REPLIGEN CORPORATION Overview
Repligen and its subsidiaries, collectively doing business asRepligen Corporation ("Repligen", "we", "our", or the "Company") is a global life sciences company that develops and commercializes highly innovative bioprocessing technologies and systems that increase efficiencies and flexibility in the process of manufacturing biological drugs. As the overall market for biologics continues to grow and expand, our customers - primarily large biopharmaceutical companies and contract development and manufacturing organizations - face critical production cost, capacity, quality and time pressures. Built to address these concerns, our products are helping to set new standards for the way biologics are manufactured. We are committed to inspiring advances in bioprocessing as a trusted partner in the production of critical biologic drugs - including monoclonal antibodies ("mAb"), recombinant proteins, vaccines and gene therapies - that are improving human health worldwide. For more information regarding our business, products and acquisitions, see Part I, Item 1, "Business" included in our 2020 Annual Report on Form 10-K ("Form 10-K"), which was filed with theSecurities and Exchange Commission ("SEC") onFebruary 24, 2021 . We currently operate as one bioprocessing business, with a comprehensive suite of products to serve both upstream and downstream processes in biological drug manufacturing. Building on over 35 years of industry expertise, we have developed a broad and diversified product portfolio that reflects our passion for innovation and the customer-first culture that drives our entire organization. We continue to capitalize on opportunities to maximize the value of our product platform through both organic growth initiatives (internal innovation and commercial leverage) and targeted acquisitions. 2021 Acquisitions Acquisition ofPolymem S.A. OnJune 22, 2021 , the Company entered into a Stock Purchase Agreement withPolymem S.A. ("Polymem"), a company organized under the laws ofFrance , andJean-Michel Espenan andFranc Saux , acting together jointly and severally as the representatives of the sellers, which transaction subsequently closed onJuly 1, 2021 (the "Polymem Acquisition."). Polymem, which is headquartered in,Toulouse, France , is a manufacturer of hollow fiber membranes, membrane modules and systems for industrial and bioprocessing applications. Polymem products will complement and expand the Company's portfolio of hollow fiber systems and consumables. The acquisition substantially increasesRepligen's membrane and module manufacturing capacity and establishes a world-class center of excellence inEurope to address the accelerating global demand for these innovative products. 2020 AcquisitionsARTeSYN Biosolutions Holdings Ireland Limited OnOctober 27, 2020 , we entered into an Equity and Asset Purchase Agreement withARTeSYN Biosolutions Holdings Ireland Limited ("ARTeSYN"), a company organized under the laws ofIreland ,Third Creek Holdings, LLC , aNevada limited liability company ("Third Creek"),Alphinity, LLC , aNevada limited liability company ("Alphinity", and together with Third Creek the "ARTeSYN Sellers"), andMichael Gagne , solely in his capacity as the representative of the ARTeSYN Sellers, pursuant to which the Company acquired (i) all of the outstanding equity securities of ARTeSYN and (ii) certain assets from Alphinity related to the business of ARTeSYN (collectively, the "ARTeSYN Acquisition") for approximately$200 million , comprised of approximately$130 million in cash to the ARTeSYN Sellers and approximately$70 million in our common stock to Third Creek. The transaction closed onDecember 3, 2020 . ARTeSYN is headquartered inWaterford, Ireland and conducts its operations inIreland ,the United States andEstonia . Its suite of single-use solutions has been created with the goal of enabling "abundance in medicine" by allowing greater efficiency in biologics manufacturing. The ARTeSYN team has created a number of solutions targeting the single-use space from single-use valves with fully disposable valve liners, XO ® skeletal supports, a hybrid small parts offering for de-bottlenecking traditional facilities, and fully automated SU process systems that have quickly become leading solutions in the bioprocessing industry. ARTeSYN has established downstream processing leadership with a suite of state of the art single-use systems for chromatography, filtration, continuous manufacturing and media/buffer prep workflows. In addition, the Company has integrated unique flow path assemblies utilizing the Company's silicone extrusion and molding technology, to deliver highly differentiated, low hold-up volume systems that minimize product loss during processing. The ARTeSYN portfolio expands on the market success of the Company's hollow fiber systems and complements our chromatography and TFF filtration product lines. 