BioLife Solutions, Inc.

Q3 2024 Earnings Conference Call

11/12/2024

spk02: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the BioLife Solutions Q3 2024 Shareholder and Analyst Conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. I will now turn the call over to Troy Wicherman, Chief Financial Officer of BioLife Solutions.
spk08: Thank you, operator. Good afternoon, everyone, and thank you for joining the BioLife Solutions 2024 Third Quarter earnings conference call. On the call with me today is Roderick DeGriff, CEO and Chairman of the Board. 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 third 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-GAP or adjusted results. Reconciliation of GAP to non-GAP 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 DeGriff, Chairman and CEO of BioLife.
spk10: Thanks, Troy. Good afternoon and thank you for joining us for BioLife's Third Quarter 2024 earnings call. I'm pleased to report another strong quarter, marking our fourth consecutive period of sequential revenue growth and a strong rebound year over year. This further demonstrates our belief that the macro environment, as it relates to the bio-production subsector in which we operate, is continuing to improve. Our cell processing platform revenue totaled $19 million, representing a sequential increase of 6% and up 43% compared to the third quarter of 2023. This is a high-margin business, and we see that profitability directly reflected in our financial performance this quarter with continued margin expansion. Adjusted gross margin for Q3 came in at 54%, up from 44% in the same period last year, and we delivered an adjusted EBITDA margin of 20% compared to 6% last year. These results underscore the attractiveness of our market-leading cell processing portfolio as we continue to drive both top-line growth and margin expansion through our proprietary high-margin recurring revenue streams. Earlier today, we announced the strategic divestiture of our SciSafe bio-storage business, which serves as yet another pivotal step in our evolution. I will discuss this in further detail momentarily, but I'm confident that with our streamlined structure and fortified balance sheet, BioLife is better positioned than ever to deliver long-term value for our shareholders. Looking ahead, based on the strength of our Q3 results, combined with what we're seeing as the last quarter of the year unfolds, we have modestly increased our cell processing revenue guidance, which Troy will speak to later in the call. We believe that the momentum we've realized throughout this year, both in terms of revenue growth and margin expansion, provides us with a solid jumping-off point from which to enter 2025. Staying focused on our cell processing revenue, our biopreservation media products, which account for the vast majority of the platform's revenue, had a strong -over-quarter increase. This was somewhat offset by an expected timing-related sequential decline in other products. Historical biopreservation media revenue trends remain consistent this quarter, with our top 20 customers accounting for approximately 80% of media revenue. An estimated 60% of the biopreservation media revenue came from direct customers in the quarter, and of that amount, customers with approved therapies totaled approximately 40%. We believe our biopreservation media products are embedded in more than 70% of relevant, commercially-sponsored CGT clinical trials, which provides an encouraging indicator for sustainable future growth. In Q3, the CGT regulatory environment continued the forward momentum that started last year, with our biopreservation media embedded in two newly approved therapies during the quarter. This brings us to a total of 17 unique therapies that incorporate our market-leading biopreservation media. Further, we see six additional product approvals, geographic expansions, or new indications occurring in the next 12 months. Looking strategically at the road ahead, we will continue to refocus our efforts and allocate our capital toward our proprietary, high-growth, high-margin cell processing portfolio of products. This morning's announcement of the sale of our SciSafe bio-storage business and a $73 million all-cash transaction is a pivotal step in the evolution of biolife into a pure-play CGT tools provider, driven by our recurring reagents business. Not only does the divestiture fortify our balance sheet, it also frees up significant operational bandwidth, which will be redeployed to support the growth of our core cell processing products. During our recent strategic review, we determined that our bio-storage business, which accounted for $16 million in Q3 -to-date revenue, was furthest away from our core competencies and expertise. In addition, we believe the level of capital required for consolidation and future growth would be better allocated to supporting and expanding our cell processing product portfolio, specifically our biopreservation media products. As a result of a more streamlined product portfolio, we have consolidated all our sales and marketing efforts under Todd Berard, who has moved into the newly created role of Chief Commercial Officer. Todd, who has served as our Chief Marketing Officer, has been with Biolife for more than ten years and has a deep understanding of the CGT market, our product line, as well as established relationships with our larger key customers. Gary Richardson, who has been our Chief Revenue Officer for the last year and the original founder of SciSafe, will become the CEO of the now independent SciSafe. I would like to personally thank Gary and the entire SciSafe team for their contributions to Biolife over the last four years and wish them a bright and successful future. With that said, we realize the job is not done and we're committed to exiting the remaining freezer business. Although CBS generated positive adjusted EBITDA for the quarter and represents less than 13% of sales, it has dragged on long-term margins. We are making steady progress and will provide updates as events warrant. Our vision is to evolve Biolife into a pure-play CGT tools and reagents provider so we can fully leverage our core competencies and the distinct market leadership of our biopreservation media. We believe this approach represents the strongest path to delivering sustained shareholder value as we drive both revenue growth and profitability into 2025 and beyond. Now I'll turn the call over to Troy who will provide a review of our Q3 financial results.
