BioLife Solutions Inc
NASDAQ:BLFS
US |
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
|
US |
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Mastercard Inc
NYSE:MA
|
Technology
|
|
US |
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
|
US |
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
|
US |
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
|
US |
Visa Inc
NYSE:V
|
Technology
|
|
CN |
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
|
US |
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
|
US |
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
|
US |
Coca-Cola Co
NYSE:KO
|
Beverages
|
|
US |
Walmart Inc
NYSE:WMT
|
Retail
|
|
US |
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
15.14
27.47
|
Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
Johnson & Johnson
NYSE:JNJ
|
US | |
Berkshire Hathaway Inc
NYSE:BRK.A
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Mastercard Inc
NYSE:MA
|
US | |
UnitedHealth Group Inc
NYSE:UNH
|
US | |
Exxon Mobil Corp
NYSE:XOM
|
US | |
Pfizer Inc
NYSE:PFE
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
Nike Inc
NYSE:NKE
|
US | |
Visa Inc
NYSE:V
|
US | |
Alibaba Group Holding Ltd
NYSE:BABA
|
CN | |
3M Co
NYSE:MMM
|
US | |
JPMorgan Chase & Co
NYSE:JPM
|
US | |
Coca-Cola Co
NYSE:KO
|
US | |
Walmart Inc
NYSE:WMT
|
US | |
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the BioLife Solutions Second Quarter 2023 Shareholders and Analyst Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions]
I will now turn the call over to Troy Wichterman, Chief Financial Officer of BioLife Solutions.
Thank you, Savi. Good afternoon, everyone, and thank you for joining us. With me on today’s call is Mike Rice, Chairman and Chief Executive Officer.
Earlier today, we issued a press release announcing our financial results and operational highlights for the second quarter of 2023, 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.
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.
Now, I’d like to turn the call over to Mike Rice, Chairman and CEO of BioLife.
Thanks, Troy. Thanks, everyone, for joining our call. We have several updates to report and discuss in the near term when our business fundamentals and mid- to long-term growth rates remain intact, and we remain confident in our end markets. Our consumables portfolio includes critical inputs for cell and gene therapy bioproduction and these high-margin solutions sold to customers with whom we have very sticky relationships can create enduring shareholder value.
I’ll let Troy speak to the numbers, but on a high level, the macro headwinds and the global economic uncertainty now being experienced across the bioprocessing industry have not just constrained biotech funding and capital equipment purchases, freezers in our world, but also more recently led to a noticeable destocking and temporary slowdown in demand for our Cell Processing consumables. Our largest distributor also reported slower growth in China, consistent with the comments by several of our peers.
As a result of this inventory destocking and broad lumpiness, we are adjusting our near-term forecast for demand and reducing 2023 guidance in line with that of others in the space. To be clear, we don’t view this environment as a new normal for bio-processing and bio-production but a temporary period of customer disruption.
To remind you, our products are critical consumable components required to delivering cell and gene therapies. BioLife is a leading supplier of these solutions, and we count the vast majority of commercial and clinical stage CGT players as our core customers.
Before discussing our Q2 results and an updated outlook for the rest of this year, I’ll begin with an update to our Q1 announcement regarding strategic alternatives for our Sterling ULT and Custom Biogenic Systems cryogenic freezer businesses.
Post June 30, after considering all strategic alternatives, management and the Board of Directors have concluded that divesting our Sterling and CBS freezer assets will optimize the growth and profitability of our consumable product portfolio and allow the company to focus exclusively on our recurring higher margin streams. It is the right decision for the business, our customers and you, our shareholders.
To this end, and based on the interest and feedback we’ve received so far, we are now able to fully commit to starting 2024 without the freezer product lines and the impact these have had on our margins, working capital requirements and revenue lumpiness. We appreciate the value of the related IP and products and teams and expect a new owner to be better able to provide global access to these innovative products.
In our earnings release issued today, we provided a pro forma illustration of our first half 2023 results, excluding the freezer businesses and other onetime charges. This clearly and strongly reinforces our commitment to divest these assets, and we are keenly focused on managing the process to meet our year-end completion goals.
