BioLife Solutions, Inc. — Q2 2018 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2018. BioLife develops and sells cell- and tissue-preservation media, principally for regenerative medicine, biobanking and drug discovery, and provides related formulation and fill-and-finish services.
Financial performance and liquidity
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Revenue | $5.18 million | $2.56 million | $8.99 million | $4.92 million |
| Gross profit / margin | $3.64 million / 70% | $1.60 million / 63% | $6.09 million / 68% | $3.04 million / 62% |
| Operating income (loss) | $1.28 million | ($0.34 million) | $1.42 million | ($0.81 million) |
| Net income (loss) attributable to common stockholders | $1.05 million | ($0.77 million) | $0.94 million | ($1.64 million) |
| Basic / diluted EPS | $0.07 / $0.05 | ($0.06) / ($0.06) | $0.06 / $0.05 | ($0.13) / ($0.13) |
- Q2 revenue increased 102% year over year; first-half revenue increased 83%. Management attributed growth mainly to regenerative medicine customers and distributors. In Q2, regenerative medicine sales rose 176% and distributor sales rose 144% year over year.
- First-half operating expenses rose 21% to $4.67 million, less than revenue growth. General and administrative expense increased 26%, primarily reflecting investor relations, travel and consulting, quality-system consulting, performance compensation and corporate taxes.
- First-half cash from operations was $0.95 million, versus cash used of $0.27 million a year earlier. Investing used $1.06 million, including a $1.0 million SAVSU investment; financing provided $7.61 million, mainly from warrant and option exercises.
- Cash and cash equivalents were $14.17 million at June 30, 2018, up from $6.66 million at year-end 2017. Current assets were $18.81 million and current liabilities $1.66 million. Total liabilities were $2.13 million. The filing reports equipment-financing interest but does not provide a clear aggregate debt balance.
Material changes and notable items
- Revenue growth and higher average selling prices, production volume and lower overhead cost per liter lifted gross margin by 7 percentage points in Q2 and 6 points for the first half. The company moved from operating and net losses to profits in both comparison periods.
- Warrant exercises generated $8.7 million in first-half proceeds. Approximately 1.8 million warrants were exercised during the period; a further 274,798 warrants generated $1.3 million after quarter-end through July 30. Common shares outstanding were 16.1 million at June 30, compared with 14.0 million at December 31, 2017.
- BioLife redeemed 1,063 of 4,250 Series A preferred shares for $1.063 million; 3,187 remained outstanding at quarter-end. It accrued $93,258 in preferred dividends, paid July 2.
- BioLife held a 30.5% interest in SAVSU at June 30, after its additional $1.0 million contribution. Its first-half equity-method loss was $0.32 million. Ownership had been 26.7% at March 31; the filing describes ownership adjustments tied to contributions by BioLife and SAVSU’s majority owner.
- After quarter-end, on August 9, Casdin Capital agreed to invest $20 million for 1,428,571 newly issued shares at $14 per share, subject to a 12-month resale restriction. This was a primary issuance, distinct from the earlier Q2-highlighted agreement for Casdin to purchase 1 million existing shares from a shareholder.
Outlook, risks and contingencies
- Management expects continued adoption and use of its products and stated that available cash should meet liquidity needs for at least 12 months, based on current revenue and expense expectations. It may seek financing opportunistically and may pursue acquisitions or other strategic transactions. The filing provides no specific numerical revenue or earnings guidance.
- Results can fluctuate with customers’ clinical-trial progress and enrollment, which affects orders. Customer and market concentration is material: three customers generated about 38% of Q2 product revenue; two customers generated about 27% of first-half revenue. Three customers represented about 38% of gross receivables at quarter-end.
- The company maintained a full valuation allowance against deferred tax assets, citing the lack of sustained profitability, while noting it may release some or all of the allowance if future evidence supports doing so.
- The Bothell lease runs through July 2021, with two five-year extension options. BioLife expected to record material right-of-use assets and lease liabilities upon adopting the new lease standard in 2019.
- Management reported no currently material ordinary-course litigation, no off-balance-sheet arrangements and no significant change in contractual obligations. Disclosure controls were assessed as effective as of June 30, 2018.
Key facts for investors to verify
- Whether the sharp sales growth, especially in regenerative medicine and distributor channels, persists and broadens beyond a small customer base.
- Whether improved gross margins and operating profitability are sustainable as operating expenses rise and customer orders remain tied to clinical-trial activity.
- The effect of warrant exercises, the post-quarter $20 million stock issuance, and other equity awards on share count and per-share results.
- SAVSU’s funding needs, performance, ownership percentage and potential effect on BioLife’s results and cash resources.
- Lease-standard adoption impacts, the status of the deferred-tax valuation allowance, and any material developments in financing or acquisition plans.