Maravai LifeSciences Holdings, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021, compared with the three months ended March 31, 2020. Maravai supplies products and services across nucleic acid production, biologics safety testing, and protein detection. The filing notes that 2020 comparative results predate the November 2020 IPO and related organizational transactions, which affect comparability.
Financial and operating highlights
| Metric | Q1 2021 | Q1 2020 | Change / context |
|---|---|---|---|
| Revenue | $148.2 million | $51.0 million | Up 190.7% |
| Nucleic Acid Production revenue | $123.9 million | $30.5 million | Up 306.5%; approximately 84% of Q1 2021 revenue |
| Biologics Safety Testing revenue | $17.6 million | $14.3 million | Up 23.5% |
| Protein Detection revenue | $6.6 million | $6.2 million | Up 7.0% |
| Gross profit / gross margin | $117.8 million / 79.5% | $35.7 million / 70.0% | Margin expansion attributed primarily to favorable product mix |
| Operating income | $92.4 million | $34.8 million | Up 165.5%; Q1 2020 included a $19.0 million sale-leaseback gain |
| Net income | $75.9 million | $23.9 million | Up 217.7% |
| Net income attributable to Maravai | $23.2 million | $23.4 million | Down 0.6%; most Q1 2021 net income was attributable to non-controlling interests |
| Basic and diluted EPS | $0.24 | $0.09 | Share/unit counts and ownership structure differ following the IPO; comparison is not like-for-like |
| Adjusted EBITDA (non-GAAP) | $101.9 million | $29.6 million | Management’s segment performance measure |
| Cash from operating activities | $38.7 million | $9.7 million | Working-capital movements included substantial cash outflows |
| Cash and total debt at period end | $247.7 million / $548.5 million | — | No revolving credit borrowings outstanding |
Margins and expenses: Cost of revenue was $30.4 million, or 20.5% of revenue, versus $15.3 million, or 30.0%, a year earlier. R&D expense declined 42.2% to $2.2 million, largely because Q1 2020 included $2.9 million of acquired in-process R&D costs. SG&A increased 44.1% to $23.2 million, including higher personnel, professional services, and facilities costs.
Liquidity and cash flow: Cash was $247.7 million at March 31, 2021, up from $236.2 million at year-end 2020. Operating cash flow was $38.7 million; investing activities used $3.0 million and financing activities used $24.2 million, including $23.1 million of tax distributions to non-controlling interest holders. Accounts receivable rose to $121.8 million from $51.0 million and inventory to $47.1 million from $33.3 million. Deferred revenue increased to $119.2 million from $78.1 million.
Debt and obligations: Long-term debt had $548.5 million of principal outstanding, matures in October 2027, and carried a 5.25% interest rate at quarter-end. The $180 million revolving facility was undrawn. A $415 million notional interest-rate cap runs through March 2023. The company reported compliance with its debt covenants. The Tax Receivable Agreement liability was $383.7 million; the company generally owes former owners 85% of specified tax benefits realized or deemed realized.
Material changes and drivers
- The revenue increase was driven predominantly by CleanCap-related products and highly modified RNA, including demand associated with COVID-19 vaccine production and renewed mRNA therapeutic programs. Management also cited increased biologics safety testing demand and resumed research-laboratory activity.
- Revenue from Pfizer and BioNTech represented 29.2% and 22.2%, respectively, of Q1 2021 revenue. Management identifies customer concentration as a risk.
- Adjusted EBITDA increased to $101.9 million from $29.6 million. The Q1 2021 figure includes a $5.9 million gain from remeasurement of the TRA liability; Q1 2020 included the $19.0 million sale-leaseback gain, among other adjustments.
- Net income attributable to Maravai was nearly flat despite much higher consolidated net income, in part because the post-IPO ownership structure allocated $52.6 million of Q1 2021 net income to non-controlling interests. Maravai held approximately 38% of Topco LLC units at quarter-end.
- Operating cash flow rose year over year but was below net income, with growth in receivables and inventory partly offset by higher deferred revenue.
Outlook, risks, contingencies, and unusual items
- No specific revenue or earnings guidance is provided. Management expects continued investment in personnel, manufacturing automation and capacity, R&D, marketing, and public-company costs; it expects related expenses to increase.
- Management describes continued demand for CleanCap and RNA products as a growth driver, but cautions that COVID-19-related demand may change with the pandemic, vaccine competition, and customer programs. Pandemic-related restrictions, supply interruptions, and operational disruptions could also adversely affect results.
- Other stated risks include dependence on a limited number of customers and suppliers; customer pipeline and product adoption uncertainty; competition, quality and regulatory requirements; and the ability to protect intellectual property. A newly added risk discusses potential policy actions or an intellectual-property waiver affecting COVID-19 vaccine-related protections, including CleanCap; the company said the impact was not estimable because policy details and adoption were uncertain.
- Variable-rate debt exposes the company to interest-rate changes. Management estimated a hypothetical 100-basis-point rate change would affect quarterly interest expense by approximately $1.4 million.
- The April 2021 secondary offering sold 20.7 million shares at $31.25 per share for $646.9 million gross proceeds to selling stockholders. Maravai received no proceeds and bore offering costs. Certain LLC units were exchanged for Class A shares in connection with the offering.
- The company reported no material pending legal proceedings and no material changes to previously disclosed risk factors other than the intellectual-property risk noted above. Disclosure controls were deemed effective at a reasonable assurance level.
Important facts for investors to verify
- How sustainable CleanCap- and RNA-related demand is, and how much Q1 growth was tied to COVID-19 vaccine activity and a small number of customers.
- Whether the sharp increase in receivables and inventory converts to cash, and whether deferred revenue supports future shipments and revenue recognition.
- The effect of non-controlling interests and future LLC-unit exchanges on income attributable to Maravai, ownership, and per-share comparisons.
- The timing and cash cost of TRA payments, alongside required tax distributions and scheduled debt service.
- Whether the company can maintain growth and margins while funding capacity, hiring, R&D, and other planned investments; Adjusted EBITDA and Adjusted Free Cash Flow are non-GAAP measures and should be considered alongside GAAP results and cash flow.