Q1 2020 Earnings Call
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Solutions Inc. earnings conference call at this time, all participants are in listen only mode. After the speakers presentation. There will be a question and answer session to ask a question during the session you'll need to press star one on your telephone as a reminder, todays program is being recorded I would now like to introduce your host for today's program Roderick degrees Jupiter.
That's a lock Sir please go ahead Sir.
Thank you Jonathan good afternoon, everyone and thank you for joining us for the Biolife Solutions Conference call to review, the operating and financial results for the first quarter of 2020.
Earlier. This afternoon, we issued a press release, which summarizes our financial results for the three months ended March 31st.
As a reminder, during this call we may make certain projections and other forward looking statements regarding future events for the future financial performance of the company.
These statements are subject to.
The 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 qualifies forward looking statements I refer you to our periodic and other public filings filed with the FCC.
Company projections and forward looking statements are based on factors that are subject to change and therefore these statements speak only as to the date there given the company assumes no obligation to update any projections or forward looking statements, except as required by law.
During the 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.
Non-GAAP or adjusted financial metrics should not be viewed as an alternative to gap. However in light of our M&A activity. We believe that they use of non gap 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 my Christ, President and CEO of Biolife. Thanks, Rod and good afternoon, everyone. Thank you for joining our call.
Despite significant coburn 19 related disruption to our operations in Q1, the team performed flawlessly delivering record revenue and gating 40, new customers in a very challenging environment.
For the last month or so of the quarter, we hit our team members either working from home part of an essential reduced onsite workforce or not working to all the transition to get our customer support teams up and running remotely.
We stayed in close contact with our customers and shipped more media products than in any other period end buyer likes history.
Many of our bar preservation media customers responded to our proactive outreach and placed safety stock or replenishment orders so their cell and gene therapy research and development projects could continue unabated during the Corona virus pandemic.
Well, it's clear that someone gene therapy clinical trials have been significantly affected by the reallocation of hospital beds to covert patients our customers are planning for success and clearly demonstrated through their order volume.
But our media products are considered mission critical to their cell and gene therapy manufacturing workflow.
In retrospect the business continuity plants, we began to put in place two years ago, which included Offsite media product inventory storage proved well thought out.
Turning now to Q1 revenue, we finished at 12.2 million, which was 111% growth over Q1 last year and 47% sequential growth over the fourth quarter of 2019.
Buyer preservation media sales were the key driver in Q1 with 8.7 million in revenue, representing 50% year over year growth and 67% sequential growth over Q4 last year. We gained 16, new buyer preservation media customers and placed first time orders in Q1.
Some notable new accounts include so fire Jana that packed pharma Sanofi Trovera Basque region and Ventria.
We also processed 13 additional U.S. ft, a master file cross reference request for the use of cryo store or hypothermia, Sol and human clinical trials seller gene therapies.
We estimate that our media products have been used in over 400 customer clinical applications.
I'm also pleased to tell you that we're supplying a proprietary buyer preservation media products to several customers working on cell based treatments or vaccines for covert 19.
Turning to an update on our thoughts star line of automated water free thawing products for frozen Biologics Q1 revenue was in line with our expectation that just under 400000 in the first quarter was shipped the first batch of our new thought star CB product. This new product is designed to safely automate the following a biologic material frozen and cryo back.
Eggs.
Also gained six new thought star customers, including Alba Tech AC therapies knots therapeutics and honeycomb biotechnologies.
With our evil whole chain management platform, including smart shipping containers and the evil I ask cloud App, we continue to gain traction in the southern gene therapy space with our carrier partners, adding 10, new customers in Q1, we're now supporting nearly 100 cell and gene therapy clinical trials with our evil platform through our relationships with two of the law.
Artist specialty carriers, serving the region med space, while Q1 revenue remained modest at 435 K as customer use ramps up we are seeing increased inbound interest in evil platform and are continuing to support existing product validations by leading cell and gene therapy companies.
