BioLife Solutions Inc (BLFS) Q3 2021 Earnings Call Transcript

BioLife Solutions Inc (BLFS 4.58%)
Q3 2021 Earnings Call
Nov 11, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day and thank you for standing by. Welcome to the Third Quarter 2021 BioLife Solutions Earnings Conference Call. [Operator Instructions] After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]

I would now like to hand the conference over to your first speaker for today, Mr. Troy Wichterman, Chief Financial Officer of BioLife Solutions. Please go ahead, sir.

Troy Wichterman -- Chief Financial Officer

Thank you, Elai [Phonetic]. Good afternoon, everyone, and thank you for joining our third quarter earnings call. Joining me today to discuss our results are: Michael Rice, Chairman and Chief Executive Officer; and Rod de Greef, President and Chief Operating Officer.

Earlier this afternoon, we issued a press release, which detailed our financial results and operational highlights for the three and nine months ended September 30th 2021. As a reminder, during this call we may make certain projections and other forward-looking statements regarding future events or the future financial performance of the Company or it's acquisitions. These statements are subject to risks and uncertainties that may cause actual results to differ materially from expectations. For a detailed discussion of the risks and uncertainties that affect the Company's business and that qualify as forward-looking statements, I refer you to our periodic and other public filings filed with the SEC.

Company projections and forward-looking statements are based on factors that are subject to change and therefore these statements speak only as of the date they are given. The Company assumes no obligation to update any projections or forward-looking statements except as required by law.

During 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 M&A activity, we believe that the use of non-GAAP or adjusted metrics provides investors with a clear view of our current financial results, when compared to prior periods.

Now I'd like to turn the call over to Mike Rice, BioLife's, Chairman and CEO.

Michael Rice -- Chairman and Chief Executive Officer

Thanks, Troy and it's great to have you in the CFO role and on your first earnings call with Rod and me. And Rod, it's just great that you'll be on the team with us for another year or so. Thank you everyone for joining our call. After my remarks, Rob will provide an update on key initiatives he is managing, targeting integration and gross margin improvements. Then Troy will present our financials for Q3 and the first nine months of 2021, and speak to another guidance increase we're making for 2021, based on continued strong demand for our biopreservation media products. After that, we'll be glad to take your questions.

Turning to Q3 revenue and customer highlights. We sustained our strong momentum this year with topline revenue of nearly $34 million in the quarter, this was up 200% versus Q3 last year and 8% above Q2 this year. Organic revenue growth was up 37% over Q3 last year, driven by biopreservation media revenue growth of nearly 50% year-over-year. In Q3, we gained at least 213 new customers across our three products and services platforms, and I'll remind you know what those are.

First, cell processing, which includes biopreservation media and Sexton products. Second is our Freezers and Thaw Systems platform, comprised of CBS Liquid Nitrogen Freezers and Stirling Mechanical Freezers and ThawSTAR. And finally, Storage and Cold Chain services, which includes our size safe storage services and our evo Cold Chain management offering. These more than 200 new customers in Q3, compares to 213 in all of 2020 and 183 in Q2 this year. For the first nine months of 2021, we gained nearly 500 new customers, but as noted before the actual count should be significantly higher and we'll report on that after year-end when we get data from our key indirect distribution partners.

You might recall that in 2020 for our biopreservation media products alone two of our largest distributors shipped products to more than 2,300 different end-users. Based on order volumes so far this year, we expect another stellar year for our direct team and indirect partners and driving much broader adoption of our portfolio of bioproduction tools and services. Cross-selling to capture revenue synergies is a key focus for us. And in the first nine months of this year, more than 30 customers have purchased at least one additional portfolio solution than they were previously using.

Note that we also disclosed earlier this year and a leading pharma CDMO is using every portfolio offering and more recently that we have a multipoint engagement with a top 10 global pharma company that uses our CryoStor biopreservation media, evo Cold Chain Management offering and size safe storage services. We expect to continue to capture revenue synergies by driving broader adoption of our portfolio components at our strategic accounts.

