ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
|
||
(Address of principal executive offices) |
(Zip Code) |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
☒ |
Accelerated filer | ☐ | ||||
Non-accelerated filer | ☐ |
Smaller reporting company | ||||
Emerging growth company |
PAGE |
||||||
Forward-looking Statements | 1 | |||||
PART I |
||||||
Item 1. |
Business | 2 | ||||
Item 1A. |
Risk Factors | 14 | ||||
Item 1B. |
Unresolved Staff Comments | 36 | ||||
Item 2. |
Properties | 36 | ||||
Item 3. |
Legal Proceedings | 36 | ||||
Item 4. |
Mine Safety Disclosures | 36 | ||||
PART II |
||||||
Item 5. |
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 37 | ||||
Item 6. |
Reserved | 38 | ||||
Item 7. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 39 | ||||
Item 7A. |
Quantitative and Qualitative Disclosures About Market Risk | 57 | ||||
Item 8. |
Financial Statements and Supplementary Data | 57 | ||||
Item 9. |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 58 | ||||
Item 9A. |
Controls and Procedures | 58 | ||||
Item 9B. |
Other Information | 62 | ||||
63 | ||||||
PART IV |
||||||
Item 15. |
Exhibits and Financial Statement Schedules | 64 | ||||
Item 16. |
10-K Summary | 66 | ||||
67 |
• | Our product revenue may be negatively impacted by a number of factors, including without limitation, competition in the bioprocessing market, our historical reliance on a limited number of large customers, our ability to develop or acquire additional bioprocessing products in the future, our ability to manufacture our bioprocessing products sufficiently and timely, and our ability to effectively penetrate the bioprocessing products market. |
• | We rely on a limited number of suppliers or, for certain of our products, one supplier, and we may not be able to find replacements or immediately transition to alternative suppliers, which could have a material adverse effect on our financial condition, results of operations and reputation. |
• | We may not be able to achieve sufficient market acceptance for our bioprocessing products, and our results of operations and competitive position could suffer. |
• | If our products do not perform as expected or the reliability of the technology on which our products are based is questioned, we could experience lost revenue, delayed or reduced market acceptance, increased cost and damage to our reputation. |
• | If we are unable to manufacture our products in sufficient quantities and in a timely manner, our operating results will be harmed, our ability to generate revenue could be diminished and our gross margin may be negatively impacted. |
• | Acquisitions we have completed, including our recent acquisitions of ARTeSYN Biosolutions Holdings Ireland Limited, Non-Metallic Solutions, Inc. or Engineered Molding Technology LLC, or may complete in the future, may expose us to risks that could adversely affect our business, and we may not achieve the anticipated benefits of acquisitions of businesses or technologies. |
• | Our results of operations could be negatively affected by potential fluctuations in foreign currency exchange rates. |
• | If we are unable to hire and retain skilled personnel, including technical, sales and marketing personnel, then we will have trouble developing and marketing our products. |
• | If we are unable to obtain, maintain and protect our intellectual property rights related to our products, we may not be able to compete effectively or succeed commercially. |
• | The business interruptions resulting from the COVID-19 outbreak or similar public health crises may disrupt the development, manufacturing and commercial sales of our products and adversely impact our business. |
ITEM 1. |
BUSINESS |
• | Continued innovation |
• | Platforming our products. |
• | Targeted acquisitions |
• | Geographical expansion |
• | Operational efficiency |
For the Years Ended December 31, |
||||||||||||
2020 |
2019 |
2018 |
||||||||||
Revenue by customers’ geographic locations: |
||||||||||||
North America |
48 | % | 51 | % | 48 | % | ||||||
Europe |
38 | % | 37 | % | 40 | % | ||||||
APAC/Other |
14 | % | 12 | % | 12 | % | ||||||
|
|
|
|
|
|
|||||||
Total revenue |
100 | % | 100 | % | 100 | % | ||||||
|
|
|
|
|
|
ITEM 1A. |
RISK FACTORS |
• | significantly greater name recognition; |
• | larger and more established distribution networks; |
• | additional lines of products and the ability to bundle products to offer higher discounts or other incentives to gain a competitive advantage; |
• | greater experience in conducting research and development, manufacturing, clinical trials, marketing, obtaining regulatory approval and entering into collaborations or other strategic partnership arrangements; and |
• | greater financial and human resources for product development, sales and marketing and patent litigation. |
• | the potential diversion of resources in the healthcare system away from routine patient treatment, drug development and clinical trials to focus on pandemic concerns, which could result in reduced demand for our products or our customer’s products and could significantly impact our operating results; |
• | limitations on travel that could interrupt our customers’ key preclinical activities and trial activities, such as clinical trial site initiations and monitoring, domestic and international travel by customer employees, contractors or patients to clinical trial sites, including any government-imposed travel restrictions or quarantines that will impact the ability or willingness of patients, employees or contractors to travel to a customer’s research, manufacturing and clinical trial sites or secure visas or entry permissions, any of which could delay or adversely impact the conduct or progress of such customer’s prospective clinical trials; |
• | interruption or delays in the operations of the FDA and comparable foreign regulatory agencies, which may impact review, inspection, clearance and approval timelines; |
• | interruption in global shipping affecting the transport of our products and other supplies used in our customer’s prospective clinical trials due to staffing shortages, production slowdowns or stoppages and disruptions in delivery systems; |
• | limitations on business operations by local, state, or the federal government that could impact our customers’ ability to conduct preclinical or clinical activities; |
• | business disruptions caused by potential workplace, laboratory and office closures and an increased reliance on employees working from home, disruptions to or delays in ongoing laboratory experiments and operations, staffing shortages, travel limitations, or communication or mass transit disruptions, any of which could adversely impact our business operations or delay necessary interactions with local regulators, ethics committees, manufacturing sites and other important agencies and contractors; |
• | business disruptions or cybersecurity risks associated with a substantial portion of our workforce working from home for extended periods of time; and |
• | the impact on the valuation of our marketable securities and other financial assets due to market volatility. |
• | difficulties in integrating new operations, technologies, products, and personnel; |
