What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2023-02-22 compared with 2022-02-17 · 186 added, 171 removed, 427 unchanged (46% of the section changed)

6 unchanged sentences

We anticipate that we will retain all earnings, if any, to support our operations.

Any future determination as to the payment of dividends will be at the sole discretion of our Board of Directors and will depend on our financial condition, results of operations, capital requirements and other factors our Board of Directors deems relevant.

Any future determination as to the payment of dividends will be at the sole discretion of our Board of Directors (the "Board") and will depend on our financial condition, results of operations, capital requirements and other factors the Board deems relevant.

Equity Compensation Plan Information

24 unchanged sentences

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Information pertaining to fiscal year 2019 was included in the Company’s Annual Report on Form 10-K (“Form 10-K”) for the year ended December 31, 2020 on pages 39 through 57 under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,”

Information pertaining to fiscal years 2021 and 2020 was included in the Company’s Annual Report on Form 10-K (“Form 10-K”) for the year ended December 31, 2021, on pages 37 through 52 under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,”

which was filed with the SEC on February 17, 2022.

Repligen and its subsidiaries, collectively doing business as Repligen Corporation (“Repligen”, “we”, “our”, or “the Company”) is a global life sciences company that develops and commercializes highly innovated bioprocessing technology and systems that increase efficiencies and flexibility in the process of manufacturing biological drugs.

As the overall market for biologics continues to grow and expand, our customers –

primarily large biopharmaceutical companies and contract development and manufacturing organizations –

As the overall market for biologics continues to grow and expand, our primary customers –

global biopharmaceutical companies and contract development and manufacturing organizations and other life sciences companies (integrators) –

face critical production cost, capacity, quality and time pressures.

3 unchanged sentences

that are improving human health worldwide.

For more information regarding our business, products and acquisitions, see above sections in Part I entitled “Overview”, “Our Products”, “2021 Acquisitions”, “2020 Acquisitions”, “2019 Acquisition”

Increasingly, our technologies are being implemented to overcome challenges in processing plasmid DNA (a starting material for the production of mRNA) and gene delivery vectors such as lentivirus and adeno-associated viral vectors.

For more information regarding our business, products and acquisitions, see above sections in Part I, Item 1.

"Business" including “Overview”, “Our Products”, “2021 Acquisitions”, “2020 Acquisitions”

and “Our Market Opportunity”

sections therein.

Macroeconomic Trends

As a result of our global presence, a significant portion of our revenue and expenses is denominated in currencies other than the U.S.

We are therefore subject to non-U.S.

currency risks and non-U.S.

exchange exposure.

Exchange rates can be volatile and a substantial weakening or strengthening of foreign currencies against the U.S.

dollar could increase or reduce our revenue and gross profit margin and impact the comparability of results from period to period.

We have experienced, and expect to continue to experience, cost inflation, primarily in raw materials, and other supply chain costs, as a result of global macroeconomic trends, including the conflict between Russia and Ukraine, government-mandated actions in response to the COVID-19 pandemic, including all subsequent variants of the SARS-CoV-2 coronavirus ("COVID-19"), and labor shortages.

Actions taken to mitigate supply chain disruptions and inflation, including price increases and productivity improvements, have generally been successful in offsetting the impact of these trends.

In addition, decreasing demand for COVID-19 vaccination is driving a reduction in future demand of our products related to these vaccines.

We expect that these trends will continue to impact our results for 2023 as well.

License Agreement

On September 19, 2022, we entered into a 15-year exclusive License Agreement (the "Daylight Agreement") with DRS Daylight Solutions, Inc.

("Daylight"), giving us exclusive license and commercialization rights to use certain technology and intellectual property subject to conditions set forth in the Daylight Agreement.

We agreed to pay Daylight (i) an initial, one-time, non-refundable, non-creditable upfront cash payment and (ii) certain quarterly royalty payments.

COVID-19 Pandemic

Our global operations have been and continue to be affected by the ongoing global pandemic of a novel strain of coronavirus (“COVID-19”) and the resulting volatility and uncertainty it has caused in the United States and international markets.

Our global operations have been and continue to be affected by the COVID-19 pandemic and the resulting volatility and uncertainty it has caused in the United States and international markets.

During the year ended December 31, 2022, many businesses and countries, including the United States, continued applying preventative and precautionary measures designed to mitigate the spread of the virus and its variants including government orders and other restrictions on the conduct of business operations.

In response to COVID-19, we enacted safety measures, including social distancing protocols, encouraging employees to work from home when possible, suspending non-essential work travel, frequently disinfecting our workspaces and providing appropriate personal protective equipment to employees who are physically present at our facilities.

As COVID-19 conditions improved, we began implementing a phased reopening process (which we have since reversed in response to the identification of COVID-19 variants), encouraged our employees to receive COVID-19 vaccinations and COVID-19 booster shots as they become available.

We will continue to implement appropriate safety measures until COVID-19 is contained.

We may take further actions and adjust our reopening process as government authorities require or recommend or as we determine to be in the best interests of our employees, customers, partners and suppliers.

COVID-19 continues to be dynamic, and near-term challenges across the economy remain.

Similar to other companies, from the onset of COVID-19, we implemented measures to support the health and well-being of our employees, customers, partners and communities, including working remotely and operating our business in a fundamentally different way.

While COVID-19 restrictions imposed by state and local governments have largely been lifted, COVID-19 continues to disrupt business and negatively impact consumer and business confidence.

COVID-19 continues to be dynamic, and near-term challenges

across the economy remain.

The ongoing effects of COVID-19 remain difficult to predict due to numerous uncertainties, including the severity, duration and resurgence of the outbreak, new variants, the effectiveness of health and safety measures including vaccines, the pace and strength of the economic recovery, and supply chain pressures, among others.

The Company's commercial operations have not been significantly impacted by COVID-19 to date, although COVID-19 related revenue is expected to continue to decline in 2023 as the demand for vaccines decreases.

We will continue to actively monitor the effects of COVID-19 and will continue to take appropriate steps to mitigate the impacts to our employees and on our business results.

28 unchanged sentences

We evaluate our global accounts receivable through a continuous process of assessing our portfolio on an individual customer and overall basis.

This process consists of a thorough review of historical collection experience, current aging status of the customer accounts, financial condition of our customers, and whether the receivables involve retainages.

This process consists of a thorough review of historical collection experience, current aging status of the customer

accounts, financial condition of our customers, and whether the receivables involve retainages.

We also consider the economic environment of our customers, both from a marketplace and geographic perspective, in evaluating the need for an allowance.

6 unchanged sentences

We review our inventory at least quarterly and record a provision for excess and obsolete inventory based on our estimates of expected sales volume, production capacity and expiration dates of raw materials, work-in-process and finished products.

We write down inventory that has become obsolete, inventory that has a cost basis in excess of its expected net realizable value, and inventory in excess of expected requirements to cost of product revenue.

Manufacturing of bioprocessing finished goods is done to order and tested for quality specifications prior to shipment.

A change in the estimated timing or amount of demand for our products could result in additional provisions for excess inventory quantities on hand.