Now I'll make some qualitative comments about our three revenue platforms and let Troy speak to the overall metrics for each. For cell processing in Q3, we gained 42 new customers and received confirmation that our cell processing media products will be used in at least 24 additional clinical trials for new cell and gene therapies. We estimate that our biopreservation media products have been incorporated into more than 530 customer clinical applications. For biopreservation media, we also remain confident that each customer clinical application if approved could generate annual revenue in a range of $500,000 to $2,000,000 million based on the estimated number of doses our customers would manufacturer in a year. The volume of our media in each dose in milliliters and the average selling price per mill.

To date, our biopreservation media is used in the seven approved therapies and our Sexton cell processing media and vials are used in three approved therapies. For biopreservation media in approved therapies, actual and forecasted annual revenue is supporting the revenue range I just mentioned.

With our Freezers and Thaw Systems platform, despite the operational challenges, we continue to work through, we gained 162 new customers. In early October, we shipped another high-value, high-margin, high-capacity controlled rate freezer to a leading allogeneic cell therapy company. We anticipate shipping another this quarter. And our final of three revenue platforms, Stores and Cold Chain services, which includes evo Cold Chain Rentals and SciSafe Storage Services, we gained 26 new customers for the second consecutive quarter, 15 for Storage Services and 11 for evo. Specific to our Storage Services platform, we recently announced the opening of our first European bio repository in Amsterdam.

Our opportunities list of potential new storage service customers as long and robust. We're very bullish on how we can grow this business and as you can imagine, are well into the planning process for where additional facilities will be located, so we can capture our growth opportunities. With our evo Cold Chain management platform cell and gene therapy companies now have full optionality to access our class-defining offering through our expanded specialty courier partner network that now includes World Courier, Quick International, Patheon at Thermo Fisher, Marken and Biocair.

We're also well engaged in our new product development roadmap for the evo platform and look forward to sharing details when we can, but I can say, we're committed to finding the class through innovation, both internal and external.

Now, I'll turn the call over to Rod, to give you an update on some of the supply chain and gross margin improvement initiatives, he is leading, Rod?

Rod de Greef -- President and Chief Operating Officer

Thanks, Mike. I'd like to start by addressing why I delayed the date of my retirement. The timing was originally based on two things. First that the company was on a solid growth trajectory, which I believe is clearly the case and which is demonstrated by the revenue strength we realized in Q3 and continue to see in Q4.

The second factor was the full team was in place to manage that growth. Based on Dusty's resignation, the second half of the equation has changed and given the 20-years I've been associated with the company in one form or another, I offered to step in and fill the gap based on my previous experience as COO from late 2019 to earlier this year.

In this role, I currently have manufacturing and logistics, customer service and IT reporting to me. And what's new is the addition of the Stirling and Sexton product lines, and that's where I'll be focusing a significant amount of my time. A key area of attention will be to finish the integration work that has been started, particularly in the area of consolidating the company's supply chain with the objective of realizing opportunities for gross margin improvement.

In addition, we will continue to build out our companywide customer service organization with the specific goal of adding at least one new service revenue stream in 2022. On the IT side of things, the priority is to work with the existing cross-functional team already in place and continue the deployment of the NetSuite ERP project, which is well underway and on track to be fully implemented across the company by the end of next year.

I'll end my remarks by addressing some operational issues we faced during the third quarter, which resulted in a total charge to COGS of $4.3 million or 13% of revenue in Q3. Approximately $4 million of the total was related to two issues with the Stirling ULT product line and was comprised of $1.5 million in purchase price variance charges and $2.5 million in increased warranty and scrap expense. As is the case with many companies operating in today's supply chain constrained environment, the Stirling operation realized a significant increase in Q3 PPV charges, when compared to prior quarters. A large part of these charges were directly related to an ongoing transition away from a large vendor, which will be completed in the coming months.

This transition also resulted in raw material delivery issues, which negatively impacted our actual versus standard labor costs. The warranty and scrap charges are the result of certain defined and contained quality issues, the magnitude of which came to light during the quarter and which fundamentally stemmed from the 52% year-over-year increase in freezer production. These problems have now been largely addressed through process and design improvements, but the increase in warranty expense reflects the amount necessary to establish an adequate warranty accrual on the balance sheet.

