Q2 2021 BioLife Solutions Inc Earnings Call

August 12, 2021

[music].

Good day, everyone and thank you for standing by.

Welcome to the second quarter of 2021, Biolife solutions incorporated 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. During the session you will need to press star one on your telephone please be advised.

Today's conference is being recorded and if you require any further assistance. Please press star zero.

Now I'd like to hand, the conference over your speaker today.

<unk> Financial Officer, Mr. Roger Wood degree. Please go ahead Sir.

Thank you Delfin good afternoon, everyone and thank you for joining our second quarter earnings call.

Earlier. This afternoon, we issued a press release, which details our financial results and operational highlights for the three and six months ended June 30th.

2021.

As a reminder, during this call we may make certain projections and other forward looking statements regarding future events or the future financial performance of the company or its acquisitions.

These statements are subject to risks and uncertainties that may cause actual results to differ materially from expectations for.

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 SEC.

Company projections and forward looking statements are based on factors that are subject to change and therefore these statements speak only as of the date they are given.

The company assumes no obligation to update any projections or forward looking statements, except as required by law.

During this call, we will speak to non-GAAP or adjusted results.

Reconciliations of GAAP to non-GAAP or adjusted financial metrics are included in the press release, we issued this afternoon.

These non-GAAP or adjusted financial metrics should not be viewed as an alternative to GAAP. However in light of our M&A activity. We believe that the use of non-GAAP or adjusted metrics provides investors with a clear view of our current financial results when compared to prior periods.

Now I'd like to turn the call over to Mike Rice, Biolife, Chairman and CEO.

Thanks, Ron and good afternoon, everyone. Thank you for joining our call.

Joining rhodonite today is Dusty Tenney, President and Chief operating officer.

After my remarks does she will provide an update on key initiatives. He is managing targeting integration and revenue and cost synergies.

And Rod will present, our financials for Q2 in the first half of 2021 and speak to another guidance increase we are making for 2021 based on our recently announced acquisition of Sexton Biotechnologies.

After that we'll be glad to take your questions. Okay.

Okay. So turning to our Q2 highlights we sustained our strong momentum from Q1 with topline revenue of $31 million. This was up 215% versus Q2 last year and 85% above Q1 this year.

It's important to note that organic revenue was up 49% versus Q1 last year and specifically our bio preservation media franchise grew 45% year over year in.

In Q2, we gained nearly 200, new customers across our three product and services platforms, including media freezes and thaw systems and storage and cold chain services. This compares to 80, new customers in Q1 and 213 in 2020.

So I'm very pleased with the team's execution to quickly capture more customers and the high growth cell and gene therapy or CGT market.

Now I will make some qualitative comments about our three revenue platforms, and let Rob speak to the financial metrics for each.

In Q2, we gained 22, new media customers, including Anson Biopharma axolotl biologics by and check Saga Rhythmics.

Actually alerting.

<unk> monotherapy, <unk> crawl therapeutics and <unk>.

We also received confirmation that our media products will be used in an additional 13 clinical trials for new cell and gene therapies, and one additional BLA filing from customers, including Bluebird bio <unk> de Vera Therapeutics Fuji film Io Vance myeloid therapeutics.

Virgin Novartis said July Therapeutics Lion TCR in Wuhan.

We estimate that our bio preservation media products have been incorporated into more than 500 customer clinical applications.

These are immediate as used in six approved therapies <unk> and <unk> from kite.

Xena Beckman from BMS, and <unk> and Sky sonar from Bluebird.

Clara stores also used in three new therapies that could get approved in the next few quarters. These include on Baidu itself from commuter cell sit Lasalle from Johnson and heal itself from Bluebird, We continue to believe that our media franchise, a sticky marquee customers is the engine that we can leverage to market, our bio preservation tools and services portfolio too.

Our freezers and thoughts systems platform performed well in Q2, despite having to work through some supplier issues.

This platform includes CBS liquid nitrogen freezers Sterling ultra cold mechanical freezers and our thoughts are line of automated water free thawing systems. We gained 155 new customers for this platform, including one 129 now using Sterling Freezers 16, now using CBS freezers or.

<unk> and 10 now using fast our systems.

Notable new freezer customers include <unk>, Biotherapeutics Waterworks northwest Cadillac Corona Therapeutics, Roche tissue diagnostics and <unk>.

New thought customers include alloy therapeutics kept side of biotherapeutics, KSU therapeutics, and Trialing Biotechnologies and.

And our final of III revenue platforms stores in cold chain services, which includes Evo cold chain rentals and <unk> storage services, we gained 26 new customers in the platform and expect demand for all platform solutions to remain strong for the rest of 2021.

For our storage services platform, we continue to make good progress to build out and validate two new facilities one in the U S and one in Europe with both expected to come online before the end of the year.

With our Evo cold chain management platform I'm very pleased to report that in Q2, we processed nearly 1000 shipments of critical starting material and manufactured cell and gene therapies for about 140, new end customers.

The Evo D V 10, smart shipper in Evo OIS cloud App, where both also used in more than 100 shipments of an approved car T cell therapy for the notable customer we've been referencing for some time now.

These were all in one geography, and we expect additional countries to come online over the next few months we're.

We're all very pleased to have the opportunity to partner with this pharma company to enhance the transportation of a lifesaving cell therapy. This customer also uses our bio preservation media and several clinical trials of new cell therapies.

Finally, we recently received an order for nearly 200, Evo smart shipper systems from a new carrier customer and partner.

This customer is a top three specialty logistics carrier, serving our cell and gene therapy space.

We're working through the execution of final documents and training to support this carrier sales marketing and support activities deployment is expected to be completed over the next three to four quarters.

I would now like to spend a few minutes speaking about our just announced acquisition of Sexton Biotechnologies.

We call that following its spin off from <unk> in September 2019, Biolife and Kazdin capital made seed investments as sections to fund the company's growth plans.

We've noted the progress that Shawn Warner and the entire team have made in increasing awareness in the CGT space for Sexton solutions and driving product adoption. It's clear that section is at an inflection point with their products embedded in more than 50 cell and gene therapy clinical trials strong momentum and a great opportunity for high growth.

Their products are so synergistic with our bio preservation media platform, we decided to acquire the company now to leverage all of Biolife resources and relationships to accelerate growth.

At a high level sections portfolio can be divided into three platforms first differentiated cell culture media in the form of human platelet lifestyle products are H P. L, which are increasingly being used as a non protein based replacement for animal or human derived certain media SEC.

Automated fill and finished machines, which automate several steps in the manufacturing process and third sell Seo vials of proprietary primary package solution for manufacturer of cell and gene therapies.

Sexton has about 150 active customers using at least one solution with some notable customers being Aphesis Bristol Myers Squibb, who uses the <unk> package, they're approved brands a car T cell therapy, Cartesian therapeutics option and Tc Biopharm.

With the acquisition of section, we welcomed 20 dedicated and very capable new team members to the Biolife family, including four additional scientific sellers.

And our upcoming worldwide sales meeting later this month, we will train are now 35 person strong global sales team on all of our platforms to further generate cross selling opportunities.

From this point forward, we will report Sexton and revenue in our cell processing platform, but also includes bio preservation media.

In summary section is a great example of how our accelerated investment partnership with cash and capital works to bring in another high value asset to the Biolife enterprise.

Now I'll turn the call over to Dusty to give you an update on the integration and some of the identified revenue and cost synergy initiatives. He is leading dusty. Thanks, Mike in Q2 integration efforts have moved from planning to execution.

We have systematically focused our efforts on three areas of synergy growth.

Cost and systems.

For gross synergy we have moved forward to enable our sales team to cross sell while rationalizing and expanding our distribution partners.

Further we are strategically working to expand into geographies, where we are underrepresented given the size of opportunities within these end markets.

On the cost synergy front, we have identified opportunities to leverage our supply chain spend.

Optimize and more efficiently utilize facility space, while continuing to realize the benefits between and across our business platforms with equipment and products to provide complete solutions for our customers.

