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Item 7. Management’s Discussion and Analysis

2024-02-29 compared with 2023-02-28 · 225 added, 195 removed, 397 unchanged (51% of the section changed)

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This discussion and analysis generally addresses 2023 and 2022 items and year-over-year comparisons between 2023 and 2022.

Discussions of 2020 items and year-over-year comparisons between 2021 and 2020 that are not included in this Annual Report on Form 10-K can be found in Part II, Item 7 of our 2021 Annual Report on Form 10-K filed with the SEC on March 1, 2022.

Discussions of 2021 items and year-over-year comparisons between 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in Part II, Item 7 of our 2022 Annual Report on Form 10-K filed with the SEC on February 28, 2023.

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.

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Our customers also include a range of government, academic and biotechnology institutions.

As of December 31, 2022, we employed a team of over 610 full-time employees, approximately 18% of whom have advanced degrees.

As of December 31, 2023, we employed a team of over 650 employees, approximately 24% of whom have advanced degrees.

As of January 5, 2024, following the completion of a reduction in force (as described under “Restructuring” below), we had approximately 570 employees, approximately 25% of whom have advanced degrees.

We primarily utilize a direct sales model for our sales to our customers in North America.

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Total revenue by segment was $224.8 million in Nucleic Acid Production and $64.2 million in Biologics Safety Testing for the year ended December 31, 2023.

Total revenue by segment was $711.9 million in Nucleic Acid Production, $68.4 million in Biologics Safety Testing and $19.0 million in Protein Detection for the year ended December 31, 2021.

We divested our Protein Detection segment in September 2021, and since then operate two business segments only, Nucleic Acid Production and Biologics Safety Testing.

Total revenue by segment was $813.1 million in Nucleic Acid Production and $69.9 million in Biologics Safety Testing for the year ended December 31, 2022.

We focus a substantial portion of our resources supporting our core business segments.

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2023 and Recent Developments

In January 2022, we completed the acquisition of MyChem, LLC (“MyChem”), a privately-held San Diego, California-based provider of ultra-pure nucleotides to customers in the diagnostics, pharma, genomics and research markets, for a total purchase consideration of $257.9 million, which includes an estimated fair value of contingent consideration of $7.8 million as of the acquisition date.

As a result of the acquisition, we own all the outstanding interest in MyChem.

Our consolidated results of operations for the year ended December 31, 2022 include the operating results of MyChem from the acquisition date.

In January 2023, we completed the acquisition of Alphazyme, LLC (“Alphazyme”), a privately-held original equipment manufacturer (“OEM”) and provider of custom, scalable, molecular biology enzymes to customers in the genetic analysis and nucleic acid synthesis markets, for a total purchase consideration of $75.3 million.

As a result of the acquisition, we own all the outstanding equity interest in Alphazyme.

Our consolidated results of operations for the year ended December 31, 2023 include the operating results of Alphazyme from the acquisition date.

See Note 2 to our consolidated financial statements for additional information.

In January 2023, we completed the acquisition of Alphazyme, LLC (“Alphazyme”), a privately-held original equipment manufacturer (“OEM”) provider of custom, scalable, molecular biology enzymes to customers in the genetic analysis and nucleic acid synthesis markets.

The total consideration to acquire Alphazyme consisted of a base cash purchase price of $70.0 million, subject to customary post-closing adjustments, and potential performance payments payable in cash of up to $75.0 million.

Government Assistance

In May 2022, TriLink entered into a cooperative agreement (“Cooperative Agreement”) with the U.S.

Department of Defense, as represented by the Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense on behalf of the Biomedical Advanced Research and Development Authority (“BARDA”), within the U.S.

Department of Health and Human Services, to advance the development of domestic manufacturing capabilities and to expand TriLink’s domestic production capacity for products critical to the development and manufacture of mRNA vaccines and therapeutics, including nucleoside triphosphates and CleanCap ® , TriLink’s proprietary co-transcriptional mRNA capping reagents.

TriLink is expanding its San Diego manufacturing campus by making a significant investment in additional cleanroom and small molecule manufacturing space, implementing automation systems and adding support areas to augment production capacity (the “Flanders San Diego Facility”).

Pursuant to certain requirements, BARDA awarded TriLink an amount equal to 50% of the construction and validation costs currently budgeted for the Flanders San Diego Facility.

Restructuring

In November 2023, the Company implemented a cost realignment plan (the “Cost Realignment Plan”) that included the termination of approximately 15% of the Company’s workforce, the termination of certain leases, and other actions to reduce expenses, all as part of a plan to optimize business operations and match them to current market conditions.

The reduction in

force was completed on January 5, 2024, following the end of the sixty-day notification period required by the Worker Adjustment and Retraining Notification Act.

The Company expects the remaining actions under the Cost Realignment Plan to be substantially complete during the first quarter of 2024.

During the year ended December 31, 2023, we incurred restructuring costs of $6.5 million, primarily related to severance and other employee-related costs, facility and other exit costs, professional fees and other restructuring costs.

We do not expect to incur any additional restructuring costs, however, we expect to recognize a benefit of $1.2 million during the first quarter of 2024 relating to equity award forfeitures associated with employee terminations.

We expect the Cost Realignment Plan to yield certain cost savings of approximately $30.0 million annually, of which $23.0 million relates to labor costs.

See Note 3 to our consolidated financial statements for additional information.

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COVID-19 Related Revenue Trends and Uncertainties

Since the start of the COVID-19 pandemic in early 2020, our results of operations and cash flows have substantially benefited from the strong demand for COVID-19 related products and services, including our proprietary CleanCap® analogs and highly modified RNA products, particularly mRNA.

We estimate that revenue from COVID-19 related products and services represented approximately 67.9% and 69.7%, respectively, of our total revenues for the years ended December 31, 2022 and 2021, respectively.

However, we believe the second quarter of 2022 represented the highest revenue quarter for revenue attributable to our COVID-19 related products and services, with substantial declines in COVID-19 related revenue expected in the future.

In addition to the general market trend of reduced demand for COVID-19 related products and services as the pandemic subsides, our COVID-19 related revenue for 2023 may be negatively impacted by unused inventory of our products that our customers have on hand.

We are unable to estimate the impact of this unused inventory on future demand given both binding contractual commitments by our customers for additional purchases and our customers generally having not provided us with detailed inventory data.

Our results of operations and cash flows during each of the years ended December 31, 2022, 2021 and 2020 substantially benefited from the demand for COVID-19 related products and services, including our proprietary CleanCap® analogs and highly modified RNA products, particularly mRNA, which are used by our customers in the production of COVID-19 vaccines.

As a result of the general decrease in market demand for COVID-19 related products and services, including the supply and manufacture of COVID-19 vaccines, and in particular, following the end of U.S.

federal public health emergency declaration and World Health Organization declaration of the end of the pandemic in early May 2022, we expect to experience further declines in COVID-19 related revenue, as discussed in further detail below.

We estimate that revenue from COVID-19 related products and services represented approximately 21.0% and 67.9% of our total revenues for the years ended December 31, 2023 and 2022, respectively.

We believe that the second quarter of 2022 will have represented the highest revenue quarter for revenue attributable to our COVID-19 related products and services, and have experienced substantial declines in COVID-19 related revenue since such quarter as a result of the general market trend of reduced demand for COVID-19 related products and services as the pandemic subsides, including the supply and manufacture of COVID-19 related vaccines, and the World Health Organization declaring an end to the COVID-19 pandemic.

We expect further declines in COVID-19 related revenue for these reasons, as well as a result of unused inventory of our products that our customers have on hand.

We are currently unable to fully estimate the impact of this unused inventory on our future COVID-19 related revenue, nor are we able to predict when our customers will resume purchasing COVID-19 related products given that our customers generally have not provided us with detailed inventory data.

Our longer-term revenue prospects for COVID-19 related products are highly uncertain but are expected to be substantially less than pandemic highs.

There are various political, social, economic and regulatory factors that could influence the ongoing manufacture and supply of COVID-19 vaccines, and in turn, our longer-term COVID-19 related revenue, including:

The factors that could influence longer-term COVID-19 related revenue include:

the emergence, duration and intensity of new virus variants;

emerging information concerning the severity and incidence of the virus and its variants;

competition faced by our customers from other COVID-19 vaccine manufacturers or developers of alternative treatments;

regional resurgences of the virus globally;

competition faced by our customers from other COVID-19 vaccine manufacturers and the development and availability of antiviral therapeutic alternatives;

the availability and administration of pediatric and booster vaccinations, vaccine supply constraints, vaccine hesitancy and the effectiveness of vaccines against new virus strains;

the lapsing of the public health emergency declaration made pursuant to Section 319 of the Public Health Service Act in January 2020;

political and social debate relating to the need for, efficacy of, or side effects related to one or more specific COVID-19 vaccines;

and global macroeconomic conditions, including impacts resulting from supply chain constraints, labor market shortages and inflationary pressures.

economy and global economy, including impacts resulting from supply chain constraints, labor market shortages and inflationary pressures.

