10-Q 1 mrvi-20220331.htm 10-Q mrvi-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-39725
Maravai LifeSciences Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware873185-2786970
(State or other jurisdiction of incorporation or organization)(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer Identification No.)
10770 Wateridge Circle, Suite 200
San Diego, California
92121
(Address of principal executive offices)
(Zip code)
______________________________
Registrant’s telephone number, including area code: (858) 546-0004
______________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, $0.01 par valueMRVIThe Nasdaq Stock Market LLC
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerýAccelerated filer
o
Non-accelerated filer
o
Smaller reporting company
o
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes    No  x
As of April 29, 2022, 131,538,212 shares of the registrant’s Class A common stock were outstanding and 123,669,196 shares of the registrant’s Class B common stock were outstanding.
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TABLE OF CONTENTS
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this report, including, without limitation, statements under the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements often may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “can have,” “likely” and other words and terms of similar meaning. These statements are based upon management’s current expectations, assumptions and estimates and are not guarantees of the timing or nature of our future operating or financial performance or other events. All forward-looking statements are subject to risks, uncertainties and other factors that may cause our actual results to differ materially from those that we expected, including:
Certain of our products are used by customers in the production of vaccines and therapies, some of which represent relatively new and still-developing modes of treatment. Unforeseen adverse events, negative clinical outcomes, development of alternative therapies, or increased regulatory scrutiny of these and their financial cost may damage public perception of the safety, utility, or efficacy of these vaccines and therapies or other modes of treatment and may harm our customers’ ability to conduct their business. Such events may negatively impact our revenue and have an adverse effect on our performance.
We are dependent on our customers’ spending on and demand for outsourced nucleic acid production and biologics safety testing products and services. A reduction in spending or demand could have a material adverse effect on our business, financial condition, results of operations, cash flows and prospects.
We compete with life science, pharmaceutical and biotechnology companies who are substantially larger than we are and potentially capable of developing new approaches that could make our products, services and technology obsolete.
If our products and services do not perform as expected or the reliability of the technology on which our products and services are based is questioned, we could experience lost revenue, delayed or reduced market acceptance of our products and services, increased costs and damage to our reputation.
Our products are highly complex and are subject to quality control requirements.
Our success depends on the market acceptance of our life science reagents. Our reagents may not achieve or maintain significant commercial market acceptance.
Until the 2020 fiscal year, we had incurred losses for each fiscal year since inception, we may incur losses in the future and we may not be able to generate sufficient revenue to maintain profitability.
Our operating results may fluctuate significantly in the future, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide.
Product liability lawsuits against us could cause us to incur substantial liabilities, limit sales of our existing products and limit commercialization of any products that we may develop.
Our acquisitions expose us to risks that could adversely affect our business, and we may not achieve the anticipated benefits of acquisitions of businesses or technologies.
We depend on a limited number of customers for a high percentage of our revenue. If we cannot maintain our current relationships with customers, fail to sustain recurring sources of revenue with our existing customers, or if we fail to enter into new relationships, our future operating results will be adversely affected.
We rely on a limited number of suppliers or, in some cases, sole suppliers, for some of our raw materials and may not be able to find replacements or immediately transition to alternative suppliers.
Our products could become subject to more onerous regulation by the FDA or other regulatory agencies in the future, which could increase our costs and delay or prevent commercialization of our products, thereby materially and adversely affecting our business, financial condition, results of operations, cash flows and prospects.
If we are unable to obtain, maintain and enforce intellectual property protection for our current or future products, or if the scope of our intellectual property protection is not sufficiently broad, our ability to commercialize our products successfully and to compete effectively may be materially adversely affected.
3

If we fail to comply with our obligations under any license agreements, disagree over contract interpretation, or otherwise experience disruptions to our business relationships with our licensors, we could lose intellectual property rights that are necessary to our business.
Our existing indebtedness could adversely affect our business and growth prospects.
Our principal asset is our interest in Maravai Topco Holdings, LLC (“Topco LLC”), and, accordingly, we depend on distributions from Topco LLC to pay our taxes and expenses, including payments under a tax receivable agreement with the former owners of Topco LLC (the “Tax Receivable Agreement” or “TRA”). Topco LLC’s ability to make such distributions may be subject to various limitations and restrictions.
Conflicts of interest could arise between our shareholders and Maravai Life Sciences Holdings, LLC (“MLSH 1”), the only other member of Topco LLC, which may impede business decisions that could benefit our shareholders.
The Tax Receivable Agreement requires us to make cash payments to MLSH 1 and Maravai Life Sciences Holdings 2, LLC (“MLSH 2”), an entity through which certain of our former owners hold their interests in the Company, in respect of certain tax benefits to which we may become entitled, and we expect that the payments we will be required to make will be substantial.
Our organizational structure, including the Tax Receivable Agreement, confers certain benefits upon MLSH 1 and MLSH 2 that will not benefit the other common shareholders to the same extent as they will benefit MLSH 1 and MLSH 2.
GTCR, LLC (“GTCR”) controls us, and its interests may conflict with ours or yours in the future.
Provisions of our corporate governance documents could make an acquisition of us more difficult and may prevent attempts by our shareholders to replace or remove our current management, even if beneficial to our shareholders.

We derive many of our forward-looking statements from our operating budgets and forecasts, which are based on many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause our actual results to differ materially from our expectations, or cautionary statements, are disclosed under the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021 and in this Quarterly Report on Form 10-Q.
The forward-looking statements included in this report are made only as of the date hereof. We undertake no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

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Part I.
