Q1 2021 BioLife Solutions Inc Earnings Call
[music].
Ladies and gentlemen, thank you for standing by welcome to the Q1 2021 Biolife solutions earnings 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.
To ask a question at this time, we will need to press Star then the number one on your telephone keypad to withdraw your question press the pound key thinking now I would like to turn it over to Mr. Roderick de grief Biolife CFO.
You may begin the conference Sir.
Thank you John and 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 2021.
Earlier. This afternoon, we issued a press release, which summarizes our financial results for the three months ended March 31.
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. 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 day. They are 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.
These non-GAAP or adjusted financial metrics should not be viewed as an alternative to GAAP. However in light of our continued 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.
Now I'd like to turn the call over to Mike Rice Biolife CEO.
Thanks, Rob and good afternoon, everyone and thank you for joining our call.
Joining Ron and me today is Dusty Tenney, President and Chief operating officer.
We're off to a strong start to 2021, so I'll get right to it.
Q1, we booked a record revenue of nearly 17 million a 40% increase over Q1 last year.
We gained 80, new customers compared with the full year of 2020 strong count of 213 new customers.
The team executed to drive product adoption across the portfolio and to set the stage for a stellar 2021.
We're making an initial increase to our revenue guidance for the full year 2021, which rod will speak to in a few minutes.
We also expanded our leadership team with the promotions of markets shows to Chief revenue Officer, and Sara Ebersold as VP global human resources.
Lastly, we strengthened our board with the addition of new directors, Amy to Ross and Rachel Ellingson.
Now I'll make some comments about our three revenue platforms, starting with media.
In Q1, we booked record media revenue of nearly $9 million, which was up 3% over the same period in 2020, a tough comp when we booked about $1 $5 million in COVID-19 related safety stock orders for our bio preservation media.
We gained 16, new media customers, including Celsius Therapeutics galvanized therapeutics hydro so.
<unk> and Salix.
We also received confirmation that our media products will be used in an additional 13 clinical trials for new cell or gene therapies from customers, including <unk>, Johnson Mustang bio and Carta Takeda and community.
We estimate that our bio preservation media products have been incorporated into nearly 500 customer clinical applications.
These are immediate as Houston five approved therapies.
If the cargoes from kite.
Honestly in a decrement from Celgene and <unk> from Bluebird.
<unk> is also used in for new therapies that could get approved in the next few quarters. These include I'd itself from Celgene. When we do buy sell from <unk> to sell sit Lasalle from Johnson and early sell from Bluebird.
We continue to believe that our media franchise, a sticky marquee customers as the engine that we can leverage to market, our bar production tools and services portfolio too.
Our freedom of thought platform performed well in Q1, we booked nearly $5 million in revenue a 60% increase over the same period in 2021.
We gained 39, new freezer and thought customers and completed the development of our new high capacity controlled rate freezer family. The first of which was shipped in mid April to our current fast our customer.
And our final III revenue platforms bio storage, which includes Evo cold chain and Si state of storage services, we booked revenue of $3 1 million increase of $2 6 million over Q1 2020, we gained 25 new customers in the platform, including 16, new Evo cold chain users.
Demand for <unk> storage services continues to increase.
Regarding M&A, we continue to be active and believe our strategy can accelerate growth and further solidify our position as a leading supplier of class defining by our production tools and services.
I would now like to give an update on our acquisition of Sterling Ultra cold. So I'll ask <unk> to provide some comments on how we are continuing to integrate all of the companies we acquired by focusing on revenue and cost synergies system upgrades and organizational efficiencies Dusty.
Thanks, Mike Sterling Ultra cold continues to realize significant market traction, adding 29, new customers during the quarter totaling over 450, <unk> freezer systems globally.
Within these new customer footprints, Cadillac recently announced a global strategic partnership with Sterling Ultra cold to establish energy efficient cold chain capabilities for biologics and emerging modalities, including cell and gene therapies.
Sterling is ultra low temperature freezer system is unique in the market.