Any significant unanticipated changes in demand or unexpected quality failures could have a significant impact on

the value of inventory and reported operating results.

Any significant unanticipated changes in demand or unexpected quality failures could have a significant impact on the value of inventory and reported operating results.

During all periods presented in the accompanying consolidated financial statements, there have been no material adjustments related to a revised estimate of inventory valuations.

10 unchanged sentences

Such changes in the fair value of contingent consideration are recorded as contingent consideration expense in our consolidated statements of comprehensive income.

For the year ended December 31, 2021, we recorded $5.9 million of contingent consideration expense related to the change in estimated contingent consideration obligations from the acquisition of Avitide, Inc.

We recorded an adjustment to the fair value of the contingent consideration obligation for the twelve months ended December 31, 2022 of ($28.7) million related to the change in estimated contingent consideration obligations from the acquisition of Avitide, Inc.

("Avitide") in September 2021.

3 unchanged sentences

We base the discount rates used to arrive at a present value as of the date of acquisition on the time value of money and certain industry-specific risk factors.

We believe the estimated purchased customer relationships, developed technologies, trademark/tradename, patents, non-competition agreements and in-process research and development amounts so determined represent the fair value at the date of acquisition and do not exceed the amount a third-party would pay for the assets.

We believe the estimated purchased customer relationships, developed technologies, trademark/tradename, patents, non-competition agreements and in-process research and development ("R&D") amounts so determined represent the fair value at the date of acquisition and do not exceed the amount a third-party would pay for the assets.

Intangible assets and goodwill

10 unchanged sentences

We test goodwill for impairment 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.

Events that would indicate impairment and trigger an interim impairment assessment 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 or operational performance of the business, and an adverse action or assessment by a regulator.

Events that would indicate impairment and trigger an interim impairment assessment include, but are not limited to, macroeconomic conditions, industry and market conditions, entity specific factors such as strategies and financial performance, a significant adverse change in legal factors and an adverse action or assessment by a regulator.

Goodwill is tested for impairment as of December 31 st of each year, or more frequently as warranted by events or changes in circumstances mentioned above.

4 unchanged sentences

The Company operates as one reporting unit.

The fair value of the reporting unit is determined using both an income approach and market approach.

Our income approach model used for our reporting unit valuation is consistent with that used for our December 31, 2019 goodwill impairment valuation noted above, except that cash flows from the entire business enterprise were used for the reporting unit valuation.

Our market approach model estimated the fair value of the reporting unit based on market prices paid in actual precedent transactions of similar businesses and market multiples of guideline public companies.

As a result of our 2020 quantitative assessment, we concluded that goodwill was not impaired as of December 31, 2020.

During the qualitative assessment of the Company’s one reporting unit during the 2021 goodwill impairment testing, it was determined that it was not more likely than not that its fair value was less than its carrying amount.

As such, a quantitative impairment assessment was not required as of December 31, 2021.

If an event occurs or circumstances change that would more likely than not reduce the fair value of its reporting unit below its carrying value, the Company will evaluate its goodwill for impairment between annual tests.

We performed a qualitative assessment for our reporting unit as of December 31, 2022 and 2021.

This assessment considered changes in our projected future cash flows and discount rates, recent market transactions and overall macroeconomic conditions for each period.

Based on the assessment, we concluded that it was more likely than not that the estimated fair value of our reporting unit for 2022 and 2021 was higher than its carrying value for such years, and that the performance of the quantitative impairment test was not required.

We performed a quantitative test on our goodwill as of December 31, 2020 and concluded that the carrying amount of the reporting unit did not exceed its fair value.

Therefore, no impairment was required as of December 31, 2020.

Accrued liabilities

3 unchanged sentences

We have processes in place to estimate the appropriate amounts to record for accrued liabilities, which principally involve the applicable personnel reviewing the services provided.

In the event that we do not identify certain costs that have begun to be incurred or we under or over-estimate the level of services performed or the costs of such services, the reported expenses for that period may be too low or too high.

In the event that we do not identify certain costs that have begun to be incurred

or we under or over-estimate the level of services performed or the costs of such services, the reported expenses for that period may be too low or too high.

The date on which certain services commence, the level of services performed on or before a given date, and the cost of such services often require the exercise of judgment.

4 unchanged sentences

Debt accounting

Our short-term debt balance is related to our 0.375% Convertible Senior Notes due 2024 (the “2019 Notes”), which were issued in July 2019, and are carried at their principal amount less unamortized debt discount.

We account for our convertible notes as separate liability and equity components.

We estimate the carrying amount of the liability component by estimating the fair value of a similar liability that does not have an associated conversion feature.

The Company allocates transaction costs related to the issuance of convertible notes to the liability and equity components using the same proportions as the initial carrying value of the convertible notes.

The carrying value of the equity component is calculated by deducting the carrying value of the liability component from the

principal amount of the convertible notes as a whole.

The difference represents a debt discount that is amortized to interest expense in our consolidated statement of comprehensive income over the term of the convertible notes using the effective interest rate method.

We assess the equity classification of the cash conversion feature quarterly.

Our short-term debt balance is related to our 0.375% Convertible Senior Notes due 2024 (the “2019 Notes”), which were issued in July 2019.

Prior to the adoption of Accounting Standards Update No.

("ASU") 2020-06, "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40)", the 2019 Notes were carried at their principal amount less unamortized debt discount and unamortized debt issuance costs.

We had accounted for our convertible notes as separate liability and equity components prior to the adoption of 2020-06.

We estimated the carrying amount of the liability component by estimating the fair value of a similar liability that did not have an associated conversion feature.

The Company allocated transaction costs related to the issuance of convertible notes to the liability and equity components using the same proportions as the initial carrying value of the convertible notes.

The carrying value of the equity component was calculated by deducting the carrying value of the liability component from the principal amount of the convertible notes as a whole.

The difference represented a debt discount that, prior to the adoption of ASU 2020-06, was amortized to interest expense in our consolidated statement of comprehensive income over the term of the convertible notes using the effective interest rate method.

We assessed the equity classification of the cash conversion feature quarterly.

We allocated transaction costs related to the issuance of the 2019 Notes to the liability and equity components using the same proportions as the initial carrying value of the 2019 Notes.

In 2022, the Company will adopt Accounting Standards Update No.

("ASU") 2020-06, "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40)." This standard eliminates the liability and equity separation model for convertible instruments with a cash conversion feature.

As a result, after adoption, the Company will no longer separately present in equity an embedded conversion feature for the 2019 Notes.

Additionally, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the 2019 Notes.

The Company is currently evaluating the impact of the adoption of ASU 2020-06 on the Company's consolidated financial statements.

Effective January 1, 2022, the Company adopted ASU 2020-06.

After adoption, the Company now accounts for the 2019 Notes as a single liability measured at amortized cost.

See Note 13, “Convertible Senior Notes,”

to our consolidated financial statements included in this report for more information on our adoption of ASU 2020-06.

