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spk01: Good afternoon and welcome to the BioLife Solutions Q2 2024 Shareholder and Analyst Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Troy Wichterman, Chief Financial Officer of BioLife Solutions. Please go ahead.
spk05: Thank you, Operator. Good afternoon, everyone, and thank you for joining the BioLife Solutions 2024 Second Quarter Earnings Conference Call. On today's call, we will cover business highlights and financial performance for the quarter and provide an update on our full-year 2024 revenue guidance. Earlier today, we issued a press release announcing our financial results and operational highlights for the second quarter of 2024, which is available at biolifesolutions.com. As a reminder, during this call, we will make forward-looking statements. These statements are subject to risks and uncertainties that can be found in our SEC filings. These statements speak only as of the date given, and we undertake no obligation to update them. We will also 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. Now, I'd like to turn the call over to Rod DeGrief, Chairman and CEO of BioLife. Rod DeGrief Thanks, Troy.
spk06: Good afternoon, and thank you for joining us for BioLife's second quarter 2024 earnings call. Today, I'm joined by Troy Wichterman, our CFO, as well as Gary Richardson, our Chief Revenue Officer, who will offer a deeper look into our Q2 revenue results and our strategy to grow BioLife's market-leading biopreservation franchise. To begin, I'm pleased to report another quarter of sequential revenue growth in our core cell processing business. Now, halfway through the year, these results underscore our belief that we are seeing an improvement in the macro environment, specifically the bioproduction subsector we operate in. With the strategic shift away from our legacy freezer products largely behind us, our revenue is primarily driven by our high-margin cell processing platform and our biostorage and services platform. Turning to highlights from the quarter, We posted an 11% sequential increase in our self-processing revenue and a 6% sequential increase in total revenue. On a macro level, the industry-wide headwinds that began to ease late last year continued in Q2 of this year. For BioLife, this meant less inventory destocking pressure from our larger direct customers and continued strength in our distributor revenue, which we view as a proxy for the earlier stage research-focused market segment. Our first half results, combined with our outlook for the second half of 2024, has resulted in a modest increase in our self-processing revenue guidance, which Troy will speak to later in the call. On the strategic side, with our continued efforts to streamline the business, we will be increasingly better positioned to benefit from the strength of our recurring and consumable product offerings. You will recall that we announced the divestiture of our GCI, or Sterling Freezer Unit, in April. The positive financial impact of the GCI divestiture is clearly reflected in our Q2 financial results, with an adjusted gross margin of 52 percent, an adjusted EBITDA margin of 4.8 million, or 17 percent of revenue. We realize the job is not done, and we're committed to exiting the remaining freezer business as quickly and efficiently as possible. Although CBS generated positive adjusted EBITDA for the quarter and represents less than 12 percent of sales, It was a drag on margins, and we expect to see further margin expansion once that transition is completed. We will provide updates as events warrant. Turning back to cell processing, the fundamental drivers of revenue growth for that segment, specifically our biopreservation media revenue, include our market-leading share of commercially sponsored clinical trials and the overall regulatory environment for CGT. We believe that we have a market share in excess of 70% of the relevant commercially-sponsored clinical trials in the U.S., with approximately 45 Phase II and Phase III trials utilizing CryoStor. In Q2, the CGT regulatory environment continued the forward momentum that started last year, with two new indications and three earlier lines of treatment approved for biolife-supported therapies. Our bioproduction media was embedded in 15 commercial therapies at the end of the quarter, and we see an additional nine similar approval opportunities over the next 12 months. We're excited by our growing exposure to commercial therapies, and over the years, we have developed deep and direct relationships with these customers, allowing us to provide better support to our partners. As these direct customers continue to progress and evolve, we expect to realize higher revenue and enhance margins. We're encouraged by this evolution, albeit early, which we believe will become more pronounced as this modality continues to mature. Our market share clearly confirms that biolife is the industry standard in biopreservation media, and we have established ourselves as a leading pure play provider of premium bioproduction tools and services, the critical picks and shovels which support the fast-growing CGT industry. As we continue to take the steps necessary to optimize our business to focus on our cell processing platform, I'm convinced more than ever that BioLife is extremely well positioned to benefit as industry headwinds continue to ease and the space continues to mature. Now I'll turn the call over to Gary, who will provide some additional insight on Q2 revenue and our sales strategy.
