MARAVAI LIFESCIENCES HOLDINGS, INC. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm 105 Consolidated Balance Sheets 106 Consolidated Statements of Operations 107 Consolidated Statemen ts of Comprehensive Income (Loss) 108 Consolidated Statements of Changes in Stockholders ’ /Member ’ s Equity 109 Consolidated Statements of Cash Flows 111 Notes to Consolidated Financial Statements 113 104 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Maravai LifeSciences Holdings, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Maravai LifeSciences Holdings, Inc. (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ / member’s equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2016. Redwood City, California March 22, 2021 105 Table of Contents MARAVAI LIFESCIENCES HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except shares and unit amounts and par value) December 31, 2020 2019 Assets Current assets: Cash $ 236,184 $ 24,700 Accounts receivable, net 51,018 18,030 Inventory 33,301 14,202 Prepaid expenses and other current assets 11,095 3,620 Total current assets 331,598 60,552 Property and equipment, net 101,305 94,311 Goodwill 224,275 224,275 Intangible assets, net 177,656 197,853 Deferred tax assets 431,699 — Other assets 4,158 805 Total assets $ 1,270,691 $ 577,796 Liabilities and stockholders'/member’s equity Current liabilities: Accounts payable $ 8,171 $ 7,478 Accrued expenses and other current liabilities 38,546 18,743 Deferred revenue 78,061 841 Current portion of long-term debt 6,000 2,500 Total current liabilities 130,778 29,562 Long-term debt, less current portion 528,614 334,783 Deferred tax liabilities 8,609 14,697 Lease facility financing obligation, less current portion 56,167 52,919 Payable to related parties pursuant to a Tax Receivable Agreement 389,546 — Other long-term liabilities 2,231 1,208 Total liabilities 1,115,945 433,169 Commitments and contingencies (Note 6) Stockholders' / member's equity Member’s equity — 183,910 Class A common stock, $0.01 par value - 500,000,000 shares authorized; 96,646,515 shares issued and outstanding as of December 31, 2020 966 — Class B common stock, $0.01 par value - 300,000,000 shares authorized; 160,974,129 shares issued and outstanding as of December 31, 2020 1,610 — Additional paid-in capital 85,125 — Accumulated other comprehensive loss (44) (133) Retained earnings (accumulated deficit) 854 (42,381) Total stockholders' / member's equity attributable to Maravai LifeSciences Holdings, Inc. 88,511 141,396 Non-controlling interests 66,235 3,231 Total stockholders' / member’s equity 154,746 144,627 Total liabilities and stockholders' / member’s equity $ 1,270,691 $ 577,796 The accompanying notes are an integral part of these consolidated financial statements. 106 Table of Contents MARAVAI LIFESCIENCES HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and unit amounts and per share and per unit amounts) Year Ended December 31, 2020 2019 2018 Revenue $ 284,098 $ 143,140 $ 123,833 Operating expenses: Cost of revenue 79,649 66,849 60,765 Research and development 9,304 3,627 4,499 Selling, general and administrative 94,245 48,354 41,194 Change in estimated fair value of contingent consideration — 322 939 Gain on sale and leaseback transaction (19,002) — — Total operating expenses 164,196 119,152 107,397 Income from operations 119,902 23,988 16,436 Other income (expense): Interest expense (30,740) (29,959) (27,399) Loss on extinguishment of debt (7,592) — (5,622) Other income 126 118 87 Income (loss) before income taxes 81,696 (5,853) (16,498) Income tax expense (benefit) 2,880 (652) 417 Net income (loss) 78,816 (5,201) (16,915) Net (loss) attributable to non-controlling interests (10,156) (731) (12,443) Net income (loss) attributable to Maravai LifeSciences Holdings, Inc. $ 88,972 $ (4,470) $ (4,472) Net income (loss) per Class A common share/unit attributable to Maravai LifeSciences Holdings, Inc.: Basic $ 7.43 $ (0.03) $ (0.07) Diluted $ 2.36 $ (0.03) $ (0.07) Weighted average number of Class A common shares/units outstanding: Basic 10,351,137 253,916,941 253,916,941 Diluted 28,907,979 253,916,941 253,916,941 The accompanying notes are an integral part of these consolidated financial statements. 107 Table of Contents MARAVAI LIFESCIENCES HOLDINGS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) Year Ended December 31, 2020 2019 2018 Net income (loss) $ 78,816 $ (5,201) $ (16,915) Other comprehensive income (loss): Foreign currency translation adjustments (44) 34 (69) Total other comprehensive income (loss) 78,772 (5,167) (16,984) Comprehensive loss attributable to non-controlling interests (10,156) (731) (12,443) Total comprehensive income (loss) attributable to Maravai LifeSciences Holdings, Inc. $ 88,928 $ (4,436) $ (4,541) The accompanying notes are an integral part of the consolidated financial statements 108 Table of Contents MARAVAI LIFESCIENCES HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’/MEMBER’S EQUITY (in thousands) Class A Common Stock Class B Common Stock Member's Equity Shares Amount Shares Amount Additional Paid In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Non-controlling Interest Total Stockholders'/Member's Equity January 1, 2018 $ 199,614 — $ — — $ — $ — $ — $ (98) $ 15,428 $ 214,944 Distribution to non-controlling interest holder (52,056) — — — — — — — — (52,056) Repurchase of incentive units (9) — — — — — — — — (9) Equity-based compensation 1,495 — — — — — — — 626 2,121 Net loss (4,470) — — — — — — — (731) (5,201) Foreign currency translation adjustment — — — — — — — (69) — (69) December 31, 2018 144,572 — — — — — — (167) 3,611 148,016 Cumulative effect of adoption of ASC 606 326 — — — — — — — — 326 Repurchase of incentive units (227) — — — — — — — — (227) Equity-based compensation 1,328 — — — — — — — 351 1,679 Net loss (4,470) (731) (5,201) Foreign currency translation adjustment — — — — — — — 34 — 34 December 31, 2019 141,529 — — — — — — (133) 3,231 144,627 Activity prior to initial public offering ("IPO") and related Organizational Transactions: Repurchase of MLSC Holdings, LLC ("MLSC") incentive units (9,140) — — — — — — — — (9,140) Distributions to non-controlling interests holders (88,880) — — — — — — — — (88,880) Unit-based compensation 1,793 — — — — — — — 1,483 3,276 Net income 88,118 — — — — — — — 98 88,216 Purchase of non-controlling interests in MLSC (161,615) — — — — — — — (4,812) (166,427) Foreign currency translation adjustment — — — — — — — (1) — (1) Effects of the IPO and related Organizational Transactions: Effects of Organizational Transactions 28,195 28,966 289 160,974 1,610 (200,390) — 114 10,236 (159,946) Issuance of Class A common stock in connection with the IPO, net of issuance costs of $108,571 — 69,000 690 — — 1,753,742 — — — 1,754,432 109 Table of Contents MARAVAI LIFESCIENCES HOLDINGS, INC. Class A Common Stock Class B Common Stock Member's Equity Shares Amount Shares Amount Additional Paid In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Non-controlling Interest Total Stockholders'/Member's Equity Acquisition of preexisting LLC Units from MLSH 1 — — — — $ — (1,421,760) $ — $ (29) (2,538) (1,424,327) Non-controlling interest adjustment for purchase of LLC Units from Topco LLC with proceeds from IPO $ — — $ — — $ — $ (58,940) $ — $ (1) $ 58,941 $ — Repurchase and retirement of Class A common from MLSH 2 — (1,319) (13) — — (33,645) — — — (33,658) Equity-based compensation — — — — — 2,980 — — 17,407 20,387 Net loss — — — — — — (3,044) — (17,787) (20,831) Recognition of impact of entering into Tax Receivable Agreement — — — — — 42,776 — — — 42,776 Activity subsequent to the initial public offering and related Organizational Transactions: Equity-based compensation — — — — — 362 — — 604 966 Net income — — — — — — 3,898 — 7,533 11,431 Foreign currency translation adjustment — — — — — — — 6 10 16 Tax distribution to non-controlling interest holder — — — — — — — — (8,171) (8,171) December 31, 2020 $ — 96,647 $ 966 160,974 $ 1,610 $ 85,125 $ 854 $ (44) $ 66,235 $ 154,746 The accompanying notes are an integral part of the consolidated financial statements 110 Table of Contents MARAVAI LIFESCIENCES HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2020 2019 2018 Operating activities Net income ( loss) $ 78,816 $ (5,201) $ (16,915) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation 5,517 3,810 2,225 Amortization of intangible assets 20,320 20,274 20,122 Change in provision for doubtful accounts 233 (152) (415) Amortization of deferred financing costs 1,825 1,734 1,498 Equity-based compensation expense 24,629 1,679 2,121 Loss on long-term debt refinancing 7,592 — 5,622 Deferred income taxes (5,464) (1,159) 317 Change in estimated fair value of contingent consideration — 322 939 Gain on sale and leaseback transaction (19,002) — — Acquired and in-process research and development costs 2,881 — — Non-cash interest expense recognized on lease facility financing obligation 1,289 — — Financing costs incurred for line of credit (3,239) — — Other 897 518 141 Changes in operating assets and liabilities: Accounts receivable (33,144) (1,888) (4,146) Inventory (19,099) 106 2,311 Prepaid expenses and other assets (5,518) (1,983) (696) Other assets — — (570) Accounts payable 1,176 2,470 (871) Accrued expenses and other current liabilities 17,777 3,505 3,123 Earn-out liability — — (14,547) Other long-term liabilities (2,519) — 354 Deferred revenue 77,220 80 (799) Net cash provided by (used in) operating activities 152,187 24,115 (186) Investing activities Cash paid for asset acquisition, net of cash acquired (3,024) — — Working capital adjustment for acquisition in prior year — — 160 Acquisition of patents — — (70) Purchases of property and equipment (25,408) (17,148) (3,541) Proceeds from sale of building 34,500 — — Net cash provided by (used in) investing activities 6,068 (17,148) (3,451) Financing activities Distributions to non-controlling interests holders (97,051) — (52,056) Proceeds from borrowings of long-term debt, net of discount 609,000 — 310,630 Financing costs incurred for long-term debt (9,295) — (6,711) Repurchase of incentive units (9,140) (227) (9) Principal repayments of long-term debt (411,875) (2,500) (254,987) Payment of contingent consideration (1,439) (1,300) (5,819) Payments made on facility financing lease obligation and capital lease (201) (140) (215) Payment for non-controlling interests in MLSC (120,005) — — Payment to MLSH 2 for Blocker Mergers (208,053) — — Proceeds from issuance of Class A common stock sold in IPO, net of offering costs 1,757,245 — — 111 Table of Contents MARAVAI LIFESCIENCES HOLDINGS, INC. Year Ended December 31, 2020 2019 2018 Proceeds from issuance of Class B common stock sold to MLSH 1 1,687 — — Purchase of LLC Units from MLSH 1 (1,424,324) — — Repurchase of Class A common stock from MLSH 2 (33,658) — — Proceeds from employee stock purchase plan 321 — — Net cash provided by (used in) financing activities 53,212 (4,167) (9,167) Effects of exchange rate changes on cash 17 34 (69) Net increase (decrease) in cash, and restricted cash 211,484 2,834 (12,873) Cash, beginning of period 24,700 21,866 34,739 Cash, end of period $ 236,184 $ 24,700 $ 21,866 Supplemental cash flow information Cash paid for interest $ 28,916 $ 28,728 $ 25,678 Cash paid for income taxes $ 5,006 $ 802 $ 97 Supplemental disclosures of non-cash investing and financing activities Property and equipment included in accounts payable and accrued expenses $ 1,990 $ 2,765 $ 196 Financing cost deducted from long-term debt proceeds $ 6,000 $ — $ 3,800 Building and improvements capitalized under lease financing transaction $ 700 $ 51,200 $ 15,374 Property and equipment under new capital lease $ — $ 15 $ 87 Exchange of units for MLSC non-controlling interests $ 46,422 $ — $ — Exchange of Class A common stock for the Blocker Mergers $ 782,073 $ — $ — Recognition of deferred tax assets from Organizational Transactions $ 441,984 $ — $ — Recognition of liabilities under Tax Receivable Agreement $ 389,546 $ — $ — IPO issuance costs included in accounts payable and accrued expenses $ 2,816 $ — $ — Receivable from lessor funded financing $ 1,987 $ — $ — The accompanying notes are an integral part of the consolidated financial statements 112 Table of Contents MARAVAI TOPCO HOLDINGS, LLC AND SUBSIDIARIES NOTES TO THE 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”, “our”) was formed as a Delaware corporation in August 2020 for the purpose of facilitating an initial public offering (“IPO”) of its Class A common stock, facilitate certain organizational transactions and to operate the business of Maravai Topco Holdings, LLC (“Topco LLC”) and its consolidated subsidiaries. We are a leading life sciences company providing critical products to enable the development of drug therapies, diagnostics, novel vaccines and support research on human diseases. Our products address the key phases of biopharmaceutical development and include complex nucleic acids for diagnostic and therapeutic applications, antibody-based products to detect impurities during the production of biopharmaceutical products, and products to detect the expression of proteins in tissues of various species. The Company is headquartered in San Diego, California and has three principal businesses: Nucleic Acid Production, Biologics Safety Testing, and Protein Detection. 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. Our Protein Detection business sells innovative labeling and detection reagents for researchers in immunohistochemistry. Organizational Transactions and Initial Public Offering In November 2020, the Company completed its initial public offering (“IPO”) and sold 69,000,000 shares of Class A common stock at a public offering price of $27.00 per share and received proceeds of $1.8 billion, net of underwriting discounts and commissions, which the Company used to purchase 55,823,011 previously-issued and 3,703,704 newly-issued LLC units in Topco LLC to pay Maravai Life Sciences Holdings 2 (“MLSH 2”) as consideration for certain organizational transactions that occurred before the IPO. Immediately prior to, and in connection with, the completion of our IPO, the Company completed a series of organizational transactions (“Organizational Transactions”), including: • The amendment and restatement of Topco LLC’s operating agreement (the “New LLC Operating Agreement”) to, among other things, (i) modify Topco LLC’s capital structure by replacing the membership interests held by Topco LLC’s existing owners with a new class of Topco LLC units (the “LLC Units”) and (ii) appoint the Company as the sole managing member of Topco LLC. • Amend and restate the Company’s certificate of incorporation to among other things, authorize the Company to issue two classes of common stock: Class A common stock and Class B common stock. • The issuance of shares of the Company’s Class B common stock to Maravai Life Sciences Holdings, LLC (“MLSH 1”) which was Topco LLC’s pre-IPO owner on a one-to-one basis with the number of LLC Units owned; and • The acquisition, by merger, of two members of Topco LLC (“the Blocker Entities”), for which we issued 28,965,664 shares of Class A common stock and paid cash of $208.1 million as consideration (“the Blocker Mergers”) The Company is the sole managing member of Topco LLC, which operates and controls TriLink Biotechnologies, LLC, Glen Research, LLC, Vector Laboratories, Inc., MockV Solutions, LLC and Cygnus Technologies, LLC (“Cygnus”) and their respective subsidiaries. MLSH 1 is the only other member of Topco LLC. Although we have a minority economic interest, we have sole voting power in, and control the management of, Topco LLC. As a result, we consolidate Topco LLC financial results and report a non-controlling interest related to the portion of Topco LLC not owned by us. As of December 31, 2020, we owned approximately 38% of Topco LLC. The Organizational Transactions were considered transactions between entities under common control. As a result, the consolidated financial statements for periods prior to the IPO and the Organizational Transactions have been adjusted to combine the previously separate entities for presentation purposes. 113 Table of Contents 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. All significant intercompany transactions and accounts between the businesses comprising the Company have been eliminated in the accompanying consolidated financial statements. Our audited consolidated financial statements are presented in U.S. dollars. They have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Variable Interest Entities The Company consolidates all entities that it controls through a majority voting interest or as the primary beneficiary of a variable interest entity (“VIE”). In determining whether the Company is the primary beneficiary of an entity, the Company applies a qualitative approach that determines whether it has both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to that entity. The Company’s determination about whether it should consolidate such VIEs is made continuously as changes to existing relationships or future transactions may result in a consolidation event. Unit Split On November 11, 2020, Topco LLC’s member approved an amendment to its operating agreement to increase the authorized common units from 1,000 to 253,916,941 and effect a 253,916.941-for-1 split of its common units. All of the unit and per unit information included in the accompanying consolidated financial statements has been adjusted to reflect the split. Use of Estimates The preparation of consolidated financial statements in accordance with GAAP requires the Company to make judgements, 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, revenue recognition, the net realizable value of inventory, expected future cash flows including growth rates, discount rates, terminal values and other assumptions and estimates used to evaluate the recoverability of long-lived assets, estimated fair values of intangible assets and goodwill and the payable to related parties pursuant to the Tax Receivable Agreement, amortization methods and periods, valuation of intangible assets, the fair value of leased buildings and other assumptions associated with lease financing transactions, the estimated fair value of our long-term debt, equity-based compensation, the valuation of incentive units, allowance for doubtful accounts, and accounting for income taxes and assessment of valuation allowances. Actual results could differ materially from those estimates. Revenue Recognition The Company generates revenue from the sale of products and services and the performance of 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 114 Table of Contents 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 include; 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. 