BioLife Solutions, Inc. — Q2 2023 Form 10-Q
Business context and reporting period. Unaudited results for the three and six months ended June 30, 2023. BioLife develops and supplies bioproduction tools and services for cell and gene therapy and broader biopharma markets, including cell-processing products, freezers and thaw systems, storage services, and temperature-controlled shipping containers. The company reports one operating segment.
Financial highlights
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $39.5 million | $40.5 million | $77.2 million | $76.8 million |
| Operating loss | $15.3 million | $76.6 million | $28.9 million | $84.5 million |
| Net loss | $10.2 million | $72.9 million | $23.9 million | $80.3 million |
| Loss per share, basic and diluted | $0.23 | $1.72 | $0.55 | $1.90 |
| Cash used in operating activities | Not separately stated | Not separately stated | $10.4 million | $17.8 million |
Q2 revenue declined 3%; first-half revenue increased 1%. Q2 product revenue was $33.0 million, service revenue $4.2 million, and rental revenue $2.3 million. For the first half, product, service, and rental revenue were $64.6 million, $8.7 million, and $3.9 million, respectively. Management attributed product growth in cell processing to CGT-market adoption, partly offset by weaker freezer and thaw sales; service growth mainly reflected SciSafe storage services. Rental revenue declined as a prior-year COVID-19 vaccine-material storage agreement ran off.
Q2 cost of revenue excluding acquired-intangible amortization was 72% of revenue, versus 67% a year earlier; for the first half it was 68%, versus 69%. The Q2 increase included a $2.2 million inventory reserve for potentially unusable final product containers, personnel costs, and other mix effects. Operating expenses excluding the prior-year impairment comparison increased in key areas: first-half general and administrative expense rose 30%, sales and marketing 24%, and research and development 25%.
Q2 and first-half 2023 results included a $5.1 million non-cash gain from settling the Global Cooling escrow. The comparable 2022 periods included $69.9 million of intangible-asset impairment charges. These items materially affect year-over-year loss comparisons.
Financial position and liquidity
- At June 30, 2023, cash and cash equivalents were $21.4 million; available-for-sale securities totaled $26.7 million. The company reported $48.1 million of cash, cash equivalents, and available-for-sale securities, down from $64.1 million at December 31, 2022.
- Current assets were $120.3 million and current liabilities $39.6 million. Total assets were $433.2 million, total liabilities $81.0 million, and shareholders’ equity $352.1 million.
- Total debt, net of issuance costs, was $25.5 million, including $1.9 million current and $23.6 million long-term. The $20 million term loan bears a stated 7.0% rate and matures in June 2026. The company said up to $10 million of additional borrowing was available subject to lender approval and had not been drawn.
- Six-month investing cash flow was positive $12.2 million, primarily reflecting $32.6 million of securities maturities, offset by securities purchases and capital spending. Cash, cash equivalents, and restricted cash increased $1.9 million over the six months.
Management believes available liquidity will meet needs for at least twelve months from the filing date, but noted that additional debt or equity capital could be pursued for acquisitions or strategic investments and may not be available on reasonable terms.
Outlook, risks, and unusual items
- After quarter-end, management and the board began actively seeking to divest the Global Cooling and CBS freezer product lines after considering strategic alternatives. No sale terms or timing were provided.
- Management expects general and administrative, sales and marketing, and research and development expenses to rise as the company supports growth, expands sales efforts, and develops products. No numerical revenue or earnings guidance was provided.
- Sales-tax liabilities related to prior periods were estimated at $4.8 million at June 30, 2023, in addition to approximately $0.3 million of obligations from ordinary-course activity. The timing of final settlement is uncertain. The filing also describes correction of immaterial prior-period errors related to sales-tax accounting.
- Disclosure controls and procedures were concluded to be ineffective because of previously identified material weaknesses in internal controls, including entity-level controls, financial-system access, complex accounting, revenue and procure-to-pay processes, and indirect-tax accounting. Remediation was ongoing; no material control changes occurred during the quarter.
- Other watch items include the $8.4 million warranty liability, a higher inventory reserve, customer concentration (one customer represented 17% of Q2 revenue and 15% of first-half revenue), and potential litigation typical of the industry. Management reported no significant pending or threatened litigation expected to result in an unfavorable judgment, and no material changes to the risk factors in its 2022 Form 10-K.
Important facts for investors to verify
- Whether cell-processing growth can offset continued weakness in freezer and thaw sales, and whether the planned freezer-line divestiture proceeds on acceptable terms.
- Whether the inventory reserve, warranty exposure, and sales-tax estimates require further charges or cash payments.
- Cash burn, liquidity needs, and debt capacity, including lender approval requirements and the term loan’s interest and covenant terms.
- Progress and timing of remediation of the material weaknesses in internal controls.
- The durability of service growth and the effect of the expiring COVID-19-related rental agreement on future comparisons.