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spk09: recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. Troy Wichterman, Chief Financial Officer, you may begin your conference.
spk05: Thank you, Shanto. Good afternoon, everyone, and thank you for joining this call. Joining me on today's call are Mike Rice, Chairman and Chief Executive Officer, and Rod DeGrief, President and Chief Operating Officer. Earlier today, we issued a press release announcing our financial results and operational highlights for the second quarter of 2022. As a reminder, during this call, we may make certain projections and other forward-looking statements regarding future events or the future financial performance of the company or its acquisitions. These statements are subject to risks and uncertainties that may cause actual results to differ materially from expectations. For a detailed discussion of the risks and uncertainties that affect the company's business and that qualify as forward-looking statements, I refer you to our periodic and other public filings filed with the SEC. Company projections and forward-looking statements are based on factors that are subject to change. And therefore, these statements speak only as of the date they are given. The company assumes no obligation to update any projections or forward-looking statements, except as required by law. During this call, we will speak to non-GAAP or adjusted results. Reconciliations of GAAP to non-GAAP or adjusted financial metrics are included in the press release we issued this afternoon. These non-GAAP or adjusted financial metrics should not be viewed as an alternative to GAAP. However, in light of our recent M&A activity, we believe that the use of non-GAAP or adjusted metrics provides investors with a clearer view of our current financial results when compared to prior periods. Now, I'd like to turn the call over to Mike Rice, Chairman and CEO of BioLife Solutions.
spk03: Thanks, Troy, and good afternoon, everyone. Thank you for joining our call. After my remarks, Troy will present our financials for Q2, then Arad will provide an update on key operational initiatives his team is focused on. After that, we'll be glad to take your questions. Turning to Q2 revenue and customer highlights, I'm very pleased with our team's performance in delivering another quarter of record revenue and in completing key operational initiatives that are driving meaningful improvements in our financial results. Total revenue was $40.5 million, up 30% from Q2 2021, with organic revenue growth of 44% and biopreservation media revenue growth of 46%. Our growth catalyst and business fundamentals remain intact, and with improved business visibility, we are tightening our full-year 2022 revenue guidance, which Troy will cover in a few minutes. I also want to express my confidence in our operations, quality, and engineering teams for their sustained commitment to optimizing our production processes, supply chains, and QC and QA functions, specifically for our sterling ULT freezer products. We again realized important sequential improvements in gross margin and adjusted EBITDA and remain confident that we will continue to do so for the rest of the year. I'd also like to echo the strong growth sentiments in the cell and gene therapy space that other life science tools companies have expressed on their recent earnings calls. Now we'll go right to the non-cash intangible asset write-down on the Sterling acquisition. Troy will provide additional color on this, but we're confident that we're now clearly on the upswing of recovery. It's important that we convey our strong belief in the innovation and disruptive potential of this acquired technology in both our current Sterling products and in our product roadmap for new Sterling engine-based smart freezers. To put a bow on it, this was a non-cash accounting adjustment. And it does not reduce our confidence in meeting both our guidance for 2022, nor our 2024 exiting aspirational financial goals, which include $250 million in revenue, 50 points of adjusted gross margin, and 30 points of adjusted EBITDA margin. In Q2, we sold and shipped products to 202 new unique customer sites across our three products and services platforms. And I'll remind you now what those buckets are. First, self-processing, which includes biopreservation media and Sexton self-processing products. Second is our freezers and thaw systems platform, comprised of cryogenic liquid nitrogen freezers and Sterling ULT mechanical freezers and automated thawing devices. And finally, storage and cold chain services, which includes our SciSafe storage services and our EVO cold chain management offering. New Q2 customer sites Our product line included 17 now using biopreservation media, 10 new Thostar users, 11 new Evo cold chain end users, 10 new cryogenic freezer and accessory customers, 110 new Sterling ULT freezer customers, 30 new biostorage customers, and 14 new self-processing customers now using Sexton products. For cell processing in Q2, we gained 31 new customers in total and received confirmation that our biopreservation media products will be used in at least 23 additional clinical