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 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. The Company also has certain licensing and royalty arrangements with an immaterial amount of revenue. Protein Detection The Company also manufactures and sells protein labeling and detection reagents to customers that are used for basic research and development. The contracts to sell these catalog products consist of a single performance obligation to deliver the reagent products. Revenue from these contracts is recognized at a point in time, generally upon shipment of the final product to the customer. We recognize royalty revenue related to certain out-licensing and royalty arrangements in the period the sales or usage occur using third-party evidence to estimate the amount to be recorded. To date this revenue has not been material to the consolidated financial statements. The Company has elected the practical exemption 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 at December 31, 2020 and 2019, respectively. 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 115 Table of Contents 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 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 contract receivable when it has an unconditional right to consideration. Contract assets balances, which are included in prepaid and other current assets, totaled $0.2 million and $0.8 million as of December 31, 2020 and 2019, respectively. 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 $79.2 million and $1.0 million as of December 31, 2020 and 2019, 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): For the year ended December 31, 2020 Nucleic Acid Production Biologics Safety Testing Protein Detection Total North America $ 115,216 $ 21,787 $ 13,343 $ 150,346 Europe, the Middle East and Africa 69,637 14,862 5,606 90,105 Asia Pacific 21,444 17,946 3,783 43,173 Latin and Central America 23 302 149 474 Total revenue $ 206,320 $ 54,897 $ 22,881 $ 284,098 116 Table of Contents For the year ended December 31, 2019 Nucleic Acid Production Biologics Safety Testing Protein Detection Total North America $ 49,757 $ 18,984 $ 15,284 $ 84,025 Europe, the Middle East and Africa 15,975 12,102 6,805 34,882 Asia Pacific 6,843 12,964 3,784 23,591 Latin and Central America 27 366 249 642 Total revenue $ 72,602 $ 44,416 $ 26,122 $ 143,140 For the year ended December 31, 2018 Nucleic Acid Production Biologics Safety Testing Protein Detection Total North America $ 44,883 $ 14,900 $ 14,393 $ 74,176 Europe, the Middle East and Africa 9,880 11,443 6,522 27,845 Asia Pacific 5,249 11,928 4,097 21,274 Latin and Central America 45 221 272 538 Total revenue $ 60,057 $ 38,492 $ 25,284 $ 123,833 The following table provides a disaggregation of revenue for the years ended December 31, 2020 and 2019, based on the pattern of revenue recognition (in thousands): 2020 2019 Revenue recognized at a point in time $ 272,231 $ 133,091 Revenue recognized over time 11,867 10,049 Total revenue $ 284,098 $ 143,140 Prior to January 1, 2019, revenue from the sale of products and services was recognized when all of the following conditions were met: (1) there was persuasive evidence of an arrangement; (2) the product had been delivered to the customer; (3) the collection of the fees was reasonably assured; and (4) the amount of fees to be paid by the customer was fixed or determinable. When an arrangement involved multiple elements, the multiple elements, referred to as deliverables, were evaluated to determine whether they represent separate units of accounting. The Company performed this evaluation at the inception of an arrangement and as each item was delivered in the arrangement. Generally, the Company accounted for a deliverable separately if the delivered item has standalone value to the customer and delivery or performance of the undelivered item or service was probable and substantially in the Company’s control. When multiple elements could be separated into separate units of accounting, arrangement consideration was allocated at the inception of the arrangement, based on each unit’s relative selling price, and recognized based on the method most appropriate for that unit. Product sales Revenue for manufacturing of products was recognized upon the delivery of the products in accordance with the terms of the contract, which specify transfer of title and risk of loss. Payments received from customers in advance of manufacturing their products was recorded as deferred revenue until the products were delivered. Service revenue The Company also enters into custom antibody and assay development contracts with customers. The Company performs a number of acts under these contracts for which the pattern of performance cannot be discerned and therefore the Company recognizes service revenue on a straight-line basis over the contractual term or expected term of the arrangement, whichever is longer. Payments received in advance of performing these services was recognized as deferred revenue. Revenue recognized at any point in time is limited to cash received and amounts contractually due. 117 Table of Contents Shipping and Handling Costs Shipping and handling costs, which are charged to customers, are included in revenue. Shipping and handling charges included in revenue were approximately $3.3 million, $3.2 million and $2.8 million for the years ended December 31, 2020, 2019, and 2018, respectively. Freight and supplies costs directly associated with shipping products to customers are included as a component of cost of revenue. Research and Development Research and development (“R&D”) expenses include personnel costs, including salaries, benefits and equity-based compensation for laboratory personnel, and costs of supplies. R&D costs are expensed as incurred. Payments made prior to the receipt of goods or services to be used in R&D are recognized as prepaid assets until the goods are received or services are rendered. Advertising Costs The Company expenses advertising costs as incurred. Advertising costs incurred were approximately $1.2 million, $1.1 million and $0.6 million during the years ended December 31, 2020, 2019 and 2018, respectively. Equity-Based Compensation Stock-Based Compensation On November 19, 2020, in connection with the IPO, the Company’s board of directors adopted the 2020 Omnibus Incentive Plan (the “2020 Plan”). We have subsequently granted stock options to purchase shares of our Class A commons stock as well as restricted stock units (“RSUs”) from the 2020 Plan. The Company measures stock-based compensation at fair value on the grant date of the award. The fair value of RSUs is determined based on the number of shares granted and the quoted market price of the Company’s Class A common stock on the date of grant. For equity awards that vest subject to the satisfaction of service requirements, compensation expense is measured based on the fair value of the award on the date of grant and expense is recognized on a straight-line basis over the requisite service period, which is typically four years. We account for forfeitures as they occur. Stock-based compensation is classified in the accompanying consolidated statements of operations based on the function to which the related services are provided. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model. The assumptions used in estimating the fair value of these awards, such as expected term, expected dividend yield, volatility and risk-free interest rate, represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. If actual results are not consistent with the Company’s assumptions and judgments used in making these estimates, the Company may be required to increase or decrease compensation expense, which could be material to the Company’s consolidated results of operations. Unit-Based Compensation Prior to the IPO, MLSH 1 had granted unit-based awards to certain executives of Topco LLC who are also executives of the Company in the form of non-vested units. Topco LLC’s controlled subsidiary, MLSC, also granted unit-based awards only to certain employees of its subsidiaries (collectively, the “Incentive Units”). All awards of Incentive Units were measured based on the fair value of the award on the date of grant. The Company recognizes compensation expense for MLSH 1 awards in its consolidated financial statements as MLSH 1 is considered to be the economic interest holder in Topco LLC. Compensation expense for the Incentive Units is recognized over their requisite service period. Forfeitures are recognized when they occur. These Incentive Units are subject to service, market and performance conditions. For Incentive Units subject to performance conditions, the Company evaluates the probability of achieving each performance condition at each reporting date and recognizes expense over the requisite service period when it is deemed probable that a performance condition will be met using the accelerated attribution method over the requisite service period. Upon the completion of the IPO all of the Incentive Units subject to a performance and market condition vested (see Note 10). The grant date fair value of Incentive Unit awards was determined by the Company’s Board of Directors with the assistance of management and an independent third-party valuation specialist. The grant date fair value of Incentive Units was determined first by estimating an aggregate equity value using a weighting of discounted cash flows, comparable public companies, and comparable-transactions valuation methodologies. An Option-Pricing Method, which utilizes certain assumptions including volatility, time to liquidation, a risk-free interest rate, and an assumption for a discount for lack of marketability, was then used to allocate the total enterprise values to the different classes of ownership according to their rights and preferences. In 118 Table of Contents determining the fair value of the Incentive Units, the methodologies used to estimate the enterprise values were performed using methodologies, approaches, and assumptions consistent with the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (“AICPA Accounting and Valuation Guide”). Income Taxes We are subject to U.S. federal and state income taxes. We are the controlling member of Topco LLC, which has been, and will continue to be, treated as a partnership for U.S. federal and state income tax purposes. Topco LLC’s wholly-owned U.S. subsidiary, Maravai Life Sciences, Inc. (“Maravai Inc.”) and its subsidiaries, are taxpaying entities in the U.S., Canada, and the U.K. Topco LLC’s other subsidiaries are treated as pass-through entities for federal and state income tax purposes. The income or loss generated by these entities is not taxed at the LLC level. As required by U.S. tax law, income or loss generated by these LLCs passes through to their owners. As such, our tax provision consists solely of the activities of Maravai Inc. and its subsidiaries, as well as our share of income generated by Topco LLC. We account for income taxes under the asset and liability method of accounting. Current income tax expense or benefit represents the amount of income taxes expected to be payable or refundable for the current year. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as for operating loss and tax credit carryforwards. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which we expect to recover or settle those temporary differences. We recognize the effect of a change in tax rates on deferred tax assets and liabilities in the results of operations in the period that includes the enactment date. We reduce the measurement of a deferred tax asset, if necessary, by a valuation allowance if it is more likely than not that we will not realize some or all of the deferred tax asset. The Company’s tax positions are subject to income tax audits. We account for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon technical merits, it is more likely than not that the position will be sustained upon examination. Significant judgment is required in determining the accounting for income taxes. In the ordinary course of business, many transactions and calculations arise where the ultimate tax outcome is uncertain. Our judgments, assumptions and estimates relative to the accounting for income taxes take into account current tax laws, our interpretation of current tax laws, and possible outcomes of future audits conducted by foreign and domestic tax authorities. Although we believe that our estimates are reasonable, the final tax outcome of matters could be different from our assumptions and estimates used when determining the accounting for income taxes. Such differences, if identified in future periods, could have a material effect on the amounts recorded in our consolidated financial statements. Interest and penalties related to unrecognized tax benefits are recognized in income tax expense in the accompanying consolidated statements of operations and comprehensive income (loss). The provision for income taxes includes the effects of any accruals that the Company believes are appropriate, as well as any related net interest and penalties. On March 18, 2020, the Families First Coronavirus Response Act (“FFCR Act”), and on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) were each enacted in response to the COVID-19 pandemic. The FFCR Act and the CARES Act contain numerous income tax provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. On June 29, 2020, Assembly Bill 85 (“A.B. 85”) was signed into California law. A.B. 85 provides for a three-year suspension of the use of net operating losses for medium and large businesses and a three-year cap on the use of business incentive tax credits to offset no more than $5.0 million of tax per year. A.B. 85 suspends the use of net operating losses for taxable years 2020, 2021 and 2022 for certain taxpayers with taxable income of $1.0 million or more. The carryover period for any net operating losses that are suspended under this provision will be extended. A.B. 85 also requires that business incentive tax credits including carryovers may not reduce the applicable tax by more than $5.0 million for taxable years 2020, 2021 and 2022. The FFCR Act and A.B. 85 did not have a material impact on the Company’s consolidated financial statements as of December 31, 2020; however, the Company continues to examine the impacts the FFCR Act and A.B. 85 may have on its business, results of operations, financial condition, liquidity and related disclosures. During the year-ended December 31, 2020, the Company released $1.3 million of valuation allowance on its interest expense carryforward due to the increase in limitation provided by the CARES Act (see Note 12). 