Ladies and gentlemen, thank you for standing by. Welcome to the Q1 2021 BioLife Solutions earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Now I would like to turn it over to Mr. Roderick de Greef, BioLife's CFO. You may begin the conference, sir.
Thank you, John. Good afternoon, everyone, and thank you for joining us for the BioLife Solutions conference call to review the operating and financial results for the first quarter of 2021. Earlier this afternoon, we issued a press release which summarizes our financial results for the three months ended March 31st. 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. 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 and forward-looking statements are based on factors that are subject to change. 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 the 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 continued 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. Now I'd like to turn the call over to Mike Rice, BioLife's CEO.
Thanks, Rod, and good afternoon, everyone. Thank you for joining our call. Joining Rod and me today is Dusty Tenney, President and Chief Operating Officer. We're off to a strong start to 2021, so I'll get right to it. In Q1, we booked record revenue of nearly $17 million, a 40% increase over Q1 last year. We gained 80 new customers compared with the full year 2020 strong count of 213 new customers. The team executed to drive product adoption across the portfolio and to set the stage for a stellar 2021. We're making an initial increase to our revenue guidance for the full year 2021, which Rod will speak to in a few minutes. We also expanded our leadership team with the promotions of Marcus Schulz to Chief Revenue Officer and Sarah Aebersold as VP Global Human Resources.
Lastly, we strengthened our board with the addition of new directors, Amy DuRoss and Rachel Ellingson. Now I'll make some comments about our three revenue platforms, starting with media. In Q1, we booked record media revenue of nearly $9 million, which was up 3% over the same period in 2020, a tough comp when we booked about $1.5 million in COVID-19 related safety stock orders for our biopreservation media. We gained 16 new media customers, including Celsius Therapeutics, Galvanize Therapeutics, HiberCell, NeoBioSys, and Xilis. We also received confirmation that our media products will be used in an additional 13 clinical trials for new cell or gene therapies from customers including Allogene, Janssen, Mustang Bio, Nkarta, Takeda, and [Community]. We estimate that our biopreservation media products have been incorporated into nearly 500 customer clinical applications.
Of these, our media is used in five approved therapies: YESCARTA and TECARTUS from Kite, Breyanzi and ABECMA from Celgene, and ZYNTEGLO from Bluebird. CryoStor is also used in four new therapies that could get approved in the next few quarters. These include ide-cel from Celgene, omidubicel from Gamida Cell, cilta-cel from Janssen, and eli-cel from Bluebird. We continue to believe that our media franchise of sticky marquee customers is the engine that we can leverage to market our bioproduction tools and services portfolio to. Our freezer and thaw platform performed well in Q1. We booked nearly $5 million in revenue, a 60% increase over the same period in 2020. We gained 39 new freezer and thaw customers and completed the development of our new high-capacity controlled rate freezer family, the first of which was shipped mid-April to a current [fostar] customer.
In our final three revenue platforms, BioStorage, which includes evo cold chain and SciSafe storage services, we booked revenue of $3.1 million, an increase of $2.6 million over Q1 2020. We gained 25 new customers in the platform, including 16 new evo cold chain users. Demand for SciSafe storage services continues to increase. Regarding M&A, we continue to be active and believe our strategy can accelerate growth and further solidify our position as a leading supplier of class-defining bioproduction tools and services. I would like to give an update on our acquisition of Stirling Ultracold, I'll ask Dusty to provide some comments on how we are continuing to integrate all the companies we acquired by focusing on revenue and cost synergies, system upgrades, and organizational efficiencies. Dusty?
Thanks, Mike. Stirling Ultracold continues to realize significant market traction, adding 29 new customers during the quarter, totaling over 450 ULT freezer systems globally. Within these new customer footprints, Catalent recently announced a global strategic partnership with Stirling Ultracold to establish energy-efficient cold chain capabilities for biologics and emerging modalities, including cell and gene therapies. Stirling's ultra-low temperature freezer system is unique in the market as it's the only ULT to provide the full range of ultra-low temperatures between -20 and -86 degrees Celsius in a single system that can operate within any global location by simply changing a power cord. This is ideal for companies that have multiple biological storage temperature requirements, enabling ultimate flexibility to deploy these systems virtually anywhere in the world.