• | problems maintaining uniform procedures, controls and policies with respect to our financial accounting systems; |
• | lack of synergies or the inability to realize expected synergies and cost-savings; |
• | difficulties in managing geographically dispersed operations, including risks associated with entering foreign markets in which we have no or limited prior experience; |
• | underperformance of any acquired technology, product, or business relative to our expectations and the price we paid; |
• | negative near-term impacts on financial results after an acquisition, including acquisition-related earnings charges; |
• | the potential loss of key employees, customers, and strategic partners of acquired companies; |
• | claims by terminated employees and shareholders of acquired companies or other third parties related to the transaction; |
• | the assumption or incurrence of additional debt obligations or expenses, or use of substantial portions of our cash; |
• | the issuance of equity securities to finance or as consideration for any acquisitions that dilute the ownership of our stockholders; |
• | the issuance of equity securities to finance or as consideration for any acquisitions may not be an option if the price of our common stock is low or volatile which could preclude us from completing any such acquisitions; |
• | any collaboration, strategic alliance and licensing arrangement may require us to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms that are not favorable to us; |
• | diversion of management’s attention and company resources from existing operations of the business; |
• | inconsistencies in standards, controls, procedures, and policies; |
• | the impairment of intangible assets as a result of technological advancements, or worse-than-expected performance of acquired companies; |
• | assumption of, or exposure to, historical liabilities of the acquired business, including unknown contingent or similar liabilities that are difficult to identify or accurately quantify; and |
• | risks associated with acquiring intellectual property, including potential disputes regarding acquired companies’ intellectual property. |
• | make us more vulnerable to adverse changes in general U.S. and worldwide economic, industry and competitive conditions and adverse changes in government regulation; |
• | limit our flexibility in planning for, or reacting to, changes in our business and our industry; |
• | place us at a disadvantage compared to our competitors who have less debt; and |
• | limit our ability to borrow additional amounts for working capital and other general corporate purposes, including to fund possible acquisitions of, or investments in, complementary businesses, products, services and technologies. |
• | fluctuations in foreign currency exchange rates, which may affect the costs incurred in international operations and could harm our results of operations and financial condition; |
• | changes in general economic and political conditions in countries where we operate, particularly as a result of ongoing economic instability within foreign jurisdictions; |
• | the occurrence of a trade war, or other governmental action related to tariffs or trade agreements; |
• | being subject to complex and restrictive employment and labor laws and regulations, as well as union and works council restrictions; |
• | changes in tax laws or rulings in the United States or other foreign jurisdictions that may have an adverse impact on our effective tax rate; |
• | being subject to burdensome foreign laws and regulations, including regulations that may place an increased tax burden on our operations; |
• | being subject to longer payment cycles from customers and experiencing greater difficulties in timely accounts receivable collections; and |
• | required compliance with a variety of foreign laws and regulations, such as data privacy requirements, real estate and property laws, anti-competition regulations, import and trade restrictions, export requirements, U.S. laws such as the Foreign Corrupt Practices Act of 1977 and the U.S. Department of Commerce’s Export Administration Regulations, and other U.S. federal laws and regulations established by the Office of Foreign Assets Control, local laws such as the U.K. Bribery Act of 2010 or other local laws that prohibit corrupt payments to governmental officials or certain payments or remunerations to customers. |
• | preserve our trade secrets and know-how; |
• | operate without infringing the proprietary rights of third parties; |
• | obtain and maintain patent protection for our products and manufacturing processes; and |
• | secure any necessary licenses from others on acceptable terms. |
• | scope of the patent claims; |
• | validity and enforceability of the claims obtained in such patents; and |
• | our willingness and financial ability to enforce and/or defend them. |
• | We may initiate litigation or other proceedings against third parties to seek to enforce our patents against infringement. |
• | If our competitors file patent applications that claim technology also claimed by us, we may participate in interference or opposition proceedings to determine the priority of invention. |
• | If third parties initiate litigation claiming that our processes or products infringe their patent or other intellectual property rights, we will need to defend against such claims. |
ITEM 1B. |
UNRESOLVED STAFF COMMENTS |
ITEM 2. |
PROPERTIES |
Location |
Square Feet |
Principal Use |
Lease Expiration | |||||
Waltham, Massachusetts |
108,135 | (1) |
Corporate headquarters, manufacturing, research and development, marketing and administrative offices | April 1, 2030 | ||||
Rancho Dominguez, California |
68,908 | Manufacturing, research and development, marketing and administrative operations | November 30, 2025 (2) | |||||
Marlborough, Massachusetts |
63,761 | (3) |
Manufacturing operations | November 30, 2028 | ||||
Lund, Sweden |
58,405 | (4) |
Manufacturing and administrative operations | December 31, 2026 | ||||
Bridgewater, New Jersey (5) |
33,669 | Manufacturing and administrative operations | January 14, 2029 |
(1) | In 2019, we expanded our facility in Waltham, Massachusetts by approximately 33,000 square feet to accommodate additional office space and manufacturing. |
(2) | In 2018, we expanded our facility in Rancho Dominguez, California by approximately 15,000 square feet. The lease for the expanded portion of the facility expires on November 30, 2025. |
(3) | In July 2020, the Company entered into a First Amendment to the lease agreement for the Marlborough facility, expanding the space by an additional 66,939 square feet. In December 2020, the Second Amendment to the lease agreement was signed, changing the commencement date from April 1, 2021 to January 1, 2021. |
(4) | In December 2020, the Company signed an extension of the existing lease at its Lund, Sweden facility, which included approximately 13,000 square feet of additional space. The lease commences in April 2021. |
(5) | On May 31, 2019, we acquired C Technologies, an analytics company located in Bridgewater, New Jersey. |
ITEM 3. |
LEGAL PROCEEDINGS |
ITEM 4. |
MINE SAFETY DISCLOSURES |
ITEM 5. |
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Plan Category |
