Welcome to the BioLife Solutions First Quarter 2022 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Troy Wichterman, Chief Financial Officer. Please go ahead, sir.

Thank you, Rocco. Good afternoon, everyone, and thank you for joining this call. Joining me on today's call are Mike Rice, Chairman and Chief Executive Officer; and Rod De Greef, President and Chief Operating Officer. Earlier today, we issued a press release announcing our financial results and operational highlights for the first quarter of 2022. As a reminder, during this call, we may make certain projections and other forward-looking statements regarding future events or the future financial performance of the company or its acquisitions. These statements are subject to risks and uncertainties that may 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, I refer you to our periodic and other public filings filed with the SEC. Company projections are forward-looking statements are based on factors that are subject to change, and therefore, these statements speak only 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. During this call, we will speak to non-GAAP or adjusted results. Reconciliations of GAAP to non-GAAP or adjusted financial metrics are included in the press release we issued this afternoon. These non-GAAP or adjusted financial metrics should not be viewed as an alternative to GAAP. However, in light of our M&A activity, we believe that the use of non-GAAP or adjusted metrics provides investors with a clearer view of our current financial results when compared to prior periods. Now I'd like to turn the call over to Mike Rice, Chairman and CEO of BioLife Solutions.

Thank you, Troy, and good afternoon, everyone. Thank you for joining our call. After my remarks, Troy will present our financials for Q1. Then Rod will provide an update on key operational initiatives he's managing targeting gross margin improvements, specifically for our Stirling ULT freezer platform. And after that, we'll be glad to take your questions. Turning to Q1 revenue and customer highlights. Our team delivered another strong quarterly revenue performance, even more so considering the macro headwinds and specific supplier issues with regard to Stirling that we continue to experience and address. Total revenue was $36.2 million, up 115% from Q1 2021, representing organic growth of 45% and continued strong biopreservation media revenue growth of 53%. While we had more than a dozen cryogenic freezer orders totaling over $1 million in revenue that didn't ship in Q1 due to a mix of supply constraint issues and customer acceptance timing. These orders have either shipped or are expected to ship in Q2. These delayed orders and overall demand created a significant backlog entering Q2, and we're aggressively working through the backlog, and at this point, are tracking to our internal plan for Q2. I'd also like to echo the strong growth sentiments in the cell and gene therapy space that other life science tools companies have expressed on their recent earnings calls. From our view, despite the depression evaluations across the sector, CGT is poised for explosive growth over the next few years, and the BioLife Solutions portfolio plays a vital role in improving quality and reducing risk. We're focused on optimizing and scaling our operations to meet anticipated demand for our tools and services. Our growth catalysts and business fundamentals are strong, and we're affirming our full year 2022 guidance, including on planned expectations to return to positive adjusted…

Thank you, Mike. Revenue for the first quarter totaled $36.2 million, representing a 115% increase over 2021's first quarter revenue. Organic revenue increased 45% in Q1 2022 compared to Q1 2021, driven by biopreservation media revenue of $13.7 million, which was up 53% in Q1 2022 compared to Q1 2021. COVID-19 related revenue accounted for approximately 10% of total revenue in the first quarter. Cell processing platform revenue was $14.9 million, up 67% over the same period in 2021. Organic growth was 53%. Freezers and Thaw system platform revenue was $15.3 million, up 216% over the same period in 2021. COVID-19-related revenue accounted for approximately 4% of the Freezer and Thaw system platform revenue. Organic revenue was down 3% due to supply chain constraints and COVID-related customer acceptance delays in our cryogenic freezer platform. Adjusting for this delayed revenue, which we expect to recognize in Q2, organic revenue for this platform would have been up 23% compared to the same period in 2021. Storage and storage services platform revenue was $6 million, up 95% over the same period in 2021. COVID-19 related revenue accounted for approximately 52% of the storage and storage services platform revenue, organic growth was 95%. Adjusted gross margin for the first quarter of 2022 was 33% compared with 55% for the first quarter of '21 and 18% for the fourth quarter of 2021. The positive impact sequentially was largely due to lower warranty expense at our ULT platform, as well as favorable product mix, and we expect to see a positive impact on margins throughout 2022 due to leveraged operational overhead and the benefits of our supply chain efforts, which Stirling did not have in place previously. Adjusted operating expenses for Q1 2022 totaled $19.8 million compared with $8.8 million in Q1 2021. The increase in…

