BioLife Solutions, Inc. — Q2 2020 Form 10-Q
Business context and reporting period. Unaudited consolidated results for the quarter and six months ended June 30, 2020. BioLife develops and sells bioproduction tools for cell and gene therapies, including preservation media, automated thawing devices, cloud-connected shipping containers, and freezer technology. The 2019 acquisitions of Astero, SAVSU, and Custom Biogenic Systems (CBS) broadened the business and affect year-over-year comparability.
Key financial results
| Metric | Three months ended June 30, 2020 | Six months ended June 30, 2020 | Comparable 2019 period |
|---|---|---|---|
| Total product and rental revenue | $9.92 million | $22.08 million | $6.70 million; $12.47 million |
| Operating income | $0.04 million | $0.41 million | $0.75 million; $1.31 million |
| Net income (loss) | $(16.38) million | $5.93 million | $4.25 million; $(14.91) million |
| Basic earnings (loss) per share | $(0.70) | $0.23 | $0.18; $(0.80) |
| Operating cash flow | Not presented quarterly | $4.89 million | $1.08 million |
- Revenue increased 48% in Q2 and 77% in the first half, reflecting acquired businesses and growth in biopreservation media. Q2 revenue included $9.49 million of product revenue and $0.43 million of rental revenue.
- Approximate gross margin, calculated from reported revenue and cost of product and rental revenue, was 55% in Q2 and 59% in the first half, versus approximately 71% in each 2019 comparable period. Management attributed the lower rates partly to the acquired product lines’ higher costs and acquisition-related inventory step-up amortization.
- Q2 net loss primarily reflects a $16.44 million noncash loss from remeasuring the warrant liability. For the first half, a $5.47 million noncash warrant fair-value gain contributed to reported net income; operating income was $0.41 million.
- Cash and cash equivalents were $29.88 million at June 30, up from $6.45 million at December 31, 2019. Current assets were $46.25 million and current liabilities $7.49 million. Total liabilities were $8.13 million; the filing does not clearly quantify any equipment-financing debt separately.
- First-half investing cash outflow was $1.68 million, principally for rental assets; financing cash inflow was $20.22 million, primarily from the $20 million Casdin share investment. Cash increased by $23.43 million in the period.
Material changes and capital
- In May 2020, Casdin Capital invested $20 million at $10.50 per share. In a subsequent event, BioLife completed a public offering on July 7 of 5,951,250 shares at $14.50 per share, with approximately $81 million in net proceeds.
- BioLife issued 2,747,970 shares in a May cashless exercise of 3,871,405 warrants. The warrant liability fell from $39.60 million at year-end 2019 to $0.96 million at June 30, 2020, reflecting exercises and fair-value changes.
- Shares issued and outstanding were 25,982,367 at June 30, compared with 20,825,452 at December 31, 2019. The company reported 32,001,581 shares outstanding as of August 5, 2020.
- The company received a $2.18 million Paycheck Protection Program loan in April and repaid it nine days later. It deferred employer Social Security payments, with half due in 2021 and half in 2022.
Outlook, risks, and unusual items
- Management said cash, including the Casdin investment and subsequent public-offering proceeds, should meet liquidity needs for at least 12 months. It cautioned that weaker-than-expected revenue, expense levels, or COVID-19 effects could require additional financing. No numerical revenue or earnings guidance is provided.
- COVID-19 prompted an estimated $1.5–$2.0 million of additional cryopreservation-media orders in late March, which may represent pulled-forward demand rather than recurring sales. Customer facility closures delayed deliveries of thawing and freezer equipment in Q2; management could not estimate the full financial impact.
- In response to weaker near-term revenue expectations for ThawStar and freezer products, BioLife reduced the fair value of acquisition-related contingent consideration by $1.53 million in the first half, including a $1.46 million Q2 gain. It found no impairment of the reviewed long-lived assets at June 30 but noted future changes could trigger impairment.
- Customer concentration remains relevant: two customers represented approximately 25% of Q2 product revenue, and one customer represented approximately 13% of first-half revenue. CryoStor products accounted for 62% of Q2 revenue, down from 82% a year earlier.
- Disclosure controls and procedures were deemed ineffective due to a material weakness in accounting for complex equity transactions, including warrants and market-based stock awards. The company reported that related errors had resulted in restatement of prior financial statements.
- Management reported no material pending litigation known to it and no off-balance-sheet arrangements at June 30.
Important facts for investors to verify
- Whether the Q2 media orders were one-time safety-stock purchases and how COVID-19 affected subsequent media and equipment demand.
- How much of the reported first-half net income reflects noncash warrant and contingent-consideration fair-value changes versus operating performance.
- The extent to which acquired product lines can improve margins as acquisition-related inventory step-up amortization and integration costs change.
- Post-offering cash, share count, dilution, and the timing and terms of any contingent consideration or deferred payroll-tax payments.
- Remediation and independent validation of the disclosed material weakness, and any additional effects on financial reporting or prior-period figures.