Number of securities to be issued upon exercise of outstanding options, warrants and rights |
Weighted- average exercise price of outstanding options, warrants and rights |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
|||||||||
(a) |
(b) |
(c) |
||||||||||
Equity compensation plans approved by security holders |
1,362,251 | (1) |
$ | 43.88 | (2) |
2,306,943 |
(1) | Includes 696,711 shares of common stock issuable upon the exercise of outstanding options and 665,540 shares of common stock issuable upon the vesting of stock units, which include restricted stock units and performance stock units. No shares of restricted stock are outstanding. |
(2) | Since stock units do not have any exercise price, such units are not included in the weighted average exercise price calculation. |
ITEM 6. |
RESERVED |
ITEM 7. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
For the Years Ended December 31, |
2020 vs. 2019 |
2019 vs. 2018 |
||||||||||||||||||||||||||
2020 |
2019 |
2018 |
$ Change |
% Change |
$ Change |
% Change |
||||||||||||||||||||||
(Amounts in thousands, except for percentage data) |
||||||||||||||||||||||||||||
Revenue: |
||||||||||||||||||||||||||||
Product |
$ | 366,136 | $ | 270,097 | $ | 193,891 | $ | 96,039 | 35.6 | % | $ | 76,206 | 39.3 | % | ||||||||||||||
Royalty and other |
124 | 148 | 141 | (24 | ) | (16.2 | %) | 7 | 5.0 | % | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total revenue |
$ | 366,260 | $ | 270,245 | $ | 194,032 | $ | 96,015 | 35.5 | % | $ | 76,213 | 39.3 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31, |
||||||||||||
2020 (1) |
2019 (2) |
2018 |
||||||||||
(Amounts in thousands) |
||||||||||||
Filtration products |
$ | 174,896 | $ | 119,534 | $ | 90,586 | ||||||
Chromatography products |
73,551 | 64,635 | 45,326 | |||||||||
Process analytics products |
33,346 | 16,405 | — | |||||||||
Proteins products |
80,732 | 65,124 | 54,375 | |||||||||
Other |
3,611 | 4,399 | 3,604 | |||||||||
|
|
|
|
|
|
|||||||
Total product revenue |
$ | 366,136 | $ | 270,097 | $ | 193,891 | ||||||
|
|
|
|
|
|
(1) | 2020 revenue for filtration products includes revenue related to EMT from July 13, 2020, NMS from October 20, 2020 and ARTeSYN from December 3, 2020 through December 31, 2020. |
(2) | 2019 revenue includes process analytics revenue related to C Technologies from June 1, 2019 through December 31, 2019. |
For the Years Ended December 31, |
2020 vs. 2019 |
2019 vs. 2018 |
||||||||||||||||||||||||||
2020 |
2019 |
2018 |
$ Change |
% Change |
$ Change |
% Change |
||||||||||||||||||||||
(Amounts in thousands, except for percentage data) |
||||||||||||||||||||||||||||
Cost of product revenue |
$ | 156,634 | $ | 119,099 | $ | 86,531 | $ | 37,535 | 31.5 | % | $ | 32,568 | 37.6 | % | ||||||||||||||
Research and development |
20,182 | 19,450 | 15,821 | 732 | 3.8 | % | 3,629 | 22.9 | % | |||||||||||||||||||
Selling, general and administrative |
119,621 | 95,613 | 65,692 | 24,008 | 25.1 | % | 29,921 | 45.5 | % | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total costs and operating expenses |
$ | 296,437 | $ | 234,162 | $ | 168,044 | $ | 62,275 | 26.6 | % | $ | 66,118 | 39.3 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31, |
2020 vs. 2019 |
2019 vs. 2018 |
||||||||||||||||||||||||||
2020 |
2019 |
2018 |
$ Change |
% Change |
$ Change |
% Change |
||||||||||||||||||||||
(Amounts in thousands, except for percentage data) |
||||||||||||||||||||||||||||
Investment income |
$ | 1,741 | $ | 5,324 | $ | 1,895 | $ | (3,583 | ) | (67.3 | )% | $ | 3,429 | 180.9 | % | |||||||||||||
Loss on extinguishment of debt |
— | (5,650 | ) | — | 5,650 | (100.0 | )% | (5,650 | ) | 100.0 | % | |||||||||||||||||
Interest expense |
(12,133 | ) | (9,292 | ) | (6,709 | ) | (2,841 | ) | 30.6 | % | (2,583 | ) | 38.5 | % | ||||||||||||||
Other (expenses) income |
(214 | ) | (314 | ) | 262 | 100 | (31.8 | )% | (576 | ) | (219.8 | )% | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total other expenses, net |
$ | (10,606 | ) | $ | (9,932 | ) | $ | (4,552 | ) | $ | (674 | ) | 6.8 | % | $ | (5,380 | ) | 118.2 | % | |||||||||
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31, |
2020 vs. 2019 |
2019 vs. 2018 |
||||||||||||||||||||||||||
2020 |
2019 |
2018 |
$ Change |
% Change |
$ Change |
% Change |
||||||||||||||||||||||
(Amounts in thousands, except for percentage data) |
||||||||||||||||||||||||||||
Income tax (benefit) provision |
$ | (709 | ) | $ | 4,740 | $4,819 | $(5,449) | (115.0 | )% | $ | (79 | ) | (1.6 | )% | ||||||||||||||
Effective tax rate |
(1.2 | )% | 18.1 | % | 22.5 | % |
For the Years Ended December 31, |
||||||||
2020 |
2019 |
|||||||
(Amounts in thousands) |
||||||||
GAAP income from operations |
$ | 69,823 | $ | 36,083 | ||||
Non-GAAP adjustments to income from operations: |
||||||||
Acquisition and integration costs |
11,465 | 12,508 | ||||||
Inventory step-up charges |
734 | 1,483 | ||||||
Intangible amortization |
16,032 | 13,441 | ||||||
|
|
|
|
|||||
Non-GAAP adjusted income from operations |
$ | 98,054 | $ | 63,515 | ||||
|
|
|
|
For the Years Ended December 31, |
||||||||||||||||
2020 |
2019 |
|||||||||||||||
Amount |
Fully Diluted Earnings per Share* |
Amount |
Fully Diluted Earnings per Share* |
|||||||||||||
(Amounts in thousands, except per share data) |
||||||||||||||||
GAAP net income |
$ | 59,926 | $ | 1.11 | $ | 21,411 | $ | 0.44 | ||||||||
Non-GAAP adjustments to net income: |
||||||||||||||||
Acquisition and integration costs |
10,479 | 0.19 | 13,008 | 0.26 | ||||||||||||
Inventory step-up charges |
734 | 0.01 | 1,483 | 0.03 | ||||||||||||
Intangible amortization |
16,032 | 0.30 | 13,441 | 0.27 | ||||||||||||
Loss on extinguishment of debt |
— | — | 5,650 | 0.11 | ||||||||||||
Non-cash interest expense |
10,970 | 0.20 | 7,536 | 0.15 | ||||||||||||
Tax effect of intangible amortization and acquisition costs |
(9,050 | ) | (0.17 | ) | (10,003 | ) | (0.20 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Non-GAAP adjusted net income |
$ | 89,091 | $ | 1.65 | $ | 52,526 | $ | 1.07 | ||||||||
|
|
|
|
|
|
|
|
* | Note that earnings per share amounts may not add due to rounding. |
For the Years Ended December 31, |
||||||||
2020 |
2019 |
|||||||
(Amounts in thousands) |
||||||||
GAAP net income |
$ | 59,926 | $ | 21,411 | ||||
Non-GAAP EBITDA adjustments to net income: |
||||||||
Investment income |
(1,741 | ) | (5,324 | ) | ||||
Interest expense |
12,133 | 9,292 | ||||||
Tax (benefit) provision |
(709 | ) | 4,740 | |||||
Depreciation |
10,888 | 7,317 | ||||||
Intangible amortization |
16,143 | 13,551 | ||||||
|
|
|
|
|||||
EBITDA |
96,640 | 50,987 | ||||||
Other non-GAAP adjustments: |
||||||||
Acquisition and integration costs |
10,479 | 13,008 | ||||||
Loss on extinguishment of debt |
— | 5,650 | ||||||
Inventory step-up charges |
734 | 1,483 | ||||||
|
|
|
|
|||||
Adjusted EBITDA |
$ | 107,853 | $ | 71,128 | ||||
|
|
|
|
For the Years Ended December 31, |
FY20 vs FY19 $ Change |
FY19 vs FY18 $ Change |
||||||||||||||||||
2020 |
2019 |
2018 |
||||||||||||||||||
(Amounts in thousands) |
||||||||||||||||||||
Cash provided by (used in): |
||||||||||||||||||||
Operating activities |
$ | 62,625 | $ | 67,216 | $ | 32,770 | $ | (4,591 | ) | $ | 34,446 | |||||||||