During the fourth quarter of 2022, the closing price of the Company’s common stock exceeded 130% of the conversion price of the 2019 Notes for more than 20 trading days of the last 30 consecutive trading days of the quarter.

14 unchanged sentences

We recognize compensation expense on awards that vest based on service conditions on a straight-line basis over the requisite service period based upon the number of options that are ultimately expected to vest, and accordingly, such compensation expense has been adjusted by an amount of estimated forfeitures.

We recognize compensation expense on awards that vest based on performance conditions following our assessment of the probability that the performance condition will be achieved over the service period.

compensation expense on awards that vest based on performance conditions following our assessment of the probability that the performance condition will be achieved over the service period.

Forfeitures represent only the unvested portion of a surrendered option.

13 unchanged sentences

We also accrue for potential interest and penalties related to unrecognized tax benefits in income tax expense.

We are subject to a territorial tax system under the Tax Cuts and Jobs Act enacted in December 2017, in which we are required to provide for tax on Global Intangible Low-Taxed Income ("GILTI") earned by certain foreign subsidiaries.

We adopted an accounting policy to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense.

In addition, we are subject to the continual examination of our income tax returns by the U.S.

17 unchanged sentences

Since 2016, we have been increasingly focused on selling our products directly to customers in the pharmaceutical industry and to our contract manufacturers.

These direct sales have increased to 83.1% of our total product revenue during 2021 from 78.0% of our total product revenue in 2020.

We expect that direct sales will continue to account for an increasing percentage of our product revenues, as the largest customer of our protein products diversified its supply chain in 2020.

These direct sales have increased to approximately 88% of our total product revenue during 2022 from approximately 83% of our total product revenue in 2021.

Sales of our bioprocessing products can be impacted by the timing of large-scale production orders and the regulatory approvals for such antibodies, which may result in significant quarterly fluctuations.

11 unchanged sentences

("NMS") from October 20, 2020, and ARTeSYN from December 3, 2020 through December 31, 2020.

(3) 2019 revenue includes process analytics revenue related to C Technologies from June 1, 2019 through December 31, 2019.

(4) Revised 2020 and 2019 revenue in the table above reflects a shift in product revenue from chromatography products to proteins products of approximately $3 million and $4 million, respectively.

These changes are consistent with the current year presentation of product revenue.

Revenue from our filtration products includes the sale of our XCell ATF ® systems and consumables, KrosFlo ® filtration products, SIUS ® filtration products, the fluid management products offered by BioFlex, which we acquired on December 16, 2021, the hollow fiber ("HF") membrane technology offered by Polymem, which we acquired on July 1, 2021, the silicone-molded products offered by EMT, which we acquired on July 13, 2020 and the products offered by NMS and ARTeSYN, which were both acquired during the fourth quarter of 2020.

Revenue from our chromatography products includes the sale of our OPUS chromatography columns, chromatography resins and ELISA test kits as well as sales of products offered by Avitide, which we acquired on September 20, 2021.

Revenue from protein products includes the sale of our Protein A ligands and cell culture growth factors.

Revenue from our process analytics products includes the sale of our SoloVPE, FlowVPE and FlowVPX systems, consumables and service.

(3) Revised 2020 revenue in the table above reflects a shift in product revenue from chromatography products to proteins products of approximately $3 million.

This change is consistent with the 2022 and 2021 presentations of product revenue.

Revenue from the sale of our products which make up our filtration, chromatography, process analytics and proteins franchises comes from the sale of a number of products as described in Part I, Item 1.

"Business - Our Products" of this report.

Other revenue primarily consists of revenue from the sale of our operating room products to hospitals as well as freight revenue.

For 2021, product revenue increased by $304.2 million, or 83.1%, as compared to 2020 with exceptional robust demand for our filtration, chromatography, process analytics and proteins products.

For 2022, product revenue increased by $130.9 million, or 19.5%, as compared to 2021, with robust demand for our filtration, chromatography and process analytics products in mAb and C&GT manufacturing, which are not related to the manufacturing of COVID-19 vaccines.

There is continued adoption of our products by key bioprocessing customers across all key product lines, though we are seeing a deceleration in demand from customers focused on manufacturing COVID-19 vaccinations.

We also experienced an increase in revenue for 2022, compared to 2021, due to our 2021 acquisitions of Polymem, Avitide and BioFlex, which were acquired in July 2021, September 2021 and December 2021, respectively, and for which revenues related to these acquisitions were included in our results of operations from their respective date of acquisition.

For 2021, product revenue increased by $304.2 million, or 83.1%, as compared to 2020 with robust demand for our filtration, chromatography, process analytics and proteins products.

The increase is due to the continued adoption of our products by key bioprocessing customers across all our key product lines.

5 unchanged sentences

Such quarterly fluctuations are expected, but they may not be predictive of future revenue or otherwise indicate a trend.

For 2020, product revenue increased by $96.0 million, or 35.6%, as compared to 2019.

The increase was due to the continued adoption of our products by key bioprocessing customers across all our key product lines mentioned above.

Beginning in the second quarter of 2020, we experienced an increase in overall sales as a result of accelerated demand, which was from broad-based covering mAb, C&GT and COVID-19 customers working on vaccines and therapeutics.

In 2020, we also had good performance from our acquisitions executed in 2019 and 2020.

C Technologies revenue increased by $16.9 million in 2020, compared to 2019, as 2020

represented twelve months of ownership of C Technologies, which was acquired in May 2019, compared to only seven months of ownership in 2019.

Finally, as a result of our acquisitions of EMT, NMS and ARTeSYN in the second half of 2020, revenue from our filtration products included $6.2 million of additional revenue.

Royalty revenues

Royalty revenues in 2021 and 2020 relate to royalties received from a third-party systems manufacturer associated with our OPUS chromatography columns.

Royalty revenues for all periods presented relate to royalties received from a third-party systems manufacturer associated with our OPUS ® chromatography columns.

Royalty revenues are variable and are dependent on sales generated by our partner.

9 unchanged sentences

Cost of product revenue

Cost of product revenue increased $122.6 million, or 78.3%, in 2021, as compared to 2020, due primarily to the increase in product revenue and costs associated with higher product volume.

In addition, to support our rapid growth and increased demand for our products, we continue to invest in our manufacturing infrastructure through increased manufacturing headcount and increased occupancy costs.

Cost of product revenue for 2022 increased $66.6 million, or 23.8%, compared to 2021, due primarily to the increase in product revenue mentioned above and costs associated with higher product volume.

Also, in order to support our growth and demand for our products, we continue to invest in our manufacturing infrastructure through an increase in headcount related to manufacturing and occupancy costs.

In addition, we experienced cost inflation, primarily in raw materials as well as freight charges due to increased fuel costs and carrier market conditions in 2022, compared to 2021.

Our depreciation expense increased in 2022, as compared to 2021, due to manufacturing equipment being placed into service throughout 2021 and 2022.

In addition, cost of product revenue increased in 2022 due to the acquisitions of Polymem, Avitide and BioFlex in the second half of 2021 and for which expenses related to these acquisitions were included in our results of operations from their respective dates of acquisition.