To complement the identified growth and cost synergies, we are embarking on a phase rollout of an enterprise wide ERP system that will deliver significant efficiencies across the business platform and underlying support infrastructures.

Finally, with all the demand that Mike has discussed we have taken proactive steps to add and train critical resources to support the capacity requirements that will continue to meet customer demand across all of our platforms.

We look forward to providing quantification of these initiatives on a future call as we make continued progress.

Now I will turn the call over to Rod.

Thanks Dusty.

Start off with a brief review of our financial results for Q2, 'twenty, One and then make some comments about the Sexton transaction, we announced earlier this week.

Revenue for the second quarter totaled $31.2 million, representing a 215% increase over 2022nd quarter revenue of $9.9 million.

Organic revenue growth for the second quarter was 49% driven by Biocryst bio preservation media revenue of $9.7 million, which was up 45% over the second quarter of 'twenty.

Revenue from Freezers and thoughts systems for Q2 was $17.6 million, including a may and June revenue contribution from Sterling of $13.3 million.

Revenue from storage in Cold chain services for Q2 was $3.9 million inclusive of a $3.1 million contribution from <unk>, which we acquired in Q4 of last year.

Revenue for the six months ended June 32021 totaled $48.1 million, an increase of 118% over 2026 month revenue of $22.1 million.

Bio preservation media revenue for the first six months of 'twenty, one increased 21% to $18.6 million, reflecting a challenging Q1 comparison last year, which included $1.5 $2 million of Covid related demand.

Pull forward.

We expect to see full year 'twenty, one media growth in the mid to high 20% range.

Our adjusted gross margin for the second quarter of 'twenty, one was 43% compared with 57% last year.

For the first six months of 'twenty one.

<unk> gross margin was 47% compared with 61% in the same period last year.

The decrease in adjusted gross margin for both periods reflects the lower margin profile of the product lines, we acquired in 2020 one.

We believe that in Q3 or Q4, adjusted gross margin will begin to show modest sequential increases, which should continue into 'twenty, two and beyond as we execute toward our mid term gross margin target of plus 50%.

Adjusted operating expenses for Q2 of 'twenty, one totaled $13.3 million compared with $6.1 million in Q2 of last year.

For the first six months of 'twenty, one adjusted operating expenses totaled $22.2 million compared with $12.5 million in the first six months of last year.

The increase in both periods was primarily driven by additional operating expenses related to the acquisitions made in 2020, one as well as increased head count and stock based compensation expense necessary to support our overall growth objectives.

Our adjusted operating income for the second quarter of 'twenty, one with 65000 compared with an operating loss of five.

510000 last year.

Our adjusted operating income for the first six months of 'twenty, one totaled 560000 compared to 910020.

Our adjusted net loss for the second quarter of 'twenty, one was $56000 or zero cents per share compared with an adjusted net loss of 492000 or <unk> <unk> per share in 'twenty.

For the first six months of 'twenty, one adjusted net income was 422000 or zero cents per diluted share compared with adjusted net income of 952000 or <unk> <unk> per diluted share in 'twenty.

Adjusted EBITDA for the second quarter of 'twenty, one increased 208% to $3.7 million compared with $1.2 million in last year's second quarter.

For the first six months of 'twenty, one adjusted EBITDA increased 59% to $6.5 million compared with $4.1 million in the same period in 2000.

Our cash balance at June 30 was $76 million down from 89 million at March 31.

The decrease in cash is a result of increased accounts receivable related to the timing of certain revenue coming in later in the quarter.

Reductions in Sterling accounts payable balances and capital expenditures related to the expansion of our U S bio storage facilities and the establishment of our first international facility in the Netherlands, we.

We expect our cash balance to remain relatively stable for the rest of the year.

Now I'd like to make a few comments on our recently announced acquisition of Sexton. This.

This is an all stock transaction, which valued the company at $30 million or approximately five times 21 revenue.

Given biolife ownership position the consideration paid for the shares we don't already own will be $24 million paid through the issuance of approximately 506000 shares of our common stock.

We expect <unk> full year 'twenty, one revenue to come in between 6% and $6.5 million.

Up from approximately $2.8 million in 2020.

Assuming the transaction closes on September one.

Sexton is expected to contribute $2 million to biologics revenue in Q3, and Q4 and $8 million in 2022.

We expect approximately two thirds of Sexton future revenue will be comprised of recurring <unk> media sales and consumable consumables cell seal vials and accessories with the balance coming from their automated silicon with it.

Sexton gross margin in 'twenty, one is expected to be in the mid forty's ultimately ultimately climbing into the mid fifties within the next two years based on increased revenue levels.

We expect the acquisition to be modestly accretive to adjusted EPS next year.

I'll conclude my remarks, with our revenue guidance for 2021.

Beginning in Q3, we will report revenue in three product categories cell processing platform, which will include the Sexton product line as well as our bio preservation media.

Freezers and thoughts systems, which includes our CBS and Sterling Freezers and the thaw star product line.

And storage and cold chain services, which includes our Evo cold chain and bio storage services.

Total revenue for 2021 is expected to be in the range of $108 million to $117 million, reflecting year over year revenue growth of 125% to 143%.

Revenue for 2021 is expected to be comprised of the following.

Cell processing plant form revenue, including $2 million of Sexton revenue is expected to be between 40% and $42 million, reflecting growth of 29% to 36% over 2020 and accounting for approximately 36% of total revenue.

Freezers and thoughts system revenue is expected to be between 55 to 59 million accounting for approximately 51% of total revenue.

Storage and cold chain Services' revenue is expected to be between 13 and $16 million accounting for approximately 13% of total revenue.

Finally in terms of our new share count taking into consideration of 506000 shares which will be issued in connection with the Sexton transaction. We will have 41.2 million shares issued and outstanding and 43.2 million shares on a fully diluted basis.

Now I'd like to turn the call back over to Mike.

Thanks Rod.

To summarize three key takeaways from Q2 first we had sustained product demand across all of our platforms. This strong demand has carried through to today at roughly the midpoint of Q3.

Next we have another great addition to our to our portfolio and our growth catalyst with the acquisition of Sexton.

Alex are a perfect fit and the team is first class all around.

Finally, with Dusty is integration and synergies initiatives, we can see a clear pathway to reaching our aspirational goals of $250 million in revenue and an adjusted EBITDA margin of 30 plus percentage points over the next three to four years.

Now I'll turn the call back over to the operator to take your questions Delfin.

Thank you, Mr Chairman and CEO, Mike to all our participants just a reminder, if you want or if you wish to ask a question. Please press the star one.

And here's our first question.

Turning up the line of Jacob Johnson of Stephens. Please go ahead.

Hey, good afternoon, everybody and congrats on nice quarter.

Can you just made.

My first question.

Rod.

There is a pretty nice pickup in rental revenue sequentially.

<unk> you gave us some safe revenue side, if you back into it it looks like <unk> had a pretty strong quarter or you talked about I think 1000 shipments during the quarter. Mike can you just talk about how you guys did in the quarter in.

And maybe how we should think about revenues.

From that business going forward.

Acknowledging that you don't guide by by line item.

Yes, I'll make some qualitative comments on Iraq, whatever you want to do on the quantity quantitative side is is fine, but what Jacob great question. Yeah. We are clearly seeing much more momentum in adoption of Evo.

From the current three year base with a nuclear that I just announced that's coming on line here, we would expect a significant contribution from them. They are very well entrenched one of the top three so all in all the awareness of the Evo platform not only the unique capabilities of the D V tennis smart shipper, but also the unique software attributes of the Evo is cloud app are there.

Being recognized and appreciate it so.

All of the efforts we've made over the last several years to train. These carrier sales teams to help them with marketing materials.

To support their depot teams too.

Better qualify and charge and characterized the performance of the ecosystem are paying off so very bullish about this and it's cleared out despite our COO.

Competing container and company being an incumbent driver's seat for the last several years, it's just clear to us that there is room for more than one.

