BioLife Solutions, Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. Financial statement amounts are in thousands of dollars, except per-share data. BioLife develops and sells products and services for cell and gene therapy bioproduction, including preservation media, automated thawing equipment, cloud-connected shippers, and cryogenic freezers. The 2020 results include acquired product lines from Astero, SAVSU, and Custom Biogenic Systems (CBS).
Financial performance
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $11.279 million | $6.604 million | $33.361 million | $19.075 million |
| Operating income (loss) | $(1.246) million | $(0.772) million | $(0.832) million | $0.541 million |
| Net income (loss) | $(1.133) million | $10.269 million | $4.795 million | $(4.640) million |
| Basic EPS | $(0.04) | $0.42 | $0.17 | $(0.24) |
- Q3 revenue rose 71%; nine-month revenue rose 75%. Q3 product revenue was $10.804 million and rental revenue was $0.475 million.
- Q3 gross margin was approximately 57%, compared with 68% a year earlier; nine-month gross margin was approximately 58%, versus 70%. The filing attributes the lower margin chiefly to acquired product lines with higher costs and acquisition-related inventory step-up.
- Operating expenses were $12.525 million in Q3, up 70%, and $34.193 million for nine months, up 84%. R&D, sales and marketing, and G&A expenses all increased, reflecting acquisitions, hiring, infrastructure, and stock compensation.
- Reported earnings include significant fair-value and acquisition-related items. Q3 2019 net income included a $10.108 million noncash gain on the SAVSU acquisition; nine-month 2020 results included a $4.467 million gain from warrant-liability remeasurement and a $1.110 million investment fair-value gain. Q3 2020 also included a $1.005 million warrant-liability remeasurement loss.
- Nine-month operating cash flow was $4.388 million, versus $2.216 million. Investing cash use was $2.658 million, versus $12.997 million; financing cash provided was $100.806 million, versus $1.329 million.
Balance sheet, liquidity, and capital
- At September 30, cash and cash equivalents were $93.984 million and restricted cash in escrow was $15.000 million. Combined cash, cash equivalents, and restricted cash totaled $108.984 million, compared with $6.448 million at year-end 2019.
- Current assets were $127.784 million and current liabilities $8.362 million. Total liabilities were $9.036 million; the filing reports no material conventional borrowing balance. The $2.175 million PPP loan received and repaid during the period had no ending balance.
- BioLife raised approximately $100.3 million net from common-stock sales in 2020, including the July public offering. Shares outstanding increased from 20.825 million at December 31, 2019 to 32.131 million at September 30, 2020.
- Management said cash was expected to meet liquidity needs for the foreseeable future, while noting it might seek additional debt or equity capital for pandemic uncertainty or acquisitions. The $15 million escrow was paid to SciSafe sellers when that acquisition closed on October 1, 2020.
Changes, outlook, and risks
- Revenue growth reflected 2019 acquisitions and higher biopreservation-media sales. In Q3, media revenue was $7.414 million, freezers and accessories $3.094 million, evo shippers $0.494 million, and automated thawing $0.277 million. Freezer sales improved from Q2, while automated thawing remained affected by the pandemic.
- COVID-19-related facility closures and limits on in-person selling delayed capital-equipment deliveries and may defer customer purchasing decisions. Management said the financial impact could not yet be estimated. It also cautioned that early-2020 media demand may have represented a pull-forward from later periods.
- Management expected R&D, sales and marketing, and G&A expenses to rise as it develops and sells the enlarged product portfolio. The filing provides no specific revenue or earnings guidance.
- On October 1, 2020, BioLife acquired SciSafe for $15 million cash and shares, with potential additional shares tied to earnout targets. Purchase accounting and pro forma results were incomplete and not provided in this filing.
- Revenue concentration eased with portfolio diversification, but CryoStor still represented 62% of Q3 revenue. One customer accounted for approximately 11% of Q3 product revenue; two customers represented 32% of gross receivables at quarter-end.
- Potential CBS earnout payments may total up to $15 million, subject to revenue targets; Astero also has contingent consideration. Management reported no currently material litigation or known pending or threatened litigation.
- Disclosure controls were deemed ineffective because of a material weakness in accounting for complex equity transactions, including warrants and market-based stock awards. The filing says related errors led to restatements of previously issued financial statements; remediation was ongoing and not yet considered complete.
Important facts for investors to verify
- Whether capital-equipment demand recovers and whether COVID-related delays or any earlier pull-forward affect subsequent media and equipment sales.
- Underlying operating performance apart from noncash fair-value changes, acquisition gains, and acquisition-related costs; also monitor gross-margin trends as acquired businesses scale.
- Cash available after the SciSafe closing, its final purchase-price allocation, and any future earnout obligations or financing needs.
- Progress in remediating the material weakness and the potential for further accounting corrections or dilution from shares, options, and contingent stock consideration.
- Customer and product concentration, including continued reliance on CryoStor and the impact of large-customer ordering patterns.