Maravai LifeSciences Holdings, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021; financial statements are unaudited. Maravai supplies life-sciences products, principally complex nucleic acids and biologics safety-testing products. It completed the sale of Vector Laboratories, its Protein Detection business, on September 2, 2021.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $204.8 million | $87.9 million | $570.8 million | $185.7 million |
| Operating income | $156.9 million | $45.7 million | $403.6 million | $88.7 million |
| Net income | $132.8 million | $39.0 million | $343.0 million | $64.3 million |
| Net income attributable to Maravai | $54.3 million | $39.0 million | $126.6 million | $63.8 million |
| Adjusted EBITDA (non-GAAP) | $156.0 million | $57.8 million | $422.7 million | $104.8 million |
- Q3 revenue rose 133.1%; nine-month revenue rose 207.3%. Nucleic Acid Production drove the increase, with Q3 segment revenue of $182.9 million, up 170.3%. Management cited demand for CleanCap products as COVID-19 vaccine production scaled, and broader mRNA demand.
- Q3 gross profit was $172.8 million, or approximately 84.4% of revenue, versus $68.1 million, or 77.5%, a year earlier. Management attributed the margin improvement primarily to favorable product mix.
- Q3 basic and diluted earnings per Class A share were $0.46 and $0.45. Comparisons with 2020 per-unit results are affected by the IPO and organizational transactions; share counts and ownership structure differ.
- Nine-month operating cash flow was $310.4 million, compared with $72.8 million. Investing cash flow was $111.3 million, including $120.0 million net proceeds from the Vector sale; financing cash flow was negative $110.1 million, primarily due to $106.3 million of tax distributions to non-controlling owners. Cash increased by $311.7 million to $547.9 million.
- Q3 Adjusted Free Cash Flow, a non-GAAP measure, was $153.8 million; nine-month Adjusted Free Cash Flow was $412.6 million. The company defines it as Adjusted EBITDA less capital expenditures.
Financial position and material changes
- At September 30, cash was $547.9 million and current assets were $687.5 million, against current liabilities of $114.4 million. Current ratio was approximately 6.0.
- Term-loan principal was $545.5 million; carrying value, net of issuance costs, was $531.6 million. The loan bears variable interest (4.75% at quarter-end), matures in October 2027, and had no revolving-credit borrowings outstanding. The company reported compliance with debt covenants. A $415 million notional interest-rate cap runs through March 2023.
- The company reported $745.6 million payable under its Tax Receivable Agreement (TRA), which entitles former owners to 85% of certain realized or deemed tax benefits. The balance increased following LLC-unit exchanges. The company said expected TRA payments will be substantial; timing and amounts depend on utilization of tax benefits.
- The Vector sale generated $120.3 million cash and $1.6 million in receivables, subject to working-capital adjustments, and an $11.2 million pretax gain. The transaction was not reported as discontinued operations. The company also recorded $2.4 million of incremental equity-based compensation tied to the divestiture.
- April and September secondary offerings were sales by existing shareholders, not new capital raised by Maravai; selling shareholders received the proceeds. Related LLC-unit exchanges changed ownership and increased TRA obligations.
Outlook, management commentary and risks
- No specific financial guidance was provided. Management expects to invest in R&D, manufacturing capacity and automation, personnel, commercial activities, and public-company infrastructure; it expects expenses to increase.
- Management said results benefited from strong CleanCap and mRNA demand but cautioned that COVID-19 effects remain uncertain. Risks it cited include changing vaccine demand, new variants, competition among vaccine makers, supply-chain constraints, and inflation.
- Revenue is concentrated: BioNTech, Pfizer and CureVac represented 26.2%, 23.4% and 23.0% of Q3 revenue, respectively. The filing also identifies dependence on a limited number of customers and suppliers, early-stage therapeutic programs, product quality and regulatory risks, and manufacturing or site disruptions.
- The company added a risk that proposed policies to waive COVID-19 vaccine intellectual-property protections could affect its ability to enforce rights related to CleanCap; the potential impact was not estimable. It also expects to lose emerging-growth-company status at year-end 2021 and face auditor attestation requirements for internal controls.
- Adoption of lease accounting standard Topic 842 was expected in Q4 2021, with a material balance-sheet impact from recognizing right-of-use assets and lease liabilities, but no material income-statement impact expected.
Important facts for investors to verify
- How much of elevated nucleic-acid revenue reflects durable non-COVID demand versus vaccine-related customer production levels.
- Customer concentration, particularly BioNTech, Pfizer and CureVac, and any updates to supply arrangements or demand.
- Final Vector sale working-capital adjustments and post-sale transition-service obligations.
- Future TRA cash-payment timing and amounts, alongside tax-asset realizability and tax distributions to non-controlling owners.
- Variable-rate debt exposure, covenant headroom, and the effect of lease-accounting adoption on reported liabilities and liquidity.