Gross margin was 56.9% in 2022, as compared to 58.3% in 2021.

The reduction in gross margin in 2022, as compared to the 2021, is due primarily to the increase in employee-related costs from a rise in manufacturing headcount, an increase in occupancy costs due to added capacity in 2021 and 2022 and an increase in depreciation expense, as mentioned above.

The gross margin for 2021 also includes $2.1 million of amortization of inventory step-up associated with Polymem Acquisition and ARTeSYN Acquisition in 2020.

Gross margins may fluctuate in future quarters based on actual production volume and product mix.

In 2021, cost of product revenue increased $122.6 million, or 78.3%, as compared to 2020, due primarily to the increase in product revenue and costs associated with higher product volume.

In addition, to support our rapid growth and increased demand for our products, we continued to invest in our manufacturing infrastructure through increased manufacturing headcount and increased occupancy costs.

There was an approximately 84% increase in manufacturing headcount from December 31, 2020 to December 31, 2021, which resulted in higher employee-related costs.

6 unchanged sentences

Gross margins may fluctuate in future quarters based on expected production volume and product mix.

For 2020, cost of product revenue increased $37.5 million, or 31.5%, as compared to 2019, due primarily to the increase in product revenue and costs associated with higher product volume.

An increase in manufacturing headcount resulted in higher employee-related costs in 2020, compared to 2019.

Additional facility costs, including personal protection equipment purchased for essential manufacturing personnel on site to protect against COVID-19, were also incurred during 2020 for which there were no comparable amounts in 2019.

Gross margin was 57.2% in 2020, compared to 55.9% in 2019.

The gross margin in 2020 included $0.7 million of amortization of inventory step-up associated with the EMT and ARTeSYN Acquisitions and the gross margin for 2019 included $1.5 million of amortization of inventory step-up associated with the C Technologies Acquisition in May 2019.

Excluding the step-up amortization, gross margins in 2020 and 2019 were 57.4% and 56.5%, respectively.

The increase in gross margins, excluding the inventory step-up amortization, in 2020, as compared to 2019, was due primarily to the increase in revenue mentioned above, and favorable product mix, partially offset by an increase in manufacturing headcount subsequent to December 31, 2019.

Research and development expenses

1 unchanged sentence

Due to the size of the Company and the fact that these various programs share personnel and fixed costs, we do not track all of our expenses or allocate any fixed costs by program, and therefore, have not provided historical costs incurred by project.

R&D expenses in 2022 increased $9.7 million, or 28.2%, compared to 2021.

The increase during the periods is primarily due to increased spending on new product development, increased employee-related costs due to additional headcount, increased depreciation related to R&D assets that were put into service and increased occupancy costs due to added capacity in 2021 and 2022.

In addition, the increase in R&D costs in 2022, as compared to 2021, was due to the costs related to our 2021 acquisitions, primarily Polymem and Avitide in July 2021 and September 2021, respectively.

R&D expenses increased $14.1 million, or 69.8%, during 2021, as compared to 2020.

1 unchanged sentence

Additionally, R&D costs increased, due to a rise in R&D headcount and the ramp up of project spending for new product development during 2021.

R&D expenses increased $0.7 million, or 3.8% in 2020, as compared to 2019.

The increase was primarily due to a $1.1 million increase in C Technologies R&D expenses.

C Technologies was acquired on May 31, 2019.

Therefore, only seven months of expenses were recognized in 2019, compared to a full 12 months in 2020.

The increase was partially offset by a decrease in R&D spending on external projects, as certain R&D process development laboratories were not fully functional for most of 2020 due to COVID-19.

R&D expense also includes investments made to expand our proteins product offering through our development agreement with Navigo Proteins GmbH (“Navigo”).

4 unchanged sentences

During 2022, SG&A costs increased by $32.0 million, or 17.4%, as compared to 2021.

In addition, SG&A costs increased in 2022 due to the addition of Polymem, Avitide and BioFlex during the second half of 2021.

A full year of costs from these acquisitions is included in SG&A expenses in 2022, but only from the date of each respective acquisition for fiscal year 2021.

During 2021, SG&A costs increased by $64.2 million, or 53.7%, as compared to 2020.

The increase is partially due to the continued expansion of our customer-facing activities to drive sales of our bioprocessing products, and the continued buildout of our administrative infrastructure, primarily through increased headcount and increased occupancy costs as well as an increase in depreciation related to assets placed in service during the year, all to support expected future growth.

2 unchanged sentences

In addition, SG&A costs increased in 2021, due to the addition of EMT, NMS and ARTeSYN in the second half of 2020 and the addition of Polymem, Avitide, BioFlex and NTM during the second half of 2021, for which there were no comparable costs in 2020.

For 2020, SG&A costs increased by $24.0 million, or 25.1%, as compared to 2019.

The increase was partially due to the continued expansion of our customer-facing activities to drive sales of our bioprocessing products and the continued buildout of our administrative infrastructure, primarily through increased headcount, to support expected future growth.

Stock-based compensation expense and other employee-related costs increased in 2020, as compared to 2019, resulting from an increase in headcount and higher share prices period over period.

In addition, $4.2 million of the increase in SG&A costs for 2020 was related to the C Technologies operations, which was acquired in May 2019.

C Technologies’

SG&A costs for 2020 include a full year of costs, compared to only seven months in 2019.

With the acquisitions of EMT, NMS and ARTeSYN in 2020, an additional $2.2 million of SG&A costs were included in the consolidated results.

Contingent consideration expense

Contingent consideration expense represents the change in fair value of the contingent consideration obligation included in noncurrent contingent consideration on the consolidated balance sheet as of the end of each period.

Contingent consideration expense represents the change in fair value of the contingent consideration obligation included in current and noncurrent contingent consideration on the consolidated balance sheet as of the end of each period.

Re-measurement of the contingent consideration obligation is done each quarter and the carrying value of the obligation is adjusted to the current fair value through our consolidated statement of comprehensive income.

We recorded an adjustment to the fair value of the contingent consideration obligation for the year ended December 31, 2021 of $5.9 million.

In 2022 and 2021, a change in market inputs and shifts in revenue and volume projections due to the expected timing of achievement over the three-year performance period resulted in adjustments to the fair value of the contingent consideration obligation for the years ended December 31, 2022 and 2021 of ($28.7) million and $5.9 million, respectively.

Other expenses, net

3 unchanged sentences

Investment income

Loss on conversion of debt

Interest expense

Amortization of debt issuance costs

Other expenses

1 unchanged sentence

Investment income

Investment income includes income earned on invested cash balances.

The decrease of $1.6 million in 2021, as compared to 2020, is attributable to a decrease in interest rates on our invested cash balances and to a decrease in our average invested cash balances.

In March 2020, in response to the outbreak of COVID-19 and to stay ahead of disruptions and economic slowdown, the Federal Reserve reduced federal funds rates to a range of 0.0% to 0.25%, which will continue to affect our investment income in future periods.

Investment income includes income earned on invested cash balances and short-term investments.