The only <unk> to provide the full range of ultra low temperatures between minus 20, and minus 80 <unk> in a single system that can operate within any global location by simply changing our power Corp.
This is ideal for companies that have multiple biological storage temperature requirements, enabling ultimate flexibility to deploy these systems virtually anywhere in the world.
Currently Sterling has the smallest footprint highest capacity freezers on a market that are extremely reliable given the application of the proprietary Stirling engine, which has only two moving parts.
The combination of these attributes also culminates in Sterling freezers.
<unk> energy Star, having both the lowest use of energy of all freezer systems within its class and lowest heat output of any <unk> on the market delivering superior environmental sustainability benefits.
We also recently completed proof of concept testing of our proprietary Stirling engine technology, which demonstrated an ability to achieve cryo temperatures at minus 160 see if commercialized this potentially disruptive intellectual property could provide even more flexibility to support the expanding cell and gene therapy market.
Building off a strong finish to 2020 Sterling delivered its strongest quarter on record with unaudited revenues of $17 5 million.
Leveraging substantive.
Capacity increases within our operations.
Approximately 20% to 25% of these sales can be attributed to the support of COVID-19 vaccine storage and distribution.
The balance of sales falls into a similar historic pattern with roughly 60% of sales within pharma biotech.
20% within academic and government research and 20% supporting clinical and bio banking applications.
For the balance of the year, the Sterling business does experience some level of seasonality during Q3, given EU summer holidays slightly offset by U S government fiscal year end spending during the quarter in Q4, we have historically experienced a slight pickup as customers spend their year end capital budgets.
These calendar factors are built into the aggregate guidance that rod will share with you later in the call.
As I have assumed the role was integration leader for the business, we have begun to identify clear growth synergies in the business that include but are not limited to cross selling products.
Expanding distribution networks and geographic reach across the portfolio notwithstanding the opportunities that we have and the launch of new products across the portfolio in the second half.
The complementary nature of Sterling into Biolife portfolio, our focus on cost synergies has targeted supply chain optimization and rationalization of op ex spend recognizing that there are some duplicative described discretionary expenses in the area of sales and marketing information technology, and G&A that can be reduced or eliminated to improve our call.
Structure.
Across the Biolife enterprise, we've already identified several best practices that will be share to improve operational performance and further enhance our productivity and efficiency critical in the near to midterm.
These initial synergy opportunities have been factored into our second half outlook and guidance now.
Now I will turn the call over to Rob.
Thanks Dusty.
As we mentioned on our last call for 2021, we have streamlined our revenue reporting into three categories Bio preservation media, which consists of all media sales freezer and thought platform revenue, which includes the freezer and automated thaw product lines and the bio storage platform, which includes evil rental revenue.
<unk> as well as bio storage revenue, resulting from our acquisition of size say for last October.
Revenue for the first quarter totaled $16 8 million, representing a 39% increase over last year's first quarter revenue of $12 2 million sequentially.
Sequentially total revenue was up 14% over last quarter.
Media revenue totaled $8 9 million, which represents a modest 3% increase over the prior year. However, as we have previously discussed we believe last year's Q1 media revenue included approximately $1 $5 million of COVID-19 related demand pull forward. So we estimate that a normalize.
<unk> year over year growth rate from media this quarter was approximately 25%.
Revenue from the freezer and thought platform totaled $4 $8 million this quarter or an increase of 59% compared to 2020, driven by strong freezer sales included the shipment of our first high capacity rate freezer, which had a sales price slightly below $500000.
Our bio storage platform revenue totaled $3 1 million compared to 438000 last year. The increase in this revenue is primarily attributable to sales generated by our acquisition of <unk>, which occurred in Q4 of last year.
Our adjusted gross margin for the first quarter of this year was 55% compared with 64% last year.
The decrease in adjusted gross margin for the quarter reflects the lower margin profile of the acquired product lines, which accounted for 47% of revenue this quarter compared with 29% of revenue in Q1 of 2020.