To summarize, while we may see some continued issues on the supplier side impacting PPV's in Q4, they should be lower and we fully expect to see improved gross margins in Q4 and then solid expansion during 2022.

Now I'd like to turn the call over to Troy Witcherman, our CFO to recap the quarter's financials results. Troy?

Troy Wichterman -- Chief Financial Officer

Thanks, Rod. I'll start off with a brief review of our financial results for Q3 2021, and then provide updates to the guidance for the remainder of 2021. Revenue for the third quarter totaled $33.8 million, representing a 200% increase over 2020's third quarter revenue of $11.3 million. Organic revenue increased 37% in Q3 2021, compared to Q3 2020, driven by biopreservation media revenue of $11.1 million, which was up 49%.

Revenue from the cell processing platform for Q3 2021 was $11.5 million, which includes our biopreservation media revenue and Sexton cell processing tools. Sexton contributed $425,000 in revenue since our acquisition on September 1st and was in line with our expectations. Revenue from the Freezers and Thaw Systems platform for Q3 2021 was $17.6 million, which includes our CBS Stirling and ThawSTAR brands.

Revenue from the Storage and Storage Services platform for Q3 2021 was $4.7 million, which includes our evo and SciSafe brands. Revenue for the nine months ended September 30th, 2021, totaled $81.9 million, an increase of 145% over 2020's nine month revenue of $33.4 million and organic growth was 34%. Biopreservation media revenue for the first nine months of 2021 increased 31% to $29.7 million.

Our adjusted gross margin for the third quarter of 2021 was 28%, compared with 57% last year. For the first nine months of 2021, adjusted gross margin was 39%, compared to 60% in the same period last year. As Rod stated, we had $4.3 million of unusual cost of sales charges in the quarter. This was primarily related to the Stirling Freezer products. Without these charges, our adjusted gross margin for Q3 would have been approximately 40%, which is more in line with our historical range. We believe we will see sequential margin growth throughout the next few quarters.

Adjusted operating expenses for Q3 of 2021 totaled $17.4 million, compared with $6.8 million in Q3 of 2020. And for the first nine months of 2021, adjusted operating expenses totaled $39.5 million, compared with $19.3 million in the first nine months of 2020. The increase in both periods was primarily driven by the absorption of operating costs related to our SciSafe, Stirling and Sexton acquisitions, as well as increased head count and stock-based compensation expense necessary to support our overall growth objectives.

Our adjusted operating loss for the third quarter of 2021 was $8.1 million, compared with an operating loss of $359,000 in Q3 2020. Our adjusted operating loss for the first nine months of 2021 totaled $7.5 million, compared to adjusted operating income of $547,000 in 2020.

Our adjusted net loss for the third quarter of 2021 was $8.3 million or negative $0.19 per share, compared with an adjusted net loss of $346,000 or negative $0.02 per share in 2020. For the first nine months of 2021, adjusted net loss was $7.8 million or negative $0.20 per share, compared with adjusted net income of $606,000 or $0.03 per diluted share in 2020.

Adjusted EBITDA for the third quarter of 2021 was negative $2.1 million, compared with positive $1.7 million in the third quarter of 2020. For the first nine months of 2021, adjusted EBITDA was positive $4.4 million, compared with positive $5.8 million in the same period in 2020. Our cash balance at September 30th was $75.1 million.

I'll conclude my remarks with our updated revenue guidance for 2021. Total revenue for 2021 is expected to be in the range of $115 million to $119 million, reflecting year-over-year revenue growth of 139% to 147% and organic growth of 30% to 35%. Cell processing platform revenue is expected to be between $42 million and $43 million, accounting for approximately 37% of total revenue, which includes the contributions of Sexton, which we closed on September 1st.

Freezers and Thaw Systems revenue is expected to be between $57 million and $59 million, accounting for approximately 49% of total revenue. Storage and storage service revenue is expected to be between $16 million and $17 million, accounting for approximately 14% of total revenue.

Finally, in terms of our new share count, taking into consideration the 530,000 shares we issued in connection with the Sexton transaction, we have 41.6 million shares issued and outstanding and 43.8 million shares on a fully diluted basis.

Now, I'll turn the call back to Mike.

