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Small-Cap Confidential
Undiscovered stocks that can make you rich

November 6, 2020

Three of our portfolio stocks report earnings.

BLFS, AVLR, and EVBG Report Q3 Results

Our newest position BioLife Solutions (BLFS) reported Q3 results yesterday that came in about as I expected and there are numerous positives that keep the bullish thesis well intact. Revenue was up 71% to $11.3 million while adjusted EPS was -$0.02. The company gained 56 new customers, completed the acquisition of SciSafe and ended the quarter with $109 million in cash. Subsequent to the end of the quarter roughly $15 million was spent on SciSafe, so BioLife now has around $95 million. It expects to announce more acquisitions in the coming months. Biopreservation media accounted for 66% of revenue and freezer sales remain constrained due to travel restrictions and other Covid-19 related challenges. But this should be temporary and the potential to ramp up this business in the coming years is significant.

There were numerous interesting details on the conference call. Stepping back to a high level, management reiterated the strategy of growing through acquisitions. Equally important, they talked about how it is not just about growing but growing in the right way. And specifically, in high value gene and cell therapy markets, not generics. This came up when asked about adding assets in the freezer and transportation market. Management said the SciSafe acquisition was equally about the technology as it was about the customer relationships and quality of the people. I like to hear that.

There was a lot of talk about various customers in each of the business segments, but I don’t have time to transcribe all of them from the conference call. The most interesting aspects to me are that the media business keeps cranking and new customers are coming in as researchers that use BioLife’s media speak with colleagues. These customer testimonials are gold. BioLife also just received validation for the evo shipping container for a large customer that they’re trying to get permission to reveal.

Taking everything together, I’m more encouraged about the future of BioLife today than I was yesterday. Yes, there are headwinds to freezers and other areas due to Covid-19, but there are also tailwinds. And the bigger story of a highly-specialized market and a company with premium solutions that knows who it is and has a rational growth plan suggests we could be hooked up to a big winner here. The stock is up nicely today. Keeping at buy. BUY

Avalara (AVLR) reported a great Q3 as expected and shares are up around 6% to a new all-time high. Revenue was up 30% to $128 million, beating by $11.6 million, while adjusted EPS of $0.02 beat by $0.11. We already knew about the Transaction Tax Resources acquisition and were in favor of it, and we just learned about the acquisition of Business Licenses, which adds solutions for licensing and registration. Since we jumped into Avalara at the beginning of 2019 the story has evolved from a small cap company that wasn’t that well known to a mid-cap that’s gaining scale, both organically and through acquisitions, in a market where it’s hard for new players to enter. The story is playing out as we hoped. Management did temper enthusiasm for 2021, probably so they have some room to beat expectations. On that note, new guidance calls for full year 2020 revenue near $490 million, which is $20 million higher than expectations, and which implies 28% growth (acquisitions help). Keeping at buy. BUY

Everbridge (EVBG) is rallying again after reporting Q3 results yesterday. The stock has now surged for the last three days and is back in the middle of its previous comfort zone, (between 115 and 157). It had fallen as low as 100 on Monday. The report was great. Revenue was up 35.8% to $71.3 million, beating by $2.7 million. Adjusted EPS of $0.05 beat by $0.16. We didn’t hear a lot about the pandemic slowing down the business. In fact, there were more deals, and larger deals (over $500K), in the quarter because of Covid-19. Roughly two-thirds of sales over the last twelve months have been from new solutions like Covid-19 Shield, Return to Work/Campus, and Contact Tracing. The company now has 5,467 enterprise customers, up from 4,851 a year ago. Management updated guidance for 2020 by pushing revenue up by almost $4 million, to a range of $267.8 million to $268.2 million. I have enough confidence in the stock trend and fundamentals here to move back to buy. BUY