Additionally, Stirling has the smallest footprint, highest capacity freezers on the market that are extremely reliable given the application of the proprietary Stirling engine, which has only two moving parts. The combination of these attributes also culminates in Stirling freezers being rated ENERGY STAR, having both the lowest use of energy of all freezer systems within its class, and the lowest heat output of any ULT on the market, delivering superior environmental sustainability benefits. We also recently completed proof of concept testing of our proprietary Stirling engine technology, which demonstrated an ability to achieve cryo temperatures at -160 degrees Celsius. If commercialized, this potentially disruptive intellectual property could provide even more flexibility to support the expanding cell and gene therapy market. Building off a strong finish to 2020, Stirling delivered its strongest quarter on record with unaudited revenues of $17.5 million, leveraging substantive capacity increases within our operations.
Approximately 20%-25% of these sales can be attributed to the support of COVID-19 vaccine storage and distribution. The balance of sales falls into a similar historic pattern, with roughly 60% of sales within pharma biotech, 20% within academic and government research, and 20% supporting clinical and biobanking applications. For the balance of the year, the Stirling business does experience some level of seasonality during Q3, given EU summer holidays slightly offset by U.S. government fiscal year-end spending during the quarter. In Q4, we have historically experienced a slight pickup as customers spend their year-end capital budgets. These calendar factors are built into the aggregate guidance that Rod will share with you later in the call.
As I have assumed the role as integration leader for the business, we have begun to identify clear growth synergies in the business that include, but are not limited to, cross-selling products, expanding distribution networks, and geographic reach across the portfolio, notwithstanding the opportunities that we have in the launch of new products across the portfolio in the second half. Given the complementary nature of Stirling into the BioLife portfolio, our focus on cost synergies has targeted supply chain optimization and rationalization of OpEx spend, recognizing that there are some duplicative discretionary expenses in the area of sales and marketing, information technology, and G&A that can be reduced or eliminated to improve our cost structure. Across the BioLife enterprise, we have already identified several best practices that will be shared to improve our operational performance and further enhance our productivity and efficiency, critical in the near to midterm.
These initial synergy opportunities have been factored into our second half outlook and guidance. Now I'll turn the call over to Rod.
Thanks, Dusty. We mentioned on our last call, for 2021, we have streamlined our revenue reporting into three categories. Biopreservation media, which consists of all media sales. Freezer and thaw platform revenue, which includes the freezer and automated thaw product lines. The BioStorage platform, which includes evo rental revenue, as well as BioStorage revenue resulting from our acquisition of SciSafe last October. Revenue for the first quarter totaled $16.8 million, representing a 39% increase over last year's first quarter revenue of $12.2 million. Sequentially, total revenue was up 14% over last quarter. Media revenue totaled $8.9 million, which represents a modest 3% increase over the prior year. However, as we have previously discussed, we believe last year's Q1 media revenue included approximately $1.5 million of COVID-19-related demand pull forward. We estimate that a normalized year-over-year growth rate for media this quarter was approximately 25%.
Revenue from the freezer and thaw platform totaled $4.8 million this quarter, or an increase of 59% compared to 2020, driven by strong freezer sales, including the shipment of our first high-capacity rate freezer, which had a sales price slightly below $500,000. Our BioStorage platform revenue totaled $3.1 million, compared to $438,000 last year. The increase in this revenue is primarily attributable to sales generated by our acquisition of SciSafe, which occurred in Q4 of last year. Our adjusted gross margin for the first quarter of this year was 55%, compared with 64% last year. The decrease in adjusted gross margin for the quarter reflects the lower margin profile of the acquired product lines, which accounted for 47% of revenue this quarter, compared with 29% of revenue in Q1 of 2020. Adjusted operating expenses for Q1 of 2021 totaled $8.8 million, compared with $6.4 million in Q1 last year.
