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Item 5. Market for Registrant’s Common Equity

2024-02-22 compared with 2023-02-22 · 13 added, 587 removed, 26 unchanged (96% of the section changed)

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOC KHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information for Common Stock

Our common stock is traded on the Nasdaq Global Select Market under the symbol “RGEN.”

Stockholders and Dividends

2 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 (the "Board") and will depend on our financial condition, results of operations, capital requirements and other factors the Board deems relevant.

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

Equity Compensation Plan Information

The following table sets forth information as of December 31, 2022, regarding shares of common stock that may be issued under the Company’s equity compensation plans, consisting of the Second Amended and Restated 2001 Repligen Corporation Stock Plan, the Amended and Restated 2012 Stock Option and Incentive Plan and the 2018 Stock Option and Incentive Plan.

The following table sets forth information as of December 31, 2023, regarding shares of common stock that may be issued under the Company’s equity compensation plans, consisting of the Amended and Restated 2012 Stock Option and Incentive Plan and the 2018 Stock Option and Incentive Plan.

Plan Category

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Stock Performance Graph

The graph below matches Repligen Corporation’s cumulative 5-year total shareholder return on common stock with the cumulative total returns of the Nasdaq Composite index, the Nasdaq Pharmaceutical index, and the Nasdaq Biotechnology index.

The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from December 31, 2018 to December 31, 2023.

5 unchanged sentences

Issuer Purchases of Equity Securities

In June 2008, the Board of Directors authorized a program to repurchase up to 1.25 million shares of our common stock to be repurchased at the discretion of management from time to time in the open market or through privately negotiated transactions.

In June 2008, the Board authorized a program to repurchase up to 1.25 million shares of our common stock to be repurchased at the discretion of management from time to time in the open market or through privately negotiated transactions (the “2008 Share Repurchase Program”).

The 2008 Repurchase Program has no set expiration date and may be suspended or discontinued at any time.

We did not repurchase any shares of common stock during the year ended December 31, 2022.

We did not repurchase any shares of common stock under the 2008 Repurchase Program during the year ended December 31, 2023.

In prior years, we repurchased a total of 592,827 shares, leaving 657,173 shares remaining under this authorization.

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 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.

Built to address these concerns, our products help set new standards for the way biologics are manufactured.

We are committed to inspiring advances in bioprocessing as a trusted partner in the production of critical biologic drugs –

including monoclonal antibodies (“mAbs”), recombinant proteins, vaccines and cell and gene therapies ("C&GT") –

that are improving human health worldwide.

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 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.

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.

Critical Accounting Policies and Estimates

While our significant accounting policies are more fully described in the notes to our consolidated financial statements, we have identified the policies and estimates below as being critical to our business operations and the understanding of our results of operations.

These policies require management’s most difficult, subjective or complex judgements, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

The impact of and any associated risks related to these policies on our business operations are discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations,”

specifically in the “Results of Operations”

section, where such policies affect our reported and expected financial results.

Although we believe that our estimates, assumptions, and judgements are reasonable, they are based upon information presently available.

Actual results may differ significantly from these estimates under different assumptions, judgments, or conditions.

Revenue recognition

We generate revenue from the sale of bioprocessing products, equipment devices, and related consumables used with these equipment devices to customers in the life science and biopharmaceutical industries.

Under Accounting Standards Codification No.

(“ASC”) 606, “

Revenue from Contracts with Customers,”

revenue is recognized when, or as, obligations under the terms of a contract are satisfied, which occurs when control of the promised products or services is transferred to customers.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or services to a customer (“transaction price”).

To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing the expected value method or the most likely amount method, depending on the facts and circumstances relative to the contract.

Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur.

Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the Company’s anticipated performance and all information (historical, current and forecasted) that is reasonably available.

Sales, value add, and other taxes collected on behalf of third parties are excluded from revenue.

When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component.

Applying the practical expedient in paragraph 606-10-32-18, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less.

None of the Company’s contracts contained a significant financing component as of December 31, 2022.

Contracts with customers may contain multiple performance obligations.

For such arrangements, the transaction price is allocated to each performance obligation based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation.

The Company determines standalone selling prices based on the price at which the performance obligation is sold separately.

