BioLife Solutions, Inc. — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016. BioLife develops and sells cell- and tissue-preservation media and provides related biologistics products and services. The unaudited statements consolidate the company and its majority-owned biologistex subsidiary.
Financial results and position
| Metric | Q1 2016 | Q1 2015 / comparison |
|---|---|---|
| Revenue | $1.852 million | $1.501 million; up 23% |
| Gross profit / margin | $1.081 million / 58% | $883,000 / 59% |
| Operating expenses | $2.573 million | $2.043 million; up 26% |
| Operating loss | $1.492 million | $1.161 million |
| Consolidated net loss | $1.491 million | $1.152 million |
| Net loss attributable to BioLife | $1.227 million; $0.10 per share | $1.031 million; $0.09 per share |
| Cash used in operations | $1.593 million | $1.308 million |
| Cash and cash equivalents at period end | $1.662 million | $2.971 million at March 31, 2015 |
At March 31, 2016, total assets were $10.776 million, current assets $5.307 million, current liabilities $1.480 million, and total liabilities $2.246 million. No borrowing is listed at quarter-end; liabilities primarily include accounts payable, accruals, and deferred rent. Cash, cash equivalents, and short-term investments totaled $3.825 million at December 31, 2015; the short-term investments were sold during the quarter. Investing activities provided $1.071 million, chiefly from investment sales, while financing activities provided $12,000. The company spent $553,000 on internal-use software development.
Changes and management commentary
- Core biopreservation media sales rose 25% to $1.852 million, driven by higher regenerative-medicine sales and distributor growth. Contract manufacturing revenue was zero, versus $24,000 in Q1 2015.
- Gross margin declined one percentage point to 58%; management cited an underutilization adjustment, partly offset by forfeited stock-based compensation.
- Operating expenses rose 26%. Research and development increased 57%, sales and marketing 47%, and general and administrative 9%. Management attributed increases to product and software development, added personnel, biologistex marketing, executive severance, and stock-based compensation.
- Net loss widened, which management primarily attributed to higher headcount and severance payments to former executives. Operating cash use also increased, reflecting the higher loss and working-capital changes.
Outlook, risks, and other material items
- Management estimated full-year 2016 core product revenue growth of 20%–30% over 2015 and gross margin of 55%–65% on core media products. It expected no contract manufacturing revenue in the near term.
- Management said the $4 million shareholder credit facility, together with operating cash, was expected to fund working-capital needs for at least 12 months and support positive operating cash flow in 2017. This is an outlook, not a guarantee.
- On May 12, 2016, after quarter-end, BioLife entered into the facility with largest shareholder WAVI Holding AG: four $1 million advances scheduled through March 1, 2017. The unsecured note bears 10% annual interest, matures June 1, 2017, and restricts liens subject to exceptions. WAVI received five-year warrants for 550,000 shares at $1.75 per share.
- The biologistex joint venture had an approximately $2.1 million remaining commitment to purchase Smart Containers as of March 31, 2016. The company leases approximately 30,000 square feet through July 2021; monthly base rent was approximately $59,700, with scheduled increases and additional operating-cost obligations.
- Revenue and cash balances may fluctuate with customer clinical-trial progress. One customer contributed approximately 12% of Q1 2016 product revenue; foreign customers contributed 21% of revenue. One customer represented approximately 19% of gross receivables at quarter-end.
- Management reported disclosure controls were effective as of March 31, 2016 and no material change in internal control over financial reporting during the quarter. The filing reports no material litigation and no off-balance-sheet arrangements.
Important facts for investors to verify
- Whether product growth and the 20%–30% full-year revenue outlook are achieved, and whether margins remain within the stated range.
- Timing and availability of each WAVI advance, the 10% financing cost, the warrant’s potential dilution, and the conditions and restrictions in the executed agreements.
- Cash burn, working-capital needs, and the assumptions supporting management’s expectation of positive operating cash flow in 2017.
- Progress and funding obligations of biologistex, including the remaining Smart Container purchase commitment.
- Customer concentration, clinical-trial-related demand variability, and the impact of continued operating expense growth.