Investing activities |
(201,385 | ) | (205,308 | ) | (14,037 | ) | 3,923 | (191,271 | ) | |||||||||||
Financing activities |
305,916 | 484,867 | 3,407 | (178,951 | ) | 481,460 | ||||||||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
12,729 | (3,190 | ) | (2,077 | ) | 15,919 | (1,113 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net increase in cash, cash equivalents and restricted cash |
$ | 179,885 | $ | 343,585 | $ | 20,063 | $ | (163,700 | ) | $ | 323,522 | |||||||||
|
|
|
|
|
|
|
|
|
|
Total |
Less than one year |
One to three years |
Three to five years |
Over five years |
||||||||||||||||
(Amounts in thousands) |
||||||||||||||||||||
Convertible senior notes (1) |
$ | 287,500 | $ | 287,500 | $ | — | $ | — | $ | — | ||||||||||
Interest payments related to convertible senior notes |
1,078 | 1,078 | — | — | — | |||||||||||||||
Operating lease obligations |
44,840 | 7,196 | 12,252 | 9,865 | 15,527 | |||||||||||||||
Purchase obligations (2) |
55,253 | 55,253 | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 388,671 | $ | 351,027 | $ | 12,252 | $ | 9,865 | $ | 15,527 | ||||||||||
|
|
|
|
|
|
|
|
|
|
(1) | During the fourth quarter of 2020, 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 2021, 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 reclassified the carrying value of the 2019 Notes from long-term liabilities to current liabilities on the Company’s balance sheet as of December 31, 2020. |
(2) | Primarily represents purchase commitments with certain vendors and open purchase orders for the procurement of raw materials for manufacturing. |
• | the expansion of our bioprocessing business; |
• | the ability to sustain sales and profits of our bioprocessing products; |
• | our ability to acquire additional bioprocessing products; |
• | the scope of and progress made in our research and development activities; |
• | the extent of any share repurchase activity; and |
• | the success of any proposed financing efforts. |
ITEM 7A. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 8. |
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
ITEM 9. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. |
ITEM 9A. |
CONTROLS AND PROCEDURES |
• | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
• | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and |
• | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
ITEM 9B. |
OTHER INFORMATION |
ITEM 15. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
Page |
||||
69 | ||||
71 | ||||
72 | ||||
73 | ||||
74 | ||||
75 |
# | Confidential treatment obtained as to certain portions. |
* | Management contract or compensatory plan or arrangement. |
+ | Filed electronically herewith. |
ITEM 16. |
10-K SUMMARY |
REPLIGEN CORPORATION | ||||||
Date: February 24, 2021 | By: | /S/ TONY J. HUNT | ||||
Tony J. Hunt President and Chief Executive Officer |
Signature |
Title |
Date | ||
/S/ TONY J. HUNT Tony J. Hunt |
President, Chief Executive Officer and Director (Principal executive officer) |
February 24, 2021 | ||
/S/ JON K. SNODGRES Jon K. Snodgres |
Chief Financial Officer (Principal financial and accounting officer) |
February 24, 2021 | ||
/S/ KAREN DAWES Karen Dawes |
Chairperson of the Board |
February 24, 2021 | ||
/S/ NICOLAS M. BARTHELEMY Nicolas M. Barthelemy |
Director |
February 24, 2021 | ||
/S/ CARRIE EGLINTON MANNER Carrie Eglinton Manner |
Director |
February 24, 2021 | ||
/S/ ROHIN MHATRE Rohin Mhatre |
Director |
February 24, 2021 | ||
/S/ GLENN P. MUIR Glenn P. Muir |
Director |
February 24, 2021 | ||
/S/ THOMAS F. RYAN, JR. Thomas F. Ryan, Jr. |
Director |
February 24, 2021 |
Page |
||||
69 | ||||
71 | ||||
72 | ||||
73 | ||||
74 | ||||
75 |
Accounting for acquisitions | ||
Description of the Matter |
As disclosed in Note 3 to the consolidated financial statements, during 2020, the Company completed three acquisitions for total aggregate consideration of approximately $244.5 million, net of cash acquired. The most significant of these was the acquisition of all outstanding equity of ARTeSYN Biosolutions Holdings Ireland Limited for consideration of approximately $201.0 million, net of cash acquired. The transactions were accounted for as business combinations. Auditing the Company’s accounting for its acquisitions was complex due to the significant estimation uncertainty in the Company’s determination of the fair value of identified intangible assets of $90.2 million, which principally consisted of customer relationships and developed technology. The significant estimation uncertainty was primarily due to the sensitivity of the respective fair values to underlying assumptions about the future performance of the acquired business. The Company used a discounted cash flow model to measure the customer relationship and developed technology intangible assets. The significant assumptions used to estimate the value of the intangible assets included discount rates and certain assumptions that form the basis of the forecasted results, including revenue growth rates. These significant assumptions are forward looking and could be affected by future economic and market conditions. | |
How We Addressed the Matter in Our Audit |
We tested the Company’s controls over its accounting for acquisitions. Our tests included controls over the process supporting the recognition and measurement of consideration transferred, customer relationship, and developed technology intangible assets. We also tested management’s review of assumptions used in the valuation models. | |
For each of the Company’s acquisitions, we read the purchase agreements, evaluated the significant assumptions and methods used in developing the fair value estimates, and tested the recognition of (1) the tangible assets acquired and liabilities assumed at fair value; (2) the identifiable intangible assets acquired at fair value; and (3) goodwill measured as a residual. | ||
To test the estimated fair value of the customer relationship and developed technology intangible assets, we performed audit procedures that included, among others, evaluating the Company’s selection of the valuation methodology, evaluating the methods and significant assumptions used by the Company, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. This includes comparing the significant assumptions to current industry, market and economic trends, to the assumptions used to value similar assets in other acquisitions, to the historical results of the acquired business and to other guidelines used by companies within the same industry. We involved our valuation professionals to assist in our evaluation of the methodology used by the Company and significant assumptions included in the fair value estimates. |
December 31, 2020 |
December 31, 2019 |
|||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | $ | ||||||
Restricted cash |
— | |||||||
Accounts receivable, net of reserves of $ |
||||||||
Royalties and other receivables |
||||||||
Unbilled receivables |
— | |||||||
Inventories, net |
||||||||
Prepaid expenses and other current assets |
||||||||
Total current assets |
||||||||
Property, plant and equipment, net |
||||||||
Intangible assets, net |
||||||||
Goodwill |
||||||||
Deferred tax assets |
||||||||
Operating lease right of use assets |