Our investment income increased by $6.8 million in 2022, compared to 2021, due to an increase in interest rates on average invested cash balances since December 31, 2021, as well as interest earned on U.S.

treasury bills purchased in 2022.

We expect investment income to vary based on changes in the amount of funds invested and fluctuation of interest rates.

The decrease of $3.6 million in 2020, as compared to 2019, was also attributable to a decrease in interest rates on our invested cash balances.

Higher average invested cash balances during 2020, as compared to 2019 due to the completion of a public offering and the issuance of our 2019 Notes during the third quarter of 2019, partially offset the decrease in interest rates mentioned above.

Loss on conversion of debt

The loss on conversion of debt in 2021 is a result of the settlement of the conversion of $11,000 aggregate principal of our 2019 Notes.

We had no loss on conversion of debt in 2020.

The $5.7 million loss on conversion of debt for the year ended December 31, 2019 resulted from the settlement of our outstanding 2.125% Convertible Senior Notes due 2021 (the “2016 Notes”) in the third quarter of 2019.

The loss represents the difference between (i) the fair value of the liability component and (ii) the sum of the carrying value of the debt component and any unamortized debt issuance costs at the time of settlement.

The decrease of $1.6 million in 2021, as compared to 2020, is attributable to a decrease in interest rates on our invested cash balances and to a decrease in our average invested cash balances.

Interest expense

Interest expense in 2022 and 2021 is primarily from the 2019 Notes, which were issued in July 2019.

Interest expense in 2022 includes the contractual coupon interest on the 2019 Notes.

In 2021, interest expense includes the amortization of the debt discount as well as the contractual coupon interest.

As a result of our adoption of ASU 2020-06, "Debt - Debt with Conversion Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40)," effective January 1, 2022, the equity portion of the debt conversion feature recorded upon the issuance of the 2019 Notes, or the debt discount, was reversed along with the total amortization taken on that discount.

Since there was no debt discount, no amortization was taken in 2022.

Interest expense in 2021 and 2020 is primarily from our 2019 Notes.

2 unchanged sentences

As these costs decrease, the carrying value of the debt increases and interest calculated based on the carrying value increases as well.

Interest expense in 2020 was primarily from our 2019 Notes.

In 2019, interest expense was from a combination of our 2016 Notes, which were settled during the third quarter of 2019 and our 2019 Notes.

Interest expense increased $2.8 million in 2020, as compared to 2019 based on the increase in debt issued from $115.0 million for the 2016 Notes to $287.5 million for the 2019 Notes.

The amortization of debt issuance costs on the 2019 Notes was $11.5 million and $11.0 million in 2021 and 2020, respectively.

Amortization of debt issuance costs on the 2019 Notes was $4.7 million in 2019.

The amortization of the debt issuance costs on the 2016 Notes was $2.8 million in 2019.

Contractual coupon interest incurred on the 2019 Notes in 2021 and 2020 was $1.1 million in each year.

Interest calculated based on the carrying value related to the 2019 Notes for 2019 was $0.5 million.

Contractual coupon interest incurred on the 2016 Notes was

$1.3 million in 2019.

Since the 2016 Notes were settled during July 2019, interest no longer accrued on the 2016 Notes subsequent to their settlement.

Amortization of debt issuance costs

In accounting for the transaction costs related to the issuance of the 2019 Notes, the Company allocated the total costs incurred to the liability and equity components of the 2019 Notes based on their relative values.

Transaction costs attributable to the liability component are amortized to amortization of debt issuance costs on the consolidated statements of comprehensive income.

Amortization of debt issuance costs increased during 2022, as compared to 2021.

This is a result of the decrease in the balance of debt issuance costs that are being amortized.

As these costs decrease, the carrying value of the debt increases and interest calculated based on the carrying value increases as well.

Other expenses, net

The change in other expenses, net in 2022, compared to 2021, is primarily attributable to realized foreign currency losses related to transactions with customers and vendors.

The change in other expenses, net in 2021, as compared to 2020, is primarily attributable to realized foreign currency losses related to amounts due from non-Swedish krona-based customers and vendors.

The change in other expenses during 2020, as compared to 2019, was primarily attributable to realized foreign currency losses related to amounts due from non-Swedish krona-based customers and vendors.

In addition, $0.5 million was included in other expenses in 2019, which represents a bridge loan commitment fee incurred as part of the C Technologies Acquisition.

Income tax provision (benefit)

5 unchanged sentences

For 2022, we recorded an income tax provision of $33.2 million.

The effective tax rate in 2021 was 16.4% and is based upon the estimated income for the year ending December 31, 2021 and the composition of income in different jurisdictions.

The effective tax rate was 15.1% for 2022 and is based upon the income for the year ending December 31, 2022, and the composition of income in different jurisdictions.

The difference in effective tax rates between 2022 and 2021 was primarily due to increased benefits from business tax credits and nontaxable contingent consideration partially offset by lower windfall benefits recognized on stock option exercises and vesting of stock units.

Our effective tax rate for 2022 was lower than the U.S.

statutory rate of 21% primarily due to business tax credits, windfall benefits on stock option exercises and the vesting of stock units, benefits from foreign-derived intangible income and nontaxable contingent consideration.

On August 16, 2022, the United States enacted the Inflation Reduction Act of 2022 ("IRA"), which, among other things, implements a 15% alternative minimum tax on global adjusted financial statement income of certain large corporations, a 1% excise tax on net stock repurchases and several tax incentives to promote clean energy and will become effective beginning in 2023.

We evaluated the provisions of the IRA, and no provision had a material effect on our consolidated financial position or results of operations as of December 31, 2022.

For 2021, we recorded an income tax provision of $25.3 million.

The effective tax rate in 2021 was 16.4% and is based upon the income for the year ending December 31, 2021, and the composition of income in different jurisdictions.

The increase in effective tax rates was primarily due to higher income before income taxes, lower windfall benefits recognized on stock option exercises and the vesting of stock units, partially offset by lower U.S.

3 unchanged sentences

In 2020, we recorded an income tax benefit of $0.7 million.

Our effective tax rate in 2020 was (1.2%) and was based upon the estimated income for the year ending December 31, 2020 and the composition of income in different jurisdictions.

Our effective tax rate in 2020 was (1.2%) and was based upon the income for the year ending December 31, 2020, and the composition of income in different jurisdictions.

Our effective tax rate in 2020 was lower than the U.S.

statutory rate of 21% primarily due to windfall benefits on stock option exercises and the vesting of stock units.

For the year ended December 31, 2019, we recorded an income tax provision of approximately $4.7 million.

Our effective tax rate was an income tax provision of 18.1% and was based upon the estimated taxable income for the year ending December 31, 2019 and the composition of the taxable income in different jurisdictions.

Our effective tax rate was lower than the U.S.

statutory rate of 21% due primarily to windfall benefits on stock option exercises and the vesting of restricted stock units and to deductions related to debt extinguishment.

Non-GAAP Financial Measures

We provide non-GAAP adjusted income from operations, non-GAAP adjusted net income and adjusted EBITDA as supplemental measures to GAAP measures regarding our operating performance.