25 -------------------------------------------------------------------------------- Table of Contents Non-Metallic Solutions, Inc. OnOctober 15, 2020 , we executed a Stock Purchase Agreement with Non-MetallicSolutions, Inc. ("NMS"), aMassachusetts corporation, and each of William Malloneé andDerek Masser , the legal and beneficial owners of NMS, to purchase NMS, which transaction subsequently closed onOctober 20, 2020 (the "NMS Acquisition"). NMS, headquartered inAuburn, Massachusetts , is a manufacturer of fabricated plastics, custom containers, and related assemblies and components used in the manufacturing of biologic drugs. The acquisition of NMS strengthens the Company's portfolio of single-use integrated systems and flow path assemblies, streamlines our supply chain for current products, and provides greater flexibility to scale and expand single-use and systems portfolios.Engineered Molding Technology LLC OnJuly 13, 2020 , we completed the acquisition of 100% of the membership interests of EMT, aNew York limited liability company, pursuant to a Membership Interest Purchase Agreement, datedJune 26, 2020 , by and among the Company, EMT, and each ofMichael Pandori andTodd Etesse , the legal and beneficial owners of EMT (such acquisition, the "EMT Acquisition"). EMT, headquartered inClifton Park, New York , is an innovator and manufacturer of single-use silicone assemblies and components used in the manufacturing of biologic drugs. EMT's standard and custom molding as well as their over-molded connectors and silicone tubing products are key components in single-use filtration and chromatography systems. EMT's products complement and expand our single-use product offerings. EffectiveJuly 11, 2021 , EMT was absorbed into the Company by way of "short-form" merger pursuant toNew York andDelaware law, which did not require a vote of the Company's shareholders. Critical Accounting Policies and Estimates A "critical accounting policy" is one which is both important to the portrayal of our financial condition and results and requires management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. For a description of our critical accounting policies that affect our more significant judgments and estimates used in the preparation of our consolidated financial statements, refer to Management's Discussion and Analysis of Financial Condition and Results of Operations and our significant accounting policies in Note 2 to the consolidated financial statements included in our Form 10-K. Results of Operations The following discussion of the financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements and the related footnotes thereto. Revenues Total revenue for the three and six months endedJune 30, 2021 and 2020 were as follows: Three Months Ended Six Months Ended June 30, Increase/(Decrease) June 30, Increase/(Decrease) 2021 2020 $ Change % Change 2021 2020 $ Change % Change (Amounts in thousands, except for percentage data) Revenue: Products$ 162,920 $ 87,432 $ 75,488 86.3 %$ 305,657 $ 163,492 $ 142,165 87.0 % Royalty and other 40 30 10 33.3 % 140 60 80 133.3 % Total revenue$ 162,960 $ 87,462 $ 75,498 86.3 %$ 305,797 $ 163,552 $ 142,245 87.0 % Product revenues Direct sales represented approximately 83% and 74% of our product revenue for each of the three months endedJune 30, 2021 and 2020, respectively, and represented 82% and 75% of our product revenue for each of the six months endedJune 30, 2021 and 2020, respectively. We expect that direct sales will continue to account for an increasing percentage of our product revenues, as the largest customer of our OEM products diversified its supply chain in 2020. Sales of our bioprocessing products can be impacted by the timing of large-scale production orders and the regulatory approvals for such antibodies, which may result in significant quarterly fluctuations. 