Q2 2024 BioLife Solutions Inc Earnings Call

Speaker Change: Good afternoon and welcome to the BioLife Solutions Q2 2024 Shareholder and Analyst Conference Call.

Operator: Q2 2024 Shareholder and Analyst Conference Call. All participants will be in listen-only mode.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star than one on your telephone keypad. To withdraw your question, please press star than two. Please note, this event is being recorded. I would now like to turn the conference over to Troy Wichterman, Chief Financial Officer of BioLife Solutions. Please go ahead. Thank you, Operator.

Speaker Change: All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2.

Speaker Change: Please note, this event is being recorded.

Troy Wichterman: I would now like to turn the conference over to Troy Wichterman, Chief Financial Officer of BioLife Solutions. Please go ahead. Thank you, Operator. Good afternoon, everyone, and thank you for joining the BioLife Solutions 2024 Second Quarter Earnings Conference Call.

Troy Wichterman: Good afternoon, everyone, and thank you for joining us at the BioLife Solutions 2024 Second Quarter Earnings Conference. On today's call, we will cover business highlights and financial performance for the quarter and provide an update on our full year 2024 revenue guidance. Earlier today, we issued a press release announcing our financial results and operational highlights for the second quarter of 2024, which is available at biolifesolutions.gov. As a reminder, during this call, we will make forward-looking statements.

Speaker Change: On today's call, we will cover business highlights and financial performance for the quarter and provide an update on our full year 2024 revenue guidance.

Speaker Change: Earlier today, we issued a press release announcing our financial results and operational highlights for the second quarter of 2024, which is available at BiolifeSolutions.com.

Speaker Change: As a reminder, during this call, we will make forward-looking statements.

Speaker Change: These statements are subject to risks and uncertainties that can be found in our SEC filings.

Speaker Change: These statements speak only as of the date given, and we undertake no obligation to update them.

Speaker Change: We will also speak to non-GAP or adjusted results.

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

Troy Wichterman: These statements are subject to risks and uncertainties that can be found in our SEC filing. These statements speak only as of the date given, and we undertake no obligation to update them. We will also speak to non-gap or adjust the results. Reconciliation of Gap to non-Gap, or adjusted financial metrics, are included in the press release we issued after this announcement. Now, I'd like to turn the call over to Rod DeGrief, Chairman and CEO of BioLife.

Speaker Change: Now, I'd like to turn the call over to Rod DeGrief, Chairman and CEO of BioLife.

Rod DeGrief: Troy. Good afternoon, and thank you for joining us for BioLife's second quarter 2024 earnings call. Today I'm joined by Troy Wichterman, our CFO, as well as Gary Richardson, our Chief Revenue Officer, who will offer a deeper look into our Q2 revenue results and our strategy to grow bio-life's market-leading bio-preservation franchise. To begin, I'm pleased to report another quarter of sequential revenue growth in our core self-processing business. Now, halfway through the year, these results underscore our belief that we are seeing an improvement in the macro environment, specifically the bioproduction subsector we operate in.

Rod DeGrief: Thanks, Troy. Good afternoon and thank you for joining us for BioLife's second quarter 2024 earnings call.

Speaker Change: Today, I'm joined by Troy Wichterman, our CFO , as well as Gary Richardson, our Chief Revenue Officer, who will offer a deeper look into our Q2 revenue results.

Speaker Change: and our strategy to grow BioLife's market-leading body preservation franchise.

Speaker Change: To begin, I'm pleased to report another quarter of sequential revenue growth in our core cell processing business.

Speaker Change: Now, halfway through the year, these results underscore our belief that we are seeing an improvement in the macro environment.

Rod DeGrief: With the strategic shift away from our legacy freezer products largely behind us, our revenue is primarily driven by our high-margin cell processing platform and our biostorage and services platform. During the highlights from the quarter, we posted an 11% sequential increase in our cell processing revenue and a 6% sequential increase in total revenue. On a macro level, the industry-wide headwinds that began to ease late last year continued in Q2 of this year.

Speaker Change: specifically the bioproduction

Speaker Change: Our revenue is primarily driven by our high-margin cell processing platform and our biostorage and services platform.

Speaker Change: Turning to highlights from the quarter.

Speaker Change: We posted an 11% sequential increase in our self-processing revenue.

Speaker Change: and a 6% sequential increase in total revenue.

Speaker Change: On a macro level, the industry-wide headwinds that began to ease late last year continued in Q2 of this year. For BioLife, this meant less inventory destocking pressure from our larger direct customers.

Speaker Change: and continued strength in our distributor revenue, which we view as a proxy for the earlier stage research-focused market segment.

Speaker Change: Our first half results combined with our outlook for the second half of 2024 has resulted in a modest increase in our cell processing revenue guidance, which Troy will speak to later in the call.

Rod DeGrief: On the strategic side, with our continued efforts to streamline the business, we will be increasingly better positioned to benefit from the strength of our recurring and consumable product offering. You will recall that we announced the investment in our GCI, or Strowling Freezer Unit, in April. The positive financial impact of the GCI divestiture is clearly reflected in our Q2 financial results, with an adjusted gross margin of 52% and an adjusted EBITDA margin of 4.8 million, or 17% of revenue.

Troy Wichterman: On the strategic side, with our continued efforts to streamline the business, we will be increasingly better positioned to benefit from the strength of our recurring and consumable product offerings.

