Cryoport, Inc. — Q2 2020 Form 10-Q
Reporting period: Three and six months ended June 30, 2020; filed August 10, 2020. Cryoport provides temperature-controlled logistics and biostorage services to life sciences, reproductive medicine, and animal health customers. It reports Global Logistics Solutions and Global Bioservices segments.
Financial performance and position
| Metric | Q2 2020 | Six months 2020 |
|---|---|---|
| Revenue | $9.39 million, up 10.9% year over year | $19.16 million, up 26.8% |
| Gross margin | 54.6%, versus 51.3% | 54.2%, versus 51.5% |
| Operating loss | $5.85 million | $9.43 million |
| Net loss | $5.80 million; $0.15 per share, versus $2.53 million and $0.08 per share | $9.75 million; $0.26 per share, versus $4.92 million and $0.16 per share |
| Operating cash flow | Not separately presented in the filing summary | $(0.31) million, versus $(1.25) million |
- Q2 Global Logistics Solutions revenue was $8.10 million, up 2.7%; Global Bioservices revenue was $1.29 million, up 123.7%. For the six months, segment revenue was $16.60 million and $2.56 million, respectively.
- At June 30, cash and cash equivalents were $44.3 million and short-term investments were $163.9 million, totaling $208.2 million. Working capital was $207.2 million.
- The company issued $115 million of 3.00% convertible senior notes due 2025, receiving approximately $111.3 million net proceeds. Notes had a $111.0 million carrying value; initial conversion price is approximately $23.91 per share. No defaults were reported.
- Six-month investing cash outflow was $119.6 million, largely reflecting purchases of short-term investments; financing cash inflow was $117.0 million, primarily from the notes and option and warrant exercises.
- Shares outstanding were 38.6 million at June 30, versus 37.3 million at year-end 2019. The notes are initially convertible into approximately 4.81 million shares.
Changes versus prior comparable periods
- Revenue growth was driven by commercial shipments for Novartis and Kite/Gilead therapies, more biopharma customers and trials, and inclusion of Cryogene, acquired in May 2019. Commercial revenue was $2.6 million in Q2 and $5.5 million for the first half.
- Gross margin improved, which management attributed to higher volume, pricing adjustments, lower freight as a percentage of revenue, and lower fixed manufacturing costs.
- Losses widened as operating expenses increased faster than gross profit. Q2 general and administrative expense rose 75.9%, sales and marketing 15.8%, and engineering and development 259.8%. The first-half net loss was nearly twice the prior-year amount.
- Management cited $1.7 million in Q2 consulting and legal costs related to acquisition activities, alongside higher staffing, overhead, and engineering consulting costs.
Outlook, management commentary, and risks
- No specific revenue or earnings guidance was provided. Management said it expected revenue to ramp gradually as some COVID-19 restrictions eased and stated that longer-term demand remained strong.
- COVID-19 had adversely affected revenue growth: clinical trials were suspended or delayed, reproductive medicine activity was disrupted, and animal health demand declined. Further effects on customers, operations, shipping, supply availability, and costs remained uncertain.
- Management believed cash, investments, and projected cash flows would fund operational and capital needs for at least the next 12 months, but noted that additional capital might be needed before sustained profitability and could not be assured on acceptable terms.
- Customer concentration is material: three customers represented 17.0%, 16.6%, and 11.0% of first-half revenue. One customer accounted for about 82% of Bioservices revenue and approximately 11% of consolidated revenue. Two customers represented 47.4% of net receivables at quarter-end.
- Management reported effective disclosure controls. Its assessment excluded Cryogene’s controls. No material change in internal control over financial reporting was reported; no legal proceedings were listed.
Important facts for investors to verify
- Whether clinical-trial activity and reproductive medicine volumes recover, and how that affects revenue and cash needs.
- Progression of commercial therapies and the clinical-trial pipeline; the filing reports support for 491 trials, including 66 Phase III trials.
- Customer concentration, particularly the Bioservices segment’s reliance on one customer and the concentration of receivables.
- Use, liquidity, and investment risk of the $163.9 million short-term investment portfolio, and the company’s actual operating cash requirements.
- Convertible-note terms, potential dilution, and the ability to meet obligations or secure additional funding if profitability is delayed.
- Whether acquisition-related costs recur and whether elevated operating and development expenses translate into improved growth and profitability.