This contraction in COVID-19 related demand will significantly decrease our revenue and cash flow, which in turn could have a material adverse impact on our operating results and financial condition in the future.

Other Trends and Uncertainties

Biopharmaceutical customers are increasingly relying on outside parties to provide important inputs and services for their clinical research and manufacturing, a development driving growth for suppliers with unique capabilities and the ability to manufacture at an appropriate scale to support customer programs.

We believe that suppliers like ourselves, with this rare combination of capabilities, proprietary products and the required investment in manufacturing and quality systems, are benefiting from rapid growth as biopharmaceutical customers seek to partner with a small number of trusted suppliers.

In addition to the continued trend toward outsourcing, several market developments are driving increased growth, in our addressable market segments, including:

(i) pivot toward mRNA vaccines driven in part by the success of mRNA COVID-19 vaccines;

(ii) rapid growth in development of cell and gene therapies;

(iii) large and growing pipeline of protein-based therapeutics;

and (iv) rise in molecular diagnostics driven by COVID-19.

Our Biologics Safety Testing business continues to see headwinds from business in Asia, seeing impacts from the ongoing COVID-19 pandemic lockdowns in China and our ongoing decisions not to ship products into Russia.

While we believe that the long-term trend of biopharmaceutical customers relying on outside parties to provide important inputs and services for their clinical research and manufacturing remains a long-term growth driver for us, we believe that recent industry trends and uncertainties, including changes in our customers’ spending priorities and budgetary policies and practices, which negatively impacted our revenue and operating results in the year ended December 31, 2023, may continue and result in slower growth and/or cause a further decline in our revenues during the year ending December 31, 2024.

These trends and uncertainties, which we primarily attribute to lower levels of investment in the research and development funding of early-stage biotechnology companies and declines and uncertainties in the capital markets amidst ongoing negative macroeconomic challenges, has and may continue to cause those companies to take action to conserve capital, resulting in a potential reduction in research and development spending across the markets in which we participate.

Our businesses also continue to see headwinds from a general contraction in economic activity in Asia, particularly in China, which may negatively impact our revenue derived from those markets.

See more information under Part I, Item 1.

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The key measures we use to determine how our business is performing are revenue and Adjusted EBITDA.

Adjusted EBITDA is a non-GAAP financial measure that we define as net income (loss) adjusted for interest, provision for income taxes, depreciation, amortization and equity-based compensation expenses.

Adjusted EBITDA is a non-GAAP financial measure that we define as net (loss) income adjusted for interest, provision for income taxes, depreciation, amortization and equity-based compensation expenses.

Adjusted EBITDA reflects further adjustments to eliminate the impact of certain items, including certain non-cash and other items, that we do not consider representative of our ongoing operating performance.

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We generated total consolidated revenue of $288.9 million and $883.0 million for the years ended December 31, 2023 and 2022, respectively, through the following segments:

(i) Nucleic Acid Production, (ii) Biologics Safety Testing and (iii) Protein Detection.

We divested our Protein Detection segment in September 2021, and since then operate two business segments only, Nucleic Acid Production and Biologics Safety Testing.

(i) Nucleic Acid Production and (ii) Biologics Safety Testing.

Nucleic Acid Production Segment

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Our Biologics Safety Testing segment 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 activities.

Protein Detection Segment

Our Protein Detection segment products, which included a portfolio of labeling and visual detection reagents, were purchased by our scientific research customers for their tissue-based protein detection and characterization needs.

In September 2021, we completed the divestiture of Vector Laboratories, Inc.

and subsidiaries (“Vector”), which made up our Protein Detection segment.

Cost of Revenue

Cost of revenue associated with our products primarily consists of manufacturing related costs incurred in the production process, including personnel and related costs, equity-based compensation expense, inventory write-downs, costs of materials, labor and overhead, packaging and delivery costs and allocated costs, including facilities, information technology, depreciation, and amortization of intangibles.

Cost of revenue also includes adjustments for excess, obsolete or expired inventory, and idle capacity.

Cost of revenue associated with our services primarily consists of personnel and related costs, equity-based compensation expense, cost of materials and allocated costs, including facilities and information technology costs.

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Our selling, general and administrative expenses primarily consist of salaries, benefits and equity-based compensation expense for our employees in our commercial sales functions, marketing, executive, accounting and finance, legal and human resource functions as well as travel expenses, professional services fees, such as consulting, audit, tax and legal fees, general corporate costs and allocated costs, including facilities, information technology and amortization of intangibles.

We expect that our selling, general and administrative expenses will continue to increase, primarily due to increased headcount and expanding facilities footprint to support anticipated long-term growth in the business, costs incurred in increasing our presence globally, and increases in marketing activities to drive awareness and adoption of our products and services.

We expect that our selling, general and administrative expenses will gradually increase in future periods, primarily due to expanding facilities footprint to support anticipated long-term growth in the business, costs incurred in increasing our presence globally, and increases in marketing activities to drive awareness and adoption of our products and services.

Research and Development

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Payment made prior to the receipt of goods or services to be used in research and development are recognized as prepaid assets until the goods are received or services are rendered.

We expect our research and development costs to fluctuate in future periods as we continue our research and development efforts, including meeting our customers’ needs.

These costs may fluctuate from period to period due to the timing and scope of our development activities.

We expect our research and development costs to increase to support our research and development efforts, including meeting our customers’ needs.

Change in Estimated Fair Value of Contingent Consideration

In the first quarter of 2022, we completed the acquisition of MyChem and recorded a contingent consideration liability of $7.8 million.

In the second quarter of 2022, we recorded a fair value adjustment to the liability based on our assessment of the probability of achieving certain revenue thresholds and other probability factors.

This was due to a change in estimate associated with MyChem revenue projections reaching thresholds that would trigger a contingent payment per the MyChem Securities Purchase Agreement (the “MyChem SPA”).

Gain on Sale of Business

In the third quarter of 2021, we completed the sale of Vector, which represented our Protein Detection business, to Voyager Group Holdings, Inc.

(“Voyager”) and recorded a gain of $11.2 million.

Change in estimated fair value of contingent consideration consists of fair value adjustments to contingent consideration liabilities associated with completed acquisitions.

These adjustments are based on our assessment of the probability of achieving certain revenue thresholds and other probability factors.

Restructuring

Restructuring costs primarily consist of severance and other employee-related costs, facility and other exit costs, professional fees and other restructuring costs resulting from the Cost Realignment Plan.

Other Income (Expense)

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Interest Income

Interest income consists of interest earned on our cash balances held at financial institutions.

Loss on Extinguishment of Debt

Loss on extinguishment of debt represent the write-off of remaining unamortized debt discount and deferred issuance costs on previously outstanding debt when we engage in refinancing activities.

Interest income consists of interest earned on our cash balances and short-term investments in money market funds held at financial institutions.

Change in Payable to Related Parties Pursuant to the Tax Receivable Agreement

The Tax Receivable Agreement liability adjustment reflects changes in the Tax Receivable Agreement liability recorded in our consolidated statements of financial condition primarily due to changes in our estimated state apportionment and the corresponding change of our estimated state tax rate.

During the year ended December 31, 2023, we determined that making a payment under the Tax Receivable Agreement for subsequent years was not probable under Accounting Standards Codification 450 - Contingencies as a result of a valuation allowance having been recorded against our deferred tax assets, and therefore, that it is more likely than not that we will not

generate sufficient future taxable income to utilize related tax benefits that would result in a payment under the Tax Receivable Agreement.

As a result, we remeasured the non-current portion of the liability due under the Tax Receivable Agreement to zero, as of December 31, 2023, and recorded a corresponding gain on Tax Receivable Agreement liability remeasurement.

Income Tax Expense

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federal, state and local income taxes with respect to our allocable share of any taxable income of Topco LLC and will be taxed at the prevailing corporate tax rates.

In addition, we evaluate the realizability of our deferred tax assets on a quarterly basis and establish valuation allowances when it is more likely than not that all or a portion of a deferred tax asset may not be realized.

During the year ended December 31, 2023, we recognized a full valuation allowance against our deferred tax assets and recorded a corresponding income tax expense.

Non-Controlling Interests

Non-controlling interests represent the portion of profit or loss, net assets and comprehensive income or loss of our consolidated subsidiaries that is not allocable to the Company based on our percentage of ownership of such entities.

