Good day, ladies and gentlemen, and welcome to the Q2 2017 BioLife Solutions Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Roderick de Greef, Chief Financial Officer. Please go ahead.

Thank you, Charlotte. Good afternoon everyone and thank you for joining us for the BioLife Solutions conference call to review the operating and financial results for the second quarter of 2017. Earlier this afternoon, we issued a press release which summarizes our results for the three and six months ended June 30. This release is available on the Investor Relations page of our website at biolifesolutions.com. As a reminder, this call is being recorded and broadcast live on our website. A replay of the webcast will be available through the same link for 90 days. We have also posted an updated investor presentation on our website. Before we get started, I would like to remind everyone that during this call, we will make projections and other forward-looking statements regarding future events or the future financial performance of the company. These statements are subject to many risks and uncertainties that could cause actual results to differ materially from expectations. For a detailed discussion of the risks and uncertainties that affect the company's business and that qualifies forward-looking statements made on this call, I refer you to our periodic and other public filings filed with the SEC. Company projections and forward-looking statements are based on factors that are subject to change and therefore, these statements speak only of as of the date they are given. The company assumes no obligation to update any projections or forward-looking statements except as required by law. Now I'd like to turn the call over to Mike Rice, President and CEO of BioLife.

Thanks, Rod, and good afternoon everyone. We appreciate your interest in BioLife and we are very pleased to report on and discuss our continued strong operating and financial results. We had a very strong quarter in Q2. We are on track to make 2017 a remarkable year for BioLife, our customers and shareholders. Revenue from our strategic market segments was strong with our third consecutive quarter with over $1 million in revenue from the regenerative medicine segment. Total revenue was $2.6 million, a 29% year-over-year increase and Q2, 2017 was our eighth consecutive quarter of record biopreservation media revenue. We gained 28 new customers in Q2 with 11 in the regen med market. I'll start off by recapping the unmet needs in biopreservation of living cells and tissues and explain specifically how our biopreservation media products address these issues and are enabling the commercialization of hundreds of novel cell based therapies, targeting all major disorders and diseases. For background, the use of living biologic materials such as cells, tissues and organs is growing rapidly in several high growth market segments, including drug discovery, biobanking and regenerative medicine, which is comprised of cell therapy companies and engineered tissue products. Common to all these applications, is a critical need to ensure that the biologic materials are effectively preserved after removal from the body during transport and up to the point of administration to a patient. Poor preservation leads to limited or no therapeutic efficacy. So shelf life is a critical parameter. Apart from a limited number of ambient shipping examples, hypothermic preservation at refrigerated temperatures or cryopreservation in the frozen temperature range are the dominant modalities used to move biologic materials across time and space. These are effective methods to reduce the need for oxygen and nutrients to extend shelf life and…

Thanks Mike. As you've noted our biopreservation media revenue for the second quarter of 2017 reached a record $2.6 million, representing a 29% increase over the second quarter of last year. For the six months ended June 30, revenue grew 28% to $4.9 million from $3.8 million last year. The increase in revenue for both periods was a result of higher direct sales to our customers in the regen med space and to our indirect distributor channel. The gross margin for the second quarter of 2017 increased seven percentage points to 63% compared to 56% last year. For the six months of this year, gross margin was 62% compared to 57% in 2016. The increase in both periods compared to 2016 was primarily driven by increased manufacturing efficiencies and higher blended product ASPs. Operating expenses in Q2 totaled $1.9 million, a decrease of 28% compared to $2.7 million in 2016. For the first six months of 2017, operating expenses totaled $3.8 million, a 27% decrease from $5.3 million in 2016. The decrease in operating expenses for both periods is primarily the result of a restructuring of our joint venture with SAVSU Technologies which occurred at the end of last year. The operating loss for the quarter was $341,000, which was a 79% decrease from $1.6 million last year. For the six month period, the operating loss was $805,000 or 75% below last year's operating loss of $3.1 million. The net loss for the second quarter was $768,000, which represents a 43% decrease compared to $1.4 million last year. Net loss for the six month period was $1.6 million compared to $2.6 million in 2016. I would like to point out that the net loss for the three and six months periods include a non-cash charge of $260,000 and $489,000 respectively…

Thanks again, Rod. In closing I believe that 2017 will be a very positive inflection point in BioLife's history. I am honored to lead our team and have an opportunity to work with our dedicated customers who are committed to improving the quality of life for millions of patients. All of us in BioLife feel fortunate to play a role and helping to bring our customers' life-saving therapies to the market. Thanks again for your interest in BioLife solutions. Now we'll turn the call over to the operator to take your questions. Charlotte?

Thank you. [Operator Instructions] Our first question comes from the line of Paul Knight from Janney Montgomery. Your line is now open.

Hi, Mike, congratulations.

Hi, Paul.

You give this range of 500,000 to 2 million per regen of medicine therapy. I know that's kind of been what you have talking about, but is your confidence higher in that range, do you think it's possible to be on the upper end of the range, is there any change in your thinking about this range for therapy.

Yeah, good question Paul. No change in our thinking and again a little bit too early to try to revise it up or down. But we know have the Kolon approval, that is just one data point, but as you have heard Rod say and me say overtime, it's not light switch effect, as soon as there is an approval there will be a ramp depending how fast customers can get squared away with payers and to start to drive prescribing behavior on the part of physicians. So at this point we are going to stick with the range that what we have already guided to.

The Adaptimmune agreement and you have heard - what is the length or the term on these agreements you are typically seeing?

10 years.

Okay and the - is that the regenerative medicine category that's giving you the 500 to 2 million range or is it each customer has that potential?

Yes, thanks for asking. It's important that we clarify that. We believe that every single regen med application that our products are embedded in has the potential to generate annual revenue in a range from $500,000 to $2 million.

Yes. And then Ron on regarding your financial metrics, you obviously you're EBITDA positive to a slight degree. What's your goal is, you goal to keep driving that upward or you operate along near breakeven or is it your goal is to reach a given level of op margin or EBITDA margin?

Yeah, we are pleased that we achieved this milestone earlier than we had anticipated. In terms of the rest of the year we see that number climbing and so we have adjusted our overall guidance to a full year adjusted EBITDA number, which we are confident we can reach. We don't have particular target set, we'd want to share at this point. I think next year, for our guidance in 2018 we will be in a better position to do so as things settle down but we're confident that we expect to see as revenue increases based on the excellent operating leverage we have, both on the COG side and on the OpEx side we expect that adjusted EBITDA number to continue to increase.

Okay, thank you very much.

Thank you.

Thank you. Our next question comes from the line of Gabrielle Zhou of Maxim Group. Your line is open.

Hi, guys. It's Gabrielle Zhou, congratulations on the quarter.

Thank you, Gabrielle.

Just quick question in terms of your manufacturing capacity. So how flexible are you given the fact that now Kolon has the market approval and Kite and Novartis approval might come in imminent?

So I'll start, maybe Rod can finish. Of the bat Gabrielle we have no issues and no worries whatsoever that we would have any problem fulfilling Kolon's demand. Rod, do you want to talk about potential margin expansion based on how much more product we can make in the plant.

Sure I think as Mike said we have plenty of capacity, significant multiple of what we are producing today and as we start to fill that capacity, based on the mix between the variable and the fixed cost structure that we have in our manufacturing area we do see the opportunity for some significant gross margin expansion, to the tune of have somewhere between five and ten percentage points over time.

Great. Thank you.

Thank you.

Thank you. And at this time I am not showing any questions in the queue.

All right, Charlotte. I think we can conclude. Thanks again everyone, Good afternoon and good evening.