spk02: Gary? Thanks, Rod. Good to be here again. In the second quarter, we continued to see an uptick in positive sentiment activity across our core cell processing customer base. For our cell processing platform, sequential revenue increased 11 percent to $18 million in Q2 from $16.1 million in Q1. We achieved a sequential increase in sales across all product lines, including strong demand in our non-biopreservation products, particularly our HPL growth media, which performed above expectations, and as a reminder, came through our acquisition of Sexton Biotechnologies in 2021. The majority of our cell processing revenue continues to be driven by our biopreservation media or BPM products. Our top 20 BPM customers continue to account for approximately 80% of media revenue, with 65% of BPM revenue coming from direct customers, and of that amount, customers having approved therapies totaled approximately 40%. Distributor sales, which we see as reflecting a broader spectrum of the CGT market, continued to improve compared to the second half of 2023 and represented approximately 35% of BPM revenue. Our growth strategy for the cell processing platform features a two-pronged approach. First, we're committed to maintaining and growing our leading BPM market share by engaging new early-stage CGT market entrants. This includes both oncology and non-oncology indications, with promising new applications of CAR-T therapies targeting autoimmune diseases as an example. In addition, we're building a robust mechanism in conjunction with key distribution partners to ensure that these early-stage developers have access and exposure to not just our BPM products, but the entire cell processing product portfolio. Second, we're leveraging our thought leadership and key BPM customer relationships, which have in some cases been in place for nearly a decade, thanks to the dedicated efforts of Dr. A.B. Matthew to cross-sell our other cell processing tools. A good example of this is the ongoing effort to expose our key BPM customers to our recently introduced cryo case which has generated strong initial interest. You may recall the cryo case is the first ever cryo-compatible rigid container, which we introduced at ISCT in May, and its intended use is to replace the standard cryo bags for the final CGT dose. Based on initial testing, we believe that the cryo case could positively impact the industry-wide particulate issue, which is inherent in the use of standard cryo bags. Before handing the call over to Troy, I'd like to briefly touch on our biostorage services platform where we continue to see modest storage revenue growth as general market conditions remain stable for those services and as our existing facilities get closer to full capacity. This growth was offset by sequential reductions in our other products and services within that category. We have an enviable position as the market leader in the field of biopreservation media and we have an exciting portfolio of other cell processing-related products. I'm confident that this position, combined with the underlying trends of the still early CGT industry, provides the basis for continued revenue performance in the future. Now, I will turn the call over to Troy.