Income or loss attributed to the non-controlling interests is based on the LLC Units outstanding during the period and is presented on the consolidated statements of income.

As of December 31, 2022, we hold 51.6% of the outstanding LLC Units of Topco LLC and 48.4% of the outstanding LLC Units of Topco LLC are held by MLSH 1.

Income or loss attributed to the non-controlling interests is based on the LLC Units outstanding during the period and is presented on the consolidated statements of operations.

As of December 31, 2023, we held approximately 52.6% of the outstanding LLC Units of Topco LLC, and MLSH 1 held approximately 47.4% of the outstanding LLC Units of Topco LLC.

Results of Operations

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Change in estimated fair value of contingent consideration (3,286) (7,800) (57.9) %

Gain on sale of business — (11,249) *

Restructuring (1)

Total operating expenses 320,593 308,785 3.8 %

Income from operations 574,216 554,645 3.5 %

(Loss) income from operations

(31,648) 574,216 (105.5) %

Other income (expense), net 649,384 (22,744) (2955.2) %

Income before income taxes

617,736 551,472 12.0 %

Income tax expense 756,111 60,809 1143.4 %

Net income $ 490,663 $ 469,250 4.6 %

Net income attributable to non-controlling interests 270,458 287,213 (5.8) %

Net income attributable to Maravai LifeSciences Holdings, Inc.

Net (loss) income $ (138,375) $ 490,663 (128.2) %

Net (loss) income attributable to non-controlling interests (19,346) 270,458 (107.2) %

Net (loss) income attributable to Maravai LifeSciences Holdings, Inc.

$ (119,029) $ 220,205 (154.1) %

Net income per Class A common share attributable to Maravai LifeSciences Holdings, Inc.:

Net (loss) income per Class A common share attributable to Maravai LifeSciences Holdings, Inc.:

Basic $ (0.90) $ 1.67

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Research and development 2,715 1,129 140.5 %

Restructuring

Total equity-based compensation expense $ 34,588 $ 18,670 85.3 %

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Biologics Safety Testing 64,176 69,932 (8.2) % 22.2 % 7.9 %

Protein Detection — 18,959 * — % 2.4 %

Total revenue $ 288,945 $ 883,001 (67.3) % 100.0 % 100.0 %

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* Not meaningful

Total revenue was $883.0 million for the year ended December 31, 2022 compared to $799.2 million for the year ended December 31, 2021, representing an increase of $83.8 million, or 10.5%.

Nucleic Acid Production revenue increased from $711.9 million for the year ended December 31, 2021 to $813.1 million for the year ended December 31, 2022, representing an increase of $101.2 million, or 14.2%.

The increase in Nucleic Acid Production was driven by demand for our proprietary CleanCap analogs as COVID-19 vaccine manufacturers scaled production earlier in the year, and for our highly modified RNA products as this technology becomes incorporated into more therapeutic and vaccine development programs.

Total revenue was $288.9 million for the year ended December 31, 2023 compared to $883.0 million for the year ended December 31, 2022, representing a decrease of $594.1 million, or 67.3%.

Nucleic Acid Production revenue decreased from $813.1 million for the year ended December 31, 2022 to $224.8 million for the year ended December 31, 2023, representing a decrease of $588.3 million, or 72.4%.

The decrease in Nucleic Acid Production was primarily driven by decreased revenue from our proprietary CleanCap analogs as demand decreased from COVID-19 vaccine manufacturers.

For the year ended December 31, 2023, we estimate that approximately $60.8 million, or 54.7%, of our $111.1 million CleanCap revenue was a result of customer demand attributable to COVID-19 vaccines or other COVID-19 related commercial products or developmental programs.

For the year ended December 31, 2022, we estimate that approximately $599.8 million, or 90.8%, of our $660.5 million CleanCap revenue was a result of customer demand attributable to COVID-19 vaccines or other COVID-19 related commercial products or developmental programs.

Biologics Safety Testing revenue increased from $68.4 million for the year ended December 31, 2021 to $69.9 million for the year ended December 31, 2022, representing an increase of $1.5 million, or 2.2%.

The increase was driven by growth in the underlying markets supporting cell and gene therapies, biosimilar and other biologic programs and growing adoption of MockV ® technology for viral clearance prediction during biopharmaceutical manufacturing.

There was no Protein Detection revenue for the year ended December 31, 2022 due to the sale of our Protein Detection business segment, which was completed in early September 2021.

Biologics Safety Testing revenue decreased from $69.9 million for the year ended December 31, 2022 to $64.2 million for the year ended December 31, 2023, representing a decrease of $5.8 million, or 8.2%.

The decrease was primarily due to an industry-wide weak demand environment and slowdowns in biologics manufacturing, which continued to impact demand for our HCP ELISA kits.

Segment Information

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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.

We define 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.

We define Adjusted EBITDA as net (loss) 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, net of eliminations, are managed on a standalone basis and are not allocated to segments.

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The following schedule includes revenue and adjusted EBITDA for each of our reportable operating segments (in thousands):

We have revised our presentation for the prior periods below to remove the presentation of Total Adjusted EBITDA and reconcile the total of our reportable segments’ measure of profit or loss to income before income taxes, in addition to net income, and removed corporate costs, net of eliminations from total reportable segments’ adjusted EBITDA and included such amounts in the reconciliation to income before income taxes.

Additionally, we have revised our presentation for the prior

periods below of our total reportable segments’ revenue, in which we removed intersegment eliminations from our total reportable segment’s revenue.

Year Ended December 31,

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Biologics Safety Testing 64,179 69,932

Protein Detection — 18,959

Total reportable segments’ revenue 288,948 883,008

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Biologics Safety Testing 46,908 54,841

Protein Detection — 6,391

Total reportable segments’ adjusted EBITDA 129,566 693,178

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Equity-based compensation (34,588) (18,670)

Gain on sale of business — 11,249

Merger and acquisition related expenses (4,392) (2,416)

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Chief Executive Officer transition costs (28) (2,426)

Restructuring costs (1)

Other (1,763) (1,814)

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Income tax expense (756,111) (60,809)

Net income $ 490,663 $ 469,250

During the year ended December 31, 2022, intersegment revenue was immaterial between the Nucleic Acid Production and Biologics Safety Testing segments.

During the year ended December 31, 2021, intersegment revenue was $0.7 million between the Nucleic Acid Production and Protein Detection segments.

Net (loss) income

$ (138,375) $ 490,663

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(1) Equity-based compensation benefit of $0.1 million related to forfeited equity awards in connection with the restructuring is included on the equity-based compensation line item.

During the year ended December 31, 2023 and 2022, intersegment revenue was immaterial between the Nucleic Acid Production and Biologics Safety Testing segments.

The intersegment sales and the related gross margin on inventory recorded at the end of the period are eliminated for consolidation purposes.

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Adjusted EBITDA

A reconciliation of net income to Adjusted EBITDA, which is a non-GAAP measure, is set forth below (in thousands):

A reconciliation of net (loss) income to Adjusted EBITDA, which is a non-GAAP measure, is set forth below (in thousands):

Year Ended December 31,

Net income $ 490,663 $ 469,250

Net (loss) income

$ (138,375) $ 490,663

Amortization 27,356 24,269

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Acquisition contingent consideration (1)

(3,286) (7,800)

Acquisition integration costs (2)

12,695 13,362

Equity-based compensation (3)

34,588 18,670

Gain on sale of business (4)

Merger and acquisition related expenses (4)

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Chief Executive Officer transition costs (8)

Restructuring costs (9)

Adjusted EBITDA $ 65,309 $ 637,800

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(1) Refers to the change in the estimated fair value of performance payments related to the acquisition of MyChem, which was completed in January 2022.

(1) Refers to the change in the estimated fair value of contingent consideration related to completed acquisitions.

(2) Refers to incremental costs incurred to execute and integrate completed acquisitions, and retention payments in connection with these acquisitions.

(3) Refers to non-cash expense associated with equity-based compensation.

(4) Refers to the gain on the sale of Vector, which was completed in September 2021.

(4) Refers to diligence, legal, accounting, tax and consulting fees incurred associated with acquisitions that were pursued but not consummated.

(6) Refers to transaction costs related to the refinancing of our long-term debt and costs from a secondary offering of our common stock that are not capitalizable or cannot be offset against proceeds from such transactions.

(7) Refers to non-cash expense associated with adjustments to the carrying value of the indemnification asset recorded in connection with the acquisition of MyChem.

(8) Refers to the adjustment of our Tax Receivable Agreement liability primarily due to changes in our estimated state apportionment and the corresponding change of our estimated state tax rate.