This activity has been impacted by covert 19, resulting in delays and completing the transition to evolve what we're confident that this will emerge as a strong competitor to the existing non optimize shipping containers and information systems and use.
On our last product revenue stream, the custom biogenic systems or CBS line, we booked revenue of 2.7 million in the quarter. This was slightly below our plan, but as capital equipment. Some customers could have delayed large purchases due to cash conservation plans during the covert pandemic.
Q1, CBS revenue included product shipments to several of the leading cell and gene therapy companies. Many of whom also use our media saw and cold chain management products. We gained eight new CBS freezer customers with two notable accounts being let's start to therapeutics and next immune for perspective, our freezer customer base now totals more.
Than 750 accounts and includes many of the leading cell and gene therapy developers and pharma companies such as Abbvie, That's tell us Bellicum Celgene fate Fisher scientific Fuji film Glaxo, Hitachi Juneau, Kite Lonza Mayo northwest Orchard precision.
Bio SYGMA and sorento.
I'd like to give an update on our intellectual property estate.
The first quarter of 2020, we were granted three new patents related to our cold chain management technologies. This brings our total of issued patents to 50 with 34 additional pending patent applications submitted and in the review process.
Before I turn the call back over to Rod I'll provide some comments on the new growth capital investment, we announced today by existing shareholder cash and capital. We're fortunate to have a growth equity partner in cash and capital that enables us to strengthen our balance sheet to aggressively grow our portfolio of high value buyer production tools and services targeting the cell and gene therapy market.
We believe that through a combination of internal innovation acquisitions co investments and licensing of external assets, we have a strategy to significantly expand our business over the next few years, we're committed to playing a role and consolidating the bar production tool supplier space and anticipate continuing to jointly identify targets with kazdin that may lead to.
The additional corn investments or outright acquisitions with their financial support.
I will pass the call back over to rock to present, our financial for Q1.
Thanks, Mike revenue for the first quarter totaled 12.2 million as you mentioned, representing a 111% increase over last year's first quarter revenue of 5.8 million.
Media revenue.
For the first quarter of 2020 was 8.7 million or 71% of total revenue and represented an increase of 50% compare to last year, largely driven by the buying behavior, Mike alluded to earlier.
This quarter's revenue also included 394000 of sales related to the automated thought product line 438000 of Eagle Cold chain related revenue and 2.7 million and freezers and accessories. All of these revenue streams were acquired subsequent to the first quarter of 2019.
Our adjusted gross margin for the first quarter of this year was 64.1% compared with 71.5% last year.
The decrease in adjusted gross margin for the first quarter reflects the lower margin profile of the automated saw evoke and freezer product lines, which accounted for 29% of revenue compared with media only revenue last year.
Adjusted operating expenses, excluding cost of revenue for Q1 totaled 6.4 million compared with 3.3 million in Q1 of 2019.
The increase primarily reflects the fact that this quarter was the first full quarter of operating expenses related to the acquisitions, we made last year and secondarily to increased head count and stock based compensation expense necessary to support our overall growth.
Adjusted operating profit for the first quarter of 2020 was 1.4 million compared with adjusted operating profit of 774000 in the first quarter of 2019.
Our adjusted net income for the first quarter of 2020 was 1.4 million or six cents per share.
Compared with adjusted net income of 942000 or four cents per diluted share in the same period last year.
GAAP net income for the first quarter included 21.9 million of other income related to the change in fair value of outstanding warrants, whereas GAAP net income in the first quarter of 2019 included other expense of 19.7 million also related to the change in the fair value about staff.
Ending warrants.
Adjusted EBITDA for the first quarter was 2.9 million, which was an increase of 110% compared with 1.4 million in the same period last year for both periods adjusted EBITDA equal to 24% of revenue.
Our cash balance at March 30, Onest totaled 6.4 million.
We believe that this amount when added to the 20 million in capital we're receiving from the placement of common shares to cast in capital will be sufficient to fund our operations as well as provide additional capital to take advantage of any strategic operations.
