Repligen Corporation — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; financial statements are unaudited. Comparisons are with Q1 2021 unless noted. Amounts are in U.S. dollars.
Business context
Repligen develops and sells bioprocessing products and systems used in biologic drug manufacturing. It reports one operating segment. Recent acquisitions—Avitide, Polymem and BioFlex/NTM—expanded its affinity-resin, membrane and single-use fluid-management offerings.
Financial performance
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $206.4 million | $142.8 million | +44.5% |
| Gross margin | 60.1% | 58.2% | +1.9 percentage points |
| Income from operations | $60.0 million | $36.4 million | +64.9% |
| Net income | $47.0 million | $29.5 million | +59.5% |
| Diluted EPS | $0.81 | $0.52 | +55.8% |
| Operating cash flow | $23.1 million | $9.3 million | +$13.9 million |
| Capital expenditures | $27.2 million | $7.6 million | +$19.6 million |
Product revenue increased 44.6%; management attributed growth mainly to strong demand across filtration, chromatography and process analytics, with approximately $6 million of revenue from 2021 acquisitions. Gross margin improved on higher revenue and favorable mix, partly offset by increased employee, occupancy and depreciation costs. GAAP operating expenses rose 37.5%, including higher R&D, SG&A and acquisition-related costs. Non-GAAP adjusted EBITDA was $72.2 million versus $48.8 million.
Operating cash flow exceeded net income less capital expenditures by less than zero: using the reported figures, operating cash flow less capital expenditures was approximately negative $4.1 million. The cash outflow reflected inventory growth of $30.0 million, partly supporting anticipated demand.
Financial position and liquidity
- Cash and cash equivalents were $584.6 million at March 31, 2022, down from $603.8 million at December 31, 2021. Net cash decreased $19.2 million during the quarter.
- Working capital was $520.5 million, down from $556.4 million at year-end 2021. Inventories increased to $213.8 million from $184.5 million.
- The 0.375% convertible senior notes due July 2024 had $287.5 million principal and $283.3 million net carrying value, classified as current. Their reported fair value was $490.2 million.
- Avitide contingent consideration was $91.8 million at quarter-end, including $27.8 million current and $64.0 million noncurrent. A $2.4 million fair-value decrease was recorded as a benefit in Q1.
Outlook, risks and unusual items
- No specific revenue or earnings guidance was provided. Management expected operating expenses and R&D spending to increase through the rest of 2022 as the company expands its business, product development and commercial capabilities.
- Management stated that, absent additional acquisitions, existing cash was expected to meet needs for at least 24 months from the filing date. Future cash needs may depend on growth investment, acquisitions, contingent earnout payments and demand; additional financing could dilute shareholders or impose restrictions.
- Management cited uncertain COVID-19-related demand, including possible effects from vaccination trends, alongside increased demand for cell and gene therapy and monoclonal-antibody manufacturing. Other disclosed risks include acquisition integration, manufacturing capacity and third-party supply relationships, customer concentration, foreign exchange exposure and competition. The company did not hedge foreign-exchange exposure.
- Pfizer accounted for $21.1 million, or 10% of Q1 revenue. No customer represented at least 10% of trade receivables at March 31, 2022.
- Effective January 1, 2022, Repligen adopted ASU 2020-06 for convertible debt accounting. Adoption materially changed opening balance-sheet amounts and the EPS treatment of the notes; the company now records them as a single liability at amortized cost. On March 4, it elected to settle note principal in cash and conversion premium in shares. Holders could convert during Q2 2022 under the note terms.
- Acquisition purchase-price allocations remained preliminary. Management reported no material change to the risk factors from its 2021 Form 10-K, no known legal proceedings expected to have a material adverse effect, and effective disclosure controls.
Most important facts to verify
- Whether strong product demand and the reported margin improvement continued, and how much growth came from acquired businesses versus underlying sales.
- Whether inventory growth converts into sales and cash flow, given Q1 capital spending exceeded operating cash flow.
- The timing and cash/share settlement effects of convertible-note conversions and the 2024 maturity.
- How Avitide earnout fair value and final acquisition accounting change, and whether acquired businesses deliver expected benefits.
- Whether management issued subsequent guidance or disclosed material developments after this quarter; this filing provides no quantified full-year outlook.