Item 1. Financial Statements and Supplementary Data
MARAVAI LIFESCIENCES HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
(Unaudited)
March 31, 2022December 31, 2021
Assets
Current assets:
Cash$431,469 $551,272 
Accounts receivable, net120,355 117,512 
Inventory51,409 51,557 
Prepaid expenses and other current assets15,902 19,698 
Total current assets619,135 740,039 
Property and equipment, net47,702 46,332 
Goodwill283,535 152,766 
Intangible assets, net235,405 117,571 
Deferred tax assets793,210 808,117 
Other assets64,243 53,451 
Total assets$2,043,230 $1,918,276 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable$10,384 $8,154 
Accrued expenses and other current liabilities32,411 34,574 
Deferred revenue3,693 10,211 
Current portion of payable to related parties pursuant to a Tax Receivable Agreement34,747 34,838 
Current portion of long-term debt5,440 6,000 
Total current liabilities86,675 93,777 
Long-term debt, less current portion524,499 524,591 
Payable to related parties pursuant to a Tax Receivable Agreement, less current portion711,232 713,481 
Other long-term liabilities66,522 41,066 
Total liabilities1,388,928 1,372,915 
Stockholders' equity:
Class A common stock, $0.01 par value - 500,000 shares authorized; 131,490 and 131,488 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
1,315 1,315 
Class B common stock, $0.01 par value - 300,000 shares authorized; 123,669 shares issued and outstanding as of March 31, 2022 and December 31, 2021
1,237 1,237 
Additional paid-in capital128,584 128,386 
Retained earnings251,423 184,561 
Total stockholders' equity attributable to Maravai LifeSciences Holdings, Inc.382,559 315,499 
Non-controlling interest271,743 229,862 
Total stockholders' equity654,302 545,361 
Total liabilities and stockholders' equity$2,043,230 $1,918,276 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

MARAVAI LIFESCIENCES HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(Unaudited)

Three Months Ended
March 31,
20222021
(as adjusted)*
Revenue$244,293 $148,211 
Operating expenses:
Cost of revenue40,032 31,391 
Selling, general and administrative33,200 23,471 
Research and development3,695 2,160 
Total operating expenses76,927 57,022 
Income from operations167,366 91,189 
Other income (expense):
Interest expense(2,664)(7,904)
Loss on extinguishment of debt(208) 
Change in payable to related parties pursuant to a Tax Receivable Agreement2,340 5,886 
Other income7 3 
Income before income taxes166,841 89,174 
Income tax expense19,981 13,709 
Net income146,860 75,465 
Net income attributable to non-controlling interests79,998 52,363 
Net income attributable to Maravai LifeSciences Holdings, Inc.$66,862 $23,102 
Net income per Class A common share attributable to Maravai LifeSciences Holdings, Inc.:
Basic$0.51 $0.24 
Diluted$0.50 $0.24 
Weighted average number of Class A common shares outstanding:
Basic131,489 96,647 
Diluted255,287 96,673 
____________________
*As adjusted to reflect the impact of the adoption of Accounting Standards Codification 842 (“ASC 842”). See Note 1 to the condensed consolidated financial statements for a summary of the adjustments.
The accompanying notes are an integral part of these condensed consolidated financial statements.
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MARAVAI LIFESCIENCES HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(Unaudited)

Three Months Ended
March 31,
20222021
(as adjusted)*
Net income$146,860 $75,465 
Other comprehensive income:
Foreign currency translation adjustments 8 
Total other comprehensive income146,860 75,473 
Comprehensive income attributable to non-controlling interests79,998 52,369 
Total comprehensive income attributable to Maravai LifeSciences Holdings, Inc.$66,862 $23,104 
____________________
*As adjusted to reflect the impact of the adoption of ASC 842. See Note 1 to the condensed consolidated financial statements for a summary of the adjustments.
The accompanying notes are an integral part of the condensed consolidated financial statements.
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MARAVAI LIFESCIENCES HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands)
(Unaudited)

Three Months Ended March 31, 2022
Class A Common StockClass B Common Stock
SharesAmountSharesAmountAdditional Paid-In CapitalRetained EarningsNon-Controlling InterestTotal Stockholders' Equity
December 31, 2021131,488$1,315 123,669$1,237 $128,386 $184,561 $229,862 $545,361 
Issuance of Class A common stock under employee equity plans, net of shares withheld for employee taxes2 — — — 34 — — 34 
Non-controlling interest adjustment for changes in proportionate ownership in Topco LLC— — — — (14)— 14  
Stock-based compensation— — — — 1,869 — 1,758 3,627 
Distribution for tax liabilities to non-controlling interest holder— — — — — — (39,889)(39,889)
Impact of change to deferred tax asset associated with cash contribution to Topco
— — — — (1,691)— — (1,691)
Net income— — — — — 66,862 79,998 146,860 
March 31, 2022131,490$1,315 123,669$1,237 $128,584 $251,423 $271,743 $654,302 

Three Months Ended March 31, 2021
Class A Common StockClass B Common Stock
SharesAmountSharesAmountAdditional Paid-In CapitalAccumulated Other Comprehensive LossRetained EarningsNon-Controlling InterestTotal Stockholders' Equity
December 31, 202096,647$966 160,974$1,610 $85,125 $(44)$854 $66,235 $154,746 
Cumulative effect of adoption of ASC 842, net of tax— — — — — — 1,670 2,784 4,454 
Stock-based compensation— — — — 854 — — 1,424 2,278 
Distribution for tax liabilities to non-controlling interest holder— — — — (3)— — (23,125)(23,128)
Net income— — — — — — 23,102 52,363 75,465 
Foreign currency translation adjustment— — — — — 2 — 6 8 
March 31, 2021
(as adjusted)*
96,647$966 160,974$1,610 $85,976 $(42)$25,626 $99,687 $213,823 
____________________
*As adjusted to reflect the impact of the adoption of ASC 842. See Note 1 to the condensed consolidated financial statements for a summary of the adjustments.
The accompanying notes are an integral part of the condensed consolidated financial statements.
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MARAVAI LIFESCIENCES HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Three Months Ended
March 31,
20222021
(as adjusted)*
Operating activities:
Net income$146,860 $75,465 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation1,855 1,256 
Amortization of intangible assets5,527 5,041 
Non-cash operating lease expense1,874 2,378 
Amortization of deferred financing costs699 654 
Equity-based compensation expense3,627 2,278 
Loss on extinguishment of debt208  
Deferred income taxes13,217 11,760 
Revaluation of liabilities under the Tax Receivable Agreement(2,340)(5,886)
Other(985)(300)
Changes in operating assets and liabilities:
Accounts receivable(2,217)(70,812)
Inventory1,201 (13,808)
Prepaid expenses and other assets2,517 (581)
Accounts payable1,950 1,896 
Accrued expenses and other current liabilities(4,062)(10,746)
Deferred revenue(6,518)41,114 
Other long-term liabilities(1,109)(1,383)
Net cash provided by operating activities162,304 38,326 
Investing activities:
Cash paid for acquisition of a business, net of cash acquired(238,836) 
Purchases of property and equipment(2,748)(3,332)
Proceeds from sale of building 548 
Net cash used in investing activities(241,584)(2,784)
Financing activities:
Distributions for tax liabilities to non-controlling interests holders(39,889)(23,128)
Proceeds from borrowings of long-term debt8,455  
Principal repayments of long-term debt(9,815)(1,500)
Proceeds from employee stock purchase plan and exercise of stock options, net of shares withheld for employee taxes
726 570 
Net cash used in financing activities(40,523)(24,058)
Effects of exchange rate changes on cash 7 
Net (decrease) increase in cash(119,803)11,491 
Cash, beginning of period551,272 236,184 
Cash, end of period$431,469 $247,675 
Supplemental cash flow information:
Cash paid for interest$1,373 $7,219 
Cash paid for income taxes$914 $2,725 
Supplemental disclosures of non-cash investing and financing activities:
Property and equipment included in accounts payable and accrued expenses$1,742 $1,202 
Right-of-use assets obtained in exchange for new operating lease liabilities$773 $ 
9

MARAVAI LIFESCIENCES HOLDINGS, INC.