I’d like to acknowledge the sustained improvement efforts of our leadership team, middle management and line workers at CBS and Sterling, who have put these assets in the best shape ever from the perspectives of quality, operations, supply chain, financial accounting, CRM, HR systems, and sales and marketing. We appreciate and recognize that operating through a divestiture process can lead to uncertainty for our team members and customers and I’m proud of and grateful for their dedication and support. We’ll proactively communicate updates internally and externally as best we can as the process continues.
Now, I’ll move on to discussing our Q2 performance. To some specifics, in Q2, we sold and shipped products and provider services to 188 new unique customer sites across our three products and services platforms. A large portion of our total revenue continues to come from existing customers as we penetrate deeper and pitch our integrated solutions to take an increased share of their spend for manufacturing, storage and distribution products and services.
In each of the last six quarters, we gained over 150 new customer sites and have a strong pipeline of early-stage users that we will carefully nurture and support to drive future growth. We now estimate that our BioLife and Sexton Cell Processing products have been used in or are planned to be used in over 800 customer clinical applications, and we remain confident that each customer clinical application, if approved but generate annual revenue in the range of $500,000 to $2 million. We expect to be able to continue to take share from homebrew preservation cocktails as awareness grows with the critical role our engineered media formulations play in reducing risk for CGT companies.
New Q2 customer sites by product and service line included 19 now using biopreservation media, six new ThawSTAR users, 17 new evo Cold Chain end users, 13 new Cryogenic Freezer and accessory customer sites, 102 new Sterling ULT Freezer and accessory customer sites, 21 new Biostorage customers and 10 new Cell Processing customers now using Sexton products. For our Cell Processing platform in Q2, we received confirmation that our solutions will be used in at least 24 additional clinical trials for new cell or gene therapies, 20 for BioLife biopreservation media and for Sexton Cell Processing tools.
In our Storage and Storage Services platform, which includes evo Cold Chain rentals and SciSafe Storage Services, we gained 38 new customer sites in Q2, 21 for biological storage services and 17 for evo. evo shipments continue to grow as more end customers are onboarded by our courier partners. It’s clear that late-stage and approved CGT companies will continue to derisk their reliance on the long-term and incumbent competitor.
Specific to that, a global pharma company with two approved therapies continues to work through their evaluation and validation of the evo platform and now anticipate starting to ramp in the last half of 2024. Their conveyed demand for evo, if fully realized, would significantly increase our fleet size and total revenue for the platform.
On the SciSafe side of the platform, we also continue to penetrate further in existing customers and have a very strong pipeline of high-value, long-term contract opportunities, and we expect another banner year for SciSafe. We continue to evaluate a list of potential expansion locations to increase our global biostorage capacity footprint. Of course, we look for potential synergies to co-locate a bio repository within our planned new GMP Media Manufacturing Center of Excellence.
On that point, to support this anticipated mid and long-term growth, with two leading commercial real estate advisory firms that specialize in life sciences expansions, we made progress on our initial assessment of potential locations to build and validate a de novo Cell Processing media production facility. The objective of this initiative is to derisk potential environmental disruptions to our Bothell and Indy facilities, but also to build sufficient additional capacity to meet anticipated demand for our proprietary high-margin recurring revenue media products. While the time line is not yet locked, it’s likely this new facility will come online toward the end of 2025.
I’ll wrap my comments with this. We sell critical CGT buyer production tools that are sole sourced from BioLife. These are not onetime buys, but rather consumables that need to be replenished. We have a strong brand and track record with limited competitive substitutes. Our CGT customers participate in emerging class of therapeutic modalities that are just now becoming real, and we naturally expect demand for our products to increase as they progress their programs. The reality is that right now, the economy is tighter and the participants in this ecosystem all want to reduce cash burn and are holding less inventory than previously.
Growing demand will offset this, but for now, we must weather this moment and with the help of the planned divestitures, we’ll make thoughtful adjustments to our operations to become leaner, less complex and a significantly more profitable business starting in 2024.
