Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the BioLife Solutions Q4 2023 Shareholder and Analyst Conference Call. Please also note today's event is being recorded. I would now like to turn the call over to Troy Wichterman, Chief Financial Officer of BioLife Solutions. Please go ahead.

Thank you, operator. Good afternoon everyone, and thank you for joining the BioLife Solutions 2023 fourth quarter earnings conference call. On this call, we will cover business highlights, financial performance for the quarter and 2024 revenue guidance. Earlier today, we issued a press release announcing our financial results and operational highlights for the fourth quarter of 2023 and 2024 revenue guidance, which is available at biolifesolutions.com. As a reminder, during this call, we will make forward-looking statements. These statements are subject to risks and uncertainties that can be found in our SEC filings. These statements speak only as of the date given and we undertake no obligation to update them. We'll also 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. Now, I'd like to turn the call over to Rod de Greef, Chairman and CEO of BioLife.

Thanks, Troy. Good afternoon and thank you for joining us for BioLife's fourth quarter and full year 2023 conference call. It has been a busy four months since rejoining the company as CEO, and I'm encouraged by our team's ability to navigate one of the more challenging environments for the life sciences industry in recent memory, not to mention their consistent execution throughout the organizational changes related to our strategic refocusing on higher margin recurring revenue streams. Over time, BioLife has become the industry standard in terms of biopreservation media and has established itself as a leading provider of premium bioproduction tools and services, the critical picks and shovels that support the fast-growing cell and gene therapy industry. This is our mission and I'm convinced more than ever that BioLife is in an excellent position to benefit as the space matures, expanding upon our already dominant share of the market and offering diversified exposure to the nascent industry, which we expect to grow at a 20% to 25% CAGR through 2033. As we look back on an undeniably challenging year for the CGT industry, we recognized that BioLife was not alone as companies large and small felt the impact of inventory destocking, a constrained funding environment and weaknesses in China. Our full year results were certainly impacted by these challenges, but our initiatives to divest the freezer product lines and refocus helped us exit the year with positive momentum. With encouraging early signs that the macro headwinds facing the industry may have begun to subside, we similarly saw evidence of stabilization and momentum in the CGT industry and our business as demonstrated by our fourth quarter Cell Processing platform revenue growing 11% sequentially over Q3 and across our top 50 biopreservation media customers who will account for 90% of total media revenue, growing 14% compared to the third quarter. It is early, and as we have said, we will need to continue to work closely with our customers to manage inventory to normalize levels, which we believe positions us well for what could be a sustained recovery as 2024 progresses. With that, let's take a closer look at our full year 2023 results. Total revenue for '23 was $143.3 million, an 11% decrease compared to '22. Ex-COVID revenue decreased 4% for the year as there was no COVID-related revenue in '23. Looking across our platforms for the full year of '23, our Cell Processing platform revenue declined 4% to $65.8 million from 2022 due to a 6% decrease in our biopreservation media revenue, which was partially offset by a 9% increase in our other cell processing tools, which include our CellSeal, hPL and CT Automated Fill product lines. In '23, our top 20 media customers accounted for 78% of media revenue and were up slightly year-over-year by 1% and our all other category decreased by a total of 26%. In '23, distributors accounted for 40% of total media revenue compared to 38% in '22. Customers with commercially approved therapies accounted for an estimated 52% of direct media revenue in '23 compared with 49% in '22, keeping in mind that some of this revenue is related to validation, R&D and other clinical work, in addition to patient dosing. Our full year '23 Biostorage and Services platform revenue decreased 2% to $25.9 million. However, excluding prior year COVID-related revenue, this platform grew a strong 61%, as Garrie Richardson's team did an excellent job of replacing the lost COVID revenue. We are currently in the process of consolidating our two Boston area facilities, which we expect will save approximately $0.50 million in annual operating costs and which should be completed early in the third quarter. Our '23 Freezer and Thaw platform revenue declined 23% or $15.1 million from 2022, primarily due to a difficult capital equipment environment and the competitive disadvantage generated by the divestiture process. As you know, we have been in the process of divesting the CBS and Stirling Freezer entities since August of last year. We recently signed two separate LOIs for the sale of these freezer product lines, and our goal is to close these transactions within the next 45 to 60 days. All in all, this has been a difficult and time-consuming process and we expect no net proceeds, and in fact, we'll realize an initial cash outflow. This initial cash outflow will be offset by the elimination of future cash burn and certain long-term debt, as well as future product warranty liabilities, while materially improving our overall '24 financial performance and margin profile. On a more macro industry note, 2023 was a breakthrough year for CGT approvals in the U.S. This momentum continued into the first quarter of '24 with the recent approval of IOVANCE's groundbreaking TIL-based therapy AMTAGVI, an industry first, which we support with two of our biopreservation media products. This brings us to a total of 14 unique approved therapies which have our biopreservation media embedded and three of these unique approved therapies also utilize our CellSeal vials. In the next 12 months, we believe there could be up to 10 additional unique therapy approvals, expanded indications or geographic expansions, which include our proprietary products. In addition to our strong market position in approved therapies, we believe there are currently more than 230 active U.S. commercially sponsored clinical trials and estimate that our biopreservation media is embedded in more than 70% of those trials. Looking at these statistics, it's evident that BioLife is the clear industry standard when it comes to biopreservation, and as the industry grows, so do we. We have amassed a class defining portfolio of products to improve quality and reduce risk in the manufacture and delivery of these novel therapies. We have earned a high level of trust with our marquee customer base and operate in an environment with limited credible competition, specifically in the area of biopreservation. As we look ahead, we're taking a cautious approach toward our 2024 revenue guidance, despite certain customer conversations which suggest some growing optimism around improving market conditions in the second half of the year. At this point, we are expecting 2024 revenue excluding freezers to range from $95.5 million to $100 million with our Cell Processing platform generating between $66 million and $68.5 million, and our Biostorage and Services platform, which now includes our Thaw product line to range from $29.5 million to $31.5 million. While the total year-over-year growth rate of 2% to 7% may seem modest, I would point out that against an annualized second half '23 run rate, which we believe is a more appropriate baseline given the industry challenges of last year, our guidance for total revenue growth is 13% to 18% with cell processing growing at 17% to 22% and Biostorage and Services at 4% to 11%. As we progress through '24, we're committed to delivering increases in revenue, gross margin and adjusted EBITDA, both in absolute terms and as a percent of revenue. At this point, I'll turn the call over to Troy to provide a more detailed review of our financial results. Troy.