trials for new cell gene therapies. Some notable confirmations were from Instil Bio, Community, Synthekine, Bonus Therapeutics, Alonis Therapeutics, Turnstone Biologics, Brexagen, Selencos, Celevolve, and Kiberna. We estimate that our biopreservation media products have been used in, or are planned to be used in, more than 550 customer clinical applications. For biopreservation media, we also remain confident that each customer clinical application, if approved, could generate annual revenue in a range of $500,000 to $2 million. To date, our biopreservation media is used in 10 approved therapies, and our sex and cell processing media and vials are used in three approved therapies. Our biopreservation media products are also embedded in at least 10 additional CGT applications for which BLA or other regulatory approval filings are expected to be submitted this year and next year. I'll conclude by saying that our biopreservation media clinical customer base includes most of the CAR T-cell developers, with our products embedded in a majority of the autologous and allogeneic platforms currently in development. We expect to be able to continue to take share from homebrew preservation cocktails as awareness grows of the critical role our engineered media formulations play in reducing risk for CGT companies. We also see the recent and pending approvals of CGT products for first and second line treatments and approvals for new indications and a new geography as three growth catalysts for our biopreservation media and other solutions. For the other part of our self-processing platform, our Sexton products, adoption and clinical customer applications include 67 using HPL media, 61 using cell seal vials, and 3 using automated fill machines. So you can see we're running our biopreservation media playbook to drive adoption of Sexton products. We estimate that annual revenue for Sexton reagents and consumables used in approved customer therapies ranges from $500K to $1 million for both cell seal vials and HPL media. Turning to our freezers and thaw systems platform. To reiterate, we shipped first-time orders to 130 new customer sites. Our hyper focus on the acquired Sterling platform has resulted in greatly improved quality and reduced shipping lead times, which Rod will speak to. Hats off to our sales team for hanging in there while we complete our field service updates to the acquired install base of ULT freezers. This has been a sales headwind and will be to some degree until we're finished with the field updates later this year. We're all very appreciative of our loyal customers who selected Sterling Freezers for the specific differentiated value they provide. A couple of notes on our indirect distribution partners for our freezers and thaw systems platform. First, on our last call, I mentioned that we added our cryogenic liquid nitrogen freezers to a key distribution agreement. This is with Avantor, VWR, and we're already seeing some sales pull through from this expanded relationship, specifically with U.S. government accounts. We're also in the process of adding our Thar Star CB cryo bag, automated Thar, to our distribution agreement with Stem Cell Technologies, who, as you know, is one of our most treasured customers and indirect sales partners. In our final of three revenue platforms, storage and cold chain services, which includes EVO cold chain rentals and SciSafe storage services, we either shipped first-use products or engaged for initial services with 41 new customer sites in Q2, 30 for storage services, and 11 for EVO. Our SciSafe storage services platform is growing rapidly, and we're on plan for the start of build-out for a nearly 60,000 square foot state-of-the-art biorepository in the U.S. to support demand for our storage services. With our EVO cold chain management platform, cell and gene therapy companies now have broad access to our class-defining offering through our expanded specialty courier partner network that now includes World Courier, Quick International, Pathion Thermal Fisher, Marken, and Biocare. We're very excited about our market opportunity to drive our EVO platform to become a meaningful revenue and profit contributor. Q2 EVO shipments were up 100% over the same quarter last year. Full year 2022 EVO shipments could exceed 8,000, double from 2021. We're collecting a huge amount of shipment information that is shaping our continued EVO IS cloud innovation to give our courier partners and end customers even more actionable data to reduce risk. Our Evo cold chain platform is currently used to store and transport two approved CAR T cell therapies, and we anticipate two additional global pharma companies will commence use of Evo for the storage and shipment of the remaining four approved CAR T cell therapies. This means by mid next year, we expect the Evo platform will be used for all of the currently approved CAR T cell therapies. This adoption validates our belief that the EVO platform will increasingly be selected as a class-defining, temperature-controlled shipping container and related cloud app by the leading CGT companies. I'll turn the call over to Troy to present our financials for Q2. Troy?