Troy Wichterman: You will recall that we announced the divestiture of our GCI, or Stirling Freezer Unit, in April .

Troy Wichterman: The positive financial impact of the GCI divestiture is clearly reflected in our Q2 financial results, with an adjusted gross margin of 52%, and adjusted EBITDA margin of 4.8 million, or 17% of revenue.

Rod DeGrief: We realize the job is not done, and we're committed to exiting the remaining freezer business as quickly and efficiently as possible... Although CBS generated positive adjusted EBITDA for the quarter and represents less than 12% of sales, it was a drag on margins, and we expect to see further margin expansion once that transition is complete. We will provide updates as events warrant. Turning back to the process.

Speaker Change: We realize the job is not done, and we're committed to exiting the remaining freezer business as quickly and efficiently as possible.

Speaker Change: Although CBS generated positive adjusted EBITDA for the quarter and represents less than 12% of sales, it was a drag on margins and we expect to see further margin expansion once that transition is completed.

Speaker Change: We will provide updates as events warrant.

Rod DeGrief: Fundamental drivers are revenue growth for that segment, specifically our BioProservation Media Revenue, which includes our market leading share of commercially sponsored clinical trials and the overall regulatory environment for CG. We believe that we have a market share in excess of 70% of the relevant commercially sponsored clinical trials in the U.S., with approximately 45 Phase II and Phase III trials utilizing cryo-stores, and Q2, the CGT Regulatory Environment, continues the forward momentum that started last year, with two new indications and three earlier lines of treatment approved for BioLife support at

Speaker Change: Turning back to cell processing.

Speaker Change: The fundamental drivers of revenue growth for that segment, specifically our biopreservation media revenue, include our market-leading share of commercially sponsored clinical trials and the overall regulatory environment for CGT.

Speaker Change: We believe that we have a market share in excess of 70% of the relevant commercially sponsored clinical trials in the U.S.

Speaker Change: with approximately 45 phase 2 and phase 3 trials utilizing CryoSTOR.

Speaker Change: In Q2, the CGT regulatory environment continued the forward momentum that started last year with two new indications and three earlier lines of treatment approved for BioLife-supported therapies.

Rod DeGrief: Our BioProduction Media was embedded in 15 commercial therapies at the end of the quarter, and we see an additional 9 similar approval opportunities over the next 12 months. We're excited by our growing exposure to commercial therapies, and over the years, we have developed deep and direct relationships with these customers, allowing us to provide better support to our partners. As these direct customers continue to progress and evolve, we expect to realize higher revenue at an enhanced margin.

Speaker Change: Our bioproduction media was embedded in 15 commercial therapies at the end of the quarter, and we see an additional 9 similar approval opportunities over the next 12 months.

Speaker Change: We're excited by our growing exposure to commercial therapies, and over the years we have developed deep and direct relationships with these customers, allowing us to provide better support to our partners.

Speaker Change: As these direct customers continue to progress and evolve, we expect to realize higher revenue and enhanced margins.

Rod DeGrief: We're encouraged by this evolution, albeit early, which we believe will become more pronounced as this modality continues to mature. Our market share clearly confirms that BioLife is the industry standard in bi-preservation medium, and we have established ourselves as a leading pure-play provider of premium bi-production tools and services. The critical picks and shovels which support the fast growing CGT industry. As we continue to take the steps necessary to optimize our business to focus on our cell processing platform, I'm convinced more than ever that BioLife is extremely well positioned to benefit as industry headwinds continue to ease and the space continues to mature. Now we'll turn the call over to Gary. He'll provide some additional insight on Q2 revenue and our sales strategy. Gary, thank you.

Speaker Change: We're encouraged by this evolution, albeit early, which we believe will become more pronounced as this modality continues to mature.

Speaker Change: Thanks for watching, and don't forget to like, share, and subscribe to our channel.

Speaker Change: Our market share clearly confirms that BioLife is the industry standard in biopreservation media, and we have established ourselves as a leading pure play provider of premium bioproduction tools and services.

Speaker Change: the critical picks and shovels which support the fast-growing CGT industry.

Speaker Change: As we continue to take the steps necessary to optimize our business to focus on our cell processing platform, I'm convinced more than ever that BioLife is extremely well positioned to benefit as industry headwinds continue to ease and the space continues to mature.

Gary: Now I'll turn the call over to Gary, who will provide some additional insight on Q2 revenue and our sales strategy. Gary? Thanks, Rod. Good to be here again. In the second quarter, we continue to see an uptick in positive sentiment activity across our core sale processing customer base.

Gary Richardson: Thanks, Rod. It's good to be here again. In the second quarter, we continue to see an uptick in positive sentiment activity across our core cell processing customer base. For our cell processing platform, sequential revenue increased 11% to $18 million in Q2 from $16.1 million in Q1. We achieved a sequential increase in sales across all product lines, including strong demand for our non-biopreservation products, particularly our HPL growth media, which performed above expectations and, as a reminder, came through our acquisition of Sexton Biotechnologies in 2021.

Gary: For our cell processing platform, sequential revenue increased 11% to $18 million in Q2 from $16.1 million in Q1.

Speaker Change: We achieved a sequential increase in sales across all product lines, including strong demand in our non-biopreservation products, particularly our HPL growth media, which performed above expectations, and as a reminder, came through our acquisition of Sexton Biotechnologies in 2021.