Three Months Ended
March 31,
20222021
(as adjusted)*
Fair value of contingent consideration liability recorded in connection with acquisition of business in other long-term liabilities$7,800 $ 
Accrued consideration payable
$10,000 $ 
____________________
*As adjusted to reflect the impact of the adoption of ASC 842. See Note 1 to the condensed consolidated financial statements for a summary of the adjustments.
The accompanying notes are an integral part of the condensed consolidated financial statements.
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MARAVAI LIFESCIENCES HOLDINGS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.Organization and Significant Accounting Policies
Description of Business
Maravai LifeSciences Holdings, Inc. (the “Company”, and together with its consolidated subsidiaries, “Maravai”, “we”, “us”, and “our”) provides critical products to enable the development of drugs, therapeutics, diagnostics and vaccines and to support research on human diseases. Our products address the key phases of biopharmaceutical development and include complex nucleic acids for diagnostic and therapeutic applications and antibody-based products to detect impurities during the production of biopharmaceutical products.
The Company is headquartered in San Diego, California and has historically operated in three principal businesses: Nucleic Acid Production, Biologics Safety Testing and Protein Detection. In September 2021, the Company completed the divestiture of its Protein Detection business. Our Nucleic Acid Production business manufactures and sells products used in the fields of gene therapy, vaccines, nucleoside chemistry, oligonucleotide therapy and molecular diagnostics, including reagents used in the chemical synthesis, modification, labelling and purification of deoxyribonucleic acid (“DNA”) and ribonucleic acid (“RNA”). Our core Nucleic Acid Production offerings include messenger ribonucleic acid (“mRNA”), long and short oligonucleotides, our proprietary CleanCap® capping technology and oligonucleotide building blocks. Our Biologics Safety Testing business sells highly specialized analytical products for use in biologic manufacturing process development, including custom product-specific development antibody and assay development services.
Organization
We were incorporated as a Delaware corporation in August 2020 for the purpose of facilitating an initial public offering (“IPO”). Immediately prior to the IPO, we effected a series of organizational transactions (the “Organizational Transactions”), which, together with the IPO, were completed in November 2020, that resulted in the Company operating, controlling all of the business affairs and becoming the ultimate parent company of Maravai Topco Holdings, LLC (“Topco LLC”) and its consolidated subsidiaries. Maravai Life Sciences Holdings, LLC (“MLSH 1”), which is controlled by investment entities affiliated with GTCR, is the only other member of Topco LLC.
The Company is the sole managing member of Topco LLC, which operates and controls TriLink Biotechnologies, LLC (“TriLink”), Glen Research, LLC, MockV Solutions, LLC and Cygnus Technologies, LLC (“Cygnus”) and their respective subsidiaries. Prior to the Company’s divestiture of its Protein Detection business in September 2021, Topco LLC also operated and controlled Vector Laboratories, Inc. and its subsidiaries (“Vector”).
Basis of Presentation
The Company operates and controls all of the business and affairs of Topco LLC, and through Topco LLC and its subsidiaries, conducts its business. Because we manage and operate the business and control the strategic decisions and day-to-day operations of Topco LLC and also have a substantial financial interest in Topco LLC, we consolidate the financial results of Topco LLC, and a portion of our net income is allocated to the non-controlling interests in Topco LLC held by MLSH 1.
The accompanying unaudited interim condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and accounts between the businesses comprising the Company have been eliminated in the accompanying consolidated financial statements.
Unaudited Interim Condensed Consolidated Financial Statements
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to Form 10-Q of Regulation S-X of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated financial statements include all adjustments necessary to fairly state the financial position and the results of our operations and cash flows for interim periods in accordance with GAAP. All such adjustments are of a normal, recurring nature. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 or for any future period.
The condensed consolidated balance sheet presented as of December 31, 2021, has been derived from the audited consolidated financial statements as of that date. The condensed consolidated financial statements and notes are presented as permitted by Form 10-Q and do not contain all information that is included in the annual financial statements and notes thereto of the Company. The condensed consolidated financial statements and notes included in this report should be read in conjunction with
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the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 Form 10-K”) filed with the SEC.
Use of Estimates
The preparation of consolidated financial statements in accordance with GAAP requires the Company to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenue and expenses, and related disclosures. These estimates form the basis for judgments the Company makes about the carrying values of assets and liabilities that are not readily apparent from other sources. The Company bases its estimates and judgments on historical experience and on various other assumptions that the Company believes are reasonable under the circumstances. These estimates are based on management’s knowledge about current events and expectations about actions the Company may undertake in the future. Significant estimates include, but are not limited to, the measurement of right-of-use assets and lease liabilities and related incremental borrowing rate, the payable to related parties pursuant to the Tax Receivable Agreement (as defined in Note 9), the realizability of our net deferred tax assets, and valuation of goodwill and intangible assets acquired in business combinations. Actual results could differ materially from those estimates.
Significant Accounting Policies
A description of the Company’s significant accounting policies is included in Note 1 of the Notes to the Consolidated Financial Statements included in its 2021 Form 10-K. Except as noted below, there have been no material changes in the Company’s significant accounting policies during the three months ended March 31, 2022.
Revenue Recognition
The Company generates revenue primarily from the sale of products, and to a much lesser extent, services in the fields of nucleic acid production, biologics safety testing and protein detection. Revenue is recognized when control of promised goods or services is transferred to a customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To determine revenue recognition for its arrangements with customers, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The majority of the Company’s contracts include only one performance obligation. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is defined as the unit of account for revenue recognition. The Company also recognizes revenue from other contracts that may include a combination of products and services, the provision of solely services, or from license fee arrangements which may be associated with the delivery of product. Where there is a combination of products and services, the Company accounts for the promises as individual performance obligations if they are concluded to be distinct. Performance obligations are considered distinct if they are both capable of being distinct and distinct within the context of the contract. In determining whether performance obligations meet the criteria for being distinct, the Company considers a number of factors, such as the degree of interrelation and interdependence between obligations, and whether or not the good or service significantly modifies or transforms another good or service in the contract. As a practical expedient, we do not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment and the transfer of goods or services is expected to be one year or less. Contracts with customers are evaluated on a contract-by-contract basis as contracts may include multiple types of goods and services as described below.