(9) Refers to legal fees and other costs associated with the previously announced Chief Executive Officer leadership transition planned for the middle of 2023.

(10) Refers to the loss recognized during the period associated with certain working capital and other adjustments related to the sale of Vector, which was completed in September 2021, and a loss incurred on extinguishment of debt.

(5) Refers to transaction costs related to the refinancing of our long-term debt that are not capitalizable.

(6) Refers to non-cash expense associated with adjustments to the carrying value of the indemnification asset recorded in connection with the acquisition of MyChem, LLC (“MyChem”), which was completed in January 2022.

(7) For the year ended December 31, 2023, refers to the adjustment of our Tax Receivable Agreement liability primarily due to remeasuring the non-current portion of the liability to zero as we no longer consider the payments under the agreement to be probable.

For the year ended December 31, 2022, refers to the adjustment of our Tax Receivable Agreement liability primarily due to changes in our estimated state apportionment and the corresponding change of our estimated state tax rate.

(8) Refers to legal fees and other costs associated with the Chief Executive Officer leadership transition that occurred during July 2023.

(9) Refers to restructuring costs associated with the Cost Realignment Plan, which was implemented in November 2023.

Equity-based compensation benefit of $0.1 million related to forfeited equity awards in connection with the restructuring is included on the equity-based compensation line item.

(10) For the year ended December 31, 2023, refers to severance payments, legal settlement amounts, inventory step-up charges in connection with the acquisition of Alphazyme, certain working capital and other adjustments related to the acquisition of MyChem, and other non-recurring costs.

For the year ended December 31, 2022, refers to the loss recognized during the period associated with certain working capital and other adjustments related to the sale of Vector Laboratories, Inc., which was completed in September 2021, and the loss incurred on extinguishment of debt.

Adjusted Free Cash Flow

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(1) We define capital expenditures as:

(i) purchases of property and equipment which are included in cash flows from investing activities, accounts payable and accrued expenses, offset by government funding recognized;

and (ii) construction costs determined to be lessor improvements recorded as prepaid lease payments and right-of-use assets, including portions included in accounts payable and accrued expenses, offset by government funding recognized.

(i) purchases of property and equipment which are included in cash flows from investing activities, offset by government funding received;

and (ii) construction costs determined to be lessor improvements recorded as prepaid lease payments and right-of-use assets, offset by government funding received.

We revised our capital expenditures definition in the quarter ended March 31, 2023 to exclude the portions in accounts payable and accrued expenses.

Operating Expenses

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Change in estimated fair value of contingent consideration (3,286) (7,800) (57.9) % (1.1) % (0.9) %

Gain on sale of business — (11,249) * — % (1.4) %

Restructuring 6,466 — * 2.2 % — %

Total operating expenses $ 320,593 $ 308,785 3.8 % 111.0 % 35.0 %

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Cost of Revenue

Cost of revenue increased by $28.4 million from $140.6 million for the year ended December 31, 2021 to $169.0 million for the year ended December 31, 2022, or 20.2%.

The increase in cost of revenue was primarily attributable to an increase in inventory reserve of $8.0 million as a result of lower projected manufacturing demand, and an increase in quality control costs of $6.6 million.

The increase was further driven by increases in amortization expense of $9.2 million for intangible assets recognized for the MyChem acquisition, an increase in personnel costs of $6.2 million driven by higher headcount to support Company growth, and an increase in facilities cost of $3.1 million due to additional facilities occupied.

These were partially offset by a $7.2 million decrease in labor and overhead costs driven by improved labor efficiencies.

Gross profit increased by $55.4 million from $658.7 million for the year ended December 31, 2021 to $714.0 million for the year ended December 31, 2022.

The decrease in gross profit margin as a percentage of sales was primarily attributable to increases in inventory reserve, quality control costs, and amortization expense for newly acquired intangible assets.

These are partially offset by a favorable product mix shift compared to prior period.

Cost of revenue decreased by $20.2 million from $169.0 million for the year ended December 31, 2022 to $148.7 million for the year ended December 31, 2023, or 12.0%.

The decrease in cost of revenue compared to the prior period was primarily attributable to a decrease of $42.2 million in direct product costs driven by overall decreased revenues.

This was partially offset by an increase of $14.3 million in personnel costs primarily driven by retention payment accruals associated with the acquisition of MyChem, additional headcount to support expanded manufacturing capacity and additional headcount related to the acquisition of Alphazyme, an increase of $6.0 million in depreciation and amortization expense primarily due to new equipment and newly acquired intangible assets, and an increase of $1.6 million in facilities costs driven by new facilities.

Gross profit decreased by $573.8 million from $714.0 million for the year ended December 31, 2022 to $140.2 million for the year ended December 31, 2023.

The decrease in gross profit margin as a percentage of sales was primarily attributable to a decrease in volume, unfavorable product mix shift, an overall increase in the cost of revenue as a percentage of sales as the result of higher labor and facility costs, and depreciation and amortization.

Selling, General and Administrative

Selling, general and administrative expenses increased by $22.1 million from $129.3 million for the year ended December 31, 2022 to $151.4 million for the year ended December 31, 2023, or 17.1%.

The increase was primarily driven by an increase in personnel costs of $10.6 million, an increase in marketing costs of $7.5 million attributable to market studies conducted and increased advertising efforts to help elevate market presence, an increase in services and other costs of $4.5 million which includes increased legal fees and transaction costs associated with the acquisition of MyChem, and an increase in provision for credit losses of $2.6 million driven by increases in outstanding receivables.

The increase was primarily driven by an increase of $22.7 million in personnel costs largely due to additional headcount from the acquisition of Alphazyme and incremental equity-based compensation expense.

Research and Development

Research and development expenses increased by $3.2 million from $15.2 million for the year ended December 31, 2021 to $18.4 million for the year ended December 31, 2022, or 20.7%.

The increase was primarily driven by an increase in personnel costs of $11.7 million, including $9.3 million relating to retention payment accruals associated with the acquisition of MyChem.

This is partially offset by a decrease in supplies, materials and services of $8.6 million primarily driven by contracted studies in the prior year aimed at improvements for manufacturing processes.

Research and development expenses decreased by $1.1 million from $18.4 million for the year ended December 31, 2022 to $17.3 million for the year ended December 31, 2023, or 5.9%.

The decrease in expenses compared to the prior period was primarily driven by a decrease of $1.8 million in personnel costs largely due to certain retention payment accruals now being included in cost of revenue.

This is partially offset by an increase of $0.6 million in facilities costs driven by new facilities.

Change in Estimated Fair Value of Contingent Consideration

The change in estimated fair value of contingent consideration of $7.8 million for the year ended December 31, 2022 was due to the decrease in estimated fair value of the liability during the second quarter of 2022 for the contingent payments associated with the acquisition of MyChem.

This was due to a change in estimate associated with MyChem revenue projections reaching thresholds that would trigger a contingent payment per the MyChem SPA.

Gain on Sale of Business

The gain on sale of business of $11.2 million for the year ended December 31, 2021 was from the sale of Vector in September 2021.

The change in estimated fair value of contingent consideration changed by $4.5 million from $7.8 million for the year ended December 31, 2022 to $3.3 million for the year ended December 31, 2023, or 57.9%.

The changes were due to the decreases in estimated fair value of the liability for the contingent payments associated with the acquisitions of Alphazyme and MyChem.

These were due to changes in estimates associated with revenue projections relative to defined revenue targets or thresholds that would trigger contingent payments per the Securities Purchase Agreement between the Company and sellers of Alphazyme and the Securities Purchase Agreement between the Company and the sellers of MyChem.

See Notes 2 and 5 to our consolidated financial statements for additional information.

Restructuring

Restructuring costs for the year ended December 31, 2023 relate to the Cost Realignment Plan, which was implemented in November 2023.

These include severance and other employee-related costs of $4.3 million, offset by a $0.1 million equity-based compensation benefit, facility and other exit costs of $2.0 million, and professional fees and other associated costs of $0.3 million.

See Note 3 to our consolidated financial statements for additional information.

Other Income (Expense)

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Change in payable to related parties pursuant to the Tax Receivable Agreement 668,886 (4,102) * 231.5 % (0.5) %

Other income (358) 279 * 0.0 % 0.0 %

Other expense

(1,337) (358) 273.5 % (0.5) % 0.0 %

Total other income (expense), net $ 649,384 $ (22,744) * 224.7 % (2.6) %

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* Not meaningful

Other expense was $23.9 million for the year ended December 31, 2021 compared to $22.7 million for the year ended December 31, 2022, representing a decrease of $1.1 million, or 4.8%.