These financial measures exclude the impact of certain acquisition related items and, therefore, have not been calculated in accordance with GAAP.

In addition to our key financial metrics presented above, we provide non-GAAP adjusted income from operations, adjusted net income and adjusted EBITDA as supplemental measures to GAAP measures regarding our operating performance.

These financial measures exclude the items detailed below and, therefore, have not been calculated in accordance with GAAP.

A detailed explanation and a reconciliation of each non-GAAP financial measures to its most comparable GAAP financial measures are described below.

We include this financial information because we believe these measures provide a more accurate comparison of our financial results between periods and more accurately reflect how management reviews its financial results.

We excluded the impact of certain acquisition related items because we believe that the resulting charges do not accurately reflect the performance of our ongoing operations for the period in which such charges are incurred.

We include this financial information because we believe these measures are helpful to investors in providing a comparison of our financial results between periods that more accurately reflects how management reviews its financial results.

We excluded the impact of certain acquisition-related items and items related to the issuance of conversion of our 2019 Notes because we believe that the resulting charges do not accurately reflect the performance of our ongoing operations for the period in which such charges are incurred.

Non-GAAP adjusted income from operations

Non-GAAP adjusted income from operations is measured by taking income from operations as reported in accordance with GAAP and excluding acquisition and integration costs, inventory step-up charges, contingent consideration expense and intangible amortization booked through our consolidated statements of comprehensive income.

Non-GAAP adjusted income from operations is measured by taking income from operations as reported in accordance with GAAP and excluding inventory step-up charges, acquisition and integration costs, contingent consideration fair value adjustments and intangible amortization booked through our consolidated statements of comprehensive income.

The following is a reconciliation of income from operations in accordance with GAAP to non-GAAP adjusted income from operations for the years ended December 31, 2022 and 2021:

8 unchanged sentences

Non-GAAP adjusted income from operations

Non-GAAP adjusted net income

Non-GAAP adjusted net income is measured by taking net income as reported in accordance with GAAP and excluding acquisition and integration costs and related tax effects, inventory step-up charges, contingent consideration, intangible amortization and related tax effects, loss on conversion of debt and non-cash interest expense booked through our consolidated statements of comprehensive income.

The following is a reconciliation of net income in accordance with GAAP to non-GAAP adjusted net income for the years ended December 31, 2021 and 2020:

Non-GAAP adjusted net income and adjusted earnings per share

Non-GAAP adjusted net income and adjusted earnings per share is measured by taking net income as reported in accordance with GAAP and excluding acquisition and integration costs, intangible asset amortization, inventory step-up charges, loss on conversion of debt, non-cash interest expense, amortization of debt issuance costs, contingent consideration fair value adjustments and the tax effects on these items.

The following are reconciliations of net income and fully diluted earnings per share in accordance with GAAP to non-GAAP adjusted net income and adjusted fully diluted earnings per share for the years ended December 31, 2022 and 2021:

For the Years Ended December 31,

7 unchanged sentences

Loss on conversion of debt

Amortization of debt issuance costs (1)

Non-cash interest expense (1)

1 unchanged sentence

Non-GAAP adjusted net income

(1) See Note 2, "Summary of Significant Accounting Policies - Earnings Per Share," in this report, for more information on the effects of adopting ASU 2020-06, "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40)," which we adopted effective January 1, 2022, to these financial statement line items.

* Note that earnings per share amounts may not add due to rounding.

Adjusted EBITDA

Adjusted EBITDA is measured by taking net income as reported in accordance with GAAP, excluding investment income, interest expense, taxes, depreciation and intangible amortization, and excluding acquisition and integration costs, inventory step-up charges, contingent consideration and loss on conversion of debt booked through our consolidated statements of comprehensive income.

Adjusted EBITDA is measured by taking net income as reported in accordance with GAAP, excluding investment income, interest expense, taxes, depreciation and intangible amortization, acquisition and integration costs, inventory step-up charges, loss on conversion of debt and contingent consideration fair value adjustments booked through our consolidated statements of comprehensive income.

The following is a reconciliation of net income in accordance with GAAP to adjusted EBITDA for years ended December 31, 2022 and 2021:

5 unchanged sentences

Interest expense

Income tax provision (benefit)

Non-cash interest expense

Amortization of debt issuance costs

Income tax provision

Other non-GAAP adjustments:

8 unchanged sentences

At December 31, 2022, we had cash and cash equivalents of $523.5 million compared to cash and cash equivalents of $603.8 million at December 31, 2021.

Our cash equivalents and short-term investments held to maturity portfolio as of December 31, 2022, consisted of money market funds and U.S.

treasury securities.

In December 2022, we invested $100.0 million in short-term U.S.

treasury bills which we classified as held to maturity because we have the positive intent and ability to hold until maturity.

There were no restrictions on cash as of December 31, 2022.

On December 8, 2020, the Company completed a public offering in which 1,725,000 shares of its common stock, including the underwriters’

full exercise of an option to purchase up to an additional 225,000 shares, were sold to the public at a price of $181.00 per share.

The total proceeds received by the Company from this offering, net of underwriting discounts and commissions and other estimated offering expenses payable by the Company, were approximately $297.8 million.

On September 19, 2022, we entered into the Daylight Agreement, giving us exclusive license and commercialization rights to use certain technology and intellectual property subject to conditions set forth in the Daylight Agreement.

We agreed to pay Daylight (i) an initial, one-time, non-refundable, non-creditable upfront cash payment and (ii) certain quarterly royalty payments.

In 2021 we acquired three companies for an aggregate of $149.9 million in cash, net of cash acquired.

5 unchanged sentences

All obligations related to these acquisitions have been settled.

We acquired C Technologies on May 31, 2019 for $239.9 million in cash and shares of our common stock.

The C Technologies Acquisition was funded through payment of approximately $195.0 million in cash and issuance of 779,221 unregistered shares of the Company’s common stock totaling $53.9 million.

On July 19, 2019, the Company completed a public offering in which 1,587,000 shares of its common stock, including the underwriters’

full exercise of an option to purchase an additional 207,000 shares, were sold to the public at a price of $87.00 per share for $131.1 million in net proceeds to the Company, after deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company (the “July Stock Offering”).

On July 19, 2019, the Company issued $287.5 million aggregate principal amount of 2019 Notes, which includes the underwriters’

4 unchanged sentences

included in this report for more information on this transaction.

On May 3, 2019, the Company completed a public offering in which 3,144,531 shares of its common stock, including the underwriters’

full exercise of an option to purchase up to an additional 410,156 shares, were sold to the public at a price of $64.00 per share.

The total proceeds received by the Company from this offering, net of underwriting discounts and commissions and other estimated offering expenses payable by the Company, totaled approximately $189.6 million.

Proceeds from this public offering were partially used to fund the C Technologies Acquisition on May 31, 2019.

2 unchanged sentences

The Company expects to continue meeting these terms and has again classified the carrying value of the 2019 Notes as current liabilities on the Company’s balance sheet as of December 31, 2022 and 2021.