26 -------------------------------------------------------------------------------- Table of Contents Revenues from our filtration franchise include the sales of our XCell ATF ® systems and consumables, KrosFlo ® TFF and TFDF systems,TangenX ® flat sheet cassettes, ARTeSYN ® systems, and silicone-molded and plastic consumables offered by EMT and NMS. Revenues from our process analytics franchise includes the sale of our SoloVPE ® , FlowVPE ® and FlowVPX ® systems and associated consumables and service. Revenues from our chromatography franchise include the sales of our OPUS ® pre-packed columns, resins, ELISA test kits and ARTeSYN ® systems. Revenues from our proteins franchise include the sale of our Protein A ligands and cell culture growth factors. Other revenue primarily consists of sales of our operating room products to hospitals as well as freight revenue. During the three and six months endedJune 30, 2021 , product revenue increased by$75.5 million , or 86.3% and$142.2 million , or 87.0%, as compared to the same periods of 2020, with exceptionally robust demand for our filtration products. Since the second quarter of 2020, we have experienced accelerated demand across all of our franchises due to the critical needs of customers working on the novel coronavirus ("COVID-19") vaccines and therapeutics. In addition, we saw an increase in demand for gene therapy and monoclonal antibody manufacturing. Royalty revenues Royalty revenues in the three and six months endedJune 30, 2021 and 2020 relate to royalties received from a third-party systems manufacturer associated with our OPUS PD chromatography columns. Royalty revenues are variable and are dependent on sales generated by our partner. Costs of product revenue and operating expenses Total costs and operating expenses for the three and six months endedJune 30, 2021 and 2020 were comprised of the following: Three Months Ended Six Months Ended June 30, Increase/(Decrease) June 30, Increase/(Decrease) 2021 2020 $ Change % Change 2021 2020 $ Change % Change (Amounts in thousands, except for percentage data) Cost of product revenue$ 61,990 $ 36,863 $ 25,127 68.2 %$ 121,737 $ 68,845 $ 52,892 76.8 % Research and development 8,389 4,336 4,053 93.5 % 16,001 9,038 6,963
77.0 % Selling, general and administrative 44,341 26,726 17,615
65.9 % 83,436 54,226 29,210 53.9 %
Total costs and operating expenses$ 114,720 $ 67,925 $ 46,795 68.9 %$ 221,174 $ 132,109 $ 89,065 67.4 % Cost of product revenue Cost of product revenue increased 68.2% and 76.8% in the three and six months endedJune 30, 2021 , compared to the same periods of 2020, due primarily to the increase in product revenue mentioned above and costs associated with higher product volume. In addition, there was an increase in manufacturing headcount for the three and six months endedJune 30, 2021 , as compared to the same periods of 2020, which resulted in higher employee-related costs. We completed acquisitions during the second half of 2020, which resulted in an increase in costs of product revenue during these periods in 2021 as well, for which there were no comparable amounts during 2020. Gross margin was 62.0% and 60.2% in the three and six months endedJune 30, 2021 . The gross margin for the six months endedJune 30, 2021 includes$1.6 million of amortization of inventory step-up associated with the ARTeSYN Acquisition. The gross margin for the six months endedJune 30, 2020 was 57.9%. Excluding the step-up amortization, gross margin for the six months endedJune 30, 2021 was 60.7%. The increase in gross margin, excluding the inventory step-up amortization, in the six months endedJune 30, 2021 , as compared to the same period of 2020, is due primarily to the increase in revenue mentioned above, and favorable product mix, partially offset by an increase in manufacturing headcount subsequent toJune 30, 2020 . Gross margins may fluctuate in future quarters based on expected production volume and product mix. 27 -------------------------------------------------------------------------------- Table of Contents Research and development expenses Research and development ("R&D") expenses are related to bioprocessing products, which include personnel, supplies and other research expenses. Due to the size of the Company and the fact that these various programs share personnel and fixed costs, we do not track all of our expenses or allocate any fixed costs by program, and therefore, have not provided historical costs incurred by project. R&D expenses increased 93.5% during the three months endedJune 30, 2021 , compared to the same period of 2020. The increase during the period is primarily due to the addition of$1.0 million of R&D expenses incurred by ARTeSYN during the period, for which there were not comparable costs in 2020, and due to the increase in employee related costs as the number of R&D employees has increased sinceJune 30, 2020 . R&D expenses increased 77.0% during the six months endedJune 30, 2021 , compared to the same period of 2020. The increase during the period is due to the addition of$2.1 million in R&D expenses related to ARTeSYN's operations and increased