Michael Rice -- Chairman and Chief Executive Officer

Thanks, Troy. I'd like to summarize two key takeaways from Q3. First, demand for our bioproduction tools and services portfolio is at record levels in each platform, we've built a phenomenal customer base and with the anticipated growth in the cell and gene therapy industry have the potential to build BioLife into a significantly larger enterprise and [Indecipherable] stated aspirational financial goals.

Second, the operational issues we're tackling are not uncommon growing pains typical in acquisitions. I'm confident that our team will continue to execute well as we further integrate our various teams and steadily improve in our focus areas. Finally, I'm pleased to say that product demand so far in Q4 is very strong and we're looking forward to sharing our results for Q4 and the full-year of 2021.

Now, I'll turn the call back over to the operator to take your questions. Elai?

Questions and Answers:

Operator

Thank you, Mike. [Operator Instructions] All right and for the first question we have Max Masucci from Cowen & Company. Your line is open.

Max Masucci -- Cowen & Company -- Analyst

Hi, thanks for taking the questions.

Michael Rice -- Chairman and Chief Executive Officer

Hi, Max.

Max Masucci -- Cowen & Company -- Analyst

Hey, so Rod, related to the supply chain disruption, it sounds like the issue is more on the input side of things. Can you just give us a bit more detail around the issue that came about with the specific vendor area, which raw materials were the culprit, if you could share that and then just whether you expect to reconcile the issue with the existing vendor or to seek an alternative?

Rod de Greef -- President and Chief Operating Officer

Yes. You know, it's good question, Max, but I'm going to be a little bit circumspect since we still have a relationship with this vendor, right. And so, really it's fundamentally driven by the fact that a couple of months back, we made a decision to transition from this vendor to another vendor for a variety of reasons. And that transition has not gone as smoothly as we had hoped. There have been a lot of surcharges -- unexpected surcharges involved in the transition and in addition, as I mentioned, the supply has not been consistent in terms of its delivery, which has had a negative impact on the shop floor as it relates to labor rates.

So it's something that I think it's clearly transitory, because the relationship will be fully transitioned and we've been transitioning different parts over the last several months. We've probably got another month or two of that activity. So we expect the impact to come down and then in 2022, to be eliminated completely.

Max Masucci -- Cowen & Company -- Analyst

Great. And then just, you know, if we think about the imply in Q4 results, just looking at the raised guidance netted against the beat versus our expectations in Q3. I would just love to get your latest view on the embedded assumptions for Stirling, for the core business and then also new customer wins versus same customer growth?

Rod de Greef -- President and Chief Operating Officer

So, I'll make a comment and then turn it over to Mike. But, you know, Max that we don't split out the particular product lines within a platform. So, we've been pretty clear in terms of what we expect the platforms to do in the guidance that Troy laid out. And in terms of customer wins, I'll let Mike address that piece.

Michael Rice -- Chairman and Chief Executive Officer

Yes, good question, Max. Well, look, we're winning in both categories, both having success, having new groups adopt one or more platforms, but also going deeper within our key strategic accounts and we do have some concentration or at least we did with media and I'm sure to some degree that carries over to the other platforms. But I guess the way I'd want to characterize it as you've obviously seen from many other life science tools companies this quarter and even the quarter before, the demand is really remarkable. And our proprietary products are doing really well, everything else that we tucked into the platform portfolio is doing really well.

So it's just a really -- it's a really frothy time now based on level of investment and how that investment is translating into spend here. So it's really both, but very, very, bullish and I'm sure you've heard that come across in my voice with my remarks, but we're really, really strong.

Max Masucci -- Cowen & Company -- Analyst

Yes. Absolutely, makes sense. And if I could squeeze one more, in previous -- look at the past two years, your customer base is growing, your product portfolios has evolved. Just with that in mind, how do you view the opportunity to expand from within and cross-sell the broader portfolio once you really get your foot in the door. Are there any products that are being cross sold effectively? It seems like there were some positive data points in the prepared remarks?

