BioLife Solutions, Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019. BioLife develops and sells biopreservation media and related products for cell and gene therapies, regenerative medicine, biobanking, and drug discovery. It also held a 44.4% equity-method interest in SAVSU Technologies at quarter-end.
Financial performance and position
| Metric | Q1 2019 | Q1 2018 / prior date |
|---|---|---|
| Revenue | $5.77 million | $3.82 million; up 51% |
| Gross profit and margin | $4.12 million; 71% | $2.45 million; 64% |
| Operating expenses | $3.63 million | $2.31 million; up 57% |
| Operating income | $491,000 | $140,000 |
| Net income | $427,000; $0.02 per basic and diluted share | $3,000; $0.01 loss attributable to common shareholders after preferred dividends |
| Operating cash flow | $1.15 million | $392,000 |
| Cash and cash equivalents | $31.82 million at March 31 | $30.66 million at December 31, 2018 |
| Total assets / liabilities | $48.07 million / $3.71 million | $45.47 million / $2.32 million at December 31, 2018 |
Investing cash use was $156,000, primarily for property and equipment; financing cash provided was $177,000, mainly from option and warrant exercises. The filing reports lease liabilities, including $1.63 million operating and $27,000 finance lease liabilities at March 31; it does not present material conventional borrowings in the balance sheet.
Material changes and operating drivers
- Revenue growth was driven principally by distributor orders, which increased about 200% year over year. Distributor sales were $3.10 million versus $1.04 million; regenerative medicine sales were $2.18 million versus $2.10 million.
- Gross margin improved on higher average selling prices and lower overhead costs per liter. Cost of sales rose 21%, less than revenue growth.
- Operating expenses increased, particularly general and administrative expense, up 63%, due mainly to payroll, consulting, and internal-control audit costs. Q1 included $208,000 of Astero acquisition costs.
- Two customers accounted for approximately 34% of Q1 revenue, versus 30% a year earlier; CryoStor represented about 90% of revenue. The company added 25 customers, including 19 regenerative medicine companies making first-time orders.
- BioLife adopted ASC 842 lease accounting on January 1, 2019, recording approximately $1.3 million of operating lease right-of-use assets and $1.8 million of lease liabilities at adoption. The company said adoption did not materially affect earnings or cash flow.
Outlook, risks, and unusual items
Management said existing cash was expected to meet liquidity needs for the foreseeable future, in excess of one year, based on current revenue and expense expectations. It cautioned that weaker-than-expected revenue or insufficient expense control could require additional financing. No specific revenue or earnings guidance was provided.
- On April 1, 2019, BioLife completed its acquisition of Astero Bio for $8.0 million upfront. The agreement includes up to $4.5 million tied to product-development milestones and up to $8.0 million over three years tied to revenue targets. The acquisition accounting and pro forma results were incomplete at filing; BioLife expected to provide further information in its Q2 filing.
- Management cited potential quarter-to-quarter fluctuations tied to customer clinical-trial progress, customer orders, and concentration in a limited number of customers and markets. Foreign sales were 40% of revenue, including 23% from Canada.
- BioLife recorded a $232,000 noncash loss from its SAVSU investment. It also held an 18-month option, entered into in September 2018, to acquire SAVSU’s remaining 56% for the greater of 1 million BioLife shares or approximately $23 million in BioLife shares, calculated at exercise.
- Ordinary-course legal proceedings were described as not currently material. Management reported disclosure controls were effective as of March 31, 2019.
Important facts for investors to verify
- Whether distributor-led growth and improved gross margin continue, and how much revenue remains dependent on CryoStor and a small number of customers.
- The cash and liquidity impact of Astero’s upfront payment, escrow, milestone payments, and revenue-based earnouts, together with the acquisition’s eventual accounting and performance.
- Whether customer clinical-trial activity, foreign sales, or market concentration materially affect future orders and quarterly results.
- Any decision to exercise the SAVSU purchase option and the resulting consideration, financing needs, and investment exposure.
- The extent to which reported cash generation is sustained, given working-capital changes and noncash items.