Opportunities that may arise.
Finally in addition to the 1.9 million shares issued to cast in in the private placement.
We entered into an agreement with our two large Swiss warrant holders to immediately exercise all of their warrants on a cash flows basis, resulting in the issuance of 2.7 million shares and the elimination of 3.9 million warrants. This puts our total issued and outstanding share count at 25.8 million.
And 29.1 million on a fully diluted basis now I'd like to turn the call back over to Mike.
Thanks again Rod in summary, we demonstrated solid execution in Q1 and drove the business to record revenue and an impressive adjusted EBITDA margin demonstrating the operating leverage we envisioned as the enterprise scales. We built a highly valued business as a supplier of critical class defining bioproduction tools for cell and gene therapy manufacturing.
Over 19 continues to create uncertainty and how the rest of 2020 will play out over focused on the things, we can control and serving our customers I will turn the call back over to the operator to take your questions Jonathan.
Certainly ladies and gentlemen, if you have a question at this time. Please press Star then one on you touched on telephone. If your question has been answered and you'd like to move yourself from the Q. Please press the pound.
Our first question comes from the line of Paul Knight from Janney Montgomery Your question. Please.
Hey, Mike what was the portion on the revenue from a stocking orders.
Hi, Paul.
You know, we don't have complete visibility some Pos came in and said cobot 19 related but not all.
No, it's probably a million 2 million and a half maybe it's 2 million were not exactly sure, but that's that's probably a decent guest.
111.
Something like that or one of the half to two in that range.
Okay.
And then.
Regarding that's not on my end sorry about that.
And then regarding Cvs can you talk about how things are going in the April period.
Somewhat Paul I guess I could say that has capital equipment Thats big ticket items and so we are seeing you know some delays in and closing period from quotes and all that on the media side you know the quarter to date has started out relatively strong and so fingers crossed on that and how the quarter is going to enough but I.
He is a different buying behavior on the capital equipment side versus the reagents.
CBS and service.
Very little.
Okay, it's kind of equipment, yes.
The big on the Freezers and then the related accessories are obviously not capitalized with them as a decent accessory business, but most of the revenue comes from the big Iron Yes.
Okay. Thank you thanks.
Thank you. Our next question comes from the line Suraj Kalia from Oppenheimer. Your question. Please.
Good afternoon, everyone can you hear me all right, Yes, Heiser rush.
Hey, Mike hit Rock hope, everyone is safe and healthy.
So.
Thank you so Mike.
In terms of.
You know you guys have anniversaried the last three acquisitions.
Help us in terms of.
What will optimize they should this be gone on the sales force side of equation.
Hello.
Remains to be done as we progress through why twinkie any color would be great.
Sure sure I was really good question. So we've analyzed across the line now.
The various external distributors know the indirect partners, who have been wrapping the various lines, particularly at CBS.
And you know the strategy that we have is to optimize and deploy the best resources based on market segments and so you know the CBS crew was selling into seven gene therapy into biopharma at some other ancillary markets. We're obviously looking to maximize our own media relationships, which are the strongest and leverage those for direct selling so it's a process.
That will unfold over the next several quarters on the on the marketing side, we have several initiatives underway to expose.
The entire new customer base to all the products in the portfolio.
Obviously travel is difficult now to get on site in many places, but nevertheless, the inbound interest in the referral leads were getting from people.
And then really quite remarkable so more work to do in that regard, but we've got a good plan and we look forward to really leveraging those relationships and maximizing that cross selling opportunities units there.
Got it keeping on that's the Mike.
Obviously, there has been an infusion of new investment I guess one question is are there any inorganic opportunities that you are enough work already identified which is driving this decision.
And second so part of that question for Rod specifically is what is the cost of ownership stake of Kazdin. If you don't my my asking.
Sure. So Ross good question I'll take the first part then I'll, let Rob answer the second part my part is yes, there are some.