Michael Rice -- Chairman and Chief Executive Officer

Most definitely, Max and that's a key focus area and I have -- and as a management team, particularly in our sales and marketing functional groups, we have really high expectations about our ability to capture those revenue synergies by seeing this cross-selling opportunities, leveraging relationships, finding homes for more parts of the portfolio based on now obviously in a good way physically being back on site, seeing our friends, but also seeking at other decision makers and influencers to present the other parts of the portfolio.

I have to say the integrated freezer sales team is doing a great job and when we've got a lot going on there to pitch for SciSafe storage services, the evo platform. So, the good news is there just aren't 10s of 1,000s of prospects, it's a finite enough universe for us to get our arms around through our both our direct team and our distribution partners and it's great to see the way that we're leveraging these various relationships and being introduced to other folks. So yes, key focus area for sure.

Max Masucci -- Cowen & Company -- Analyst

Great, thanks for taking the questions.

Michael Rice -- Chairman and Chief Executive Officer

You're welcome, Max.

Operator

Next, we have Jacob Johnson from Stephens. Your line is open.

Jacob Johnson -- Stephens -- Analyst

Hey, good afternoon. And, Rod, I'd say it's good to have you back, but I guess you never left. May just one follow-up on just kind of the Stirling operational stuff. Has this impacted your relationship with customers, the perception of the brand or maybe more simply, do any of these kind of issues impact your outlook for revenues at Stirling?

Michael Rice -- Chairman and Chief Executive Officer

Yes, really good question, Jacob. As you can imagine for competitive reasons. I'll be fairly brief in my remarks, but I think it's obvious that every time a customer orders a freezer, if it doesn't work or doesn't work like it's supposed to, that's a bad experience and we don't like that, so we're all over that to try to reduce those and to get things to return to a normal sort of expected warranty rate of touch points and service call and all that. But yes, so far so good, but we're on it, because we understand how customer loyalty works and they have options, which may not be the best options, but they have other options to consider, so hyper-focused on it.

Jacob Johnson -- Stephens -- Analyst

Thanks for that. Mike. And then, just sticking on the freezer side and kind of a bigger picture question that I get from investors, you guys are seeing strong demand for your freezers. We're seeing it elsewhere too. Can you just talk about the demand in freezers you're seeing, is this new customers coming to you, is it existing customers, kind of, scaling up or out, is this to prepare for commercial product launches or just for research? Any kind of color you can give on kind of the broader demand backdrop you're seeing on the freezer side of the business.

Michael Rice -- Chairman and Chief Executive Officer

Yes, I can give a little bit. It's all of the above, and it depends on the segment, you're talking about. Within cell and gene therapy, clearly the high capacity controlled rate freezer from our CBS LN2 line has an appeal there and there is demand for that, and there's really good interest. Those are -- as you know, high value, $0.5 million, kind of, range freezers with good margins on them. In the broader biopharma market, there is really obviously, demand for LN2 storage, but really more demand for mechanical freezers and that space you think about the three markets of academia, government and then corporate or industrial with really strong demand among all of those. So I would just say that where we are the beneficiary of this tide is lifting all the boats.

Jacob Johnson -- Stephens -- Analyst

Got it. I'll just sneak in one more. Nice quarter in the services business. Can you just -- on the kind of the build out of SciSafe you added the Amsterdam facility, can you talk broadly about the footprint of SciSafe today? And then if you want to look ahead to maybe hint that any other regions that could be of interest in the future, I suspect, Asia-Pacific would be one that would come to mind?

Michael Rice -- Chairman and Chief Executive Officer

Yes. Well, so today, there are five facilities, and if you think how are we making this filter criteria for selection of locations. It's really about where are the clusters of biotech companies and cell and gene therapy companies that would have a need or an interest in outsourced storage and we all know what those clusters are and each of those has a certain footprint from competitors, who offer outsourced biologic storage. So we've got a lot of factors going into it. But you can imagine where we're not, in the US and of course, those are going to kind of boil to the top of the list.

Just to put some color on that and Rod, you can chime in or Troy if you want, but we think we've got a really good handle on what it cost to turn up a facility in terms of capex and timing and all that. And it's an interesting opportunity for us, where people are coming to us, because they see some differentiation based on quality, how we engage. So we're really bullish about how we can grow that business out.