119 Table of Contents Payables to Related Parties Pursuant to the Tax Receivable Agreement In connection with the completion of our IPO we entered into a TRA with MLSH 1 and MLSH 2. The TRA provides for the payment by us to MLSH 1 and MLSH 2, collectively, of 85% of the amount of tax benefits, if any, that we actually realize, or in some circumstances are deemed to realize from exchanges of LLC Units (together with the corresponding shares of Class B common stock) for Class A common stock, as a result of (i) certain increases in the tax basis of assets of Topco LLC and its subsidiaries resulting from purchases or exchanges of LLC Units, (ii) certain tax attributes of the Organization Transactions and (iii) certain other tax benefits related to our entering into the TRA, including tax benefits attributable to payments that we make under the TRA (collectively, the “Tax Attributes”). The payment obligations under the TRA are not conditioned upon any LLC Unitholder maintaining a continued ownership interest in us or Topco LLC and the rights of MLSH 1 and MLSH 2 under the TRA are assignable. We expect to benefit from the remaining 15% of the tax benefits, if any, that we may actually realize. We accrue a liability for the payable to related parties for the TRA and a reduction to stockholders’ equity, when it is deemed probable that the Tax Attributes will be used to reduce our taxable income, as the contractual percentage of the benefit of Tax Attributes that we expected to receive over a period of time. The current portion, if any, of the liability is the amount estimated to be paid within one year of the consolidated balance sheet date. For purposes estimating the value of the payable to related parties for the TRA, the tax benefit deemed realized by us and payable to MLSH 1 and MLSH 2 is computed by taking 85% of the difference of between our undiscounted forecasted cash income tax liability over the term of benefit of the Tax Attributes and the forecasted amount of such taxes that we would have been required to pay had there been no Tax Attributes. The TRA applies to each of our taxable years, beginning with the taxable year that the TRA is entered into. There is no maximum term for the TRA and the TRA will continue until all such tax benefits have been utilized or expired unless we exercise our right to terminate the TRA for an agreed-upon amount equal to the estimated present value of the remaining payments to be made under the agreement. We may record additional liabilities under the TRA when LLC Units of Topco LLC are exchanged in the future and as our estimates of the future utilization of the tax benefits change. If, due to a change in facts, these tax attributes are not utilized in future years, it is reasonably possible no amounts would be paid under the TRA. In this scenario, the reduction of the liability under the TRA would result in a benefit to our consolidated statement of operations. Subsequent adjustments to the payable to related parties for the TRA based on changes in anticipated future taxable income are recorded in our consolidated statement of operations. Non-Controlling Interests Non-controlling interests represent the portion of profit or loss, net assets and comprehensive loss of our consolidated subsidiaries that is not allocable to the Company based on our percentage of ownership of such entities. Non-controlling interests consist of the following: • Until November, 2020 Topco LLC held a 70% ownership interest in MLSC Holdings, LLC (“MLSC”) through its consolidated subsidiaries with the remaining 30% being recorded as non-controlling interests in our consolidated financial statements as of December 31, 2019. MLSC net income or loss was attributed to the non-controlling interests using an attribution method, similar to the hypothetical liquidation at book value method, based on the distribution provisions of the MLSC Amended and Restated Limited Liability Company Agreement (“MLSC LLC Agreement”). In November 2020, and before the closing of the IPO, Topco LLC repurchased all of the outstanding non-controlling interests in MLSC for $166.4 million (see Note 11) . • In November 2020, based on the Organizational Transactions described above, we became the sole managing member of Topco LLC. As of December 31, 2020, we hold approximately 38% of the outstanding LLC Units of Topco LLC, and approximately 62% of the outstanding LLC Units of Topco LLC are held by MLSH 1. Therefore, we report non-controlling interests based on LLC Units of Topco LLC held by MLSH 1 on our consolidated balance sheet as of December 31, 2020. 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 consolidated statements of operations and consolidated statements of comprehensive income (loss). MLSH 1 is entitled to exchange LLC Units, 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 year ended December 31, 2020 MLSH 1 had not exchanged any Paired Interests. During the year ended December 31, 2018, $52.0 million of capital distributions were made to certain legacy unit holders of MLSC Holdings, LLC (“MLSC”), the parent entity of Cygnus. The 2018 distribution was treated as a preferred return of capital 120 Table of Contents per the terms of the MLSC limited liability company agreement (the “MLSC LLC Agreement”). There were no such distributions made during the year ended December 31, 2019. A tax distribution of $0.3 million was made to the non-controlling interest holders of MLSC during the year ended December 31, 2020. Segment Information The Company operates in three reportable segments. Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker in deciding how 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. Substantially all of our long-lived assets are located in the United States. Cash Cash consists of deposits held at financial institutions. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable primarily consist of amounts due from customers for product sales and services. Estimated allowances for doubtful accounts are provided for based on an evaluation of potential uncollectible accounts. The Company evaluates accounts receivable to determine collectability. Judgments and estimates are involved in performing this evaluation, which are based on the Company’s assessment of a customer’s ability to pay, credit quality of the customer, age of the receivable balance and current economic conditions. As of December 31, 2020 and 2019, the allowance for doubtful accounts was approximately $0.4 million and $0.1 million, respectively. Write-offs of accounts receivable and recoveries were not significant during either 2020 or 2019. To manage credit risk certain Company subsidiaries require select customers to prepay for product prior to shipment. Such prepayments approximated $1.1 million and $0.2 million as of December 31, 2020 and 2019, respectively, and were recorded within accrued expenses and other current liabilities and subsequently recognized as revenue upon shipment. Inventory Inventories consist of raw materials, work in process and finished goods. Inventories are stated at the lower of cost (weighted average cost) or net realizable value. Inventory costs include materials, direct labor and manufacturing overhead, which are related to the purchase or production of inventories. The Company regularly monitors for excess and obsolete inventory based on its estimates of expected sales volumes, production capacity and expiration of raw materials, work-in-process and finished products excess and obsolete inventories and reduces the carrying value of inventory accordingly. The Company writes down inventory that has become obsolete, inventory that has a cost basis in excess of its expected net realizable value, and inventory in excess of expected manufacturing requirements. Any write-downs of inventories are charged to cost of revenue. A change in the estimated timing or amount of demand for the Company’s products could result in reduction to the recorded value of inventory quantities on hand. Any significant unanticipated changes in demand or unexpected quality failures could have a significant impact on the value of inventory and reported operating results. During all periods presented in the accompanying consolidated financial statements, there have been no material adjustments related to a revised estimate of our inventory valuations. Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the following estimated useful lives: Assets Useful Lives Buildings 20-35 years Building improvements 5-15 years Furniture, fixtures, equipment and software 3-11 years Leasehold improvements are amortized over the shorter of the related lease term or useful life. 121 Table of Contents Maintenance and repairs are charged to operations when incurred, while betterments or renewals are capitalized. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in the results of operations. The Company is considered to be an owner lessee of certain buildings (Notes 5 and 6). The leased buildings are being depreciated over the lease term to a residual value that will approximate the remaining lease financing obligation at the end of the lease. Internal-Use Software Costs The Company capitalizes costs for acquired or developed software for internal use. Costs related to preliminary project activities and post implementation activities are expensed as incurred. Once it is probable the project will be completed, and the software will be used to perform the function intended, internal and external costs, if direct and incremental, are capitalized until the application is substantially complete and ready for use. Capitalized costs are included in property and equipment within furniture, fixtures, equipment, and software. The Company capitalized approximately $0.9 million and $0.7 million of software development costs in each of the years ended December 31, 2020 and 2019, respectively, and recognized amortization expense of $0.4 million, $0.2 million, and an insignificant amount for the years ended December 31, 2020, 2019, and 2018, respectively. Goodwill Goodwill represents the excess of consideration transferred over the estimated fair value of assets acquired and liabilities assumed in a business combination. The Company conducts a goodwill impairment analysis at least annually and more frequently if changes in facts and circumstances indicate that the fair value of the Company’s reporting units may be less than carrying amount. In performing each annual impairment assessment and any interim impairment assessment, the Company determines if it should qualitatively assess whether it is more likely than not that the fair value of goodwill is less than its carrying amount (the qualitative impairment test). If the Company concludes it is more likely than not that the fair value of the reporting unit is less than its carrying amount, or elect not to use the qualitative impairment test, a quantitative impairment test is performed The Company annual or interim quantitative impairment testing is performed by comparing the estimated fair value of the reporting unit to its carrying value. An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the carrying value of goodwill. Intangible Assets The Company’s finite-lived intangible assets represent purchased intangible assets and primarily consist of trade names, customer relationships, patents, and developed technology. Certain criteria are used in determining whether intangible assets acquired in a business combination must be recognized and reported separately. Finite-lived intangible assets are initially recognized at fair value, are subject to amortization and are subsequently stated at amortized cost. The Company’s finite-lived intangible assets are amortized using a method that reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise used. If that pattern cannot be reliably determined, the intangible assets are amortized using the straight-line method over their estimated useful lives and are tested for impairment along with other long-lived assets. Amortization related to patents and developed technology is allocated to cost of revenue whereas amortization associated with trade names and customer relationships is allocated to selling, general and administrative expenses. Impairment of Long-Lived and Intangible Assets The Company periodically reviews long-lived assets, including property and equipment and finite-lived intangible assets, to determine whether current events or circumstances indicate that such carrying amounts may not be recoverable. If such facts or circumstances are determined to exist, an estimate of the undiscounted future cash flows of these assets is compared to the carrying value the assets to determine whether impairment exists. If the assets are determined to be impaired, the loss is measured based on the difference between the fair value and carrying value of the assets. No impairment loss was recognized for long-lived or finite-lived intangible assets during the years ended either December 31, 2020, 2019 or 2018. Contingent Consideration Contingent consideration relates to the potential payment for an acquisition that is contingent upon the achievement of the acquired entity meeting certain performance milestones. 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 as an operating expense in the Company’s consolidated statement of 122 Table of Contents operations. Subsequent changes in the fair value of the contingent consideration are classified as an adjustment to cash flows from operating activities in the consolidated statement of cash flows because the change in fair value was is an input in determining net loss. 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. Significant 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. In 2017, the Company acquired Glen Research Corporation as an acquisition of a business. The purchase agreement called for contingent consideration of up to $4.0 million to be paid out upon the achievement of defined 2018 and 2019 revenue targets which were subsequently achieved. The change in fair value of this contingent consideration during 2019 and 2018, was approximating $0.3 million and $0.9 million, respectively. The first $2.0 million was paid to former owners of Glen Research Corporation during 2019, and the remaining $2.0 million, was paid to these former owners during 2020. Debt Issuance Costs Costs incurred in connection with obtaining new debt financing are deferred and amortized over the life of the related financing. If such financing is settled or replaced prior to maturity with debt instruments that have substantially different terms, the settlement is treated as an extinguishment and the unamortized costs are charged to gain or loss on extinguishment of debt. If such financing is settled or replaced with debt instruments from the same lender that do not have substantially different terms, the new debt agreement is accounted for as a modification for the prior debt agreement and the unamortized costs remain capitalized, the new original issuance discount costs are capitalized, and any new third-party costs are charged to expense. Deferred costs are recognized as a direct reduction in the carrying amount of the debt instrument on the consolidated balance sheets and are amortized to interest expense over the term of the related debt using the effective interest method. Foreign Currency The Company translates the assets and liabilities of its non-U.S. dollar denominated functional currency subsidiaries into U.S. dollars using exchange rates in effect at the end of each period. Revenue and expenses for its foreign subsidiaries are translated using rates that approximate those in effect during the period. Translation gains and losses are recognized in accumulated other comprehensive income (loss) within stockholders’/member’s equity on the consolidated balance sheets. Foreign currency transaction gains and losses are included in net income or loss for the period. Foreign currency losses have not been material for the years ended December 31, 2020, 2019 or 2018. Accumulated Other Comprehensive Loss Comprehensive income (loss) and its components encompass all changes in equity other than those with stockholders or member. Comprehensive income (loss) for the Company consists of foreign currency translation adjustments. There were no reclassifications out of accumulated other comprehensive loss during the periods presented. 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 December 31, 2020 and 2019, the carrying value of current assets and liabilities approximates fair value due to the short maturities of these instruments. The fair values of the Company’s long-term debt approximate carrying value, excluding the 123 Table of Contents 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). During 2017, the Company entered into two interest rate cap agreements to manage a portion of its variable interest rate risk on its then current borrowings. During 2018, in connection with the Company’s debt refinancing, the Company entered into two additional interest rate cap agreements, bringing its total to four agreements as of December 31, 2019. The contracts entitled the Company to receive from the counterparty at specified dates the amount, if any, by which a specified market rate exceeds the cap strike interest rate, applied to the contracts notional principal amount of approximately $262.0 million. No principal payments were exchanged. The interest rate cap agreements have not been designated as a hedging relationship and were recognized on the consolidated balance sheet at fair value within non-current assets with changes in fair value recognized in the consolidated statements of operations and comprehensive income (loss). The fair value of the interest rate caps as of December 31, 2019 and 2018 were insignificant and all four interest rate cap agreements matured during 2020. Leases, Deferred Rent, and Lease Facility Financing Obligation The Company rents its office space and facilities under non-cancelable operating lease agreements and recognizes the related rent expense on a straight-line basis over the term of the lease. The Company’s lease agreements contain rent holidays, scheduled rent increases, and renewal options. Rent holidays and scheduled rent increases are included in the determination of rent expense to be recorded ratably over the lease term. The Company does not assume renewals in its determination of the lease term unless they are deemed to be reasonably assured at the inception of the lease. The Company begins recognizing rent expense on the date that it obtains the legal right to use and control the leased space. Deferred rent consists of the difference between cash payments and the recognition of rent expense on a straight-line basis for the buildings the Company occupies. In certain arrangements, the Company is involved in the construction of improvements to buildings it is leasing. To the extent the Company is involved with the structural improvements of the construction project or takes construction risk, the Company is considered to be the owner of the building and related improvements for accounting purposes during the construction period. The Company records the fair value of the building and related landlord and lessee funded improvements subject to the lease within property and equipment on the consolidated balance sheet. The Company also records a corresponding construction payable obligation on its consolidated balance sheet representing the amounts financed by the lessor for the building and lessor financed improvements. Once a construction project is complete, the Company considers the requirements for sale-leaseback accounting treatment. If the Company concludes the arrangement does not qualify for sale-leaseback accounting treatment, the building and related improvements remain on the Company’s consolidated balance sheet and are subject to depreciation and assessment of impairment. For such arrangements, at both pre and post the construction period, the Company bifurcates its lease payments into a portion allocated to the building and a portion allocated to the parcel of land on which the building has been built considering their respective fair values. The land lease portion of the lease payments allocated to the land is treated for accounting purposes as operating lease payments, and therefore is recorded as rent expense in the consolidated statements of operations. The portion of the lease payments allocated to the building is further bifurcated into a portion allocated to interest expense and a portion allocated to reduce the lease financing obligation. The interest rate used for the lease financing obligation represents the Company’s estimated incremental borrowing rate at the inception of the lease, adjusted to reduce any built-in loss. The fair value of the leased property, less its expected residual value, is depreciated over the term of the lease. At the conclusion of the lease term, the Company will de-recognize both the then carrying values of the asset and lease facility financing obligation with any differences between the book value of the asset and remaining lease facility financing obligation being recognized in operations at that time. These differences are not expected to be material. 