Q3 2024 BioLife Solutions Inc Earnings Call
Speaker Change: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the BioLife Solutions Q3 2024 Shareholder and Analyst Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. I will now turn the call over to Troy Wichterman, Chief Financial Officer of BioLife Solutions.
Troy Wichterman: Thank you, Operator. Good afternoon, everyone, and thank you for joining the BioLife Solutions 2024 Third Quarter Earnings Conference Call. On the call with me today is Roderick DeGrief, CEO and Chairman of the Board.
Troy Wichterman: We will cover business highlights and financial performance for the quarter and provide an update on our full year 2024 revenue guidance.
Troy Wichterman: As a reminder, during this call, we will make forward-looking statements.
Troy Wichterman: These statements are subject to risks and uncertainties that can be found in our SEC filings.
Troy Wichterman: These statements speak only as of the date given, and we undertake no obligation to update them.
Troy Wichterman: We will also speak to non-GAAP or adjusted results. Reconciliations of GAAP to non-GAAP or adjusted financial metrics are included in a press release we issued this afternoon.
Speaker Change: Now, I'd like to turn the call over to Rod DeGroote, Chairman and CEO of BioLife.
Rod DeGroote: Thanks, Troy. Good afternoon and thank you for joining us for BioLife's third quarter 2024 earnings call. I'm pleased to report another strong quarter, marking our fourth consecutive period of sequential revenue growth and a strong rebound year over year.
Rod DeGroote: This further demonstrates our belief that the macroenvironment, as it relates to the bioproduction subsector in which we operate, is continuing to improve.
Rod DeGroote: Our self-processing platform revenue totaled $19 million, representing a sequential increase of 6%, and up 43% compared to the third quarter of 2023.
Rod DeGroote: This is a high margin business and we see that profitability directly reflected in our financial performance this quarter with continued margin expansion.
Rod DeGroote: Adjusted gross margin for Q3 came in at 54% up from 44% in the same period last year and we delivered an adjusted EBITDA margin of 20% compared to 6% last year.
Rod DeGroote: These results underscore the attractiveness of our market-leading self-processing portfolio as we continue to drive both top-line growth and margin expansion through our proprietary high-margin recurring revenue streams.
Rod DeGroote: Earlier today, we announced the strategic divestiture of our SciSafe biostorage business, which serves as yet another pivotal step in our evolution.
Rod DeGroote: I will discuss this in further detail momentarily, but I'm confident that with our streamlined structure and fortified balance sheet, BioLife is better positioned than ever to deliver long-term value for our shareholders.
Rod DeGroote: Looking ahead, based on the strength of our Q3 results combined with what we're seeing as the last quarter of the year unfolds, we have modestly increased our cell processing revenue guidance, which Troy will speak to later in the call.
Rod DeGroote: We believe that the momentum we've realized throughout this year, both in terms of revenue growth and margin expansion, provides us with a solid jumping off point from which to enter 2025.
Rod DeGroote: Staying focused on our self-processing revenue, our biopreservation media products, which account for the vast majority of the platform's revenue, had a strong quarter-over-quarter increase.
Rod DeGroote: This was somewhat offset by an expected timing-related sequential decline in other products.
Rod DeGroote: Historical biopreservation media revenue trends remain consistent this quarter, with our top 20 customers accounting for approximately 80% of media revenue.
Rod DeGroote: An estimated 60% of the biopreservation media revenue came from direct customers in the quarter, and of that amount, customers with approved therapies totaled approximately 40%.
Rod DeGroote: We believe our biopreservation media products are embedded in more than 70% of relevant commercially sponsored CGT clinical trials, which provides an encouraging indicator for sustainable future growth.
Rod DeGroote: In Q3, the CGT regulatory environment continued the forward momentum that started last year with our biopreservation media embedded in two newly approved therapies during the quarter.
Rod DeGroote: This brings us to a total of 17 unique therapies that incorporate our market-leading biopreservation media.
Rod DeGroote: Further, we see six additional product approvals, geographic expansions, or new indications occurring in the next 12 months.
Rod DeGroote: Looking strategically at the road ahead, we will continue to refocus our efforts and allocate our capital toward our proprietary, high-growth, high-margin self-processing portfolio of products.
Rod DeGroote: This morning's announcement of the sale of our SciSafe Biostorage business and a $73 million all-cash transaction is a pivotal step in the evolution of BioLife into a pure-play CGT tools provider driven by our recurring reagents business.
Rod DeGroote: Not only does the divestiture fortify our balance sheet, it also frees up significant operational bandwidth, which will be redeployed to support the growth of our core self-processing products.