Jacob Johnson -- Stephens -- Analyst

Great. I'll leave it there. Thanks for taking the questions, Mike.

Michael Rice -- Chairman and Chief Executive Officer

Sure.

Operator

Next we have Paul Knight from KeyBanc. Your line is open.

Paul Knight -- KeyBanc -- Analyst

Hi, Mike, [Technical Issues] more references in the industry about increasing importance in either the cell and gene therapy market. Are you seeing your customers -- per customer sales increase? Are they moving into Phase II, Phase III? What are you seeing on per customer on the media side of the business?

Michael Rice -- Chairman and Chief Executive Officer

Most definitely, Paul. Clearly as they move into later stage or later phase trials of a particular candidate, but also our ability, because relationships are very sticky. So our ability to get the media embedded in their follow on development projects is really strong. So that whole gestation period in customer revenue journey, it's going to be repeated several times with many, many customers where we may be in an approved cell therapy, but we're also in most if not all of the follow-on candidates that they're evaluating through clinical trials. So, you bet.

Paul Knight -- KeyBanc -- Analyst

It seems like CD-1 approved therapy doesn't use your product. I mean, would they have not had gone through a lot of safety studies for that approval?

Michael Rice -- Chairman and Chief Executive Officer

I think they would have been and you're speaking specifically of Kymriah from Novartis, who uses the homebrew cocktail for preservation that came from the UPenn process that they scaled up. And in their shoes, it's always the balance of, if we switch to CryoStor, we can improve functionality and post preservation viability and functional recovery of cells, but at least to-date, their assessment of the lift to do that, particularly as it relates to how the agency in the US might mandate that they do some bridging studies or maybe small animal studies or something, they haven't convinced themselves they should do that. However, I would tell you that Novartis is a strategic customer of our media and we're in lots of other projects they've got going on there in clinical trials.

Paul Knight -- KeyBanc -- Analyst

Okay, great. And then lastly on the integration of Stirling 2 with CBS and other products. Is of Sterling's presence in the more, let's call it, 20 to 80 market, is that -- is there any integration issues with CBS in terms of their higher end, let's call it, colder, ultra cold products?

Michael Rice -- Chairman and Chief Executive Officer

Not integration as it relates to on our side. Paul, but definitely opportunities as it relates to how we can now offer freezers that cover the complete temperature continuum. So if a customer needs the coldest of the cold, that minus 150 or colder with LN2, we've got it covered. If they don't need that, but they're in the mechanical space of minus 20 to minus 80, we obviously got the class-defining Stirling offering to pitch as well.

Rod de Greef -- President and Chief Operating Officer

And Paul, it's Rod. To the extent there's integration work to be done relative to the manufacturing side of things, and customer service to a degree, it really revolves around consolidating the supply chain, so that we can leverage certain components, both electronic and metal, that both platforms use.

Paul Knight -- KeyBanc -- Analyst

Okay. And then last on COVID, I know Stirling had some COVID benefit. What's the direction of COVID demand right now?

Michael Rice -- Chairman and Chief Executive Officer

It's actually coming down, so if you look at the sort of year-to-date number, it's going to be around 20%, but if you look at Q3, it's down sort of in the 15% to the 18% range. We expect that to come down further in Q4 and maybe normalize next year. I think, it's going to go longer than we had originally expected. So, maybe it's 10% next year going forward.

Paul Knight -- KeyBanc -- Analyst

Okay, thanks.

Michael Rice -- Chairman and Chief Executive Officer

You bet.

Operator

Next we have Yuan Zhi from B. Riley Securities. Your line is open.

Yuan Zhi -- B. Riley Securities -- Analyst

Hi team, thank you for taking our questions. Congratulations on another strong quarter. So a while ago you mentioned a top ten big pharma selected a portfolio of service from BioLife to support its regulatory application. To the extent that you can share, can you provide some color about the history with this company by how long the relationship has been, how the service provided to the company has evolved over time, and what are the key factors you think that differentiate you from other competitors? Thank you.