Now, I’ll turn the call back over to Troy to present our financials for Q2 in the first half of 2023. Troy?
Thank you, Mike. Total revenue for the second quarter of 2023 was $39.5 million, representing a 3% decrease from Q2 2022. And excluding COVID-related revenue from Q2 2022, growth was 7%. Revenue growth was driven by a 22% increase in our Cell Processing platform, offset by a 26% decline in our Freezers and Thaw Systems platform. There was no COVID-related revenue in Q2 2023, and compared to 9% of COVID-related revenue in Q2 2022.
Cell Processing platform revenue for the second quarter of 2023 was $18.7 million, up 22% over the same period in 2022. Freezers and Thaw Systems platform revenue for the second quarter was $13.9 million, down 26% over the same period in 2022. Excluding COVID-related revenue from Q2 2022, revenue in Q2 2023 decreased 23%. Storage and Storage Services platform revenue for the second quarter was $6.9 million, up 7% over the same period in 2022. Excluding COVID-related revenue from Q2 2022, revenue in Q2 2023 increased 94%.
Total revenue for the six months ended June 30, 2023, was $77.2 million, representing a 1% increase over the same period in 2022. And excluding COVID-related revenue from this period, growth was 11%, which was driven by a 24% increase in Cell Processing revenue. There was no COVID-related revenue during 2023 compared to 9% of COVID-related revenue in the six months ended June 30, 2022.
Cell Processing platform revenue for the six months ended was $37.7 million, up 24% over the same period in 2022. Freezers and Thaw Systems platform revenue for the six months ended was $26.9 million, down 21% over the same period in 2022. Excluding COVID-related revenue from the same period in 2022, revenue decreased 18%. Storage and Storage Services platform revenue for the six months ended was $12.6 million, up 1% over the same period in 2022. Excluding COVID-related revenue from the same period in 2022, revenue increased 96%.
Adjusted gross margin for the second quarter of 2023 was 35% compared with 36% for the second quarter of 2022. Adjusted gross margin for the six months ended June 30, 2023, was 36% compared with 34% from the same period in 2022.
GAAP operating expenses for Q2 2023 were $54.8 million versus $117.1 million in Q2 2022. For the six months ended, GAAP operating expenses were $106.1 million versus $161.3 million for the same period in 2022.
Adjusted operating expenses for Q2 2023 totaled $22.2 million compared with $20.3 million in Q2 2022. Adjusted operating expenses for the six months ended were $46.8 million compared with $40.4 million for the same period in 2022. The increase in operating expenses was primarily driven by increased headcount and infrastructure costs to support our long-term growth objectives.
Our adjusted operating loss for the second quarter of 2023 was $10.4 million compared with $5.7 million in Q2 2022. For the six months ended, adjusted operating loss was $21 million versus $14.1 million for the same period in 2022. Adjusted EBITDA for the second quarter of 2023 was negative $1.2 million compared with positive $1.2 million for the second quarter of 2022. For the six months ended, adjusted EBITDA was negative $2.2 million compared with positive $44,000 for the same period in 2022.
Next, I would like to turn to our pro forma first half 2023 financial profile, excluding Sterling and CBS. Our revenue for the first half of 2023 would have been $51.5 million with a 52% adjusted gross margin and approximately 16% to 18% of adjusted EBITDA.
Our cash and marketable securities balance at June 30, 2023, was $48.1 million compared with $56.9 million at March 31, 2023. Taking into consideration our adjusted EBITDA of negative $1.2 million cash use in Q2 2023 was primarily related to unfavorable working capital adjustments of $4.7 million, largely due to the timing of raw material deliveries related to media and capital expenditures of $2.2 million.
Turning to 2023 revenue guidance. Management is updating full year guidance to reflect expectations for its existing business. Total revenue for the year is now expected to be in the range from $144 million to $158 million, reflecting a year-over-year decrease of 11% to 2%. Excluding COVID-19-related revenue, this would represent a year-over-year decrease of 3% to an increase of 6%. Revenue guidance for 2023 does not include any COVID-19 related revenue.