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 the majority of its cash balances at multiple financial institutions that management believes are of high-credit quality and 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: 124 Table of Contents Revenue Accounts Receivable, net Year Ended December 31, December 31, 2020 December 31, 2019 2020 2019 2018 BioNTech SE 16.7 % * * * * Pfizer, Inc. 14.2 % * * 45.1 % * CureVac * * * 12.8 % * Thermo Fisher Scientific, Inc. * 10.4 % * — % 10.5 % Ultragenyx Pharmaceutical, Inc. * * * — % 10.8 % *Less than 10% For the year ended December 31, 2020, substantially all of the revenue recorded for BioNTech SE and Pfizer, Inc. were generated by our Nucleic Acid Production segment. The Company continues to experience significant revenue growth in our Nucleic Acid Production segment driven primarily by sales of CleanCap ® r elated products that represents a significant portion of the Company’s total revenue in fiscal year 2020. For the year ended December 31, 2019, 43.2%, 30.1%, and 26.7%, of revenue recorded for Thermo Fisher Scientific, Inc. were generated by our Nucleic Acid Production, Biologics Safety Testing, and Protein Detection segments, respectively. Net Income (Loss) per Class A Common Share/Unit Attributable to Maravai LifeSciences Holdings, Inc. Basic net income (loss) per Class A Common share/unit attributable to Maravai LifeSciences Holdings, Inc. is computed by dividing net income (loss) attributable to us by the weighted average number of Class A Common shares/units outstanding during the period. The non-controlling interest, for historical periods prior to the IPO, is calculated pursuant to the terms of the MLSC LLC Agreement on a fully-distributed basis, taking into account the various classes of equity of MLSC, including the cumulative yields on MLSC’s preferred units. Diluted net income (loss) per Class A Common share/unit is calculated by giving effect to all potential weighted average dilutive LLC incentive units for historical periods prior to the IPO and stock options, restricted stock units, and Topco LLC Units, that together with an equal number of shares of our Class B common stock (together referred to as “Paired Interests”) are convertible into shares of our Class A Common stock, for the period after the IPO. For historical periods prior to the IPO, the weighted average number of common units outstanding during the period and the potential dilutive common unit equivalents is determined under the two-class method. The dilutive effect of outstanding awards, if any, is reflected in diluted earnings per share/unit by application of the treasury stock method or if-converted method, as applicable. In periods in which the Company reports a net loss attributable to Maravai LifeSciences Holdings, Inc. diluted net loss per Class A Common share/unit attributable to the Company since dilutive equity instruments are not assumed to have been issued if their effect is anti-dilutive. The Company reported a net loss attributable to Maravai LifeSciences Holdings, Inc. for the years ended December 31, 2019 and 2018. Emerging Growth Company Status The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. Recently Adopted Accounting Pronouncements In June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-07, Compensation—Stock Compensation (Topic 718):Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). ASU 2018-07 simplifies the accounting for share-based payment transactions in which a grantor acquires goods or services to be used or consumed in operations from a nonemployee. This standard was effective for annual periods beginning after December 15, 2019. The Company’s adoption of this standard as of January 1, 2020 did not have a material impact on the Company’s consolidated financial statements. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820)—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”) removed the following disclosure requirements: (1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; (2) the policy for timing of transfers between 125 Table of Contents levels; and (3) the valuation processes for Level 3 fair value measurements. Additionally, this update added the following disclosure requirements: (1) the changes in unrealized gains and losses for the period included in other comprehensive income and loss for recurring Level 3 fair value measurements held at the end of the reporting period; (2) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. The Company’s adoption of this standard as of January 1, 2020 did not have a material impact on the Company’s consolidated financial statements. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. This guidance is effective for fiscal years beginning after December 31, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company early adopted ASU 2019-12 effective January 1, 2020. ASU 2019-12 removes the exception to the incremental approach for intra-period tax allocation in the event of a loss from continuing operations and income or gain from other items such as other comprehensive income. The exception previously resulted in allocating a tax benefit to continuing operations and tax expense to other items, even when tax expense may have been zero. Under the simplification, no tax expense or benefit will be recorded to continuing operations. The Company has an immaterial minimum state tax liability in California and no franchises tax liability. These amounts were recorded above-the-line prior to adoption of ASU 2019-12. ASU 2019-12 requires non-income tax-based state franchise taxes to be recorded above-the-line. The other provisions within ASU 2019-12 are not applicable to the Company. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements. In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260) , Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception (“ASU 2017-11”). Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable non-controlling interests. The amendments in Part II of this update do not have an accounting effect. The amendments in Part I of this update were effective for fiscal years beginning after December 15, 2019. The Company’s adoption of Part I of this standard on January 1, 2020 did not have a material impact on the audited consolidated financial statements. In January 2017, the FASB adopted ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”) which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The implied fair value for a reporting unit is determined in the same manner as the amount of goodwill recognized in a business acquisition of the reporting unit. Under the amendments in ASU 2017-04, an entity shall recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The updated guidance requires adoption on a prospective basis. ASU 2017-04 is currently effective for the Company beginning January 1, 2022. Early adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. The Company early adopted ASU 2017-04 for its 2020 annual impairment test. The adoption of this ASU did not have a material impact on the audited consolidated financial statements. Recently Issued Accounting Pronouncements Not Yet Adopted In February 2016, the FASB issued ASU 2016-02, Leases (“Topic 842”), which supersedes the guidance in ASC 840, Leases . The new standard, as amended by subsequent ASUs on Topic 842 and recent extensions issued by the FASB in response to COVID-19, requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee 126 Table of Contents is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The Company plans to adopt this standard using the modified retrospective approach with a cumulative effect adjustment to retained earnings at the beginning of the period of adoption. The Company will also adopt certain practical expedients provided by Topic 842. As a result of the Company having elected the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act, and assuming the Company continues to be considered an Emerging Growth Company, Topic 842 will be effective for the Company on January 1, 2022. The Company is currently assessing its inventory of leases but has not yet determined the full effects of Topic 842 on its consolidated financial statements but does expect the adoption of Topic 842 will have a material impact on the Company’s consolidated financial statements and related notes to the recognition of right of use (“ROU”) assets and lease liabilities on the Company’s consolidated balance sheets, but it will not have a material impact on the Company’s operations. The adoption of Topic 842 will also result in enhanced disclosures. In June 2016, the FASB issued ASU 2016-13 , Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which has been subsequently amended (“ASU 2016-13”). ASU 2016-13 revises the measurement of credit losses for most financial instruments measured at amortized cost, including trade receivables, from an incurred loss methodology to an expected loss methodology which results in earlier recognition of credit losses. Under the incurred loss model, a loss is not recognized until it is probable that the loss-causing event has already occurred. The new standard introduces a forward-looking expected credit loss model that requires an estimate of the expected credit losses over the life of the instrument by considering all relevant information including historical experience, current conditions, and reasonable and supportable forecasts that affect collectability. In addition, this standard also modifies the impairment model for available-for-sale debt securities, which are measured at fair value, by eliminating the consideration for the length of time fair value has been less than amortized cost when assessing credit loss for a debt security and provides for reversals of credit losses through income upon credit improvement. ASU 2016-13, is effective for the Company’s January 1, 2023, with early adoption permitted. The Company is currently assessing the impact of adopting this standard on its consolidated financial statements and disclosures. In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). The ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This new standard also requires customers to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. This ASU is effective for years beginning after December 15, 2020, with early adoption permitted. The Company has not yet determined the potential effects of this ASU on its consolidated financial statements. In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to the Related Party Guidance for Variable Interest Entities . ASU 2018-17 changes how entities evaluate decision-making fees under the variable interest entity guidance. To determine whether decision-making fees represent a variable interest, an entity considers indirect interests held through related parties under common control on a proportional basis, rather than in their entirety. This guidance is effective for fiscal years, beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021, with early adoption permitted. All entities are required to apply the amendments in this ASU retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented. The Company is currently evaluating the impact this standard will have on its consolidated financial statements and disclosures. In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for convertible instruments, amends the guidance on derivative scope exceptions for contracts in an entity’s own equity, and modifies the guidance on diluted earnings per share calculation as a result of these changes. The standard is effective for the Company for annual reporting periods beginning after December 15, 2023. The Company is currently evaluating the impact the adoption of this standard may have on its consolidated financial statements. In March, 2020 the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“Update 2020-04”) , for facilitation of the effects of reference rate reform on financial reporting. This update provides optional guidance for a limited period of time to help ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting. The amendments in the guidance provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate form if certain criteria are met. The amendments apply to contracts, hedging relationships, and other transactions that reference London inter-bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. When elected, the optional expedients for contract modifications are applied consistently for all eligible contracts or eligible transactions within the relevant areas of GAAP. This guidance was effective upon issuance and may generally be applied through December 31, 2022. We are currently evaluating 127 Table of Contents our contracts and we do not expect that the adoption of this guidance will have a material impact on our consolidated financial statements and disclosures. 2. Acquisitions Mock V In March 2020, the Company acquired all of the outstanding shares of MockV Solutions, Inc. (“MockV”), a private entity, for $3.0 million, inclusive of acquisition costs of $0.2 million. The MockV technology acquired is a novel, proprietary viral clearance prediction tool that includes a non-infectious “mock virus particle” mimicking the physicochemical properties of live virus that may be present endogenously in the drug substance or introduced during bioproduction and will expand the Company biologics safety testing offerings. The transaction was accounted for as an asset acquisition as the acquired set of assets and activities did not meet the definition of a business. In connection with this acquisition, the Company acquired developed technology, an in-process research and development asset (“IPR&D”), an assembled workforce, and an insignificant amount of working capital balances. The relative fair value attributed to the acquired developed technology, assembled workforce, and working capital balances was insignificant. The IPR&D acquired was allocated a value of $2.9 million and the Company recognized a charge of $2.9 million related to the IPR&D as a component of research and development on the consolidated statement of operations because the technology had not yet reached technological feasibility and had no alternative future use. The Company must also make contingent cash payments (the “Earn-Outs”) of up to $9.0 million to the sellers of MockV based upon the achievement of long-term revenue targets. The Earn-Outs were determined to be contingent consideration that was not subject to derivative accounting and will be recognized when the contingency is resolved, and the consideration becomes paid or payable. As the Company had no tax basis in the acquired IPR&D asset, and the acquired IPR&D asset was expensed prior to the measurement of any deferred taxes, no deferred taxes were recognized for the initial transaction. In November 2020, MockV was converted into a single member LLC and was deemed liquidated for income tax purposes. 3. Goodwill and Intangible Assets The Company’s goodwill of $224.3 million as of December 31, 2020 and 2019 respectively, represents the excess of purchase consideration over the fair value of assets acquired and liabilities assumed. In periods prior to 2020, the Company had three reporting units, Nucleic Acid Production, Biologics Safety Testing, and Protein Detection, with such reporting units being aligned with our segments. However, during the year ended December 31, 2020, the Company determined that our Nucleic Acid Production segment contained two reporting units that should no longer be combined as a reporting unit due to a lack of economic similarities primarily driven by changes in margins realized by these reporting units. These reporting units continue to be considered as one segment for purposes of segment reporting, as our CODM continues to review financial results and making operating decisions at the Nucleic Acid Production level. The Company performed a quantitative goodwill impairment analysis on each of its four reporting units during the fourth quarter of 2020 and concluded that the fair value of each reporting unit exceeded its carrying value and therefore that it was more-likely-than-not that the fair value of goodwill exceeded its carrying value. During 2019, given the lack of any triggering events being identified indicating that the fair value of the goodwill may be impaired, the Company completed its qualitative goodwill impairment analysis for the nucleic acid production and biologics safety testing reporting units during the fourth quarter of 2019 and concluded it was not more-likely-than-not that the fair value of goodwill exceeded its carrying value and no further testing was required. Having identified triggering events for the Protein Detection reporting unit, the Company performed a quantitative analysis and also concluding that it was not more-likely-than-not that the fair value of goodwill exceeded its carrying value and no further testing was required. The qualitative impairment test was elected for these two reporting units because of the growth in revenue and cashflows in excess of our initial projections. The Company has not recognized any goodwill impairment in any of the periods presented. The following is a rollforward of the Company’s goodwill by segment (in thousands): Nucleic Acid Production Biologics Safety Testing Protein Detection Total December 31, 2020 $ 32,838 $ 119,928 $ 71,509 $ 224,275 December 31, 2019 32,838 119,928 71,509 224,275 During the year ended December 31, 2020, there was no change in the recorded segment goodwill balances. 