Adjusted operating expenses for Q1 of 2021 totaled $8 8 million compared with $6 4 million in Q1 last year.
The increase was primarily attributable to the inclusion of size safe operating costs. This quarter not in place in 2020, and secondarily to increased headcount and stock based compensation expense necessary to support our overall growth.
Our adjusted net income for the first quarter of 2021 was 478000 or <unk> <unk> per share compared with adjusted net income of $1 4 million or <unk> <unk> per diluted share in the same period last year.
Adjusted EBITDA for the first quarter was $2 8 million, which was basically flat compared with $2 9 million in the same period last year.
It should be noted that both adjusted net income.
And adjusted EBITDA for Q1 of last year were positively impacted by approximately $1 million based on the flow through of the COVID-19 related media demand pull forward.
Our cash balance on March 31 totaled $89 million.
And inclusive of the $6 6 million shares issued to shareholders of Sterling on May 3rd. We currently have 44 million shares issued and outstanding and $42 7 million shares on a fully diluted basis.
On our last call. We provided full year 2021 revenue guidance of between $101 million to $110 million inclusive of an expected contribution of $35 million to $37 million from the Sterling acquisition.
Based on continued strong demand at Sterling, we now expect that the 2021 revenue contribution from Sterling will come in $5 million higher than originally expected or 40% to $42 million and we are increasing our full year 2021 guidance accordingly to $106 million to $115 million now.
I'd like to call turn the call back over to Mike.
Thanks Rod.
I'd like to summarize the key takeaways from Q1 in our rest of year outlook, we're off to a great start across the portfolio.
Travel restrictions are lifted and we're back on the road visiting customers in our sites to meet with team members.
We expect 2021 to be an inflection year based on our Q1 results a very strong Q2, so far and our confidence in customer demand for our products and services throughout the rest of the year. The Sterling team continues to crush it from accounting on industrial to play a critical role in integrating sterling into Biolife now I will turn the call back.
Over to the operator to take your questions John.
Thank you at this time I would like to remind everyone. If you would like to ask a question. Please press Star then the number one on your telephone keypad.
Sure.
First question is coming from the line of Chris Lin from Cowen.
Hi, Thanks for taking my questions Hi, Chris Mike.
Mike So Mike from a dusty.
The number one question I received from investors today, and turn Sterling specifically.
Specifically investors are asking how differentiated the ultra low temperature technology is and how difficult it would be for a competitor to enter this space.
I know this was addressed that point during the last call and all of this call, but any incremental details you can provide would be appreciated.
Adjusted why don't you take that one okay. Chris. Thanks. Thanks for the question in the representation of the share base. There I think there's a couple of things that I think are meaningful one is really around the market. When you take a look at the <unk> market, it's definitely growing mid to high single digit which is.
From from our standpoint, a key attribute in terms of the investments that we're making to expand the portfolio. I think we're also taking share in the market our brand recognition through the COVID-19 period is really exacerbated.
The visibility of Sterling ultra cold in the market and the flexibility of a tool that can be used at multiple different touch points throughout.
The markets that we're addressing.
And I think the third is an opportunity in relationship to the geographic reach and right now as I start to think about the opportunities in that particular space current.
China comes to mind, where clearly underpenetrated in that respective market and by virtue of that that's probably the highest growth market. That's out there today in terms of <unk>. So I think it's those three things I think it is the market growth I think it's the fact that we're taking some share and the opportunities that we have in a market that we're not playing in today.
Okay. Thank you maybe could you also just address how difficult would it be for a competitor to enter this space. So really just how long will it take you to develop this technology for for I guess, a larger competitor.
Well one is a realization that the technology that we have which leverages sterling is well protected with patents those patents.
<unk> had been brought into the Biolife portfolio.
First I want to get into the space and establish themselves, especially with the breadth of sales and distribution that we have on a global basis Thats, a real tough putt, Chris to be quite honest and by virtue of that.
The ability to get into the market to be successful as a real challenge, especially with the entrenchment that we have with a number of critical customers. One nice highlight of course was catalyst with the with a global relationship that we've recently just established.