Nucleic Acid Production
Nucleic Acid Production revenue is generated from the manufacture and sale of highly modified, complex nucleic acids products to support the needs of our of customers’ research, therapeutic and vaccine programs. The primary offering of products includes CleanCap®, mRNA and specialized oligonucleotides. Contracts typically consist of a single performance obligation. We also sell nucleic acid products for labeling and detecting proteins in cells and tissue samples research. The Company recognizes revenue from these products in the period in which the performance obligation is satisfied by transferring control to the customer. Revenue for nucleic acid catalog products is recognized at a single point in time, generally upon shipment to the customer. Revenue for contracts for certain custom nucleic acid products, with an enforceable right to payment and a reasonable margin for work performed to date, is recognized over time, based on a cost-to-cost input method over the manufacturing period. Payments received from customers in advance of manufacturing their products is recorded as deferred revenue until the products were delivered.
Biologics Safety Testing
The Company’s Biologics Safety Testing revenue is associated with the sale of bioprocess impurity detection kit products. We also enter into contracts that include custom antibody development, assay development and antibody
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affinity extraction services. These products and services enable the detection of impurities that occur in the manufacturing of biologic drugs and other therapeutics. The Company recognizes revenue from the sale of bioprocess impurity detection kits in the period in which the performance obligation is satisfied by transferring control to the customer. Custom antibody development contracts consist of a single performance obligation, typically with an enforceable right to payment and a reasonable margin for work performed to date. Revenue is recognized over time based on a cost-to-cost input method over the contract term. Where an enforceable right to payment does not exist, revenue is recognized at a point in time when control is transferred to the customer. Assay development service contracts consist of a single performance obligation, revenue is recognized at a point in time when a successful antigen test and report is provided to the customer. Affinity extraction services, which generally occur over a short period of time, consist of a single performance obligation to perform the extraction service and provide a summary report to the customer. Revenue is recognized either over time or at a point in time depending on contractual payment terms with the customer.
Protein Detection
Prior to the divestiture of its Protein Detection business in September 2021, the Company also manufactured and sold protein labeling and detection reagents to customers that were used for basic research and development. The contracts to sell these catalog products consisted of a single performance obligation to deliver the reagent products. Revenue from these contracts was recognized at a point in time, generally upon shipment of the final product to the customer.
The Company elected the practical expedient to not disclose the unfulfilled performance obligations for contracts with an original length of one year or less. The Company had no material unfulfilled performance obligations for contracts with an original length greater than one year for any period presented.
The Company accepts returns only if the products do not meet customer specifications and historically, the Company’s volume of product returns has not been significant. Further, no warranties are provided for promised goods and services other than assurance type warranties.
Revenue for an individual contract is recognized at the related transaction price, which is the amount the Company expects to be entitled to in exchange for transferring the products and/or services. The transaction price for product sales is calculated at the contracted product selling price. The transaction price for a contract with multiple performance obligations is allocated to the separate performance obligations on a relative standalone selling price basis. Standalone selling prices for products are determined based on the prices charged to customers, which are directly observable. Standalone selling price of services are mostly based on time and materials. Generally, payments from customers are due when goods and services are transferred. As most contracts contain a single performance obligation, the transaction price is representative of the standalone selling price charged to customers. Revenue is recognized only to the extent that it is probable that a significant reversal of the cumulative amount recognized will not occur in future periods. Variable consideration has not been material to our consolidated financial statements.
Sales taxes
Sales taxes collected by the Company are not included in the transaction price as revenue as they are ultimately remitted to a governmental authority.
Shipping and handling costs
The Company has elected to account for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer the associated products. Accordingly, revenue for shipping and handling is recognized at the same time that the related product revenue is recognized.
Contract costs
The Company recognizes the incremental costs of obtaining contracts as an expense when incurred when the amortization period of the assets that otherwise would have been recognized is one year or less. These costs are included in sales and marketing and general and administrative expenses. The costs to fulfill the contracts are determined to be immaterial and are recognized as an expense when incurred.
Contract balances
Contract assets are generated when contractual billing schedules differ from revenue recognition timing and the Company records a contract receivable when it has an unconditional right to consideration. There were no contract asset balances as of March 31, 2022 and December 31, 2021.
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Contract liabilities include billings in excess of revenue recognized, such as customer deposits and deferred revenue. Customer deposits, which are included in accrued expenses, are recorded when cash payments are received or due in advance of performance. Deferred revenue is recorded when the Company has unsatisfied performance obligations. Total contract liabilities were $5.3 million and $12.6 million as of March 31, 2022 and December 31, 2021, respectively. Contract liabilities are expected to be recognized into revenue within the next twelve months.
Disaggregation of Revenue
The following tables summarize the revenue by segment and region for the periods presented (in thousands):
Three Months Ended March 31, 2022
Nucleic Acid ProductionBiologics Safety TestingTotal
North America$79,418$7,519$86,937
Europe, the Middle East and Africa131,3504,697136,047
Asia Pacific12,8678,32821,195
Latin and Central America1599114
Total revenue$223,650$20,643$244,293
Three Months Ended March 31, 2021
Nucleic Acid ProductionBiologics Safety TestingProtein DetectionTotal
North America$68,132$6,412$3,752$78,296
Europe, the Middle East and Africa47,8984,3491,46853,715
Asia Pacific7,8856,7351,36015,980
Latin and Central America1715350220
Total revenue$123,932$17,649$6,630$148,211
Total revenue is attributed to geographic regions based on the bill-to location of the transaction. For all periods presented, the majority of our revenue was recognized at a point in time.
Non-Controlling Interests
Non-controlling interests represent the portion of profit or loss, net assets and comprehensive income of our consolidated subsidiaries that is not allocable to the Company based on our percentage of ownership of such entities.
In November 2020, following the completion of the Organizational Transactions, we became the sole managing member of Topco LLC. As of March 31, 2022, we held approximately 51.5% of the outstanding LLC Units of Topco LLC, and MLSH 1 held approximately 48.5% of the outstanding LLC Units of Topco LLC. Therefore, we report non-controlling interests based on the percentage of LLC Units of Topco LLC held by MLSH 1 on the condensed consolidated balance sheet as of March 31, 2022. Income or loss attributed to the non-controlling interest in Topco LLC is based on the LLC Units outstanding during the period for which the income or loss is generated and is presented on the condensed consolidated statements of income and condensed consolidated statements of comprehensive income.
MLSH 1 is entitled to exchange its LLC Units of Topco LLC, together with an equal number of shares of our Class B common stock (together referred to as “Paired Interests”), for shares of Class A common stock on a one-for-one basis or, at our election, for cash, from a substantially concurrent public offering or private sale (based on the price of our Class A common stock in such public offering or private sale). As such, future exchanges of Paired Interests by MLSH 1 will result in a change in ownership and reduce or increase the amount recorded as non-controlling interests and increase or decrease additional paid-in-capital when Topco LLC has positive or negative net assets, respectively. For the three months ended March 31, 2022 and 2021, MLSH 1 did not exchange any Paired Interests.