128 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 15 years. The components of finite-lived intangible assets and accumulated amortization are as follows: As of December 31, 2020 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Estimated Useful Life Weighted Average Remaining Amortization Period (in thousands) (in years) (in years) Trade Names $ 11,490 $ 5,384 $ 6,106 5-15 6.3 Patents and Developed Technology 169,404 52,809 116,595 5-14 9.5 Customer Relationships 83,323 28,368 54,955 10-14 8.8 Total $ 264,217 $ 86,561 $ 177,656 9.1 As of December 31, 2019 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Estimated Useful Life Weighted Average Remaining Amortization Period (in thousands) (in years) (in years) Trade Names $ 11,490 $ 4,093 $ 7,397 5-15 7.3 Patents and Developed Technology 169,313 40,134 129,179 5-14 10.5 Customer Relationships 83,290 22,013 61,277 10-14 9.8 Total $ 264,093 $ 66,240 $ 197,853 10.1 The Company recognized $12.7 million, $12.2 million and $12.1 million of amortization expense from intangible assets directly linked with revenue generating activities within cost of revenue in the consolidated statement of operations for the years ended December 31, 2020, 2019, and 2018, respectively. Amortization expense for intangible assets that are not directly related to sales generating activities of $7.6 million, $8.0 million and $8.0 million was recorded as selling, general and administrative expenses for each of the years ended December 31, 2020, 2019, and 2018, respectively. As of December 31, 2020, the estimated future amortization expense for finite-lived intangible assets is as follows (in thousands): 2021 $ 20,079 2022 19,428 2023 19,230 2024 19,230 2025 19,230 Thereafter 80,459 Total estimated amortization expense $ 177,656 4. Fair Value Measurements There were no assets or liabilities measured at fair value on a recurring basis as of December 31, 2020 or 2019. The Company assesses the fair value of contingent consideration to be settled in cash related to acquisitions using probability weighted models for the various contractual earn-outs. These are Level 3 measurements. Significant unobservable inputs used in the estimated fair values of these contingent consideration liabilities include probabilities of achieving customer related performance targets, specified sales milestones, changes in projected revenue and risk adjusted discount rates. 129 The following table provides a reconciliation of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2019 (in thousands): Contingent Consideration Balance at January 1, 2019 $ 3,678 Change in fair value 322 Settlement (2,000) Transfer out of Level 3 fair value hierarchy (2,000) Balance at December 31, 2019 $ — During the year ended December 31, 2019, upon the achievement of the maximum liability threshold of $4.0 million, as defined in the purchase agreement for Glen Research Corporation, the total contingent purchase consideration was no longer based on significant unobservable inputs and was reclassified out of Level 3 fair value hierarchy to accrued expenses. 5. Balance Sheet Components Inventory Inventory consists of the following at December 31 (in thousands): 2020 2019 Raw materials $ 11,112 $ 5,037 Work in process 18,333 6,083 Finished goods 3,856 3,082 Total inventory $ 33,301 $ 14,202 Property and equipment Property and equipment consists of the following at December 31 (in thousands): 2020 2019 Land $ 818 $ 8,516 Buildings 2,129 7,685 Buildings capitalized under lease finance obligations 61,202 61,202 Leasehold improvements 1,637 2,990 Furniture, fixtures, and equipment 23,157 12,887 Software 2,632 1,742 Total 91,575 95,022 Less accumulated depreciation (10,647) (8,099) Total 80,928 86,923 Construction in-progress 20,377 7,388 Total property and equipment, net $ 101,305 $ 94,311 Depreciation expense totaled approximately $5.6 million, $3.8 million, $2.2 million for the years ended December 31, 2020, 2019, and 2018, respectively, and includes depreciation expense related to the Company’s capital leases. Accrued expenses and other current liabilities Accrued expenses consisted of the following at December 31 (in thousands): 130 2020 2019 Employee related $ 18,448 $ 7,660 Professional services 7,670 3,199 Sales and use tax liability 2,896 3,030 Consideration payable — 2,000 Other 9,532 2,854 Total accrued expenses and other current liabilities $ 38,546 $ 18,743 6. Commitments and Contingencies Lease Commitments The Company leases five facilities, including office, laboratory and manufacturing space under long-term non-cancelable operating leases. The leased facilities have initial terms of two to twelve years, and two leases have multiple five-year renewal terms and the other leases having three-year and five-year renewal terms. The Company also has capital leases for office equipment within initial terms of two to three years expiring in 2023. Rent expense for each of the years ended December 31, 2020, 2019, and 2018 were approximately $3.2 million, $2.5 million, and $2.0 million, respectively. For the year ended December 31, 2020, reported rent expense is net of approximately $1.4 million of deferred gain being recognized over the life of the lease associated with the Company’s sale leaseback arrangement for its Burlingame, California facility. In January 2020, the Company completed the sale of land, building and related building improvements specific to its facility in Burlingame, California for approximately $34.5 million in cash. Simultaneously, with the close of the transaction, the Company leased the property for a two-and-a-half-year period, resulting in a total of $3.3 million in new lease obligations through December 31, 2021. The Company’s sale of the building and immediate leaseback of the facility qualified for sale-leaseback accounting. The lease was evaluated and classified as an operating lease. Given the Company was considered to retain more than a minor part but less than substantially all of the use of the property, the present value of the minimum lease payment over the lease term of $3.1 million was required to be deferred and recognized as a reduction of rent expense over the life of the lease. Net of the $3.1 million in deferred gain, the Company recognized a net gain on the sale of the asset of $19.0 million during the year ended December 31, 2020. In August 2020, the Company executed a six-month extension for the leased property, including escalating rent payments, with total incremental lease payments associated with the extension of $1.8 million. The unamortized deferred gain at the time of the modification, approximating $2.0 million, will be amortized on a prospective basis over the extended lease term. Upon execution of the amendment inclusive of escalating rent payments, expense is being recognized on a straight-line basis and the difference between the recognized rent expense and the amounts paid under the lease are being recorded as deferred rent included in other short-term and long-term liabilities on the consolidated balance sheet as of December 31, 2020. In July 2018, the Company entered into a lease for a new manufacturing facility (the “San Diego Facility Lease”). The lease included tenant improvement provisions for construction prior to occupancy. Construction on this new manufacturing facility began in 2018 and Company evaluated the extent of its financial and operational involvement in the tenant improvements of the new facility related to the San Diego Facility Lease to determine whether it was considered the owner of the construction project. The Company concluded that it was deemed to be the owner of the facility for accounting purposes (even though it did not meet the definition for legal purposes) during the construction period which began in 2018 and was completed in 2019. In 2019, upon completion of the construction, the Company evaluated the lease and concluded that the completed construction project failed to qualify for sale and leaseback accounting and has accounted for the lease as a financing lease transaction. The leased building and related improvements remain on the Company’s balance sheet as of December 31, 2019 and rental payments associated with the San Diego Facility Lease have been allocated to operating lease expense for the ground underlying the leased building and principal and interest payments on the lease facility financing obligation. The Company recorded the fair value of the building asset and improvements, which was estimated to be $59.0 million and the related lease facility financing obligation of $51.2 million. The difference between the gross asset value and the lease facility financing obligation represents the approximate $8.0 million of building improvement costs reimbursed by the Company. In September 2020, the Company amended its San Diego Facility lease agreement to provide for additional manufacturing and office space. The amended lease agreement provides for tenant improvements for construction prior to occupancy of $2.7 million, rent concessions, and escalating rent payments over the life of the lease which now expires in May 2023. The total future minimum lease payments under the amended lease agreement are $57.1 million, with an option to renew subject to certain conditions. Similar to the original lease, once construction is completed on the expansion, the 2020 amended lease is 131 being accounted for as an increase to the financing lease transaction with rental payments allocated between principal and interest on the lease facility financing obligation. As of December 31, 2020, the anticipated tenant improvement allowance has been recorded as a component of the lease facility financing obligation a $2.0 million receivable for lessor-funded financing within prepaid and other current assets, and $0.7 million in construction in progress for costs incurred to date as the Company has earned the right to this portion of the tenant allowance as of December 31, 2020. Additionally, during 2020, the Company incurred incremental building improvement costs for the initially leased space. As of December 31, 2020, the Company has recognized $20.4 million and $1.7 million in construction in progress and accrued expenses, respectively, within the consolidated balance sheet specific to this facility. The Company recognizes payments under the lease agreement as a reduction of the lease facility financing obligation using the effective interest method and the ground rent as operating lease expense as reflected in the schedule below. Payments on the San Diego Facility Lease obligation for the year ended December 31, 2020, 2019, and 2018 were approximately $2.3 million and $0.9 million, $0.9 million, respectively. For the years ended December 31, 2020, 2019 and 2018 the Company recognized rent expense associated with the ground lease for the San Diego Facility Lease of approximately $0.8 million, $0.8 million, and $0.4 million, respectively, in the consolidated statement of operations. The Company is also considered to be the accounting owner of its Southport, North Carolina leased facility (the “Southport Facility”) In 2017, the Company amended its initial lease with the former related party landlord (Note 14) to include the lease of additional space as well as an adjustment of the base rent for the existing space. The Company continues to recognize payments under the amended lease agreement as a reduction of the facility financing obligation using the effective interest method and the ground rent as operating lease expense as notes in the schedule below. As a result of the amendment, the Company anticipates the repayment of the financing obligation by September 2024. The fair value of the leased property established at acquisition continues to be depreciated over the building’s estimated useful life of thirty-five years. Payments on these lease obligations for the years ended December 31, 2020, 2019 and 2018 were approximately $0.3 million, respectively. For the years ended December 31, 2020, 2019 and 2018, rent expense associated with the ground lease for the Southport Facility was not significant. As of December 31, 2020, minimum annual payments under the Company’s non-cancelable lease agreements, capital lease agreements, and lease financing obligations were follows (in thousands): Capital Leases Lease Facility Financing Obligations Operating Leases 2021 $ 50 $ 4,126 $ 2,777 2022 25 4,648 3,062 2023 — 5,014 1,336 2024 — 5,109 1,371 2025 — 5,071 1,104 2025 and beyond — 24,232 5,286 Total minimum payments 75 48,200 14,936 Less: amount representing interest (16) (27,830) Present value of future minimum lease payments 59 20,370 Residual value of lease facility financing obligation — 36,547 Less: short-term capital lease and lease facility financing obligations (36) (750) Long-term capital lease and lease facility financing obligations $ 23 $ 56,167 Operating leases in the table above includes future minimum lease payments for the ground lease for the Southport and San Diego Facilities and Vector sale-leaseback. Future minimum lease payments for the Vector sale-leaseback for fiscal years 2021 and 2022 are $1.6 million and $1.8 million, respectively. Legal Proceedings The Company is involved in various legal proceedings arising in the normal course of business. The Company accrues for a loss contingency when it determines that it is probable, after consultation with counsel, that a liability has been incurred and the amount of such loss can be reasonably estimated. The Company believes that the results of any such contingencies, either 132 individually or in the aggregate, will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. Indemnification Agreements In the ordinary course of business, we may provide indemnification of varying scope and terms to vendors, lessors, customers and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. These indemnities include indemnities to our directors and officers to the maximum extent permitted under applicable state laws. The maximum potential amount of future payments that we could be required to make under these indemnification agreements is, in many cases, unlimited. We have not incurred any material costs as a result of such indemnifications and are not currently aware of any indemnification claims. 7. Long-Term Debt 2020 Credit Agreements In October 2020, Maravai Intermediate Holdings, LLC (“Intermediate”), a wholly-owned subsidiary of Topco LLC, along with its subsidiaries (the “New Borrowers”), entered into a credit agreement (the “New Credit Agreement”) to refinance existing $400.0 million long-term debt with a new $780.0 million facility. The New Credit Agreement provides for a First Lien Term Loan (the “New First Lien Term Loan”) of $600.0 million, maturing October 2027, and a Revolving Credit Facility (the New Revolving Credit Facility”) for up to $180.0 million in funding. The New Credit Agreement amended and restated the Company’s prior credit agreement as of August 2018 (the “First and Second Lien Credit Agreements”). In November 2020, the Company repaid $50.0 million of principal balance of the New First Lien Term Loan using proceeds from the IPO. Borrowings under the New Credit Agreement bear interest (a) initially, at our option, either (i) at the Base Rate plus 3.25% per annum or (ii) the Adjusted Eurocurrency Rate plus 4.25% per annum and (b) after delivery of the compliance certificate for the fiscal quarter ending March 31, 2021, at our option, either at (i) the Base Rate plus the applicable margin of 3.25% per annum with a stepdown to 3.00% based on Intermediate’s first lien net leverage ratio or (ii) the Adjusted Eurocurrency Rate plus the margin of 4.25% per annum with a stepdown to 4.00% based on Intermediate’s first lien net leverage ratio. Interest rates will also decrease an additional 0.25% in any period if the Company’s credit ratings issued by Moody’s and S&P are B2 or better and B or better, respectively. The Base Rate is defined as the greatest of (i) the rate last quoted by The Wall Street Journal as the “Prime Rate” in the United States, (ii) the Federal Reserve Bank of New York Rate (“NYFRB”) plus 0.50% per annum, (iii) the Adjusted Eurocurrency Rate for a one month interest period plus 1.00% per annum, (iv) solely with respect to the initial term loans, 2.00% per annum and (v) for any loans that are not initial term loans, 1.00% per annum. The “Adjusted Eurocurrency Rate” is defined as the greater of (a) with respect to the initial term loans the greater of (i) the Eurocurrency Rate for such interest period multiplied by the Statutory Reserve Rate (as such term is defined in the New Credit Agreement), and (ii) 1.00% and (b) with respect to the revolving loans, the greater of (i) the Eurocurrency Rate for such interest period multiplied by the Statutory Reserve Rate (as such term is defined in the New Credit Agreement), and (ii) 0%. The “Eurocurrency Rate” is defined as the London Inter-bank Offered Rate (“LIBOR”) as displayed by Reuters (which if negative will be deemed to be 0%) or, if LIBOR is unavailable, a rate based on historical LIBOR, as determined by the administrative agent under the New Credit Agreement. The New Term Loan contains prepayment provisions that allow for, at the Company’s option, to prepay all or a portion of the principal amount at any time. Subject to certain exceptions and limitations and reinvestment rights, the Company is required to repay borrowings under the New Term Loan and New Revolving Credit Facility with the proceeds of certain occurrences, such as the incurrence of debt and certain asset sales or dispositions. The New Credit Agreement also requires mandatory prepayments to be calculated commencing with the fiscal year ending December 31, 2021 upon certain excess cash flow as defined in the terms of the agreement. The New Term Loan becomes repayable in quarterly payments of $1.5 million beginning on March 31, 2021, with all remaining outstanding principal due at maturity in October 2027. All outstanding amounts drawn under the New Revolving Credit Facility will become due at maturity in October 2025. Accrued interest under the New Credit Agreement is generally payable quarterly in arrears on the date of any repayment or prepayment and at maturity. In addition to paying interest on outstanding principal under the New Credit Agreement we are required to pay a commitment fee to the lenders under the New Revolving Credit Facility for any unutilized commitments at 0.375% per annum, with one stepdown to 0.25% per annum based on Intermediate’s first lien net leverage ratio calculation. As of December 31, 2020, the interest rate on the New Term Loan was 5.25% per annum. The New Credit Agreement also provides for a $20.0 million dollar letters of credit limit, which remained unused as of December 31, 2020. 