spk05: Thank you, Mike. Revenue for the second quarter 2022 totaled a record $40.5 million, representing a 30% increase over 2021. Organic revenue increased 44%. driven by biopreservation media revenue of $14.1 million, which was up 46% versus Q2 2021. COVID-19-related revenue accounted for approximately 9% of total revenue in the quarter. Cell processing platform revenue was $15.4 million, up 58% over the same period in 2021, and organic growth was 46%. Freezers and thaw systems platform revenue was $18.7 million, up 6% over the same period in 2021, and organic growth was 23%. COVID-19 related revenue accounted for approximately 4% of the freezer and thaw systems platform revenue. Storage and storage services platform revenue was $6.5 million. Total and organic growth was 65% over the same period in 2021. COVID-19-related revenue accounted for approximately 45% of the storage and storage services platform revenue. Revenue for the six months ended June 30, 2022, totaled $76.8 million, an increase of 60% over 2021, with organic growth of 45%. Adjusted gross margin for the second quarter of 2022 was 36%, compared with 43% for the second quarter of 2021 and 33% for the first quarter of 2022. For the first six months of 2022, adjusted gross margin was 34% compared with 47% in the same period last year. The sequential quarterly improvement in Q2 2022 gross margin was largely due to sequential improvement at our ULT platform as well as favorable product mix. we expect to see increases in gross margin in Q3 and Q4 net of newly granted stock awards. GAAP operating expenses for Q2 2022 was $116.8 million versus $35.8 million in Q2 2021. And year-to-date operating expenses was $160.6 million compared with $53.6 million in 2021. Gap operating expenses in Q2 2022 and year-to-date include a non-cash intangible impairment of $69.9 million related to the global cooling acquisition. The non-cash impairment to the global cooling intangible assets primarily resulted from changes in our assumptions for ULT freezer product development projects, including lower forecasted cash flow due to inflationary pressures on materials, reduced revenue expectations and delays in launch. Despite the accounting adjustment, we continue to believe there is significant value in the uniqueness of the Sterling technology. Adjusted operating expenses for Q2 2022 totaled $20 million compared with $13.3 million in Q2 2021 and $19.8 million in Q1 2022. For the first six months of 2022, adjusted operating expenses totaled $39.8 million compared with $22.2 million in the first six months of last year. Adjusted operating expenses increased due to the 2021 acquisitions of Global Cooling and Sexton. In addition, operating expenses increased due to higher accounting costs and increased headcount to support our growth. Adjusted operating expenses increased by $200,000 over the previous quarter due to increased headcount partially offset by lower accounting fees. Adjusted operating loss for the second quarter of 2022 was $5.4 million compared with adjusted operating income of $65,000 in the second quarter of 2021. Our adjusted operating loss for the first six months of 2022 totaled $13.4 million compared to operating income of $560,000 in 2021. Adjusted EBITDA for the second quarter of 2022 was positive $1.5 million compared with positive 3.7 million for the second quarter of 2021 and negative 814,000 for the first quarter of 2022. For the first six months of 2022, adjusted EBITDA was positive 679,000 compared with positive 6.5 million in the same period in 2021. We expect an improvement in adjusted EBITDA in the second half of 2022 compared to the first half of 2022. Our cash and marketable securities balance at June 30, 2022, was $47 million, compared to $59.4 million at March 31, 2022. Taking into consideration our adjusted EBITDA of positive $1.5 million, cash use in Q2 2022 was related to working capital adjustments of $13.4 million, primarily due to timing, which includes a $7 million increase in accounts receivable, and a $3.1 million increase in inventories. In addition, capital expenditures were $2 million in the quarter, primarily related to the build-outs of our biorepository facilities. We do not expect the same level of cash use going forward. Turning to 2022 revenue guidance, we have tightened full-year 2022 revenue guidance to be in the range of $160 million to $166 million, reflecting year-over-year growth of 34% to 39% and organic growth of 37% to 43%. COVID-19-related revenue is expected to account for approximately 8% of total revenue. Total revenue expectations for 2022 include the following platform updates. Cell processing platform. increased the low range by 3 million and the high range increased by 2 million, reflecting high demand for biopreservation media. And the platform is expected to be between 67 million to 69.5 million, an increase of 49% to 55% over 2021, and organic growth of 42% to 47%. Freezers and thaw systems platform. decreased the low range by 4 million and decreased the high range by 6 million and is expected to be between 70 million and 71.5 million, reflecting lower than expected revenue for our ULT product line. This is an increase of 24% to 26% over 2021 and organic growth of 31% to 34%. COVID-19-related revenue is estimated to account for less than 5% of the freezer and thaw systems platform revenue. Storage and storage services platform increased low range by 1.5 million and reduced high range by 1 million and is expected to be between 23 million to 25 million. This is a total and organic increase of 31% to 42% over 2021. COVID-19 related revenue is expected to count for an estimated 40% to 45% of the storage and storage services platform revenue. The COVID-19 related revenue is primarily based on contracts, and therefore, you don't expect to see variability on this number throughout the balance of the year. In regard to our aspirational financial goals for the Q4 2024 run rate, we are confident in our targets of $250 million in revenue 50% adjusted gross margin, and 30% adjusted EBITDA. Biopreservation media, which has the highest margin profile, is currently growing at a faster pace than expected, partially offset by lower revenue expectations for our ULT freezer line. Demand for our portfolio is strong, and we believe we will show continuing improvements in financial performance. Finally, in terms of our new share count, As of today, we have 42.6 million shares issued in outstanding and 44.5 million shares on a fully diluted basis. Now, I'll turn the call to Rod.