Great very helpful. Just two more questions from me and apologies if I missed this but I think you increased sterling revenue guidance by $5 million for the full year.
Whats driving the upside.
It's just Chris to fundamentally continued strong.
Demand that we see coming down both in Q2 in the near term versus when we put out our guidance back in March.
It's been stronger than expected and when that's expected to continue throughout the rest of the year.
Okay, Great and last question, Mike could you just help us unpack the media strength and a bit more detail.
They are being driven by the addition of new customers or is it existing customers increasing utilization as they progress through clinical trials.
Thanks, Chris Great question, I'm glad to provide some detail, it's both but seriously the impact comes from existing customers have progressed to clinical trials and need more media and we're also acquiring new media customers and continue to do so at a really fast clip. They don't buy very much in the early phases or even in the preclinical phase but.
We're capturing the market really well, but it's clearly the biggest factor is existing customers progressing through and needing more as their enrollment increases as they advance to later stages of development.
Great. Thanks for taking my questions sure.
And then if you would like to ask a question. Please press Star then the number one on your telephone Keypad next question is coming from the line of Jacob Johnson from Stephens.
Hey, good afternoon, Mike Rod and Dusty Hi.
Hi, Jacob.
I guess first question, maybe just on the sequential growth in the services segment.
Like Evo revenues picked up nicely sequentially.
Just confirm if that was the case in any kind of color you want to talk about the growth.
That segment, yes.
Yes, so per.
My comments early on Jacob we are.
We're trying to streamline the revenue categories, because when you look at both thaw and Evo.
Right now they are representing somewhere around less than 5% of total revenue and when we plug sterling into the mix next quarter, it's going to even be smaller more like two years or 3% of revenue so to call that out as a separate line item is not something we're going to do but what I can say is that there was some sequential growth on on that.
<unk> side, but the bulk of the increase.
Is the.
As a bio storage revenue from size say, if that had a nice bump up and we are seeing some strong growth and we have some pretty decent visibility as that unfolds because typically there is there are contracts.
The large ones that are signed with some pretty specific timelines associated with them in terms of when that revenue starts to kick in so we're pretty confident and optimistic about that contribution this year.
Okay got it thanks for that and maybe.
One other question for you just.
If I look at the the freezer and thoughts.
You did just shy of $5 million of revenues during the quarter I think if I back out Sterling you Dan.
Did something like 15% to $17 million for that segment for the year was there any kind of onetime benefit in the quarter.
I know you don't like talking about specific product line sales there similar seasonality in this segment to.
So the seasonality that dusty outlined at Sterling.
I think we're going to see something similar in Q3 that debt Dusty highlighted I think relative to Q1 here certainly we had a strong quarter with just the core product line that the company has been selling now for some time, but as I mentioned, we introduced the high capacity rate freezer, which has a very high.
<unk> ASP nearing a half a million dollars and that certainly you don't have to sell many of those two to have that positive impact on the revenue line.
Okay got it and then.
Maybe just one big picture question for whoever wants to tackle it.
You put out this $250 million revenue goal in the next three or four years can you maybe talk about and now you have these.
Newly defined segments, how should we think about the growth profile of each of those segments to get to the $250 million.
Should we assume theyre, all kind of growing similarly or should we expect.
One or two of these segments to be kind of more important growth drivers as we look out three or four years.
Yes, rather than then get.
<unk> around growth rates, what I would say is this jacob that when you look at the $2 50 right.
Alright, we would expect just slightly over 50% now that we have sterling onboard coming from the freezer and thaw product platform.
About 30% would come from media.
And 20% we would expect to go from.
Come in from storage.
That storage line.
Got it I should ask the question that way.
And congrats on the quarter you bet. Thank you Jake Thanks Jacob.
Next question is from Thomas Flaten from Lake Street capital.
Hey, guys. Thanks for taking the questions.
Hi, Tom.
Just and I might be pushing it a little bit here, but I know, Mike you said that you would likely see expansion of the commercial products in the 12 months to 24 month window you have.