Total revenue expectations for 2023 include the following platform contributions: Cell Processing platform, $65 million to $74 million, a decrease of 5% to an increase of 8% over 2022. Previous guidance for this platform was estimated to be $89 million to $93 million. Based on our customers’ updated forecast, we expect a quarterly sequential decrease of approximately 30% in Q3, followed by a 40% sequential improvement in Q4. Freezers and Thaw Systems platform, $53 million to $56 million, a decrease of 21% to 16% compared with 2022.
Excluded COVID-19-related revenue, year-over-year decrease of 18% to 13%. Previous guidance for this platform was estimated to be $72.5 million to $79 million. Storage and Storage Services platform, $26 million to $28 million, a decrease of 2% to an increase of 6% over 2022. Excluding COVID-19-related revenue, year-over-year growth of 61% to 74%. Previous guidance for this platform was estimated to be $26.5 million to $30 million.
The updated forecast reflects the macroeconomic issues seen by our peers and a significant decrease in anticipated 2023 sales from our largest biopreservation media direct customer. While the updated forecast from our customers are disappointing, we remain confident in the mid- and long-term growth potential for BioLife.
I would like to note, revenue from biopreservation media from 2020 to our anticipated 2023 forecast would be over a 35% compounded annual growth rate.
Finally, in terms of our share count, as of today, we had 43.5 million shares issued and outstanding and 46 million shares on a fully diluted basis.
Now, I’ll turn the call to Mike.
Thanks, Troy. I’ll summarize two key takeaways from Q2 and today’s call. First, we are committed to investing Sterling and CBS by the end of the year. The first half 2023 financial pro forma without freezers, again, clearly and strongly reinforces our decision to divest these assets, and we are keenly focused on managing this process to meet our year-end completion goal. We’re committed to starting 2024 with a rationalized portfolio comprised of recurring higher-margin streams to create the most shareholder value.
And two, demand for our portfolio of class-defining bioproduction tools and services in the exciting CGT market is modulated by customer production throughput and their inventory management strategies. We remain confident in the mid long-term growth rates, but demand softened in Q2, and we expect this to persist for the rest of the year. We are very well entrenched and intent on maintaining our position as a premier enabling CGT tools and services provider. We anticipate a recovery of sub magnitude in 2024. And for the rest of this year, we will continue to focus on getting closer to our key customers, running the business efficiently and completing divestitures of Sterling and CBS.
Now I’ll turn the call back over to the operator to take your questions. Savi?
[Operator Instructions] Our first question comes from Jacob Johnson with Stephens.
Hey, good afternoon Mike and Troy.
Hi, Jacob.
Hey, first on the Cell Processing segment, I guess, just kind of qualitatively investors have been worried about destocking for some time in the industry. I’m just curious kind of why you’re seeing it now? Why didn’t you see it earlier? And then two, just on the China piece. Is there any way to frame up how much exposure you have to China via distributors? So I’ll start there. Thank you.
Yes. Great question, Jacob. Well, I guess I’d say as it relates to destocking while several customers are probably experiencing this, it’s really one customer, and it’s a top 10 customer who’s gone through an inventory sort of management rationalization strategy, and that’s kind of where they’ve ended.
But I have to say, not to blame our customers for our relative level of precision and forecasting. But they’re undergoing, as you can imagine, a dynamic sort of chaotic time, and it’s not uncommon for us to get updates to demand which are vastly different from what may have been communicated even as recently as a couple of weeks. So we’re doing the best we can to get our arms around that.
But as I mentioned, we have to get closer to them so we can just have a tighter, more real-time update as to what they’re seeing for demand and then hopefully they’ll be consistent and their order flow will follow the most recent projections that have given us. So that’s the story there. It’s really one customer.
Now to the second part of your question on China, I’ll say that this large distributor has conveyed to us that their demand for our products in China through their secondary and tertiary distributors and maybe there is some direct in there, but its flat year-over-year. Now they’re not on our calendar year. So things are a little bit miss a line in terms of looking at quarters, but that’s pretty significant because they are our largest indirect customer, and so that’s meaningful. As far as trying to quantify those in dollars, we’re not ready to do that right now. But it’s not meaningless, it’s material.