The increase was primarily attributable to the inclusion of SciSafe operating costs this quarter, not in place in 2020, and secondarily, to increased headcount and stock-based compensation expense necessary to support our overall growth. Our adjusted net income for the first quarter of 2021 was $478,000, or $0.01 per share, compared with adjusted net income of $1.4 million or $0.06 per diluted share in the same period last year. Adjusted EBITDA for the first quarter was $2.8 million, which was basically flat compared with $2.9 million in the same period last year. It should be noted that both adjusted net income and Adjusted EBITDA for Q1 of last year were positively impacted by approximately $1 million based on the flow-through of the COVID-related media demand pull forward.
Our cash balance on March 31st totaled $89 million, inclusive of the 6.6 million shares issued to shareholders of Stirling on May 3rd, we currently have 40.4 million shares issued and outstanding and 42.7 million shares on a fully diluted basis. On our last call, we provided full year 2021 revenue guidance of between $101 million-$110 million, inclusive of an expected contribution of $35 million-$37 million from the Stirling acquisition. Based on continued strong demand at Stirling, we now expect that the 2021 revenue contribution from Stirling will come in $5 million higher than originally expected, or $40 million-$42 million, we are increasing our full year 2021 guidance accordingly to $106 million-$115 million. Now I'd like to turn the call back over to Mike.
Thanks, Rod. I'd like to summarize the key takeaways from Q1 and our rest of year outlook. We're off to a great start across the portfolio. Travel restrictions are lifting, we're back on the road visiting customers and our sites to meet with team members. We expect 2021 to be an inflection year based on our Q1 results, a very strong Q2 so far, our confidence in customer demand for our products and services throughout the rest of the year. The Stirling team continues to crush it. We're counting on Dusty to play a critical role in integrating Stirling into BioLife. I'll turn the call back over to the operator to take your questions. John?
Thank you. At this time, I would like to remind everyone, if you would like to ask a question, please press star, then the number one on your telephone keypad. First question is coming from the line of Chris Lin from Cowen.
Hi. Thanks for taking my questions.
Hi, Chris.
Hey, Mike. Mike and Dusty, the number one question I receive from investors today concerns Stirling. Specifically, investors are asking how differentiated the ultra-low temperature technology is and how difficult it would be for a competitor to enter the space. I know this was addressed at a point during the last call and on this call, any incremental details you can provide would be appreciated.
Dusty, why don't you take that one?
Okay. Chris, thanks for the question and the representation of the share base there. I think there's a couple things that I think are meaningful. One is really around the market. When you take a look at the ULT market, it's definitely growing mid to high single-digit, which is, from our standpoint, a key attribute in terms of the investments that we're making to expand the portfolio. I think we're also taking share in the market. Our brand recognition, through the COVID period, has really exacerbated the visibility of Stirling Ultracold in the market and the flexibility of a tool that can be used at multiple different touchpoints throughout the markets that we're addressing. I think the third is an opportunity in relationship to the geographic reach. Right now, as I start to think about the opportunities in that particular space, clearly China comes to mind.
We're clearly under-penetrated in that respective market, by virtue of that's probably the highest growth market that's out there today in terms of ULTs. I think it's those three things. I think it's the market growth, I think it's the fact that we're taking some share, the opportunities that we have in a market that we're not playing in today.
Okay, thank you. Maybe could you also just address how difficult would it be for a competitor to enter the space? Really, just how long will it take to develop this technology for, I guess, a larger competitor?
Well, one is a realization that the technology that we have, which leverages Stirling, is well protected with patents. Those patents have been brought into the BioLife portfolio. For someone to get into the space and establish themselves, especially with the breadth of sales and distribution that we have on a global basis, that's a real tough putt, Chris, to be quite honest. By virtue of that, the ability to get in the market to be successful is a real challenge, especially with the entrenchment that we have with a number of critical customers. One I'd highlight, of course, was Catalent with the global relationship that we recently just established.