spk05: Thank you, Gary. As Rod noted, we divested global cooling on April 17th, and on this call, we will be reviewing current and prior period financials from continuing operations only, which excludes any GCI-related results. The financials from continuing operations includes our LN2 freezer platform, Custom Biogenic Systems, which is in the process of being divested. We've reported Q2 revenue from continuing operations of $28.3 million, representing a decrease of 3 percent year-over-year. the year-over-year decrease was primarily related to a 4% decrease in our self-processing platform. Total revenue was up sequentially from Q1 2024 by 1.5 million, or 6%, primarily due to a sequential increase of 1.8 million, or 11%, in our self-processing revenue. Adjusted gross margin for the second quarter was 52%, compared with 45% in the prior year. The increase was primarily due to product mix, operational efficiencies, and higher capacity utilization at our biorepository facilities. Adjusted operating expenses for Q2 2024 totaled $16.9 million, compared with $19 million in the prior year. The decrease is primarily due to lower personnel costs from the Q3 2023 reduction in force and continued focus on expenses. Our adjusted operating loss for the second quarter was $2.1 million compared with $5.8 million in Q2 2023. Our GAAP net loss was $7.1 million in Q2 compared to $5.5 million in the prior year. The increase in net loss was primarily due to a $4.1 million write-off of our IVEXL investment due to the uncertainty of IVEXL's going concern status. Adjusted EBITDA for the second quarter of 2024 was 4.8 million or 17 percent of revenue compared with 1.7 million or 6 percent of revenue in the prior year. Adjusted EBITDA increased in the prior year due to improvement in gross margin driven by lower personnel costs and greater operational efficiency, partially offset by a decrease in our self-processing platform revenue. our adjusted EBITDA increased $1 million sequentially from Q1 2024, primarily due to higher gross profit contribution and decreases in professional fees. Turning to our balance sheet, our cash and marketable securities balance was $36.9 million at June 30th, 2024. This compares to $46.1 million reported at the end of the first quarter, 2024. The sequential cash decrease of $9.2 million was primarily driven by cash outflows of approximately $13 million related to the divestiture of global cooling during the quarter, partially offset by $4.8 million in positive adjusted EBITDA from our continuing operations. Our SVB long-term debt balance was $20 million, with quarterly repayments of $2.5 million beginning in Q3 2024. Turning to our updated full-year revenue guidance. Total revenue is expected to be $99 million to $101 million, reflecting an overall growth of 5 percent to 8 percent, compared to our original guidance of $95.5 million to $100 million. As previously discussed, 2024 guidance is based on expectations for our cell processing and biostorage services platform and does not include any revenue from freezer product lines. The BioStorage Services platform includes our ThawStar automated thawing devices product line. Our cell processing platform is expected to contribute $70 million to $71 million, reflecting a 6% to 8% growth over 2023. This compares to our original guidance of $66 million to $68.5 million. Our bio-storage services platform is expected to contribute 29 million to 30 million, or 3 percent to 7 percent growth over 2023, and on a like-for-like basis, growth of 8 percent to 12 percent. This compares to our original guidance of 29.5 million to 31.5 million. Finally, in terms of our share count, as of August 1st, we had 46 million shares issued in outstanding and 48.7 million shares on a fully diluted basis. Now, I'll turn the call back to the operator to open up for questions.
spk01: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. And at this time, we will pause momentarily to assemble our roster. And the first question will come from Jacob Johnson with Stevens. Please go ahead.
spk08: Good afternoon, everybody. Congrats on a nice quarter. On cell processing, obviously good quarter there. You increased the guidance. If my calculator is right and I just annualize this 2Q number, I get to the midpoint of your guidance. So I guess two questions. Any kind of one-time benefits in cell processing in the quarter that maybe we should be aware of and not assume they repeat in the back half of the year? And then the second question, why shouldn't we see more of a pickup in cell processing demand in the back half of the year? Or I guess third, is there some conservatism in this?
spk06: Yeah. Hi, Jacob. So with respect to your question on Q2, as Gary mentioned, we did have a particularly strong quarter in HPL, that product line. We don't necessarily expect that to repeat in the Qs 3 and 4. I think that when you look at the first half guidance against or first half actual against second half implied guidance, we're really looking at a 5% to 8% increase of second half over first half. So we feel pretty good about that. With respect to being conservative, I think we've done our best to articulate how we see the second half of the year as we sit here today in the beginning of August.
spk08: Got it. Thanks, Rod. And then, Rod, I may stick in with you. I think last quarter you mentioned that you're reviewing your product portfolio internally. Are there any initial findings you'd like to share? Should we expect some kind of formal update from that process? at some point?
spk06: Yeah, you can. You know, we've been spending the last 10 months really trying to focus on streamlining the cell processing platform, divesting the freezer lines, right? And so we've not made as much progress on the strategic review, but I think on the next call, we should be in a position to provide some further clarity on the outcome of that process.