The decrease in expense was attributable to a $9.8 million decrease in interest expense primarily due to a $10.3 million change in fair value of the interest rate cap.

The decrease was further driven by a $2.3 million increase in interest income for interest earned on our new demand deposits held at financial institutions.

These were partially offset by a $10.2 million change in gain (loss) related to the payable to related parties pursuant to the Tax Receivable Agreement as a result of changes in our estimated state income tax apportionment and the corresponding change of our estimated state income tax rate.

Other expense was $22.7 million for the year ended December 31, 2022 compared to Other income of $649.4 million for the year ended December 31, 2023, representing a change of $672.1 million.

The overall change in Other income (expense) was primarily attributable to a $668.9 million gain related to the payable to related parties pursuant to the Tax Receivable Agreement as we concluded that it was not probable that we will be able to realize the remaining tax benefits based on estimates of future taxable income.

This was partially offset by a $0.9 million increase in Other expense relating to the indemnification asset recorded in connection with the acquisition of MyChem.

Relationship with GTCR, LLC (“GTCR”)

Prior to our initial public offering (“IPO”), we utilized GTCR for certain services pursuant to an advisory services agreement.

Under this agreement, GTCR provided us with financial and management consulting services in the areas of corporate strategy, budgeting for future corporate investments, acquisition and divestiture strategies, and debt and equity financings.

The advisory services agreement provided that we pay a $0.1 million quarterly management fee to GTCR for these services.

We also reimbursed GTCR for out-of-pocket expenses incurred while providing these services.

The advisory services agreement also provided that certain of our subsidiaries pay placement fees to GTCR of 1.0% of the gross amount of debt or equity financings.

In connection with our IPO, this advisory services agreement was terminated.

During the years ended December 31, 2022 and 2021, the Company made distributions of $150.2 million and $153.5 million for tax liabilities to MLSH 1.

As of December 31, 2023, investment entities affiliated with GTCR collectively controlled approximately 56% of the voting power of our common stock, which enables GTCR to control the vote of all matters submitted to a vote of our shareholders and to control the election of members of the Board and all other corporate decisions.

During the years ended December 31, 2023 and 2022, the Company made distributions of $9.6 million and $150.2 million, respectively, for tax liabilities to MLSH 1.

We are also a party to a Tax Receivable Agreement, or TRA, with MLSH 1, who is primarily owned by GTCR, and MLSH 2 (see Note 14 to our consolidated financial statements).

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 entities acquired from MLSH 1 and MLSH 2 in connection with the Organizational Transactions, Topco LLC and subsidiaries of Topco LLC that existed prior to the IPO, 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 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 entities acquired from MLSH 1 and MLSH 2 in connection with the Organizational Transactions, Topco LLC and subsidiaries of Topco LLC that existed prior to the IPO, 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”).

Payment obligations under the TRA are not conditioned upon any Topco LLC unitholders maintaining a continued ownership interest in us or Topco LLC, and the rights of MLSH 1 and MLSH 2 under the TRA are assignable.

There is no stated term for the TRA, and the TRA will continue until all tax benefits have been utilized or expired unless we exercise our right to terminate the TRA for an agreed-upon amount.

We recognize the amount of TRA payments expected to be paid within the next 12 months and classify this amount as current.

This determination was based on our estimate of taxable income for the year ended December 31, 2023.

As of December 31, 2023, our current liability under the TRA was $7.1 million.

As of December 31, 2023, the Company has derecognized the remaining non-current liability under the TRA after concluding it was not probable that the Company will be able to realize the remaining tax benefits based on estimates of future taxable income.

The estimation of liability under the TRA is by its nature imprecise and subject to significant assumptions regarding the amount, character, and timing of the taxable income in the future.

If the valuation allowance recorded against the deferred tax assets applicable to the tax attributes referenced above is released in a future period, the remaining TRA liability may be considered probable at that time and recorded on the consolidated balance sheet and within earnings.

We made payments of $42.6 million to MLSH 1 and MLSH 2 pursuant to the TRA during the year ended December 31, 2023, of which $0.4 million is related to interest.

We made payments of $1.3 million to MLSH 1 and MLSH 2 pursuant to the TRA during the year ended December 31, 2021.

As of December 31, 2022, our liability under the TRA was $718.2 million.

This determination was based on our taxable income for the year ended December 31, 2022.

We made payments of $35.3 million to MLSH 1 and MLSH 2 pursuant to the TRA during the year ended December 31, 2022, of which $1.1 million is related to interest.

This determination was based on our taxable income for the year ended December 31, 2021.

Liquidity and Capital Resources

We have financed our operations primarily from cash flow from operations, borrowings under long-term debt agreements and, to a lesser extent, the sale of our Class A common stock.

As of December 31, 2022, we had cash of $632.1 million, retained earnings of $404.8 million, and net income of $490.7 million for the fiscal year ended December 31, 2022.

As of December 31, 2023, we had cash and cash equivalents of $575.0 million and retained earnings of $285.7 million.

We had a net loss of $138.4 million for the fiscal year ended December 31, 2023.

We also had positive cash flow from operations of $126.2 million.

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We believe our cash on hand, cash generated from operations and continued access to our credit facilities, will be sufficient to satisfy our cash requirements over the next 12 months and beyond.

We expect to spend approximately $2.8 million in restructuring costs primarily during the first quarter of 2024 associated with the Cost Realignment Plan using existing cash on hand.

As a result of our ownership of LLC Units in Topco LLC, the Company is subject to U.S.

federal, state and local income taxes with respect to its allocable share of any taxable income of Topco LLC and is taxed at the prevailing corporate tax rates.

In addition to tax expenses, we also will incur expenses related to our operations and we will be required to make payments under the TRA with MLSH 1 and MLSH 2.

In addition to tax expenses, we also will incur expenses related to our operations and we may be required to make payments under the TRA with MLSH 1 and MLSH 2.

Due to the uncertainty of various factors, we cannot precisely quantify the likely tax benefits we will realize as a result of LLC Unit exchanges and the resulting amounts we are likely to pay out to LLC Unitholders of Topco LLC pursuant to the TRA.

however, we estimate that such payments may be substantial.

Assuming no changes in the relevant tax law, and that we earn sufficient taxable income to realize all tax benefits that are subject to the TRA, we expect that future payments under the TRA relating to the purchase by the Company of LLC Units from MLSH 1 and the tax attributes to be approximately $718.2 million and to range over the next 14 years from approximately $42.3 million to $63.3 million per year and decline thereafter.

Future payments in respect of subsequent exchanges or financings would be in addition to these amounts and are expected to be substantial.

Assuming no changes in the relevant tax law, we expect that probable future payments under the TRA relating to the purchase by the Company of LLC Units from MLSH 1 and the corresponding tax attributes to be approximately $7.1 million.

This determination is based on our estimate of taxable income for the year ended December 31, 2023.

During the year ended December 31, 2023, we determined that making a payment under the non-current

portion of the TRA was not probable under Accounting Standards Codification 450 - Contingencies since a valuation allowance has been recorded against our deferred tax assets and we do not believe we will generate sufficient future taxable income to utilize related tax benefits and result in a payment under the TRA.

If we had determined that making a payment under the TRA and generating sufficient future taxable income was probable, we would have also recorded a liability pursuant to the TRA, net of current portion, of approximately $665.3 million in the consolidated balance sheet.

Future payments in respect of subsequent exchanges or financings and tax attributes relating to the purchase by the Company of LLC Units from MLSH 1 would be in addition to this amount and may be substantial.

The foregoing numbers are estimates and the actual payments could differ materially.

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In addition to payments to be made under the TRA, we are also required to make tax distributions to MLSH 1 pursuant to the LLC Operating Agreement for the portion of income passing through to them from Topco LLC.

During the years ended

December 31, 2022 and 2021, the Company made distributions of $150.2 million and $153.5 million for tax liabilities to MLSH 1 under this agreement, respectively.

During the years ended December 31, 2023 and 2022, the Company made distributions of $9.6 million and $150.2 million, respectively, for tax liabilities to MLSH 1 under this agreement.

Credit Agreement

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Borrowings under the Credit Agreement are unconditionally guaranteed by Topco LLC, along with 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.

In January 2022, the Company entered into an amendment (the “Amendment”) to the Credit Agreement to:

(i) refinance the existing $544.0 million aggregate principal balance on the First Lien Term Loan and to replace it with a new Tranche B Term Loan (“Tranche B Term Loan”), (ii) replace the LIBOR-based interest rate with a Term Secured Overnight Financing Rate (“SOFR”) based rate, and (iii) reduce the interest rate margins applicable to the Term Loan and Revolving Credit Facilities under the Credit Agreement.

