BioLife Solutions, Inc. — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018; comparisons are with the three months ended March 31, 2017 unless stated otherwise. BioLife develops, manufactures and sells cell- and tissue-preservation media, with products serving regenerative medicine, biobanking and drug discovery markets.
Financial performance and position
| Metric | Q1 2018 | Q1 2017 / comparison |
|---|---|---|
| Revenue | $3.815 million | $2.366 million; up 61% |
| Gross profit and margin | $2.451 million; 64% | $1.438 million; 61% |
| Operating income (loss) | $140,000 | ($464,000) |
| Net income (loss) | $3,482 | ($870,290) |
| Net loss attributable to common stockholders | ($102,768), or ($0.01) per share | ($870,290), or ($0.07) per share |
| Operating cash flow | $392,000 provided | $169,000 used |
| Cash and cash equivalents | $7.033 million at March 31 | $6.663 million at December 31, 2017 |
Operating expenses rose 22% to $2.311 million: research and development increased 21% to $346,000, sales and marketing increased 19% to $612,000, and general and administrative increased 23% to $1.353 million. Cash used in investing was $41,000, principally for property and equipment; financing provided $18,000, including option and warrant proceeds partly offset by preferred dividends.
At March 31, total assets were $12.293 million, current assets $10.244 million, current liabilities $1.312 million, total liabilities $1.822 million, and shareholders’ equity $10.471 million. The filing does not clearly present a standalone debt balance; it reports equipment-financing interest and payments. The company had no off-balance-sheet arrangements.
Changes and business developments
- Revenue growth was led by regenerative medicine sales, which approximately doubled to $2.104 million; distributor revenue rose 37% to $1.039 million. Drug discovery revenue was $377,000 and biobanking revenue was $295,000.
- Management attributed the higher gross margin to increased average selling prices and sales volume. Cost of sales also included a raw-material write-off.
- Two customers represented approximately 30% of product revenue, versus 21% a year earlier; two customers accounted for approximately 34% of gross receivables at quarter-end.
- BioLife’s ownership in SAVSU, accounted for under the equity method, declined from 35% to 26.7% following additional contributions by the majority owner. BioLife recorded a $144,000 share of SAVSU’s loss, versus $229,000 a year earlier.
- The company reported 36 new customers, including 19 regenerative medicine companies; it also announced a private-label supply agreement with MilliporeSigma. BioLife adopted revenue standard Topic 606 on January 1, 2018; adoption had no reported financial-statement impact.
Outlook, risks and other matters
Management said it expects continued growth in adoption and use of its products and believes existing cash will meet liquidity needs for at least the next 12 months. This is not quantified revenue or earnings guidance. The company said slower-than-expected revenue growth or insufficient expense control, including required preferred-stock dividends, could necessitate additional financing; it may also pursue financing opportunistically or for strategic transactions.
Revenue and cash balances may fluctuate with customers’ clinical-trial progress and ordering patterns. The business depends on a relatively small number of customers and market sectors, and customer concentration increased year over year. Foreign customers represented 13% of revenue, versus 22% a year earlier. The filing identifies ordinary-course legal proceedings as not currently material. The Bothell lease runs through July 2021, with two five-year extension options; monthly base rent was approximately $58,000 at quarter-end. Management concluded disclosure controls were effective as of March 31, 2018.
After quarter-end, through May 8, 2018, 920,116 warrants were exercised at a weighted-average $4.75 per share, generating approximately $4.4 million in proceeds. Preferred-stock dividends of $106,250 accrued at quarter-end were paid April 2, 2018.
Important facts for investors to verify
- Whether regenerative medicine demand, safety-stock orders and distributor growth are sustained, and how customer concentration develops.
- Cash runway assumptions and the company’s ability to fund operations, preferred dividends and potential strategic activity without additional financing.
- The effect of SAVSU’s lower ownership percentage, ongoing losses and any further funding requirements on BioLife’s investment.
- Potential dilution from outstanding options and warrants, including post-quarter warrant exercises and proceeds.
- The future effect of the new lease accounting standard, which management expected to materially increase recorded assets and liabilities but was still evaluating.