If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

The Company recognizes product revenue under the terms of each customer agreement upon transfer of control to the customer, which occurs at a point in time.

Allowance for credit losses

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.

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

Based on our review of these factors, we establish or adjust allowances for specific customers.

Credit losses can vary substantially over time and the process involves judgment and estimation that require a number of assumptions about matters that are uncertain.

Accordingly, our results of operations can be affected by adjustments to the allowance due to actual write-offs that differ from estimated amounts.

See Note 7, “Credit Losses,”

to our consolidated financial statements included in this report for more information.

We value inventory at cost or, if lower, net realizable value, using the first-in, first-out method.

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 in our consolidated statements of comprehensive income.

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.

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

Business combinations

Total consideration transferred for acquisitions is allocated to the tangible and intangible assets acquired and liabilities assumed, if any, based on their fair values at the dates of acquisition.

This purchase price allocation process requires management to make significant estimates and assumptions with respect to intangible assets and deferred revenue obligations.

The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions determined by management.

Any excess of purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill.

While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as any contingent consideration, where applicable, our estimates are inherently uncertain and subject to refinement.

As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

Upon conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of comprehensive income.

The Company estimates the fair value of the contingent consideration earnouts using the Monte Carlo Simulation and updates the fair value of the contingent consideration at each reporting period based on the estimated probability of achieving the earnout targets and applying a discount rate that captures the risk associated with the expected contingent payments.

To the extent that our estimates change in the future regarding the likelihood of achieving these targets, we may need to record material adjustments to our accrued contingent consideration.

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

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.

We use the income approach to determine the fair value of certain identifiable intangible assets including customer relationships and developed technology.

This approach determines fair value by estimating after-tax cash flows attributable to these assets over their respective useful lives and then discounting these after-tax cash flows back to a present value.

We base our assumptions on estimates of future cash flows, expected growth rates, expected trends in technology, etc.

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 ("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

Intangible assets

Intangible assets with a definite life are amortized over their useful lives using the straight-line method and the amortization expense is recorded within cost of product revenue, research and development and selling, general and administrative expense in the consolidated statements of comprehensive income.

Intangible assets and their related useful lives are reviewed at least annually to determine if any adverse conditions exist, that would indicate the carrying value of these assets may not be recoverable.

More frequent impairment assessments are conducted if certain conditions exist, including a change in the competitive landscape, any internal decisions to pursue new or different technology strategies, a loss of a significant customer, or a significant change in the marketplace, including changes in the prices paid for the Company’s products or changes in the size of the market for the Company’s products.

If impairment indicators are present, the Company determines whether the underlying intangible asset is recoverable through estimated future undiscounted cash flows.

If the asset is not found to be recoverable, it is written down to the estimated fair value of the asset based on the sum of the future discounted cash flows expected to result from the use and disposition of the asset.

If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life.

The Company continues to believe that its definite-lived intangible assets are recoverable at December 31, 2022.

Indefinite-lived intangible assets are tested for impairment at least annually.

There has been no impairment of our intangible assets for the periods presented.

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, 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.

Accounting guidance also permits an optional qualitative assessment for goodwill to determine whether it is more likely than not that the carrying value of a reporting unit exceeds its fair value.

If, after this qualitative assessment, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then no further quantitative testing would be necessary.

A quantitative assessment is performed if the qualitative assessment results in a more likely than not determination or if a qualitative assessment is not performed.

The quantitative assessment considers whether the carrying amount of a reporting unit exceeds its fair value, in which case an impairment charge is recorded to the extent the reporting unit’s carrying value exceeds its fair value.

The Company operates as one reporting unit.

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

We estimate accrued liabilities by identifying services performed on our behalf, estimating the level of service performed and determining the associated cost incurred for such service as of each balance sheet date.

For example, we would accrue for professional and consulting fees incurred with law firms, audit and accounting service providers and other third-party consultants.

These expenses are determined by either requesting those service providers to estimate unbilled services at each reporting date for services incurred or tracking costs incurred by service providers under fixed fee arrangements.

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.

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.

We make these judgments based upon the facts and circumstances known at the date of the financial statements.

A change in the estimated cost or volume of services provided could result in additional accrued liabilities.

Any significant unanticipated changes in such estimates could have a significant impact on our accrued liabilities and reported operating results.