Great. Very helpful. Just two more questions from me, and apologies if I missed this, I think you increased Stirling revenue guidance by $5 million for the full year. What's driving that upside?
It's just, Chris, the fundamentally continued strong demand that we see coming down, both in Q2 in the near term versus when we put out our guidance back in March. It's been stronger than expected, and that's expected to continue throughout the rest of the year.
Okay, great. Last question. Mike, could you just help us unpack the media strength in a bit more detail? Is the growth there being driven by the addition of new customers, or is it due to existing customers increasing utilization as they progress through clinical trials?
Yeah. Thanks, Chris. Great question. I'm glad to provide some detail. It's both. Seriously, the impact comes from existing customers that progress through clinical trials and need more media. We're also acquiring new media customers and continue to do so at a really fast clip. They don't buy very much in the early phases or even in the pre-clinical phase. We're capturing the market really well. What's clearly the biggest factor is existing customers progressing through and needing more as their enrollment increases, as they advance to later stages of development.
Great. Thanks for taking my question.
Sure.
Again, if you would like to ask a question, please press star, then the number one on your telephone keypad. Next question is coming from the line of Jacob Johnson from Stephens.
Hey, good afternoon, Mike, Rod, and Dusty.
Hi, Jacob.
Hey. I guess first question, maybe just on the sequential growth in the services segment. It looks like evo revenues picked up nicely sequentially. May you just confirm if that was the case, and any kind of color you want to talk about the growth in that segment?
Yeah. Per my comments early on, Jacob, we are trying to streamline the revenue categories, because when you look at both thaw and evo, right now they're representing somewhere around less than 5% of total revenue. When we plug Stirling into the mix next quarter, it's going to even be smaller, more like 2% or 3% of revenue. To call that out as a separate line item is not something we're going to do. What I can say is that there was some sequential growth on the evo side, but the bulk of the increase is the bio storage revenue from SciSafe. That had a nice bump up, we are seeing some strong growth.
We have some pretty decent visibility as that unfolds because typically there are contracts, and pretty large ones, that are signed with some pretty specific timelines associated with them in terms of when that revenue starts to kick in. We're pretty confident and optimistic about that contribution this year.
Okay, got it. Thanks for that, Rod. Maybe one other question for you, Rod. Just if I look at the freezer and thaw segment, you did just shy of $5 million of revenues during the quarter. I think if I back out Stirling, you're guiding to something like $15 million-$17 million for that segment for the year. Was there any kind of one-time benefit in the quarter? I know you don't want to talk about specific product lines, but is there similar seasonality in this segment to the seasonality that Dusty outlined at Stirling?
Yeah, I think we're going to see something similar in Q3 that Dusty highlighted. I think relative to Q1 here, certainly we had a strong quarter with just a core product line that the company's been selling now for some time. As I mentioned, we introduced the high-capacity rate freezer, which has a very high ASP nearing a half a million dollars, and you don't have to sell many of those to have that positive impact on the revenue line.
Okay, got it, Rod. Maybe just one big picture question for whoever wants to tackle it. You put out this $250 million revenue goal in the next three or four years. Can you maybe talk about, and now you have these newly defined segments, how should we think about the growth profile of each of those segments to get to the $250 million goal? Should we assume they're all kind of growing similarly, or should we expect one or two of these segments to be more important growth drivers as we look out three or four years?
Yeah. Rather than get specific around growth rates, what I would say is this, Jacob: that when you look at the 250, we would expect just slightly over 50%, now that we have Stirling on board, coming from the freezer and thaw product platform. About 30% would come from media, and 20% we would expect to come in from that storage line.
Got it. I should have asked the question that way. Thanks for that, Rod, and congrats on the quarter.
You bet. Thank you, Jacob.
Thanks, Jacob.
Next question is from Thomas Flaten from Lake Street Capital.
Good evening, guys. Thanks for taking the questions.