spk08: Got it. Thanks, Rod. And maybe just lastly, if I can speak one more in, Gary, maybe just last quarter you talked about, well, on this call too, you talked about cross-selling your tools. It sounds like you're working with both direct customers and distributors on that. Can you just elaborate on how those efforts are going?
spk02: Yeah, I think we've seen it to be particularly effective around what was formerly the Sexton product line and obviously biopreservation media. We've got these super solid relationships with our legacy clients. And what we're trying to do, and I think we're having some great success, is really utilize those relationships to really push things through, right? And that's things like, you know, the Cryo case, for instance, right? That is you know, homegrown innovation addressing the needs of the market. We're super excited about that product. And because of the relationships that we have, we're able to put it in the hands of the people that really need to see it. So I think leveraging that, I think, has been super effective when it comes to the kind of combined Sexton or former Sexton and biopreservation media lines.
spk08: Got it. Thanks for taking the questions. Thanks, Jacob.
spk01: Thanks, Jake. The next question will come from Anna Snopkowski from KeyBank. Please go ahead.
spk00: Hi, thanks for taking my question. This is Anna on for Paul. I just have one, and it's around the funding environment. We've been tracking the ARM data pretty closely, and we've seen pretty substantial sequential improvement. I was just wondering if you've seen this affect your business, whether it's just overall more clinical activity or more trial starts. Any commentary around that would be helpful. Thank you.
spk06: Yeah, thanks, Dana. I think that as we've talked to you before that, you know, our direct customers are particularly the ones with commercial therapies are well-funded, and so they're really not impacted by the overall funding environment. I think where we see the impact of that is the revenue that we generate through our distribution, particularly the larger distribution partners that we have who focus on the earlier stage and the research type accounts. And we've seen solid growth on the distribution side compared to last year. So that's the best kind of dot connection that we can make with respect to the funding environment impacting our revenue.
spk00: Thank you.
spk01: You bet. The next question is from Matt Stanton from Jefferies. Please go ahead.
spk03: Thanks. Nice progress on the EBITDA margins here in the quarter. Are you still comfy with the kind of 20% plus exit rate you've talked about in the past? And any reason we couldn't see that maybe a bit sooner here in 3Q, just given the process, I guess, given cell processing dollars are kind of flattish into the back half, maybe that's still a 4Q, but any color just around the comfort of the 20% plus exit rate for this year? Thanks.
spk06: Yeah, thanks, Matt. We're still committed to that as a target. I think, as we've talked before, it's all about the media growth over the next several quarters because of the flow through that comes along with that revenue growth. I think the other aspect that's going to impact the adjusted EBITDA margin is going to be the divestiture of CBS, which we would expect to happen prior to the end of the year. So we feel good about those things allowing us to achieve that target that we've stated.
spk03: Thanks. And then maybe one on the cryo case launch. Can you just talk a bit about the validation process, so when it gets in customers' hands to when they could potentially be using it, and then any early feedback you've been getting from customers? And as we start to think about contribution in 25 and beyond, any finer point in terms of, you know, numbers of customers looking at it. Is it the commercial side? Is it clinical side? You know, now that you've launched it in a few months, any more color you can provide there? Thank you.
spk02: Yeah, so I think we've, yeah, thanks for the question. So I think we've had a lot of early stage interest. I think that really is driven by some of the, obviously, challenges in the market when it comes to particulate. I think the process, you know, this is early stages, right? And I think adoption is something that obviously, You know, I don't really want to put a time around, but it is in the hands of the right people that are going to be going through their own validation protocols, depending on the client. So I couldn't give you an exact timeline, but I think there is great interest around the product due to the market conditions.
spk03: Okay, maybe just one more on that. So in terms of on the commercial side, is there anything from a regulatory perspective that wouldn't be able to allow on-market or commercially supported therapies to try and swap to this product from the regulatory standpoint? Thanks.
spk02: Not that I've been made aware of at this point, no. I don't think that that is a major challenge, but I do think also we do have some ongoing outreach to regulatory authorities as well. Super. Thank you.