Thank you, Rod. We reported Q4 revenue of $32.7 million, representing a decrease of 26% year-over-year, and excluding COVID-related revenue from Q4 of 2022, the decline was 23%. The year-over-year decrease was primarily related to a $6.1 million decrease, or 35% in our Freezers and Thaw systems platform, and a $5.4 million or 27% decrease in our Cell Processing platform, reflecting the industry headwinds and destocking in 2023. However, our sequential growth in Q4 from Q3 for the Cell Processing platform was 11%. As Rod mentioned, we are starting to see positive indicators for future revenue growth for the Cell Processing platform. Turning to our Biostorage and Services platform. Revenue for the fourth quarter was $6.6 million, a decrease of 1% over the same period in 2022, excluding COVID-related revenue from Q4 of 2022, revenue in Q4 2023 increased 26% as the COVID-related revenue was backfilled. Freezers and Thaw systems platform revenue for the fourth quarter was $11.4 million, a decrease of 35% over the same period in 2022. Excluding COVID-related revenue from Q4 2022, revenue in Q4 '23 decreased 32%. Adjusted gross margin for the fourth quarter was 35% compared with 32% in the prior year. The increase in adjusted gross margin was primarily due to product mix related to decreased revenue from our freezer business and lower warranty and scrap expense from our ULT product line. Adjusted gross margin increased approximately 450 basis points sequentially, largely due to increased cell processing revenue and product mix. GAAP Operating expenses for Q4 2023 were $45.9 million versus $93.5 million in Q4 2022. The decrease was largely due to the non-cash asset impairment charge we took during Q4 2022 in the freezer businesses of $40.5 million. Adjusted operating expenses for Q4 2023 totaled $20.4 million compared with $22.1 million in the prior year. The decrease was largely due to reduced personnel expenses from the reduction in force in Q3 2023, decreased consulting costs and a reduction in travel expenses. Our adjusted operating loss for the fourth quarter of 2023 was $9.3 million compared with $8.2 million in Q4 2022. Our GAAP net loss was $13.4 million in Q4 compared with $49.2 million in the prior year. The decrease in net loss was primarily due to the $40.5 million non-cash intangible asset impairment charge related to Stirling and CBS taking during Q4 2022. Adjusted EBITDA for the fourth quarter of 2023 was $700,000 compared with $1.7 million in the prior year. Our adjusted EBITDA decreased primarily due to lower biopreservation media revenue. Adjusted EBITDA for Q4 increased sequentially by $3.8 million from Q3, largely due to higher revenue from our Cell Processing platform, reduced freezer R&D costs and decreased personnel costs and was the first positive quarterly adjusted EBITDA for the year. Turning to our balance sheet, our cash and marketable securities balance at December 31, 2023 was $52.3 million compared with $42.2 million at September 30, 2023. Taking into consideration our adjusted EBITDA of $700,000, our increase in cash during Q4 2023 was primarily related to a $10.4 million PIPE that closed on October 19, 2023 with an existing shareholder. Our SVB long-term debt balance was $20 million, which is interest only through Q2 2024 with quarterly repayments of $2.5 million beginning in Q3 2024. Turning to 2024 revenue guidance. Our 2024 guidance is based on expectations for our cell processing and Biostorage and Services platform, which now includes the ThawSTAR automated thawing devices product line and does not include any revenue from freezer product lines, which are in the process of being divested. Total revenue is expected to be $95.5 million to $100 million, reflecting an overall growth of 2% to 7%. Our Cell Processing platform is expected to contribute $66 million to $68.5 million or flat to 4% growth over 2023. Our Biostorage and Services platform is expected to contribute $29.5 million to $31.5 million, or 5% to 12% growth over 2023, and on a like-for-like basis, growth of 10% to 16%. In addition, we expect revenue, gross margin and adjusted EBITDA growth in 2024. Finally, in terms of our share count, as of February 22, 2024, we had 45.3 million shares issued and outstanding and 48.2 million shares on a fully diluted basis. Now I will turn the call back to the operator to open up for questions.