Some near to mid term opportunities really shouldn't get into the size of opportunities or technologies, but there is some definitely some activity underway and you know to the other question about well is that all the raise it we're opportunistic we see what fits.
Clearly this infusion of capital is helpful. It may not be helpful enough for larger opportunities. If so then we'll be opportunistic to make sure that we can fund those should those are rice rod.
They're going to be right at around 18.4% of the issued and outstanding shares rush.
Got it and.
Hey, Mike you said, if I heard you correctly about <unk> billion and a half 2 million was sort of pull through into Q1.
Demand corporate related for media, how that though.
The remaining three buckets stack up for thoughts start equal and CBS wasnt, an unusual ordering patterns or.
What the somewhat depressed may be in CBS, I guess my point being more than offsetting factors or could that be was then more impact just immediate so.
A little bit difficult to know in that the CBS revenue comes through distributors are Raj, but the media, where we have the direct relationships in the closest relationships.
Well not perfect, we certainly have more clarity so.
Really nothing nothing really outstanding on the thought side.
The evil line or in the freezer side and the media is where we definitely saw customers responding to.
Our outreach and making sure that they had enough media to make sure their clinical programs could continue.
Got it and finally I'll hop back in queue forgive me if one wants squeeze one in any update on the the big fish you guys were hoping for.
On the evil side as the equation I guess you guys had made some brief comments last quarter I believe it was that 80% there any updates there. Thank you sure thanks for asking a permanent.
Yes still on track to covert has caused some delays and some of the validation work, but still on track and no checking indirect regularly with us account to make sure that we understand what the going through and providing all the support weekend.
Thank you. Our next question comes from an lined up Jacob Johnson from Stifel. Your question. Please.
Hey, thanks.
You guys are going well.
Clockwise.
I might say rod.
And obviously strong starts a year.
Is there any way to estimate account and any impact you're seeing.
Im don't make clinical trials in into two if at all it does this varies by product line.
Yes.
I think if you're breaking up a little bit on ourselves I think we got it really hard to to try to assess impact on clinical trials I think based on some of the safety stock and funded from ordering we could infer from that the customer is fully expect that as beds get freed up there will be back in business and enrolling at the the pace that they were before this whole thing star.
And so if anything just validation that our stuff is really really important its critical and they had to have to make sure that they could continue on as far as how they're the rest of the year will shake out with that.
No anybody's Crystal ball. This is good as anybody else's at this point right.
Got it and then just want to your question for me.
Very strong gross margins this quarter.
Soc that up to that to get media sales quarter anything else to call out on the gross margin line.
No I think that's exactly it Jacob is that the percentage of revenue that we got from.
The higher level of media revenue with the higher margin definitely played a positive role on that.
Got it. Thanks, Thanks, Mike you back if you.
Thank you. Our next question comes from the line of rock Gram Silver watch from H.C. Wainwright. Your question. Please.
Hi, This is Larry Colin on just a few for me.
Could you provide a rough update or an update on the rough percentage of your customers that directly.
Impacted by corporate banking restrictions and their clinical development programs.
Sure 100%.
Any customer that was running a clinical trial of a cell and gene therapy has clearly been impacted to some degree none have not been impacted to any degree they've all been impacted to some degree I'm not sure I can get anymore granular than heffler.
Okay, and just qualitatively are you seeing any impact to cover 19.
Related restrictions on FTC review timelines participating does pertinent to manufacturing processes for cell and gene therapy products.
Well, there's no doubt the FDA is marshaling resources to evaluate.
Seller gene therapy based.
Treatments or vaccines for cobot, but for the other stuff the normal cellengine therapy stuff targeting the other clinical disease States, we haven't seen any whether that's going on or not to it could be but we havent seen any.
Okay, and then just last one for me.
Is your business being impacted at all by the significant reduction airline plates and the fact that may having on shipping logistics.
That's a great question and I would say no through our Courier partners. They have been very creative and they have found.