spk04: Thanks, Troy. As I mentioned on our last quarterly call, continued progress at Sterling has allowed the operations team to begin to focus on additional opportunities for improvement for other product lines, and these activities continued throughout the last quarter. Before I get to that, however, I'll start with some comments on the Sterling operation. Based on the operational metrics we track at Sterling on a regular basis, we continue to make progress across the board. If I were to pick just one operational metric which summarizes the overall improvements in production and quality, it would be the lead time associated with our large capacity 780XLE freezers, which contributed the majority of ULT freezer revenue in the first six months of 2022. In February of this year, the lead time for this product stood at 10 weeks. And since then, the team in Athens has been able to bring this down to one week, which not only speaks to the overall progress made, but also positively impacts our competitiveness. And this decrease in lead time has been achieved with higher first pass yields and a substantial improvement in gross margin compared to Q1 of this year. As part of the overall recovery plan for Sterling, We recently announced internally that we are going to take two ULT freezer products, which are currently produced for us by an outside CMO, and bring them back in-house. These two products were originally outsourced in 2021 due to space and labor constraints in Athens. We will consolidate the production of these two products at our LN2 freezer manufacturing facility in Michigan. We have the space and the team members there to make it happen. and expect the move to be completed in Q4, generating higher levels of quality and modest increases in gross margin for these two products. The Athens facility will continue to focus on the production of the 780XLE and prepare for the planned 2023 launch of the next generation large capacity freezer. In addition to bringing the two ULT products into our Michigan facility, last quarter we began the validation of a second source for a key component used in the LN2 freezer line. The validation has gone well, and we expect to begin shipping products using this new supplier in September or October. Not only does this new relationship mitigate supply constraints, which have had an impact on revenue in recent quarters, it also yields cost savings, which should translate into a gross margin pickup of two to three percentage points on these LN2 products. So we're pleased with the overall results of this effort. Moving to our biopreservation media products, we're focused on increasing capacity in the near and mid-term based on the continued strength in demand. We are in the final phase of increasing our media batch size from 100 to 200 liters, which will effectively double the capacity of the Bothell facility, allowing us to comfortably meet demand and replenish our safety stock, which has been depleted over the past several quarters. In addition, we've also kicked off the planning phase of establishing a small, but scalable biopreservation media production suite at our facility in Indianapolis, which currently makes our HPL products. And expect that facility to begin producing our smaller volume media runs by mid-2023. Finally, with respect to two other key operational initiatives, which are to establish a high-margin service revenue program and implement the NetSuite ERP system, I'm pleased to report that our pilot service revenue program generated solid revenue growth in Q2 versus Q1, while still only utilizing one full-time team member. The NetSuite ERP implementation remains largely on track. All in all, operationally, things are moving up and to the right, and we'll push hard to ensure that trend continues in the coming quarters. Now I'll turn the call back over to Mike.
spk03: Thanks, Rod. I'll leave you with our key takeaways from Q2 and for the rest of 2022. First, Demand for our portfolio of class-defining myoproduction tools and services remains strong, and we fully expect to meet or beat our full-year revenue guidance. Number two, we made real progress addressing supplier and quality issues with our Sterling product line and expect to demonstrate continued sequential improvements throughout the rest of 2022 and beyond. And three, to say it one more time, we remain very confident that we will achieve our Q4 2024 run rate aspirational financial goals of $250 million in revenue, 50 points of adjusted gross margin, and 30 points of adjusted EBITDA. Fast forwarding to today, I'm pleased to say that overall, product and service demand so far in Q3 is strong, and we're looking forward to sharing our results in November. Now I'll turn the call back over to the operator to take your questions. Chantal?