Today's first question comes from Paul Knight with KeyBanc.

Does the LOI allow you to move the freezer assets to discontinued ops for the statements?

Unfortunately, what we need to do is have a signed document before we can move them into discontinued operations. We are currently working through the final due diligence while our legal team is preparing the necessary documents. We hope to complete this process within the next 30 to 60 days, and if we can finalize everything by the end of March, these assets will be classified as discontinued operations for the entire quarter.

A signed LOI gets you to move them to discontinued?

No, it does not by itself. A deal does.

But you have LOI signed at this juncture or waiting on LOIs?

No, we have two signed LOIs, one for each of the entities, clear terms spelled out. Final diligence is in process with the buyers and the lawyers are working on the security purchase agreement and in the other case an asset purchase agreement.

And then you had positive EBITDA in the quarter, Rod, could you talk to steps taken to get to positive EBITDA?

Yes, I'll let Troy deal with that, Paul.

Yes, Paul, so as you recall, we did a reduction in force towards the end of Q3, so that reduction in expenses flowed through Q4. In addition, as remarked in my script, we had the increase in cell processing revenue, and then we just did a control on discretionary expenses such as consulting costs and travel.

My last question is about the 10 additional potential cell and gene therapies expected in 2024 compared to 13 from last year. I know this might not be entirely accurate, but why not consider nearly doubling the revenue from approved customers mentioned in the call to estimate the potential revenue run rate for these approvals? What qualifications would you apply to suggest that I can't simply double my commercial revenue based on approved CGTs?

Yes, there are a couple of points to consider. When discussing a newly approved therapy, there is certainly a period of ramp-up. If you have listened to the IOVANCE conference call, they were quite careful about not disclosing how many patients they anticipate being able to treat in the near future. That’s one aspect. Additionally, we have refined our approach to evaluating what we refer to as approved therapies, particularly as we assess the number over the next 12 months, which is projected to be 10. This figure includes the potential for three unique therapies, three new indications for an existing therapy, and four new geographic regions. These are the factors that will contribute to increasing the number of patients who could be treated. For example, Breyanzi could have three new indications in 2024, which doesn’t necessarily represent a new approval in the current context. Each of these three elements—being a new indication, an expansion of an indication, or an expansion into a new geographic region, along with the movement of a therapy from a later treatment line to an earlier one—are variables that ultimately influence the patient count for dosing. Therefore, it’s not a straightforward comparison.

The last thing promise is, as you get these events happening in a year, I would assume they would do some additional stocking in front of it. Are you seeing that at this juncture?

It's difficult to say. What I would say is when we look at a customer like IOVANCE who probably had a pretty good heads-up that things were going their way. Their '23 purchases were nicely above '22, and their projected '24 is also nicely above '23.

And our next question today comes from Jacob Johnson with Stephens.

Maybe Rod, first regarding the freezer sale, I appreciate the insights shared in your prepared comments and what you just explained in response to Paul's question. How confident are you that this will all be finalized in the next couple of months, considering you have two letters of intent? I also heard you mention possible expenses related to these transactions. Can you provide any estimates on that?