costs associated with an increase in R&D headcount and the ramp up of project spending for new product development during the first half of 2021. We expect our R&D expenses for the remainder of 2021 to gradually increase to support new product development. Selling, general and administrative expenses Selling, general and administrative ("SG&A") expenses include the costs associated with selling our commercial products and costs required to support our marketing efforts, including legal, accounting, patent, shareholder services, amortization of intangible assets and other administrative functions. During the three and six months endedJune 30, 2021 , SG&A costs increased by$17.6 million , or 65.9%, and$29.2 million , or 53.9%, as compared to the same periods of 2020. The increase is partially due to the continued expansion of our customer-facing activities to drive sales of our bioprocessing products, and the continued buildout of our administrative infrastructure, primarily through increased headcount, to support expected future growth. Stock-based compensation expense and other employee-related costs increased during the three and six months endedJune 30, 2021 , as compared to the same period in 2020, resulting from an increase in headcount period over period. In addition,$3.6 million and$6.8 million of the increase in SG&A costs for the three and six months endedJune 30, 2021 , respectively, was related to the addition of EMT, NMS and ARTeSYN during the second half of 2020 for which there were no comparable amounts for the same periods of 2020. Other expenses, net The table below provides detail regarding our other expenses, net: Three Months Ended Six Months Ended June 30, Increase/(Decrease) June 30, Increase/(Decrease) 2021 2020 $ Change % Change 2021 2020 $ Change % Change
(Amounts in thousands, except for percentage data) Investment income
$ 41 $ 253 $ (212 ) (83.8 %)$ 93 $ 1,617 $ (1,524 ) (94.2 %) Interest expense (3,144 ) (3,004 ) (140 ) 4.7 % (6,250 ) (5,980 ) (270 ) 4.5 % Other expenses (779 ) (766 ) (13 ) 1.7 % (1,003 ) (384 ) (619 )
161.2 %
Total other expense, net$ (3,882 ) $ (3,517 ) $ (365 ) 10.4 %$ (7,160 ) $ (4,747 ) $ (2,413 ) 50.8 % Investment income Investment income includes income earned on invested cash balances. The decrease of$0.2 million and$1.5 million in the three and six months endedJune 30, 2021 , as compared to the same periods of 2020, was attributable to a decrease in interest rates on our invested cash balances. InMarch 2020 , in response to the outbreak of COVID-19 and to stay ahead of disruptions and economic slowdown, theFederal Reserve reduced federal funds rates to a range of 0.0% to 0.25%, which will continue to affect our investment income in future periods. We expect investment income to vary based on changes in the amount of funds invested and fluctuation of interest rates. 28 -------------------------------------------------------------------------------- Table of Contents Interest expense Interest expense in the three and six months endedJune 30, 2021 and 2020 is primarily from our 0.375% Convertible Senior Notes due 2024 (the "2019 Notes"), which were issued inJuly 2019 . Interest expense, which includes the amortization of debt issuance costs and contractual coupon interest, increased$0.1 million and$0.3 million for the three and six months endedJune 30, 2021 , as compared to the same periods in 2020. This is a result of the decrease in the balance of debt issuance costs that are being amortized. As these costs decrease, the carrying value of the debt increases and interest calculated based on the carrying value increases as well. Other expenses The change in other expenses, net during the three and six months endedJune 30, 2021 , compared to the same period of 2020, is primarily attributable to realized foreign currency losses related to amounts due from non-Swedish krona-based customers and vendors. Income tax provision Income tax provision for the three and six months endedJune 30, 2021 and 2020 was as follows: Three Months Ended Six Months Ended June 30, Increase/(Decrease) June 30, Increase/(Decrease) 2021 2020 $ Change % Change 2021 2020 $ Change % Change (Amounts in thousands, except for percentage data) Income tax provision$ 8,125 $ 159 $ 7,966 5010.1 %$ 11,780 $ 1,020 $ 10,760 1054.9 % Effective tax rate 18.3 % 1.0 % 15.2 % 3.8 % For the three and six months endedJune 30, 2021 , we recorded an income tax provision of$8.1 million and$11.8 million , respectively. The effective tax rate was 18.3% and 15.2% for the three and six months endedJune 30, 2021 and is based upon the estimated income for the year endingDecember 31, 