Got a couple of products that meet that criteria.
Is it too early from a small number of events to really see if that thesis is bearing out in terms of multiple expansion in terms of.
Product that you are selling to those commercial products.
It's still too early Thomas sure I mean, we're in five Karl Storz using five approved therapies now I mentioned for more who could get approved in the next several quarters.
I think the takeaway.
Our thesis there is that cryo store hypothermia, so they're used in so many customer clinical applications.
And let's be fair about it I mean, there's going to be probably serious attrition. If we're in several hundred we're not going to have 20 car Ts all targeting the same specific form of cancer right from the market can't support that but nevertheless, we have so many shots on goal that we believe that over the next.
Three to five years, if the FDA is.
Doing what they say, they're going to need to staff up into.
To fast track application and review and that we could see we could actually see 10 to 20, new approvals each year starting in 2025.
We are in a such a big number of those where there is tremendous upside for us from the media side alone.
Great and then.
So to use someone else's phrase a slightly bigger picture question as you look out at the universe of potential acquisition opportunities is there is there a SKU product versus service or do you have that.
Do you have a preference there are your opportunistic across the board.
Well I think the.
Net responses certainly opportunistic if we can find consumable disposable revenues with media like margins of course were going to try to find those first.
Those aren't growing or falling off trees are there aren't that many of those that are left Nevertheless, we do have some targets that could be meaningful for us and where we are active so.
Great and then just one final one.
I was caught up in taking notes I was wondering if dusty if you could repeat the seasonality comments that you've made in the prepared comments I'm not sure I caught those properly.
Yes so.
Thomas the phraseology that I use there was really centered around the fact that in Q3.
There is some.
Level of slight off.
Downward turn in the business slight driven.
Driven by the European summer holidays, but slightly offset by the U S government fiscal year end spend.
The second referenced was really in Q4, and Thats normally where we experienced a slight pickup just by virtue of the year end capital spending.
Excellent. Thanks, so much congrats on the quarter guys. Thank you. Thank you.
Okay.
And then if you'd like to ask a question. Please press Star then the number one on your telephone keypad net.
Next question is from Michael <unk> from Keybanc capital markets.
Two on the media any commercial stocking revenue in <unk> that was in preparation of the true commercial launches that were approved in <unk> and then.
Looking forward baked in the guidance you are implying.
If you can step up in growth in media can you just talk to the visibility of that and I guess any any numbers baked into the potential commercial approvals.
You mentioned earlier on the call.
Thanks, Mike This is Mike I'll take the first one yes, so we would expect.
The company's net recently got approved to be meaningful customers force in this calendar year.
Whether or not.
We can attribute their order flow for stocking are gearing up for commercialization, we are not going to get into that but I would just leave my remarks to say that they should be meaningful customers meaningful revenue contributions with media, Rob you want to take the second part yes sure. So.
Yes, Mike as we've talked about in the past.
We have a pretty significant revenue concentration in the media business and so the bulk of those customers, we have supply agreements with and they provide us with forecast, which gives us some decent visibility it's getting a little chop here over the last say 24 months versus what it was before that but nevertheless.
It gives us some decent visibility and then also customers are starting to get in the habit of actually some of the larger ones placing pose.
Out through the balance of the year, which corresponds to that forecast. So that we have pretty good visibility on a chunk of that media business. Why is why we're pretty confident about where it is.
Great. Thanks, and then Dusty on the Sterling side.
Guess, maybe run rate in the first quarter revenue of $17 five.
That kind of gets you to $70 million from a full year, but the overall guidance I think implies about $60 million. Once it's run into Biolife mix can you kind of talk to the dynamics of that and then incrementally how much revenue was baked into the new Catalan announcement as well thanks guys.
Yes.
So Mike if you take a look at the business profile and I provided a little bit of guidance, that's sort of laid right into what rod had provided to you.
On a linear basis and I think the upside that we're seeing inside of the business as a byproduct of the fact that we did see very strong demand in Q1.