Gary Richardson: The majority of our cell processing revenue continues to be driven by our biopreservation media, or BPM, products. Our top 20 BPM customers continue to account for approximately 80% of media revenue, with 65% of BPM revenue coming from direct customers, and of that amount, customers having approved therapies totaled approximately 40%. Distributor sales, which we see as reflecting a broader spectrum of the CGT market, continued to improve compared to the second half of 2023 and represented approximately 35% of BPM revenue.

Gary: The majority of our cell processing revenue continues to be driven by our biopreservation media or BPM products.

Gary: Our top 20 BPM customers continue to account for approximately 80% of media revenue, with 65% of BPM revenue coming from direct customers, and of that amount, customers having approved therapies totaled approximately 40%.

Gary: Distributors sales, which we see as reflecting a broader spectrum of the CGT market, continue to improve compared to the second half, 2023, and represented approximately 35% of BPM revenue.

Gary Richardson: Our growth strategy for the cell processing platform features a two-pronged approach. First, we're committed to maintaining and growing a leading BPM market share by engaging new early-stage CGT Market Entrances. This includes both oncology and non-oncology indications, with promising new applications of CAR-T therapies targeting autoimmune diseases as an example.

Gary: Our growth strategy for the cell processing platform features a two-pronged approach. First, we're committed to maintaining and growing our leading BPM market share by engaging new early-stage CGT market entrants.

Gary: This includes both oncology and non-oncology indications with promising new applications of CAR-T therapies targeting autoimmune diseases as an example.

Gary Richardson: In addition, we're building a robust mechanism in conjunction with key distribution partners to ensure that these early stage developers have access and exposure to not just our BPM products but the entire cell processing product portfolio. Second, we're leveraging our thought leadership and key BPM customer relationships, which have, in some cases, been in place for nearly a decade, thanks to the dedicated efforts of Dr. A.B. Matthew, to cross-sell our other cell processes.

Gary: In addition, we're building a robust mechanism in conjunction with key distribution partners to ensure that these early stage developers have access and exposure to not just our BPM products, but the entire cell processing product portfolio.

Speaker Change: Tech and we're leveraging our thought leadership and KBPM customer relationships, which have in some cases been in place for nearly a decade, thanks for the dedicated efforts of Dr. A.B. Matthew to cross-sell our other cell processing tools.

Gary Richardson: A good example of this is the ongoing effort to expose our key BPM customers to our recently introduced Cryo Case, which has generated strong initial interest. You may recall the Cryo Case is the first ever cryo-compatible rigid container, which we introduced at ISCT in May, and its intended use is to replace the standard cryo bags for the final CGT dose. Based on initial testing, we believe that the cryo case could positively impact the industry-wide particulate issue which is inherent in the use of standard cryogenics.

Gary: A good example of this is the ongoing effort to expose our KBPM customers to our recently introduced Criercase, which has generated strong initial interest.

Speaker Change: You may recall the cryocase is the first ever cryocombatable richest container, which we introduced at ISCT and May, and it's intended uses to replace the standard cryobags for the final CGT dose.

Speaker Change: Based on initial testing, we believe that the cryo case could positively impact the industry white particular issue, which is inherent in the use of standard cryo bags.

Gary Richardson: Before handing the call over to Troy, I'd like to briefly touch on our BioStorage services platform, where we continue to see modest storage revenue growth as general market conditions remain stable for those services and as our existing facilities get closer to full capacity. However, this growth was offset by sequential reductions in our other products and services within that category. We have an environmental position as the market leader in the sort of bio-preservation media, and we have an exciting portfolio of other cell processing related products. I'm confident that this position, combined with the underlying trends of the still early CGT industry, provides the basis for continued revenue performance in the future. Now, I will turn the ball over to Troy.

Speaker Change: Before handing the call over to Troy, I'd like to briefly touch on our BioStorage services platform where we continue to see modest storage revenue growth as general market conditions remain stable for those services and as our existing facilities get closer to full capacity.

Speaker Change: This growth was offset by sequential reductions in our other products and services within that category.

Troy Wichterman: We have an enviable position as a market leader in the field of biopreservation media, and we have an exciting portfolio of other cell processing-related products.

Constantin: and Constantin this position, combined with the underlying trends of the still early CGT industry, provides the basis for continued revenue performance in the future.

Troy Wichterman: Gary. As Rod noted, we divested global cooling on April 17th, and on this call, we will be reviewing current and prior period financials from continuing operations, which excludes any GCI-related results. The financials from continuing operations include our LN-2 freezer platform and custom biogenic systems, which are in the process of being the best. We reported Q2 revenue from continuing operations of $28.3 million, representing a decrease of 3% year-over-year. The year over your decrease was primarily related to a 4% decrease in our cell processing class.

Constantin: Now, I will turn the call over to Troy.

Troy Wichterman: Thank you, Gary. As Rod noted, we divested global cooling on April 17th, and on this call, we will be reviewing current and prior period financials from continuing operations only, which excludes any GCI-related results.

Troy Wichterman: The financials from continuing operations include our LN-2 freezer platform, custom biogenic systems which is in the process of being divested.

Troy Wichterman: We reported Q2 revenue from continuing operations of 28.3 million representing a decrease of 3% year over year.

Troy Wichterman: The year-over-year decrease was primarily related to a 4% decrease in our cell processing platform.

