BioLife Solutions, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Unaudited consolidated results; amounts below are in U.S. dollars unless noted. BioLife develops and supplies bioproduction tools and services for cell and gene therapy and broader biopharma markets, including cell-processing products, freezers and thaw systems, and biostorage services.
Financial results and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $33.3 million | $40.7 million | $110.5 million | $117.5 million |
| Operating loss | $28.8 million | $11.7 million | $57.7 million | $96.3 million |
| Net loss | $29.1 million | $10.3 million | $53.0 million | $90.6 million |
| Loss per share, basic and diluted | $0.67 | $0.24 | $1.22 | $2.14 |
- Q3 revenue fell 18%; nine-month revenue declined 6%. Product revenue was $26.9 million for Q3 and $91.5 million for the nine months. Service revenue was $4.4 million and $13.0 million, respectively; rental revenue was $2.1 million and $6.0 million.
- Management reported cost of revenue, including acquired-technology amortization, at 67% of revenue in Q3 and 68% for the nine months, versus 67% and 69% in the comparable 2022 periods.
- Q3 operating loss included $15.5 million of non-cash impairment charges. Nine-month results also included a $5.1 million non-cash gain from settlement of the Global Cooling escrow.
- Cash, cash equivalents and available-for-sale securities totaled $42.2 million at September 30, 2023, down from $64.1 million at December 31, 2022. Cash and cash equivalents alone were $19.2 million.
- Operating cash outflow was $14.8 million for the nine months, compared with $16.3 million in 2022. Investing activities provided $13.9 million, largely reflecting maturities of marketable securities; financing activities provided $0.8 million.
- Total debt was $26.0 million, including $5.0 million current and $20.9 million long-term. The $20.0 million term loan bears a 7.0% rate at period-end; the company reported compliance with its covenants. Up to $10.0 million in additional borrowing was available subject to lender approval and loan conditions.
- Working capital was $74.2 million, based on current assets of $116.8 million and current liabilities of $42.6 million. Inventory was $43.4 million.
Changes versus the prior comparable period
- Q3 product revenue decreased 20%, primarily due to lower freezer/thaw and cell-processing sales. For the nine months, freezer/thaw product revenue fell 20%, while cell-processing product revenue rose 6%.
- Management cited lower biopharma capital spending and customer inventory destocking as headwinds to product sales. Biostorage service revenue grew, while rental revenue declined following expiration of a major customer agreement related to COVID-19 vaccine material storage.
- Q3 net loss widened year over year, principally reflecting the impairment charge and higher operating expenses. For the nine months, net loss improved compared with 2022, which included $69.9 million of impairment charges.
- General and administrative, sales and marketing, and research and development expenses increased for the nine months, by 22%, 28%, and 35%, respectively. Management cited higher staffing-related costs, professional services, severance, marketing and advertising, R&D supplies write-offs, and research milestone payments.
Outlook, risks and unusual items
- Management said available liquidity was expected to meet needs for at least 12 months from the filing date. On October 19, 2023, after quarter-end, BioLife sold 927,165 shares to Casdin for approximately $10.4 million at $11.19 per share.
- After Q2, the company began actively seeking to divest its Global Cooling and Custom Biogenic Systems freezer product lines. The related September impairment was $9.7 million for property and equipment and $5.8 million for definite-lived intangible assets; goodwill was not impaired. Management expected G&A, sales and marketing, and R&D expenses to decrease in future periods in connection with the divestiture initiative. No specific revenue or earnings guidance was provided.
- On October 19, 2023, CEO and Chairman Michael Rice retired; the board appointed Roderick de Greef President and CEO and Chairman. Rice agreed to serve as a consultant for six months.
- Sales taxes payable were $5.5 million at quarter-end, including an estimated $5.2 million liability related to prior periods. The company said the timing of final settlement could not be predicted. Short-term purchase obligations were $14.3 million.
- Disclosure controls and procedures were deemed ineffective because of previously identified material weaknesses in internal controls, including control environment and oversight, financial-system access, complex accounting, revenue recognition and procure-to-pay processes, and indirect-tax accounting. Remediation was ongoing.
- Other watch items include a concentrated supplier base (one supplier represented 12% of nine-month purchases and 19% of accounts payable at quarter-end), uncertainty in asset valuations and impairment assumptions, and exposure to industry spending and customer inventory levels. Management reported no material pending litigation and no material changes to the risk factors in its latest Form 10-K.
Important facts for investors to verify
- Progress, timing, proceeds and any additional impairment or operating effects from the proposed freezer-business divestiture.
- Quarterly revenue trends and customer demand, particularly freezer/thaw and cell-processing sales, destocking, and the decline in rental revenue.
- Cash burn, liquidity after the Casdin share issuance, and any conditions or lender approval required to access the additional term-loan borrowing.
- Resolution and payment timing of the sales-tax liability, and whether the estimate changes in subsequent filings.
- Progress in remediating material weaknesses and whether management concludes controls are effective in a future reporting period.
- Effects of the CEO transition and any related separation, consulting or employment costs.