2021 and the composition of income in different jurisdictions. The increase in effective tax rates was primarily due to higher income before income taxes, lower windfall benefits recognized on stock option exercises and the vesting of stock units, partially offset by lowerU.S. taxation of foreign earnings. The effective tax rate for the three and six months endedJune 30, 2021 was lower than theU.S. statutory rate of 21% primarily due to business tax credits and windfall benefits on stock option exercises and the vesting of stock units. For the three and six months endedJune 30, 2020 , we recorded an income tax provision of$0.2 million and$1.0 million , respectively. The effective tax rate was 1.0% and 3.8% for the three and six months endedJune 30, 2020 and is based upon the estimated income for the year endingDecember 31, 2020 and the composition of income in different jurisdictions. The effective tax rate for the three and six months endedJune 30, 2020 was lower than theU.S. statutory rate of 21% primarily due to windfall benefits on stock option exercise and the vesting of stock units. Non-GAAP Financial Measures We provide non-GAAP adjusted income from operations; adjusted net income; and adjusted EBITDA as supplemental measures to GAAP measures regarding our operating performance. These financial measures exclude the items detailed below and, therefore, have not been calculated in accordance with GAAP. A detailed explanation and a reconciliation of each non-GAAP financial measure to its most comparable GAAP financial measure are provided below. We include this financial information because we believe these measures provide a more accurate comparison of our financial results between periods and more accurately reflect how management reviews its financial results. We excluded the impact of certain acquisition-related items because we believe that the resulting charges do not accurately reflect the performance of our ongoing operations for the period in which such charges are incurred. Non-GAAP adjusted income from operations Non-GAAP adjusted income from operations is measured by taking income from operations as reported in accordance with GAAP and excluding inventory step-up charges, acquisition and integration costs, and intangible amortization booked through our consolidated statements of comprehensive income. The following is a reconciliation of income from operations in accordance with GAAP to non-GAAP adjusted income from operations for the three and six months endedJune 30, 2021 and 2020: 29
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Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
(Amounts in thousands)
GAAP income from operations $ 48,240 $ 19,537 $ 84,623 $ 31,443
Non-GAAP
adjustments to income from operations:
Inventory
step-up
charges - - 1,598 -
Acquisition and integration costs 3,218 2,134 5,769 4,687
Intangible amortization 5,161 3,874 10,323 7,752
Non-GAAP
adjusted income from operations
Non-GAAP adjusted net income Non-GAAP adjusted net income is measured by taking net income as reported in accordance with GAAP and excluding acquisition and integration costs, intangible amortization, inventory step-up charges, loss on conversion of debt, non-cash interest expense and the tax effects of these items. The following are reconciliations of net income in accordance with GAAP to non-GAAP adjusted net income for the three and six months endedJune 30, 2021 and 2020: Three Months Ended June 30, 2021 2020 Fully Fully Diluted Diluted Earnings Earnings per per Amount Share Amount Share (Amounts in thousands, except per share data) GAAP net income$ 36,233 $ 0.64 $ 15,861 $ 0.30 Non-GAAP adjustments to net income: Acquisition and integration costs 3,218 0.06 2,134 0.04 Intangible amortization 5,161 0.09 3,874 0.07 Loss on conversion of debt 4 - - - Non-cash interest expense 2,862 0.05 2,724 0.05 Tax effect of non-GAAP charges (2,615 ) (0.05 ) (2,085 ) (0.04 ) Non-GAAP adjusted net income$ 44,863 $ 0.79 $ 22,508 $ 0.42 Six Months Ended June 30, 2021 2020 Fully Fully Diluted Diluted Earnings Earnings per per Amount Share Amount Share (Amounts in thousands, except per share data) GAAP net income$ 65,683 $ 1.16 $ 25,676 $ 0.48 Non-GAAP adjustments to net income: Inventory step-up charges 1,598 0.03 - - Acquisition and integration costs 5,769 0.10 4,687 0.09 Intangible amortization 10,323 0.18 7,752 0.15 Loss on conversion of debt 4 - - - Non-cash interest expense 5,690 0.10 5,415 0.10 Tax effect of non-GAAP charges (5,437 ) (0.10 ) (4,262 ) (0.08 ) Non-GAAP adjusted net income$ 83,630 $ 1.47 $ 39,268 $ 0.74
* Per share totals may not add due to rounding.