Troy Wichterman: Total revenue was up sequentially from Q1, 2024 by 1.5 million or 6% primarily due to a sequential increase of 1.8 million or 11% in our solve processing revenue. Adjusted gross margin for the second quarter was 52% compared with 45% in the prior year. The increase was primarily due to product mix, operational efficiencies, and higher capacity utilization at our biorepository facility. Adjusted operating expenses for Q2 2024 totaled 16.9 million, compared with 19 million in the prior year. The decrease is primarily due to lower personnel costs from Q3, 2020, a reduction in force, and continued focus on expenses.

Troy Wichterman: Total revenue was up sequentially from Q1, 204 by 1.5 million or 6% primarily due to a sequential increase of 1.8 million or 11% in our cell processing revenue.

Troy Wichterman: Adjusted gross margin for the second quarter was 52% compared with 45% in the prior year.

Speaker Change: The increase was primarily due to product mix, operational efficiencies, and higher capacity utilization at our biorepository facilities.

Speaker Change: Adjusted operating expenses for Q2 2024 totaled $16.9 million, compared with $19 million in the prior year.

Troy Wichterman: The decrease is primarily due to lower personnel costs from the Q3 2023 reduction in force and continued focus on expenses.

Troy Wichterman: Our adjusted operating loss for the second quarter was $2.1 million compared with $5.8 million in Q2 2023. Our gap net loss was 7.1 million in Q2 compared to 5.5 million in the prior year. The increase in net loss was primarily due to a $4.1 million right-off of our Avaxel investment due to the uncertainty of Avaxel's going concerns debt.

Troy Wichterman: Our adjusted operating loss for the second quarter was 2.1 million compared with 5.8 million in Q2 2023.

Troy Wichterman: Our gap net loss was $7.1 million in Q2 compared to $5.5 million in the prior year. The increase in net loss was primarily due to a $4.1 million write-off of our Ivexil investment due to the uncertainty of Ivexil's going concern status.

Troy Wichterman: Adjusted EBITDA for the second quarter of 2024 was $4.8 million or 17% of revenue compared with $1.7 million or 6% of revenue in the prior year. Adjusted EBDA increased from the prior year due to improvement in gross margin, driven by lower personnel costs and greater operational efficiency. Partly offset by a decrease in our sold processing platform river, adjusted EBITDA increased $1 million sequentially from Q1. Primarily due to higher gross profit, contribution, and decreases in professional fees.

Troy Wichterman: Adjusted EBITDA for the second quarter of 2024 was $4.8 million or 17% of revenue compared with $1.7 million or 6% of revenue in the prior year.

Troy Wichterman: Adjusted EBITDA increased from the prior year due to improvement in gross margin driven by lower personnel costs and greater operational efficiency.

Troy Wichterman: Partly offset by a decrease in our salt processing platform revenue.

Troy Wichterman: Our adjusted EBITDA increased $1 million sequentially from Q1 2024, primarily due to higher gross profit contribution and decreases in professional fees.

Troy Wichterman: Turning to our balance sheet, our cash and marketable securities balance was $36.9 million at June 30, 2024. This compares to $46.1 million reported at the end of the first quarter of 2024. The sequential cash decrease of $9.2 million was primarily driven by cash outflows of approximately $13 million related to the divestiture of global cooling during the quarter, partially offset by $4.8 million in positive adjusted EBITDA from our continuing operation. Our SVB long-term debt balance was $20 million, with quarterly repayments of 2.5 million beginning in Q3 2024.

Troy Wichterman: Turning to our balance sheet, our cash and marketable securities balance was $36.9 million at June 30, 2024.

Troy Wichterman: This compares to 46.1 million reported at the end of the first quarter, 2024.

Troy Wichterman: The sequential cash decrease of $9.2 million was primarily driven by cash outflows of approximately $13 million, related to the divestiture of global cooling during the quarter, partially offset by $4.8 million in positive adjusted EBITDA from our continuing operations.

Troy Wichterman: Our SBB long-term debt balance was $20 million, with quarterly repayments of $2.5 million beginning in Q3 2024.

Troy Wichterman: Turning to our updated full-year revenue guidance, total revenue is expected to be between $99 million and $101 million, reflecting an overall growth of 5% to 8%. Compared to our original guidance of 95.5 million to 100 million. As previously discussed, 2020 guidance is based on expectations for a cell processing and bio storage services platform and does not include any revenue from the freezer product line. The BioStorage Services platform includes our thought star, Automated Sign Devices Product Life.

Troy Wichterman: Turning to our updated full year revenue guidance.

Troy Wichterman: Total revenue is expected to be 99 million to 101 million, reflecting an overall growth of 5% to 8%. Compared to our original guidance of 95.5 million to 100 million.

Troy Wichterman: As previously discussed, 2024 guidance is based on expectations for a cell processing and bio-storage services platform and does not include any revenue from freezer product lines.

Troy Wichterman: The Biostorage Services Platform includes our Thawstar automated thawing devices product line.

Troy Wichterman: Our cell processing platform is expected to contribute $70 million to $71 million, reflecting a 6% to 8% growth over 2023. This compares to our original guidance of 66 million to 68.5 million. Our bio storage services platform is expected to contribute $29 million to $30 million, or $3% to $7% growth over $20.23 on a like for like basis, growth of $8% to $12%. This compares to our original guidance of $29.5 million to $31.5 million. Finally, in terms of our share count, as of August 1st, we had 46 million shares issued and outstanding and 48.7 million shares on a fully diluted basis.