Thanks, Troy. As we discussed in our last earnings call, my main focus in stepping back from the CFO role and turning the reins over to Troy, who by the way, is doing an excellent job, has been addressing and correcting the near-term supplier quality and production issues at the Stirling facility in Athens, Ohio. What we inherited in the transaction and recognized quickly once inside was that Stirling had experienced tremendous growth, which as a reminder, was a 100% increase in unit production between 2020 and 2021, and they had not scaled to accommodate that growth on multiple levels. With the commitment and effort of a lot of people at that facility, as well as the experience the BioLife team brings to bear, we've made good progress on all fronts, which has resulted in a modest but positive like-for-like sequential increase in gross margin for that product line. While we still have a lot of work to do, we're on the right track and regular and consistent progress is being made, which I believe will have a further positive gross margin impact as we move throughout the year. Acquisitions and integrations present new and different issues, and I'm confident that we have our arms around this and are on the right path going forward. Over the last several weeks, I've been able to shift some of my focus to spend some time at our three manufacturing sites, as well as our newly opened biostorage facility in Amsterdam. While there are always opportunities for operational improvement, in general, these operations are running smoothly with no material issues outside of a number of external supply chain constraints similar to what many companies in our industry and others are facing. A prime example of this kind of situation is a key vendor…

Thanks, Rod. So the key takeaways I'd like to leave you with are, number one, demand for our portfolio of class-defining bioproduction tools and services remains strong, and we fully expect to meet or beat our full year revenue guidance. Number two, we expect to demonstrate continued sequential improvements with the operations and margins in our ULT-freezer platform and to realize positive adjusted EBITDA for the entire business by the end of the year. And number three, we're focused on innovative new product launches for this year and next and are seeing the tangible and real signals of lift-off in cell and gene therapy. The last comment I want to make before taking questions is that we believe in the growth ahead for the business, the value of BioLife and our alignment with you, our shareholders. With that, several members of our leadership team, including myself, have agreed to accept BioLife stock in little part of our salaries. Our Board members have also agreed to accept BioLife shares in lieu of their cash board fees. We're all fully confident we will continue to grow the business in this environment where our catalysts and business fundamentals are strong and intact, and we look forward to being rewarded in line and accordingly. Related to this, apart from some occasional sell-to-cover stock sales transactions to cover taxes for upcoming vesting events, my long-standing portfolio diversification plan sales are now complete. This is a great moment for BioLife and the cell and gene industry in a difficult macro and public market environment, but I'm pleased to say that overall product demand so far in Q2 is strong, and we're looking forward to sharing our results on our Q2 earnings call. Now I'll turn the call back over to the operator to take your questions. Rocco?

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from Max Masucci with Cowen and Company. Please go ahead.

Hi. Thanks for taking the questions. Mike, first one, you called out the dislocation between the high growth that we continue to see in the cell and gene therapy end markets, the weakness we've seen in the public arena. So if we take a step back here, you look at the company's revenue growth trajectory here in 2022, the gross margin recovery that's underway. What gave you the confidence to swap stock for cash compensation? And then I would be curious to hear if there's any limit to the percentage of stock that your leadership team could swap?

Yeah. Thanks, Max, and really good question. I'm glad to offer some other color comments. I fully believe in the business, the team here, our ability to execute. And at these silly depressed share prices. I'm looking to accumulate as many shares of BioLife stock as I can. And it's going to range by individual Max from 50% to 100% will come in the form of stock as opposed to cash.

Got it. Moving to the co-promote. Is there any detail you can provide around the makeup and the profile of Coriell your partner's customer base, whether the co-promote gives you increased exposure to any specific customer types or geographic regions where you were previously underexposed? And then any detail around the structure of the agreement and the split of revenue sharing would be great.

Sure. I'll start with the last one. It goes like this. Whoever originates obviously gets a little finder's fee. And if that originator does the work, meaning the service they can provide, they get, again, most of it. But if not, it's just - it's sub-single or mild single digits for the referral fee and all the rest goes to the other party, depending on who does the work.