Rod DeGroote: During our recent strategic review, we determined that our biostorage business, which accounted for $16 million in Q3 year-to-date revenue, was furthest away from our core competencies and expertise.
Rod DeGroote: In addition, we believe the level of capital required for consolidation and future growth would be better allocated to supporting and expanding our cell processing product portfolio, specifically our biopreservation media products.
Rod DeGroote: As a result of a more streamlined product portfolio, we have consolidated all our sales and marketing efforts under Todd Berard, who has moved into the newly created role of Chief Commercial Officer.
Rod DeGroote: Todd, who has served as our Chief Marketing Officer, has been with BioLife for more than 10 years and has a deep understanding of the CGT market, our product line, as well as established relationships with our larger key customers.
Rod DeGroote: Gary Richardson, who has been our Chief Revenue Officer for the last year and the original founder of SciSAFE, will become the CEO of the now independent SciSAFE. I would like to personally thank Gary and the entire SciSAFE team for their contributions to bio life over the last four years and wish them a bright and successful future.
Rod DeGroote: With that said, we realize the job is not done and we're committed to exiting the remaining freezer business.
Rod DeGroote: Although CBS generated positive adjusted EBITDA for the quarter and represents less than 13% of sales, it is dragged on long-term margins. We are making steady progress and will provide updates as events warrant.
Rod DeGroote: Our vision is to evolve biolife into a pure play CGT tools and reagents provider so we can fully leverage our core competencies and the distinct market leadership of our biopreservation media.
Rod DeGroote: We believe this approach represents the strongest path to delivering sustained shareholder value as we drive both revenue growth and profitability into 2025 and beyond.
Troy Wichterman: Now, I'll turn the call over to Troy, who will provide a review of our Q3 financial results.
Thank you, Rod.
Troy Wichterman: Today, we will be reviewing current and prior period financials from continuing operations for Q3 2024, which excludes sterling.
Troy Wichterman: We reported Q3 revenue from continuing operations of $30.6 million, representing an increase of 30% year-over-year. The year-over-year increase was primarily related to a 43% increase in our cell processing platform.
Troy Wichterman: Total revenue was up sequentially from Q2 2024 by 2.2 million or 8%, primarily driven by a double-digit sequential increase in biopreservation media revenue.
Thank you.
Troy Wichterman: Gap gross margin for Q3 2024 was 51% compared with 48% in Q3 2023.
Troy Wichterman: Adjusted gross margin for the third quarter was 54% compared with 44% in the prior year.
Troy Wichterman: GAAP operating expenses for Q3 2024 were $32.1 million versus $39 million in Q3 2023.
Troy Wichterman: The decrease compared to the prior year was largely due to a reduction in headcount that took place at the end of Q3 2023, in addition to an asset impairment of $8.3 million related to our freezer business that the company took in Q3 2023.
Troy Wichterman: Adjusted operating expenses for Q3 2024 totaled $17.2 million compared with $18.7 million in the prior year. The decrease is primarily due to lower personnel costs from the Q3 2023 reduction in force and continued focus on expenses.
Troy Wichterman: Gap operating loss for Q3 2024 was $1.6 million versus $15.5 million in the prior year.
Troy Wichterman: Our adjusted operating loss for the third quarter of 2024 was $600,000 compared with $8.3 million in Q3 2023.
Troy Wichterman: The decrease in operating loss was primarily due to an 8.3 million impairment the company took in Q3 2023 related to our freezer business.
Troy Wichterman: Our gap net loss was 1.7 million or 4 cents per share in Q3 2024 compared to 15.8 million or 36 cents per share in the prior year.
Troy Wichterman: The decrease in net loss was primarily due to an $8.3 million impairment the company took during Q3 2023 related to our freezer business and a $4.5 million improvement in gross margin.
Troy Wichterman: Adjusted EBITDA for the third quarter of 2024 was $6.1 million or 20% of revenue compared with $1.4 million or 6% of revenue in the prior year.
Troy Wichterman: Adjusted EBITDA increased from the prior year due to a 4.5 million dollar improvement in gross margin driven by increased sales of biopreservation media and lower personnel costs.
Troy Wichterman: Our adjusted EBITDA increased $2.3 million sequentially from Q2 2024, primarily due to increased sales of biopreservation media.
Speaker Change: As Rod mentioned, earlier today we announced the sale of our SciSAfe bio-storage business and we issued an 8k earlier today which included Proformas without SciSAfe in our financial results and includes GAP to non-GAP reconciliations.