You bet. Hi, Thomas.
I might be pushing it a little bit here, but I know, Mike, you've said that you'd likely see expansion in the commercial products in the 12 to 24 month window. You've got a couple products that meet that criteria. Is it too early from a small number of ends to really see if that thesis is bearing out in terms of multiple expansion in terms of product that you're selling to those commercial products?
A bit still too early, Thomas. Sure. CryoStor is used in five approved therapies now. I mentioned four more who could get approved in the next several quarters. I think the takeaway in our thesis there is that CryoStor or HypoThermosol, they're used in so many customer clinical applications. Let's be fair about it, there's going to be probably serious attrition. If we're in several hundred, we're not going to have 20 CAR- T all targeting the same specific form of cancer, right? I mean, the market can't support that. Nevertheless, we have so many shots on goal that we believe that over the next three to five years, if the FDA is doing what they say they're going to do to staff up and to fast-track applications review and that, then we could actually see 10 to 20 new approvals each year starting in 2025.
We're in such a big number of those where there's tremendous upside for us on the media side alone.
Great. Then, to use someone else's phrase in a slightly bigger picture question, as you look out at the universe of potential acquisition opportunities, is there a skew, product versus service, or do you have a preference there, or are you opportunistic across the board?
Well, I think the immediate response is certainly opportunistic. If we can find consumable but disposable revenues with media-like margins, of course, we're going to try to find those first. Those aren't growing or falling off trees, and there aren't that many of those that are left. Nevertheless, we do have some targets that could be meaningful for us, and we're active.
Great. Just one final one. I was caught up in taking notes. I was wondering if, Dusty, you could repeat the seasonality comments that you made in the prepared comments. I'm not sure I caught those properly.
Yeah. Thomas, the phraseology that I used there was really centered around the fact that in Q3, there is some level of slight downward turn in the business, slight, driven by the European summer holidays, but slightly offset by the U.S. government fiscal year-end spend. The second reference was really in Q4, and that's normally where we experience a slight pickup just by virtue of the year-end capital spending.
Excellent. Thanks so much. Congrats on the quarter, guys. Thank you.
Thank you.
Again, if you would like to ask a question, please press star, then the number one on your telephone keypad. Next question is from Paul Knight from KeyBanc Capital Markets.
Two on the media. Any commercial stocking revenue in 1Q that was in preparation of the two commercial launches that were approved in 1Q? Looking forward, baked in the guidance, you're implying a pretty significant step-up in growth in media. Can you just talk to the visibility of that and, I guess, any numbers baked into the potential commercial approvals that you mentioned earlier on the call?
Thanks, Mike. This is Mike here. I'll take the first one. We would expect the companies that recently got approved to be meaningful customers for us in this calendar year. Whether or not we can attribute their order flow for stocking or gearing up for commercialization, we're not going to get into that. I would just leave my remark to say that they should be meaningful customers, meaningful revenue contributions with media. Rod, you want to take the second part?
Yeah, sure. Mike, as we've talked about in the past, we have a pretty significant revenue concentration in the media business. The bulk of those customers we have supply agreements with, and they provide us with forecasts, which gives us some decent visibility. It's getting a little choppier over the last, say, 24 months versus what it was before that. Nevertheless, it gives us some decent visibility. Also customers are starting to get in the habit of actually, some of the larger ones, placing POs out through the balance of the year, which correspond to that forecast. We have pretty good visibility on a chunk of that media business, is why we're pretty confident about where it is.
Great, thanks. Dusty, on the Stirling side, I guess maybe run rating the first quarter revenue of $17.5, that kind of gets you to $70 million for the full year. The overall guidance, I think, implies about $60 million, once it's run into the BioLife mix. Can you kind of talk to the dynamics of that, incrementally, how much revenue was baked into the new Catalent announcement as well? Thanks, guys.