There have been no material adjustments to our accrued liabilities in any of the periods presented in the accompanying consolidated financial statements.

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.

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.

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.

As a result, the 2019 Notes are convertible at the option of the holders of the 2019 Notes during the first quarter of 2023, the quarter immediately following the quarter when the conditions are met, as stated in the terms of the 2019 Notes.

Expecting to continue meeting these terms, the Company continues to classify the carrying value of the 2019 Notes as current liabilities on the Company’s balance sheet as of December 31, 2022.

This classification is reassessed each quarter.

Stock-based compensation

We use the Black-Scholes option pricing model to calculate the fair value of stock option awards on the grant date.

The expected term of options granted represents the period of time for which the options are expected to be outstanding and is derived from our historical stock option exercise experience and option expiration data.

For purposes of estimating the expected term, we have aggregated all individual option awards into one group, as we do not expect substantial differences in exercise behavior among our employees.

The expected volatility is a measure of the amount by which our stock price is expected to fluctuate during the expected term of options granted.

We determined the expected volatility based upon the historical volatility of our common stock over a period commensurate with the option’s expected term.

The risk-free interest rate is the implied yield available on U.S.

treasury zero-coupon issues with a remaining term equal to the option’s expected term on the grant date.

We have never declared or paid any cash dividends on any of our capital stock and do not expect to do so in the foreseeable future.

Accordingly, we use an expected dividend yield of zero to calculate the grant-date fair value of a stock option.

The fair value for stock units, which include restricted stock units and performance stock units, is calculated using the closing price of the Company’s common stock on the date of grant.

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.

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.

Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Based on an analysis of historical data, we have calculated an 8% annual forfeiture rate for non-executive level employees, a 3% annual forfeiture rate for executive level employees, and a 0% forfeiture rate for non-employee members of the Board of Directors, which we believe are reasonable assumptions to estimate forfeitures.

However, the estimation of forfeitures requires significant judgment and, to the extent actual results or updated estimates differ from our current estimates, a cumulative adjustment to stock-based compensation expense will be recorded in the period estimates are revised.

For the years ended December 31, 2022, 2021 and 2020, we recorded stock-based compensation expense of $27.3 million, $27.5 million and $17.0 million, respectively, for share-based awards granted under all of the Company’s stock plans.

As of December 31, 2022, there was $63.9 million of total unrecognized compensation cost related to unvested share-based awards.

This cost is expected to be recognized over a weighted average remaining requisite service period of 3.01 years.

We expect 2,071,467 unvested options and stock units to vest over the next five years.

Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.

Valuation allowances are provided, if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

We account for uncertain tax positions using a “more-likely-than-not”

threshold for recognizing and resolving uncertain tax positions.

The evaluation of uncertain tax positions is based on factors including, but not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position.

We evaluate our tax position on a quarterly basis.

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.

Internal Revenue Service (“IRS”) and other domestic and foreign tax authorities.

We expect future examinations to focus on our intercompany transfer pricing practices as well as other matters.

We regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may result from such examinations.

We believe such estimates to be reasonable;

however, the final determination of any of these examinations could significantly impact the amounts provided for income taxes in our consolidated financial statements.

Recent accounting standards update

See Note 2, “Summary of Significant Accounting Policies –

Recent Accounting Standards Updates,”

to our consolidated financial statements included in this report for more information.

Results of Operations

The following discussion of the financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements and the related footnotes thereto.

Total revenues for years ended December 31, 2022, 2021 and 2020 were comprised of the following:

For the Years Ended December 31,

(Amounts in thousands, except for percentage data)

Royalty and other

Total revenue

Product revenues

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 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.

Product revenues were comprised of the following:

For the Years Ended December 31,

(Amounts in thousands)

Filtration products

Chromatography products (3)

Process analytics products

Proteins products (3)

Total product revenue

(1) 2021 revenue for filtration products includes revenue related to Polymem from July 1, 2021, as well as BioFlex Solutions LLC ("BioFlex") and Newton T&M Corp ("NTM") from December 16, 2021 through December 31, 2021.

2021 revenue for proteins products includes revenue related to Avitide from September 20, 2021 through December 31, 2021.

(2) 2020 revenue for filtration products includes revenue related to Engineered Molding Technology LLC ("EMT") from July 13, 2020, Non-Metallic Solutions, Inc.

