BioLife Solutions, Inc. — Q3 2018 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2018. BioLife develops and sells clinical-grade biopreservation media for regenerative medicine, biobanking, and drug discovery. Its core products include HypoThermosol and CryoStor.
Financial performance
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | $5.29 million; up 79% from $2.96 million | $14.29 million; up 81% from $7.89 million |
| Gross profit / margin | $3.69 million / 70%, versus $1.87 million / 63% | $9.78 million / 68%, versus $4.91 million / 62% |
| Operating income (loss) | $1.19 million, versus a $32,000 loss | $2.62 million, versus an $838,000 loss |
| Net income (loss) attributable to common stockholders | $1.15 million, or $0.07 basic and $0.05 diluted per share; versus a $425,000 loss | $2.09 million, or $0.13 basic and $0.10 diluted per share; versus a $2.06 million loss |
- Operating expenses were $2.49 million for the quarter, up 31%, and $7.16 million for the nine months, up 25%. Expenses declined as a share of revenue to 47% and 50%, respectively.
- Operating cash flow was positive $1.76 million for the nine months, compared with cash used of $198,000 in 2017. Investing used $6.34 million, primarily for SAVSU; financing provided $30.29 million.
- Cash and cash equivalents were $32.38 million at September 30, 2018, up from $6.66 million at December 31, 2017. Total liabilities were $2.52 million; the balance sheet reports no significant borrowings, though equipment-financing interest expense continued. The filing does not provide a clear total debt balance.
- Current assets were $38.29 million and current liabilities $2.10 million. Total assets were $46.45 million; shareholders’ equity was $43.93 million.
Material changes and notable items
- Growth was driven principally by regenerative medicine sales and distributors. Q3 regenerative medicine sales increased 80% year over year and distributor sales increased 148%. Drug discovery and BioBanking sales declined for the nine-month period.
- Management attributed improved gross margin to higher average selling prices and lower overhead costs per liter as production volume increased.
- Funding strengthened liquidity: Casdin Capital invested $20 million in common stock in August, and warrant exercises generated $11.3 million during the nine months. The company also received proceeds from employee stock-option exercises. Shares issued and outstanding rose to 18.24 million from 14.02 million at year-end; subsequent to quarter-end, 225,000 additional warrants were exercised for $1.1 million.
- BioLife invested an additional $6 million in SAVSU, increasing its effective ownership to 44.4% from 35% at year-end. It holds an 18-month option to acquire the remaining 56% for the greater of 1 million common shares or approximately $23 million in common stock, based on the share price at exercise.
Outlook, risks, and contingencies
- No numerical earnings or revenue guidance was provided. Management said it expects continued growth in adoption and use of its products and is considering acquisitions or other strategic transactions; future consideration or financing could include cash, equity, or debt.
- Results can fluctuate with customers’ clinical-trial progress and enrollment, and sales depend on a relatively small number of customers and market sectors. Three customers generated approximately 41% of Q3 revenue; two customers generated 28% of nine-month revenue. Four customers accounted for approximately 54% of gross receivables at quarter-end.
- The company maintained a full valuation allowance against deferred tax assets, citing that it had not yet established sustained profitability. Any future release depends on evidence in subsequent periods.
- The Bothell lease runs through July 2021, with two optional five-year extensions and monthly base rent of approximately $59,000 at quarter-end. BioLife expected to record material right-of-use assets and lease liabilities when adopting the new lease standard in 2019.
- Ordinary-course legal proceedings were not considered material. The company reported no off-balance-sheet arrangements and no significant changes to previously disclosed contractual obligations.
Key facts for investors to verify
- Whether strong revenue growth and improved margins persist, particularly given customer concentration and clinical-trial-related order variability.
- Cash conversion and working-capital trends: receivables and inventory increased during the period despite positive operating cash flow.
- The potential cost, share dilution, and strategic rationale of exercising the SAVSU purchase option, alongside SAVSU’s operating performance.
- Further dilution from outstanding options and warrants, and the effect of preferred-stock dividends on common-stockholder earnings.
- The timing and financial impact of lease-standard adoption and any future acquisitions or financing.