Okay. Fair enough. And then maybe just on the guidance for Cell Processing. If I heard Troy right, I mean, I think we’re looking at revenues there being down maybe 30% next quarter and then maybe a little bit down mid-single digits in the fourth quarter.
I guess the question there is on the destocking, how long could this play out? Is this a one quarter phenomenon? Or kind of a two-quarter phenomenon? Or is there any risk that spills into 2024? And I guess similar question, how confident are you in returning Cell Processing to growth in 2024?
Yes. Jacob, I’d just like to reiterate what I said in my script, and that was a sequential decline. So from Q2 to Q3, a 30% decline and then a sequential increase from Q3 to Q4 of 40%. And then I’ll let Mike handle the destocking question.
Yes. So as it relates to the persistence of this, Jacob, our sense is that this is getting worked through right now, and we’ve got better visibility now, and we don’t believe that we’re going to have swings destocking swings of this magnitude that we’re going to have to talk about in the future quarters, okay?
Okay. Got it. And then just last question, Mike, I think in the press release and in your prepared comments, you said you don’t plan to enter 2024 with the freezer business. Does that mean the freezers will be – you expect those businesses to be sold by the end of this year? Or is that just referring to the discontinued operations treatment.
It means that we – based on the interest level we received to date and where we are with the pitch books and the parties, we would expect that we can complete both divestitures by the end of the year.
Got it. Okay. Thanks for taking the questions.
You’re welcome.
Our next question comes from Chad Wiatrowski from TD Cowen.
Hey, Chad Wiatrowski on for Steven Mah [ph], when it comes to the new facility, could you just speak sort of to how you’re rationalizing that if you can reduce the working capital burn by exiting the freezer business, how do you prioritize a new facility versus investing and doubling down in your current portfolio?
Yes, Chad. Good question. And maybe we weren’t crystal clear about this. But this – what we like people to take away is that the fundamentals of demand for the Cell Processing business while softened as a two to three quarter trough, so to speak, not a new normal, that’s not that we review it.
So we know based on the marquee customer list we have, the number of commercial therapies we’re supporting those particular customers’ outlooks for their own increase of doses over time, as driven by the five catalysts that we’ve been talking about every quarter, all of which can increase the number of doses that we have to be ready, which means we have to start right now looking at the current capacity in Bothell and Indy and be planning to meet that demand and have room for further demand in addition in the new facility.
So this is all about portfolio rationalization and CapEx going where it can actually provide the biggest impact, and that’s really all about media production and biostorage capacity in the form of new SciSafe facilities.
Understood. And on the freezer business, are you able to quantify or just give an update on some of the improvements that you’ve made over the past few months? And how has that sort of impacted the ongoing negotiations?
You bet. Yes, thanks for asking. In the pitch books, we have a lot of data and slides that speak to as you can imagine, would be of interest to prospective buyers. So what is the state of quality in this freezer operation?
I’m speaking primarily about Sterling to a much lesser extent about CBS, but guys, give us some color on, so what did you inherit, what do you do to fix it? And what are the results in terms of fewer initial at the line failures and then obviously, fewer out-of-box failures and fewer first 30, 60, 90-day customer negative experiences. And all of those metrics are going much better. They’re all drastically reduced from even a few quarters ago.
So we’ve done a tremendous lift here. And the shout out clearly goes to our quality engineering teams to look at all those failures, find the root causes, implement sustainable fixes and get at that. That was not – that was not a light undertaking. But as I mentioned in my comments earlier, the products in those portfolios have never been in better shape from all those dimensions that I mentioned, quality being the very first one. So it was a ton of that work, including supply chain initiatives, but really looking at what are we going to do as people are putting things together making sure that we’re getting material in and doing things right the first time and not passing along defects as a product moves down the production line.
So that was a tremendous intensive exercise with a lot of people in the company, both there and Athens, but also generally amongst our quality engineering teams and the results speak for themselves. And clearly, whoever ends up as the emerging winner in these investment processes are going to be able to recognize that, and I’m sure they’ll value that.