And as I've mentioned on previous calls we would expect that similar to this approved cell therapy company, who is now shifting a significant portion of shipments away from income into the Evo that other companies will do that as well as a derisking measure and we're glad to be there. It's been a long time to to see this fruition of the Evo platform being adopted but super glad we made.

The acquisition and kudos to Bruce Mccormack, and Dana and all the folks in SaaS, who had this idea and got it to a certain point and it's been a great fit and again really bullish about the opportunity. Robert you can just speak or not speak about Jacob's question on the revenue modeling for that.

I think Jacob you, you've obviously back into the queue to Evo side of the revenue within that bucket and we really want to try and stay away from.

No.

Providing guidance for each and every product line, we have and so what I would say is that.

It has been performing well and we expect it to perform well throughout the balance of the year, which is as far as we're looking out, particularly based on the 200 new units that are going out.

Got it.

Thanks for that Rob and Mike and then maybe on the Sexton detail. Mike can you just talk about the synergies.

That exists between the Cryopreservation media media you have.

Fill finish work in the bylaws that Sexton provides.

How related are those those two products.

Thanks for picking that up Jacob exactly in most or many cases its the same users the same buyers the same decision makers. So.

In the workflow now with the <unk> acquisition of the portfolio now we've moved up in the workflow, whereas cryo is pretty much towards the end just before final packaging. So now we're up a few steps in that protocol and the network flow of customer engagement and again same people same labs same building. So I think it is highly synergistic and we're going to.

Leverage that to the fullest extent possible.

They've got a ton of relationships.

We've got great technical and scientific support in the form of Dr. Matthew an hour Sean Warner on other Phd, who can be just ambassadors and champions to help customers optimize use in their systems.

It's going to be fantastic.

Got it and then if I could just sneak in one more on sex and Mike.

I guess, when I think about cell and gene therapy, you see a lot of bags and industry, but she sees vials everywhere else in the Biopharma World can you just talk about the landscape I guess for vials versus bags in cell and gene therapy, and where that is today and maybe where it could go in the future.

And maybe if you want to speak to why Brianti chose to use the Celsius bio yeah right on right on really intuitive questions. So you know traditionally in the cell therapy space.

Hold over from stem cell transplants, the packaging was bags right, but there are smaller infusion volumes that lend itself to avaya, where.

Theres less waste you can dose titrate based on the patient's weight in crackers, many vials as you need to there could be less risk of losing the entire shipment in a bag versus sending vials in more than one shipments. So it really depends on the infusion volume based on the clinical indication or application.

And again, we could see we would expect that there could be a decent shift away from bags, the traditional sort of stem cell transplant bags to a proprietary optimize vials such as Celsius, So that's where it's going.

But again predicated based on our total infusion volume right.

That makes sense Mike.

Mike Thanks for taking the question congrats on a nice quarter.

Thanks, Jacob Thanks Jacob.

We have our next question Mr. Max Masucci of Cowen. Please go ahead.

Hi, good afternoon, congrats on a great quarter, okay. Thanks Max.

So can you just give us a bit more detail around the specific drivers of the inflection in new customer wins in Q2, and maybe your expectations around.

The pace of new customer wins going forward or if you'll be shifting your focus towards expanding these relationships with new and existing customers.

Alright on Max I think that.

We are both right and lucky and a lot of ways here because theres. So much activity in the cell and gene therapy space, we're leveraging our media customers to expose them to the other parts of the portfolio selling them for selling them freezers asking the questions about do they need outsource biologics storage services, which would be a great play for Gary and the team at <unk>.

Now we've got the entire temperature continuum covered with freezers, both mechanical at Sterling and Ellen Tu with CBS. So all in all just a greater opportunity for us Max two to again go back to those core very sticky media customers and have different conversation. So I would expect this sort of pace of new customers to increase or at least be maintained for the <unk>.

Rest of the year for example, the Sterling team of 20, plus sellers, including.

A very strong relationship they have with the VW are of onto our team, which has as you know many many dozens of feet on the street.

This is.

This is a force multiplier opportunity for us in an advantage that we've got so telling a lot of stories here in a good way and forming relationships and again I would expect the pace to at least be maintained if not to continue.

Great maybe just one one more basic question here you are pretty healthy.

<unk> consensus here in Q2.

Just curious if there are any one timers Europe locker larger nonrecurring orders in the quarter that can just help us think appropriately about the implied guidance for second half of the year.

Any other swing factors to the second half guide that would be great Supermac Rod why don't you take that and I can follow up if needed.

Yes sure.

I think that we.

We've been working a bit of backlog off at the Sterling.

<unk> of the business and that certainly helped the quarter, we've got more of that coming.

But I think the guidance. We gave out is specific really the only change. We gave out was the addition of the $2 million from Sexton that we expect to have hit the rest of it we left stable and we did that purposefully because there may be some seasonal seasonality in Q3, and so I think we're going to revisit the guidance for the balance of the year.

Here as we get to the end of Q3 and see how we did there but right now we're feeling pretty bullish about Q3, and so just standby.

Makes sense, thanks for taking the questions.

Thanks, Matt.

And our next question is from Mr. Paul Knight.

<unk> Bank. Please go ahead.

Hey, Mike could you talk is there.

I know, it's hard to quantify COVID-19 that investors always ask or is there a.

Change in momentum on any demand on the Covid side and then the question on the I think it's really productive in terms of Sterling and Cadillac.

That agreement is that over a multiyear period, some color around the timing of that relationship.

Great. Thanks, Paul good to hear your voice.

Dusty I think I'll ask <unk> to speak to either your specific knowledge of Covid related revenue on freezes and Rod you can speak to the total industrial could follow up on the catalog part of the question.

Specifically around Sterling right, yes, okay. So Paul thanks, Thanks for the insight there.

So as we look at the overall demand profile sort of cutting through some of the data and some of the interactions that we've had there's been a natural extension, but I think we're all sort of seeing in the market, but to the extent of what we currently see.

Directly related to Covid.

Base revenue, it's about 10 about 10, 15%.

So we're actually starting to see some recovery in a couple of the end markets that that we had patent in the past just by virtue of the impacts of Covid.

Academic and government sector Thats ultimately supporting that so about 10% to 15% is sort of tied with the COVID-19 piece.

Yes, Paul I'll just jump on the last part on the media thought side.

Really no COVID-19 bumped whatsoever, it's all just great organic growth from the traditional applications, we've got in cell and gene therapy, and the broader biopharma space.

You know there is some COVID-19 revenue.

Coming from our storage services business, we don't quantify that or we don't talk about whats in certain locations due to some security aspects, but theres some of that for sure.

A healthy amount of non COVID-19 revenue as well from the store side.

Unless you want to speak to the Sterling agreement, yes. So.

Just to sort of pick up on the catalog arrangement Paul the the dynamics of the arrangement is.

Get a long term agreement and as you're probably well aware Cadillac continues to build out at CGT capabilities on a global basis and by virtue of <unk>.

In transportation ships that we've been building on over time, we're going to be carrying forward with those relationships in these expanding geographies that primarily is in Asia Pacific, but they've identified some other build outs in key geographies here in the U S. As well. So it is a it is a long term agreement is an agreement that.

Standardizes on the Sterling platform.

Has been previously communicated.

And then lastly.

Question on the sales force integration with CBS Sterling.

Where are we with that Duffy.

I'd say, we're in early innings.

Over the last couple of months a lot of introductory.

Aspects that have taken place with each of the respective team members being brought across we've got some initial training that's taking place we have a sales meeting that might talked about here at the end of August Paul and we're bringing bringing that team together. So there is high expectations. There is a lot of synergy as Mike has mentioned before a lot of the similar.

<unk> that we're interfacing with it not only need biological storage, but they also need to expand to cover the cell and gene therapy space with our two platforms and it's a it's a great opportunity for us to leverage.

The sales team who are already connected with those respective customers and then ultimately building on top of that is the great. Just distributors that we have in play as well. So early names, but we're making some good traction and will continue to provide further updates with very specific examples here as we as we move forward and bring those teams together.