Distributions of $39.9 million and $23.1 million for tax liabilities were made to MLSH 1 during the three months ended March 31, 2022 and 2021, respectively.
Segment Information
The Company has historically operated in three reportable segments. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker in deciding how
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to allocate resources and assessing performance. The Company’s chief operating decision maker (“CODM”), its Chief Executive Officer, allocates resources and assesses performance based upon discrete financial information at the segment level. All of our long-lived assets are located in the United States. After the divestiture of Vector in September 2021, the Company no longer has the Protein Detection segment. The Company has reported the historical results of the Protein Detection business as such discrete financial information evaluated by the CODM for the periods presented included the information for this legacy segment. As of March 31, 2022, the Company operated in two reportable segments: Nucleic Acid Production and Biologics Safety Testing.
Net Income per Class A Common Share Attributable to Maravai LifeSciences Holdings, Inc.
Basic net income per Class A Common share attributable to Maravai LifeSciences Holdings, Inc. is computed by dividing net income attributable to us by the weighted average number of Class A Common shares outstanding during the period. Diluted net income per Class A Common share is calculated by giving effect to all potential weighted average dilutive stock options, restricted stock units, and Topco LLC Units, that together with an equal number of shares of our Class B common stock , are convertible into shares of our Class A Common stock. The dilutive effect of outstanding awards, if any, is reflected in diluted earnings per share by application of the treasury stock method or if-converted method, as applicable. The Company reported net income attributable to Maravai LifeSciences Holdings, Inc. for the three months ended March 31, 2022 and 2021.
Contingent Consideration
Contingent consideration represents additional consideration that may be transferred to former owners of an acquired entity in the future if certain future events occur or conditions are met. Contingent consideration resulting from the acquisition of a business is recorded at fair value on the acquisition date. Such contingent consideration is re-measured to its estimated fair value at each reporting date with the change in fair value recognized within operating expenses in the Company’s condensed consolidated statements of income. Subsequent changes in the fair value of the contingent consideration are classified as an adjustment to cash flows from operating activities in the condensed consolidated statements of cash flows because the change in fair value is an input in determining net income. Cash paid in settlement of contingent consideration liabilities are classified as cash flows from financing activities up to the acquisition date fair value with any excess classified as cash flows from operating activities.
Changes in the fair value of contingent consideration liabilities associated with the acquisition of a business can result from updates to assumptions such as the expected timing or probability of achieving customer related performance targets, specified sales milestones, changes in projected revenue or changes in discount rates. Judgment is used in determining those assumptions as of the acquisition date and for each subsequent reporting period. Therefore, any changes in the fair value will impact the Company’s results of operations in such reporting period thereby resulting in potential variability in the Company’s operating results until such contingencies are resolved.
Fair Value of Financial Instruments
The Company defines fair value as the amount that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. The Company follows accounting guidance that has a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of the asset or liability as of the measurement date. Instruments with readily available actively quoted prices, or for which fair value can be measured from actively quoted prices in an orderly market, will generally have a higher degree of market price transparency and a lesser degree of judgment used in measuring fair value. The three levels of the hierarchy are defined as follows:
Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets;
Level 2—Include other inputs that are directly or indirectly observable in the marketplace; and
Level 3—Unobservable inputs which are supported by little or no market activity.
As of March 31, 2022 and December 31, 2021, the carrying value of the Company’s current assets and liabilities approximated fair value due to the short maturities of these instruments. The fair values of the Company’s long-term debt approximated carrying value, excluding the effect of unamortized debt discount, as it is based on borrowing rates currently available to the Company for debt with similar terms and maturities (Level 2 inputs).
Acquisitions
The Company evaluates mergers, acquisitions and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or an acquisition of assets. The Company first identifies who is the acquiring entity by determining if the target is a legal entity or a group of assets or liabilities. If control over a legal entity is being evaluated, the
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Company also evaluates if the target is a variable interest or voting interest entity. For acquisitions of voting interest entities, the Company applies a screen test to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the screen test is met, the transaction is accounted for as an acquisition of assets. If the screen is not met, further determination is required as to whether or not the Company has acquired inputs and processes that have the ability to create outputs which would meet the definition of a business.
The Company accounts for its business combinations using the acquisition method of accounting which requires that the assets acquired and liabilities assumed of acquired businesses be recorded at their respective fair values at the date of acquisition. The purchase price, which includes the fair value of consideration transferred, is attributed to the fair value of the assets acquired and liabilities assumed. The purchase price may also include contingent consideration. The Company assesses whether such contingent consideration is subject to liability classification and fair value measurement or meets the definition of a derivative. Contingent consideration liabilities are recognized at their estimated fair value on the acquisition date. Contingent consideration arrangements that are determined to be compensatory in nature are recognized as post combination expense in our condensed consolidated statements of income ratably over the implied service period beginning in the period it becomes probable such amounts will become payable. The excess of the purchase price of the acquisition over the fair value of the identifiable net assets of the acquiree is recorded as goodwill. The fair value of assets acquired and liabilities assumed in certain cases may be subject to revision based on the final determination of fair value during a period of time not to exceed twelve months from the acquisition date. The results of acquired businesses are included in the Company’s consolidated financial statements from the date of acquisition. Transaction costs directly attributable to acquired businesses are expensed as incurred.
Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates, including the selection of valuation methodologies and assumptions about future net cash flows, discount rates and market participants. Each of these factors can significantly affect the value attributed to the identifiable intangible asset acquired in a business combination.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and accounts receivable. The Company maintains substantially all of its cash balances at a financial institution that management believes is of high credit-quality and is financially stable. Cash is deposited with major financial institutions in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the cash is held. The Company provides credit, in the normal course of business, to international and domestic distributors and customers, which are geographically dispersed. The Company attempts to limit its credit risk by performing ongoing credit evaluations of its customers and maintaining adequate allowances for potential credit losses.
The following table summarizes revenue from each of our customers who individually accounted for 10% or more of our total revenue or accounts receivable for the periods presented:
RevenueAccounts Receivable, net
Three Months Ended March 31,March 31, 2022December 31, 2021
20222021
BioNTech SE40.4 %22.2 %**
Pfizer Inc.29.5 %29.2 %64.3 %23.6 %
CureVac N.V.***46.5 %
Nacalai USA, Inc.***11.6 %
____________________
*Less than 10%
For the three months ended March 31, 2022 and 2021, substantially all of the revenue recorded for BioNTech SE and Pfizer Inc. was generated by the Nucleic Acid Production segment.