Speaker Change: For the six-month period ending June 30, 2024, our revenue with OutsideSafe would have been $44.7 million versus our reported results of $55.1 million.
Speaker Change: Our adjusted gross margin without size-safe would have been 60% versus 53% reported and our adjusted EBITDA would have been 13% versus 15% reported.
Speaker Change: In addition, there will be cost savings going forward by consolidating our sales and marketing department under Todd Berard.
Speaker Change: Turning to our balance sheet, our cash and marketable securities balance reported as of September 30th, 2024 was $39.3 million, compared with $36.9 million as of June 30th, 2024.
Speaker Change: This does not include any proceeds from the sale of SciSafe.
Speaker Change: The total sequential cash increase of $2.4 million was primarily driven by cash provided by operation activities of $6.8 million, partially offset by a $2.5 million principal payment on our term loan and $1.4 million in capital expenditures.
Speaker Change: Our SUV long-term debt balance was $17.5 million. We expect to continue making quarterly repayments of $2.5 million going forward.
Turning to 2024 Revenue Guidance.
Speaker Change: We are updating our previous guidance, which is based on expectations for our cell processing platform, Evo, Thastar, and 10 months of revenue from SciSafe, and does not include any revenue from CBS.
Speaker Change: As has been the case throughout this year, the Biostorage Service Platform Guidance includes the Thawstar Automated Thawing Devices product line.
Speaker Change: Our total revenue is expected to be $98 million to $100 million.
Speaker Change: A reduction from our original guidance of $99 to $101 million, reflecting an increase in guidance for our self-processing platform of $2 million, which is offset by $3 million related to the decrease in expected storage revenue given the sale of SciSAFE.
Speaker Change: Our self-processing platform is expected to contribute $72 million to $73 million, or 9% to 11% growth over 2023.
Speaker Change: This is an increase of $2 million on both the low and high end of our previous guidance.
Speaker Change: Our bio-storage services platform is expected to contribute $26 million to $27 million, which includes 10 months of SciSafe revenue.
Speaker Change: Finally, in terms of our share count, as of November 5th, we had 46 million shares issued in outstanding and 48.5 million shares on a fully diluted basis.
Speaker Change: Now, I'll turn the call back to the operator to open up for questions.
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 touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we'll pause momentarily to assemble our roster.
Speaker Change: Our first question comes from Jacob Johnson from Stevens Inc. Please go ahead.
Speaker Change: Hi, this is Hannah on for Jacob. Thanks for taking the questions. To start with the SySafe sale, can you just frame up what pro forma gross margins look like and then how should we think about any OPEX savings and depreciation going forward?
Speaker Change: Yeah, we issued an 8K earlier today that lays out all the details for different prior periods 2021 up to the six months ended in 2024. So you'll see in the six months of 2024,
Speaker Change: adjusted gross margin with outside SAFE of 60% and an adjusted EBITDA margin of 13%. However, going forward, we expect to have a very minimal impact on our adjusted EBITDA profile.
Speaker Change: Alright, thanks. And then, I know you're not diving into 2025, but with destocking, we've seen some swings in revenue and growth over the last year, and I'm just curious if you could frame up how we should think about long-term growth from here, and if there are any puts and takes we should be aware of as we're starting to think about 2025.
Speaker Change: Yeah, I think the best thing to do would be to wait for us to put out our formal guidance, which we'll do in early January, in advance of the JPM conference. But I think if you, your point is well taken with respect to Q2 to Q3 last year.
Speaker Change: But then when you look at Q3 forward, as we said in our formal remarks, that we've had four quarters of sequential growth. And while it may not be sequential each and every quarter going forward, we certainly do expect growth.
Speaker Change: in 25, and we believe that the destocking in particular is well behind us at this point in time.
Awesome, thanks. I'll leave it there.
Thank you.
Speaker Change: The next question comes from Matt Stanton from Jeffries. Please go ahead.
Matt Stanton: Hey, thanks. Rod, you know, you talked about a post-SciSafe sale, kind of being able to streamline the structure, balance sheet in a better position to deliver value. Can you just talk about some of the areas of...
Matt Stanton: of Focus post the sale, whether it be, you know, looking to do additional deals, capacity ads around the media business, just like where, you know, where the focus will be strategically post the size-safe sale there. Thank you.
Rod DeGroote: You bet. The focus is in general around our self-processing product line, which would be
Rod DeGroote: the biopreservation media and the Sexton tools that we acquired several years back, which would include HPL.
the CryoSeal product line, which includes the newly introduced CryoCase.