Max, with respect to Coriell's customer base and highly aligned with some of the broader biopharma companies we'd like to crack into. I can say, candidly, there have been some storage opportunities over the last few years with SciSafe that we've bid on but didn't win because we couldn't offer comprehensive cell analytics services and now we can, through a world-class partner. So that's going to be great. I don't see us no bidding on any opportunities now, now that we've got this agreement in place. So really excited about it. But it's going to be focused on customers who need storage and they need some tumor [ph] analysis, DNA extraction, other analysis on cell types, whether it's to characterize master cell banks, working cells or things like that.

Okay. Final one here for Troy and Rod. And nice to see the gross margin recovery. As we just fine-tune the gross margin expectations in our models, is there any additional detail you can give us in terms of the pacing we should expect on the gross margin front in the coming, call it, three quarters and whether there are any other gross margin swing factors that we should be taking into consideration?

Thanks for the question, Max. Yeah. So as I addressed in my commentary, we do expect sequential modest improvement in gross margin. And to address your question on the margin swings, we do not anticipate any big swings one way or the other on the gross margin side at this point in time.

Got it. Thanks for taking the questions.

Thanks, Max.

Ladies and gentlemen, our next question today comes from Jacob Johnson at Stephens Inc. Please go ahead.

Hey. Good afternoon, everybody.

Hey, Jacob.

Hey, Mike. Maybe starting on Stirling. It seems like the business development trends are really strong there. Can you talk about any impact from these operational issues on kind of selling the Stirling freezers? It doesn't sound like you've seen any and then your ability to deliver on that the demand you're seeing there?

Yeah. Sure, Jacob. I will say that while we're in this relative precarious position, we're, I would say, appropriately nervous about every order, but we're confident that we'll be able to retain nearly all the orders. Some customers just as in Q4 and in some cases, in Q1, some customers couldn't wait so they had to buy something from somebody else. But we have not seen - we have not seen any mass erosion or order cancellations to the contrary due to, I think, the efforts of our sales team and just the incredible degree of integrity that they have being transparent with our customers about what's wrong and what we're doing to fix it. They're preserving a backlog and they're continuing to generate new orders. So, so far, so good. We just can't get through it fast enough. Let me just say it that way.

Got it. Understood. And then evo, 60% growth in shipments year-over-year. So it seems like you and your courier partners are seeing traction there. I'm just curious, as we think about the volumes there, how much of that is kind of you getting into the early-stage clinical trials? How much of it is these kind of second sourcing wins of commercial therapies. Maybe just kind of talk about where you're seeing traction with new customers on the evo side?

Yeah. Jacob, super insightful question. Most of the evo shipments are transporting an approved CAR T-cell therapy or the ZOLGENSMA approved gene therapy. And then the bulk of the rest are all early stage, early clinical trial face customers. And that list of the number of customers and the names of those customers is long and very well known. So I think it's all going the right way here. The other evo validation underway by a company with two approved CAR-Ts continues to rock and we look forward to reporting on that hopefully later in the year.

You answered my next question, so I'll leave it there. Thanks, Mike.

Sure.

Ladies and gentlemen, our next question today comes from Thomas Flaten with Lake Street Capital Markets. Please go ahead.

Great. Thanks for taking the question. Hi, guys.

Hi, Thomas.

Two quick questions. Mike, in your prepared comments, you mentioned, I don't want to paraphrase taking share from the home brew market with media. Do you have a sense of the growth that you're seeing? How much is just the tide lifting all boats versus you taking share? Do you have any - I mean I don't know if you can quantify it, but any qualitative comments you have around that?

Sure. I think, Thomas, that we are taking share. I think that our seeding the use of CryoStor, HypoThermosol in the researches only market, some of which will translate into clinical, also the pure clinical markets and then the later-stage clinical trial phase projects, which hopefully will get over the goal line here in the next couple of years or so. I think we're definitely seeing more uptick more traction. And I think that as new groups get formed, or spun out of academic centers or clinical centers that they're defaulting to using CryoStor versus defaulting to use a home brew. Now I can't quantify that with any sort of precision, but that's just my sense. And when I connect with Aby Mathew, our CSO and EVP, and I think back to just an hour or so ago, when he came in and gave me an update on the ISCT conference, and all the people that line up to talk to him and the other parts of our team, I mean just tremendous amount of exposure and awareness of what we've got here. And frankly, because a lot of people haven't traveled for the last couple of years, much more awareness and the discovering that BioLife is a much different company with a much broader portfolio. So I think the way we run the playbook to get media adopted in CGT is clearly going to pay off. And again, the thesis of our acquisition strategy to leverage those sticky media customers to sell them more things in the portfolio, I fully expect us to realize that and execute on that as well throughout the year. So good to be back, good to be out in front of people and feeling really good about what's going on across the platforms.