Troy Wichterman: Our cell processing platform is expected to contribute $70 million to $71 million, reflecting a 6% to 8% growth over 2023.

Troy Wichterman: This compares to our original guidance of 66 million to 68.5 million.

Troy Wichterman: Our Biostorage Services Platform is expected to contribute $29 million to $30 million or 3% to 7% growth over 2023, and on a like-for-like basis, growth of 8% to 12%. This compares to our original guidance of $29.5 million to $31.5 million.

Troy Wichterman: Finally, in terms of our share count, as of August 1st, we had 46 million shares issued and outstanding, and 48.7 million shares on a fully diluted basis.

Operator: Now, I'll turn the call back to the operator to open up for questions. Thank you. We'll see you in the next video.

Speaker Change: Now, I'll turn the call back to the operator to open up for questions.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. And at this time, we will pause momentarily to assemble ourselves. And the first question will come from Jacob Johnson with Stevens. Please go ahead.

Speaker Change: Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2.

Speaker Change: And at this time, we will pause momentarily to assemble our roster.

Speaker Change: And the first question will come from Jacob Johnson with Stevens. Please go ahead.

Jacob Johnson: Good afternoon, everybody. Congratulations on this quarter. On cell processing, obviously, a good quarter there; you increased the guidance. If my calculator's right and I just annualize this 2Q number, I get to the midpoint of your guidance. So I guess I have two questions. Any kind of one-time benefits in self-processing in the quarter that maybe we should be aware of and not assume they repeat in the back half of the year? And then the second question, why shouldn't we see more of a pickup in self-processing demand in the back half of the year? Or, to put it another way, is there some conservatism?

Jacob Johnson: Good afternoon everybody, congrats on this quarter. On cell processing, obviously good quarter there, you increase the guidance.

Jacob Johnson: If my calculator is right and I just annualize this 2Q number, I get to the midpoint of your guidance.

Speaker Change: I guess two questions. Any kind of one-time benefits in self-processing in the quarter that maybe we should be aware of and not assume they repeat in the back half of the year? And then the second question, why shouldn't we see more of a pickup in self-processing demand in the back half of the year? Or I guess third, is there some conservatism in this?

Gary: Yeah. Hi, Jacob. So, with respect to your question on Q2, as Gary mentioned, we did have a particularly strong quarter in HPL, that product line.

Speaker Change: We don't necessarily expect that to repeat in the Qs 3 and 4. I think that when you look at the first half guidance against, or first half actual against second half implied guidance, we're really looking at a 5 to 8 percent increase.

Speaker Change: second half over first half. So we feel pretty good about that. With respect to being conservative, I think we've done our best to articulate how we see the second half of the year as we sit here today in the beginning of August .

Rod DeGrief: Got it. Thanks, Rod. And then Rod, it may stick in with you.

Speaker Change: Got it. Thanks, Rod. And then Rod, I'm really sticking with you. I think last quarter you mentioned that you're reviewing your product portfolio internally. Are there any initial findings you'd like to share? Should we expect some kind of formal update from that process?

Speaker Change: at some point.

Speaker Change: Yeah, you can. You know, we've been spending the last 10 months really trying to focus on streamlining the cell processing platform.

Rod DeGrief: I think last quarter you mentioned that you're reviewing your product portfolio. Internally, are there any initial findings you'd like to share? Should we expect some kind of formal update from that process at some point?

Rod DeGrief: divesting the freezer lines, right, and so we've not made as much progress on the strategic review, but I think on the next call we should be in a position to provide some further clarity on the outcome of that that process.

Gary Richardson: and maybe just lastly, if I can speak one more time to Gary, maybe just last quarter you talked about, well, on this call to you, you talked about cross-selling your tools, and it sounds like you're working with most direct customers and distributors on that. Can you just elaborate on how those efforts are going?

Gary: Yeah, that's right. And maybe just lastly, if I can speak one more in Gary, maybe just last quarter you talked a bit. Well, on this call, T, you talked about cross-selling your tools and sounds like you're working with most direct customers and distributors on that. Can you just elaborate on how those efforts are going?

Gary Richardson: Yeah, I think we've seen it to be particularly effective around what was the form of the sex and product line and, obviously, bio preservation media, super solid relationships with our legacy clients. And what we're trying to do, and I think we're having some great success, is really utilize those relationships to really push things through, right? And that's things like, you know, the cryo case, for instance.

T: Yeah I think we've seen it to be particularly effective around what was formerly the Sexton product line and obviously biopreservation media. We've got these

Rod DeGrief: This meant less inventory destocking pressure from our larger direct customers and continued strength in our distributor revenue, which we view as a proxy for the earlier stage research focused market segment. Our first half results combined with our outlook for the second half of 2024, as a result of which, resulted in a modest increase in our self-processing revenue guidance, which Troy will speak to later in the call.

Speaker Change: Super solid relationships with our legacy clients and what we're trying to do and I think we're having some great success.

T: is really utilised those relationships to really push things through, right? And that's things like...

Gary Richardson: That is, you know, homegrown innovation addressing the needs of the market. We're super excited about that product. And because of the relationships that we have, we're able to put it in the hands of the people that really need to see it. So I think leveraging that, I think has been super effective when it comes to the kind of combined Sexton or former Sexton biopreservation media line.