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

(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 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.

Beginning in the second quarter of 2020, we experienced an increase in overall sales as a result of accelerated demand across all our franchises due to the critical needs of customers working on COVID-19 vaccines and therapeutics.

In addition, during 2021 we saw an increase in demand for C&GT and monoclonal antibody manufacturing.

Revenue for 2021 also increased due to revenue from Polymem, Avitide, BioFlex and NTM, which we acquired during the second half of 2021.

During 2021, we also include twelve months of revenue from our acquisitions executed in the second half of 2020, EMT, NMS and ARTeSYN, for which there was only a partial year of revenue commencing from the respective acquisition dates in 2020, through December 31, 2020.

Sales of our bioprocessing products are impacted by the timing of orders, development efforts at our customers or end-users and regulatory approvals for biologics that incorporate our products, which may result in significant quarterly fluctuations.

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

Royalty revenues

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.

Costs and operating expenses

Total costs and operating expenses for the years ended December 31, 2022, 2021 and 2020 were comprised of the following:

For the Years Ended December 31,

(Amounts in thousands, except for percentage data)

Cost of product revenue

Research and development

Selling, general and administrative

Contingent consideration expense

Total costs and operating expenses

Cost of product revenue

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.

Our depreciation expense increased as manufacturing equipment was placed in service during 2021.

The impact on cost of product revenue from our three acquisitions in 2021 was $7.4 million, which has also contributed to the increase in cost of product revenue as there were no comparable costs for these acquisitions in 2020.

Gross margin was 58.3% in 2021, as compared to 57.2% in 2020.

The gross margin in 2021 included $2.1 million of amortization of inventory step-up associated with the Polymem Acquisition and ARTeSYN Acquisition and 2020 included $0.7 million of amortization of inventory step-up associated with the ARTeSYN Acquisition and the acquisition of EMT.

Excluding the step-up amortization, gross margin for 2021 and 2020 was 58.7% and 57.4%, respectively.

The increase in gross margin, excluding the inventory step-up amortization, in 2021, as compared to 2020, was due primarily to the increase in revenue mentioned above, and favorable product mix, partially offset by an increase in employee costs related to an increase in manufacturing headcount subsequent to December 31, 2020, an increase in occupancy costs due to added capacity in 2021 and an increase in depreciation expense mentioned above.

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

Research and development expenses

Research and development (“R&D”) expenses are related to bioprocessing products, which include personnel, supplies and other research expenses.

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

R&D expenses 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.

The increase was due to the addition of R&D expenses related to operations of Avitide, Polymem and ARTeSYN, from their respective acquisition dates to December 31, 2021, including a full year of costs related to ARTeSYN programs for which there were costs from one month in 2020.

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

The Company invested $2.6 million in 2022, $2.3 million in 2021 and $0.9 million in 2020 in the form of milestone payments to Navigo.

We expect our R&D expenses in 2023 to modestly increase to support new product development.

Selling, general and administrative expenses

Selling, general and administrative (“SG&A”) expenses include the costs associated with selling our commercial products and costs required to support our marketing efforts, including legal, accounting, patent, shareholder services, amortization of intangible assets and other administrative functions.

During 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.

Employee-related costs during 2021, as compared to the same periods in 2020, resulted from the increase in headcount period over period.

These costs include stock-based compensation expense, which increased $9.1 million in 2021, as compared to 2020.

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.

Contingent consideration expense

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.

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

The table below provides detail regarding our other expenses, net:

For the Years Ended December 31,

(Amounts in thousands, except for percentage data)

Investment income

Interest expense

Amortization of debt issuance costs

Other expenses

Total other expenses, net

Investment income

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 $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 affected our investment income.

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.

Interest expense, which includes the amortization of debt issuance costs and contractual coupon interest, increased $0.6 million in 2021, as compared to 2020.

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

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

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.

Income tax provision (benefit)

Income tax provision (benefit) for the years ended December 31, 2022, 2021 and 2020 was as follows:

For the Years Ended December 31,

(Amounts in thousands, except for percentage data)

Income tax provision (benefit)

Effective tax rate

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

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.

taxation of foreign earnings.

Our effective tax rate for 2021 was lower than the U.S.

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

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 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.