As of the date of this filing, the Company has received requests to convert $13,000 aggregate principal amount of 2019 Notes of which $11,000 have been settled and $2,000 still remain in the Observation Period (as defined by the First Supplemental Indenture dated as of December 31, 2021), which the Company will settle during the first quarter of 2022.

We intend to pay or deliver, as the case may be, the settlement amount to be determined –

As of the date of this filing, the Company has received requests to convert $30,000 aggregate principal amount of 2019 Notes all of which have been settled.

Under the Second Supplemental Indenture to the Base Indenture which we entered into on March 4, 2022, we irrevocably elected to pay the settlement amount to be determined in cash –

paying the amount in excess of the aggregate principal portion of the converted notes in shares of our common stock.

16 unchanged sentences

Operating activities

For 2022, our operating activities provided cash of $172.1 million reflecting net income of $186.0 million and non-cash charges totaling $49.9 million primarily related to depreciation, amortization, contingent consideration adjustments, amortization of debt discount and issuance costs, deferred income taxes and stock-based compensation charges.

An increase in accounts receivable consumed $3.6 million of cash and was primarily driven by the 19.5% year-to-date increase in revenue in 2022, as compared to 2021.

Additionally, we had an increase in inventory manufactured of $57.2 million to support expected increases in future revenue.

Accounts payable decreased $8.2 million due to the timing of payments to vendors and accrued expenses decreased $2.0 million due to corporate income taxes paid.

Offsetting these uses of cash was a $4.1 million net increase in operating lease liabilities due to new operating leases entered into during 2022 and a $2.4 million decrease in prepaid expenses, including corporate income taxes.

The remaining cash used in operating activities resulted from unfavorable changes in various other working capital accounts.

For 2021, our operating activities provided cash of $119.0 million reflecting net income of $128.3 million and non-cash charges totaling $92.9 million primarily related to depreciation, amortization, inventory step-up amortization, contingent consideration expense, deferred income taxes, amortization of debt discount and issuance costs and stock-based compensation charges.

1 unchanged sentence

An increase in inventory manufactured of $89.8 million supports expected increases in future revenue and an increase in prepaid expenses, specifically insurance and taxes of $10.2 million.

The increases in accounts receivable, prepaid expenses and inventory

manufactured are offset by an increase in accounts payable of $19.5 million, which is primarily due to increased inventory purchases to support customer orders, an increase in accrued liabilities of $23.2 million, which was due to an increase in the accrual for expected costs, taxes payable, and to a decrease in deferred revenue related to products shipped during the first half of 2021.

The increases in accounts receivable, prepaid expenses and inventory manufactured are offset by an increase in accounts payable of $19.5 million, which is primarily due to increased inventory purchases to support customer orders, an increase in accrued liabilities of $23.2 million, which was due to an increase in the accrual for expected costs, taxes payable, and to a decrease in deferred revenue related to products shipped during the first half of 2021.

The remaining net cash used in operating activities resulted from unfavorable changes in various other working capital accounts.

2 unchanged sentences

In addition, $4.9 million was consumed for increases in prepaid expenses for annual software and network contracts, as well as the renewal of the Company’s global insurance policies.

These were offset by an increase in accounts payable and accrued liabilities of $3.5 million due primarily to increased inventory purchases to support customer orders and year-end tax adjustments, offset by payment of acquisition-related bonuses for C Technologies during the second quarter of 2020.

during the second quarter of 2020.

The remaining cash source of operating activities resulted from favorable changes in various other working capital accounts.

For 2019, our operating activities provided cash of $67.2 million reflecting net income of $21.4 million and non-cash charges totaling $46.9 million primarily related to depreciation, amortization, non-cash interest expense, deferred taxes, loss on conversion of debt and stock-based compensation charges.

An increase in accounts receivable consumed $7.7 million of cash and was primarily driven by the 39% year-to-date increase in revenues and an increase in inventory consumed $9.3 million to support future revenue, due to the addition of C Technologies on May 31, 2019.

These were offset by an increase in accounts payable and accrued liabilities of $13.8 million due to the addition of C Technologies and a decrease in unbilled receivables of $2.1 million.

The remaining cash used in operating activities resulted from unfavorable changes in various other working capital accounts.

Investing activities

Our investing activities consumed $233.2 million of cash during 2022, mainly due to $88.3 million of capital expenditures in 2022 as we continue to increase our manufacturing capacity worldwide.

Of these expenditures, $3.5 million represented capitalized costs related to our internal-use software for 2022.

In addition, in September 2022, the Company paid a one-time, non-refundable, non-creditable upfront payment to Daylight as required under the Daylight Agreement for the commercialization and sale of Culpeo ® QCL-IR Liquid Analyzer.

In December 2022, the Company invested $100.0 million in short-term U.S.

treasury securities.

Our investing activities consumed $221.2 million of cash during 2021.

6 unchanged sentences

Of these expenditures, $3.9 million represented capitalized costs related to our internal-use software.

Our investing activities consumed $205.3 million of cash during 2019.

We used $182.2 million in cash (net of cash received) for the C Technologies Acquisition on May 31, 2019.

Capital expenditures consumed $23.2 million as we continue to increase our manufacturing capacity worldwide.

Of these expenditures, $4.7 million represented capitalized costs related to our internal-use software.

Financing activities

Our financing activities consumed $13.3 million of cash in 2022, which included cash disbursed in relation to shares withheld to cover employee income tax due upon the vesting and release of restricted stock units of $17.0 million.

This was partially offset by proceeds received from stock option exercises during the period of $3.7 million.

In 2021, cash provided by financing activities of $1.0 million included proceeds from stock option exercises, offset by cash disbursed in relation to shares withheld to cover employee income taxes due upon the vesting and release of restricted stock units.

2 unchanged sentences

Proceeds from stock option exercises during 2020 were $8.2 million.

In 2019, cash provided by financing activities of $484.9 million included $320.7 million from the issuance of our common stock resulting from our public offerings completed in May and July 2019.

In addition, in July 2019 the Company issued $287.5 million aggregate principal amount of the 2019 Notes for net proceeds of $278.5 million.

Proceeds from stock option exercises during 2019

were $1.2 million.

Offsetting these activities was $115.0 million of cash utilized by the Company in July 2019 to settle the 2016 Notes.

Effect of exchange rate changes on cash, cash equivalents and restricted cash

The effect of exchange rate changes on cash during 2022 is a result of the weakening of the Swedish krona against the U.S.

Dollar by 10% and the weakening of the Euro against the U.S.

dollar by 15%, the weakening of the Euro against the U.S.

dollar by 6% and the weakening of the British pound against the U.S.

dollar by 12%.

4 unchanged sentences

the expansion of our bioprocessing business;

the ability to sustain sales and profits of our bioprocessing products;

the ability to sustain sales and profits of our bioprocessing products and successfully integrate them into our business;

our ability to acquire additional bioprocessing products;

the scope of and progress made in our research and development activities;

the scope of and progress made in our R&D activities;

the scope of investment in our intellectual property portfolio;

contingent consideration earnout payments resulting from our acquisitions;

the extent of any share repurchase activity;

the success of any proposed financing efforts;

general economic and capital markets;

change in accounting standards;

the impact of inflation on our operations, including our expenditures on raw material and freight charges;

fluctuations in foreign currency exchange rates;

costs associated with our ability to comply with emerging environmental, social and governance standards.