||||||||
Other assets |
||||||||
Total assets |
$ | $ | ||||||
Liabilities and Stockholders’ Equity |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | $ | ||||||
Operating lease liability |
||||||||
Accrued liabilities |
||||||||
Convertible senior notes, current portion, net |
— | |||||||
Total current liabilities |
||||||||
Convertible senior notes, net |
— | |||||||
Deferred tax liabilities |
||||||||
Operating lease liability, long-term |
||||||||
Other liabilities, long-term |
||||||||
Total liabilities |
||||||||
Commitments and contingencies (Note 11) |
||||||||
Stockholders’ equity: |
||||||||
Preferred stock, $ |
||||||||
Common stock, $ |
||||||||
Additional paid-in capital |
||||||||
Accumulated other comprehensive income (loss) |
( |
) | ||||||
Accumulated earnings |
||||||||
Total stockholders’ equity |
||||||||
Total liabilities and stockholders’ equity |
$ | $ | ||||||
For the Years Ended December 31, |
||||||||||||
2020 |
2019 |
2018 |
||||||||||
Revenue: |
||||||||||||
Products |
$ | $ | $ | |||||||||
Royalty and other revenue |
||||||||||||
|
|
|
|
|
|
|||||||
Total revenue |
||||||||||||
|
|
|
|
|
|
|||||||
Costs and operating expenses: |
||||||||||||
Cost of product revenue |
||||||||||||
Research and development |
||||||||||||
Selling, general and administrative |
||||||||||||
|
|
|
|
|
|
|||||||
Total costs and operating expenses |
||||||||||||
|
|
|
|
|
|
|||||||
Income from operations |
||||||||||||
|
|
|
|
|
|
|||||||
Other (expenses) income: |
||||||||||||
Investment income |
||||||||||||
Loss on extinguishment of debt |
— | ( |
) | — | ||||||||
Interest expense |
( |
) | ( |
) | ( |
) | ||||||
Other (expenses) income |
( |
) | ( |
) | ||||||||
|
|
|
|
|
|
|||||||
Other expenses, net |
( |
) | ( |
) | ( |
) | ||||||
|
|
|
|
|
|
|||||||
Income before income taxes |
||||||||||||
Income tax (benefit) provision |
( |
) | ||||||||||
|
|
|
|
|
|
|||||||
Net income |
$ | $ | $ | |||||||||
|
|
|
|
|
|
|||||||
Earnings per share: |
||||||||||||
Basic |
$ | $ | $ | |||||||||
|
|
|
|
|
|
|||||||
Diluted |
$ | $ | $ | |||||||||
|
|
|
|
|
|
|||||||
Weighted average common shares outstanding: |
||||||||||||
Basic |
||||||||||||
|
|
|
|
|
|
|||||||
Diluted |
||||||||||||
|
|
|
|
|
|
|||||||
Net income |
$ | $ | $ | |||||||||
Other comprehensive income (loss): |
||||||||||||
Foreign currency translation adjustment |
( |
) | ( |
) | ||||||||
|
|
|
|
|
|
|||||||
Comprehensive income |
$ | $ | $ | |||||||||
|
|
|
|
|
|
Common Stock |
Additional Paid-In Capital |
Accumulated Other Comprehensive Income (Loss) |
Accumulated Earnings/ (Deficit) |
Total Stockholders’ Equity |
||||||||||||||||||||
Number of Shares(#) |
Par Value |
|||||||||||||||||||||||
Balance at December 31, 2017 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
Net income |
— | — | — | — | ||||||||||||||||||||
Issuance of common stock for debt conversion |
— | — | ||||||||||||||||||||||
Exercise of stock options and vesting of stock units |
— | — | ||||||||||||||||||||||
Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||
Cumulative effect of accounting changes |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
Translation adjustment |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
Balance at December 31, 2018 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
Net income |
— | — | — | — | ||||||||||||||||||||
Issuance of common stock for debt conversion |
— | — | ||||||||||||||||||||||
Reduction of equity component from debt conversion, net of tax |
— | — | ( |
) | — | — | ( |
) | ||||||||||||||||
Exercise of stock options and vesting of stock units |
— | — | ||||||||||||||||||||||
Issuance of common stock pursuant to the acquisition of C Technologies, Inc. |
— | — | ||||||||||||||||||||||
Tax withholding on vesting of restricted stock |
( |
) | ( |
) | ( |
) | — | — | ( |
) | ||||||||||||||
Equity component of |
— | — | — | — | ||||||||||||||||||||
Proceeds from issuance of common stock, net of issuance costs of $ |
— | — | ||||||||||||||||||||||
Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||
Translation adjustment |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
Balance at December 31, 2019 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
Net income |
— | — | — | — | ||||||||||||||||||||
Exercise of stock options and vesting of stock units |
— | — | ||||||||||||||||||||||
Issuance of common stock pursuant to the acquisition of ARTeSYN Biosolutions |
— | — | ||||||||||||||||||||||
Proceeds from issuance of common stock, net of issuance costs of $ |
— | — | ||||||||||||||||||||||
Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||
Translation adjustment |
— | — | — | — | ||||||||||||||||||||
Balance at December 31, 2020 |
$ | $ | $ | $ | $ | |||||||||||||||||||
For the Years Ended December 31, |
||||||||||||
2020 |
2019 |
2018 |
||||||||||
Cash flows from operating activities: |
||||||||||||
Net income |
$ | $ | $ | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||||
Depreciation and amortization |
||||||||||||
Amortization of debt discount and issuance costs |
||||||||||||
Stock-based compensation expense |
||||||||||||
Deferred income taxes, net |
( |
) | ( |
) | ||||||||
Loss on extinguishment of debt |
— | — | ||||||||||
Other |
( |
) | ||||||||||
Changes in operating assets and liabilities, excluding impact of acquisitions: |
||||||||||||
Accounts receivable |
( |
) | ( |
) | ( |
) | ||||||
Royalties and other receivables |
( |
) | ||||||||||
Unbilled receivables |
( |
) | ||||||||||
Inventories |
( |
) | ( |
) | ( |
) | ||||||
Prepaid expenses and other assets |
( |
) | ( |
) | ( |
) | ||||||
Operating lease right of use assets |
( |
) | — | |||||||||
Other assets |
( |
) | ( |
) | — | |||||||
Accounts payable |
||||||||||||
Accrued expenses |
( |
) | ||||||||||
Operating lease liability |
( |
) | — | |||||||||
Long-term liabilities |
( |
) | ( |
) | ||||||||
|
|
|
|
|
|
|||||||
Total cash provided by operating activities |
||||||||||||
|
|
|
|
|
|
|||||||
Cash flows from investing activities: |
||||||||||||
Additions to capitalized software costs |
( |
) | ( |
) | ( |
) | ||||||
Developed technology intangible asset payment |
— | — | ( |
) | ||||||||
Acquisitions, net of cash acquired |
( |
) | ( |
) | — | |||||||
Purchases of property, plant and equipment |
( |
) | ( |
) | ( |
) | ||||||
|
|
|
|
|
|
|||||||
Total cash used in investing activities |
( |
) | ( |
) | ( |
) | ||||||
|
|
|
|
|
|
|||||||
Cash flows from financing activities: |
||||||||||||
Proceeds from issuance of senior convertible notes, net of issuance costs |
— | — | ||||||||||
Proceeds from issuance of common stock, net of issuance costs |
— | |||||||||||
Exercise of stock options |
||||||||||||
Repayment of senior convertible notes |
— | ( |
) | ( |
) | |||||||
Payment of tax withholding obligation on vesting of restricted stock |
( |
) | ( |
) | — | |||||||
|
|
|
|
|
|
|||||||
Total cash provided by financing activities |
||||||||||||
|
|
|
|
|
|
|||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
( |
) | ( |
) | ||||||||
|
|
|
|
|
|
|||||||
Net increase in cash, cash equivalents and restricted cash |
||||||||||||
|
|
|
|
|
|
|||||||
Cash, cash equivalents and restricted cash, beginning of period |
||||||||||||
|
|
|
|
|
|
|||||||