Other ways to get this very temperature and time sort of biologic material pushed around whether it was through the cargo as part of commercial flights versus.
Or cargo only flights, but not to this point in fact, some carrier partners are reporting that their business has increased dramatically because the treatment location for some medicines that they've been shipping has transitioned from the hospital to the patients home I'm not talking about cell based therapies I'm talking to other types of medicine that are cold chain depends.
They are tied with temperature sensitive so yes that they've certainly figured it out.
Perfect and if I can just get one more in.
How defensible do you think the bill cloud application permit intellectual property standpoint it.
Oh I love that question, not just because of an adventure and some of the patents, but definitely we've got a bunch of novel.
Processes and functional areas in the evil I asked and that really really differentiated from the other alternatives that are out there. So we'll continue to to write and submit patents on as much as we can as you may know software patents I really hard to get we have been successful I think with three or four so far so we're going to keep asset.
Perfect. Thanks, guys you're welcome.
Thank you. Our next question comes from a line of Thomas flattened from Lake Street Capital. Your question. Please.
Good afternoon, guys. Thanks for taking the question just stop you from me Hi, guys.
With respect to the capital infusion I know, there's a question about inorganic opportunities other organic opportunities you think you might deploy some of the capital out or there are other growth opportunities inside the inside the business that could be assisted by that.
There are although I would say they use of cash would be modest Rowdies go ahead, yeah, I think it's really about continuing to build out the sales and marketing effort.
Throughout the organization and get that integrated.
That's really where the internal opportunity would be Thomas for deploying that cash best yet.
Yeah got it and then with respect to broadening the portfolio across all the customers do you can you either qualitatively or quantitatively speak to the extent to which you've seen the ability to to cross sell products between customers.
Yes at least at this point it'll have to be in a qualitative perspective, we're doing okay. At that we can certainly do better and we have a a significant project underway with Salesforce dot com to make sure that we've got good visibility and the right tracking analytics and all that so we can really measure how our activities and campaigns are going but it's certainly my intention that we'll be able to give some key.
Quantitative granularity on that in coming quarters.
Great.
I appreciate the opportunity. Thanks, Thanks, guys for welcome.
Thank you. Our next question comes from the line Markwest Burger from B. Riley FBR. Your question. Please.
Yes. Thank you good afternoon.
I'm wondering if you could provide some insight into the discussions you're having with your distributors and maybe.
How.
The discussions relative to their geography in the activity there seeing across the globe.
Hi, Mark.
Well, we're certainly talking to them I'm really not sure how could limit my comments without getting into it a little too much of inside baseball, but no doubt the distributors or after it and we've signed some new distributors were evaluating all the distributors for productivity, but this is a product line has highly valued to the extent they're concerned about competing.
Against US I guess, all I can say as it it's a really target rich environment. There a lot of prospects. We don't have a lot of channel conflict and our distributors at least the top four who have worldwide footprints in terms of weather sellers and support areas are they're doing fantastic just really phenomenal.
Understood. Thank you for that.
Talking about maybe potential.
Capex spending slowed down related to the to the freezers.
Can you also add some color on potential the delaying capex, maybe because of the new freezers that might be coming out later in the year and anticipating that and what's the kind of mix.
There.
Yes, good question.
We really related to cobot right now as opposed to people just waiting to get to the next improve model. We've got a lot of stuff going on a lot of conversations underway and these are big projects and these are expensive product. So there's a lot of work that has to happen both on our side as well as the customers with.
Site assessments and in fact excess acceptance testing site acceptance testing and so on and so forth. So their long term and we don't really sense right now that many of these opportunities are being delayed or customers are waiting because they just want to hang out for the next to the next.
Rendition that might be coming up here.
Understood and last one from me.
In light of kind of the global supply chain disruptions.
And your contract manufacturers in China, making in few Lars and potentially moving that to Detroit has that been that thought process been accelerated and kind of whats the progress on that front. Thank you very yes. Thanks for asking why didn't go ahead on that so it is definitely the plan for 2019, it's going to happen toward the end.