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Adjusted EBITDA
Adjusted EBITDA is measured by taking net income as reported in accordance with
GAAP, excluding investment income, interest expense, taxes, depreciation and
amortization, acquisition and integration costs, inventory
step-up
charges and loss on conversion of debt booked through our consolidated
statements of comprehensive income. The following is a reconciliation of net
income in accordance with GAAP to adjusted EBITDA for the three and six months
ended June 30, 2021 and 2020:
Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
(Amounts in thousands)
GAAP net income $ 36,233 $ 15,861 $ 65,683 $ 25,676
Non-GAAP
EBITDA adjustments to net income:
Investment income (41 ) (253 ) (93 ) (1,617 )
Interest expense 3,144 3,004 6,250 5,980
Tax provision 8,125 159 11,780 1,020
Depreciation 3,797 2,578 7,052 5,063
Amortization 5,190 3,902 10,379 7,807
EBITDA 56,448 25,251 101,051 43,929
Other
non-GAAP
adjustments:
Inventory
step-up
charges - - 1,598 -Acquisition and integration costs 3,218 2,134 5,769
4,687
Loss on conversion of debt 4 - 4 -
Adjusted EBITDA $ 59,670 $ 27,385 $ 108,422 $ 48,616
Liquidity and Capital Resources
We have financed our operations primarily through revenues derived from product
sales, the issuance of the 2019 Notes in July 2019 and the issuance of common
stock in our December 2020 , July 2019 and May 2019 public offerings (the
"Offerings"). Our revenue for the foreseeable future will primarily be limited
to our bioprocessing product revenue.
At June 30, 2021 , we had cash and cash equivalents (excluding restricted cash)
of $734.3 million compared to cash and cash equivalents (excluding restricted
cash) of $717.3 million at December 31, 2020 .
During the second quarter of 2021, the closing price of the Company's common
stock exceeded 130% of the conversion price of the 2019 Notes for more than 20
trading days of the last 30 consecutive trading days of the quarter. As a
result, the 2019 Notes are convertible at the option of the holders of the 2019
Notes during the third quarter of 2021, the quarter immediately following the
quarter when the conditions are met, per the First Supplemental Indenture
underlying the 2019 Notes. These conditions were also met during the fourth
quarter of 2020 and the first quarter of 2021. As a result, the Company received
notices from note holders that they would convert $6,000 aggregate principal
amount of the 2019 Notes, of which $1,000 principal were settled during the
first quarter of 2021, $4,000 principal were settled during the second quarter
of 2021 and $1,000 principal will be settled during the third quarter of 2021.
The conversions resulted in the issuance of a nominal number of shares of the
Company's common stock to the holder, and the Company recorded a loss of
approximately $4,000 on the conversion of these notes, which is included in
other expenses, net on our consolidated statements of comprehensive income for
the three and six months ended June 30, 2021 . The 2019 Notes have a face value
of $287.5 million and a carrying value and a carrying value of $249.4 million
and continue to be classified as current liabilities on the Company's
consolidated balance sheet as of June 30, 2021 . It is the Company's policy and
intent to settle the face value of the 2019 Notes in cash and any excess
conversion premium in shares of our common stock.
In July 2020 , the Company entered into a First Amendment to the lease agreement
for its Marlborough, Massachusetts facility, expanding the leased space by
66,939 square feet. In December 2020 , the Company signed the Second Amendment to
the lease agreement, changing the commencement date from April 1, 2021 to
January 1, 2021 . As a result, under the amended lease agreement, the Company
will pay an additional $5.7 million in base rent over the life of the lease,
which expires on November 30, 2028 .
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In May 2021 , the Company entered into an agreement to lease approximately 64,000
square feet of space at a site in Hopkinton, Massachusetts , which expires on
August 15, 2034 . This space will be used as an assembly center for our ProConnex
®
single-use
flow path products. Under the lease, the Company will pay $17.7 million in base
rent over the term of the lease.