Okay. Thank you.

Thanks, Paul.

And our next question is from Lake Street Capital Mr. Thomas Flaten. Please go ahead ask your question now.

Good afternoon, and let me add my congrats on the quarter as well.

Quick quick question on Sexton.

Specific to the H P L and the Celsius files are those DMF incorporated.

Yes, there are master files at the FDA I want to say for both but I'll follow up.

For a completely accurate question, but I know there are there our DMF Theyre just general Master files for.

If not all of them most of the Sexton portfolio products, yes.

Got it and then.

On the expansion of the <unk> facilities could you just talk a little bit about what you expect them to do for the business is it about attracting new customers or better serving existing customers or perhaps it's a blend of both good.

Quick question, Yes, generally speaking again I can't get too specific but generally speaking.

Just reacting to Opportunistically strategically locating facilities, where we know there is demand we typically open a new facility with an anchor customer and then bring in new business around that to fill out the capacity.

It's a very frothy space right, Dr. Thomas and glad that we've got Gary and the team in the business and very focused on these first first of what I would assume to be several more facilities over time.

Fantastic I appreciate you taking the questions. Thanks, guys Youre welcome.

And once again to all our participants if you wish to ask a question. Please press is Taiwan and the next question Mr. Mark Weisenberger Euryale Securities go ahead Sir.

Thanks, Good afternoon.

Mike the old the old way to think about Biolife as a peer media company was we could expect kind of certain revenues from a customer in phase one and then two and three and ultimately with approved therapy, but you alluded to earlier that you've kind of moved up the chain in the workflow so with with all the new offerings can you give us an update on how we should think.

About the customer kind of economics as they move through the clinical process relative to when you were pyramid media play.

Sure.

I know that you get it mark that the discrete purchases of freezers. They have a long lifetime. So that's kind of a onetime shot or every so many years shot the media more recurring revenue, obviously, both biolife media dissection media.

SLC vials as a consumable so thats a recurring revenue stream.

They would go the thoughts star as a fixed piece of capital, but in terms of trying to quantify that we're working hard to get that model together, we don't have enough and yet to kind of feel confident to put some even some ranges out about that but we will in a future call and we'll try to help you guys understand in a typical customer journey.

In a typical application what things might look like in and our goal is obviously to be able to articulate what we think the Tam and the Sam are for each of those product portfolios and what we would expect to reach in terms of our aspirational market shares over time.

Okay fair enough.

Another kind of high level, one clearly the challenge in the processing or the process for cell and gene therapy manufacturing is still evolving so maybe help us understand your vision for the future a little better incorporating sexton and some of the other products in the portfolio, but also with kind of what flexibility and dynamism does biolife hasnt.

Place to adapt to the changes.

On an organic basis and not purely the inorganic side, what's the capabilities you've built up in house.

I like that question for sure.

The jury is obviously out about a couple of factors right one would be the the timing of and the magnitude of the shift from autologous to allogeneic therapies right.

Clearly if that becomes a significant shift that'll be great for patients in terms of access to therapies and great for a company like Biolife that is supplying tools that if theyre not used generally speaking they're using every single manufacturer dose. So we'll benefit from the uptick in the number of doses that are manufactured.

It's pretty bullish about that transition at some point the other is whats going to happen with the initiatives too.

Decentralized manufacturing and to enable the Fred Hutch is Dana Farber is or even community hospitals to make their own cell therapies I'm not nearly as optimistic that that's going to be a reality or anytime soon just based on the.

Our capital investments to acquire the talent that you have to acquire and retain the quality systems that you have to put in place. So as a potential headwind, we're not too worried about that at its core mark the basis is that all of these therapies because they are biologic material. They are both time sensitive and temperature sensitive so they need to be handled very precious Lee and carefully.

The entire time, there outside of the body. So our ability to adapt would be all about different container sizes or different volumes not so much different variance of media because what we have now works really well. So we don't need to get into that game of custom media for each customer's application thankfully the broad based utility of the cryo store and hypothermia.

Platforms are not proven themselves for many many years, but nevertheless, they are to use your word of flexibility.

We want to be nimble, so we can respond to different packaging requirements.

Look at other tools that we could either acquire or develop in house that would again further cement our.

Our position as a trusted partner with these companies there are several other parts of their workflow, where we don't participate at all and we're obviously cognizant of who those players are and how embedded their respective technologies are so we'll be careful about sort of picking our sweet points, but so far everything we brought into the portfolio now Sexton being the sixth company in the last 30 months or so.

It's all fitting very nice with no overlap and just a lot of leverage opportunities.

Great very helpful. And then just a final one for me you guys called out Freezers did well even after having a deal with I think you said some supplier issues in the quarter.

Previously you called out that.

With regards to Sterling there is some three Q seasonality I'm wondering if you could just talk about the supplier issues that you experienced in the quarter. What you think will happen in the third quarter and should we maybe expect a little bit larger or exacerbated three Q seasonality and maybe a larger bump into Q4 with regards to sterling.

Yeah.

Yes, you can take that and we can fill in but theres not too much we can say on that.

Yes, I think from a seasonality perspective.

<unk>.

The guidance, we've given for the back half of the year is what it is.

<unk> is going to be is the summer Q3 summer doldrums is that going to impact the.

The freezer sales or is it going to come in is going to be driven by people having to spend money at the end of Q3 et cetera. So there will be some but I think if you want to be safe. It would be simply just take our guidance and split it between those two quarters as it relates to the freezer piece.

Yeah, Thanks, Rod in industrial maybe without getting specific on suppliers. Just maybe you could just talk to how that.

It's probably not an unexpected manifestation of the great demand and pushing so much more product through the factory, yes, I think theres a couple of different dynamics and clearly volume has a big.

Component, there and we've all been faced with a variety of different commodity related ASP.

Aspects that have impacted us we've worked through those we've got not only primary channels, but we have secondary channels.

To take care of the supply constraints that sometimes ends up having some impact on the business, but we've navigated those and I think we've got good line of sight as Robert noted in relationship to the outlook that's been provided.

Great. Thank you very much.

Thanks Mark.

And he was our last question coming from Suraj Kalia often.

Hamer. Please ask your question now.

Hey, Mike Ross does seem okay.

Same to you.

So Mike a high level question al assets like.

So you got the Biolife story over the years more essentially into an M&A driven strategy and I'm curious.

And I talked to years ago, and average revenue per customer per quarter.

And I'm just asking the same question.

Please help us understand.

You can.

In terms of this metric today and.

And also if you could just tack on to that how does customer overlap look like and how does the venn diagram, what should be the venn diagram, let's say 18 months from now.

Yes, good question Suraj, well, it's still early and the revenue is still fairly concentrated in each of the six platforms. So it's not like we can speak of averages because it is pretty weighted some large contributors who are later stage and in all of these hundreds and hundreds of other customers who are earlier in their clinical pipeline somewhere even preclinical.

They haven't even started a phase one trial yet but.

So just the sheer number of customers suraj that we're acquiring every quarter, both direct and then to what extent we have visibility from the distributors.

It's pretty Mindboggling, one of the benefits of the ERP system Slash here Dusty.

<unk> described is to have much better visibility on a per customer example of what all they're using what the order patterns or should we have visibility to monetize those trends.

Right now, it's very disparate or different systems.

A lot of manual systems and number crunching going on so we really can't speak to.

A typical customer revenue journey on an annual basis, yet because it's really all over the map.

One thing that I would say, though.

Of the six approved <unk> therapies that we have media and you know that we've talked about potential media revenue from an approved therapy in a range of 500000, a $2 million annually I can't tell you that with just a couple of exceptions all of those customers that I mentioned earlier are at or near our exceeding the high end of that revenue range.

On an annual basis, so that that thesis is holding its still too small of an end, though for us to think about revising the range, we need a few more wins in some time with those newly approved customers CR tracks out, but so far that's that narrative is really holding so that's pretty cool.

Got it.

And final two questions for Roger if I may so Rob any update on the Sterling.