Michael Rice -- Chairman and Chief Executive Officer

Yes. Super -- super insightful question. Well, this relationship is very long term, I think this relationship was in its nascent days when I joined the company almost 16 years ago on the media side, OK. And they evaluated CryoStor for a number of early phase cell therapy candidates and that relationship had been flowed as some of those candidates progressed more or didn't progress, so on and so for. And then, it transitioned into the evaluation and the validation and the adoption of the evo platform to transport their CAR T cell therapy around, which is just fantastic and obviously, that was a joint kind of win, if you will, Yuan, with select courier partners of ours.

Yuan Zhi -- B. Riley Securities -- Analyst

Yes, thanks for the helpful color. And maybe can you provide an overview of your rental business, like which business segment you are having this rental business and is it like iPhone and the user gets upgrade every couple of years? Thank you.

Michael Rice -- Chairman and Chief Executive Officer

Sure. So the evo cold chain management business is reported in our storage services in cold chain services platform. We don't break out the revenue of each. The revenue is based on the rental of containers to the specialty carriers, who then in turn use those to move customers temperature-sensitive biologic material from point A to point B.

Yuan Zhi -- B. Riley Securities -- Analyst

Yes. Got it. Thank you.

Michael Rice -- Chairman and Chief Executive Officer

You're welcome.

Operator

Next, we have Thomas Flaten from Lake Street Capital Markets. Your line is open.

Thomas Flaten -- Lake Street Capital Markets -- Analyst

Hey guys, thanks for taking the questions and congrats Troy on the position. Just a quick one on the gross margins. So if we adjust out the charges and get to 40%, was that a bit below where you guys had anticipated margins being for the quarter.

Rod de Greef -- President and Chief Operating Officer

Yes, I think it was. I think it really has to do with some stock comp that was issued to a couple of hundred people at Stirling facility in Q3, that was not in place in Q2. So I think if you look at Q2 as sort of a benchmark, if you will, a baseline, I think the bulk of the delta between those two has to do with that stock comp, Troy?

Troy Wichterman -- Chief Financial Officer

Yes. And I just like to add to that, we actually did stock comp grants for everyone throughout the company in Q3, so that's why you're seeing the drops to the gross margin as well.

Thomas Flaten -- Lake Street Capital Markets -- Analyst

Got it. And switching gears a bit with Dusty's resignation and Rod's un-resignation, how do you think about -- as the company grows both in size and complexity. How do you think about building a bench of capable leaders for the future? Obviously, I'm assuming you're going to continue to be acquisitive and the business only continue to grow. I'm just curious to get your thoughts on that in light of recent announcements.

Rod de Greef -- President and Chief Operating Officer

Yes, I think that's a good question, Thomas. I think clearly, with respect to Troy's promotion that has been in the works in terms of getting him ready for that seat for quite some time. As it relates to a future potential Chief Operating Officer, there are a couple of candidates internally. We're going to evaluate those candidates over the next year. And I think, you know, barring some strangeness that we can see today, it's likely that one of those folks would step up into the role, say early 2023 when I'm ready to formally and finally retire. So that's the plan there.

Thomas Flaten -- Lake Street Capital Markets -- Analyst

Got it. I appreciate the questions. Thanks, guys.

Michael Rice -- Chairman and Chief Executive Officer

You bet, Thomas.

Operator

[Operator Instructions] Next we have Suraj Kalia from Oppenheimer and Company. Your line is open.

Suraj Kalia -- Oppenheimer and Company -- Analyst

Good afternoon. Mike, Rod, Troy. Can you hear me, alright?

Michael Rice -- Chairman and Chief Executive Officer

Yes, hi, Suraj.

Suraj Kalia -- Oppenheimer and Company -- Analyst

Hey, Mike. Hope everyone is safe and healthy. So one multi-part question for you and one I'll pose it to either Rod or Troy. So Mike, to the extent that you can share, you mentioned 500 new customers in the quarter?

Michael Rice -- Chairman and Chief Executive Officer

Yes.

Suraj Kalia -- Oppenheimer and Company -- Analyst

How many were de novo versus pull through from acquisitions? I'm just curious...

Michael Rice -- Chairman and Chief Executive Officer

I'll take that one. None were inherited from acquisitions, but all the de novo, OK.