spk08: Thank you, Rod. Today we will be reviewing current and prior period financials from continuing operations for Q3 2024 which excludes sterling. We reported Q3 revenue from continuing operations of $30.6 million representing an increase of 30% -over-year. The -over-year increase was primarily related to a 43% increase in our self-processing platform. Total revenue was up sequentially from Q2 2024 by $2.2 million or 8% primarily driven by a double-digit sequential increase in biopreservation media revenue. Gap gross margin for Q3 2024 was 51% compared with 48% in Q3 2023. Adjusted gross margin for the third quarter was 54% compared with 44% in the prior year. The increase was primarily due to more favorable product mix and better utilization at our Sise safe bio-repository facilities. Gap operating expenses for Q3 2024 were $32.1 million versus $39 million in Q3 2023. The decrease compared to the prior year was largely due to a reduction in headcount that took place at the end of Q3 2023 in addition to an asset impairment of $8.3 million related to our freezer business that the company took in Q3 2023. Adjusted operating expenses for Q3 2024 totaled $17.2 million compared with $18.7 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. Gap operating loss for Q3 2024 was $1.6 million versus $15.5 million in the prior year. Our adjusted operating loss for the third quarter of 2024 was $600,000 compared with $8.3 million in Q3 2023. The decrease in operating loss was primarily due to an $8.3 million impairment the company took in Q3 2023 related to our freezer business. Our gap net loss was $1.7 million or $0.04 per share in Q3 2024 compared to $15.8 million or $0.36 per share in the prior year. The decrease in net loss was primarily due to an $8.3 million impairment the company took during Q3 2023 related to our freezer business and a $4.5 million improvement in gross margin. Adjusted EBITDA for the third quarter of 2024 was $6.1 million or 20% of revenue compared with $1.4 million or 6% of revenue in the prior year. Adjusted EBITDA increased from the prior year due to a $4.5 million improvement in gross margin driven by increased sales of biopreservation media and lower personnel costs. Our adjusted EBITDA increased $2.3 million sequentially from Q2 2024 primarily due to increased sales of biopreservation media. As Rob mentioned, earlier today we announced the sale of our Sidesafe bio storage business and we issued an 8K earlier today which included proformas without Sidesafe in our financial results and includes gap to non-gap reconciliations. For the six month period ending June 30, 2024, our revenue without Sidesafe would have been $44.7 million versus our reported results of $55.1 million. Our adjusted gross margin without Sidesafe would have been 60% versus 53% reported and our adjusted EBITDA would have been 13% versus 15% reported. Although there was a slight decrease in our adjusted EBITDA profile for the first half of 2024 without Sidesafe, we believe we will have a stronger EBITDA profile going forward without Sidesafe as media revenue increases which has a significant flow through to our bottom line. In addition, there will be cost savings going forward by consolidating our sales and marketing department under Todd Berard. Turning to our balance sheet, our cash and marketable securities balance reported as September 30, 2024 was $39.3 million compared with $36.9 million as of June 30, 2024. This does not include any proceeds from the sale of Sidesafe. The total sequential cash increase of $2.4 million was primarily driven by cash provided by operation activities of $6.8 million, partially offset by a $2.5 million principal payment on our term loan and $1.4 million in capital expenditures. Our SVB long-term debt balance was $17.5 million. We expect to continue making quarterly repayments of $2.5 million going forward. Turning to 2024 revenue guidance, we are updating our previous guidance which is based on expectations for our self-processing platform, EVO, Thostar, and 10 months of revenue from Sidesafe and does not include any revenue from CBS. As has been the case throughout this year, the BioStorage Service Platform guidance includes the Thostar Automated Filing Devices product line. Our total revenue is expected to be $98 million to $100 million, a reduction from our original guidance of $99 