Appreciate the color and thanks for the questions.
You’re welcome.
Our next question comes from Amanda Young with KeyBanc Capital Markets.
Hi guys. This is Amanda Young on for Paul Knight from KeyBanc. My first question is, would you be able to update us on the cell and gene therapy landscape previously, your peers have talked around 10 BLA approvals in 2023. I’m just kind of curious how the approval landscape is shaping out?
Sure. We can give some qualitative response to it, Amanda. Thanks for the question. Well, I think it’s no surprise if you were to hear us say that particularly for earlier-stage CGT companies, they’re in a challenging environment right now. This is all about how do they keep powder dry. But the onus is – it’s really on them to have very well-designed clinical trials that have really rational inclusion and exclusion criteria, so they get just the right patients and they can get data that’s meaningful.
They just can’t afford them a footfall because they might not have enough powder to start over. So we do watch that. And while that’s certainly impacted some of our early-stage companies that we’re engaged with, I think, generally, not so much about the number of approvals because we don’t really have a crystal ball there. But there’s just – it’s just clear that the manufacturing bottlenecks that some of our key customers are experiencing, whether they make stuff directly or they have CDMOs do that for them, those bottlenecks are having an impact, whether it’s related to that old planning whether they’re relying on some other components that they just can’t get, which means they just can’t complete a final dose.
So there’s some of that going on as well. That manufacturing throughput is a real issue. However, having said all that, we know the customer concentration from the customers who have approved therapies. We have a decent sense of the revenue that comes from the therapy production versus their other clinical trials or validation work, things like that, not total precision, but a decent assumption that we can get to.
And all those metrics are going the right way. So we remain completely of the mindset that over time, and when I say over time, I mean, in the midterm that cell and gene therapies will become their primary first-line treatment modality for these large disease states, and not just blood cancers and solid tumors, but these really big patient populations, including vision loss, movement disorders, stroke, you name it.
So it’s still early. That’s what we have to keep reminding ourselves right? We have to keep thinking that there will be fits and starts and the macro behind all this is certainly not helpful. But fundamentally, we believe in the science, and we believe that we’re engaged with the customers who will be the winners because these are global biopharma companies who are, again, very smart, and they’ve obviously now all realized that cell and gene therapies are not pills that can stay on a shelf at room temperature.
There’s a whole Cold Chain infrastructure and other things that you have to do so you can best take care of these very sensitive time and temperature-sensitive doses. So you don’t ruin them along the way. And that’s clearly where our products come in. This is about risk mitigation. Giving them the best chance to have the most viable cells, which obviously impacts dose potency, which can then be the decision between whether or not the patient’s response leads to reimbursement or not. So we’re in a good spot, but it is early.
Absolutely. That makes a ton of sense. And then just one follow-up question. How is the funding environment looking from your perspective as of today?
Well, I think without realizing the specific reason you’re asking, I’ll just try to presume that. If you’re talking about companies who need to raise funds to fund operations, that’s challenging. If you’re talking about the ability to raise funds to make a strategic acquisition that would fit, there’s a lot of interest for that.
And I’m not going to give any more color comments about what we might be looking at or not. But just suffice to say that it really depends on the reason for the question. There are certainly funds around if folks are interested to do something strategic where it makes sense.
Absolutely, appreciate your time guys and thanks for the questions.
You’re welcome Amanda.
Our next question comes from Matt Hewitt with Craig-Hallum.
Hi, this is Jack on for Matt. Thanks for taking our questions. Just to dig a little bit deeper in the funding environment. Have you been seeing an increase in order delays in relation to the tightening biotech capital funding environment?
Well, I have to be careful here, Jack, to not make general statements because we sort of bifurcate the CGT customers into two buckets. Those that have approved therapies and those are the global biopharma companies.
And while they’re certainly tightening their belt, they need this stuff. They need our stuff because if they can’t get our stuff because of poor inventory management or other decisions which would lead them to not have enough of our stuff in their plant, then they’re done and they can’t make a dose and if they can’t make a dose, they can’t get paid for it to state the obvious, right?