Rod DeGroote: as well as the CT5 automated fill machine. So those products are going to get the lion's share of our attention. With respect to capacity in particular, we definitely have some capacity needs coming into the next couple of years with respect to biopreservation. And that...
Rod DeGroote: That sale of SciSafe provides us with the capital to do so.
Rod DeGroote: To the extent that we would look at anything inorganic or any kind of transactions from an M&A perspective, I think that there's a place for that.
Rod DeGroote: But I think that our criteria going forward around this issue is very stringent
Rod DeGroote: And I think at this point, the only thing that we would look to do...
HPL, etc.
Rod DeGroote: The other I think key criteria is that whatever we do does not negatively impact the margin expansion trajectory that we're on right now because that's that's a critical objective for us to increase that that margin both on the gross side and on the adjusted EBITDA side.
Speaker Change: Awesome, thanks for that. And then I guess going back over to Sexton, the launch of the new CrowdCase.
Speaker Change: for those that have a trial that had it in their hands, kind of.
Speaker Change: feedback, whether that be, you know, biopharma customers, CROs, CDMOs, folks like that. And, you know, if we look out a year from now, you know, what are you going to quantify as a successful launch of that product here? Thank you.
Speaker Change: impression from a handful of really key customers is positive. There's a pretty significant validation process that these customers need to go through to consider this.
Speaker Change: It's not insurmountable in any way, shape, or form, but the initial feedback is good, and I would expect to
Speaker Change: start to see revenue generated at any kind of material level toward the end of next year, the back half of next year. But we may end up talking about some sort of revenue contribution in our guidance, but at this point in time, Matt, it's a little early.
Thank you. I'll leave it there. Appreciate it.
You bet.
Speaker Change: The next question comes from Brandon Smith from TD Cowan. Please go ahead.
Speaker Change: Hi guys, thanks for taking the question, congrats on the solid quarter. Maybe just a quick one from us, kind of building on the previous questions here, but
Speaker Change: Can you expand a bit on what some of the specific levers are within the cell processing platform that you can pull heading into next year, just to help shore up some of that top line growth in 2025? And I guess what I'm really getting at...
Speaker Change: I'm wondering what kinds of macro trends you're seeing specifically and how some of those could be leveraged as you kind of continue to restructure the business internally. Thanks.
Speaker Change: Yeah, so I think that as we've talked about, you know, a couple of key
Speaker Change: factors. One would be the fact that 80% of our media revenue comes from 20 customers.
Speaker Change: That's a really key fact. And so, to some degree, our success is based on their success, right? So that's an important thing.
I think that the opportunity that we have
to drive revenue past a sort of natural pull.
Speaker Change: that would happen from these large customers is to deepen our relationship with our distributors, which we're working on doing. There are some pricing opportunities that we have also that we have so far had some good initial success on in terms of reducing historical legacy discounts.
Speaker Change: And I think the other area where we can actually have...
Speaker Change: potentially material impact on driving revenue and self-processing is that cross-selling feature of the Sexton Tool products into our existing customer base. And there are a number of different evaluations going on for different products with different customers. And we would expect to see some
Thank you.
Speaker Change: some revenue come out of that toward the end of next year in particular. Cryo case being one of those as I mentioned earlier.
Very helpful, guys. Thank you.
You bet.
Speaker Change: The next question comes from Anna Snopkowski from KeyBank. Please go ahead.
Speaker Change: Hi, thanks for taking my question. This is Anna Snepkowski on for Paul.
Speaker Change: My first question is regarding the announced divestiture of SciSafe. You talked about this a little during your prepared remarks.
Speaker Change: But I was wondering if this changes your strategy at all going forward, specifically on the potential divestiture of CBS.
Sorry, I think...
Speaker Change: In terms of CBS, I'll just speak to that specifically, we are definitely in the throes of a transaction there. We're pretty close and we are committed, as we have been for some time, to exiting that business through a transaction. So, stay tuned for that.
in terms of the strategic impact of
Speaker Change: the sale of SySafe, I think we've tried to be clear about the fact that the focus of the company going forward is going to be on the proprietary, higher growth, higher margin, recurring revenue products that primarily are in the self-processing platform as it's defined today.
Speaker Change: Quarter for us with respect to that and destocking as we've talked about in the past really got behind us
Speaker Change: sort of Q1. We had one customer in Q2, but that customer started to take product in Q3. So we do believe it's behind us, barring some sort of industry-wide issue that pops up here again.
Thank you.
Speaker Change: The next question comes from Matt Hewitt from Craig Hallam Capital Group.
Please go ahead.
Speaker Change: Good afternoon and congratulations on a strong quarter. Maybe first up, and thank you for pointing out the 8k
I think you mentioned 60% roughly gross margins.
