BioLife Solutions, Inc. — Q3 2019 Form 10-Q
Reporting period: Three and nine months ended September 30, 2019. Financial amounts below are in millions unless stated otherwise. BioLife develops and supplies biopreservation media and automated thawing products, and expanded into cold-chain shipping through its SAVSU acquisition.
Financial performance
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $6.604 | $5.293 | $19.075 | $14.286 |
| Gross profit | $4.520 | $3.687 | $13.385 | $9.779 |
| Gross margin | 68% | 70% | 70% | 68% |
| Operating income (loss) | $(0.597) | $1.195 | $0.813 | $2.619 |
| Net income attributable to common stockholders | $9.316 | $1.151 | $10.581 | $2.094 |
| Diluted earnings per share | $0.37 | $0.05 | $0.43 | $0.10 |
- Revenue rose 25% in Q3 and 34% year to date. Management attributed growth chiefly to higher volume and selling prices in regenerative medicine and distributor sales. Q3 regenerative medicine sales increased 19% year over year and distributor sales 38%.
- Q3 operating expenses more than doubled to $5.117 million; year-to-date expenses increased 76% to $12.572 million. Higher acquisition-related, research and development, sales and marketing, and administrative costs weighed on operating income.
- Reported net income includes a $10.108 million noncash gain from remeasuring BioLife’s existing SAVSU investment upon acquiring control. Excluding that gain, reported earnings do not reflect the underlying operating result; the filing does not present an adjusted earnings measure.
Cash, liquidity and obligations
- Cash and cash equivalents were $21.205 million at September 30, 2019, versus $30.657 million at December 31, 2018. Current assets were $32.067 million and current liabilities $4.944 million.
- For the first nine months, operating cash flow was $2.216 million (prior year $1.763 million); investing cash flow was $(12.997) million (prior year $(6.339) million); and financing cash flow was $1.329 million (prior year $30.294 million). Investing outflows included $12.439 million for the Astero acquisition and a $1.0 million iVexSol investment.
- Total liabilities were $7.266 million. The balance sheet reports no material conventional borrowing; lease liabilities totaled approximately $1.544 million, and acquisition contingent consideration totaled $1.931 million. BioLife may owe up to $8.5 million in cash over three years for Astero performance targets.
- Management said current cash should meet liquidity needs for more than one year under its current expectations. It cautioned that slower-than-expected revenue growth or inability to manage expenses could require additional equity or debt financing.
Material changes, outlook and risks
- BioLife acquired Astero on April 1, 2019 and acquired the remaining 56% of SAVSU on August 8 for 1.1 million BioLife shares. SAVSU contributed $0.211 million of revenue and a $0.676 million net loss after acquisition through September 30. The acquisition added $18.8 million of preliminary goodwill and $12.4 million of identifiable intangible assets; purchase accounting estimates remained subject to refinement.
- After quarter-end, BioLife invested $1.5 million for an 18% stake in Sexton Biotechnologies. On November 12, it announced the acquisition of Custom Biogenic Systems assets for $15 million ($11 million cash and $4 million stock), with up to another $15 million payable in cash or stock based on revenue targets. Initial purchase accounting was incomplete at filing.
- Q3 gross margin declined to 68% from 70%, reflecting higher raw-material costs, Astero inventory step-up costs, and underutilization of SAVSU cold-chain overhead. Nine-month margin improved to 70% from 68%, primarily due to lower overhead cost per liter sold.
- Management expects continued adoption of its biopreservation media products but provided no quantified revenue or earnings guidance. Results may fluctuate with customers’ clinical-trial enrollment and ordering patterns. Revenue is concentrated: three customers represented 33% of Q3 revenue; CryoStor accounted for 81% of Q3 revenue. Management also noted the risk from dependence on a limited number of customers and market sectors.
- The company maintained a full valuation allowance against deferred tax assets, stating it had not yet established sustained profitability. Legal proceedings in the ordinary course were described as not currently material. Management reported disclosure controls were effective as of September 30, 2019.
Important facts for investors to verify
- How much of reported earnings and future comparisons relate to the one-time SAVSU remeasurement gain versus recurring operations.
- Whether acquired businesses can improve operating performance and margins as integration costs, inventory step-up effects, and SAVSU utilization develop.
- The final SAVSU and Astero purchase accounting, including goodwill, intangible-asset valuations, and contingent consideration.
- Cash use and funding needs after the Astero, Sexton, and CBS transactions, including performance-based payments and any potential dilution.
- Customer concentration, clinical-trial-driven order variability, and progress in diversifying revenue beyond CryoStor and major customers.