The previous interest rate margin on the facilities was, with respect to each LIBOR-based loan, 3.75% to 4.25% and, with respect to each base rate-based loan, 2.75% to 3.25% (depending, in each case, on consolidated first lien leverage).

Following the Amendment, the interest rate margin on the facilities is 3.00%, with respect to each Term SOFR-based loan, and 2.00%, with respect to each base rate-based loan.

Further, the Amendment reduced the base rate floor for the term loans from 2.00% to 1.50%, sets the floor for Term SOFR-based term loans at 0.50% and sets the floor for Term SOFR-based revolving loans at 0.00%.

No other significant terms under the Credit Agreement were changed in connection with the Amendment.

The Base Rate is defined in the Credit Agreement as the greatest of (i) the rate last quoted by The Wall Street Journal as the “Prime Rate” in the United States, (ii) the NYFRB Rate plus 0.50% per annum, (iii) the Term SOFR Rate for a one month interest period plus 1.00% per annum, (iv) solely with respect to the Tranche B Term Loans, 1.50% per annum and (v) for any loans that are not Tranche B Term Loans, 1.00% per annum.

The “Term SOFR Rate,” as defined in the Credit Agreement, means with respect to any Term SOFR Rate Borrowing and for any other tenor comparable to the applicable interest period, the Term SOFR Reference Rate at approximately 5:00 a.m., Chicago time, two U.S.

Government Securities Business Days prior to the commencement of such tenor comparable to the applicable interest period, as such rate is published by the CME Term SOFR Administrator;

provided that in no event shall the Term SOFR Rate for any interest period (i) for Tranche B Term Loans be less than 0.50% or (ii) for any other Loans, be less than 0.00%.

The Tranche B Term Loan became repayable in quarterly payments of $1.4 million beginning in March 2022, with all remaining outstanding principal due in October 2027.

The Tranche B Term Loan includes prepayment provisions that allow us, at our option, to repay all or a portion of the principal amount at any time.

The Revolving Credit Facility allows us to repay and borrow from time to time until October 2025, at which time all amounts borrowed must be repaid.

Subject to certain exceptions and limitations, we are required to repay borrowings under the Tranche B Term Loan and Revolving Credit Facility with the proceeds of certain occurrences, such as the incurrence of debt, certain equity contributions and certain asset sales or dispositions.

In January 2022, the Company entered into an amendment (the “Amendment”) to refinance the term loan and to replace London Interbank Offered Rate (“LIBOR”) with a Term Secured Overnight Financing Rate (“SOFR”) based rate.

Commencing with the fiscal year ended December 31, 2021, and each fiscal year thereafter, the Credit Agreement requires that we make mandatory prepayments on the Term Loan principal out of certain excess cash flow, subject to certain step-downs based on the Company’s first lien net leverage ratio.

The mandatory prepayment shall be reduced to 25% or 0% of the calculated excess cash flow if the first lien net leverage ratio was equal to or less than 4.75:1.00 or 4.25:1.00, respectively;

The mandatory prepayment shall be reduced to 25% or 0% of the calculated excess cash flow if the Company’s first lien net leverage ratio was equal to or less than 4.75:1.00 or 4.25:1.00, respectively;

however, no prepayment is required to the extent excess cash flow calculated for the respective period is equal to or less than $10.0 million.

As of December 31, 2023, our first lien net leverage ratio was less than 4.25:1.00.

Thus, a prepayment was not required.

Thus, a mandatory prepayment on the Term Loan out of excess cash flow was not required.

The Term Loan became repayable in quarterly payments of $1.4 million beginning in March 2022, with all remaining outstanding principal due in October 2027.

The Term Loan includes prepayment provisions that allow us, at our option, to repay all or a portion of the principal amount at any time.

The Revolving Credit Facility allows us to repay and borrow from time to time until October 2025, at which time all amounts borrowed must be repaid.

Subject to certain exceptions and limitations, we are required to repay borrowings under the Term Loan and Revolving Credit Facility with the proceeds of certain occurrences, such as the incurrence of debt, certain equity contributions and certain asset sales or dispositions.

Accrued interest under the Credit Agreement is payable by us (a) quarterly in arrears with respect to Base Rate loans, (b) at the end of each interest rate period (or at each three-month interval in the case of loans with interest periods greater than three months) with respect to Term SOFR Rate loans, (c) on the date of any repayment or prepayment and (d) at maturity (whether by acceleration or otherwise).

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The TRA provides for the payment by us to MLSH 1 and MLSH 2, collectively, of 85% of the amount of certain tax benefits, if any, that we actually realize, or in some circumstances are deemed to realize, as a result of the Organizational Transactions, IPO and any subsequent purchases or exchanges of LLC Units of Topco LLC.

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.

As of December 31, 2022, our liability under the TRA was $718.2 million, representing 85% of the calculated tax savings we anticipated being able to utilize in future years.

As of December 31, 2023, our current liability under the TRA was $7.1 million, representing 85% of the calculated tax savings we expect to utilize for the year ended December 31, 2023.

During the year ended December 31, 2023, we recognized a gain of $668.9 million, in connection with a TRA liability adjustment due to remeasuring the non-current portion of the liability to zero as we no longer consider the payments under the agreement to be probable.

We may record additional liabilities under the TRA when LLC Units are exchanged in the future and as our estimates of the future utilization of the Tax Attributes, net operating losses and other tax benefits change.

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Interest on such payments will begin to accrue from the due date (without extensions) of such tax return at a rate of LIBOR (or, if LIBOR ceases to be published, a Replacement Rate) plus 100 basis points.

any late payments will continue to accrue interest at LIBOR (or a replacement rate, as applicable) plus 500 basis points until such payments are made.

Generally, any late payments will continue to accrue interest at LIBOR (or a Replacement Rate, as applicable) plus 500 basis points until such payments are made.

Given the cessation of LIBOR, we have transitioned to the Secured Overnight Financing Rate (“SOFR”) as the applicable Replacement Rate as allowable under the Tax Receivable Agreement.

The payment obligations under the TRA are obligations of Maravai LifeSciences Holdings, Inc.

and not of Topco LLC.

Although the actual timing and amount of any payments that may be made under the TRA will vary, we expect that the aggregate payments that we will be required to make to MLSH 1 and MLSH 2 will be substantial.

Although the actual timing and amount of any payments that may be made under the TRA will vary, the aggregate payments that we will be required to make to MLSH 1 and MLSH 2 may be substantial.

Any payments made by us under the TRA will generally reduce the amount of overall cash flow that might have otherwise been available to us or to Topco LLC and, to the extent that we are unable to make payments under the TRA for any reason, the unpaid amounts will be deferred and will accrue interest until paid by us.

We anticipate funding ordinary course payments under the TRA from cash flow from operations of Topco LLC and its subsidiaries, available cash and/or available borrowings under the Credit Agreement.

During the year ended December 31, 2023, we determined that making a payment under the non-current portion of the TRA was not probable under Accounting Standards Codification 450 - Contingencies as a result of a valuation allowance having been recorded against our deferred tax assets, and therefore, that it is more likely than not that we will not generate sufficient future taxable income to utilize related tax benefits that would result in a payment under the TRA.

The following table summarizes our cash flows for the periods presented (in thousands):

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Financing activities (61,090) (187,499)

Effects of exchange rate changes on cash — (88)

Net increase in cash $ 80,866 $ 315,088

Net (decrease) increase in cash and cash equivalents

$ (57,176) $ 80,866

Operating Activities

Net cash provided by operating activities for the year ended December 31, 2022 was $536.0 million, which was primarily attributable to a net income of $490.7 million, non-cash depreciation and amortization of $31.8 million, amortization of right-of-use assets of $6.3 million, non-cash amortization of deferred financing costs of $2.8 million, non-cash equity-based compensation of $18.7 million, non-cash deferred income taxes of $42.3 million, and non-cash loss on the revaluation of liabilities under the TRA of $4.1 million.

These were partially offset by a non-cash gain on the change in estimated fair value of contingent consideration of $7.8 million, and a net cash outflow from the change in our operating assets and liabilities of $45.1 million, which is net of government funding of $17.0 million.

Net cash provided by operating activities for the year ended December 31, 2023 was $126.2 million, which was primarily attributable to a net cash inflow from the change in our operating assets and liabilities of $97.8 million, non-cash depreciation and amortization of $40.3 million, non-cash amortization of operating lease right-of-use assets of $8.5 million, non-cash amortization of deferred financing costs of $2.9 million, non-cash equity-based compensation of $34.6 million, and non-cash deferred income taxes of $754.9 million.

