Repligen Corporation — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Unaudited; dollar amounts below are in millions except per-share data. Repligen develops and sells bioprocessing products and systems used in biologics manufacturing.
Financial results
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $163.0 | $87.5 | $305.8 | $163.6 |
| Revenue growth | 86.3% | — | 87.0% | — |
| Gross margin | 62.0% | Not stated in the filing text | 60.2%; 60.7% excluding $1.6 inventory step-up | 57.9% |
| Income from operations | $48.2 | $19.5 | $84.6 | $31.4 |
| Net income | $36.2 | $15.9 | $65.7 | $25.7 |
| Diluted EPS | $0.64 | $0.30 | $1.16 | $0.48 |
| Operating margin (calculated) | 29.6% | 22.3% | 27.7% | 19.2% |
Q2 product revenue was $162.9 million; royalty and other revenue was immaterial. Management attributed growth to exceptionally strong filtration demand and higher demand across franchises, including from customers working on COVID-19 vaccines and therapeutics and on gene therapy and monoclonal-antibody manufacturing. Direct sales were 83% of Q2 product revenue, up from 74%.
For the first half, operating cash flow was $46.9 million, versus $26.3 million a year earlier. Capital spending was $24.1 million, and cash used in investing activities was $26.2 million. Cash and cash equivalents were $734.3 million at June 30, 2021, up from $717.3 million at year-end 2020. Working capital was $651.5 million.
Balance sheet, debt and liquidity
- Total assets were $2,016.0 million and total liabilities were $412.9 million at June 30, 2021.
- The 0.375% Convertible Senior Notes due 2024 had $287.5 million principal and a $249.4 million net carrying value. They were classified as current liabilities because holders could convert during Q3 2021 under the indenture’s trading-price conditions. The company stated it intended to settle principal in cash and any conversion premium in shares.
- Management said existing cash was adequate for at least 24 months from the filing date, absent acquisitions of additional products, candidates or intellectual property. It cautioned that additional financing might be needed for acquisitions or if cash flows or demand fell short.
Changes, outlook and risks
- Revenue more than doubled year over year in both Q2 and the first half. First-half gross margin rose to 60.2% from 57.9%; excluding acquisition-related inventory step-up charges, 2021 margin was 60.7%. Management cited favorable product mix and higher revenue, partly offset by higher manufacturing headcount.
- Operating expenses increased with higher staffing, expanded commercial and administrative capacity, R&D investment and the inclusion of EMT, NMS and ARTeSYN, acquired in 2020. First-half R&D expense rose 77%; management expected R&D spending to increase gradually in the rest of 2021.
- Adjusted net income, a non-GAAP measure, was $44.9 million ($0.79 diluted per share) in Q2 and $83.6 million ($1.47 per share) in the first half. These figures exclude specified acquisition costs, amortization, debt-related and other items; they are not GAAP results.
- Polymem, a French hollow-fiber membrane manufacturer, was acquired July 1, 2021, after quarter-end. Repligen said the deal expands manufacturing capacity; purchase-price allocation was not yet available in this filing.
- Key uncertainties include COVID-19 effects, variable timing of large production orders and regulatory approvals, customer and supplier relationships, acquisition integration, manufacturing capacity and third-party dependencies, competition, and foreign-exchange movements. The company did not hedge its foreign-currency exposure. Cytiva represented 12% of accounts receivable at June 30, 2021, though no customer accounted for at least 10% of first-half revenue.
- No material change to the risk factors in the 2020 Form 10-K was reported. Management said disclosure controls were effective; ERP and consolidation-system implementations changed certain internal controls.
Important facts for investors to verify
- Whether unusually strong demand, including pandemic-related demand, persists and how order timing and product mix affect growth and gross margins.
- Conversion timing and settlement of the $287.5 million notes, including the cash requirement and potential share dilution.
- Integration and realized benefits of acquisitions, including Polymem, and the effect of acquisition costs and amortization on reported versus adjusted results.
- Working-capital absorption: first-half increases in receivables used $31.9 million of cash and inventory used $42.8 million.
- Capacity expansion, capital spending and lease commitments, as well as exposure to foreign exchange and customer concentration in receivables.