And those with – again, with the one exception of the one customer who’s destocking was really a result of them implementing maybe more – inventory management strategy and however they chose to communicate that to us, albeit with a bunch of changes that are very dynamic. That’s that thing.
Now for everybody else, the non-approved companies who are still in the clinical trial phase, it depends on the size. We’ve got a lot of those that are early stage. And so you bet they’re slowing down. There are reasons why they’re delaying enrollment or they’re reducing enrollment whether it’s not so much access to beds, but it’s more about access to funds so they can keep going and do what they need to.
So we are seeing some of that for sure. But again, we try to focus on the 20/80 rule, particularly as it relates to how concentrated our customer revenue is, and we just have to get better to understand what they’re going through and to try to navigate through what they’re telling us with the hope that they don’t tell us something drastically different one week or 10 days later or two weeks later, which can be obviously seen as a bit of a curve ball, which makes not only our production planning really difficult, but it certainly makes the extent to which we inform our internal plan on our guidance, based on those inputs from key customers challenging as well.
And we’re not alone in that regard. We’re not blaming our customers. We’re just trying to say that we got to do everything we can to make sure we’re as close as we can and we get really consistent information from them to the extent that they can behave in a more consistent way, that’s going to be better for all of us.
Okay. That’s helpful. I appreciate the color.
You’re welcome Jack.
And our last question comes from Thomas Flaten with Lake Street.
Hey good afternoon guys. I appreciate you taking the questions.
Hi, Thomas.
Hey guys. Just to make sure I’m not misattributing the sequential downtick in the third quarter. That’s – I’m assuming, due to more than the destocking by the one customer. It’s more of a kind of a blended macro impact? Or is I just want to make sure I understand that because it’s pretty significant, like almost $6 million down in the third quarter relative to the first quarter for the Cell Processing revenues.
Yes, right, Thomas. I appreciate you asking. A couple of customers are quite a bit of that. So it’s not just one, and it’s based on as best as we have right now from customer forecast and other analysis of the all other bucket and those ordering patterns against the macro backdrop. That’s what we’re forecasting right now. So that’s what we’re guiding to.
And we certainly are not sandbagging nor are we being overly exuberant. We’re really trying to use the best information we have right now to both make sure that everybody on the call realizes what we would not want you to do is take the difference between the first half results against the guidance and just split that up equally amongst Q3 and Q4. We’ve got some empirical data to say that’s not the right way to look at the business. That’s what we’re giving the specificity around Q3 over Q2 sequential clear if you want to call it, a – with more than a modest recovery in Q4, which ultimately, combined with the first half results, will get us to that updated guidance picture.
And then going back to a discussion that occurred at the Analyst Day a few months ago, given the CapEx spending constraints, are you seeing increased demand for storage services? And if so, how do you feel about capacity to take that demand on board at this point?
That’s a really intuitive question, Thomas. Yes, and thanks for reminding everybody about that. We have a really robust opportunity pipeline. We’re sort of okay for now, but we do have to, and again, obviously, divesting the freezers puts the company in a much better position, both from a cash perspective, a less complex business, less distractions, so on and so forth.
We’re going to have to be very intentional in 2024 as we look to giving Gary and our entire storage services team, the space they need because they’ve got folks who want to fill it up.
And then if I may, one final one. Troy, any thoughts on EBITDA for 2023, just to help us in the middle of the P&L?
Not at this time, Thomas, if you just look at our current EBITDA for the quarter, I would say that given the dynamics here, right, with the high gross margin media and the product mix shift away from that in the short term. I think you can see that the EBITDA margin and gross dollar number probably is not going to improve significantly throughout the year until the – are divested.
Got it. Appreciate you guys taking the questions. Thank you.
Thanks, Thomas.
Since there are no other questions, the queue is now closed. I will turn the call back over to Mike Rice for closing remarks.
Thanks, Savi, and thanks again, everyone, for your interest in BioLife. We certainly look forward to providing updates throughout the rest of the year on our progress, and we are intent on setting the stage for a banner 2024. Good evening.
This concludes the meeting. You may now disconnect.