Yeah. Mike, if you take a look at the business profile, and I provided a little bit of guidance that sort of laid right into what Rod had provided to you on a linear basis, and I think the upside that we're seeing inside the business is a byproduct of the fact that we did see very strong demand in Q1. One would say that things were over from a COVID perspective, and I shared some observations in relationship to what that looked like in relationship to the total revenue. Given that as a construct and a continued effort in terms of build-out of capabilities, both in the research side, some level of COVID dynamics, that is continuing to spill over, and we're seeing that benefit come through by virtue of the bookings that we're seeing inside the business.
As a result, and that's again supported by the guidance that Rod shared with the team, if you do linear extrapolate the Q1, even though, again, we expect to see a little bit of a slight downturn just by virtue of the calendarization in Q3, on a linear basis, we're operating in that $60 million-$70 million range that you just noted.
Was the driver of the upside of the guide on the Catalent announcement, can you provide any color around that? Thanks.
From a Catalent perspective, that was baked in as part of the guidance. They are expanding globally, and we've got an incredible relationship that has been a byproduct of some of the work that we've done over the last two or three years in building that relationship.
Perfect. Thanks for the time, guys.
Thanks, Mike.
Next question is from Carl Byrnes from Northland Capital Markets.
Question, also, congratulations on your progress.
Thanks, Carl.
I was looking at media sales. Oh, thanks. Looking at media sales of $8.9 million, up 3%, and I think $1.5 million was related to COVID safety purchases in 2020, and you had mentioned the normalized number would've been up approximately 25% on a year-over-year basis. My question here is, has the impact from the COVID safety purchases in 2020 baked off at this point? I have a follow-up question.
Yeah, I think that what we saw early on last year when it happened, you might recall, Carl, that we were of two minds. We didn't know if it was a permanent safety stock that our customers were putting in place, or if it was simply demand pull forward that would result in reduced revenue throughout the rest of the year. I think at this point, we feel pretty confident to say that it was really demand pull forward and they used it throughout 2020 and the balance of 2020 was probably a little bit lower, based on that pull forward. We think that there's zero impact in Q1 of this issue of Q1 of this year.
From our perspective, it's behind us, but it does create this lumpiness, and we've talked about in the past that as we go forward through the year, in our view, the best way to try to calibrate the media growth rate is to look at the year-to-date number again, as we go through 2021. I think that's going to be a better reflection because it'll smooth out the sort of bumps that we've had in 2020.
Got it. That's very helpful. Also just to follow up on the Catalent expanded agreement. If I recall correctly, there was a commitment, in addition to being preferred vendor of [100f t freezers]. I'm wondering if you're able to quantify that spend and over what timeframe you would expect to garner it. Thanks.
We've got an agreement with Catalent and the specifics around 100 is a byproduct of them actually getting their facilities in place. At the time that their facilities are ready, we will be deploying those systems. Those have been earmarked and again, baked into our outlook, but most likely that will take place here over the back half of the year.
Excellent. Thanks so much. Congrats again.
Thanks, Carl.
Thanks, Carl.
Next question is from Suraj Kalia from Oppenheimer.
Good afternoon, everyone.
Hi, Suraj.
Hey, Dusty. I just want to make sure for Stirling, we understand the incremental COVID related business. If I remember correctly from the last call, there was something between $10 million-$20 million was COVID related. Help us sort of get our arms around so that we can normalize on an ex-COVID basis once we come out of this.
Yeah. Suraj, the framework, and I'll just speak relative to my comments during the call here today as a framework. Roughly 20%-25% of what we saw on the $17.5, we directly attributed to revenues that were targeted for COVID. The math there and the dynamics is roughly $3 million-$4 million of that is what we experienced in Q1. As I mentioned before, there is sort of a declining focus now on COVID. Most of the bookings that we've experienced in Q1 were actually outside the COVID environment. We're actually seeing the market come back in critical areas in the pharma and biotech. Some of the biobanking dynamics that are taking place in the business, in the market, as well as even in clinical trials and studies where our products play an extremely important part.