Manufacturing efficiency roadmap.

<unk> gross margins took quite a bit stepped down and I understand.

One of your.

Our goal is to get gross margins up, especially at Sterling. So if you could walk us through that also rub $108 million lowering the revenue guidance.

I understand the breakup of the different.

Poland's look fundamentally.

Okay.

What was the consideration is it just because of it does it.

Implied growth is quite a bit.

Thank you for taking my questions.

Sure.

So again I think that on the Sterling side. So the margin expansion that is going to drive us to.

The sort of 50 plus target that we talked about is going to primarily come from both CBS and Sterling.

At the CBS side of things, it's going to be driven primarily by the leverage of a pretty significant amount of fixed costs by increased revenue there'll be some cost savings on on some new product introductions, but in particular, the high capacity rate freezer, which is what we've talked about last quarter.

The first one has half a million dollars ASP.

And a gross margin that's significantly in excess of the rest of the freezer line, so that's going to be driving.

The margin expansion at CBS with respect to Sterling.

It's really going to be driven by a couple of things one is the the overall leverage that we'll get on the fixed cost base there, although that won't be as significant as CBS, it's going to come from also the the benefit of purchasing as an example steel for both CBS and the <unk>.

Sterling product lines. So that we will have some some benefit of the purchasing power there, but the primary driver on gross margin expansion for Sterling is going to be the <unk>.

Lower cost of goods lower Bom associated with the new product introductions that will come out within the next 12 to 18.24 months.

And slightly higher Asps based on the benefit features of those of those new products. So that's sort of how that that works out.

With respect to the guidance, we took a hard look at the low end of our guidance, we could have tightened the range up a bit however, the seasonality comments I made with respect to the in particular, the freezer business in Q in Q3 and Q4, we just felt.

And part two to be conservative that we leave the range exactly as it was at the end of Q1 and simply increase it by the expected contribution from the Sexton acquisition.

Thank you.

Thanks Suraj.

Thank you for your questions and that puts on that dark Q&A session now I would like to turn it over to our chairman and CEO, Mr. Mike Weiss.

Thank you Delfin and thanks, everyone for your interest in Biolife.

We've built a high performance team here and I am proud of the people working here and their commitment to serving customers and also the indirect role that our solutions play in saving or improving the lives of patients around the world. We're looking forward to sharing our Q2 results with you Goodnight.

And that concludes today's conference call with Biolife. Thank you everyone for your participation you may now all disconnect.

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Good day, everyone and thank you for standing by and welcome to the second quarter of 2021 Biolife Solutions incorporated 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 during the session you will need to be.

Lastly star one on your telephone please be advised that today's conference is being recorded and if you require any further assistance. Please press star zero I would now like to hand, the conference over your speaker today.

<unk> financial officer, Mr. Rather a degree. Please go ahead sir.

Thank you Delfin good afternoon, everyone and thank you for joining our second quarter earnings call.

Earlier. This afternoon, we issued a press release, which details our financial results and operational highlights for the three and six months ended June 32.

2021.

As a reminder, during this call we may make certain projections and other forward looking statements regarding future events or the future financial performance of the company or its acquisitions.

These statements are subject to risks and uncertainties that may cause actual results to differ materially from expectations.

Company projections and forward looking statements are based on factors that are subject to change and therefore these statements speak only as of the date there given the.

The company assumes no obligation to update any projections or forward looking statements, except as required by law.

During this call, we will speak to non-GAAP or adjusted results.

Reconciliations of GAAP to non-GAAP or adjusted financial metrics are included in the press release, we issued this afternoon.

These non-GAAP or adjusted financial metrics should not be viewed as an alternative to GAAP. However in light of our M&A activity. We believe that the use of non-GAAP or adjusted metrics provides investors with a clearer view of our current financial results when compared to prior periods.

Now I'd like to turn the call over to Mike Rice, Biolife, Chairman and CEO.

Thanks, Ron and good afternoon, everyone. Thank you for joining our call joining.

Good morning, Rod and I today is Dusty Tenney, President and Chief operating officer.

After my remarks does she will provide an update on key initiatives. He is managing targeting integration and revenue and cost synergies.

After that we'll be glad to take your questions.

Okay. So turning to our Q2 highlights we sustained our strong momentum from Q1 with topline revenue of $31 million. This was up 215% versus Q2 last year and 85% above Q1 this year.

It's important to note that organic revenue was up 49% versus Q1 last year and specifically our bio preservation media franchise grew 45% year over year in.

In Q2, we gained nearly 200, new customers across our three product and services platforms, including media freezes and thaws systems and stores in Cold chain services. This compares to 80, new customers in Q1 and 213 in 2020.

So I'm very pleased with the team's execution to quickly capture more customers and the high growth cell and gene therapy or CGT market.

Now I will make some qualitative comments about our three revenue platforms, and let Rob speak to the financial metrics for each.

In Q2, we gained 22, new media customers, including Anson Biopharma <unk> biologics by an SEC saga Rhythmics.

Alerting icon Avere mono therapeutics <unk> therapeutics in Wuxi.

We also received confirmation that our media products will be used in an additional 13 clinical trials for new cell and gene therapies, and one additional BLA filing from customers, including Bluebird Bio <unk> <unk> Therapeutics Fuji film <unk> myeloid therapeutics, the <unk> novartis.

Jalan Therapeutics Lion TCR in Wuhan.

We estimate that our bio preservation media products have been incorporated into more than 500 customer clinical applications.

These are media is used and six approved therapies.

<unk> <unk> from <unk> <unk> from BMS, <unk> and Sky solar from Bluebird.

<unk> is also used in three new therapies that could get approved in the next few quarters. These include on the <unk> for <unk> to sell set Lasalle from Johnson and Hela cell from Bluebird, We continue to believe that our media franchise of sticky marquee customers is the engine that we can leverage to market, our bio preservation tools and services portfolio too.

Our freezers and thoughts systems platform performed well in Q2, despite having to work through some supplier issues.

Accessories, and 10 now using fast our systems.

Notable new freezer customers include <unk>, Biotherapeutics Waterworks northwest Cadillac <unk> Therapeutics, Roche tissue diagnostics and <unk>.

New thought customers include alloy therapeutics, hepatocyte, biotherapeutics, <unk> therapeutics, and <unk> Biotechnologies and.

And our final III revenue platforms stores in cold chain services, which includes Evo cold chain rentals and <unk> storage services, we gained 26 new customers in the platform and expect demand for all platform solutions to remain strong for the rest of 2021.

The Evo Dv 10, smart shipper and <unk> cloud App, where both also used in more than 100 shipments of an approved car T cell therapy for the notable customer we've been referencing for some time now.

These were all in one geography, and we expect additional countries to come online over the next few months we're.

We're all very pleased to have the opportunity to partner with this pharma company to enhance the transportation of our life saving cell therapy. This customer also uses our bio preservation media and several clinical trials of new cell therapies.

Finally, we recently received an order for nearly 200, Evo smart shipper systems from a new carrier customer and partner.

This customer is a top three specialty logistics carrier, serving our cell and gene therapy space.

I would now like to spend a few minutes speaking about our just announced acquisition of Sexton Biotechnologies.

We call that following its spin off from <unk> in September 2019, Biolife and Kasdan capital made seed investments as section to fund the company's growth plans.

We've noted the progress that Shawn Warner and the entire team have made in increasing awareness in the CGT space for Sexton solutions and driving product adoption. It is clear that section is at an inflection point with their products embedded in more than 50 cell and gene therapy clinical trials strong momentum and a great opportunity for high growth.

Their products are so synergistic with our bio preservation media platform, we decided to acquire the company now to leverage all of <unk> resources and relationships to accelerate growth.

At a high level sextans portfolio can be divided into three platforms first differentiated cell culture media in the form of human platelet lifestyle products or <unk>, which are increasingly being used as a non protein based replacement for animal or human derived <unk> media.

Automated fill and finished machines, which automate several steps in the manufacturing process and third <unk> a proprietary primary package solution for manufactured cell and gene therapies.