spk01: And the next question is from Stephen Ma from TD Cowan. Please go ahead.
spk07: Hi. Thanks for taking the questions, and congrats on the quarter. One on the cell processing platform, just I guess a follow-up question from prior questions. I mean, you mentioned that, you know, destocking pressures seem to be easing and that you have increasing engagement with clinical customers using cell processing products. But is there any way you can quantify or give us some color on the impact of between how much was it from destocking versus how much is it from companies, you know, maybe ordering more in anticipations of approvals or geographic expansion or approvals of new indications?
spk06: Yeah. Hi, Steve. Thanks for the question. I think it's it's difficult to get that granular. I mean, clearly we, we know which customers have asked us to push out orders. And as I've said in the past, if you look at Q3 of last year, we were probably looking at five or six large direct customers, plus a large distributor that was doing that, you know, where we are today, it's perhaps one direct customer. So that's just to give you a sort of trajectory of, of the easing of those, that particular headwind.
spk07: Okay. All right. Thanks for that. And then maybe a follow-up question on cryo case. Is that a drop-in replacement for cryo bags? In other words, you know, it will impact the workflow that physicians are currently using?
spk06: We think it's a nice fit, particularly in a closed system, which is what it was designed for. So we really don't see it as a massive change of workflow. And I think when you consider and take into account the potential impact it has in terms of addressing the issue of particulates, which are inherent in the use of cryobags, I think that to the extent there is a change in workflow, that tradeoff is more than worth it for the end user.
spk07: Okay, I appreciate that. And then maybe sneaking in one more. On the bowel storage guide, it seems to have tied into the lower end of the prior range. Can you give us some color and maybe square that away with some of the other comments, given that the overall kind of recovery and sentiment in the marketplace seems to be happening? Thank you.
spk02: Yeah, so with regard to the platform, with storage, we continue to see sequential growth in that area. So that's solid. Some of our courier partners have resized a little bit of their EVO fleets based on some of the prior market conditions, but we continue to be excited about the product line in the future.
spk07: Okay, thank you.
spk01: And again, if you would like to ask a question, please press star, then 1. The next question is from Thomas Flatton from Lake Street Capital Markets. Please go ahead.
spk04: Just sticking with the theme of the cryo case, remind us if that's compatible with the SawStar products.
spk06: It is not right now, Thomas, although the definite objective is to have it be compatible with what is currently our bag device. So our vial device, Our vial automated thaw device is definitely compatible with our cell seal vial product line. So the same would go for the bag device to be the cassette device at some point down the road, likely a 2025 kind of introduction.
spk04: Got it. And then just a quick one on the potential impact of a CBS divestiture on EBITDA margins. I mean, it's a single-digit million product line. That's EVA.positive. So, I mean, how many millions of OPEX are we talking about that you might be able to strip out of the middle here? A few million bucks? Can you put some magnitude around that?
spk05: Yeah, that would be correct. So, as you recall, CBS is a low margin on the growth side as well. So, the rest of that being obviously OPEX that we can strip out.
spk04: Got it. Appreciate it.
spk01: Thanks, Thomas. And, ladies and gentlemen, this concludes today's question and answer session. I would like to turn the conference back over to Roderick DeGrief for any closing remarks.
spk06: Roderick DeGrief Thank you, Chad. As we move through the second half of this year, we believe there will be continued strength of the fundamentals underlying the CGT industry, and BioLife is in an excellent position to capitalize on that macro environment. We plan on leveraging our market-leading position in biopreservation to drive the adoption of our other high-margin recurring revenue cell processing tools and services in our portfolio, and expect those to provide an increasing amount of revenue and profitability in the future. Thank you for your time today, and we look forward to updating you on future calls and meeting with some of you at the upcoming investor conferences we'll be participating in during the coming months.
spk01: The conference has concluded. Thank you for attending today's presentation. You may now disconnect.
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