Cash flows
Six Months Ended
Increase/
June 30, (Decrease)
2021 2020 $ Change
(Amounts in thousands)
Operating activities $ 46,913 $ 26,265 $ 20,648
Investing activities (26,198 ) (9,517 ) (16,681 )
Financing activities 852 5,402 (4,550 )
Effect of exchange rate changes on cash, cash
equivalents and restricted cash (4,532 ) 807 (5,339 )
Net increase in cash, cash equivalents and
restricted cash $ 17,035 $ 22,957 $ (5,922 )
Operating activities
For the six months ended June 30, 2021 , our operating activities provided cash
of $46.9 million reflecting net income of $65.7 million and
non-cash
charges totaling $43.8 million primarily related to depreciation, amortization,
deferred income taxes, amortization of debt discount and issuance costs, and
stock-based compensation charges. An increase in accounts receivable consumed
$31.9 million of cash and was primarily driven by the 87.0%
year-to-date
increase in revenues. An increase in inventory manufactured of $42.8 million
supports expected increases in future revenue. The increases in accounts
receivable and inventory manufactured are offset by an increase in accounts
payable of $8.3 million , which was primarily due to increased inventory
purchases to support customer orders, an increase in accrued liabilities of
$4.5 million , which was due to an increase in the accrual for expected costs,
and to a decrease in deferred revenue related to products shipped during the
first half of 2021. The remaining cash used in operating activities resulted
from unfavorable changes in various other working capital accounts.
For the six months ended June 30, 2020 , our operating activities provided cash
of $26.3 million reflecting net income of $25.7 million
and non-cash charges
totaling $24.8 million primarily related to depreciation, amortization, deferred
income taxes,
non-cash
interest expense and stock-based compensation charges. An increase in accounts
receivable consumed $6.0 million of cash and was primarily driven by the 24.5%
year-to-date
increase in revenues. An increase in inventory consumed $15.0 million to support
future revenue. A decrease in accounts payable and accrued liabilities of
$4.1 million was due primarily to the payment of the $9.0 million to employees
during the second quarter of 2020 for C Technologies acquisition-related
bonuses. The remaining cash provided by operating activities resulted from
favorable changes in various other working capital accounts.
Investing activities
Our investing activities consumed $26.2 million of cash during the six months
ended June 30, 2021 , primarily related to the ongoing capital expenditures as we
continue to increase our manufacturing capacity worldwide. Of these
expenditures, $2.2 million represented capitalized costs related to our
internal-use
software.
Capital expenditures for the six months ended June 30, 2020 included
$2.2 million for capitalized costs related to our
internal-use
software.
Financing activities
Cash provided by financing activities of $0.9 million for the six months ended
June 30, 2021 included proceeds from stock option exercises during the period.
Proceeds from stock option exercises during the six months ended June 30, 2020
were $5.4 million .
Working capital increased by $68.1 million to $651.5 million at June 30, 2021
from $583.4 million at December 31, 2020 due to the various changes noted above.
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Table of Contents Our future capital requirements will depend on many factors, including the following:
• the expansion of our bioprocessing business;
• the ability to sustain sales and profits of our bioprocessing products;
• our ability to acquire additional bioprocessing products; • the scope of and progress made in our R&D activities; • the extent of any share repurchase activity; and • the success of any proposed financing efforts. Absent acquisitions of additional products, product candidates or intellectual property, we believe our current cash balances are adequate to meet our cash needs for at least the next 24 months from the date of this filing. We expect operating expenses for the rest of the year to increase as we continue to expand our bioprocessing business. We expect to incur continued spending related to the development and expansion of our bioprocessing product lines and expansion of our commercial capabilities for the foreseeable future. Our future capital requirements may include, but are not limited to, purchases of property, plant and equipment, the acquisition of additional bioprocessing products and technologies to complement our existing manufacturing capabilities, and continued investment in our intellectual property portfolio. We plan to continue to invest in our bioprocessing business and in key R&D activities associated with the development of new bioprocessing products. We actively evaluate various strategic transactions on an ongoing basis, including licensing or acquiring complementary products, technologies or businesses that would complement our existing portfolio. We continue to seek to acquire such potential assets that may offer us the best opportunity to create value for our shareholders. In order to acquire such assets, we may need to seek additional financing to fund these investments. If our available cash balances and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements, including because of any such acquisition-related financing needs or lower demand for our products, we may seek to sell common or preferred equity or convertible debt securities, enter into a credit facility or another form of third-party funding, or seek other debt funding. The sale of equity and convertible debt securities may result in dilution to our shareholders, and those securities may have rights senior to those of our