One would say that things were over from a COVID-19 perspective and a share.
Some observations in relationship to what that looked like in relationship to the total revenue so given that as a construct in our continued effort in terms of build out of capabilities. Both in the research side some level of COVID-19.
<unk> dynamics that is continuing to spillover and we're seeing that benefit come through by virtue of the bookings that we're seeing inside the business.
As a result, and Thats again supported by the guidance of Rod shared with the team.
If you do linear extrapolate the Q1, even though again, we expect to see a little bit of a slight downturn just by virtue of the conversation in Q3.
On a linear basis theirs, we're operating in that $60 million to $70 million range that you just noted.
And was the driver of the upside of the guide on the Catlin announcement can you provide any color around that thanks.
So from a Cadillac perspective that was baked in as part of the guidance.
They are expanding globally.
We've got incredible relationship that has been a byproduct of some of the work that we've done over the over the last two or three years in building that relationship.
Perfect. Thanks for the time guys.
Mike.
Okay.
Next question is from Karl.
Laurence from Northland capital markets.
Question and also.
Congratulations on your progress on.
We're getting immediate sales thanks.
Looking at meeting media sales and $8 9 million up three 3% I think $1 5 million was related to COVID-19 safety purchases in 2020, and you had mentioned the normalized number would have been up.
Approximately 25 percentage year over year basis. So my question here is has the impact from the COVID-19 purchases in 2020 bake offs at this point and then I have a follow up question, Yes, I think that what we saw early on last year when it happened.
You might recall Carl that we were of two minds. We didn't know if it was a permanent safety stock that our customers were putting in place or if it was simply demand pull forward that would be.
And reduced revenue throughout the rest of the year I think at this point, we feel pretty confident to say that it was really demand pull forward and they used it throughout 2020.
The balance of 2020 was probably a little bit lower.
Based on that pull forward. So we think that there is zero impact in Q1 of this issue of Q1 of this year. So from our perspective, it's behind us, but it does create this lumpiness and we've talked about in the past debt as we go forward through the year in our view the best way to try to calibrate the meat.
<unk> growth rate is to look at the year to date number US again as we go through 2021, and I think that's going to be a better reflection because it'll smooth out.
The sort of bumps that we've had in 2020.
That's very helpful. And then also just a follow up on the Catlin expanded agreement.
If I recall correctly, there was a commitment in addition to being preferred vendor of 100 feet Freezers I'm wondering if you're able to quantify that spend and over what timeframe you would expect to garner.
Yes, so we.
<unk>.
We've got an agreement with Cadillac and the specifics around 100 is a byproduct of them actually getting their facilities in place and at the time that their facilities are ready we will be deploying those systems. So those have been earmarked and again baked into our outlook, but most likely that will take place here over the over the back half of the year.
Excellent. Thanks, so much and congrats again, thanks, Scott Thanks, Tom.
Next question is from Suraj Kalia from open hymer.
Good afternoon, everyone Hi, Suraj.
Hey, Dusty.
Just wanted to make sure for Sterling.
We understand the incremental COVID-19 related business, if I remember correctly from the last call. There was something between $10 million to $20 million was COVID-19 related.
Help us sort of get our arms around so that we can normalize on an ex COVID-19 basis. Once we come out of this.
Yes, so suraj.
The framework and I'll just speak relative to my comments during the call here today as a framework.
Roughly about I'd say about 20%, 25% of what we saw in the $17 five we directly attributed to revenues that were targeted for COVID-19.
So the math, there and the dynamics is roughly about $3 million to $4 million of that.
What we experienced in Q1 as I mentioned before there is sort of declining focus now on COVID-19. So most of the bookings that we've experienced in Q1.
We're actually outside the COVID-19 environment, we're actually seeing the market come back in critical areas in the pharma and biotech.
The bio banking.
Dynamics that are taking place in the.
And the business in the market as well as even in clinical trials and studies, where our products play.
Extremely important part.
No.