million to $101 million, reflecting an increase in guidance for our self-processing platform of $2 million, which is offset by $3 million related to the decrease in expected storage revenue given the sale of Sidesafe. Our self-processing platform is expected to contribute $72 million to $73 million, or 9% to 11% growth over 2023. This is an increase of $2 million on both the low and high end of our previous guidance. Our BioStorage Service Platform is expected to contribute $26 million to $27 million, which includes 10 months of Sidesafe revenue. Finally, in terms of our share count, as of November 5th, we had 46 million shares issued in outstanding and 48.5 million shares on a fully diluted basis. Now, I'll turn the call back to the operator to open up for questions.
spk02: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using the speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Jacob Johnson from Stevens, Inc. Please go ahead.
spk05: Hi, this is Hannah on for Jacob. Thanks for taking the questions. To start with the Sidesafe sale, can you just frame up what pro forma growth margins look like and then how should we think about any OPEC savings and depreciation going forward?
spk08: Yeah, we issued an 8K earlier today that lays out all the details for different prior periods, 2021 up to the six months ended in 2024. So you'll see in the six months of 2024, adjusted gross margin with outside safe of 60% and an adjusted EBITDA margin of 13%. However, going forward, we expect that to have a very minimal impact on our adjusted EBITDA profile.
spk05: All right, thanks. And then I know you're not diving into 2025, but with the stocking, we've seen some swings in revenue and growth over the last year. And I'm just curious if you could frame up how we should think about long term growth from here and if there are any puts and takes we should be aware of as we're starting to think about 2025.
spk10: Yeah, I think the best thing to do would be to wait for us to put out our formal guidance, which we'll do in early January in advance of the JPM conference. But I think if you your point is well taken with respect to Q2 to Q3 last year. But then when you look at Q3 forward, as we said in our formal remarks, that we've had four quarters of sequential growth. And while it may not be sequential each and every quarter going forward, we certainly do expect growth in 25. And we believe that the de-stocking in particular is well behind us at this point in time.
spk05: Awesome, thanks. I'll leave it there.
spk10: Thank you.
spk02: The next question comes from Matt Stanton from Jefferies. Please go ahead.
spk09: Hey, thanks. Rod, you talked about -SI-SAFE sale, kind of being able to streamline the structure, balance sheet in a better position to deliver value. Could you just talk about some of the areas of focus post the sale, whether it be looking to do additional deals, capacity adds around the media business, just like where the focus will be strategically post the SI
spk10: -SAFE sale there? Thank you. You bet. The focus is in general around our self-processing product line, which would be the biopreservation media and the sextant tools that we acquired several years back, which would include HPL, the CryoSeal product line, which includes the newly introduced CryoCase, as well as the CT5 automated fill machine. So those products are going to get the lion's share of our attention. With respect to capacity in particular, we definitely have some capacity needs coming into the next couple of years with respect to biopreservation. And that sale of SI-SAFE provides us with the capital to do so. To the extent that we would look at anything inorganic or any kind of transactions from an M&A perspective, I think that there's a place for that. But I think that our criteria going forward around this issue is very stringent. And I think at this point, the only thing that we would look to do needs to have a direct impact on maintaining or expanding our market leadership position in those self-processing tools. So that would be biopreservation media. It would be HPL, et cetera. The other, I think, key criteria is that whatever we do does not negatively impact the margin expansion trajectory that we're on right now, because that's a critical objective for us to increase that margin both on the gross side and on the adjusted EBITDA side.