Cash, cash equivalents and restricted cash, end of period |
$ | $ | $ | |||||||||
|
|
|
|
|
|
|||||||
Supplemental disclosure of cash flow information: |
||||||||||||
Income taxes paid |
$ | $ | $ | |||||||||
Interest paid |
$ | $ | $ | |||||||||
Supplemental disclosure of non-cash investing and financing activities: |
||||||||||||
Assets acquired under operating leases |
$ | $ | $ | — | ||||||||
|
|
|
|
|
|
|||||||
Fair value of |
$ | $ | — | $ | — | |||||||
|
|
|
|
|
|
|||||||
Fair value of |
$ | — | $ | $ | — | |||||||
|
|
|
|
|
|
|||||||
Fair value of common stock issued for acquisition of C Technologies, Inc. |
$ | — | $ | $ | — | |||||||
|
|
|
|
|
|
|||||||
Non-cash effect of adoption of ASU 2016-16 |
$ | — | $ | — | $ | |||||||
|
|
|
|
|
|
|||||||
Property, plant and equipment related to lease incentives |
$ | — | $ | — | $ | |||||||
|
|
|
|
|
|
1. |
Organization and Nature of Business |
2. |
Summary of Significant Accounting Policies |
For the Years Ended December 31, |
||||||||||||
2020 |
2019 |
2018 |
||||||||||
(Amounts in thousands) |
||||||||||||
Cash and cash equivalents |
$ | $ | $ | |||||||||
Restricted cash |
— | — | ||||||||||
Total cash, cash equivalents, and restricted cash |
$ | $ | $ | |||||||||
Level 1 – |
Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. | |
Level 2 – |
Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly. | |
Level 3 – |
Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
Classification |
Estimated Useful Life | |
Buildings |
||
Leasehold improvements |
||
Equipment |
||
Furniture, fixtures and office equipment |
||
Computer hardware and software |
For the Years Ended December 31, |
||||||||||||
2020 |
2019 |
2018 |
||||||||||
(Amounts in thousands, except per share data) |
||||||||||||
Net income |
$ | $ | $ | |||||||||
|
|
|
|
|
|
|||||||
Weighted average shares used in computing net income per share - basic |
||||||||||||
Effect of dilutive shares: |
||||||||||||
Options and stock units |
||||||||||||
Convertible senior notes |
— | |||||||||||
|
|
|
|
|
|
|||||||
Dilutive potential common shares |
||||||||||||
|
|
|
|
|
|
|||||||
Weighted average shares used in computing net income per share - diluted |
||||||||||||
|
|
|
|
|
|
|||||||
Earnings per share: |
||||||||||||
Basic |
$ | $ | $ | |||||||||
|
|
|
|
|
|
|||||||
Diluted |
$ | $ | $ | |||||||||
|
|
|
|
|
|
For the Years Ended December 31, |
||||||||||||
2020 (1) |
2019 (2) |
2018 |
||||||||||
(Amounts in thousands) |
||||||||||||
Filtration products |
$ | $ | $ | |||||||||
Chromatography products |
||||||||||||
Process analytics products |
— | |||||||||||
Proteins products |
||||||||||||
Other |
||||||||||||
|
|
|
|
|
|
|||||||
Total product revenue |
$ | $ | $ | |||||||||
|
|
|
|
|
|
(1) | 2020 revenue for filtration products includes revenue related to EMT from July 13, 2020, NMS from October 20, 2020 and ARTeSYN from December 3, 2020. |
(2) | 2019 revenue for process analytics products includes revenue related to C Technologies from May 31, 2019 through December 31, 2019. |
For the Years Ended December 31, |
||||||||||||
2020 |
2019 |
2018 |
||||||||||
Revenue by customers’ geographic locations: |
||||||||||||
North America |
% | % | % | |||||||||
Europe |
% | % | % | |||||||||
APAC/Other |
% | % | % | |||||||||
|
|
|
|
|
|
|||||||
Total revenue |
% | % | % | |||||||||
|
|
|
|
|
|
December 31, |
||||||||
2020 |
2019 |
|||||||
(Amounts in thousands) |
||||||||
Total assets by geographic locations: |
||||||||
North America |
$ | $ | ||||||
Europe |
||||||||
APAC |
||||||||
|
|
|
|
|||||
Total assets by geographic location |
$ | $ | ||||||
|
|
|
|
December 31, |
||||||||
2020 |
2019 |
|||||||
(Amounts in thousands) |
||||||||
Long-lived assets by geographic locations: |
||||||||
North America |
$ | $ | ||||||
Europe |
||||||||
APAC |
||||||||
Total long-lived assets by geographic location |
$ | $ | ||||||
For the Years Ended December 31, |
||||||||||||
2020 |
2019 |
2018 |
||||||||||
MilliporeSigma |
% | % | % | |||||||||
Cytiva (formerly GE Healthcare) |
N/A | % | % |
3. |
Acquisitions |
Cash consideration |
$ | |||
Equity consideration |
||||
Contingent consideration |
||||
Settlement of preexisting liabilities |
||||
Fair value of net assets acquired |
$ |
|||
Cash and cash equivalents |
$ | |||
Accounts receivable |
||||
Inventory |
||||
Prepaid expenses and other current assets |
||||
Property and equipment |
||||
Operating lease right of use asset |
||||
Other noncurrent assets |
||||
Customer relationships |
||||
Developed technology |
||||
Trademark and tradename |
||||
Non-competition agreements |
||||
Goodwill |
||||
Accounts payable |
( |
) | ||
Accrued liabilities |
( |
) | ||
Deferred revenue |
( |
) | ||
Deferred tax liabilities, net |
( |
) | ||
Notes payable |
( |
) | ||
Operating lease liability |
( |
) | ||
Operating lease liability, long-term |
( |
) | ||
Fair value of net assets acquired |
$ |
|||
Useful life |
Fair Value |
|||||||
(Amounts in thousands) |
||||||||
Customer relationships |
$ | |||||||
Developed technology |
||||||||
Trademark and tradename |
||||||||
Non-competition agreements |
||||||||
$ | ||||||||
Cash and cash equivalents |
$ | |||
Accounts receivable |
||||
Inventory |
||||
Prepaid expenses and other current assets |
||||
Property and equipment |
||||
Operating lease right of use asset |
||||
Customer relationships |
||||
Developed technology |
||||
Trademark and tradename |
||||
Non-competition agreements |
||||
Goodwill |
||||
Deferred tax assets |
||||
Accounts payable |
( |
) | ||
Accrued liabilities |
( |
) | ||
Operating lease liability |
( |
) | ||
Operating lease liability, long-term |
( |
) | ||
|
|
|||
Fair value of net assets acquired |
$ |
|||
|
|
Useful life |
Fair Value |
|||||||
(Amounts in thousands) |
||||||||
Customer relationships |
$ | |||||||
Developed technology |
||||||||
Trademark and tradename |
||||||||
Non-competition agreements |
||||||||
|
|
|||||||
$ | ||||||||
|
|
Cash and cash equivalents |
$ | |||
Accounts receivable |
||||
Inventory |
||||
Prepaid expenses and other current assets |
||||
Property and equipment |
||||
Operating lease right of use assets |
||||
Customer relationships |
||||
Developed technology |
||||
Trademark and tradename |
||||
Non-compete agreements |
||||
Goodwill |
||||
Accounts payable |
( |
) | ||
Accrued liabilities |
( |
) | ||
Operating lease liability |
( |
) | ||
Operating lease liability, long-term |
( |
) | ||
|
|
|||
Fair value of net assets acquired |
$ |
|||
|
|
Useful life |
Fair Value |
|||||||
(Amounts in thousands) |
||||||||
Customer relationships |
$ | |||||||
Developed technology |
||||||||
Trademark and tradename |
||||||||
Non-competition agreements |
||||||||
|
|
|||||||
$ | ||||||||
|
|
Cash and cash equivalents |
$ | |||
Restricted cash |
||||
Accounts receivable |
||||
Inventory |
||||
Prepaid expenses and other current assets |
||||
Fixed assets |
||||
Operating lease right of use asset |
||||
Customer relationships |
||||
Developed technology |
||||
Trademark and tradename |
||||
Non-competition agreements |
||||
Goodwill |
||||
Deferred taxes |
||||
Accounts payable |
( |
) | ||
Accrued liabilities |
( |
) | ||
Accrued bonus |
( |
) | ||
Deferred revenue |
( |
) | ||
Operating lease liability |
( |
) | ||