Of the year, we've not had any supply issues with.
With numerous coming out of China to date at least and we have what we believe is adequate inventory in Albuquerque for the next couple of quarters. We do have some units that are on order to come in.
Throughout the summer, but we have no indication that theres anything that would prevent those from coming in.
Great. Thank you.
Thank you. Our next question comes from the line of Christopher Hillary from Big Capital. Your question. Please.
Hi, Good afternoon, Hey, Chris How're you doing.
Great.
How are you guys, you and everyone staying healthy yes, thanks for asking hopefully on your side as well, yes, Indeed I.
I wanted to ask just as part of the broader discussion about having more of the healthcare supply chain.
Mastic are there certain areas that you think would be.
Of particular interest to the company to either expand or invest in.
Definitely yes, and I will try to be just broad as opposed to being two specific so we don't tip, our hand to other folks who might be shopping for the similar assets or something but but really broadly speaking Chris you know our interest is looking at the 17 therapy manufacturing workflow, which starts with the acquisition of some starting material from a patient that which gets moved.
To sum factory, where someone makes a dose out of it.
Let manufacturer dose gets moved back to a clinic, where its administered to a patient and whether we're talking about autologous therapies or allogeneic for that matter. So really anything that's used in that continuum that I. Just described is of interest now several of those segments are.
Supplied by really large companies that have really good solution. So we're obviously not going to be poking around there, but there is enough opportunity here, we believe around the edges in coming into our the center there where there are some disruptive innovative technologies that we believe overtime could really start to come and some decent market share. So that's what we're focusing on now that could be in the form of.
Reagents containers devices analytics instruments.
Product contact layers you name it so anything in that continue and.
There's a lot there's a lot of stuff that's used in the manufacturer of us LNG in therapy and a lot of areas that really have not been optimized for while an innovation can certainly play a key to reduce cost and also improved quality for our customers.
Okay great.
Good luck in the but with the rest of year. Thanks very much. Thank you.
Thank you. Our next question is a follow up from the line of Paul Knight from Janney Montgomery. Your question. Please.
Ron have you if your K filed down.
We are on track.
Paul to file Tomorrow.
You know kind of five o'clock eastern is the target and it's a pretty hard stop for us. So we're all hands on Dec trying to make that happen with.
With our new auditor.
So fingers crossed okay, and the adjustment effectively low hit on the other line item on below operating income is that correct. Yes for the most part that is correct. There's some small adjustments that will flow through but they're not material in anyway.
Okay. Thanks.
Yes.
Thank you. Our next question comes from the line of Carl Burns from Northland Capital. Your question. Please.
Thanks, and congratulations on the progress I was just curious.
Yes, thanks, yes going back to potential acquisition.
Opportunities do you see.
The environment, maybe coming.
A little more some more.
Wider.
Maybe thoughts in terms of with the valuations may be if Capex would for example, capex maybe under pressure would it be potential opportunities.
Tuck under acquisitions.
Devaluation may come in and be more compelling.
Oh, perhaps Carl you know I think that's.
Every company is reacting to this colder environment and trying to figure out what it means to them and you know some companies.
Have assets that may not be able to be fully utilized or marketed depending on how those companies are reacting what's going on in the world. We don't know that you know each case is different.
I don't think we've got a strong signal right now that valuations are through the roof, nor are they significantly depressed. So things are status quo from my view Rod you want to add anything to no I think thats right and it's just really about.
Keeping an eye out for what's happening.
And things definitely will be impacted if this if this issue of coated continues.
Throughout the year, we would expect some impact on valuations.
Thanks again.
Thanks Carl.
Thank you I'm not showing any further questions in the queue at this time I'd like to hand, the program back to Mike Rice CEO for any further remarks.
Thanks again, Jonathan Thanks again, everyone for your interest in wireline. Please stay safe and we look forward to speaking with you during our follow up calls and when we report our Q2 results Goodnight.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
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