These were partially offset by a net loss of $138.4 million, non-cash gain on the change in estimated fair value of contingent consideration of $3.3 million, and non-cash gain on the revaluation of liabilities under the TRA of $668.9 million.

Net cash provided by operating activities for the year ended December 31, 2022 was $536.0 million, which was primarily attributable to a net income of $490.7 million, non-cash depreciation and amortization of $31.8 million, non-cash amortization of operating lease right-of-use assets of $6.3 million, non-cash amortization of deferred financing costs of $2.8 million, non-cash equity-based compensation of $18.7 million, non-cash deferred income taxes of $42.3 million, and non-cash loss on the revaluation of liabilities under the TRA of $4.1 million.

These were partially offset by a non-cash loss on the change in estimated fair value of contingent consideration $7.8 million, and a net cash outflow from the change in our operating assets and liabilities of $45.1 million, which is net of government funding of $17.0 million.

The net cash outflow from the change in our operating assets includes $13.4 million relating to an increase in prepaid lease payments for Flanders I (as defined in Note 7 to our consolidated financial statements).

Net cash provided by operating activities for the year ended December 31, 2021 was $368.6 million, which was primarily attributable to a net income of $469.3 million, non-cash depreciation and amortization of $24.8 million, non-cash amortization of right-of-use assets of $8.8 million, non-cash amortization of deferred financing costs of $2.7 million, non-cash equity-based compensation of $10.5 million, and non-cash deferred income taxes of $46.9 million, partially offset by a non-cash gain on sale of business of $11.2 million, non-cash gain on the revaluation of liabilities under the TRA of $6.1 million, and a net cash outflow from the change in our operating assets and liabilities of $176.6 million.

Investing Activities

Net cash used in investing activities for the year ended December 31, 2023 was $122.3 million, which was primarily comprised of $69.8 million for the net cash consideration paid for the acquisition of Alphazyme and cash outflows of $65.6 million for property and equipment purchases.

These were partially offset by proceeds from government assistance allocated to property and equipment of $12.9 million.

Net cash used in investing activities for the year ended December 31, 2022 was $267.6 million, which was primarily comprised of $239.0 million for the net cash consideration paid for the acquisition of MyChem, net cash outflows of $17.1 million for property and equipment purchases, and $13.3 million of prepaid lease payments for Flanders II (as defined in Note 7 to our consolidated financial statements).

Net cash provided by investing activities for the year ended December 31, 2021 was $105.7 million, which was primarily comprised of net cash receipts of $120.0 million from the sale of Vector.

This was partially offset by net cash outflows of $14.9 million for property and equipment purchases.

Financing Activities

Net cash used in financing activities for the year ended December 31, 2023 was $61.1 million, which was primarily attributable to $42.2 million of payments to MLSH 1 and MLSH 2 pursuant to the TRA, a $9.7 million payment of acquisition consideration holdback relating to the acquisition of MyChem, $9.6 million of distributions for tax liabilities to non-controlling interest holders, required pursuant to the terms of the LLC Operating Agreement, and $5.4 million of principal repayments of long-term debt.

This was partially offset by proceeds from derivative instruments of $6.2 million.

Net cash used in financing activities for the year ended December 31, 2022 was $187.5 million, which was primarily attributable to $150.2 million of distributions for tax liabilities to non-controlling interest holders, required pursuant to the terms of the LLC Operating Agreement, $34.2 million of payments to MLSH 1 and MLSH 2 pursuant to the TRA, and $13.9 million of principal repayments of long-term debt.

This was partially offset by proceeds from borrowings of long-term debt of $8.5 million.

Net cash used in financing activities for the year ended December 31, 2021 was $159.0 million, which was primarily attributable to $153.5 million of distributions for tax liabilities to non-controlling interest holders and $6.0 million of principal repayments of long-term debt.

Capital Expenditures

Capital expenditures for the year ended December 31, 2023 totaled $52.7 million, which is net of government funding of $12.9 million.

Capital expenditures, including costs incurred for lessor improvements, for the year ending December 31, 2023 are projected to be in the range of $55.0 million to $65.0 million, which is net of anticipated government funding of $4.3 million.

This primarily includes new facility construction costs recorded as prepaid lease payments and equipment purchases for the Flanders San Diego Facility.

Capital expenditures for the year ending December 31, 2024 are projected to be in the range of $30.0 million to $35.0 million, which is net of anticipated government funding recognized.

This includes leasehold improvements and equipment primarily for the Flanders San Diego Facility.

Contractual Obligations and Commitments

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$ 65,533 $ 10,224 $ 20,431 $ 17,228 $ 17,650

Finance leases (2)

34,517 3,327 6,957 7,380 16,853

Debt obligations (3)

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3,300 3,300 — — —

Consideration payable (5)

10,000 10,000 — — —

Other commitments (6)

MyChem retention payments (6)

20,000 20,000 — — —

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See Note 8 to our consolidated financial statements for additional information.

(2) Represents finance lease payment obligations, excluding any renewal options we are reasonably certain to execute and have recognized as lease liabilities.

See Note 8 to our consolidated financial statements for additional information.

(3) Represents long-term debt principal maturities, excluding interest.

See Note 10 to our consolidated financial statements for additional information.

(3) Reflects the estimated timing of TRA payments as of December 31, 2022.

Such payments could be due later than estimated depending on the timing of our use of the underlying tax attributes.

(4) Reflects the estimated timing of the current TRA liability payment as of December 31, 2023.

See "Risk Factors-Risks Related to Our Organizational Structure" and Note 14 to our consolidated financial statements for additional information regarding our liability under the TRA.

(5) Represents firm purchase commitments to our suppliers.

(5) Represents an additional amount we may be required to pay to the sellers of MyChem subject to the completion of certain calculations associated with acquired inventory.

See Note 9 to our consolidated financial statements for additional information.

(6) Represents the estimated timing and amounts of lease payments for the Flanders San Diego Facility that is under construction.

(6) Represents certain payments to the sellers of MyChem as of the second anniversary of the closing of the acquisition date as long as they continue to be employed by TriLink.

See Note 2 to our consolidated financial statements for additional information.

Tax distributions are required under the terms of the Topco LLC Agreement.

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See Note 14 to our consolidated financial statements for additional information regarding tax distributions.

Commencing with the fiscal year ended December 31, 2021, and each fiscal year thereafter, the Credit Agreement requires mandatory prepayments of the Term Loan principal upon certain excess cash flow, subject to certain step-downs based on our first lien net leverage ratio.

Commencing with the fiscal year ended December 31, 2021, and each fiscal year thereafter, the Credit Agreement requires that we make mandatory prepayments of the Term Loan principal upon certain excess cash flow, subject to certain step-downs based on our first lien net leverage ratio.

The mandatory prepayment shall be reduced to 25% or 0% of the calculated excess cash flow if the first lien net leverage ratio was equal to or less than 4.75:1.00 or 4.25:1.00, respectively;

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As of December 31, 2023, our first lien net leverage ratio was less than 4.25:1.00.

In connection with our acquisition of MyChem, we may be required to make certain payments to its sellers.

We may be required to make additional payments of up to $40.0 million to the sellers of MyChem dependent upon meeting or exceeding defined revenue targets during fiscal 2022.

We may also be required to make certain payments of $20.0 million to them as of the second anniversary of the closing of the acquisition date as long as the sellers of MyChem continue to be employed by TriLink.

In connection with our acquisition of Alphazyme, we may be required to make additional payments of up to $75.0 million to the sellers of Alphazyme dependent upon meeting or exceeding defined revenue targets during fiscal years 2023 through 2025.

We may also be required to make certain payments of $9.3 million to its sellers and certain employees as of various dates but primarily through December 31, 2025 as long as these individuals continue to be employed by the Company.

We cannot, at this time, determine when or if the related targets will be achieved or whether the events triggering the commencement of payment obligations will occur.

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Our preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures in the consolidated financial statements.

Our estimates are based on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Our estimates are based on historical

experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results could differ from these estimates under different assumptions or conditions and any such difference may be material.

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federal and state income tax purposes.

Topco LLC’s subsidiaries are treated as pass-through entities for federal and state income tax purposes.

Topco LLC’s previously wholly-owned U.S.

subsidiary, Maravai Life Sciences, Inc.

(“Maravai Inc.”) and its subsidiaries, were taxpaying entities in the U.S., Canada, and the U.K.

Maravai Inc.’s subsidiaries were sold and Maravai Inc.

ceased to be a regarded entity and was deemed liquidated for U.S.

tax purposes during the year ended December 31, 2021.