Operating lease liability, long-term |
( |
) | ||
|
|
|||
Fair value of net assets acquired |
$ |
|||
|
|
December 31, |
||||||||
2019 |
2018 |
|||||||
Total revenue |
$ | $ | ||||||
Net income |
$ | $ | ||||||
Earnings per share: |
||||||||
Basic |
$ | $ | ||||||
|
|
|
|
|||||
Diluted |
$ | $ | ||||||
|
|
|
|
4. |
Leases |
As of December 31, 2020 |
Amount |
|||
2021 |
$ | |||
2022 |
||||
2023 |
||||
2024 |
||||
2025 |
||||
2026 and thereafter |
||||
|
|
|||
Total future minimum lease payments |
||||
Less: amount of lease payment representing interest |
||||
|
|
|||
Total operating lease liabilities |
$ | |||
|
|
December 31, |
||||||||
2020 |
2019 |
|||||||
Operating lease liability |
$ | $ | ||||||
Operating lease liability, long-term |
||||||||
|
|
|
|
|||||
Minimum operating lease payments |
$ | $ | ||||||
|
|
|
|
For the Years Ended December 31, |
||||||||
Lease Cost |
2020 |
2019 |
||||||
(Amounts in thousands) |
||||||||
Operating lease cost |
$ | $ | ||||||
Variable operating lease cost |
||||||||
|
|
|
|
|||||
Lease cost |
$ | $ | ||||||
|
|
|
|
For the Years Ended December 31, |
||||||||
2020 |
2019 |
|||||||
Operating lease cost |
$ | ( |
) | $ | ( |
) |
Weighted average remaining lease term (years) |
||||
Weighted average discount rate |
% |
5. |
Revenue Recognition |
For the Years Ended December 31, |
||||||||||||
2020 |
2019 |
2018 |
||||||||||
(Amounts in thousands) |
||||||||||||
Product revenue |
$ | $ | $ | |||||||||
Royalty and other income |
||||||||||||
Total revenue |
$ | $ | $ | |||||||||
For the Years Ended December 31, |
||||||||||||
2020 |
2019 |
2018 |
||||||||||
MilliporeSigma |
$ | $ | $ | |||||||||
Cytiva (formerly GE Healthcare) |
N/A | $ | $ |
2020 |
2019 |
|||||||
Balances from contracts with customers only: |
||||||||
Accounts receivable |
$ | $ | ||||||
Deferred revenue (included in accrued liabilities in the consolidated balance sheets) |
$ | $ | ||||||
Revenue recognized during years presented relating to: |
||||||||
The beginning deferred revenue balance |
$ | $ | ||||||
Changes in pricing related to products or services satisfied in previous periods |
— | — |
6. |
Credit Losses |
2020 |
||||
Balance at January 1, 2020 |
$ | ( |
) | |
Current period change for expected credit losses |
( |
) | ||
|
|
|||
Balance at March 31, 2020 |
$ | ( |
) | |
Current period change for write-offs |
||||
Current period change for expected credit losses |
||||
|
|
|||
Balance at June 30, 2020 |
$ | ( |
) | |
Current period change for expected credit losses |
( |
) | ||
|
|
|||
Balance at September 30, 2020 |
$ | ( |
) | |
Current period change for write-offs |
||||
Current period change for expected credit losses |
( |
) | ||
|
|
|||
Balance at December 31, 2020 |
$ | ( |
) | |
|
|
7. |
Goodwill and Intangible Assets |
Balance as of December 31, 2018 |
$ | |||
Acquisition of C Technologies |
||||
Cumulative translation adjustment |
( |
) | ||
|
|
|||
Balance as of December 31, 2019 |
$ | |||
Measurement period adjustment - C Technologies |
||||
Acquisition of EMT |
||||
Acquisition of NMS |
||||
Acquisition of ARTeSYN |
||||
Cumulative translation adjustment |
||||
|
|
|||
Balance as of December 31, 2020 |
$ | |||
|
|
December 31, 2020 |
||||||||||||||||
Gross Carrying Value |
Accumulated Amortization |
Net Carrying Value |
Weighted Average Useful Life (in years) |
|||||||||||||
(Amounts in thousands) |
||||||||||||||||
Finite-lived intangible assets: |
||||||||||||||||
Technology - developed |
$ | $ | ( |
) | $ | |||||||||||
Patents |
( |
) | — | |||||||||||||
Customer relationships |
( |
) | ||||||||||||||
Trademarks |
( |
) | ||||||||||||||
Other intangibles |
( |
) | ||||||||||||||
|
|
|
|
|
|
|||||||||||
Total finite-lived intangible assets |
( |
) | ||||||||||||||
Indefinite-lived intangible asset: |
||||||||||||||||
Trademarks |
— | — | ||||||||||||||
|
|
|
|
|
|
|||||||||||
Total intangible assets |
$ | $ | ( |
) | $ | |||||||||||
|
|
|
|
|
|
December 31, 2019 |
||||||||||||||||
Gross Carrying Value |
Accumulated Amortization |
Net Carrying Value |
Weighted Average Useful Life (in years) |
|||||||||||||
(Amounts in thousands) |
||||||||||||||||
Finite-lived intangible assets: |
||||||||||||||||
Technology - developed |
$ | $ | ( |
) | $ | |||||||||||
Patents |
( |
) | — | |||||||||||||
Customer relationships |
( |
) | ||||||||||||||
Trademarks |
( |
) | ||||||||||||||
Other intangibles |
( |
) | ||||||||||||||
|
|
|
|
|
|
|||||||||||
Total finite-lived intangible assets |
( |
) | ||||||||||||||
Indefinite-lived intangible asset: |
||||||||||||||||
Trademarks |
— | — | ||||||||||||||
|
|
|
|
|
|
|||||||||||
Total intangible assets |
$ | $ | ( |
) | $ | |||||||||||
|
|
|
|
|
|
For the Years Ended December 31, |
Estimated Amortization Expense |
|||
2021 |
$ | |||
2022 |
||||
2023 |
||||
2024 |
||||
2025 |
||||
2026 and thereafter |
||||
|
|
|||
Total |
$ | |||
|
|
8. |
Consolidated Balance Sheet Detail |
December 31, |
||||||||
2020 |
2019 |
|||||||
(Amounts in thousands) |
||||||||
Raw materials |
$ | $ | ||||||
Work-in-process |
||||||||
Finished products |
||||||||
|
|
|
|
|||||
Total inventories, net |
$ | $ | ||||||
|
|
|
|
December 31, |
||||||||
2020 |
2019 |
|||||||
(Amounts in thousands) |
||||||||
Equipment maintenance and services |
$ | $ | ||||||
Prepaid income taxes |
||||||||
Prepaid insurance |
||||||||
Other |
||||||||
|
|
|
|
|||||
Total prepaid expenses and other current assets |
$ | $ | ||||||
|
|
|
|
December 31, |
||||||||
2020 |
2019 |
|||||||
(Amounts in thousands) |
||||||||
Land |
$ | $ | ||||||
Buildings |
||||||||
Leasehold improvements |
||||||||
Equipment |
||||||||
Furniture, fixtures and office equipment |
||||||||
Computer hardware and software |
||||||||
Construction in progress |
||||||||
Other |
||||||||
|
|
|
|
|||||
Total property, plant and equipment |
||||||||
Less - Accumulated depreciation |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Total property, plant and equipment, net |
$ | $ | ||||||
|
|
|
|
December 31, |
||||||||
2020 |
2019 |
|||||||
(Amounts in thousands) |
||||||||
Employee compensation |
$ | $ | ||||||
Income taxes payable |
||||||||
Royalty and license fees |
||||||||
Warranties |
||||||||
Professional fees |
||||||||
Deferred revenue |
||||||||
Other |
||||||||
|
|
|
|
|||||
Total accrued liabilities |
$ | $ | ||||||
|
|
|
|
9. |
Income Taxes |
For the Years Ended December 31, |
||||||||||||
2020 |
2019 |
2018 |
||||||||||
(Amounts in thousands) |
||||||||||||
Domestic |
$ | $ | ( |
) | $ | ( |
) | |||||
Foreign |
||||||||||||
|
|
|
|
|
|
|||||||
Income before income taxes |
$ | $ | $ | |||||||||
|
|
|
|
|
|
For the Years Ended December 31, |
||||||||||||
2020 |
2019 |
2018 |
||||||||||
(Amounts in thousands) |
||||||||||||
Components of the income tax (benefit) provision: |
||||||||||||
Current |
$ | $ | $ | |||||||||
Deferred |
( |
) | ( |
) | ||||||||
Equity |
— | — | ||||||||||
Total |
$ | ( |
) | $ | $ | |||||||
Jurisdictional components of the income tax (benefit) provision: |
||||||||||||
Federal |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
State |
( |
) | ( |
) | ||||||||
Foreign |
||||||||||||
Total |
$ | ( |
) | $ | $ | |||||||
December 31, |
||||||||
2020 |
2019 |
|||||||
(Amounts in thousands) |
||||||||
Deferred tax assets: |
||||||||