133 Borrowings under the New 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 New 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 New Credit Agreement and using the proceeds to pay off the First and Second Lien Credit Agreements were 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 and Second Lien Credit Agreements did not participate in this refinancing transaction 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 were accounted for as a new debt financing. The Company recorded a loss on extinguishment of debt of $7.6 million in the accompanying consolidated statement of operations for the year ended December 31, 2020. For the remainder of the creditors, this transaction was accounted for as a modification because the 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 $15.8 million of various costs, of which $6.0 million 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. We also incurred $3.5 million of financing-related fees related to the New Revolving Credit Facility. As of December 31, 2020, $3.4 million of such unamortized debt issuance costs are recorded as an asset within Other Assets our consolidated balance sheet as the there is no balance outstanding related to the New Revolving Credit Facility. The New Credit Agreement contains certain covenants, including, among other things, covenants limiting our ability to incur or prepay existing certain indebtedness, pay dividends or distributions, dispose of assets, engage in mergers and consolidations, make acquisitions or other investments and make changes in the nature of the business. Additionally, the Credit Facility also requires us to maintain a certain net leverage ratio. All obligations under the Credit Facility are unconditionally guaranteed by the assets of substantially all of our subsidiaries. The Company was in compliance with these covenants as of December 31, 2020. First and Second Lien Credit Agreement In August 2018, Maravai Intermediate Holdings, LLC (“Intermediate”), a wholly-owned subsidiary of ours, along with its subsidiaries (together with Intermediate, the “Borrowers”) entered into a first lien credit agreement (the “First Lien Credit Agreement”) with leading institutions for term loan borrowings (the “First Lien Term Loan”) totaling $250.0 million and a second lien credit agreement (the “Second Lien Credit Agreement”) for term loan borrowings (the “Second Lien Term Loan”) totaling $100.0 million, to refinance a combined debt agreement entered into in 2017, including repayment of all outstanding senior secured credit facilities and senior subordinated notes outstanding and to allow for a $52.0 million distribution to our members. The First Lien Credit Agreement also provided for a revolving credit facility (the “Revolving Credit Facility”) of $50.0 million for letters of credit and loans to be used for working capital and other general corporate financing purposes, of which $15.0 million was drawn down in March 2020 to provide financing for the acquisition of MockV and other operating uses. Borrowings under the First Lien Credit Agreement and the Second Lien Credit Agreement were unconditionally guaranteed by Topco LLC and the existing and future material domestic subsidiaries of Topco LLC (subject to certain exceptions as specified in the respective guaranty agreements, and are secured by a lien and security interest in substantially all of the assets of existing and future material domestic subsidiaries of Topco LLC that are loan parties). The refinancing of the previous debt was accounted for as a modification and also as an extinguishment of the related outstanding debt balances and resulted in a $5.6 million loss on extinguishment of debt in the accompanying consolidated statement of operations for the year ended December 31, 2018 and $1.7 million was related to the modified debt and immediately expensed to interest in the accompanying consolidated statement of operations for the year ended December 31, 2018. Borrowings under the First Lien Credit Agreement bore interest at variable rates as defined in the respective agreements that could be elected at our option. At December 31, 2019, the interest rates on the First Lien Term Loan and Second Lien Term Loan were 6.063% and 9.740%, respectively. Accrued interest under the First Lien Credit Agreement was generally payable quarterly in arrears on the date of any repayment or prepayment and at maturity. An annual commitment fee was applied to the daily unutilized amount under the Revolving Credit Facility at 0.50% per annum, with one stepdown to 0.375% per annum based on Intermediate’s first lien net leverage ratio calculation. Long-term debt consisted of the following at December 31 (in thousands): 134 2020 2019 New First Lien Term Loan $ 550,000 $ — First Lien Term Loan — 246,875 Second Lien Term Loan — 100,000 Unamortized debt issuance costs (15,386) (9,592) Total long-term debt 534,614 337,283 Less: current portion (6,000) (2,500) Total long-term debt, less current portion $ 528,614 $ 334,783 There were no balances outstanding on the Company’s New Revolving Credit Facility as of December 31, 2020. There were no balances outstanding on the Company’s Revolving Credit Facility as of December 31, 2019. As of December 31, 2020, the aggregate future principal maturities of the Company’s debt obligations for each of the next five years, based on contractual due dates, were as follows (in thousands): 2021 $ 6,000 2022 6,000 2023 6,000 2024 6,000 2025 6,000 Thereafter 520,000 Total debt $ 550,000 8. Stockholders’ / Member’s Equity Prior to the Organizational Transactions, Topco LLC had established a single class of common units with MLSH 1 as its sole member. Topco LLC was authorized to issue up to 253,916,941 common units. All authorized 253,916,941 common units were issued and outstanding prior to the Organizational Transactions. MLSH 1 as the member, was not obligated to make capital contributions to Topco LLC. Topco LLC’s profits and losses were allocated to MLSH 1 as determined by the Board of Directors. Topco LLC’s common units have no conversion rights, special preferences or redemption rights. No capital contributions were received by Topco LLC from MLSH 1 in 2019 or 2018. Prior to the Organizational Transactions, a distribution was made by Topco LLC to MLSH 1 in the amount of $88.6 million, with a subsequent distribution of $8.2 million in December 2020, totaling $96.7 million of distributions for the year ended December 31, 2020. A distribution of $52.1 million was made by Topco LLC to MLSH 1 for the year ended December 31, 2018. There were no distributions made to MLSH 1 during the year ended December 31, 2019. Amendment and Restatement of Certificate of Incorporation In connection with the Organizational Transactions, the Company’s certificate of incorporation was amended and restated to, among other things, provide for the (i) authorization of 500,000,000 shares of Class A common stock with a par value of $0.01 per share; (ii) authorization of 300,000,000 shares of Class B common stock with a par value of $0.01 per share; (iii) authorization of 50,000,000 shares of preferred stock with a par value of $0.01 per share. Holders of Class A and Class B common stock are entitled to one vote per share. Except as otherwise required in the Certificate of Incorporation or by applicable law, the holders of Class A common stock and Class B common stock shall vote together as a single class on all matters on which stockholders are generally entitled to vote. Holders of the Class A common stock are entitled to receive dividends, and upon the Company’s dissolution or liquidation, after payment in full of all amounts required to be paid to creditors and to the holders of preferred stock having liquidation preferences, if any, the holders of shares of Class A and common stock will be entitled to receive the Company’s pro rata remaining assets available for distribution. Holders of Maravai’s Class B common stock are not entitled to receive dividends and will not be entitled to receive any distributions upon dissolution or liquidation of Maravai. Holders of Class A and Class B common stock do not have preemptive or subscription rights. As of December 31, 2020, no preferred stock was outstanding. We are required to, at all times, maintain (i) a one-to-one ratio between the number of shares of Class A common stock outstanding and the number of LLC Units owned by us and (ii) a one-to-one ratio between the number of shares of Class B common stock owned by the MLSH 1 and the number of LLC Units owned by the MLSH 1. We may issue shares of Class B 135 common stock only to the extent necessary to maintain these ratios. Shares of Class B common stock are transferable only together with an equal number of LLC Units if we, at the election of a MLSH 1, exchange LLC Units for shares of Class A common stock. All Class B common stock that is transferred shall be automatically retired and cancelled and shall no longer be outstanding. In November 2020, we received $1.7 million from MLSH 1 for the issuance of 168,654,981 shares of Class B common stock. Recapitalization of Topco LLC Topco LLC’s Board of Directors adopted the amended and restated Topco LLC’s operating agreement in November 2020 to, among other things, appoint us as Topco LLC’s sole managing member and to provide that Topco LLC’s members would not have voting rights or any other control or authority over Topco LLC or its business. The amended and restated operating agreement also revised the tax rate applicable to the tax distributions that Topco LLC is required to make to the holders of LLC Units, including us, as described in Note 12. Blocker Mergers As described in Note 1, pursuant to the Blocker Mergers, we acquired the Blocker Entities (together with 37,119,801 LLC Units held by the Blocker Entities), by merger, from MLSH 2. We issued an aggregate of 28,965,664 shares of Class A common stock and paid $208.1 million in cash to MLSH 2 in consideration of the Blocker Mergers. Upon consummation of the Blocker Mergers, we recognized the acquired LLC Units at carrying value, as these transactions are considered to be between entities under common control. There were no tax attributes acquired from the Blocker Entities as they had been fully utilized prior to the mergers. Repurchase of Class A Common Stock From MLSH 2 In November 2020, we repurchased 1,319,148 shares of Class A common stock from MLSH 2 for $33.7 million. These shares were immediately retired. Initial Public Offering In November 2020, the Company completed an initial public offering of 69,000,000 shares of common stock, inclusive of the 9,000,000 shares of Class A common stock purchased by underwriters pursuant to the underwriters’ option to purchase additional shares at the initial public offering price, less underwriting discounts and commissions. The Company received net proceeds from the IPO of approximately $1.8 billion after deducting underwriting discounts and commissions, which was used to purchase 55,823,011 of previously-issued and 3,703,704 of newly-issued Topco LLC Units for approximately $94.5 million. 9. Net Income (Loss) Per Class A Common Share/Unit Attributable to Maravai LifeSciences Holdings, Inc. Net income (loss) per unit for periods prior to our IPO have not been retrospectively adjusted to give effect to the Organizational Transactions described in Note 1 and the 69,000,000 shares of Class A common stock sold in our IPO. Additionally, basic net income per Class A common stock for the year ended December 31, 2020, has been calculated by dividing net income for the period, adjusted for preferred unit dividends attributable to MLSC non-controlling interests and net income (loss) attributable to non-controlling interests, by the weighted average Class A common stock outstanding during the period. Diluted net income (loss) per Class A common share/unit gives effect to potentially dilutive securities by application of the treasury stock method or if-converted method, as applicable. Diluted net income per share of Class A common stock attributable to the Company is computed by adjusting the net income and the weighted-average number of shares of Class A common stock outstanding to give effect to potentially diluted securities. Prior to the Organizational Transactions, the members’ equity of MLSC was comprised of Class A and Class B preferred units, MLSC Incentive Units and MLSC common units, each with participation rights. The MLSC preferred units were entitled to cumulative dividends of 8.0% compounded annually, up to an additional 4.0%, also compounded annually, to the extent of remaining unallocated earnings. The preferred unitholders of MLSC were required, however, to share a portion of the additional 4.0% in dividends with the holders of MLSC Incentive Units based on a formula defined in the MLSC LLC Agreement. The Company determined that vested MLSC Incentive Units and MLSC Class A and B preferred units were participating securities under the two-class method at the MLSC subsidiary level, however, they do not have a contractual obligation to share in losses, and therefore no undistributed losses have been allocated to them. MLSH 1 Incentive Units are granted by the parent of the Company, and as a result, do not represent potential common units of the Company. In September 2020, the Company entered into a Sale and Rollover Agreement and repurchased a majority of the outstanding MLSC Class B preferred units as well as entering into an agreement that resulted in an exchange of the remaining MLSC Class B preferred units and MLSC common units into 69,599 of MLSH 1 common units in November 2020 upon the IPO. Included 136 in the preferred unit dividends attributable to non-controlling interests line item for the year ended December 31, 2020, is a $10.2 million deemed dividend representing the excess of the fair value of the Class B preferred units, determined as of the date of the Sale and Rollover Agreement, over their related carrying value. In September 2020, the Company also agreed and subsequently repurchased all MLSC Incentive Units, however, such incentive units remained outstanding until October 2020, and had the potential to be dilutive to earnings per unit until they were repurchased. Prior to the Organizational Transactions and IPO, basic net loss per common unit attributable to our member for the years ended December 31, 2019 and 2018 is based on the weighted average number of common units outstanding during the period. Diluted net loss per common unit is computed by adjusting the net loss and the weighted-average number of common units outstanding to give effect to potentially dilutive securities. Year Ended December 31, 2020 2019 2018 (in thousands, except share and unit amounts and per share and per unit amounts) Net income (loss) per Class A common share/unit: Numerator—basic: Net income (loss) $ 78,816 $ (5,201) $ (16,915) Less: preferred unit dividends attributable to the MLSC non-controlling interests (15,270) (5,681) (5,260) Add: loss attributable to common non-controlling interests 13,342 2,396 4,444 Net income (loss) attributable to Maravai LifeSciences Holdings, Inc.—basic 76,888 (8,486) (17,731) Numerator—diluted: Net income (loss) attributable to Maravai LifeSciences Holdings, Inc.—basic 76,888 (8,486) (17,731) Net income (loss) effect of dilutive securities: Effect of the assumed conversion of Class B common stock (8,802) — — Net income (loss) attributable to Maravai LifeSciences Holdings, Inc.