Retrospective Application of a Change in Accounting Principle
The Company adopted Accounting Standards Update 2016-02, Leases (“ASC 842”), which supersedes the guidance in Accounting Standards Codification (“ASC”) 840, Leases (“ASC 840”), effective January 1. 2021. As the Company elected the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the Jumpstart Our Business Startups Act of 2012, ASC 842 was not adopted until the fourth quarter of 2021. The comparative information for
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the three months ended March 31, 2021 has been adjusted to reflect the impact of the adoption of ASC 842 as of January 1, 2021.
Select line items from the condensed consolidated statements of income reflecting the adoption of ASC 842 are as follows (in thousands):
Three Months Ended March 31, 2021
As Previously ReportedAdjustmentsAs Adjusted
Operating expenses:
Cost of revenue$30,368 $1,023 $31,391 
Selling, general and administrative23,237 234 23,471 
Research and development2,164 (4)2,160 
Total operating expenses55,769 1,253 57,022 
Income from operations92,442 (1,253)91,189 
Other income (expense):
Interest expense(8,770)866 (7,904)
Income before income taxes89,561 (387)89,174 
Net income75,852 (387)75,465 
Net income attributable to non-controlling interests52,605 (242)52,363 
Net income attributable to Maravai LifeSciences Holdings, Inc.23,247 (145)23,102 
The adoption of ASC 842 had no impact on the Company’s basic and diluted earnings per share for the three months ended March 31, 2021.
Select line items from the condensed consolidated statements of comprehensive income reflecting the adoption of ASC 842 are as follows (in thousands):
Three Months Ended March 31, 2021
As Previously ReportedAdjustmentsAs Adjusted
Net income$75,852 $(387)$75,465 
Total other comprehensive income75,860 (387)75,473 
Comprehensive income attributable to non-controlling interests52,605 (236)52,369 
Total comprehensive income attributable to Maravai LifeSciences Holdings, Inc.23,255 (151)23,104 
Select line items from the condensed consolidated statements of changes in stockholders’ equity reflecting the adoption of ASC 842 are as follows (in thousands):
Three Months Ended March 31, 2021
As Previously ReportedAdjustmentsAs Adjusted
Retained earnings$24,101 $1,525 $25,626 
Non-controlling interest97,145 2,542 99,687 
Total stockholders' equity209,756 4,067 213,823 
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Select line items from the condensed consolidated statements of cash flows reflecting the adoption of ASC 842 are as follows (in thousands):
Three Months Ended March 31, 2021
As Previously ReportedAdjustmentsAs Adjusted
Operating activities
Net income$75,852 $(387)$75,465 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation1,854 (598)1,256 
Amortization of intangible assets5,040 1 5,041 
Non-cash operating lease expense 2,378 2,378 
Non-cash interest expense recognized on lease facility financing obligation162 (162) 
Other(144)(156)(300)
Changes in operating assets and liabilities:
Inventory(13,828)20 (13,808)
Prepaid expenses and other assets98 (679)(581)
Accrued expenses and other current liabilities(11,044)298 (10,746)
Other long-term liabilities(280)(1,103)(1,383)
Net cash provided by operating activities38,715 (389)38,326 
Investing activities
Purchases of property and equipment(3,580)248 (3,332)
Net cash used in investing activities(3,032)248 (2,784)
Financing activities
Payments made on facility financing lease obligation and capital lease(141)141  
Net cash used in financing activities(24,199)141 (24,058)
Recently Adopted Accounting Pronouncements
In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-10, Government Assistance (Topic 832) - Disclosures by Business Entities about Government Assistance (“ASU 2021-10”). ASU 2021-10 provides guidance to increase the transparency of government assistance including the disclosure of: (i) the types of assistance, (ii) an entity’s accounting for the assistance, and (iii) the effect of the assistance on an entity’s financial statements. Under the new guidance, an entity is required to provide the following annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy: (i) information about the nature of the transactions and the related accounting policy used to account for the transactions, (ii) the line items on the balance sheet and income statement that are affected by the transactions, and the amounts applicable to each financial statement line item, and (iii) significant terms and conditions of the transactions, including commitments and contingencies. The new guidance is required to be adopted either: (i) prospectively to all transactions within the scope of the amendments that are reflected in financial statements at the date of initial application and new transactions that are entered into after the date of initial application, or (ii) retrospectively to those transactions. We adopted ASU 2021-10 on January 1, 2022 using the prospective method. There was no impact to the Company’s condensed consolidated financial statements as a result of the adoption of this ASU.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts. This approach differs from the current requirement to measure contract assets and contract liabilities acquired in a business combination at fair value. ASU 2021-08 is effective for years beginning after December 31, 2022, including interim periods within those fiscal years, with early adoption permitted. The ASU is to be applied prospectively to business combinations occurring on or after the effective date of its adoption. The Company early adopted ASU 2021-08 and there was no impact to the Company’s condensed consolidated financial statements as a result of the adoption of this ASU.
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2.Acquisition
MyChem, LLC
On January 27, 2022, the Company completed the acquisition of MyChem, LLC (“MyChem”), a privately-held San Diego, California-based provider of ultra-pure nucleotides to customers in the diagnostics, pharma, genomics and research markets. The acquisition will vertically integrate the Company’s supply chain and expand its product offerings for inputs used in the development of therapeutics and vaccines.
The Company acquired MyChem for a total purchase consideration of $257.8 million, subject to customary post-closing adjustments, including a working capital settlement. The total cash consideration paid at closing was $240.0 million using existing cash on hand. The transaction was accounted for as an acquisition of a business as MyChem consisted of inputs and processes applied to those inputs that had the ability to contribute to the creation of outputs.
For the three months ended March 31, 2022, the Company incurred $3.0 million in transaction costs associated with the acquisition of MyChem, which were recorded within selling, general and administrative in the condensed consolidated statements of income.
The acquisition date fair value of consideration transferred to acquire MyChem consisted of the following (in thousands):
Cash paid$240,012 
Consideration payable10,000 
Fair value of contingent consideration7,800 
Total consideration transferred$257,812 
Pursuant to the Securities Purchase Agreement (the “MyChem SPA”) between the Company and sellers of MyChem, additional payments to the sellers of MyChem are dependent upon meeting or exceeding defined revenue targets during fiscal 2022 (the “Performance Payment”). The MyChem SPA provides for a total maximum Performance Payment of $40.0 million. The MyChem SPA also provides that the Company will pay to the sellers of MyChem an additional $20.0 million (the “Retention Payment”) as of the second anniversary of the closing of the acquisition date as long as two senior employees who are also the sellers of MyChem continue to be employed by TriLink. The Company considers the payment of the Retention Payment as probable and is recognizing compensation expense related to this payment in the post-acquisition period ratably over the expected service period of two years. The MyChem SPA further provides that the Company will pay to the sellers of MyChem an additional amount of up to $10.0 million subject to the completion of certain calculations associated with acquired inventory, which has been recorded within other long-term liabilities on the condensed consolidated balance sheet as of March 31, 2022. The Performance Payment was recorded as contingent consideration and was included as part of the purchase consideration. For the three months ended March 31, 2022, the Company recorded $1.7 million of compensation expense related to the Retention Payment within research and development in the condensed consolidated statements of income.