Sexton has about 150 active customers using at least one solution with some notable customers being Aphesis Bristol Myers Squibb, who uses the <unk> package their approved <unk> car T cell therapy, Cartesian therapeutics option and Tc Biopharm.

With the acquisition of Sexton, we welcomed 20 dedicated and very capable new team members to the Biolife family, including four additional scientific sellers.

And our upcoming worldwide sales meeting later this month, we will train are now 35 persons strong global sales team on all of our platforms to further generate cross selling opportunities.

From this point forward, we will report <unk> revenue in our cell processing platform, but it also includes bio preservation media.

In summary section is a great example of how our accelerated investment partnership with cash and capital works to bring in another high value asset to the Biolife enterprise.

Now I'll turn the call over to Dusty to give you an update on integration and some of the identified revenue and cost synergy initiatives. He is leading dusty. Thanks, Mike in Q2 integration efforts have moved from planning to execution we.

We have systematically focused our efforts on three areas of synergy growth.

Cost and systems.

For gross synergy we have moved forward to enable our sales team to cross sell while rationalizing expanding our distribution partners.

Further we are strategically working to expand into geographies, where we are underrepresented given the size of opportunities within these end markets.

On the cost synergy front, we have identified opportunities to leverage our supply chain spec.

Optimize and more efficiently utilized facility space, while continuing to realize the benefits between and across our business platforms with equipment and products to provide complete solutions for our customers.

To complement the identified growth and cost synergies, we are embarking on a phased rollout of an enterprise wide ERP system that will deliver significant efficiencies across the business platform and underlying support infrastructures.

We look forward to providing quantification of these initiatives on a future call as we make continued progress.

Now I will turn the call over to Rod.

Thanks Dusty.

Start off with a brief review of our financial results for Q2, 'twenty, One and then make some comments about the Sexton transaction, we announced earlier this week.

Revenue for the second quarter totaled $31.2 million, representing a 215% increase over 2022nd quarter revenue of $9.9 million.

Organic revenue growth for the second quarter was 49% driven by Bioprocess bio preservation media revenue of $9.7 million, which was up 45% over the second quarter of 'twenty.

Revenue from freezes and Thaws systems for Q2 was $17.6 million, including EMEA and June revenue contribution from Sterling of $13.3 million.

Revenue from storage in Cold chain services for Q2 was $3.9 million inclusive of a $3.1 million contribution from <unk>, which we acquired in Q4 of last year.

Revenue for the six months ended June 32021 totaled $48.1 million, an increase of 118% over 2026 month revenue of $22.1 million.

Bio preservation media revenue for the first six months of 'twenty, one increased 21% to $18.6 million, reflecting a challenging Q1 comparison last year, which included one $5 million to $2 million of Covid related demand.

Pull forward.

We expect to see full year 'twenty, one media growth in the mid to high 20% range.

Our adjusted gross margin for the second quarter of 'twenty, one was 43% compared with 57% last year.

For the first six months of 'twenty, one adjusted gross margin was 47% compared with 61% in the same period last year.

The decrease in adjusted gross margin for both periods reflects the lower margin profile of the product lines, we acquired in 2020 one.

Adjusted operating expenses for Q2 of 'twenty, one totaled $13.3 million compared with $6.1 million in Q2 of last year.

For the first six months of 'twenty, one adjusted operating expenses totaled $22.2 million compared with $12.5 million in the first six months of last year.

Our adjusted operating income for the second quarter of 'twenty, one with 65000 compared with an operating loss of 510000 last year.

Our adjusted operating income for the first six months of 'twenty, one totaled 560000 compared to 910020.

Our adjusted net loss for the second quarter of 'twenty, one was $56000 or zero cents per share compared with an adjusted net loss of 492000 or <unk> <unk> per share in 'twenty.

For the first six months of 'twenty, one adjusted net income was 422000 or zero cents per diluted share compared with adjusted net income of 952000 or <unk> <unk> per diluted share in 'twenty.

Adjusted EBITDA for the second quarter of 'twenty, one increased 208% to $3.7 million compared with $1.2 million in last year's second quarter.

For the first six months of 'twenty, one adjusted EBITDA increased 59% to $6.5 million compared with $4.1 million in the same period in 'twenty.

Our cash balance at June 30 was $76 million down from 89 million at March 31.

The decrease in cash is a result of increased accounts receivable related to the timing of certain revenue coming in later in the quarter.

We expect our cash balance to remain relatively stable for the rest of the year.

Now I'd like to make a few comments on our recently announced acquisition of Sexton.

This is an all stock transaction, which valued the company at $30 million or approximately five times 21 revenue.

Given biolife ownership position the consideration paid for the shares we don't already own will be $24 million paid through the issuance of approximately 506000 shares of our common stock.

We expect <unk> full year 'twenty, one revenue to come in between 6% and $6.5 million.

From approximately $2.8 million in 2020.

Assuming the transaction closes on September one Sexton is expected to contribute $2 million to biologics revenue in Q3, and Q4 and $8 million in 2022.

We expect approximately two thirds of sextans future revenue will be comprised of recurring HBO media sales and consumable consumables, so <unk> and accessories with the balance coming from their automated silicon with it.

<unk> gross margin in 'twenty, one is expected to be in the mid forty's ultimately ultimately climbing into the mid fifties within the next two years based on increased revenue levels.

We expect the acquisition to be modestly accretive to adjusted EPS next year.

I'll conclude my remarks, with our revenue guidance for 2021.

Beginning in Q3, we will report revenue in three product categories cell processing platform, which will include the Sexton product line as well as our bio preservation media.

Freezers and thoughts systems, which includes our CBS and Sterling freezers and the fast our product line.

And storage and cold chain services, which includes our Evo cold chain and bio storage services.

Total revenue for 2021 is expected to be in the range of $108 million to $117 million, reflecting year over year revenue growth of 125% to 143%.

Revenue for 2021 is expected to be comprised of the following.

Freezers and thoughts system revenue is expected to be between 65% from 59 million accounting for approximately 51% of total revenue.

Storage and cold chain Services' revenue is expected to be between 13 and $16 million accounting for approximately 13% of total revenue.

Finally in terms of our new share count taking into consideration of 506000 shares which will be issued in connection with the Sexton transaction. We will have $41.2 million shares issued and outstanding and $43.2 million shares on a fully diluted basis.

Now I'd like to turn the call back over to Mike.

Thanks Rod.

To summarize three key takeaways from Q2 first we had sustained product demand across all of our platforms. This strong demand has carried through to today at roughly the midpoint of Q3.

Next we have another great addition to our to our portfolio.

<unk> and a growth catalyst for the acquisition of Sexton.

Products are a perfect fit and the team is first class all around.

Now I'll turn the call back over to the operator to take your questions Delfin.

Thank you, Mr Chairman and CEO and Mike Dolan, our participants just a reminder, if you want or if you wish to ask a question. Please press the star one and.

Here's our first question opening up the line of Jacob Johnson of Stephens. Please go ahead.

Hey, good afternoon, everybody and congrats on a nice quarter.

Maybe just hey.

Maybe my first question for.

Michael Rod.

A pretty nice pickup in rental revenue sequentially Rod you gave us some safe revenue side, if you back into it it looks like <unk> had a pretty strong quarter or you talked about I think 1000 shipments during the quarter. Mike can you just talk about how you guys did in the quarter.

And maybe how we should think about revenues.

That business going forward.

One thing that you don't guide by by line item.

Yes, I'll make some qualitative comments on the rod whatever you want to do on the quantity quantitative side is is fine.

Jacob Great question, Yes, we are clearly seeing much more momentum in adoption of Evo.

From the current carrier base with a nuclear that I just announced that's coming on line here, we would expect a significant contribution from them. They are very well entrenched one of the top three so all in all the awareness of the Evo platform not only the unique capabilities of the divi tend to smart shipper, but also the unique software attributes of the Evo is cloud app are there.

Being recognized and appreciated so.