T: You know, the cryo case for instance, right, that is...

Operator: Got it. Thanks for answering the questions.

T: you know, homegrown innovation, addressing the needs of the market. We're super excited about that product, and because of the relationships that we have,

T: We're able to put it in the hands of the people that really need to see it so I think leveraging that I think has been super effective when it comes to the kind of combined sex and or former sex and biopreservation media lines.

Speaker Change: Got it. Thanks for answering the questions.

Operator: The next question will come from Anna Snobkowski from Keybank. Please go ahead.

Jacob Johnson: Thanks, Jacob. Thanks, Jake.

Jacob Johnson: The next question will come from Anna Snopkowski from KeyBank. Please go ahead.

Anna Snobkowski: Hi, thanks for taking my question. This is Anna on behalf of Paul.

Anna Snopkowski: Hi, thanks for taking my question. This is Anna on for Paul.

Anna Snopkowski: I just have one, and it's around the funding environment. We've been tracking the ARM data pretty closely, and we've seen pretty substantial sequential improvement. I was just wondering if you've seen this affect your business.

Speaker Change: whether it's just overall more clinical activity or more trial starts, any commentary around that would be helpful. Thank you. Yeah, thanks Jenna. I think that as we've talked to you before that, you know, our direct customers are

Rod DeGrief: Thank you. Yeah, thanks, Anna. I think that as we've talked to you,

Rod DeGrief: Yeah, thanks, Dana. I think that, as we've talked to you before, our direct customers, particularly the ones with commercial therapies, are well-funded, and so they're really not impacted by the overall funding environment. I think where we see the impact of that is the revenue that we generate through our distribution, particularly the larger distribution partners that we have who focus on the earlier stage and research-type accounts. And we've seen solid growth on the distribution side compared to last year. So that's the best kind of dot connection that we can make with respect to the funding environment impacting our revenue.

Speaker Change: particularly the ones with commercial therapies are well-funded and so they're really not impacted by the overall funding environment. I think where we see the impact of that.

Jacob Johnson: is the revenue that we generate through our distribution, particularly the larger distribution partners that we have, who focus on the earlier stage and the research-type accounts.

Jacob Johnson: And we've seen solid growth on the distribution side compared to last year. So that's the best kind of dot connection that we can make with respect to the funding environment impacting our revenue.

Operator: The next question is from Matt Stanton from Jeffries. Please go ahead.

Jacob Johnson: Thank you.

Speaker Change: I bet.

Jacob Johnson: The next question is from Matt Stanton from Jeffries. Please go ahead.

Matt Stanton: Hey, thanks. We've made nice progress on the EBITDA margins here in the quarter. Are you still comfortable with the kind of 20% plus exit rate you've talked about in the past? And any reason we couldn't see that maybe a bit sooner here in 3Q, just given the process, I guess, given cell processing dollars are kind of... Blattis into the back half, maybe that's still a 4Q, but any color just around the comfort level of the 20% plus exit rate for this year.

Matt Stanton: Thanks. Nice progress on the EBITDA margins here in the quarter. Are you still comfy with the kind of 20% plus exit rate you've talked about in the past? And any reason we couldn't see that maybe a bit sooner here in 3Q, just given the process, I guess, given cell processing dollars are kind of

Jacob Johnson: Flattish into the back half, maybe that's still a 4Q, but any color just around the comfort of the 20% plus exit rate for this year. Thanks.

Rod DeGrief: Yeah, thanks Matt. We're still committed to that as a goal. I think, as we've talked before, it's all about the media growth over the next several quarters because of the flow through that comes along with that revenue growth. I think the other aspect that's going to impact the adjusted EBITDA margin is going to be the divestiture of CBS, which we would expect to happen prior to the end of the year. So we feel good about those things allowing us to achieve the target that we've stated.

Speaker Change: Yeah, thanks Matt. We're still committed to that as a target. I think as we've talked to you.

Speaker Change: before it's it's all about the media growth over the next several quarters because of the flow through

Speaker Change: that comes along with that revenue growth. I think the other aspect that's going to impact the adjusted EBITDA margin is going to be the divestiture of CBS, which we would expect to happen prior to the end of the year. So we feel good about those things.

Matt Stanton: allowing us to achieve that target that we've stated.

Gary Richardson: Thanks, and then maybe one on the cryo case launch, do you just talk a bit about the validation process when it gets in customer's hands to when the consumption should be using it, and then any early feedback you've been getting from customers, and as we start to think about contribution in 25 and beyond, any finer point in terms of, you know, numbers of customers looking at it, is it the commercial side, is it clinical side, you know, now that you've launched it at a few months, any more color you can provide there, thank you.

Speaker Change: Thanks and then maybe one on the on the cryo case launch. Can you just talk a bit about the validation process so when it gets in customers hands to when they could potentially be using it and then any early feedback you've been getting from customers and as we start to think about contribution in 25 and beyond.

Speaker Change: Any finer point in terms of, you know, numbers of customers looking at it? Is it the commercial side? Is it clinical side? You know, now that you've launched it in a few months, any more color you can provide there? Thank you.