Suraj Kalia -- Oppenheimer and Company -- Analyst

Okay, perfect. It might -- just given the number of tools in your toolbox now, so to speak, what is the average time it's taking you all to close a new account, if you want to compare from a year or two years ago? And also if you were in a position to share, what's the trend line for average revenues per customer looking like, and I'll just throw it my second question and therefore, Rod or Troy maybe -- gentlemen, I understand the one-time issues with Stirling at the gross margin and stock comp, Rod on a broader level, if you could just kind of remind us where you all are in the trajectory of normalizing corporate gross margins. There was a dip with Stirling, you were going to take some initiatives. Forgive me, just jumping in between calls, maybe you can walk us through how the normalization in the timeline. Thank you for taking my questions.

Michael Rice -- Chairman and Chief Executive Officer

Sure. Super. All really good questions Suraj. So, with respect to your question about sales closing time versus previous, well, it really depends on the platform. I can say, specific to media, which because so much of the business comes direct, we're closest to that, we understand the sales process and the dynamics very, very well. That is certainly getting compressed and has been compressed over the last several years, where it now much, much of the whole lead generation is inbound due to our brand awareness, people understanding what we can do for them and using the product at a different engagement and moving to a new place and taking that best practice that positive learning experience with them. So I think it's certainly getting compressed.

On the freezer side, because we do sell into a large degree through distributors, and then, we have now this new integrated direct team, but that's all a transition. It really depends most likely I'd say based on, in some segments, the time of year and if we're in the academic market or the government market and they've got to spend money by a certain date. So as you can imagine, Suraj, all of our sales presentations, our talking points, our elevator pitches, it's all about making sure that every customer prospect conversation includes the entire portfolio. With these sellers being fluent enough to identify opportunities where we can do more and we can solve our customer problems, and I think, if we're good at that and I believe we will be, that will compress the sales cycle across all the platforms.

Rod de Greef -- President and Chief Operating Officer

So, Suraj. In terms of your question, I think the best way for me to answer it is as follows. So I think if you look at, let's just use the word normalized gross margin blended for the full company on an adjusted basis, it's running 40% to 42%, right. So that's sort of the floor. The issues that we faced in Q3 are fundamentally transitory. I mean, we may have a little slop over in Q4. But as you look into 2022, we have a stated goal of three to four year gross margin target of 50% plus. So, you're really looking at increasing we're expanding gross margin by 10 percentage points over that period of time. A portion of that is going to come from some things we do fairly quickly that we'll be able to see happen in 2022 and then, the balance of it is going to be driven by fundamentally higher levels of revenue leveraging fixed costs and new product introduction with lower volumes.

So 2022 is going to be more about executing on the manufacturing side, on the purchasing side and I'm not going to put out a target there. We obviously have one internally. But then, the balance of the gross margin expansion is going to come based on revenue increases and new product introduction by that three to four year period.

Suraj Kalia -- Oppenheimer and Company -- Analyst

Thank you.

Michael Rice -- Chairman and Chief Executive Officer

You bet.

Operator

And there are no further questions at this time. That concludes the Q&A session. I will now turn the call back to Mike Rice, Chairman and Chief Executive Officer, for closing remarks

Michael Rice -- Chairman and Chief Executive Officer

Thank, Eli. Thanks again everyone for your interest in BioLife. We're in a great space with a nearly 500-person strong team of folks dedicated to quality, customers and each other. Our success is only made possible by their commitment and teamwork. We're looking forward to closing Q4 and 2021 would demonstrate execution and strong results. We appreciate your support and wish you a good evening. Good night.

Operator

[Operator Closing Remarks]

Duration: 42 minutes

Call participants:

Troy Wichterman -- Chief Financial Officer

Michael Rice -- Chairman and Chief Executive Officer

Rod de Greef -- President and Chief Operating Officer

Max Masucci -- Cowen & Company -- Analyst

Jacob Johnson -- Stephens -- Analyst

Paul Knight -- KeyBanc -- Analyst

Yuan Zhi -- B. Riley Securities -- Analyst

Thomas Flaten -- Lake Street Capital Markets -- Analyst

Suraj Kalia -- Oppenheimer and Company -- Analyst

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