Good day ladies and gentlemen and welcome to the Q4 and Full Year 2017 BioLife Solutions Incorporated 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 call is being recorded. I would now like to introduce your host for today's conference, Chief Financial Officer, Mr. Roderick de Greef. Sir, you may begin.

Thank you, Daniel. Good afternoon everyone and thank you for joining us for the BioLife Solutions conference call to review the operating and financial results for the fourth quarter and full year of 2017. Earlier this afternoon, we issued a press release which summarizes our results for the three and 12 months ended December 31st, 2017. 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. 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 qualify as forward-looking statements 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, CEO of BioLife.

Thanks Rod. Good afternoon everyone. We appreciate your interest in BioLife and are very pleased to report continued strong operating and financial results for Q4 and the full year 2017. We successfully executed key performance areas throughout 2017 and closed the year with record revenue, increased product adoption, positive cash flow from operations for the full year, and a stronger balance sheet. We are very well-positioned for continued growth in 2018 as more of our regenerative medicine customers progressed through clinical trials and secure regulatory approvals. I'm pleased to report that 2018 is starting off a strong product sales and we look forward to reporting our Q1 results. Q4 2017 marked our 10th consecutive quarter of record revenue at $3.1 million with 5% sequential growth and 39% growth over the fourth quarter of 2016. For the full year 2017, revenue was a record $11 million with growth of 34% over the full year 2016. And 2017 would gain more than 100 new direct customers with more than half of these in the high growth regenerative medicine segment. Today, we estimate that we are supplying more than 2,000 customers directly and indirectly through our international network of distributors. I'll start with a review of our strategic markets and channels. Most important is the regenerative medicine market segment comprised of cell therapy companies, hospital-based stem cell transplant centers, and contract development and manufacturing organizations. To-date, we believe our proprietary biopreservation media reagents have been used in more than 275 customer clinical applications, including two approved products and 15 to 20 Phase 3 clinical trials. This is an increase of 75 new clinical applications since January 2017. I'll remind our listeners that this number is likely higher due to the success our distributors have demonstrated in getting our products embedded in clinical trials.…

Thanks Mike. As you mentioned, biopreservation media revenue for the fourth quarter of 2017 reached a record $3.1 million, representing a 39% increase over the fourth quarter of 2016. For the full year of 2017, revenue grew 34% to $11 million, up from $8.2 million in 2016. The increase in revenue for both periods was a result of a combination of more leaders of our biopreservation media sold, primarily to our regen med customers, as well as higher realized ASPs from both our direct and indirect sales channels. The gross margin for the fourth quarter was 58.7% compared with 60.7% for the fourth quarter of 2016. The gross margin was lower due to higher than average production volume in the fourth quarter of 2016, which resulted in lower cost of goods per liter that quarter. The fourth quarter's margin was lower than previous quarters in 2017, primarily due to a higher than average mix of indirect channel revenue in the quarter which carries with it a lower gross margin. For the full year of 2017, gross margin was 61.2% compared to 58.1% in 2016, reflecting the year-over-year increase in both liters sold and overall higher ASPs. Operating expenses for the fourth quarter of 2017 totaled $2.1 million compared to $2 million in the same period in 2016. For the fourth quarter of 2017, reductions in R&D and sales and marketing expenses resulting from the restructuring of our SAVSU joint venture were offset by a $269,000 increase in G&A compared with the fourth quarter of 2016. The increase in G&A was primarily attributable to one-time non-recurring charges related to performance-based incentive compensation and a change to our vacation policy. For the full year of 2017, operating expenses totaled $7.8 million, a 19% decrease from $9.6 million in 2016. This decrease was…

Thanks again Rod. In closing, 2017 was a pivotal year for BioLife in execution and growth. Our position as the leading supplier of proprietary critical biopreservation reagents used in cell therapy manufacturing is secure and we also continue to analyze additional growth opportunities. We'd like to thank our long-term and new shareholders for your interest and support of BioLife Solutions. Now, I'll turn the call over to the operator to take your questions. Daniel?

Thank you. [Operator Instructions] And our first question comes from Paul Knight with Janney Montgomery. Your line is now open.

Hi, my congratulations on the quarter. Could you talk to the recently announced Sigma-Aldrich joint venture is -- what's that about? And should we expect more type of announcements like that?

Yes. Thanks Paul. Great question. So, we announced an OEM private label more of a cobranded agreement with Sigma where they have been a very meaningful distributor, Paul, for the last several years, but we've formalized their relationship where they're buying the standard skew of CryoStor of the products, but we are affixing here in BioLife a cobranded label to give them a little bit more brand identity. And we expect continued growth for them. Forecast, we expect to be strong for this year and while there are other large distributors who may have a potential interest to do that. Nothing to announce at this time, but certainly something we'd be open to.

Thanks. Can you talk to the tone of business this Q4 wrapped up; obviously, your Q4 growth rate was higher than your full year. Are you seeing more things go into the FDA at this point, more customer activity as the year wrapped up?

