Q3 Results Beat Big. Revenue Guidance
Increased
By Brian Marckx, CFA
Q3 Results
BioLife Solutions (
BLFS
)
reported financial results for the third quarter ending September
30, 2012 on November 13th. Results were well ahead of our
estimates, beating our numbers on both the top and bottom lines
with sales benefitting from a huge jump in contract manufacturing
revenue which, combined with flat operating expense, resulted in
net income coming in almost $300k better than our estimate.
BLFS continues to hit financial milestones, turning in another
record revenue quarter (marking the 9th in a row) which also
generated positive cash from operations (albeit just barely and
was negative ex-changes in working capital). Perhaps even
more important is that management continues to expect strong
growth in Q4 and raised their full-year revenue guidance to $5
million (up from $4.1 million previously). And while BLFS
does not provide specific financial or operational guidance
beyond the current year, based on communications in recent
press/earnings releases and public filings relative to business
activities and market opportunities/trends, we have a greater
sense that their awareness-building efforts relative to the
competitive benefits of their biopreservation media have and will
continue pay dividends in the form of increasing the customer
base and growing revenues. As such we have made some
material upward adjustments to our revenue estimates for 2012 as
well as for our out-years. The adjustments to our financial
model, which drives our valuation of BLFS, has pushed our per
share price target up from $0.30 to
$0.50.
Revenue Up 135%, Op Expenses Remain Low
Q3 revenue was $1.7 million, up 135% yoy, up 53% sequentially
and well ahead of our $854k estimate. The majority of the
$828k top-line beat came from significantly higher than modeled
($1.1MM A vs. $379k E) contract manufacturing revenue. The
recent commencement of deliveries to the new contract
manufacturing customer helped push contract manufacturing revenue
up from $102k in Q3 2011 and $341k in Q2 2012. For Q3 2012
contract manufacturing accounted for 63% of total revenue and
contributed 99% and 122% of the total revenue growth on a yoy and
sequential basis, respectively.
Product sales to direct ($446k) and indirect ($174k) customers
were up slightly (2%) on a yoy basis and down 17% on a
sequentially. As noted in previous updates, we would not
read much into the quarterly gyrations and repeat that likely
more representative of a long-term outlook for product sales is
that BioLife recently added headcount to its direct and indirect
sales teams (as well as production personnel) in order "to manage
growing demand and projections."
Gross margin was 35.4% compared to our 42.5% estimate which is
directly attributable to the big beat in contract manufacturing
revenue, which carries a lower GM compared to product
sales. We model GM for the full year 2012 of 41.7% (GM
averaged 45.5% through first nine
months).
Operating expenses of $744k were about 8% lower than our $808k
estimate. Net income and EPS were ($352k) and (0.01)
compared to our ($640k) and ($0.01)
estimates.
Cash
BioLife exited Q3 with $8k in cash and equivalents, down from
$155k at the end of Q2. Cash used in operating activities
in Q3 was an inflow of $121. Ex-changes in working capital
cash used in operating activities was an outflow of $226k.
BLFS expects to achieve positive cash flow from operations in Q4
as well.
Our Outlook
Our fundamental long-term outlook remains intact following Q3
results. And as indicated, given the stronger than
anticipated recent financial results and near-term guidance along
with our view that certain business activities and opportunities
are materializing more rapidly than perhaps we had previously
anticipated, we have made some upward adjustments to our modeled
revenue for both the remainder of the current year as well as for
out-years. We now model 2012 revenue and EPS of $5.0
million and ($0.02), up from $3.8 million and ($0.03) prior to Q3
results.
Our 2015 revenue estimate has moved from to $8.9 million, up
from $6.9 million previously. The upward revisions to our
model have moved our price target from $0.30/share to
$0.50/share. Our valuation methodology is based on comp
valuations (see our full report which includes our financial
model and valuation).
To access a free copy of the most recent BLFS research report,
CLICK HERE.
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