Just from a from a guidance perspective, I can really share with you. Some perspectives on what we have reported here, but we are seeing a decline in that dynamic debt.
It's actually been picked up by all the other.
Specific market areas that we have targeted within the business.
And specifically for Sterling Dusty would it be off in terms of Directionally.
The range was that still the incremental COVID-19 contribution.
And I'm, specifically asking about Sterling.
Broke up just a little bit of Suraj. It looks like you were about to see a number or a percent or something and we lost the line rate them.
Gentlemen, sorry, if my line is bad can you hear me all right.
Robert just asking about 10% to 20 really.
What's the context.
Hello, Yes.
<unk>, yes.
Raj could you rephrase gentlemen.
Looks like my line is bad debt.
Mike I'll take this offline, Mike a big picture and I Hope you can hear me all right on the call.
How should Mike revenues per customer is one of the metrics that we've always talked about in the past and I think that that has driven.
To a large part your your acquisition strategy and.
Mike can you give us directionally, where we are in terms of this specific metric and maybe are headed but just given the cross selling efforts again I Hope you guys heard me or my question right. Yes, we have the question right answer Raj well now it's more complicated because we have more and more stuff to sell we're still working to get much better visibility.
<unk> on how many customers in any given quarter by 1234 or all five of the solutions.
Had some modest increases sequentially from Q4 to Q1 net ready to start to publish it yet because we're still refining the database and how we're going to present that are illustrated index or speak to it on conference calls, but it is working and I think the thing I'm. Most pleased about suraj is that we have that sequential increase.
Even in the Q1.
COVID-19 related travel restrictions environment, where we werent seeing customers face to face. So we're obviously much more optimistic that now we can get on the road and visit customers that will accelerate the cross selling leverage and will capitalize on this core media customer base and be able to transact with them for the other parts of the portfolio.
Got it and last question for you and I'll hop back in queue gross margins.
There was a step up in incisive contribution and gross margins took a tick down when Stirling starts flowing through in Q2 and beyond how would you advise we modeled for from a P&L perspective gentlemen, Thank you for taking my questions. Thanks, Suraj you bet on an adjusted basis Suraj there is.
Going to be some dilution to the gross margin.
Just based on the fact that the Sterling operation has been running somewhere in the 32% to 34% range. So if you were to take off.
Our current blend.
<unk>.
And then apply the <unk>.
<unk> of revenue, we expect from them then you'd be you'd be getting an adjusted gross margin then that debt is.
Lower than what it was.
Think that we have talked about the fact that both at CBS and at CBS, We had a strong gross margin probably a record gross margin in Q1.
In large part thanks to the shipment of that one very large freezer that has significantly better margins than the rest of the product line.
And then Dusty side.
There is a path laid out to where theres going to be some significant margin improvement as we march down through the year, particularly in Q4, and then further out into 2022 so.
Our expectations for margins returning on an adjusted basis back into sort of the five with a five in front of it.
And we feel very confident that we'll get there.
Still there suraj.
John why don't you queue up the call or the question from Mark Weisenberger.
Certainly we have mark Weisenberger from B Riley Securities.
Thanks. Good afternoon. Appreciate you taking my question.
Sure.
Over the medium term can you talk about the the growth expectations for the liquid nitrogen freezers from CBS versus the Sterling product line and maybe how the go to market strategies might differ and and as Sterling looks to kind of get into the <unk>.
Much lower temperatures around 180 degrees Celsius, how would that impact.
Sterling or the CBS freezer demand potentially.
Sure Mark really insightful questions. Thanks so.
Adjusted why don't you speak to our integrated freezer platform sales team now that we've stitched together and how these folks now have an opportunity to compete for really any true.
Mark one of the biggest attribute says drilling came on too.
As part of the Biolife business is that we have roughly about 15 direct sales selling resources complement of course with a strong distribution network that now is overlaid on top of all freezer sales. So those respective key stakeholders that we have within our sales organization and now going to be selling both the sterling line as well as the <unk>.
<unk> line.