At least from a guidance perspective, I can at least share with you some perspectives on what we have reported here. We are seeing a decline in that dynamic that is actually being picked up by all the other specific market areas that we have targeted within the business.
Specifically for Stirling, Dusty, would I be off in terms of directionally range was that's still the incremental COVID contribution? I'm specifically asking about Stirling.
Suraj, yeah, broke up just a little bit, Suraj. It looked like you were about to say a number or a percent or something, and we lost the line right then.
Oh, gentlemen, sorry if my line is bad. Can you hear me all right?
Yeah.
I was just asking about 10-20, really.
What's the context?
Yeah. Hello?
Yeah, Suraj, could you repeat?
Sorry, gentlemen. It looks like my line is bad. Mike, I'll take this offline. Mike, big picture, and I hope you all can hear me all right on the call. Mike, revenues per customer is one of the metrics that we have always talked about in the past, and I think that that has driven, to a large part, your acquisition strategy. Mike, can you give us directionally where we are in terms of this specific metric and where we are headed, just given the cross-selling efforts? Again, I hope you guys heard my question all right.
Yeah, we have the question. Right on, Suraj. Now it's more complicated because we have more stuff to sell. We're still working to get much better visibility on how many customers in any given quarter buy one, two, three, four, or all five of the solutions. We had some modest increases sequentially from Q4 to Q1. Not ready to start to publish it yet because we're still refining the database and how we're going to present that or illustrate it in decks or speak to it on conference calls. It is working, and I think the thing I'm most pleased about, Suraj, is that we have that sequential increase, even in the Q1 COVID-related travel restriction environment where we weren't seeing customers face to face.
We're obviously much more optimistic that now we can get on the road and visit customers that will accelerate the cross-selling leverage, and we'll capitalize on this core immediate customer base and be able to transact with them for the other parts of the portfolio.
Got it. Rod, last question for you, and I'll hop back in queue. Gross margins, obviously there was a step up in SciSafe contribution and gross margins took a take down. When Stirling starts flowing through in Q2 and beyond, how would you advise we model from a P&L perspective? Gentlemen, thank you for taking my questions.
Thanks, Suraj.
You bet. On an adjusted basis, Suraj, there is going to be some dilution to the gross margin, just based on the fact that the Stirling Ultracold operation has been running somewhere in the 32%-34% range. If you were to take our current blend and then apply the percentage of revenue we expect from them, then you'd be getting an adjusted gross margin then that is lower than what it was. I think that we have talked about the fact that both at CBS, and at CBS we had a strong gross margin, probably a record gross margin in Q1, in large part thanks to the shipment of that one very large freezer that has significantly better margins than the rest of the product line.
On Dusty's side, at Stirling, there's a path laid out to where there's going to be some significant margin improvement as we march down through the year, particularly in Q4, then further out into 2022. Our expectations for margins returning on an adjusted basis back with a five in front of it, we feel very confident that we'll get there. Still there, Suraj?
John, why don't you queue up the call, the question from Marc Wiesenberger ?
Certainly. We have Marc Wiesenberger from B. Riley Securities.
Thanks. Good afternoon. Appreciate you taking my question.
Yeah. Hi, Marc.
Over the medium term, can you talk about the growth expectations for the liquid nitrogen freezers from CBS versus the Stirling product line, and maybe how the go-to-market strategies might differ? As Stirling looks to kind of get into the much lower temperatures around 180 degrees Celsius, how would that impact the CBS freezer demand, potentially?
Sure, Marc. Really insightful questions. Thanks. Dusty, why don't you speak to our integrated freezer platform sales team now that we've stitched these together and how these folks now have an opportunity to compete for really any opportunity?
Sure. Marc, one of the biggest attributes as Stirling came on as part of the BioLife Solutions business is that we have roughly about 15 direct selling resources, complemented of course, with a strong distribution network. That now is overlaid on top of all freezer sales. Those respective key stakeholders that we have within our sales organization are now going to be selling both the Stirling line as well as the Custom Biogenic Systems line. The key thing here that I think you need to understand is that most of these customers are dealing with several different modalities in relationship to the research they're doing. Our freezers clearly focus on targeted therapies using blood, urine as an example, typically in the -80 regime, and the business of Custom Biogenic Systems is really focused on cells and tissues.