Speaker Change: absent size-safe contribution in the first half of the year. How should we be thinking about your margin trajectory? You know, as we look out into 25 and beyond, I mean, where could your margins go, particularly on the gross margin side?
Speaker Change: Yeah, Matt, I'll take that one. So you're right, 60% for the first half, right, and what we've been talking about how key the growth of...
Speaker Change: The media revenue is to our financial profile, not only on the gross side, but on the adjusted EBITDA side.
Speaker Change: As you'll recall, historically, before we did any acquisitions, the media gross margin was roughly 70 percent. And then some of the initiatives we're working on internally to help expand that margin even further to drive our overall consolidated gross margin into, call it the upper 60s in the not so distant future.
Speaker Change: Excellent and then just regarding the third quarter here obviously a nice pop
Speaker Change: both sequentially and year-on-year for the media business. Was that just a function of the two approvals in the quarter, getting some extra stocking there, or was there something else that kind of drove that increase? Thank you.
Speaker Change: Yeah, it was not related to the two approvals that we saw. There's usually a fairly decent amount of time that that goes by between those approvals and seeing that additional demand flow through.
Speaker Change: It really had to do with just strong demand across that top 20 customer base.
Speaker Change: and you know came in very nicely for us. So that's that and what we see happening in Q4 is what led us to increase the self-processing guidance by two million dollars.
That's great. Thank you.
Thank you.
Speaker Change: Again, if you have a question, please press star then 1. And our next question comes from Thomas Flatton from Lake Street. Please go ahead.
Speaker Change: Hey Rod, just to follow up on that last comment, can you comment qualitatively on some of the smaller customers, you know, the earlier stage biotechs, academia, etc. How are they coming along from a macro perspective?
as proxies for those smaller customers.
Rod DeGroote: and we've seen good sequential growth from those distributors, bar one.
Rod DeGroote: But that had more to do with the renegotiation of the distributor agreement around pricing than it did around demand So we feel pretty good that the the demand is across the board not only just for the direct customers But for distributors as well Representing those smaller academic and earlier stage companies It's been moving in the right direction for us for sure
Speaker Change: Excellent. And then with respect to longer-term growth within cell processing, how relevant is Asia, for example, in terms of geographic expansion to help keep those long-term growth rates up?
Speaker Change: You know, less than 5 percent, we believe, of our revenue comes out of China. Right now, specifically China, even less.
for the rest of Asia.
So while it's an important piece of business for us,
It's not material in the sense of...
Speaker Change: the things that are going on, whether it's the Biosecure Act or other things like that, we do not see any impact of that on us going forward, at least at this point in time.
Got it. Thanks so much.
You bet.
Hi, is your line on mute?
Jade: Sorry, so sorry it was. Sorry, it's Jade on for each end.
Jade: So, thank you for taking my question. Sorry for being on mute. So, can you just quickly, more on those biggest three distributors you were talking about. Do you have any idea of the, like, approximate number of individual customers that represents?
Jade: Okay, great. And so I think I've heard you say earlier it was 17 approved CGTs currently using the services.
That's correct. It's Biodiversity Preservation Media.
especially, particularly.
Speaker Change: Do you expect that number to change in the next six months or so, or are most things further back in the queue, do you think?
Speaker Change: As we stated earlier, we do expect six additional, whether they're unique therapies or geographic expansions, indications, new indications for the same therapy, or movement up the line of treatment. We expect six of those occurrences in the next 12 months or so, 9 to 12 months.
Okay, all right. Thank you so much.
You bet.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Roderick DeGrief for any closing remarks.
Roderick DeGrief: Thank you operator. It's been a little over a year since I came back into an operating role with the company and as I look back I'm very pleased with the progress the BioLife team has made.
Roderick DeGrief: In the last 12 months, we've focused the bulk of our efforts on our proprietary
Roderick DeGrief: Higher Growth, Higher Margin Core Cell Processing Platform. This has allowed us to reestablish sequential revenue growth and streamline our operations, both of which have driven solid margin expansion, especially at the adjusted EBITDA level.
Roderick DeGrief: With the Strengthened Balance Sheet and an even more focused product portfolio, we're well positioned to leverage our market-leading position in biopreservation to drive the adoption of the other high-margin, recurring-revenue cell processing tools in our portfolio, which we believe will drive continued revenue growth and increased profitability.
Roderick DeGrief: We appreciate your time today and look forward to updating you on our continued progress on future calls and meeting with some of you at upcoming investor conferences during the coming months. Thank you.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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