spk09: Awesome. Thanks for that. And then, I guess, going back over to Sexton, the launch of the new crowd case, just any update there? I think it's commercially available this quarter. For those that have trials that had it in their hands, kind of feedback, whether that be BioPharma customers, CROs, CDMOs, folks like that. If we look out a year from now, what are you going to quantify as a successful launch of that product here? Thank you.
spk10: Yeah. I think the initial impression from a handful of really key customers is positive. There's a pretty significant validation process that these customers need to go through to consider this. It's not insurmountable in any way, shape, or form, but the initial feedback is good. I would expect to start to see revenue generated at any kind of material level toward the end of next year, the back half of next year. But we may end up talking about some sort of revenue contribution in our guidance, but at this point in time, Matt, it's a little early.
spk09: Thank you. I'll leave it there. Appreciate it.
spk02: You bet. The next question comes from Brandon Smith from TD Count. Please go ahead.
spk01: Hi, guys. Thanks for taking the question. Congrats on the solid quarter. Maybe just a quick one from us, kind of building on the previous questions here, but can you expand a bit on what some of the specific levers are within the cell processing platform that you can pull heading into next year just to help shore up some of that top line growth in 2025? I guess what I'm really getting at is that I'm wondering what kinds of macro trends you're seeing specifically and how some of those could be leveraged as you kind of continue to restructure the business internally. Thanks. Yeah.
spk10: So I think that as we've talked about, you know, a couple of key factors, one would be the fact that 80% of our media revenue comes from 20 customers. That's a really key fact. And so to some degree, our success is based on their success, right? So that's an important thing. I think that the opportunity that we have to drive revenue past a sort of natural pull that would happen from these large customers is to deepen our relationship with our distributors, which we're working on doing. There are some pricing opportunities that we have also that we have so far had some good initial success on in terms of reducing historical legacy discounts. And I think the other area where we can actually have potentially material impact on driving revenue and self-processing is that cross-selling feature of the sextant tool products into our existing customer base. And there are a number of different evaluations going on for different products with different customers. And we would expect to see some revenue come out of that toward the end of next year in particular, Cryocase being one of those, as I mentioned earlier.
spk01: Very helpful. Thank you.
spk02: You bet. The next question comes from Anna Snupkowski from KeyBank. Please go ahead.
spk03: Hi. Thanks for taking my question. This is Anna Snupkowski on for Paul. My first question is regarding the announced divestiture of PsiSafe. You talked about this a little during your prepared remarks, but I was wondering if this changes your strategy at all going forward specifically on the potential divestiture of CBS.
spk10: Sorry. I think in terms of CBS, I'll just speak to that specifically. We are definitely in the throes of a transaction there. We're pretty close and we are committed as we have been for some time to exiting that business through a transaction. Stay tuned for that. In terms of the strategic impact of the sale of PsiSafe, I think we've tried to be clear about the fact that the focus of the company going forward is going to be on the proprietary higher growth, higher margin, recurring revenue products that primarily are in the cell processing platform as it's defined today.
spk03: Makes sense. Looking at cell processing, is there anything you would call out in terms of customer de-stocking or pushing out orders or would you say that is largely normalized within this segment?
spk10: We believe that Q3 was a normalized order for us with respect to that and de-stocking as we've talked about in the past really got behind us. We had one customer in Q2 but that customer started to take product in Q3 so we do believe it's behind us barring some sort of industry wide issue that pops up here again.
spk03: Thank
spk02: you. The next question comes from Matt Hewitt from Craig Hallam Capital Group. Please go ahead.
spk06: Good afternoon and congratulations on a strong quarter. First up, thank you for pointing out the 8K. I think you mentioned 60% roughly gross margins, absence size, safe contribution in the first half of the year. How should we be thinking about your margin trajectory as we look out into 25 and beyond? Where could your margins go particularly on the gross margin side?