—diluted 68,086 (8,486) (17,731) Denominator—basic: Weighted average Class A common shares/units outstanding—basic (1) 10,351,137 253,916,941 253,916,941 Net income (loss) per Class A common share/unit—basic $ 7.43 $ (0.03) $ (0.07) Denominator—diluted: Weighted average Class A common shares/units outstanding—basic (1) 10,351,137 253,916,941 253,916,941 Weighted average effect of dilutive securities: Effect of dilutive restricted stock units 457 — — Effect of the assumed conversion of Class B common stock 18,556,385 — — Weighted average Class A common shares/units outstanding—diluted (1) 28,907,979 253,916,941 253,916,941 Net income (loss) per Class A common share/unit—diluted $ 2.36 $ (0.03) $ (0.07) 137 ____________________ (1) Amounts for the year ended December 31, 2020 represent shares of Class A common stock outstanding. Amounts for the years ended December 31, 2019 and 2018 represent Topco LLC units outstanding. Shares of Class B common stock do not share in the earnings or losses of the Company, and are therefore not participating securities. As such, a separate presentation of basic and diluted net income (loss) per share for Class B common stock under the two-class method has not been presented. The following table presents potentially dilutive securities excluded from the computation of diluted net income (loss) per share/unit for the periods presented because their effect would have been anti-dilutive for the years ended December 31: 2020 2019 2018 Time-based incentive units — 11,396,000 11,556,000 Performance-based incentive units — 2,849,000 2,849,000 Stock options 1,534,700 — — Shares estimated to be purchased under employee stock purchase plan 51,490 — — 1,586,190 14,245,000 14,405,000 10. Equity Incentive Plans Stock-Based Compensation In November 2020, in connection with the IPO, the Company’s board of directors adopted the 2020 Omnibus Incentive Plan (the “2020 Plan”). The 2020 Plan provided that the initial aggregate number of shares of Class A common stock reserved and available for issuance was 25,762,064 shares of Class A common stock, and provides for an automatic increase in the number of shares reserved for issuance thereunder on January 1 of each of the first 10 calendar years during the term of the 2020 Plan, by the lesser of (i) 4% of the total number of shares of Class A common stock outstanding on each December 31 immediately prior to the date of increase or (ii) such number of shares of Class A common stock determined by our board of directors or compensation committee. Shares of Class A common stock subject to an award that expires or is cancelled, forfeited, exchanged, settled in cash or otherwise terminated without delivery of shares and shares withheld to pay the exercise price of, or to satisfy the withholding obligations with respect to, an award will again be available for delivery pursuant to other awards under the 2020 Plan. All awards granted under the 2020 Plan are intended to be treated as (i) stock options, including incentive stock options (“ISOs”), (ii) stock appreciation rights (“SARs”), (iii) restricted share awards (“RSAs”), (iv) restricted stock units (“RSUs”), (v) dividend equivalents, or (vi) other stock or cash awards as may be determined by the plan’s administrator from time to time. The term of each option award shall be no more than 10 years from the date of grant. The exercise price of a stock option shall not be less than 100% (or, in the case of an ISO granted to a ten percent stock holder, 110%) of the fair market value of the shares on the date of grant. As of December 31, 2020, only stock options and restricted stock units have been issued. Stock Options The following table summarizes information related to stock options: Number of Stock Options (in thousands) Weighted Average Exercise Price per Stock Option Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (in thousands) Balance as of December 31, 2019 — — — Granted 1,535 $ 26.98 Cancelled (21) 27.00 Balance as of December 31, 2020 1,514 $ 26.98 9.9 $ 1,621 No stock options were exercised or exercisable during the year ended December 31, 2020. 138 The Company uses the Black-Scholes option pricing model to estimate the fair value of each option grant on the date of grant or any other measurement date. The assumptions and estimates are as follows: • Expected term - The expected term represents the period that stock-based awards are expected to be outstanding. Our historical share option exercise information is limited due to a lack of sufficient data points and does not provide a reasonable basis upon which to estimate an expected term. • Expected volatility - The expected volatility was derived from the historical stock volatilities of peer public companies within our industry that are considered to be comparable to our business over a period equivalent to the expected term of the stock-based awards, since there has been no trading history of our stock. • Risk-free interest rate - The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the stock-based awards’ expected term. • Expected dividend yield - The expected dividend yield is zero as we have no plans to make dividend payments. The following table sets forth the weighted average assumptions used in estimating the grant date fair value of the awards granted: Year Ended December 31, 2020 Expected volatility 59.0 % Risk-free interest rate 0.5 % Expected term (in years) 6.1 Expected dividend yield — % Stock-based compensation expense related to stock options was $0.6 million for the year ended December 31, 2020. As of December 31, 2020, the total unrecognized stock-based compensation related to stock options was $21.4 million, which is expected be recognized over a weighted-average period of approximately 3.89 years. Restricted Stock Units The Company began granting restricted stock unit awards to non-employee directors during 2020. The following table summarizes RSU activity: Restricted Stock Units Weighted Average Fair Value per RSU at Grant Date Balance as of December 31, 2019 — Granted 71,112 27.00 Balance as of December 31, 2020 71,112 $ 27.00 Stock-based compensation expense related to RSUs was $0.1 million for the year ended December 31, 2020. As of December 31, 2020, the total unrecognized equity-based compensation related to RSUs was $1.8 million, which is expected be recognized over a weighted-average period of approximately 2.9 years. Unit-Based Compensation Prior to the IPO, the Company’s parent, MLSH 1, granted unit-based awards (“MLSH 1 Incentive Units”) to certain executives of the Company in the form of non-vested units. Our controlled subsidiary, MLSC, granted unit-based awards (“MLSC Incentive Units”) only to certain employees of its subsidiaries. MLSC Incentive Units Topco LLC’s majority-owned subsidiary during the periods preceding the Organizational Transactions and wholly-owned subsidiary subsequent to the Organizational Transactions, issued incentive units (the “MLSC Incentive Units”) to its employees. The MLSC Incentive Units were subject to either a combination of service, market or performance vesting conditions. Vested MLSC Incentive Units were treated as common units for purposes of distributions. 139 Awards which vested based solely on a service condition provide for cliff-vesting over five years. The MLSC Incentive Units that included performance conditions tied to the achievement of certain cash distribution multiples provided for full vesting upon meeting the performance condition. The performance conditions that would allow the MLSC Incentive Units to vest was never deemed to be probable for any of the periods presented. All vested MLSC Incentive Units were subject to repurchase for fair value at MLSC’s option upon a voluntary or involuntary separation event that was not deemed to be for cause and only after seven months have passed since the separation event. No MLSC Incentive Units were granted in 2020 or 2019. In September 2020, Topco LLC entered into agreements (the “Repurchase Agreements”) to repurchase all outstanding MLSC Incentive Units, including the 1,500,000 MLSC Incentive Units held by the President of Cygnus, a subsidiary of MLSC. As part of the Repurchase Agreements, Topco LLC accelerated the vesting of all remaining unvested time-based MLSC Incentive Units and also removed the performance condition associated with the performance-based MLSC Incentive Units. The Company has accounted for the acceleration of the vesting on the time-based MLSC Incentive Units under settlement accounting, which resulted in the recognition of all remaining unrecognized compensation cost. Such accelerated compensation cost totaled $0.4 million. The Company has accounted for the removal of the performance condition and the ensuing acceleration of the vesting of the 249,000 performance-based MLSC Incentive Units as an improbable-to-probable modification, which provides for pre-measurement of the related compensation cost at the fair value of these incentive units as of the date of the Agreements. The total compensation cost recognized for these performance-based MLSC Incentive Units approximated $0.8 million. Topco LLC paid $9.1 million to settle the Repurchase Agreements in October 2020. MLSC Incentive Unit activity during the periods indicated is as follows: Number of Unvested MLSC Incentive Units Weighted Average Grant Date Fair Value Per Unit Balance as of December 31, 2019 821,400 $ 0.88 Vested (821,400) 0.88 Balance as of December 31, 2020 — Unit-based compensation expense for the fiscal years ended December 31, 2020, 2019 and 2018 was approximately $1.5 million, $0.4 million and $0.6 million, respectively. There were no MLSC Incentive Units outstanding as of December 31, 2020. The total fair value of the MLSC Incentive Units that vested in 2020, 2019 and 2018 was approximately $0.9 million, $0.6 million, and $0.6 million, respectively. No MLSC Incentive Units were available for grant as of December 31, 2020. MLSH 1 Incentive Units Prior to the Organizational Transactions, Topco LLC entered into agreements with certain executives and board members whereby those employees and board members were granted incentive units in MLSH 1. All MLSH 1 Incentive Unit awards were subject to a market condition which is subject to the achievement of a certain investment return threshold that increased on a compounding basis annually and a service condition subject to their continued employment. Certain MLSH 1 Incentive Unit awards contained a performance condition tied to the achievement of certain cash distribution multiples. The MLSH 1 Incentive Unit awards that include market and service conditions provide for cliff-vesting generally over four or five years. The MLSH 1 Incentive Unit awards that include market and performance conditions provide for full vesting upon meeting the performance condition. The fair value of MLSH 1 Incentive Unit awards was measured at the grant date and recognized as expense over the requisite service period for the awards. During the years ended December 31, 2019 and 2018, all MLSH 1 Incentive Unit awards with performance conditions were subject to the achievement of defined cash distribution multiples. No compensation cost was recorded for the MLSH 1 Incentive Unit awards with performance conditions during these periods, as achieving the cash distribution multiples performance condition associated with these awards was still not considered probable. In November 2020, and before the IPO, MLSH 1 Incentive Unit awards were modified to allow for vesting subsequent to the termination of the employment for two employees (i.e. improbable-probable modification). The calculation of the incremental equity-based compensation expense was based on the new fair value of the award measured as of the date of modification. As a result of the modification and based on the performance condition being satisfied, the Company recognized an incremental equity-based compensation expense of $16.7 million for the year ended December 31, 2020. Upon the IPO, the performance condition was met for certain MLSH 1 Incentive Units and the Company recorded an additional $3.5 million of equity-based compensation expense. 140 During the year ended December 31, 2020, a total of 62,000 MLSH 1 Incentive Unit awards were granted, none of which included performance condition vesting. During the year ended December 31, 2019, a total of 169,500 MLSH 1 Incentive Unit awards were granted of which 34,500 included performance condition vesting. All vested MLSH 1 Incentive Unit awards are subject to repurchase for fair value at MLSH 1’s option upon a voluntary or involuntary separation event that is not deemed to be for cause. Total compensation cost recognized by the Company during each of the years ended December 31, 2020, 2019 and 2018 for all MLSH 1 Incentive Unit awards, was approximately $22.3 million, $1.3 million, and $1.5 million, respectively. MLSH 1 Incentive Unit award activity during year ended December 31, 2020 is as follows: Number of Unvested MLSH 1 Incentive Units Weighted Average Grant Date Fair Value Per Unit Balance as of December 31, 2019 787,100 $ 11.53 Granted 62,000 42.05 Forfeited (16,500) 5.28 Vested (483,600) 11.37 Balance as of December 31, 2020 349,000 17.47 As of December 31, 2020, total unrecognized compensation cost related to unvested MLSH 1 Incentive Units subject to service condition is $3.5 million which is expected to be recognized over a weighted average period of 3.7 years. Equity-Based Compensation The following table sets forth the total equity-based compensation expense included in the Company’s consolidated statements of operations for the years ended December 31, (in thousands): 2020 2019 2018 Cost of sales $ 282 $ 22 $ 38 Research and development 131 211 297 Selling, general and administrative 24,216 1,446 1,786 Total equity-based compensation $ 24,629 $ 1,679 $ 2,121 11. Repurchase of Non-Controlling Interests In September 2020, Topco LLC and MLSH 1 entered into a Sale and Rollover Agreement with the President of Cygnus Technologies and his affiliated entity (collectively, the “Investors”) to purchase 43,264 MLSC Class B preferred units and 18,387,206 MLSC common units held by the Investors for approximately $120.0 million. In October 2020, Topco LLC repurchased $120.0 million of the MLSC Class B preferred and common units for cash. In addition, the Sale and Rollover Agreement provided that the remaining 16,736 MLSC Class B preferred units and 7,112,794 MLSC common units held by the Investors were exchanged upon the IPO into MLSH 1 common units for $46.6 million (the “Exchange”). In November 2020, and before the IPO, MLSH 1 exchanged its MLSH 1 common units for the remaining MLSC Class B preferred and common units and contributed the MLSC Class B preferred and common units to Topco LLC in a common control transaction. The difference between the consideration to be paid to the Investors associated with the non-controlling interests of $166.4 million and the carrying amount of the non-controlling interests in MLSC of $4.8 million was recorded, in the activity prior to the IPO and related Organizational Transactions, as a $161.6 million reduction in members’ equity in the consolidated statement of stockholders’/members’ equity. In November 2020, the MLSC LLC Agreement was amended and restated to recapitalize the outstanding equity into 1,000 common units. 12. Income Taxes We are subject to U.S. federal and state income taxes with respect to our allocable share of any taxable income or loss of Topco LLC generated after the IPO, as well as any stand-alone income or loss we generate. Topco LLC is organized as a limited liability company and treated as a partnership for federal tax purposes, with the exception of Maravai Inc. and its subsidiaries who are taxpaying entities in the U.S., Canada, and the U.K. Topco LLC generally does not pay income taxes on its taxable 141 income in most jurisdictions. Instead, Topco LLC’s taxable income or loss is passed through to its members, including us. Maravai, Inc. files and pays corporate income taxes for U.S. federal and state income tax purposes and internationally, primarily within the U.K. and Canada. We anticipate this structure to remain in existence for the foreseeable future. Components of income (loss) from continuing operations before income taxes for the years ended December 31 were as follows (in thousands): 2020 2019 2018 U.S. $ 82,012 $ (5,581) $ (16,292) International (316) (272) (206) $ 81,696 $ (5,853) $ (16,498) Income tax expense (benefit) consisted of the following for the years ended December 31 (in thousands): 2020 2019 2018 Current tax expense Federal $ 6,092 $ 505 $ 87 State and local 2,251 2 6 Total current tax expense $ 8,343 $ 507 $ 93 Deferred tax (benefit) expense Federal $ (3,921) $ (1,224) $ 847 State and local (1,542) 65 (554) International — — 31 Total deferred tax (benefit) expense $ (5,463) $ (1,159) $ 324 Total provision (benefit) for income taxes $ 2,880 $ (652) $ 417 A reconciliation between the Company’s effective tax rate and the applicable U.S. federal statutory income tax rate as of December 31 is summarized as follows: 2020 2019 2018 Federal statutory rate 21.0 % 21.0 % 21.0 % State and local taxes, net of federal benefits 0.3 % (1.1) % 3.3 % Deferred tax revaluation (1.8) % — % — % One-time transition tax — % — % (0.7) % Income of non-controlling interest (18.9) % — % — % Rate effect from pass-through entity — % (11.1) % (17.6) % Taxable gain on subsidiary liquidation 2.7 % — % — % Equity-based compensation 1.3 % (0.8) % (0.4) % Research and development credits (0.1) % 0.9 % 0.5 % Uncertain tax positions — % 2.5 % (0.1) % Valuation allowance (1.5) % — % (8.4) % Other 0.5 % (0.3) % (0.1) % Effective tax rate 3.5 % 11.1 % (2.5) % Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and operating loss and tax credit carryforwards. Significant items comprising the net deferred tax assets at December 31 were (in thousands): 142 2020 2019 Deferred tax assets Interest limitation $ — $ 2,333 Net operating loss ("NOL") and credit carryforwards 3,392 455 Accruals 668 454 Inventories 228 19 Property, plant and equipment 93 — Investment in Topco LLC 360,861 — Deductions to be received for Tax Receivable Agreement payments 81,123 — Other 1,729 — Total deferred tax assets 448,094 3,261 Valuation allowance (13,663) (1,561) Total deferred tax assets, net of valuation allowance 434,431 1,700 Deferred tax liabilities Property, plant and equipment — (3,064) Intangible assets (11,341) (13,007) Other — (326) Deferred tax liabilities (11,341) (16,397) Total net deferred tax asset (liability) $ 423,090 $ (14,697) As a