I'm not going to provide specifics about the terms since they are not finalized yet. However, I feel 70% to 80% confident about the outcome. The buyer for Stirling is very familiar with the business, so we don’t anticipate any unexpected issues that would pose a significant problem. While I have slightly less confidence regarding the CBS side, it is a cleaner operation, and the buyer is sophisticated, which makes me optimistic that no surprises will arise there either. Overall, I would assess my confidence level at 75% to 80% that we will wrap this up within the expected timeframe. Regarding the financial outlay, while I won't get into specifics, I can assure you that it will not affect our ability to run the company with our available cash moving forward.

That's helpful, Rod. It's encouraging to see the media segment showing sequential improvement. You're projecting single-digit growth year-over-year, which is a significant improvement compared to the trends observed in the second half of last year. I'm interested in understanding if there's a way to quantify the media performance in the first half versus the second half of the year and the run rate expected as we conclude the year. Alternatively, I'm curious about your perspective on the headwinds from last year that may continue into this year as we consider 2024 and beyond.

We recently spoke with our largest distributor customer, who visited our facility last week, and they showed a positive outlook for the second half of the year. Given that they serve nearly 6,000 customers, I view them as a good indicator for our smaller commercial and potentially preclinical customer base. While the first half of the year may appear somewhat flat compared to the second half of last year, there is potential for growth. Our commercial clients, especially our top 20 larger clinical customers, indicate that the first half of the year might make up about 45% of the total for the year, with the latter half contributing 55%. We have been cautious with our guidance, especially early in the year, as last year posed challenges, and I want to avoid premature optimism. We will monitor developments throughout the year, adjusting each quarter as our customers provide updated rolling forecasts. As these forecasts improve, we will update our guidance accordingly.

And our next question today comes from Steven Mah with TD Cowen.

Could you comment on what you are seeing in terms of your comments of macro headwinds potentially subsiding? I know you had 11% sequential growth in Q4 in cell processing. Any sense how you can share on how Q1 is shaping up? And then also any comments on how the inventory and destocking trends are looking like?

Yes, let me address the last one first, Steven. I think that when we looked at Q3 and Q4, we had four and five large customers requesting that we push their orders out, and we're talking about seven-figure orders, right? Which was the major reason or half the reason that we had such a cliff drop from Q2 to Q3 last year. And in fact, back even in Q4, we still had that three customers asking us to do that. In Q1, so far we've just had the one customer that has asked us to push things into Q2, and so we feel pretty good that that's an indication that from an inventory destocking perspective, things have kind of normalized. With respect to the larger customer, again, that customer that we just had a meeting with that has sort of 6,000 smaller customers. They are indicating that what they're seeing is a flattening from the second half of last year, and again, have expressed some optimism toward the back half of this year.

I appreciate that. And talking about the Q4, the 11% sequential growth in cell processing. Can you provide any color on the gross margins in Q4? It seemed a bit lighter than we had expected in also in light of the growth in cell processing?

Yes, so on the gross margin, it did increase about 450 basis points sequentially. We're not speaking specifically to product line gross margin, but that would be in line with our expectations at those revenue levels at a consolidated basis, including the freezer businesses.

And then let me sneak one more in any more cost-cutting efforts contemplated, or do you think the company is right sized?

Yes, that’s a good question. Generally speaking, I believe we are appropriately sized. There are still some areas where we can capitalize on opportunities. We are particularly focused on managing discretionary spending, especially travel, and applying strict criteria on who travels and for what reasons. While we see some potential for savings throughout the year, it won't be similar to the significant adjustments we made in Q3.

And our next question comes from Thomas Flaten with Lake Street Capital Markets.

Troy, in the guidance you made mention of positive adjusted EBITDA for 2024, can you quantify that, I know you laid out that 16% to 18% adjusted EBITDA margin post freezer in the middle of last year, but is that a number that that's reasonable for us to think about for the second half of the year? Or should it be lighter than that?

Yes, Thomas, that's a good way to think about it, right? When you keep in mind the media levels of revenue in the first half versus second half, right? In our guidance of what we're saying, we're still comfortable with those pro forma numbers that we put out once the media revenue grows in the second half.

I would add Thomas that, once the freezers are divested, we will be in a position to speak to gross margin and adjusted EBITDA ranges for the balance of the year. We're constrained by certain GAAP requirements in doing that right now, but as soon as those things are gone, we will address that.

Got it. And then, given that Garrie's been in post for a little while now, could you just describe a little bit about some of the initiatives he's had ongoing to kind of up your revenue game?