The Company estimated the fair value of the Performance Payment contingent consideration based on a Monte-Carlo simulation model which utilized an income approach. The estimated fair value was based on MyChem revenue projections, expected payout term, volatility and risk adjusted discount rates which are Level 3 inputs (see Note 4). As of March 31, 2022, there were no significant changes in the estimated fair value of the Performance Payment compared to its acquisition date fair value.
As the Company is in the process of finalizing the evaluation of certain liabilities and assets, the allocation of purchase consideration is preliminary and provisional measurements of certain liabilities and goodwill are subject to change. The
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following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):
Cash$1,176 
Current assets2,741 
Intangible assets, net123,360 
Other assets9,288 
Total identifiable assets acquired136,565 
Current liabilities(1,123)
Other long-term liabilities(8,399)
Total liabilities assumed(9,522)
Net identifiable assets acquired127,043 
Goodwill130,769 
Net assets acquired$257,812 
The acquisition was accounted for under the acquisition method of accounting, and therefore, the total purchase price was allocated to the identifiable tangible and intangible assets acquired and the liabilities assumed based on their respective fair values as of the acquisition date. Purchase consideration in excess of the amounts recognized for the net assets acquired was recognized as goodwill. Goodwill is primarily attributable to expanded synergies expected from the acquisition associated with a vertical supply integration. There were no tax impacts associated with the acquisition due to the pass-through income tax treatment of MyChem. All of the goodwill acquired in connection with the acquisition of MyChem was allocated to the Company’s Nucleic Acid Production segment and is deductible to Topco LLC for income tax purposes.
Upon closing of the acquisition, approximately $1.0 million was placed into escrow to cover potential working capital adjustments and approximately $12.5 million was placed into escrow to secure certain representations and warranties pursuant to the terms of the purchase agreement. These amounts are included in the total purchase consideration of $257.8 million. Because these amounts held in escrow are not controlled by the Company, they are not included in the accompanying condensed consolidated balance sheet as of March 31, 2022.
The following table summarizes the estimated fair values of MyChem’s identifiable intangible assets as of the date of acquisition and their estimated useful lives:
Estimated Fair Value
(in thousands)
Estimated Useful Life
(in years)
Trade Names$460 3
Developed Technology121,000 12
Customer Relationships1,900 12
Total$123,360 
The trade name and customer relationship intangible assets are related to the MyChem’s name, customer loyalty and customer relationships. The developed technology intangible asset is related to processes and techniques for synthesizing and developing ultra-pure nucleotides. The fair value of these intangible assets was based on MyChem’s projected revenues and were estimated using an income approach, specifically the multi-period excess earnings method. Under the income approach, an intangible asset’s fair value is equal to the present value of future economic benefits to be derived from ownership of the asset. The estimated fair value was developed by discounting future net cash flows to their present value at market-based rates of return utilizing Level 3 inputs. The useful lives for these intangible assets was determined based upon the remaining period for which the assets that are expected to contribute directly or indirectly to future cash flows. Key quantitative assumptions used in the determination of fair value of the developed technology intangible included revenue growth rates ranging from 3.0% to 30.6%, a discount rate of 16.5% and an assumed technical obsolescent curve range of 5.0% to 7.5%.
Pursuant to the terms of the MyChem SPA, the Company recognized an indemnification asset of $8.0 million within other assets, which represented the seller’s obligation to reimburse pre-acquisition income tax liabilities assumed in the acquisition, and was recorded within other long-term liabilities.
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The carrying value of the remaining assets acquired or liabilities assumed was estimated to equal their fair values based on their short-term nature. These estimates were based on the assumption that the Company believes to be reasonable; however, actual results may differ from these estimates.
Revenue and earnings from MyChem included in the Company’s condensed consolidated statements of income since the date of acquisition were immaterial.
No proforma revenue or earnings information for the three months ended March 31, 2022 and 2021 have been presented as the impact was not determined to be material to the Company’s condensed consolidated revenues and net income for the respective periods.
3.Goodwill and Intangible Assets
The Company’s goodwill of $283.5 million and $152.8 million as of March 31, 2022 and December 31, 2021, respectively, represents the excess of purchase consideration over the fair value of assets acquired and liabilities assumed. As of March 31, 2022 and December 31, 2021, the Company had three reporting units, two of which are contained in the Nucleic Acid Production segment. During the three months ended March 31, 2022, the Company recorded goodwill of $130.8 million in connection with the acquisition of MyChem that was completed in January 2022 (see Note 2). The Company has not recognized any goodwill impairment in any of the periods presented.
The following table summarizes the activity in the Company’s goodwill by segment for the period presented (in thousands):
Nucleic Acid ProductionBiologics Safety TestingTotal
Balance as of December 31, 2021$32,838 $119,928 $152,766 
Acquisition130,769  130,769 
Balance as of March 31, 2022$163,607 $119,928 $283,535 
Intangible assets are being amortized on a straight-line basis, which reflects the expected pattern in which the economic benefits of the intangible assets are being obtained, over an estimated useful life ranging from 5 to 14 years.
The following are components of finite-lived intangible assets and accumulated amortization as of the periods presented:
March 31, 2022
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountEstimated Useful LifeWeighted Average Remaining Amortization Period
(in thousands)(in years)(in years)
Trade Names$7,580 $5,192 $2,388 
5 - 10
4.1
Patents and Developed Technology288,649 68,335 220,314 
5 - 14
10.2
Customer Relationships21,853 9,150 12,703 
10 - 12
7.2
Total$318,082 $82,677 $235,405 10.0
December 31, 2021
Gross Carrying Amount
Accumulated Amortization
Net Carrying Amount
Estimated Useful Life
Weighted Average Remaining Amortization Period
(in thousands)(in years)(in years)
Trade Names$7,120 $5,012 $2,108 
5 - 10
2.9
Patents and Developed Technology167,648 63,465 104,183 
5 - 14
8.5
Customer Relationships19,953 8,673 11,280 
10 - 12
6.4
Total$194,721 $77,150 $117,571 8.1
During the three months ended March 31, 2022, the Company recorded intangible assets of $123.4 million in connection with the acquisition of MyChem that was completed in January 2022 (see Note 2).