Non-GAAP Financial Measures

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 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 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:

For the Years Ended December 31,

(Amounts in thousands)

GAAP income from operations

Non-GAAP adjustments to income from operations:

Inventory step-up charges

Acquisition and integration costs

Contingent consideration expense

Intangible amortization

Non-GAAP adjusted income from operations

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,

(Amounts in thousands, except per share data)

GAAP net income

Non-GAAP adjustments to net income:

Inventory step-up charges

Acquisition and integration costs

Contingent consideration expense

Intangible amortization

Loss on conversion of debt

Amortization of debt issuance costs (1)

Non-cash interest expense (1)

Tax effect on non-GAAP charges

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, 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:

For the Years Ended December 31,

(Amounts in thousands)

GAAP net income

Non-GAAP EBITDA adjustments to net income:

Investment income

Interest expense

Non-cash interest expense

Amortization of debt issuance costs

Income tax provision

Other non-GAAP adjustments:

Inventory step-up charges

Acquisition and integration costs

Contingent consideration expense

Loss on conversion of debt

Adjusted EBITDA

Liquidity and Capital Resources

We have financed our operations primarily through revenues derived from product sales, the issuance of the 2016 Notes in May 2016 and our 2019 Notes in July 2019 and the issuance of common stock in our December 2020, July 2019 and May 2019 public offerings.

Our revenue for the foreseeable future will primarily be limited to our bioprocessing product revenue.

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 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.

In connection with the acquisitions, the Company has an obligation to pay up to $62.5 million (undiscounted) in contingent consideration earnout payments in cash over a three-year performance period beginning January 1, 2022 and ending December 31, 2024.

See Note 3, “Fair Value Measurements,”

and Note 4, “Acquisitions,”

for additional information.

In 2020, we acquired three companies for an aggregate of $175.0 million in cash, net of cash acquired.

All obligations related to these acquisitions have been settled.

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

exercise in full of an option to purchase an additional $37.5 million aggregate principal amount of 2019 Notes (the “Notes Offering”

and, together with the July Stock Offering, the “Offerings”).

The net proceeds of the Notes Offering, after deducting underwriting discounts and commissions and other offering expenses payable by the Company, were $278.5 million.

See Note 13, “Convertible Senior Notes,”

included in this report for more information on this transaction.

As a result, the 2019 Notes are convertible at the option of the holders of the 2019 Notes during the first quarter of 2023 per the First Supplemental Indenture underlying the 2019 Notes.

The 2019 Notes have a face value of $287.5 million and a carrying value of $284.6 million.

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 $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.

In 2022, we had lease arrangements for certain equipment and facilities including corporate and manufacturing sites.

As of December 31, 2022, the Company had fixed lease payment obligations of $138.3 million, with $7.0 million payable within 12 months.

See Note 5, “Leases”

, for additional information.

In 2022, we had other purchase obligations primarily consisting of purchase commitments with certain vendors and open purchase orders for the procurement of raw materials for manufacturing.

As of December 31, 2022, the Company had other purchase obligations of $72.1 million, payable within 12 months.

For the Years Ended December 31,

(Amounts in thousands)

Cash provided by (used in):

Operating activities

Investing activities

Financing activities

Effect of exchange rate changes on cash, cash

equivalents and restricted cash

Net (decrease) increase in cash, cash equivalents

and restricted cash

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.

An increase in accounts receivable consumed $46.5 million of cash and was primarily driven by the 83.1% year-to-date increase in total revenues.

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

For 2020, our operating activities provided cash of $62.6 million reflecting net income of $59.9 million and non-cash charges totaling $51.3 million primarily related to depreciation, amortization, non-cash interest expense, deferred taxes and stock-based compensation charges.

An increase in accounts receivable consumed $21.0 million of cash and was primarily driven by the 35.5% year-to-date increase in total revenues and an increase in inventory manufactured of $29.3 million to support expected continued growth in future revenues.

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, Inc.

during the second quarter of 2020.

The remaining cash source of operating activities resulted from favorable 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.

We used $149.9 million in cash (net of cash received) for the acquisitions of Polymem, Avitide, BioFlex and NTM, in the aggregate.

Capital expenditures consumed $71.3 million as we continue to increase our manufacturing capacity worldwide.