Temporary timing differences: |
||||||||
Stock-based compensation expense |
$ | $ | ||||||
Operating leases |
||||||||
Accrued bonus |
||||||||
Other |
||||||||
Total temporary timing differences |
||||||||
Net operating loss carryforwards |
||||||||
Tax business credits carryforwards |
||||||||
Total deferred tax assets |
||||||||
Less: valuation allowance |
( |
) | ( |
) | ||||
Net deferred tax assets |
||||||||
Deferred tax liabilities: |
||||||||
Goodwill |
( |
) | ( |
) | ||||
Fixed assets |
( |
) | ( |
) | ||||
Acquired intangible assets |
( |
) | ( |
) | ||||
Operating lease right of use assets |
( |
) | ( |
) | ||||
Conversion option on convertible notes |
( |
) | ( |
) | ||||
Total deferred tax liabilities |
( |
) | ( |
) | ||||
Total net deferred tax liabilities |
$ | ( |
) | $ | ( |
) | ||
For the Years Ended December 31, |
||||||||||||||||||||||||
2020 |
2019 |
2018 |
||||||||||||||||||||||
Amount |
% |
Amount |
% |
Amount |
% |
|||||||||||||||||||
(Amounts in thousands, except percentages) |
||||||||||||||||||||||||
Income before income taxes |
$ | $ | $ | |||||||||||||||||||||
Expected tax at statutory rate |
% | % | % | |||||||||||||||||||||
Adjustments due to: |
||||||||||||||||||||||||
Difference between U.S. and foreign tax |
% | % | % | |||||||||||||||||||||
State income and franchise tax |
% | ( |
) | ( |
%) | % | ||||||||||||||||||
Business tax credits |
( |
) | ( |
%) | ( |
) | ( |
%) | ( |
) | ( |
%) | ||||||||||||
Permanent differences: |
||||||||||||||||||||||||
Stock-based compensation expense |
( |
) | ( |
%) | ( |
) | ( |
%) | ( |
) | ( |
%) | ||||||||||||
U.S. taxation of foreign earnings |
% | % | % | |||||||||||||||||||||
Executive compensation |
% | % | % | |||||||||||||||||||||
Other |
% | % | % | |||||||||||||||||||||
Change in U.S. federal tax rates |
( |
) | ( |
%) | — | % | — | % | ||||||||||||||||
Change in U.S. state tax rates |
( |
) | ( |
%) | — | % | % | |||||||||||||||||
Change in Netherlands tax rate |
% | ( |
) | ( |
%) | ( |
) | ( |
%) | |||||||||||||||
Transition tax |
— | % | — | % | ( |
) | ( |
%) | ||||||||||||||||
Uncertain tax provisions |
( |
) | ( |
%) | % | % | ||||||||||||||||||
Change in valuation allowance |
( |
) | ( |
%) | ( |
) | ( |
%) | % | |||||||||||||||
Return to provision adjustments |
( |
) | ( |
%) | ( |
) | ( |
%) | % | |||||||||||||||
Other |
% | ( |
) | ( |
%) | ( |
) | ( |
%) | |||||||||||||||
Income tax provision |
$ | ( |
) | ( |
%) | $ | % | $ | % | |||||||||||||||
Jurisdiction |
Fiscal Years Subject to Examination |
|||
United States - federal and state |
||||
Sweden |
For the Years Ended December 31, |
||||||||
2020 |
2019 |
|||||||
(Amounts in thousands) |
||||||||
Balance of gross unrecognized tax benefits, beginning of period |
$ | $ | ||||||
Gross amounts of increases in unrecognized tax benefits as a result of tax positions taken in the current period |
||||||||
Gross amounts of decreases in unrecognized tax benefits as a result of tax positions taken in the prior period |
( |
) | ( |
) | ||||
Gross amounts of decrease due to release |
( |
) | ( |
) | ||||
Balance of gross unrecognized tax benefits, end of period |
$ | $ | ||||||
10. |
Stockholders’ Equity |
For the Years Ended December 31, |
||||||||||||
2020 |
2019 |
2018 |
||||||||||
(Amounts in thousands) |
||||||||||||
Cost of product revenue |
$ | $ | $ | |||||||||
Research and development |
||||||||||||
Selling, general and administrative |
||||||||||||
Total stock-based compensation |
$ | $ | $ | |||||||||
For the Years Ended December 31, | ||||||
2020 |
2019 |
2018 | ||||
Expected term (in years) |
||||||
Expected volatility (range) |
||||||
Risk-free interest rate |
||||||
Expected dividend yield |
Shares |
Weighted average exercise price |
Weighted- Average Remaining Contractual Term (in Years) |
Aggregate Intrinsic Value (in Thousands) |
|||||||||||||
Options outstanding at December 31, 2019 |
$ | |||||||||||||||
Granted |
$ | |||||||||||||||
Exercised |
( |
) | $ | |||||||||||||
Forfeited/expired/cancelled |
— | $ | — | |||||||||||||
|
|
|||||||||||||||
Options outstanding at December 31, 2020 |
$ | $ | ||||||||||||||
|
|
|||||||||||||||
Options exercisable at December 31, 2020 |
$ | $ | ||||||||||||||
|
|
|||||||||||||||
Vested and expected to vest at December 31, 2020 (1) |
$ | |||||||||||||||
|
|
(1) | Represents the number of vested options as of December 31, 2020 plus the number of unvested options expected to vest as of December 31, 2020 based on the unvested outstanding options at December 31, 2020 adjusted for estimated forfeiture rates of non-executive level employees and |
Shares |
Weighted- Average Remaining Contractual Term (in Years) |
Aggregate Intrinsic Value (in Thousands) |
||||||||||
Unvested at December 31, 2019 |
||||||||||||
Awarded |
||||||||||||
Vested |
( |
) | ||||||||||
Forfeited/expired/cancelled |
( |
) | ||||||||||
|
|
|||||||||||
Unvested at December 31, 2020 |
$ | |||||||||||
|
|
|||||||||||
Vested and expected to vest at December 31, 2020 (1) |
$ | |||||||||||
|
|
(1) | Represents the number of vested stock units as of December 31, 2020 plus the number of unvested stock units expected to vest as of December 31, 2020 based on the unvested outstanding stock units at December 31, 2020 adjusted for estimated forfeiture rates of non-executive level employees and |
11. |
Commitments and Contingencies |
12. |
Convertible Senior Notes |
December 31, |
||||||||
2020 |
2019 |
|||||||
(Amounts in thousands) |
||||||||
0.375% convertible senior notes due 2024: |
||||||||
Convertible senior notes, current portion: |
||||||||
Principal amount |
$ | $ | — | |||||
Unamortized debt discount |
( |
) | — | |||||
Unamortized debt issuance costs |
( |
) | — | |||||
|
|
|
|
|||||
Total convertible senior notes, current portion |
— | |||||||
Convertible senior notes: |
||||||||
Principal amount |
— | |||||||
Unamortized debt discount |
— | ( |
) | |||||
Unamortized debt issuance costs |
— | ( |
) | |||||
|
|
|
|
|||||
Total convertible senior notes |
$ | $ | ||||||
|
|
|
|
13. |
Accumulated Other Comprehensive Income (Loss) |
Foreign Currency Translation Adjustment |
||||
Balance as of December 31, 2018 |
$ | ( |
) | |
Other comprehensive loss |
( |
) | ||
|
|
|||
Balance as of December 31, 2019 |
( |
) | ||
Other comprehensive income |
||||
|
|
|||
Balance as of December 31, 2020 |
$ | |||
|
|
14. |
Employee Benefit Plans |
15. |
Related Party Transactions |
16. |
Selected Quarterly Financial Data (Unaudited) |
For the Years Ended December 31, 2020 |
||||||||||||||||
Q1 |
Q2 |
Q3 |
Q4 |
|||||||||||||
(Amounts in thousands, except per share data) |
||||||||||||||||
Revenue |
$ | $ | $ | $ | ||||||||||||
Gross profit |
||||||||||||||||
Operating expenses |
||||||||||||||||
Net income |
||||||||||||||||
Earnings per share: |
||||||||||||||||
Basic |
$ | $ | $ | $ | ||||||||||||
Diluted |
$ | $ | $ | $ |
For the Years Ended December 31, 2019 |
||||||||||||||||
Q1 |
Q2 |
Q3 |
Q4 |
|||||||||||||
(Amounts in thousands, except per share data) |
||||||||||||||||
Revenue |
$ |
$ |
$ |
$ |
||||||||||||
Gross profit |
||||||||||||||||
Operating expenses |
||||||||||||||||
Net income |
||||||||||||||||
Earnings per share: |
||||||||||||||||
Basic |
$ |
$ |
$ |
$ |
||||||||||||
Diluted |
$ |
$ |
$ |
$ |