The Company recognized $4.7 million and $3.1 million of amortization expense from intangible assets directly linked with revenue generating activities within cost of revenue in the condensed consolidated statements of income for the three months
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ended March 31, 2022 and 2021, respectively. Amortization expense for intangible assets that are not directly related to sales generating activities of $0.8 million and $1.9 million was recorded as selling, general and administrative expenses for the three months ended March 31, 2022 and 2021, respectively.
As of March 31, 2022, the estimated future amortization expense for finite-lived intangible assets were as follows (in thousands):
2022 (remaining nine months)
$18,742 
202324,812 
202424,812 
202524,669 
202624,432 
Thereafter117,938 
Total estimated amortization expense$235,405 
4.Fair Value Measurements
The following table summarizes the Company’s financial assets and liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):
Fair Value Measurements as of March 31, 2022
Level 1Level 2Level 3Total
Assets
Interest rate cap$ $3,715 $ $3,715 
Liabilities
Contingent consideration$ $ $7,800 $7,800 
Assets and liabilities measured at fair value on a recurring basis as of December 31, 2021 were insignificant.
Contingent Consideration
In connection with the acquisition of MyChem (see Note 2), the Company is required to make contingent payments to the sellers of up to $40.0 million subject to achieving certain revenue thresholds. The preliminary fair value of the liability for the contingent payments recognized upon the acquisition as part of the purchase accounting opening balance sheet totaled $7.8 million. The preliminary fair value of the contingent consideration was determined using a Monte Carlo simulation-based model discounted to present value. Assumptions used in this calculation are expected revenue, a discount rate of 16.9% and various probability factors. The ultimate settlement of the contingent consideration could deviate from current estimates based on the actual results of these financial measures. The contingent consideration projected year of payment is 2023. This liability is considered to be a Level 3 financial liability that is remeasured each reporting period. Changes in fair value of contingent consideration are recognized as a gain or loss and recorded within change in estimated fair value of contingent consideration in the condensed consolidated statements of income.
The following table provides a reconciliation of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the period presented (in thousands):
Contingent Consideration
Balance as of December 31, 2021$ 
Contingent consideration related to the acquisition of MyChem7,800 
Balance as of March 31, 2022$7,800 
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5.Balance Sheet Components
Inventory
Inventory consisted of the following as of the periods presented (in thousands):
March 31, 2022December 31, 2021
Raw materials$20,054 $19,726 
Work in process20,548 21,382 
Finished goods10,807 10,449 
Total inventory$51,409 $51,557 
6.Long-Term Debt
Credit Agreement
In October 2020, Maravai Intermediate Holdings, LLC (“Intermediate”), a wholly-owned subsidiary of Topco LLC, along with its subsidiaries Vector, TriLink and Cygnus (together with Intermediate, the “Borrowers”), entered into a credit agreement (as amended, the “Credit Agreement”), which provides for a $600.0 million term loan facility, maturing October 2027 (the “Term Loan”), and a $180.0 million revolving credit facility (the “Revolving Credit Facility”).
In August 2021, in conjunction with the Company’s divestiture of the Protein Detection segment, the Company transferred, per the existing terms of the Credit Agreement, the portion of the Term Loan held by Vector of $118.4 million to Intermediate in its entirety. This amount was not assumed by Voyager Group Holdings, Inc., the entity that acquired Vector, as part of the divestiture. Total outstanding debt and loan covenant requirements remained unchanged as a result of the divestiture.
In January 2022, the Company entered into an amendment (the “Amendment”) to the Credit Agreement, among Intermediate, Cygnus, and TriLink, as the borrowers, Topco LLC, as holdings, the lenders from time-to-time party thereto and Morgan Stanley Senior Funding, Inc., as administrative and collateral agent (as amended, supplemented or otherwise modified, the “Credit Agreement”). The Company entered into the Amendment to: (i) refinance $544.0 million in aggregate principal amount of first lien term loans initially issued thereunder (the “First Lien Term Loan”) and replace it with a Tranche B Term Loan (the “Tranche B Term Loan”); (ii) replace the LIBOR-based interest rate with a Term Secured Overnight Financing Rate (“SOFR”) based rate; and (iii) reduce the interest rate margins applicable to the Term Loan and Revolving Credit Facility under the Credit Agreement. The previous interest rate margin on the facilities was, with respect to each LIBOR-based loan, 3.75% to 4.25% and, with respect to each base rate-based loan, 2.75% to 3.25% (depending, in each case, on consolidated first lien leverage). Following the Amendment, the interest rate margin on the facilities is 3.00%, with respect to each Term SOFR-based loan, and 2.00%, with respect to each base rate-based loan. Further, the Amendment reduces the base rate floor for the term loans from 2.00% to 1.50%, sets the floor for Term SOFR-based term loans at 0.50% and sets the floor for Term SOFR-based revolving loans at 0.00%. No other significant terms under the Credit Agreement were changed in connection with the Amendment.
As of March 31, 2022, the interest rate on the Tranche B Term Loan was 3.50% per annum.
The Credit Agreement also provides for a $20.0 million limit for letters of credit, which remained unused as of March 31, 2022.
Borrowings under the Credit Agreement are unconditionally guaranteed by Topco LLC, together with the existing and future material domestic subsidiaries of Topco LLC (subject to certain exceptions), as specified in the respective guaranty agreements. Borrowings under the Credit Agreement are also secured by a first-priority lien and security interest in substantially all of the assets (subject to certain exceptions) of existing and future material domestic subsidiaries of Topco LLC that are loan parties.
The accounting related to entering into the Amendment was evaluated on a creditor-by-creditor basis to determine whether each transaction should be accounted for as a modification or extinguishment. Certain creditors under the First Lien Term Loan did not participate in this refinancing transaction, were repaid their principal and interest of $8.5 million and ceased being creditors of the Company and the repayment of their related outstanding debt balances has been accounted for as an extinguishment of debt. Proceeds of borrowings from new lenders of $8.5 million were accounted for as a new debt financing. The Company recorded a loss on extinguishment of debt of $0.2 million in the accompanying condensed consolidated statements of income for the three months ended March 31, 2022. For the remainder of the creditors, this transaction was accounted for as a modification because the change in present value of cash flows between the two term loans before and after the transaction was less than 10% on a creditor-by-creditor basis. As part of the refinancing, the Company incurred $0.9 million of various costs, of which an insignificant amount was related to an original issuance discount, and were all capitalized in the accompanying balance sheet within long-term debt, and are subject to amortization over the term of the refinanced debt as an adjustment to interest expense using the effective interest method.
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We also incurred $0.3 million of financing-related fees related to the Revolving Credit Facility. As of March 31, 2022, unamortized debt issuance costs totaled $2.8 million and are recorded as assets within other assets on the accompanying condensed consolidated balance sheet as there is