Another great question and there was some of that, Paul, demand from the distributor channel in Q4 was very strong. They are finding many more homes for the products, both in the research community and also in the preclinical phase of what could be the potential commercial applications. In some of those cases, we have good visibility and we partnered with them to provide tech support to the end users. In other cases, we don't. And that's fine, but we're feeling really bullish about the indirect sales channel.

Thanks very much.

Welcome.

Thanks Paul.

Thank you. [Operator Instructions] And I'm not showing any further questions at this -- we do have a question from the line of Jason Kolbert with Maxim Group. Your line is now open.

Hi, this is Michael Okunewitch on behalf of Jason Kolbert. Again congratulations on the great quarter. Thank you for taking my question.

Thanks Michael.

I just wanted to know if -- obviously, the regenerative medicine has been very exciting this quarter; do you expect that to be the key driver for growth in the following year? Or are you looking more towards the distribution side in indirect sales?

Yes, thanks Michael. Good question. I'll reiterate that the regen med segment is our most important, most strategic and we see that as the catalytic growth driver for the rest of the year and the out years for sure. We've got a marquee customer base. We have our products embedded in many, many applications which have large patient populations. And should those customers gain approval, all of those will continue to drive demand for our products.

All right. Thank you very much.

Thank you.

Thank you. [Operator Instructions] And we do have a question from the line of Rory Jensen [ph], Private Investor. Your line is now open.

Hey guys. Good job on the final quarter and for 2017.

Thanks Rory.

Thank you, Rory.

Excellent. Can you hear me okay? So, I got a question, Rod, are we talking about these numbers, does the new tax plan -- does that -- are you making any [Indiscernible], is your corporate tax structure going to change at all going forward?

Well, I think as we reach profitability from a tax perspective, clearly, we're going to benefit from the reduced rate going from 35% to 21%. But I would say that for the next number of years and it's difficult to say exactly how many years, but certainly, for the next three to five, we would anticipate being able to use the NOLS that we already have built up. So, we really don't anticipate any tax issues for the next number of years.

Okay. Excellent. And now that we've got all of our fingers out there in the CMOs and the customer and the demand and -- with the recent acquisitions and your customers being gobbled up, are you finding these doors opening up to new avenues to customers you didn't have before?

I think Rory that with the direct activities we have and the leverage that we can realize to the CMOs and distributors, we have pretty good reach. I would say, it's not perfect, but it's pretty good to reach, particularly in our more strategic market segment of cell therapy and regen med and tissue engineering. There are thousands and thousands of participants, so it's not like we need to hire an army of sellers. So, we think that the go-to-market strategy right now with the smaller direct team and indirect channels and the CMO pull-through for which they are ordering products to support multiple projects. It's working, but we're very focused on catching the new companies, the spinoffs, and startups very early in the dev process, that's why I mentioned so many names on the call during my remarks to reinforce that we're trying to fill the funnel with very early stage customers. Not all will make it, but nevertheless, getting them exposed to what our technologies can do to optimize yields and reduce cost and really to help drive potential commercial success. It's really important to us, so we're all over that. But I think right now the plans that we have and how we're executing, it's working all right.

I would add Rory that the recent buy-outs that you referred to, I think that really demonstrates strong validation of some really large companies viewing the regen med space, Car T, in particular, as a really solid opportunity going forward, which obviously bodes well for BioLife also.

Okay, okay. Very good. I agree with that. So, good job and I look forward to 2018. Thanks guys.

Thank you, Rory.

All right, thank you.

Sure.

Thank you. [Operator Instructions] And we do have a follow-up question from Paul Knight with Janney Montgomery. Your line is now open.

Hey Rod, where are you guys at in terms of -- you mind burning some cash, showing some ETF lost or what's your thought on profitability for 2018 when you're, kind of, at the process of growing 40%-plus?

Well, we're in a really fortunate position to actually have generated cash in the full year of 2017 and particularly, in the back half of the year, which was about $900,000-plus. So, we actually see as we move into 2018 that that number will continue to get bigger. So, we don't actually anticipate, from a cash perspective, burning any additional cash. There may be a quarter or two that we do just based on variability, but in general, we expect solid cash flow from operations during 2018. We also expect full operating profit for the full year on a GAAP basis. And so while things may be below the line, for instance, the dividend piece that that is a cash item, but the amount we take for SAVSU's loss is a non-cash item, but it does hit EPS. So, we're pretty comfortable, Paul, right now looking ahead and not feeling like we have to make a lot of investments to make that sort of growth rate that you mentioned occur.

Okay. Thanks very much.

Thank you.

Thank you. And I'm not showing any further questions at this time. I would now like to turn the call back over to Mike Rice, CEO for any further remarks.

Thank you, Daniel. And thanks everyone. We look forward to speaking with you when we report our first quarter results. Good evening.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program and you may all disconnect. Everyone, have a wonderful day.