Gary Richardson: Yeah, so I think we've, yeah, thanks for the question, so I think we've had a lot of early stage interest, I think that really has driven by some of the obviously challenges in the market when it comes to particular I think the process, you know, this is early stages, right, and I think adoption is something that obviously, you know, I don't really want to put a time around, but it is in the hands of the right people that are going to be going through their own validation protocols depending on the client So, it couldn't give you an exact time line, but I think there is, there is great interest around the product due to the market condition

Speaker Change: Yeah, so I think we've, yeah, thanks for the question. So I think we've had a lot of early-stage interest. I think that really is driven by some of the, obviously, challenges in the market when it comes to particulate.

Matt Stanton: I think the process, you know, this is early stages, right, and I think adoption is something that obviously, you know, I don't really want to put a time around, but it is in the hands of the right people that are going to be going through their own validation protocols, depending on the client.

Matt Stanton: So couldn't give you an exact timeline, but I think there is there is great interest around the product due to the market conditions

Gary Richardson: Okay, maybe just one more on that, just so in terms of on the commercial side, is there anything from a regulatory perspective that wouldn't be able to allow on the market or commercially supported therapies to try and switch to this product from a regulatory standpoint?

Speaker Change: Okay maybe just one more on that just so in terms of on the commercial side is there anything from a regulatory perspective that wouldn't be able to allow on market or commercially supported therapies to try and swap to this product from from the regulatory standpoint? Thanks.

Gary Richardson: Not that I've been made aware of at this point, no. I don't think that that is a major challenge, but I do think we do have some ongoing outreach to regulatory authorities as well.

Speaker Change: Not that I've been made aware of at this point, no. I don't think that that is a major challenge, but I do think also we do have some ongoing outreach to regulatory authorities as well.

Operator: And the next question is from Steven Mah from TD Cowan. Please go ahead.

Speaker Change: Super. Thank you.

Matt Stanton: And the next question is from Steven Mah from TD Cowen. Please go ahead.

Steven Mah: Hi, thanks for taking the questions and congrats on the quarter. One on the cell processing platform, just I guess a follow-up question from prior questions.

Speaker Change: I mean, you mentioned that, you know, de-stocking pressures seem to be easing.

Speaker Change: and that you have increasing engagement with clinical customers using cell processing products. But is there any way you can quantify or give us some color on the impact?

Speaker Change: between how much was it from destocking versus how much is it from companies, you know, maybe ordering more in anticipations of approvals or geographic expansion or approvals of new indications.

Rod DeGrief: Yeah, hi Steve, thanks for the question. I think it's difficult to get that granular. I mean, clearly, we know which customers have asked us to push out orders. And as I've sent in the past, if you look at Q3 of last year, we were probably looking at five or six large direct customers, plus a large distributor that was doing that. Where we are today, it's perhaps one direct customer. So deaths, just to give you a sort of trajectory of the easing of those, that particular head.

Speaker Change: Yeah, hi Steve. Thanks for the question. I think it's...

Speaker Change: It's difficult to get that granular. I mean, clearly, we know which customers have asked us to push out orders. And as I've said in the past, if you look at Q3 of last year, we were probably looking at five or six large direct customers plus a large distributor that was doing that.

Speaker Change: You know, where we are today, it's perhaps one direct customer. So, just to give you a sort of trajectory of the easing of that particular headwind.

Rod DeGrief: Okay, all right, thanks for that. And then maybe a fall question on the cryo case. Is that a drop-in replacement for cryo bags? In other words, you know, it will impact the workflow that those positions are currently using.

Speaker Change: Okay, all right. Thanks for that. And then maybe a follow-up question on cryo case.

Speaker Change: Is that a drop-in replacement for cryobags? In other words, you know, will it impact the workflow that physicians are currently using?

Gary Richardson: We think it's a nice fit, particularly in a closed system, which is what it was designed for. So, we really don't see it as a massive change in workflow, and I think when you consider and take into account the potential impact it has in terms of addressing the issue of particulates, which are inherent in the use of cryo bags, I think that to the extent there is a change in workflow, that tradeoff is more than worth it for the end user.

Speaker Change: We think it's a nice fit, particularly in a closed system, which is what it was designed for. So we really don't see it as a massive change of workflow. And I think when you...

Speaker Change: Consider and take into account the potential impact it has in terms of addressing the issue of particulates which are inherent in the use of cryo bags. I think that to the extent there is a change in workflow that trade-off is more than worth it for the end user.

Gary Richardson: Okay, appreciate that. And then maybe sneaking in one more on the bio storage guide, and it seems to have tied into the lower end of the prior range. Can you give us some color and maybe square that away with some of the other comments, given that the overall, you know, kind of recovery and sentiment in the marketplace seems to be happening? Thank you.

Speaker Change: Okay, I appreciate that. And then maybe sneaking in one more on the BioStorage Guide.

Speaker Change: And it seems to have tied into the lower end of the prior range. Can you give us some color and maybe square that away with some of the other comments given that the overall, you know, kind of recovery and sentiment in the marketplace seems to be happening? Thank you.

Gary Richardson: So with regard to the platform, with storage, we continue to see sequential growth in that area, so that's solid. Some of our courier partners have resized a little bit of their Evo fleets based on some of the previous market conditions, but we continue to be excited about the product line and its future.

Speaker Change: Yeah, so with regard to the platform,

Speaker Change: With storage we continue to see sequential growth in that in that area so so that's solid. Some of our courier partners have resized a little bit of their Evo fleets based on some of the prior market conditions but we continue to be excited about the product line in its future.