spk09: At this time, I'd like to remind everyone to ask a question Please press star 1. We'll pause for just a moment to compile the Q&A roster. Our first question comes from Thomas Flatton with Lake Street Capital Markets. Your line is open.
spk07: Hey, thanks. Good afternoon, guys. Congrats on another great quarter. A couple questions with respect to guidance. So there was some really positive news that Rod shared around the improvements at Sterling. yet kind of layered into the write-down was reduced revenue expectations and delays in launch. Can you maybe add some color there? Have customers walked away? Is it just a natural evolution in the market? Just to get some more thoughts from you on the freezer business in particular.
spk03: Yeah, Thomas, thanks. Good question. I'll give a little more color. As it relates to the sales headwinds that I mentioned, no doubt we've had some customers have to buy from somebody else, and the guidance tightening is really just prudent based on the fact that we're not done with the field update yet. Once we get through that, I think everything will be really, really strong and back to kind of the normal flow, but we're tightening it just a little bit based on that remaining sales headwind. That's what I can say on that.
spk07: Great. And then I know we usually don't talk about things below the revenue line from a guidance perspective, but there was a really nice improvement in gross margins. Is that level of improvement something we can continue to see, or will it moderate more as we move through Q3 and Q4?
spk05: Yeah, Thomas, I think we'll see it more of a moderate level from Q3 going into Q4. And again, in my commentary, I mentioned that was net of newly issued stock grants.
spk00: Right.
spk05: Which, again, I'd like to remind... I'd like to remind you, too, that when we do the adjusted gross margin number, we do not back out stock comp. So stock comp does flow through our COGS and hence the adjusted gross margin.
spk07: Got it. And then I'm wondering if you could get some commentary on the stock for cash compensation program, which expired, I think it was August 1st. Just curious to get your thoughts on whether or not that's been extended. I'm assuming no. And just in color, that would be great.
spk03: Yeah, we haven't commented on it, and it runs actually a little bit longer, but we haven't commented publicly on whether we're going to extend it or not.
spk07: Excellent. Thanks for taking the questions, guys. Thank you. Thanks. Thank you.
spk09: Our next question comes from Jacob Johnson with Stevens. Your line is open.
spk08: Hi. It's Hannah on for Jacob. Good afternoon. A couple questions. Sterling margins were below historic levels last year. How should we think about the timeline to get back to 30% margins, and is there additional opportunity to expand that longer term?
spk04: Yeah, it's Rod here, Hannah. So we don't provide specific guidance to product line gross margins, but what we will say is that we do expect, as Troy just mentioned, continued improvement in gross margin, particularly in the Sterling facility net of new stock option grants We do expect that it's going to take some time to get back up into the sort of mid-30 level of gross margin for that particular product line, but we're not going to put ourselves in a box and say when that might happen. We're just confident of continued improvement.
spk08: Okay, and one quick follow-up. As you think about the portfolio of assets and capabilities that you've built up over the years, How are the cross-selling opportunities? Are there any particular products where you've seen traction from cross-selling initiatives?
spk03: Yeah, really insightful question. Thanks, Hannah. You bet. The one example I would point to is the crossover between our biopreservation media and our sextant cell processing products, both the HPL media, which is another liquid media, actual serum replacement media, in this case used in cell manufacturing, but also the cell seal vials, which is a really cool, novel technology small form factor, final packaging option as a replacement or an alternate for bags for cell and gene therapies. And, you know, just to point to one example of that, I can tell you that it's public, but BMS with Brianza and Abekma uses cryostore preservation media, but they also use the cell seal vial, which is really cool. Now, those were independent conversations underway, but we know a lot of the same decision makers and you know, ultimately that would have resulted in the same final result. And we're obviously looking for those sort of easy wins and early wins that we can go capture that are similar to that story. And we would expect to continue to talk about cross-selling, you know, for the foreseeable future. That was a big thesis of the whole acquisition spree. And we're seeing a lot of really good anecdotal wins as a result of expanding, you know, the sales team, but also leveraging our key relationships.
spk08: All right. I'll leave it there. Thank you.
spk03: You bet.
spk09: Our next question comes from Matt Masucci with Cowan & Company. Your line is open.