That's why those respective modalities ultimately offer up a very complimentary approach in terms of how we think about our customers, because most of those customers are doing research now on all those various biological materials. That gives us a natural extension to be talking with very similar customers that we either have business with inside Stirling or business within CBS, and the natural combination that exists. As Mike sort of noted earlier on, I want to footnote that now we have opportunities to actually sell to customers that are buying media, customers that are also buying some of the thaw and evo related products.
It really opens up some doors, but by virtue of having some critical mass, now we can really get after it from a market penetration standpoint, and leverage that go-to-market as a pathway to really strengthen the capabilities that we have in serving both ends of the biological spectrum between -20 and -196.
Yeah, then Dusty, let's take part two. I think Marc, the inference is, if in fact Stirling running at -160, it can be commercialized, will it displace LN2? I think the short answer is, in situations where there's no LN2 infrastructure, certainly not. We'll have basically everything in the portfolio to offer whatever the customer needs. That's correct.
I think actually it's complementary. It's not as if it would take away from the opportunities at CBS. There are places in the world today, Marc, that have difficulty in getting LN2. It's not a renewable type resource, and because of that opens up the opportunities. To be quite honest, in that particular space, in the mechanical space, there really isn't a level of competition that we believe it would create any challenges in terms of us taking the Stirling technology into cryogenic temperatures.
Part three of Marc's question was, are we prepared, guys, to speak to the various growth rates of LN2 versus mechanical? We're not, Marc, not at this time. We have the freezer platform now. It's also including thaw, so we're not even going to speak to the growth rates of the three portfolio platforms. Can't do that one.
Got it. That was a lot of information. Very helpful. Very nice announcement with the Catalent partnership. As CDMOs kind of continue to play a more prominent role in cell and gene therapy development and manufacture, I'm wondering, can you talk to how you expect your relationship to evolve with Catalent and maybe more broadly, what percentage of sales in the past did CDMOs maybe represent, and over time, what percentage of sales could they come to represent?
Yeah, good question, Marc. If we were talking a couple of years ago only about media, I could put my finger right on that number, and I could tell you media revenue from the various 10 or less CDMOs that were out there and in play at the time. Now it's a lot more complicated. We'll do a little research and maybe we could follow up with a call with you later on that we've got scheduled, if we can get our hands on it. If not, maybe some other time. I think the takeaway is that we fully expect to be able to replicate to some degree the success we've had with this large CDMO. We're already selling at least one solution in the portfolio to all the CMOs in the CGT space right now.
By dint of those relationships and our ability to leverage our customer service and corporate reputations, we would expect to try to replicate that to some degree. If not, realize another CDMO that uses everything in the portfolio like Catalent does.
Great. Thanks. Then one last one. Could you potentially quantify the duplicative cost that will be taken out of the system throughout the year and maybe the timeline for those rationalizations? Thank you.
No, I don't think we want to go there yet. We still have a lot of work to do, and Dusty is really all over that. What I can say, though, as a concrete example of a synergy from a CapEx perspective is, on the SciSafe side, Gary is a user of the Stirling freezers. This year alone, in order to outfit the new location in Europe that's being opened up right now, we're going to be saving approximately $2 million in CapEx by moving Stirling freezers in there versus buying from some other vendor.
Very helpful, Rod. Thanks. Thank you.
We don't have any questions at this time. Presenters, you may continue.
Thanks, John. Thanks, everyone, for your interest in BioLife. It is clear we have built a very special culture here that we are extending to our acquired companies. This team is totally customer-focused, and that dedication is paying off as evidenced by our operating results. We are looking forward to sharing our Q2 results with you. Good night.
This concludes today's conference call. Thank you all for participating. You may now disconnect.