spk08: Yeah, Matt I'll take that one. You're right, 60% for the first half. What we've been talking about how key the growth of the media revenue is to our financial profile not only on the growth side but on the adjusted EBITDA side. As you recall historically before we did any acquisitions the media gross margin was roughly 70% and then some of the initiatives were working on internally to help expand that margin even further to drive our overall consolidated gross margin into called the upper 60s in the not so distant future.
spk06: Excellent. And then just regarding the third quarter here, obviously a nice pop both sequentially and year on year for the media business. Was that just a function of the two approvals in the quarter getting some extra stocking there or was there something else that kind of drove that increase? Thank you.
spk10: Yeah, it was not related to the two approvals that we saw. There's usually a fairly decent amount of time that goes by between those approvals and seeing that additional demand flow through. It really had to do with just strong demand across that top 20 customer base and came in very nicely for us. So, that and what we see happening in Q4 is what led us to increase the cell processing guidance by $2 million. That's great.
spk06: Thank
spk10: you. Thank you.
spk02: Again, if you have a question, please press star then one. And our next question comes from Thomas Flatten from Lake Street. Please go ahead.
spk07: Hey, Rod, just to follow up on that last comment, can you comment qualitatively on some of the smaller customers, you know, the earlier stage biotechs, academia, etc. How are they coming along from a macro perspective?
spk10: Yeah, I think they're coming along fine. And we look at those basically through, we look at our distributors, our large distributors, the top three, for instance, as proxies for those smaller customers. And we've seen good sequential growth from those distributors, bar one, but that had more to do with the renegotiation of the distributor agreement around pricing than it did around demand. So we feel pretty good that the demand is across the board, not only just for the direct customers, but for distributors as well, representing those smaller academic and earlier stage companies. It's been moving in the right direction for us for sure.
spk07: Excellent. And then with respect to longer term growth within cell processing, how relevant is Asia, for example, in terms of geographic expansion to help keep those long term growth rates up?
spk10: You know, less than 5% we believe of our revenue comes out of China right now, specifically China even less for the rest of Asia. So while it's an important piece of business for us, it's not material in the sense of the things that are going on, whether it's the Bio Secure Act or other things like that. We do not see any impact of that on us going forward, at least at this point in time.
spk07: Got
spk10: it.
spk07: Thanks so much.
spk02: You bet. The next question comes from Yi Chen from HC Wainwright. Please go ahead. Hi, is your line on mute?
spk04: Sorry. So sorry it was. Sorry, it's Jade on for Yi Chen. So thank you for taking my question. Sorry for being on mute. So can you just quickly, more on those biggest three distributors you were talking about. Do you have any idea of the like approximate number of individual customers that represents or?
spk10: Yeah, collectively we think it's in the neighborhood of four to five thousand worldwide. Okay, great.
spk04: And so I think I heard you say earlier it was 17 approved CGTs currently using the services.
spk10: That's correct. Biopreservation media, particularly.
spk04: Do you expect that number to change in the next six months or so or are most things further back in the queue, do you think? No,
spk10: as we stated earlier, we do expect six additional, whether they're unique therapies or geographic expansions, indications, new indications for the same therapy or movement up the line of treatment. We expect six of those occurrences in the next 12 months or so, nine to 12 months.
spk04: Okay, all right. Thank you so much.
spk10: You bet.
spk02: This concludes our question and answer session. I would like to turn the conference back over to Roderick de Griffe for any closing remarks.
spk10: Thank you, operator. It's been a little over a year since I came back into an operating role with the company. And as I look back, I'm very pleased with the progress the BioLife team has made. In the last 12 months, we focused the bulk of our efforts on our proprietary higher growth, higher margin core cell processing platform. This has allowed us to reestablish sequential revenue growth and streamline our operations, both of which have driven solid margin expansion, especially at the adjusted EBITDA level. With a strengthened balance sheet and an even more focused product portfolio, we're well positioned to leverage our market leading position in biopreservation to drive the adoption of the other high margin recurring revenue cell processing tools in our portfolio, which we believe will drive continued revenue growth and increased profitability. We appreciate your time today. I look forward to updating you on our continued progress on future calls and meeting with some of you at upcoming investor conferences during the coming months. Thank you.
spk02: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

-

-