spk01: Hey, thanks for taking the question. Hi, Matt. Hey, so storage and cold chain really continues to emerge as a nice contributor to growth. I think the segment has beat our model, I think, for the past five straight quarters. So can you just... Give us some detail around what's spurring the non-COVID growth in storage and cold chain. Obviously, there's been a slew of new launches, but do your customers seem to be a bit more forward-looking towards solving for logistics and transportation factors compared to, call it, 12 and 24 months ago?
spk03: Yeah, Max, right on. Well, let's split them out. So on the storage services side, that demand is just booming. And let's just revisit the factors. These biopharma companies, they have a build or buy sort of dilemma, right? Are they going to go and build a biorepository and staff it and put all the gear in it and maintain it and all their precious biologic materials under one roof? That's very risky. And so there's a real appeal to outsourcing that to a partner such as BioLife, now with SciSafe, who can take really good care of their precious samples and have really good management of that stuff, chain of custody, chain of ID, chain of condition, all those buzz phrases that we toss around, but they're very important, they're critical, and it's a key value differentiator for us, and we just can't build stuff fast enough, and we're just really excited about how we're gonna continue to expand that platform, and I mentioned earlier that the big 60,000 square foot facility that we're gonna be kicking off here fairly soon, so that'll be great. We'll fill it up, I'm sure. Then on the Evo side, I just want to remind you and the listeners here that, you know, a couple years ago when we first started talking about, hey, we've got this approved CAR T-cell therapy company that's looking at Evo, and they're putting us through this really extensive evaluation and validation, and it's taking so long, but are we ever going to get some traction? Now, fast forward to mid-next year, we're going to be, you know, shipping with Evo all of the approved CAR T-cell therapies, so definitely worth the wait, and, you know, I'll just kudos shout out to our key competitor in that regard who educated the market but now there's room for two and clearly we're a primary or at least a secondary choice for all those I would call sophisticated customers who really are on the path to de-risk their entire you know shipping logistics sort of chain and we're not in logistics that's not our gig we're just providing the best technology to enable the logistics providers to reduce risk for these companies so we're really proud of that and we're not slowing down I mean I mentioned you know, the approved CAR T cell therapy companies, but I look at the Evo customer shipment list every quarter, and this is a marquee list of companies, and I'm sure some of those are going to make it over the goal line, and we'll be glad to talk about those when they do, obviously, if we get permission, but feeling really good about that. And, you know, I'll just say, additionally, with the new product roadmap for the Evo platform, with containers and radios and sensors and all that. We've got some really exciting stuff coming in. Too soon to talk about it for competitive reasons, but yeah, it's going to be a fun race, and we're going to win it in our own lane, so really excited about that.
spk01: That's great. That seems like a key area of 2022 innovation. Exciting to see. So maybe another one, just zooming out a bit. I mean, we've seen... some, you know, competitors make a, you know, make an M and a push and cold chain, you know, UPS, um, announced now, you know, the acquisition of Bomi group of Zenta has made a few acquisitions themselves. So like at a higher level, as you look across your three, you know, distinct business segments, you know, would you point to any one of them and say, you know, in that segment, you know, we're seeing a lot of growth coming from, you know, competitive wins or, you know, or taking share versus just sort of organic penetration.
spk03: Really good question as well. So you bet. I mean, we have to look at media, biopreservation media. It's so strong and it's not just existing customers buying more, it's capturing more customers every quarter, getting confirmation of more planned adoption and clinical trials. So that is the the engine that just keeps cranking. And let's remember, all of us folks, it's still really early, right? I mean, really early in the CGT approval game right now. There aren't that many, just a couple handfuls. And, you know, while we could probably all agree that that space and at least the U.S., if not outside U.S. healthcare systems, are not going to support 50 CAR-Ts for the same indication, and I think we would agree with that, we don't need that kind of level of adoption for us to drive that really, really strong. So we're just really bullish on that. So it would be media first and then storage services ultimately. And then I think, you know, not to be all doom and gloom, but we're really, really bullish about what's unique about Sterling. And particularly once we get the field update done, we can get back to, you know, leading with our front foot as opposed to being defensive in some cases. But the product roadmap for Sterling is really innovative. And, you know, at the right time, we'll be glad to talk about that.