The key thing here that I think you need to understand is that most of these customers are dealing with several different modalities in relationship to the research they are doing.
<unk>.
Our freezers clearly focus on.
Targeted therapies using blood urine as an example, typically in the minus 88 regime.
And the business. The Cvs is really focused on sales and tissues and thats why those respective modalities ultimately offer up a very very complementary approach in terms of how we think about our customers because most of those customers are doing research now on all those various <unk>.
Biological materials and that gives us a natural extension to be talking with very similar customers that we either have business with inside sterling or business within CBS and the natural combination that that exist and as Mike noted earlier on I want to footnote that now we have opportunities to actually sell.
Two customers that are buying media customers that are also buying some of the thaw and evo related products. So it really opens up some doors, but by virtue of having some critical mass now we can really get after it from them.
From a market penetration standpoint.
And leverage that.
Or is that.
Go to market as a pathway to really strengthen the capabilities that we have in servicing.
Serving both ends of the biological spectrum between minus 20, and minus 496, and then industrial let's take part two I think mark the inference is if in fact sterling running at minus 160 that can be commercialized, we will displace <unk> and I think the short answer is.
In situations, where there is no element of infrastructure, certainly not but we'll have basically everything in the portfolio to offer whatever the customer needs Thats correct, Yes, I think I think actually as complimentary it's not as if it would take away from the opportunities at CBS.
<unk> in the world today, Mark that have difficulty in getting <unk>.
It's not a renewable type resource and because of that that opens up the opportunities and to be quite honest in that particular space and the mechanical space. There really isn't a level of competition that we believe would create any challenges in terms of us taking the sterling technology into cryo cryogenic temperatures.
And then part free of Mark's question was.
Are we prepared guys to speak to the various growth rates of LNG versus mechanical and we're not not at this time and we have the freezer platform now it's also including thoughts so we're not going to speak to the growth rates of the three portfolio platform. So.
Can't kept to that one.
Got it that was a lot of information is very helpful.
Very nice announcement with the Cadillac partnership.
As <unk> kind of continue to play a more prominent role in cell and gene therapy development and manufacturer.
I'm wondering can you talk to how you expect your relationship to evolve with with Catlin and maybe more broadly kind of what percentage of sales in the past did CDM OS maybe represent an over time.
What percentage of sales could they could they come to represent.
Yes, good questions Mark.
If we were talking a couple of years ago, only about media I can put my finger right on that number and I can tell you media revenue from the various 10 or less CD modes that were out there and play at the time line, but now it's a lot more complicated, but we will do a little research and maybe we could follow up with the call with you later on that we've got scheduled if we can get our hands on it if not maybe some other time, but but I think the takeaway.
Is that we fully expect to be able to replicate to some degree. The success. We've had with this large CD Mo we're already selling at least one solution in the portfolio to all of the CMO is in the <unk> space right now.
<unk> of those relationships and our ability to leverage and our customer service and corporate reputations, we would expect to try to replicate that to some degree if not realize another CD growth that uses everything in the portfolio like catalyst does.
Great. Thanks, and then one last one could.
Could you potentially quantify that.
Applicative cost that will be taken out of the system throughout the year and kind of maybe the timeline for those rationalizations. Thank you.
No I don't think we want to go there and yet we still have a lot of work to do.
And Dusty is really all over that what I can say, though as a concrete example of a synergy from a capex perspective is.
On the <unk> side.
Gary is a user of the Sterling freezers and so this year alone in order to outfit the new location in Europe, that's being opened up right now we're going to be saving approximately $2 million in capex by moving Sterling freezers in there versus buying from some other vendor.
Very helpful. Thanks. Thank you you bet.
We don't have any questions at this time presenters you may continue.
Thanks, John.
Thanks, everyone for your interest in Biolife.
Clear, we've built a very special culture here that we're extending to our acquired companies. This.
This team is totally customer focused and that dedication is paying off as evidenced by our operating results.
Looking forward to sharing our Q2 results with you good night.
This concludes today's conference call. Thank you all for participating you may now disconnect.
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