Sure. I think the reality is around media revenue that the opportunity to drive revenue with existing customers is very limited as it relates to media revenue because they're going to use what they're going to use. So the opportunity on the media revenue is to understand where we are not, which, when you look at a 70% market share on commercially-sponsored clinical trials, as I mentioned, there's some place to go there, right? And we are going there to understand what if anything they're using, do they even have a cryo-preservation interval at this time or are they using fresh product. So that there's an exploratory phase going on there? I think where we do have the opportunity to actually move the needle from a revenue perspective is the cross-selling of the tools that we acquired from the Sexton acquisition and layering those into the market position that we have on the media side. So there is definitely that going on where there's a handful of scientifically-oriented salesmen taking those products and starting to set up meetings with those media customers to show them, basically introduce them to the Sexton product line, whether it's hPL, whether it's the CellSeal vial line. And I think we're starting to get some traction just based on some meetings that I'm seeing on the calendar, etc., with some of our larger customers, so that's an opportunity for growth here as we go through the year.

And then one quick final one, if I might. Would you be willing to comment on across the SciSafe facilities, what level of capacity you're currently at?

Yes, I'd say if you blended it, we're probably in the 75 or 80% kind of range.

And our next question comes from Matt Hewitt with Craig-Hallum.

This is Jack on for Matt. So you recently received two approvals in Q4, and received two more so far this year. How should we think about the ramp of utilization of the biopreservation media? Do customers have inventory on hand in anticipation of the launch, or do they typically wait for the launch to commence and then take on additional product?

I think they definitely buy in advance of the approval. I think we saw that just using IOVANCE as an example, where I mentioned earlier that their '23 purchases were up above '22, not just around the clinical trials, but in anticipation of an approval we believe. We think that what we see from them projection-wise for '24 is more reflective of what they think the patient dosing numbers are going to be. It's interesting that when we look at the dosing volume product used per patient, let's say for sure this particular application, this therapy uses the most of anything we have. But they don't give us projections. They've again specifically not provided the investment community with any projections about numbers of patients dosed, but I would say that they keep a safety stock on hand, generally speaking of between three and six months on the outside. And I think what we saw late last year was a movement from six months to more like a three-month safety stock.

Our next question comes from Michael Okunewitch from Maxim Group.

So I guess one of the things that I do want to ask is, as you get towards the removal of the freezer business and returning to EBITDA positive on a full year basis and with a decent cash pile, do you start the process of looking into additional product lines that you could bring in or do you look more towards letting things settle and kind of waiting for better clarity on the direction of the market environment?

I think we start by looking at the product line that we have right now, both in terms of products and services, understand the investment required to drive those products forward. Clearly, there are certain external opportunities that we would take a look at, but we're going to be very selective. And just to be general about it, I would say we're early to be looking at those things. And unless something very special comes across our desk, that's probably from a looking outside standpoint, something we would do more in 2025 versus this year. We have a lot of work to do this year, both in understanding how to drive adoption of the current product line as well as implement systems so that the business runs more smoothly.

And then just one more, and you did touch on this a little bit on one of the prior questions, but I'd like to see if you could provide a bit more color on what the impacts of the freezer business looked like on adjusted EBITDA this past quarter?

Yes, unfortunately we're a one-segment reporting company. So we don't provide that information, but as Rod mentioned, we do look forward to providing further clarity once the divestiture process is complete.

And our next question is a follow up from Paul Knight of KeyBanc.

Rod, I got to give a shout out to the services group and the 26% growth rate ex-COVID. How is this happening and why can't this go on like for a long time?

Yes, I think some of it Paul had to do with expansion from one of our very large customers and some business that they had, and that we were able to get. Not to diminish the other activity that Garrie and his team did, but that was a bit of a one-off that I would say accounts for probably half of that growth. It's one of our larger customers on the storage side. We have an excellent relationship with them and are kind of their go-to when it comes to expanded storage needs.

And ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to the management team for any closing remarks.

Thank you, Rocco. So in closing, I'd like to say that despite the relatively cautious outlook for 2024 that we're providing at this stage, we do strongly believe that the fundamental thesis remains intact and that the company is very well positioned to take advantage of the underlying growth drivers of what is still a very nascent CGT market, to drive revenue and profitability not only this year, but in years to come. We believe our biopreservation media is the industry standard and intend to leverage that market position to drive adoption of the other tools and services in our portfolio. Thank you for your time today and we look forward to updating you on future calls and meeting with some of you at the Cowen Conference in Boston next week.

This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.