spk01: Great. And now I'll just wrap up here, you know, just looking at my – monitor here you know it's a reminder that we're likely to remain in a you know volatile market environment for smid cap stocks so you know great to see positive adjusted EBITDA progress on the margins and you exited the quarter with around you know 47 million in cash so it's just a broad-based question you know the cash is obviously you know it's it's it's it's dwindling lower than it's been in recent quarters, but you're also turning the corner on profitability. So, like, I guess, how are you thinking about, you know, how comfortable, you know, you'd feel with that cash balance? I mean, is there a certain level that you don't want to go below? You know, do you feel like you have all the access to funding in place to, you know, to, I would imagine, fund more of the, you know, internal growth initiatives? but eventually return to an M&A strategy over time.
spk05: Right. Yeah, Max, Troy here. As you mentioned, we did have a positive adjusted EBITDA quarter. And as I mentioned in my commentary, a lot of that cash was tied up in working capital, in particular AR. We had a lot of AR due to late orders in the quarter. So that really built the AR balance. And then as far as needing cash or raising cash, we do not foresee the need to raise cash with our current operations.
spk01: Great. Well, thanks a lot for the call. Much appreciated, as always.
spk09: Thanks, Max. Again, if you would like to ask a question, please press star 1. Our next question comes from Suraj Kalia with Oppenheimer. Your line is open.
spk02: Good afternoon, everyone. Mike, can you hear me all right? Yeah. Hi, Suraj. How are you? Doing well. Hope everyone is safe and healthy. Thank you. Troy, Troy, forgive me if I misunderstood your comments. The impairment charge, was there any change in the long-term ULT revenue outlook? And part of the reason I ask is, how is that being incorporated? And Mike, please feel free to jump in. How is that being incorporated into the 2024 $250 million outlook that you all have maintained still?
spk03: Yeah, I'll take the last part first, and Troy can talk about the first part. Yeah, super insightful question, Siraj, and the good positive answer with confidence is that non-cash adjustment, as I mentioned on the call, it doesn't affect our confidence and our ability to hit those exiting 2024 financial aspirational goals, not in the least. Troy, you want to take the first part?
spk05: Yeah, Siraj, the valuation and the result really was how the discounted cash flow worked out. And as I mentioned in my commentary, there were a few changes in assumptions, such as higher costs, slightly lower revenue expectations, and higher cost to completion. So those are really the three main factors that contributed to the impairment.
spk02: But there was no change in the long-term revenue outlook for ULT, right, Troy?
spk05: It was slightly lowered, yep, as I mentioned in my commentary. But as we also mentioned, too, the biopreservation media is exceeding our expectations. And again, that's the highest margin product we have in our portfolio. So again, giving us confidence in our long-term goals.
spk02: Fair enough. So Mike, when I look at 250 million, right, in a couple of years, COVID is what, 8% of FY22 or estimated to be? So roughly around 15 million, right? If ULT, there has been a slight compression, and you look at next year, Just trying to understand, you know, what are all the moving parts, especially, you know, for example, what contribution Evo is going to be, or you all are thinking through from Novartis and Gilead. Just kind of walk us through how the different valves and the cylinders are firing, or at least as we look out over the next two years.
spk03: Yeah, right on, sir. Well, I think I'll start by asking Troy to remind us all that in our sort of exiting 2024 analysis, The revenue split from, let's call it consumables reagents versus instruments. Let's just cover that part first, and I'll make a comment on that.
spk05: Consumables, over 60% of the 250, and capital equipment, which would be the freezers and thaw systems, under 40% of the 250.
spk03: Yep, so against that perspective, Suraj, I would say that we're not going to quantify EVO revenue by customer or anything else like that. We're bullish about what we can grow that into, and we've got obviously internal modeling about where that can go and what the TAM and the SAMs are and things like that. But biopreservation media, super strong, super strong, and storage services as well. Those are the key levers that are going on. And then, you know, the instrument side, as traditionally as you would imagine, like other companies, not nearly the margin profile, yet very complementary. And as a some-of-the-parts kind of portfolio we can offer our customers, we're anticipating obviously a certain amount of pull through and crossover from having a broader portfolio.
spk02: Fair enough. Mike, quickly, and I'll hop back in queue. You know, you guys have obviously made a lot of progress, you know, in different initiatives, and there is a cross-fertilization effort going on between the different segments. Mike, whichever bucket you'll want to position a test, right, whether it's consumables and capital or biopreservation and storage and this and that, you know, different buckets. How should we think about the number of customers in each bucket so that we can sort of start triangulating, okay, this is where average revenues per customer, because there are a ton of new customers being added every quarter. Just help us understand. You get where I'm headed. I'd love some guideposts just to help us start thinking about where we are headed. Folks, thank you for taking my questions.