Operator: And again, if you would like to ask a question, please press star, then 1. The next question is from Thomas Flaten from Lake Street Capital Markets. Please go ahead.

Speaker Change: Okay, thank you.

Speaker Change: And again, if you would like to ask a question, please press star, then 1.

Speaker Change: The next question is from Thomas Flaten from Lake Street Capital Markets. Please go ahead.

Operator: and just sticking with the theme of the cryo case, remind us if that's compatible with the Saw Star product.

Speaker Change: And just sticking with the theme of the cryo case, remind us if that's compatible with the SawStar products.

Thomas Flaten: It is not right now, Thomas, although the definite objective is to have it be compatible with what is currently our bag device. So our vial device, our vial automated thaw device, is definitely compatible with our cell seal vial product line. So the same would go for the bag device to be the cassette device at some point down the road, likely in 2025.

Speaker Change: It is not right now, Thomas, although the the definite objective is to have it be compatible with what is currently our bag device.

Speaker Change: So our vial device...

Speaker Change: Our vial automated thought device is definitely compatible with our cell seal vial product line. So the same would go for the bag device to be the cassette device at some point down the road. It likely at 2025 kind of an introduction.

Speaker Change: Got it. And then just a quick one on the potential impact of a CBS divestiture on EBITDA margins. I mean, it's a single-digit million product line that's EBITDA positive. So, I mean, how many millions of op-ex are we talking about that you might be able to strip out of the middle here?

Rod DeGrief: Yeah, that'd be correct. So, as you recall, CBS is a low margin on the growth side as well. So, the rest of that is obviously OPEX that we can strip out.

Speaker Change: A few million bucks, so you can put some magnitude around it.

Speaker Change: Yeah, that'd be correct. So as you recall, CBS is a low margin on the growth side as well, so the rest of that being obviously OPEX that we can strip out.

Speaker Change: Got it. Appreciate it.

Operator: and Ladies and gentlemen, this concludes today's question and answer session. I would like to turn the conference back over to Roderick Degree for any closing remarks.

Speaker Change: Thanks Thomas.

Speaker Change: And ladies and gentlemen, this concludes today's question and answer session. I would like to turn the conference back over to Roderick DeGreef for any closing remarks.

Rod DeGrief: Thank you, Chad. As we move through the second half of this year, we believe there will be continued strength in the fundamentals underlying the CGT industry, and BioLife is in an excellent position to capitalize on that macro environment. We plan on leveraging our market-leading position and via preservation to drive the adoption of our other high-margin recurring revenue self-processing tools and services in our portfolio, and expect those to provide an increasing amount of revenue and profitability in the future. Thank you for your time today, and we look forward to updating you on future calls and meeting with some of you at the upcoming investor conferences we'll be participating in during the coming months.

Roderick DeGreef: Thank you, Chad. As we move through the second half of this year, we believe there will be continued strength of the fundamentals underlying the CGT industry. And BioLife is in an excellent position to capitalize on that macro environment.

Speaker Change: We plan on leveraging our market-leading position in via preservation to drive the adoption of our other high margin recurring revenue self-processing tools and services in our portfolio.

Speaker Change: and expect those to provide an increasing amount of revenue and profitability in the future.

Speaker Change: Thank you for your time today and we look forward to updating you on future calls and meeting with some of you at the upcoming investor conferences will be participating in during the coming months.

Operator: The conference has concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: The conference has concluded, thank you for attending today's presentation, you may now disconnect.

Thomas Flaten: Got it. And then just a quick one on the potential impact of a CBS divestiture on EBITDA margins. I mean, it's a single-digit million product line that's EBITDA positive. So, I mean, how many millions of objects are we talking about that you might be able to strip out of the middle here? A few million bucks, so if you can't put it in some bag that you run out of. Yeah, that'd be correct. As you recall,

Rod DeGrief: Hi Jacob, so with respect to your question on Q2, as Gary mentioned, we did have a particularly strong quarter in HPL, that product line. We don't necessarily expect that to repeat in Q3 and 4. I think that when you look at the first half guidance against or first half actual against second half implied guidance, we're really looking at a five to eight percent increase in second half over first half. So we feel pretty good about that. With respect to being conservative, I think we've done our best to articulate how we see the second half of the year as we sit here today at the beginning of August.

Steven Mah: Thanks for taking the questions and congrats on the quarter. One on the cell processing platform, just a follow-up question from a prior question. I mean, you mentioned that, you know, de-stocking pressures are, seem to be easing, and that you have increasing engagement with clinical customers using cell processing products. But is there any way you can quantify or give us some color on the impact? Between how much was it from B-stalking versus how much was it from companies, you know, maybe or more an anticipation of approvals or geographic expansion or approvals of new indications. Yeah, hi.

Rod DeGrief: Yeah, you know, we've been spending the last 10 months really trying to focus on streamlining the cell processing platform and getting rid of the freezer lines, right? And so, we have not made as much progress on the strategic review, but I think on the next call, we should be in a position to provide some further clarity on the outcome of that process.

Operator: I just have one question, and it's around the funding environment. We've been tracking the arm data pretty closely, and we've seen pretty substantial sequential improvement. I was just wondering if you've seen this affect your business, whether it's just overall more clinical activity or more trial starts. Any commentary around that would be helpful.