result of the Organizational Transactions and our IPO, we acquired LLC Units and recognized a deferred tax asset for the difference between the financial reporting and tax basis of our investment in Topco LLC which included net deferred tax assets of $445.5 million less a $13.3 million valuation allowance associated with: (i) $364.4 million related to temporary differences in the book basis as compared to the tax basis of our Company’s investment in Topco LLC and (ii) $81.1 million related to tax benefits from future deductions attributable to payments under the TRA. The valuation allowance increased by $12.1 million and decreased by an immaterial amount during the years ended December 31, 2020 and 2019, respectively. The realizability of the Company’s deferred tax asset related to its investment in Topco LLC depends on the Company receiving allocations of tax deductions for its tax basis in the investment and on the Company generating sufficient taxable income to fully offset such deductions. We believe it is more likely than not that the Company will generate sufficient taxable income in the future to fully realize any deductions allocated to it from Topco LLC associated with the reversal of its tax basis as of December 31, 2020. However, a portion of the deferred tax asset may only be realizable through the sale or liquidation of the investment and our ability to generate sufficient capital gains. Therefore, the change in the valuation allowance during December 31, 2020, is primarily due to the establishment of a $13.3 million valuation allowance to reflect the deferred tax asset that is more likely than not to not be realized. Additionally, in response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law in March 2020. The CARES Act modified the interest expense utilization rules allowing taxpayers to deduct interest up to the sum of 50% of adjusted taxable income plus business interest income (30% limit under the 2017 Tax Act) for tax years beginning January 1, 2019 and 2020. These changes to the interest expense limitation calculation allowed the Company to utilize additional interest expense that was previously disallowed causing a $1.3 million valuation allowance release in 2020. For the years ended December 31, 2020 and 2019, December 31, 2019 and December 31, 2020, the amount of undistributed foreign earnings was $0.9 million and $1.2 million, respectively. We have provided income taxes on the earnings of foreign subsidiaries, the amount of which is immaterial. Net operating loss and tax credit carryforwards as of December 31, 2020 were as follows (in millions): 143 Amount Expiration Years Net operating losses, federal (all post December 31, 2017) $ 12.5 Do not expire Net operating losses, state (1) 7.3 Beginning in 2034 Net operating losses, foreign 1.7 Do not expire Tax credits, federal 0.2 2039 - 2040 Tax credits, state 0.2 CA - Do not expire ____________________ (1) The carryforward rules for state net operating losses vary from state to state with some states not having an expiration date. As of December 31, 2020 and 2019, the Company had $0.2 million and $0.2 million, respectively, of unrecognized tax benefits, all of which would affect the effective tax rate if recognized. The Company does not expect any significant increases or decreases to our unrecognized tax benefits in the next twelve months. The aggregate changes in the balance of the Company’s unrecognized tax benefits were as follows as of December 31 (in thousands): 2020 2019 2018 Balance, beginning of year $ 208 $ 136 $ 106 Gross increases based on tax positions related to current year 62 5 34 Gross increases based on tax positions related to prior years — 105 — Gross decreases based on tax positions related to prior years (50) (38) (4) Balance, end of year $ 220 $ 208 $ 136 The Company files income tax returns in the U.S. federal jurisdiction, various U.S. states, Canada, and the United Kingdom and is not under audit by taxing authorities in any of these jurisdictions. In the normal course of business the Company is subject to examination by taxing authorities throughout the world. With a few exceptions, the Company is no longer subject to U.S. federal, state, and local, or non-U.S. income tax examinations for years before 2016 except for utilization of NOL carryforwards. Payable to Related Parties Pursuant to the TRA Pursuant with our IPO, we entered into a tax receivable agreement with MLSH 1 and MLSH 2. The Tax Receivable Agreement provides for the payment by us to MLSH 1 and MLSH 2, collectively, of 85% of the amount of tax benefits, if any, that we actually realize, or in some circumstances are deemed to realize, as a result of the Organizational Transactions and IPO. Based on our current projections of taxable income, and before deduction of any specially allocated depreciation and amortization, we anticipate having enough taxable income to utilize most of these tax benefits. Accordingly, in November 2020 a liability of $389.5 million payable to the MLSH 1 and MLSH 2 under the TRAs, representing approximately 85% of the calculated tax savings we anticipate being able to utilize in future years. The projection of future taxable income involves significant judgment. Actual taxable income may differ from our estimates, which could significantly impact the liability under the TRA. Additionally, if the tax attributes are not utilized in future years, it is reasonably possible no amounts would be paid under the TRA. In this scenario, the reduction of the liability under the TRA would result in a benefit to our consolidated statement of operations. No payments were made to MLSH1 or MLSH 2 pursuant to the Tax Receivable Agreement during 2020. As of December 31, 2020, our liabilities under the Tax Receivable Agreement are $389.5 million. Tax Distributions to Topco LLC’s Owners Topco LLC is subject to an operating agreement put in place at the date of the Organizational Transactions. The agreement has numerous provisions related to allocations of income and loss, as well as timing and amounts of distributions to its owners. This agreement also includes a provision requiring cash distributions enabling its owners to pay their taxes on income passing through from Topco LLC. These tax distributions are computed based on an assumed income tax rate equal to the sum of (i) the maximum combined marginal federal and state income tax rate applicable to an individual and (ii) the net investment income tax. The assumed income tax rate currently totals 46.7%, which may increase to 54.1% in certain cases where the qualified business income deduction is unavailable. 144 In addition, under the tax rules, Topco LLC is required to allocate taxable income disproportionately to its unit holders. Because tax distributions are determined based on the holder of LLC Units who is allocated the largest amount of taxable income on a per unit basis, but are made pro rata based on ownership, Topco LLC is required to make tax distributions that, in the aggregate, will likely exceed the amount of taxes Topco LLC would have otherwise paid if it were taxed on its taxable income at the assumed income tax rate. Topco LLC is subject to entity level taxation in certain states and certain of its subsidiaries are subject to entity level U.S. and foreign income taxes. As a result, the accompanying consolidated statements of operations include income tax expense related to those states and to U.S. and foreign jurisdictions where Topco LLC or any of our subsidiaries are subject to income tax. During 2020, Topco LLC paid tax distributions of $8.2 million to its owners, excluding us. No tax distributions were made by Topco LLC for the year ended December 31, 2019 and $0.1 million was made for the year ended December 31, 2018. As of December 31, 2020, no amounts for tax distributions have been accrued as such payments were made during 2020. 13. Employee Benefit Plans The Company sponsors a 401(k) plan (the “Maravai LifeSciences 401(k) Plan”) pursuant to which eligible employees can elect to contribute to the 401(k) Plan, subject to certain limitations, on a pretax basis. The Company provides for a cash match of up to 50% of employee contributions up to the first 6% of salary. The Company match vests over a four-year term. In February 2019, a retirement saving plan of one of our subsidiaries was closed and all funds in the plan were rolled over into the Maravai LifeSciences 401(k) Plan. The Company also maintains a non-qualified Long-Term Incentive Plan (“LTIP”) for legacy employees of one of their subsidies which is not subject to the Employee Retirement Income Security Act of 1974. As of December 31, 2019, the Company was no longer required to contribute to the plan under the terms of the historical purchase agreement. Total contributions by the Company to these plans were approximately $1.0 million, $1.2 million, and $1.0 million for the years ended December 31, 2020, 2019 and 2018, respectively. 14. Related Party Transactions Prior to the IPO, GTCR, LLC (“GTCR”), MLSH 1’s majority owner, provided subsidiaries of the Company with financial and management consulting services through an advisory services agreement. This advisory services agreement also provided that the Company pay placement fees to GTCR of 1.0% of the gross amount of any debt or equity financings. During the years ended December 31, 2020 the Company entered into the New Credit Agreement (see Note 7) and paid GTCR a $3.7 million placement fee. During the years ended December 31, 2019 and 2018, no placement fees were incurred. The advisory services agreement provides that the Company pay a $0.1 million quarterly management fee to GTCR commencing on the date of the first acquisition. For each of the years ended December 31, 2020, 2019, and 2018, the Company incurred approximately $4.2 million, $0.5 million, and $0.5 million in management fees to GTCR which were paid in full as of December 31, 2020, 2019, 2018, respectively. The advisory services agreement was terminated in connection with the IPO. The Company also reimburses GTCR for out-of-pocket expenses incurred while providing the above professional services. During the years ended December 31, 2020, 2019, and 2018, the Company incurred out-of-pocket expenses to GTCR of $0.2 million, $2.4 million, and $0.1 million, respectively. Of these balances, the amounts included in accrued expense at December 31, 2019 was approximately $2.4 million. The were no amounts included in accounts payable and accrued expenses as of December 31, 2020. The non-controlling interests in MLSC represent equity interest that was retained by the shareholders of the MLSC entity prior to its acquisition by the Company. The President of Cygnus and his affiliated entity were the owners of the non-controlling interests. In September 2020, Topco LLC and MLSH 1 entered into a Sale and Rollover Agreement with the President of Cygnus and his affiliated entity to purchase certain MLSC Class B preferred units and common units as well as exchange the remaining MLSC Class B preferred units and common units for a variable number of MLSH 1 common units. As a result of this transaction, the President of Cygnus and his affiliated entity no longer held a non-controlling interest in MLSC upon the exchange of MLSH 1 common units for the remaining MLSC Class B preferred and common units which occurred in November 2020 (see Note 11). In October 2020, the Company made a $88.6 million distribution to MLSH 1. Following the completion of the Organizational Transactions and IPO, Topco LLC made tax distributions of $8.2 million to MLSH 1. 145 The Company leases a facility, which through the date of the Organizational Transactions was owned by an entity controlled by a close relative of the President of one of its subsidiaries (see Note 6). The President of this subsidiary also personally financed a loan to this entity which was used to acquire the property leased by the Company. Upon completion of the Sale and Rollover Agreement (Note 11), this individual was no longer deemed to be a related party. For the years ending December 31, 2020, 2019, and 2018, respectively, the Company paid $0.2 million in lease payments for the leased facility. Concurrent with the completion of the IPO, the Company entered into a TRA with MLSH 1 and MLSH 2 (see Note 12). 15. Segments Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. When determining the reportable segments, the Company aggregated operating segments based on their similar economic and operating characteristics. Segment results are presented in the same manner as we present our operations internally to make operating decisions and assess performance. The accounting policies for the segments are the same as those described in Significant Accounting Policies (see Note 1). The Company’s financial performance is reported in three segments. A description of each segment follows: • Nucleic Acid Production : focuses on the manufacturing and sale of highly modified nucleic acids products to support the needs of customers’ research, therapeutic and vaccine programs. This segment also provides research products for labeling and detecting proteins in cells and tissue samples. • Biologics Safety Testing : focuses on manufacturing and selling biologics safety and impurity tests and assay development services that are utilized by our customers in their biologic drug manufacturing spectrum. • Protein Detection : focuses on manufacturing and selling labeling and visual detection reagents to scientific research customers for their tissue-based protein detection and characterization needs. The Company has determined that adjusted earnings before interest, tax, depreciation, and amortization (“Adjusted EBITDA”) is the profit or loss measure that the CODM uses to make resource allocation decisions and evaluate segment performance. Adjusted EBITDA assists management in comparing the segment performance on a consistent basis for purposes of business decision-making by removing the impact of certain items that management believes do not directly reflect the core operations and, therefore, are not included in measuring segment performance. The Company defines Adjusted EBITDA as net income before interest, taxes, depreciation and amortization, certain non-cash items, and other adjustments that we do not consider in our evaluation of ongoing operating performance from period to period. Corporate costs are managed on a standalone basis and not allocated to segments. Following is financial information relating to the operating segments (in thousands): For the year ended December 31, 2020 Nucleic Acid Production Biologics Safety Testing Protein Detection Corporate Eliminations Total Revenue $ 207,597 $ 54,897 $ 22,881 $ — $ (1,277) $ 284,098 Adjusted EBITDA $ 133,822 $ 44,516 $ 9,225 $ (18,189) $ (209) $ 169,165 For the year ended December 31, 2019 Nucleic Acid Production Biologics Safety Testing Protein Detection Corporate Eliminations Total Revenue $ 72,602 $ 44,416 $ 26,122 $ — $ — $ 143,140 Adjusted EBITDA $ 22,229 $ 36,371 $ 14,603 $ (11,189) $ — $ 62,014 For the year ended December 31, 2018 Nucleic Acid Production Biologics Safety Testing Protein Detection Corporate Eliminations Total Revenue $ 60,057 $ 38,492 $ 25,284 $ — $ — $ 123,833 Adjusted EBITDA $ 16,751 $ 31,199 $ 13,846 $ (8,796) $ — $ 53,000 During the year ended December 31, 2020, intersegment revenue was $1.3 million. The intersegment sales and the related gross margin on inventory recorded at the end of the period are eliminated for consolidation purposes in the Eliminations column. Internal selling prices for intersegment sales are consistent with the segment’s normal retail price offered to external parties. There was no commission expense recognized for intersegment sales for the year ended December 31, 2020. 146 Intersegment revenue represents intersegment revenue between the Nucleic Acid Production and Protein Detection segments. There was no inter-segment activity for the years ended December 31, 2019 and 2018. The Company does not allocate assets to its reportable segments as they are not included in the review performed by the CODM for purposes of assessing segment performance and allocating resources. Excluding approximately $0.4 million associated with a building in the United Kingdom, all of the Company’s long-lived assets are located within the United States. A reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP measure, is set forth below (in thousands): Year Ended December 31, 2020 2019 2018 Net income (loss) $ 78,816 $ (5,201) $ (16,915) Add: Amortization 20,320 20,274 20,122 Depreciation 5,593 3,810 2,225 Interest expense 30,740 29,959 27,399 Income tax expense (benefit) 2,880 (652) 417 EBITDA 138,349 48,190 33,248 Acquisition contingent consideration — 322 939 Acquisition integration costs 3,857 6,170 7,529 Amortization of purchase accounting inventory step-up — 1,856 2,967 Acquired in-process research and development costs 2,881 — — Equity-based compensation 24,629 1,679 2,121 GTCR management fees 680 523 574 Gain on sale and leaseback transaction (19,002) — — Merger and acquisition related expenses 395 3,274 — Financing costs 9,784 — — Loss on extinguishment of debt 7,592 — 5,622 Adjusted EBITDA $ 169,165 $ 62,014 $ 53,000 16. Subsequent Events In January 2021, the Company entered into a new interest rate cap agreement to manage a portion of its variable interest rate risk on its outstanding long-term debt. The contract, effective March 31, 2021, entitles the Company to receive from the counter party at each calendar quarter end the amount, if any, by which the specified defined floating market rate exceeds the cap strike interest rate, applied to the contract notional amount of $415.0 million. The floating rate of interest is reset at the end of each three month period. The contract expires on March 31, 2023. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.