common shares. If we raise additional funds through the issuance of preferred stock, convertible debt securities or other debt financing, these securities or other debt could contain covenants that would restrict our operations. Any other third-party funding arrangement could require us to relinquish valuable rights. We may require additional capital beyond our currently anticipated amounts. Additional capital may not be available on reasonable terms, if at all. Off-Balance Sheet Arrangements We do not have any special purpose entities or off-balance sheet financing arrangements as ofJune 30, 2021 . Net Operating Loss Carryforwards AtDecember 31, 2020 , we had net operating loss carryforwards of$6.4 million remaining. We had business tax credits carryforwards of$9.4 million available to reduce future federal income taxes, if any. The business tax credits carryforwards will continue to expire at various dates throughDecember 2039 . Net operating loss carryforwards and available tax credits are subject to review and possible adjustment by the Internal Revenue Service, state and foreign jurisdictions and may be limited in the event of certain changes in the ownership interest of significant shareholders. Effects of Inflation Our assets are primarily monetary, consisting of cash, cash equivalents and marketable securities. Because of their liquidity, these assets are not directly affected by inflation. Since we intend to retain and continue to use our equipment, furniture and fixtures and leasehold improvements, we believe that the incremental inflation related to replacement costs of such items will not materially affect our operations. However, the rate of inflation affects our expenses, such as those for employee compensation and contract services, which could increase our level of expenses and the rate at which we use our resources. 33
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Table of Contents Cautionary Statement Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The forward-looking statements in this Quarterly Report on Form 10-Q do not constitute guarantees of future performance. Investors are cautioned that statements in this Quarterly Report on Form 10-Q which are not strictly historical statements, including, without limitation, express or implied statements or guidance regarding current or future financial performance and position, potential impairment of future earnings, management's strategy, plans and objectives for future operations or acquisitions, product development and sales, product candidate research, development and regulatory approval, SG&A expenditures, intellectual property, development and manufacturing plans, availability of materials and product and adequacy of capital resources, our financing plans, and the projected impact of, and response to, the COVID-19 coronavirus pandemic and the related downturn of theU.S. and global economies constitute forward-looking statements. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which the Company operates, and management's beliefs and assumptions. The Company undertakes no obligation to publicly update or revise the statements in light of future developments. In addition, other written and oral statements that constitute forward-looking statements may be made by the Company or on the Company's behalf. Words such as "expect," "seek," "anticipate," "intend," "plan," "believe," "could," "estimate," "may," "target," "project," or variations of such words and similar expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated, including, without limitation, risks associated with the following: the ultimate impact of the coronavirus pandemic on our business or financial results; the success of current and future collaborative or supply relationships, including our agreements with Cytiva,MilliporeSigma and Purolite; our ability to successfully grow our bioprocessing business, including as a result of acquisitions, commercialization or partnership opportunities, and our ability to develop and commercialize products; our ability to obtain required regulatory approvals; our compliance with allU.S. Food and Drug Administration regulations, our ability to obtain, maintain and protect intellectual property rights for our products; the risk of litigation regarding our patent and other intellectual property rights; the risk of litigation with collaborative partners; our limited manufacturing capabilities and our dependence on third-party manufacturers and value-added resellers; the effect of the COVID-19 coronavirus pandemic, including mitigation efforts and economic effects, on our business operations and the operations of our customers and suppliers; our ability to hire and retain skilled personnel; the market acceptance of our products, reduced demand for our products that adversely impacts our future revenues, cash flows, results of operations and financial condition; our ability to integrateNon-Metallic Solutions, Inc. ,ARTe SYN Biosolutions Holding Ireland Limited andPolymem S.A. businesses successfully into our business and achieve the expected benefits of the acquisitions ; our ability to compete with larger, better financed life sciences companies; our history of losses and expectation of incurring losses; our ability to generate future revenues; our ability to successfully integrate our recently acquired businesses; our ability to raise additional capital to fund potential acquisitions; our volatile stock price; and the effects of our anti-takeover provisions. Further information on potential risk factors that could affect our financial results are included in the filings made by us from time to time with theSEC including under the sections entitled "Risk Factors" in our Form 10-K.
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