Absent acquisitions of additional products, product candidates or intellectual property, we believe our current cash balances are adequate to meet our cash needs for at least the next 24 months.

7 unchanged sentences

If our available cash balances and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements, for example, due to acquisition-related financing needs or lower demand for our products, among potential other events, we may seek to sell common or preferred equity or convertible debt securities, enter into a credit facility or another form of third-party funding, or seek other debt funding.

The sale of equity and convertible debt securities may result in dilution to our stockholders, and those securities may have rights senior to those of our common shares.

The sale of equity and convertible debt securities may result in dilution to our shareholders, and those securities may have rights senior to those of our common shares.

If we raise additional funds through the issuance of preferred stock, convertible debt securities or other debt financing, these securities or other debt could contain covenants that would restrict our operations.

3 unchanged sentences

Net Operating Loss Carryforwards

At December 31, 2021, the Company had federal net operating loss carryforwards of $46.2 million, state net operating loss carryforwards of $4.0 million, and foreign net operating loss carryforwards of $6.1 million.

At December 31, 2022, we had federal net operating loss carryforwards of $42.9 million, state net operating loss carryforwards of $0.8 million, and foreign net operating loss carryforwards of $4.9 million.

Federal net operating loss carryforwards of $7.3 million will expire at various dates through 2037.

The total state net operating loss carryforwards will expire at various dates through 2041, while the foreign net operating loss carryforwards do not expire.

The other $27.1 million of the federal net operating loss carryforwards have unlimited carryforward periods.

The state net operating loss carryforwards will expire at various dates through 2041, while the foreign net operating loss carryforwards do not expire.

The other $35.6 million of federal net operating loss carryforwards have unlimited carryforward periods.

We had business tax credits carryforwards of $3.8 million available to reduce future federal and state income taxes, if any.

The business tax credits carryforwards will continue to expire at various dates through

December 2041.

The business tax credits carryforwards will expire at various dates through December 2042.

Net operating loss carryforwards and available tax credits are subject to review and possible adjustment by the Internal Revenue Service, state and foreign jurisdictions and may be limited in the event of certain changes in the ownership interest of significant stockholders.

Foreign Earnings

As of December 31, 2021, the Company has accumulated undistributed earnings generated by our foreign subsidiaries of approximately $93.3 million.

As of December 31, 2022, we have accumulated undistributed earnings generated by our foreign subsidiaries of approximately $148.2 million.

Because $5.7 million of such earnings have previously been subject to the one-time transition tax on foreign earnings required by the Tax Cuts and Jobs Act enacted in December 2017, any additional taxes due with respect to such earnings or the excess of the amount for financial reporting over the tax basis of our foreign investments would generally be limited to foreign and state taxes.

At December 31, 2021, we have not provided for taxes on outside basis differences of our foreign subsidiaries, as we have the ability and intent to indefinitely reinvest the undistributed earnings of our foreign subsidiaries, and there are no needs for such earnings in the United States that would contradict our plan to indefinitely reinvest.

At December 31, 2022, we have not provided for taxes on outside basis differences of our foreign subsidiaries as it is not practicable and we have the ability and intent to indefinitely reinvest the undistributed earnings of our foreign subsidiaries, and there are no needs for such earnings in the United States that would contradict our plan to indefinitely reinvest.

Effects of Inflation

Our assets are primarily monetary, consisting of cash and cash equivalents.

Our assets are primarily monetary, consisting of cash and cash equivalents and marketable securities.

Because of their liquidity, these assets are not directly affected by inflation.

7 unchanged sentences

We have historically held investments in commercial paper, U.S.

Government and agency securities as well as corporate bonds and other debt securities.

treasury and government securities as well as corporate bonds and other debt securities.

As a result, we have been exposed to potential loss from market risks that may occur as a result of changes in interest rates, changes in credit quality of the issuer or otherwise.

We do not have any such investments as of December 31, 2021.

Our investment portfolio consists of cash and cash equivalents (cash and money market funds) that total $523.5 million and marketable securities (U.S.

treasury bills) of $100.3 million within short-term marketable securities on the consolidated balance sheet as of December 31, 2022.

Our cash equivalent investments (money market funds) have short-term maturity periods that dampen the impact of market or interest rate risk.

Our marketable securities consist of U.S.

treasury bills with a short term maturity period of 180 days.

As a result, a hypothetical 100 basis point increase in interest rates would have no effect on our cash position as of December 31, 2022.

We generally place our marketable security investments in high quality credit instruments, as specified in our investment policy guidelines.

We believe that the conservative nature of our investments mitigates our interest rate exposure, and our investment policy limits the amount of our credit exposure to any one issue, issuer (with the exception of U.S.

agency obligations) and type of instrument.

We manage our investment portfolio in accordance with our investment policy or approval by the Board of Directors.

The primary objectives of our investment policy are to preserve principal, maintain a high degree of liquidity to meet operating and other needs, and obtain competitive returns subject to prevailing market conditions without significantly increasing risk.

To achieve this objective, we maintain our portfolio of cash equivalents and marketable securities in high-quality securities, including money market funds and U.S.

treasury bills.

The marketable securities are classified as held-to-maturity and consequently are recorded at amortized cost on our consolidated balance sheet in accordance with accounting principles generally accepted in the United States.

We do not expect any material loss from our marketable security investments and therefore believe that our potential interest rate exposure is limited.

3 unchanged sentences

Our foreign currency exposures include the Swedish krona, Euro, British pound, Chinese yuan, Japanese yen, Singapore dollar, South Korean won and Indian rupee;

of these, the primary foreign currency exposures are the Swedish kronor, Euro and British pound.

of these, the primary foreign currency exposures are the Swedish kronor, Euro and Chinese yuan.

Exchange gains or losses resulting from the translation between the transactional currency and the functional currency are included in net income.

2 unchanged sentences

Although a majority of our contracts are denominated in U.S.

Dollars, 37.5% and 29.8% of total revenues during 2021 and 2020, respectively, were denominated in foreign currencies while 27.1% and 6.8% of our costs and expenses during 2021 and 2020, respectively, were denominated in foreign currencies, primarily operating expenses associated with cost of revenue, sales and marketing and general and administrative.

In addition, 17.7% and 21.8% of our consolidated tangible assets were subject to foreign

currency exchange fluctuations as of each of December 31, 2021 and 2020, respectively, while 9.6% and 5.7% of our consolidated liabilities were exposed to foreign currency exchange fluctuations as of each of December 31, 2021 and 2020, respectively.

dollars, 38.2% and 37.5% of total revenues were denominated in foreign currencies during 2022 and 2021, respectively.

FINANCIAL STATEMEN TS AND SUPPLEMENTARY DATA

2 unchanged sentences

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 5. Market for Registrant’s Common Equity