Topco LLC’s wholly-owned subsidiary, Maravai LifeSciences International Holdings, Inc., is a taxpaying entity for U.S.

and foreign jurisdictions and had limited activity subject to a transfer pricing arrangement during the year ended December 31, 2023.

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.

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As such, our tax provision consists solely of the activities of Maravai Inc.

and its subsidiaries prior to their disposal, as well as our share of income generated by Topco LLC.

and its subsidiaries, prior to their disposal, and Maravai LifeSciences International Holdings, Inc., as well as our share of income or loss generated by Topco LLC.

We anticipate this structure to remain in existence for the foreseeable future.

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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, 2022.

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.

As such, a valuation allowance of $23.8 million has been recorded as of December 31, 2022 to reflect the deferred tax asset that is more likely than not to not be realized.

We believe it is more likely than not that the Company will not 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, 2023.

In addition, 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.

As such, a valuation allowance of $642.2 million has been recorded as of December 31, 2023 to reflect the deferred tax assets that are more likely than not to not be realized.

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.

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In November 2020, 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 share of Class B 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) increase in the tax basis of assets of Topco LLC received form LLC Units held by entities acquired from MLSH 1 and MLSH 2 in connection with the Organizational Transactions (“the Blocker Entities”), Topco LLC and subsidiaries of Topco LLC that existed prior to this offering 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.

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 share of Class B 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) increase in the tax basis of assets of Topco LLC received form LLC Units held by entities acquired from MLSH 1 and MLSH 2 in connection with the Organizational Transactions, Topco LLC and subsidiaries of Topco LLC that existed prior to this offering 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.

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The TRA will generally apply 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 (calculated with certain assumptions, including as to utilization of the

Tax Attributes).

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 statements of income.

Subsequent adjustments to the payable to related parties for the TRA based on changes in anticipated future taxable income, which could include changes in estimated income allocated to the partners of Topco LLC or apportionment of state income taxes, are recorded in our consolidated statements of income.

In this scenario, the reduction of the liability under the TRA would result in a benefit to our consolidated statements of operations.

The actual Tax Attributes, as well as any amounts paid to MLSH 1 and MLSH 2 under the TRA, will vary depending on a number of factors, including:

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and not of Topco LLC.

We anticipate funding ordinary course payments under the TRA from cash flow from operations of Topco LLC and its subsidiaries, available cash and/or available borrowings under the Credit Agreement.

Assuming no material changes in the relevant tax law, and that we earn sufficient taxable income to realize all tax benefits that are subject to the TRA, we expect that future payments under the Tax Receivable Agreement relating to the purchase by us of LLC Units from MLSH 1 in connection with our prior offering and subsequent exchanges and financing, to be approximately $718.2 million and to range over the next 14 years from approximately $42.3 million to $63.3 million per year and decline thereafter.

Future payments in respect of subsequent exchanges or financing would be in addition to these amounts and are expected to be substantial.

The foregoing numbers are estimates and actual payments could differ materially.

Assuming no changes in the relevant tax law, we expect that probable future payments under the TRA relating to the purchase by the Company of LLC Units from MLSH 1 and the tax attributes to be approximately $7.1 million.

This determination is based on our estimate of taxable income for the year ended December 31, 2023.

To the extent there is a change in the determination of the realizability of our deferred tax assets, this could impact the expected probable future payments under the TRA and the amount recorded in the consolidated balance sheet.

Future payments in respect of subsequent exchanges or

financings and tax attributes relating to the purchase by the Company of LLC Units from MLSH 1 would be in addition to this amount and may be substantial.

The foregoing numbers are estimates and the actual payments could differ materially.

It is possible that future transactions or events could increase or decrease the actual tax benefits realized and the corresponding TRA payments.

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The term of the TRA commenced upon the completion of our IPO and will continue until all such tax benefits have been utilized or expire, unless we exercise our rights to terminate the agreements or payments under the agreements are accelerated in the event we materially breach any of our material obligations under the agreements.

We evaluate goodwill at the reporting unit level on an annual basis and between annual tests if events and circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value.

Such indicators could include, but are not limited to, current economic and market conditions, including a decline in market capitalization, a significant adverse change in legal factors, business climate, operational performance of the business or key personnel.

We perform our annual impairment test in the fourth quarter.

We first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value, including goodwill.

If management concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, management performs a quantitative goodwill impairment test.

In performing the quantitative impairment test, management considers a number of factors to determine the fair value of a reporting unit, including an independent valuation to conduct this test.

The valuation is based upon expected future discounted operating cash flows of a reporting unit as well as analysis of recent sales and ratio comparisons of similar companies.

We base the discount rate on the weighted average cost of capital, or WACC, or market participants.

If the carrying value of a reporting unit exceeds its estimated fair value, an impairment loss will be recognized for the amount in which the carrying amount exceeds the reporting unit’s fair value.

Due to the sustained decline in our stock price and the announcement of the Cost Realignment Plan in November 2023, we performed a quantitative analysis and compared our reporting units’ fair values to their respective carrying values to determine whether goodwill was impaired.

We determined the fair values of our reporting units using a combination of the income approach using discounted cash flows and the market approach utilizing data from comparable public companies.

The assumptions and estimates, including management’s estimated future revenue growth rates, estimated future margins and discount rates, used in the quantitative analysis were based on management’s best estimate about current and future conditions.

The result of the quantitative analysis showed that the reporting units’ fair values exceeded their carrying values and there was no impairment of the recorded goodwill as of December 31, 2023.

However, to the extent we continue to experience declines in our stock price or experience other impairment indicators, such as industry and market considerations or a decline in financial performance, or that the fair values of our reporting units are less than their carrying values, there could be a risk of goodwill impairment of our reporting units in future periods.

Recoverability and Impairment of Long-Lived Assets

We review the recoverability of our long-lived assets (including definite-lived intangible assets) if events or circumstances indicate the assets may be impaired.

We measure recoverability of assets by comparing the respective carrying value of the assets to the current and expected future cash flows, on an undiscounted basis, to be generated from such assets.

If our analysis indicates that the carrying value of these assets is not recoverable, we measure an impairment based on the amount by which the net carrying amount of the assets exceeds the fair values of the assets.

In conjunction with the goodwill impairment test performed during the fourth quarter of 2023, we also performed a recoverability assessment of our long-lived assets.

The results of the analysis did not result in an impairment charge.

Recognition of Intangible Assets as Part of a Business Combination

For acquisitions of businesses, we are required to record the assets acquired and liabilities assumed of acquired businesses at their respective fair values at the date of acquisition.

We account for our business combinations using the acquisition method of accounting which requires that the assets acquired and liabilities assumed of acquired businesses be recorded at their respective fair values at the date of acquisition.

The purchase price, which includes the fair value of consideration transferred, is attributed to the fair value of the assets acquired and liabilities assumed.

The excess of the purchase price of the acquisition over the fair value of the identifiable net assets of the acquiree is recorded as goodwill.

Determining the fair value of intangible assets acquired, defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants, requires management to use significant judgment, including the selection of valuation methodologies, assumptions about future net cash flows, and discount rates.

Determining the fair value of intangible assets acquired requires management to use significant judgment and estimates, including the selection of valuation methodologies, assumptions about future net cash flows, discount rates and market

participants.

Each of these factors can significantly affect the value attributed to the identifiable intangible asset acquired in a business combination.

We typically use the discounted cash flow method under the income approach to estimate the fair value of identifiable intangible assets acquired in a business combination.

For the acquisition of MyChem, LLC, the estimated fair value of the developed technology intangible asset was based on the multi-period excess earnings method.

The estimated fair value was developed by discounting future net cash flows to their present value at market-based rates of return.

We generally utilize a discounted cash flow method under the income approach to estimate the fair value of identifiable intangible assets acquired in a business combination.

For the acquisitions of Alphazyme, LLC and MyChem, LLC, the estimated fair values of the developed technology intangible assets were based on the multi-period excess earnings method.

The estimated fair values were developed by discounting future net cash flows to their present value at market-based rates of return.

We selected the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, estimated revenue growth rates, management’s plans, and guideline companies.

Some of the more significant assumptions inherent in estimating the fair value of this intangible asset included revenue growth rates ranging from 3.0% to 30.6%, technical obsolescent curves ranging from 5.0% to 7.5%, and a discount rate of 16.5%.

Some of the more significant assumptions inherent in estimating the fair value of these intangible assets included revenue growth rates, discount rates and assumed technical obsolescent curves.

The use of alternative estimates and assumptions could increase or decrease the estimated fair value and amounts allocated to identifiable intangible assets acquired and future amortization expense as well as goodwill.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis