Alpha Teknova, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report; it does not provide a separate Q4 income statement. Teknova supplies catalog and custom reagents used in life-sciences research and biopharmaceutical and diagnostic development. The financial statements were audited by Ernst & Young LLP, which gave an unqualified opinion on the financial statements.
Financial performance and position
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $36.9 million | $31.3 million |
| Gross profit / gross margin | $17.6 million / 47.8% | $17.8 million / 56.7% |
| Operating income (loss) | $(12.0) million | $4.7 million |
| Net income (loss) | $(9.8) million | $3.6 million |
| Cash from (used in) operations | $(9.1) million | $2.5 million |
| Capital expenditures | $19.9 million | $5.5 million |
- Revenue grew 17.9%. Lab Essentials revenue rose 28.0% to $27.2 million and Clinical Solutions rose 41.3% to $6.8 million. Sample Transport revenue fell 64.4% to $1.5 million as COVID-19 testing demand declined; Teknova ceased producing and marketing those products during 2021.
- Gross profit was nearly flat despite revenue growth. Margin declined 8.9 percentage points, primarily from higher manufacturing overhead and labor costs as a share of revenue, plus a $0.4 million Sample Transport inventory reserve.
- Operating expenses increased 126.3% to $29.6 million, including higher R&D, sales and marketing, and general and administrative costs. Management attributed the increases mainly to headcount, public-company infrastructure, and investment in product development and commercial capabilities.
- Cash and cash equivalents were $87.5 million at year-end, versus $3.3 million a year earlier; working capital was $93.5 million. Financing cash flow was $110.8 million, largely reflecting the IPO and term-loan proceeds. Investing cash outflow was $17.5 million, primarily for facility and equipment expansion.
- Long-term debt was $12.0 million gross, or $11.9 million net of issuance costs. No revolver was drawn. The secured term loan bears interest at one-month LIBOR plus 6.45%, subject to a 1.50% floor, and is due March 1, 2026. Teknova reported compliance with its $32.0 million trailing-revenue covenant at year-end.
Material changes and outlook
- Teknova completed its IPO in June 2021, issuing 6.9 million shares at $16 per share and receiving $99.1 million in net proceeds. Preferred stock converted into common stock at the IPO.
- The company expanded its facility footprint and reported about $18.8 million of construction in progress at year-end. Management plans further investment in manufacturing, automation, R&D, sales, marketing, and technical support, and expects production capacity to expand five-fold over two years.
- Management said existing cash, IPO proceeds, and available credit were expected to fund liquidity needs for at least 24 months. Facility expansion was expected to be a significant cash use over the following 12 to 18 months. The filing gives no formal revenue or earnings guidance.
- Teknova expects ASC 842 lease accounting adoption in 2022 to add approximately $20 million of lease liabilities and right-of-use assets to the balance sheet; this is an accounting presentation change, not a stated cash obligation increase.
Risks, contingencies, and unusual items
- Profitability and cash generation: The company moved from operating and net income in 2020 to losses in 2021, while operating cash flow turned negative. Continued spending on growth and public-company costs may delay or prevent sustained profitability.
- Control weakness: Management concluded disclosure controls were ineffective at December 31, 2021 because of an unremediated material weakness in controls over complex, non-routine transactions. The weakness had been identified in prior-period reporting; no material 2021 financial-statement adjustments resulted. The auditor did not attest to internal-control effectiveness.
- Customer and supplier concentration: The largest customer, a distributor, represented 18% of 2021 revenue. Three suppliers accounted for 61% of inventory purchases, including one distributor at 40%. Customer orders are generally purchase-order based and may be changed or cancelled.
- Execution and demand: Facility expansion and scaling may disrupt output, quality, delivery times, or costs. Demand may fluctuate with customer research budgets, clinical progress, COVID-related testing, and adoption of cell and gene therapies or mRNA products.
- Debt and governance: Debt is secured by substantially all company assets and carries covenants and variable-rate exposure. Telegraph Hill Partners controlled approximately 62.5% of voting power, and Teknova relied on certain controlled-company governance exemptions.
- Other disclosed matters: No material legal proceedings were reported. The filing identifies regulatory, product-quality, supply-chain, cyber, environmental, and intellectual-property risks; Teknova reported no issued patents or patent applications covering its proprietary products or manufacturing processes.
Most important facts for investors to verify
- Whether revenue growth—especially in Clinical Solutions and custom or GMP-grade products—can offset declining Sample Transport sales and higher operating expenses.
- Whether gross margin stabilizes or recovers as manufacturing capacity expands, and whether expansion spending produces the expected capacity and delivery benefits.
- Cash burn, remaining capital commitments, actual debt availability and covenant headroom, and the timing of any additional financing needs.
- Progress and independent evidence of remediation of the material weakness in financial reporting controls.
- Customer and supplier concentration, including the durability of distributor relationships and availability of critical raw materials.
- Actual lease-accounting adoption effects and any material changes to liquidity, debt, or operating outlook in subsequent filings.