing them to conserve capital and reduce R&D spending, which in turn has decreased demand for the company's products and services[287] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None Defaults Upon Senior Securities The company reported no defaults upon its senior securities - None Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended June 30, 2023 - No directors or officers adopted or terminated any Rule 10b5-1 trading arrangements during the second quarter of 2023[291] Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, equity grant amendments, and CEO/CFO certifications required by the Sarbanes-Oxley Act - Exhibits filed include amendments to employee equity plans and certifications from the CEO and CFO pursuant to Sarbanes-Oxley Act Sections 302 and 906[292]