All of the efforts we've made over the last several years to train. These carrier sales teams to help them with marketing materials.

To support their depot teams too.

Better qualify in charge and characterize the performance of the ecosystem are paying off so very bullish about this and it's cleared out despite.

<unk> container and company being an incumbent driver's seat for the last several years, it's just clear to us that there is room for more than one.

And as I've mentioned on previous calls we would expect that similar to this approved cell therapy company, who is now shifting a significant portion of shipments away from the income into the Evo that other companies will do that as well as a derisking measure and we're glad to be there. It's been a long time to to see this fruition of the Evo platform being adopted.

Super glad we made the acquisition and kudos to Bruce Mccormack, and Dana and all the folks in SaaS, who had this idea and got it to a certain point and it's been a great fit and again really bullish about the opportunity. Robert you can just speak or not speak about Jacob's question on the revenue modeling for that.

I think Jacob you, you've obviously back into the queue to Evo side of the revenue within that bucket and we really want to try and stay away from.

No.

Providing guidance for each and every product line, we have and so what I would say is that.

It has been performing well and we expect it to perform well throughout the balance of the year, which is as far as we're looking out, particularly based on the 200 new units that are going out.

Got it.

Thanks for that Rob and Mike and then maybe on the Sexton detail. Mike can you just talk about the synergies.

That exists between the Cryo preservation media, you have and the fill finish work and the vials that Sexton provides.

How related are those those two products. Thanks.

Thanks for picking that up Jacob exactly in most or many cases its the same users the same buyers the same decision makers. So.

In the workflow now with the Sexton and acquisition of the portfolio now we've moved up in the workflow, whereas cryo is pretty much towards the end just before final packaging. So now we're up a few steps in that protocol.

And that workflow of customer engagement and again same people. The same labs same building. So I think it's highly synergistic and we're going to leverage that to the fullest extent possible.

<unk> got a ton of relationships.

And we've got great technical and scientific support in the form of Dr. Matthew an hour Sean Warner on other Phd, who can be just ambassadors and champions to help customers optimize use in their systems.

I think it's going to be fantastic.

Got it and then if I could just sneak in one more on Sexton Mike.

I guess, when I think about cell and gene therapy, you see a lot of bags in the industry, but you see vials everywhere else in the Biopharma World can you just talk about the landscape I guess for vials versus bags in cell and gene therapy, and where that is today and maybe where it could go in the future.

Maybe if you want to speak to why Brianti chose to use the Celsius vial, yeah right on right on really intuitive questions. So.

Traditionally in the cell therapy space as a holdover from stem cell transplants. The packaging was bags right, but there are smaller infusion volumes that lend itself to avaya aware.

There is less waste you can dose titrate based on the patient's weight in crackers. Many vials as you need to there could be less risk of losing the entire shipment of AG versus sending vials in more than one shipments. So it really depends on the infusion volume based on the clinical indication or application.

And again, we could see we would expect that there could be a decent shift away from bags, the traditional sort of stem cell transplant bags to a proprietary optimized vials such as Celsius, So that's where it's going.

But again predicated based on our total infusion volume right.

That makes sense.

Mike Thanks for taking the question congrats on nice quarter. Thanks, Jacob Thanks Jacob.

We have our next question Mr. Max Masucci of Palin.

Go ahead.

Hi, good afternoon, congrats on a great quarter, okay. Thanks Max.

So can you just give us a bit more detail around the specific drivers of the inflection in new customer wins in Q2, and maybe your expectations around that.

The pace of new customer wins going forward or if you'll be shifting your focus.

<unk> is expanding these relationships with new and existing customers.

Right on Max I think that.

Now we've got the entire temperature continuum covered with freezers, both mechanical at Sterling and <unk> with CBS. So all in all just a greater opportunity for us Max two to again go back to those core very sticky media customers and have different conversation. So I would expect this sort of pace of new customers to increase or at least be maintained for the rep.

For the year for example, the Sterling team of 20, plus sellers, including.

Very strong relationship they have with the VW are of onto our team, which has as you know many many dozens of feet on the street.

This is.

Great maybe just one one more basic question here you are pretty healthy b versus consensus here in Q2.

Just curious if.

There are any one timers there longer larger nonrecurring orders in the quarter that can just help us think appropriately about the implied guidance for second half of the year.

And just any other swing factors to the second half guide that would be great Supermac, Rob why don't you take that and I can follow up if needed.

Yes, sure Max I think that.

We've been working a bit of backlog off at the Sterling.

Side of the business and that certainly helped the quarter, we've got more of that coming.

The year as we get to the end of Q3 and see how we did there but right now we're feeling pretty bullish about Q3, and so just standby.

Makes sense, thanks for taking the questions.

Thanks, Matt.

And our next question is from Mr. Paul Knight.

<unk> Bank. Please go ahead.

Hey, Mike could you talk is there.

I know, it's hard to quantify COVID-19 that investors always ask or change.

Change in momentum on any demand on the Covid side and then the next question on the I think it's really product the in terms of Sterling and Cadillac.

That agreement is that over a multiyear period, some color around the timing of that relationship.

Great. Thanks, Paul good to hear your voice.

Dusty I think I'll ask <unk> to speak to your specific knowledge of Covid related revenue on freezers and variety you could speak to the total industrial could follow up on the catalog part of the question.

Specifically around Sterling right, yes, okay. So Paul thanks, Thanks for the insight there.

So as we look at the overall demand profile.

Cutting through some of the data and some of the interactions that we've had there's been a natural extension, but I think we're also we're seeing in the market, but to the extent of what we currently see.

<unk> related to Covid.

Base revenue, it's about 10 about 10, 15%.

So we're actually starting to see some recovery in a couple of the end markets that that we had patent in the past just by virtue of the impacts of Covid.

Academic and government sector Thats ultimately supporting that so about 10% to 15% is sort of tied with the COVID-19 piece.

Yeah, and then Paul I will just jump into the last part on the media thoughts side.

Really no COVID-19 bumped whatsoever, it's all just great organic growth from the traditional applications, we've got in cell and gene therapy, and the broader biopharma space.

As you know there is some COVID-19 revenue.

Coming from our storage services business, we don't quantify that or we don't talk about whats in certain locations due to some security aspects, but theres some of that for sure.

A healthy amount of non COVID-19 revenue as well from the storage side.

Unless you want to speak to the Sterling agreement, yes. So.

Just to sort of pick up on the catalog arrangement Paul the the dynamics of the arrangement is.

If you're a long term agreement and as you're probably well aware Cadillac continues to build out its CGT capabilities on a global basis and by virtue of.

Transfer relationships that we've been building on over time, we're going to be carrying forward with those relationships in these expanding geographies that primarily is in Asia Pacific, but they've identified some other build outs in key geographies here in the U S. As well. So it is a it is a long term agreement is an agreement that.

Standardizes on the Sterling platform.

As has been previously communicated.

And then lastly.

Question on the sales force integration with CBS Sterling.

Where are we with that Duffy.

I would say we're in early innings over last couple of months a lot of introductory.

Aspects that have taken place with each of the respective team members being brought across we've got some initial training thats taken place we have a sales meeting that might talked about here at the end of August Paul and we're bringing bringing that team together. So there is high expectations. There is a lot of synergy as Mike has mentioned before a lot of the similar customers that.

We're interfacing with it not only need biological of storage, but they also need to expand to cover the cell and gene therapy space with our two platforms and it's a it's a great opportunity for us to leverage.

Okay. Thank you.

Thanks, Paul.

And our next question is from Lake Street Capital Mr. Thomas Flaten. Please go ahead ask your question now.

Good afternoon, and let me add my congrats on the quarter as well.

Quick quick question on Sexton.

Specific to the HBO and the Celsius vials are those DMF incorporated.

Yes, there are master files at the FDA I want to say for both but I'll follow up.

For a completely accurate question, but I know there are there our DMF Theyre just general Master files for.

If not all of them most of the Sexton portfolio of products yes.

Got it and then.