Great. And then one related to the new facilities that you opened have opened Amsterdam, Massachusetts and New Jersey. Any sense of what the - or I'm sure you know the customers, new customers, old customers relocating? Just trying to get a sense of how those new facilities are being utilized by your customer base?

Sure. It's a mix, Thomas, it's a mix of existing customers that are giving us much more business and many more projects to store, whether they're existing or brand new or whatever, but just getting much deeper for sure. And then obviously, new customers, de novo who are coming to us for the first time who have made that decision to outsource storage versus trying to take it on in the house and everything that goes along with that.

Excellent. Appreciate the question. Thanks.

You're welcome.

[Operator Instructions] Our next question comes from Suraj Kalia with Oppenheimer. Please go ahead. Hello, Suraj. Your line is open.

Mike, Rob, can you hear me all right?

Hi, Suraj. Yes, we can.

Sorry, apologies. I'm having some phone issues. Mike, just hopping in between calls, I believe I heard you say 75 or so leads for high-capacity freezers that you'll have picked up. Did I get that right?

Somewhat. I said 75 total leads at ISCT last week in San Fran and 8 or 9 for high-capacity freezers.

Mike, how much of your guidance is predicated on meeting any or some of these leads?

Thanks for asking, zero. It's all upside, Suraj...

So this would be all upside. Fair. Mike, one of the things that has been lost in the discussion about freezers and ULT is the [indiscernible] thaw system, how is the performance of the thaw system been? And also specifically on the freezers, can you give us a relative framework on year-over-year unit growth, customer growth? I'm more interested on the unit growth on the freezer side specifically?

Sure. Let's start with that. You may have heard Rod's comments from a few minutes ago, I'm not sure. Suraj, in 2021 versus 2020, we doubled ULT freezer production. So we shipped about 3,500 or so in 2020 and nearly 8,000 in 2021. And a fair amount of that was COVID lift transporting vaccines in that. But nevertheless, just phenomenal freezer unit capacity and production there. On the CBS side, the LN2 side, not newly to that scale, but nice decent growth for sure.

Got it. And Mike, in terms of the management and Board comp until August in terms of stock. It's an interesting move, and I'd love to get your perspective, was this - what was the primary driver? Was it some inbound concern? Obviously, you're telegraphing confidence based on the guidance. And I'm curious, when you layer on this comp or the stock comp, just kind of give us some perspective on the shift because I haven't heard anyone else go down this route? Gentlemen, thank you for taking my questions.

Yeah. Thanks, Suraj. And good question. Typically, as you know, when we see this, it's because companies are distressed or they're going to run out of money or something. That's not the case at all here. To the contrary, our business fundamentals are intact. And at these - I use the word silly, I'll just call it stupid at these stupid prices for BioLife, we want to do everything we can to convey confidence in our ability to execute and to be rewarded commensurately with all shareholders if we do execute. So the prospect of taking shares at $10 or $11 or $12 or $13 is really meaningful and glad to do that for at least three months, and we've got a number of senior leaders here who are signing up for the program in addition to all the Board members. So it's nothing more than that. It's about sending a signal that we are fully confident in our ability to grow the business to meet or beat this year's guidance and to turn BioLife into something that is much more valuable than it is today. We can't fix everything. The macro trends are so strong, but all we can do is winner [ph] losing our own lane, and this is one way that we intend to do that.

Great. Thank you.

And ladies and gentlemen, this concludes the question-and-answer session. I'd like to turn the conference back over to Mike Rice, Chairman and CEO, for closing remarks.

Thank you, Rocco, and thanks again, everyone, for your interest in BioLife. We remain confident in meeting or exceeding our '22 revenue guidance and in reaching our stated midterm financial goals. Thank you for your support of BioLife. Good evening, everyone.

Thank you, sir. Today's conference has now concluded. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful evening.