spk03: Yeah, understood. You bet, you bet. Good question. So I think I can give you some rough ranges right now, and then we'll think about maybe in a more formal way if we could put that out. But generally speaking, we have biopreservation media customers in a range of 4,000 to 5,000, ranging from approved companies to a single researcher in a lab was going to buy one bottle of media in a year, okay? But definitely weighted and heavily concentrated amongst the clinical side and the late stage and or the approved customers. augmented by a couple of really key distributors who move a lot of media product. You know, in the freezer platform, that's more in the range of hundreds of customers, right? And then the other platforms are less than that. Just that's probably the level of detail I'd want to disclose on this call, okay?
spk01: Fair enough. Thank you. You bet.
spk09: Our next question comes from Yuanti with B. Riley. Your line is open.
spk06: Hi, this is Brandon for UON. Thanks for taking our questions.
spk03: Hi, Brandon.
spk06: Hi. After a $70 million impairment charge, how much of the remaining goodwill on the balance is related to the ULT freezer?
spk05: Yeah, this is Troy here. That's a different analysis. We are one reporting unit, so goodwill is not affected.
spk06: Okay, thanks. Ben, so a great quarter for biopreservation media. Can you break down how much of the growth is driven by volume and how much of that is driven by price increase? Our channel check shows a year-to-date increase on listing price of 9% in some of your media products in third-party channel.
spk03: Yes, it's definitely weighted by volume. We're just cranking it. I mean, this current customers approve customers. There could be some Price appreciation, it's just not coming to mind in the last quarter. I know we did a price increase that was effective 1-1 in the first quarter, but we have some flexibility to do that based on PPVs and that, constrained somewhat by some certain supply agreements, but it's definitely a volume game here. And we're killing it. You heard Rod's comments about doubling the batch size so we can not only meet demand for media, but also replenish our safety stocks. And again, I would just remind everybody that it's still early game here, right? These 10 approved products we're in, those are products that weren't in existence from an approved standpoint three years ago. So this is really early. And look, you can hear it in my voice, the upside on biopreservation media and related consumables once we're locked in as a sole supplier, it's just tremendous. We've got so many shots on goal. And even if there was tremendous attrition from the current clinical trial bucket of applications, this thing is going to rock for years to come.
spk06: Thanks, that's helpful. Last question from us. We want to hear more about the growth potential for the EVO platform. So I'm wondering if you can share what's the portion of the total shipment volume of CAR-T products that are using the EVO platform, and if you can comment on what can drive higher adoption in customers' planned shipment.
spk03: Yeah, I don't want to cite a shipment market share estimate right here. I can tell you that with the first customer that we won. They've intimated to us that we're getting between 50% and 80% of their shipments. You can do a little math and you can figure out using 350 grand as a dose divided by two because there's an apheresis plus a final product in their reported revenues. You can figure out how many patients were dosed. We're getting a lion's share of that, which is great. The other ones, not as much yet, but those are very early wins and coming on board. And there's an actual limiter, and that's the pace at which the clinical centers get trained up on receiving the therapy in a new package. So there's a little bit of work that the pharma company has to do with the couriers to get the receiving clinicians up to speed on what's this new thing. And, you know, you guys might know the Evo. I mean, it looks state-of-the-art. It doesn't look like anything like these old traditional really ugly LN2 containers that these things have been shipped in for years. So as innovative as it is from a design or technology side, it's equally as potent from just an aesthetic. And the clinicians love it because it doesn't scare the heck out of these pediatric cancer patients when this goofy old gray or beige thing is wheeled into their room and there's this gas hissing out and all that. So yeah, we got a really, really differentiated offering and it's going to take off. But we're always going to track that. And over time, if we feel that we have confidence in some EVO shipment or CAR-T shipment market share data, then we're of course going to be proud about that and put it out a little bit early for that now though.
spk06: Okay, thanks.
spk09: We have reached the end of the question and answer session. I'll now turn the call back over to Mike Wright, CEO, for closing remarks.
spk03: Thank you, Chantal, and thanks again, everyone, for your interest in BioLife. Have a great evening and the rest of the week. Good night.
spk09: This concludes today's conference call. You may now disconnect.
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