Good question, Yes, generally speaking and again I can't get too specific but generally speaking.

Reacting to Opportunistically strategically locating facilities, where we know there is demand we typically open a new facility with an anchor customer and then bring in new business around that to fill out the capacity, but it's a very frothy space right now thomason glad that we've got Gary and the team in the business and very focused on these first first of what I would assume to be <unk>.

Several more facilities over time.

I appreciate you taking the questions. Thanks, guys.

Okay.

And once again to all our participants if you wish to ask a question. Please press is Taiwan and for the next question Mr. Mark Weisenberger Euryale Securities go ahead Sir.

Thanks, Good afternoon.

Mike the old the old way to think about Biolife as a peer media company was we could expect kind of certain revenues from a customer in phase one and then two and three and ultimately with approved therapy, but you alluded to earlier that you've kind of moved up the chain in the workflow. So with all the new offerings can you give us an update on how we should think.

About the customer kind of economics as they move through the clinical process relative to when you were pyramid media play.

Sure.

<unk> is a consumable so that's a recurring revenue stream.

They would go the <unk> is a fixed piece of capital, but in terms of trying to quantify that we're working hard to get that model together, we don't have enough and yet to kind of feel confident to put some even some ranges out about that but we will in a future call and we will try to help you guys understand in a typical customer journey.

Okay fair enough.

Lace to adapt to the changes.

On an organic basis and not purely the inorganic side, but with the capabilities you built up in house.

I like that question for sure.

The jury is obviously out about a couple of factors right one would be the the <unk>.

Timing of and the magnitude of the shift from autologous to allogeneic therapies right.

Clearly if that becomes a significant shift that'll be great for patients in terms of access to therapies and great for a company like Biolife that are supplying tools that if theyre not used generally speaking they're using every single manufactured dose. So we'll benefit from the uptick in the number of doses that are manufactured.

It's pretty bullish about that transition at some point the other is whats going to happen with the initiatives too.

Decentralized manufacturing and to enable the Fred Hutch is Dana farmers or even community hospitals to make their own cell therapies I'm not nearly as optimistic that thats going to be a reality or anytime soon just based on the.

The capital investments acquire the talent that you have to acquire and retain the quality systems that you have to put in place. So as a potential headwind, we're not too worried about that at its core mark the basis is that all of these therapies because they are biologic material. They are both time sensitive and temperature sensitive so they needed to be handled very precious Lee and carefully.

The entire time they are outside of the body. So our ability to adapt would be all about different container sizes or different volumes not so much different variance of media because what we have now works really well. So we don't need to get into that game of custom media for each customer's application thankfully the broad based utility of the cryo store and hypothermia.

Platforms are now proven themselves for many many years, but nevertheless, they are to use your word of flexibility.

We want to be nimble, so we can respond to different packaging requirements.

It's all fitting very nice with no overlap and just a lot of leverage opportunities.

Great very helpful and just a final one for me you guys called out Freezers did well even after having a deal with I think you said some supplier issues in the quarter.

Previously you called out that.

With regards to Sterling there is some <unk> seasonality I'm wondering if you could just talk about the supplier issues that you experienced in the quarter. What you think will happen in the third quarter and should we maybe expect a little bit larger or exacerbated <unk> seasonality and maybe a larger bump into Q4 with regards to sterling.

Yeah.

Yes, you can take that and we can fill in but theres not too much we can say on that.

Yes, I think from a seasonality perspective.

<unk>.

The guidance, we've given for the back half of the year is what it is.

<unk> is going to be is the summer Q3 summer doldrums is that going to impact.

The freezer sales or is it going to come in is going to be driven by people having to spend money at the end of Q3 et cetera. So there will be some but I think if you want to be safe it would be simply to take our guidance and split it between those two quarters as it relates to the freezer piece.

Yeah, Thanks, Rod in industrial maybe without getting specific on suppliers. Just maybe you could just talk to how that.

Component, there and we've all been faced with a variety of different commodity related aspects that have impacted us. We've worked through those we've got not only primary channels, but we have secondary channels too.

Great. Thank you very much.

Thanks Mark.

And he was our last question coming from Suraj Kalia of Oppenheimer. Please ask your question now.

Hey, Mike Raab dusting of yellow Hello, Suraj same to you.

So Michael a high level question and Alaska.

Sure.

So the Biolife story over the years more essentially into an M&A driven strategy and I'm curious.

You and I talked to years ago.

Average revenues per customer per quarter.

And I'm just asking the same question a little differently.

Understand.

As you can.

In terms of this metric today.

And also if you could just tack on to that.

Customer overlap look like and how does the venn diagram, what should we think of <unk>, let's say 18 months from now.

We haven't even started a phase one trial yet but.

So just the sheer number of customers suraj that we're acquiring every quarter, both direct and then to what extent we have visibility from the distributors, it's pretty mindboggling one of the benefits of the ERP system Slash C. R.

He described is to have much better visibility on a per customer example of what all they're using what the order patterns are so we have visibility to monetize those trends right.

Right now it's very disparate there are different systems, a lot of manual systems and number crunching going on so we really can't speak to.

A typical customer revenue journey on an annual basis, yet because it's really all over the map here's what one thing that I would say, though of the six approved <unk> therapies that we have media and you know that we've talked about potential media revenue from an approved therapy in a range of 500000, a $2 million annually I can't tell you that with just a <unk>.

Couple of exceptions, all of those customers that I mentioned earlier are at or near our exceeding the high end of that revenue range on an annual basis. So that that thesis is holding its still too small of an endo for us to think about revising the range, we need a few more wins in some time with those newly approved customers CR tracts out, but so far that's that narrowed.

Or is it really holding so that's pretty cool.

Got it.

And final two questions for Roger if I may so Rob.

On the Sterling.

Manufacturing efficiency roadmap.

<unk> gross margins took quite a bit stepped down and I understand.

One of your.

Our goal is to get gross margins up, especially at Sterling. So if you could walk us through that also rub $108 million lowering the revenue guidance.

I understand the breakup of that.

Components.

Fundamentally.

Okay.

What was the consideration is it just because of it.

As implied growth is quite a bit stephane. Thank you for taking my questions sure.

So again I think that on the Sterling side. So the margin expansion that is going to drive us to.

The sort of 50 plus target that we talked about is going to primarily come from both CBS and Sterling.

The CBS side of things, it's going to be driven primarily by the leverage of a pretty significant amount of fixed costs by increased revenue there'll be some cost savings on on some new product introductions, but in particular, the high capacity rate freezer, which is what we've talked about last quarter, we shipped.

The first one has half a million dollars ASP.

And a gross margin that's significantly in excess of the rest of the freezer line, so thats going to be driving.

The margin expansion at CBS with respect to Sterling.

It's really going to be driven by a couple of things. One is the the overall leverage that we will get on the fixed cost base, there, although that won't be as significant as CBS, it's going to come from also the the benefit of purchasing as an example steel for both CBS and the <unk>.

Sterling product lines. So that we will have some some benefit of the purchasing power there, but the primary driver on gross margin expansion for Sterling is going to be the <unk>.

Lower cost of goods lower bond associated with the new product introductions that will come out within the next 12 to 18.24 months.

And slightly higher Asps based on the benefits and features of those of those new products. So that's sort of how that that works out.

Part two to be conservative that we'd leave the range exactly as it was at the end of Q1 and simply increase it by the expected contribution from the Sexton acquisition.

Okay.

Thank you.

Thanks Raj.

Thank you for your questions and that puts on that dog Q&A session now I would like to turn it over to our chairman and CEO Mr. Michael Weiss.

Thank you Delfin and thanks, everyone for your interest in Biolife.

We've built a high performance team here and I am proud of the people working here and their commitment to serving customers and also the indirect role that our solutions play in saving or improving the lives of patients around the world looking forward to sharing our Q2 results with you good night.

And that concludes today's conference call with Biolife. Thank you everyone for your participation you may now all disconnect.

Q2 2021 BioLife Solutions Inc Earnings Call

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