Of these expenditures, $4.2 million represented capitalized costs related to our internal-use software.

Our investing activities consumed $201.4 million of cash during 2020.

We used $175.0 million in cash (net of cash received) for the EMT, NMS and ARTeSYN Acquisitions.

Capital expenditures consumed $26.3 million as we continue to increase our manufacturing capacity worldwide.

Of these expenditures, $3.9 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.

Proceeds from stock option exercises during 2021 were $3.9 million offset by $2.9 million of cash disbursed to pay tax obligation on the vesting of restricted stock units.

In 2020, cash provided by financing activities of $305.9 million included $297.8 million from the issuance of our common stock resulting from our public offerings completed in December 2020.

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

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 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%.

Off-Balance Sheet Arrangements

We do not have any special purpose entities or off-balance sheet financing arrangements.

Capital Requirements

Our future capital requirements will depend on many factors, including the following:

the expansion of our bioprocessing business;

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

our ability to acquire additional bioprocessing products;

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.

We expect operating expenses in 2023 to increase as we continue to expand our bioprocessing business.

We expect to incur continued spending related to the development and expansion of our bioprocessing product lines and expansion of our commercial capabilities for the foreseeable future.

Our future capital requirements may include, but are not limited to, purchases of property, plant and equipment, the acquisition of additional bioprocessing products and technologies to complement our existing manufacturing capabilities, and continued investment in our intellectual property portfolio.

We plan to continue to invest in our bioprocessing business and in key R&D activities associated with the development of new bioprocessing products.

We actively evaluate various strategic transactions on an ongoing basis, including licensing or acquiring complementary products, technologies or businesses that would complement our existing portfolio.

We continue to seek to acquire such potential assets that may offer us the best opportunity to create value for our shareholders.

In order to acquire such assets, we may need to seek additional financing to fund these investments.

If our available cash balances and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements, 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 shareholders, and those securities may have rights senior to those of our common shares.

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

Any other third-party funding arrangement could require us to relinquish valuable rights.

We may require additional capital beyond our currently anticipated amounts.

Additional capital may not be available on reasonable terms, if at all.

Net Operating Loss Carryforwards

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 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 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, 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, 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 and marketable securities.

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

Since we intend to retain and continue to use our equipment, furniture, fixtures and office equipment, computer hardware and software and leasehold improvements, we believe that the incremental inflation related to replacement costs of such items will not materially affect our operations.

However, the rate of inflation affects our expenses, such as those for employee compensation and contract services, which could increase our level of expenses and the rate at which we use our resources.

QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk in the ordinary course of our business.

Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates.

Our market risk exposure is primarily a result of fluctuations in interest rates and foreign currency exchange rates.

Interest Rate Risk

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

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.

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 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.

Foreign Exchange Risk

The reporting currency of the Company is U.S.

dollars, and the functional currency of each of our foreign subsidiaries is its respective local currency.

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 Chinese yuan.

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

Fluctuations in exchange rates may adversely affect our results of operations, financial position and cash flows.

We currently do not seek to hedge this exposure to fluctuations in exchange rates.

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

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

Financial statements and supplementary data required by Item 8 are set forth at the pages indicated in Item 15(a) below and are incorporated herein by reference.

CHANGES IN AND DISAGREEMENTS WITH ACCOUN TANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

In December 2023, the Board authorized and approved a stock repurchase, separate from the 2008 Share Repurchase Program, of up to $25.0 million of our common stock concurrent with the issuance of $600.0 million aggregate principal amount of 1.00% Convertible Senior Notes due 2028 (“2023 Notes”).

See Note 14, “ Convertible Senior Notes,” included in this report for more information on the issuance.

We used $14.4 million of the proceeds from the issuance of the 2023 Notes to repurchase 92,090 shares at a price of $156.22, including transaction costs, to offset the impact of dilution from the issuance of 2023 Notes and equity compensation programs as well as to reduce our outstanding share count (“2023 Share Repurchase Program”).

We have elected to retire the shares repurchased to date under the 2023 Share Repurchase Program.

Retired shares become part of the pool of authorized but unissued shares.

The purchase price of the retired shares in excess of par value, including transaction costs, is recorded as a decrease to additional paid-in capital in our consolidated balance sheets as of December 31, 2023.

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