Cryoport, Inc. — Q2 2019 Form 10-Q
Reporting period: Three and six months ended June 30, 2019. The unaudited filing reports Cryoport’s temperature-controlled life-sciences logistics business and, following its May acquisition of Cryogene, its new Global Bioservices segment.
Financial highlights
| Metric | Q2 2019 | Six months 2019 |
|---|---|---|
| Revenue | $8.46 million | $15.12 million |
| Gross margin | $4.34 million; 51.3% | $7.79 million; 51.5% |
| Operating loss | $2.30 million | $4.44 million |
| Net loss | $2.53 million; $0.08 per share | $4.92 million; $0.16 per share |
| Cash used in operations | Not separately presented | $1.25 million |
- Q2 revenue rose 82.9% year over year; six-month revenue rose 74.8%. Biopharmaceutical logistics was the principal growth driver. Commercial revenue was $1.9 million in Q2 and $3.3 million for the half year, versus $446,000 and $740,400, respectively, in the comparable 2018 periods.
- Gross margin declined from 54.1% to 51.3% in Q2 and from 54.2% to 51.5% for the half year. Management attributed the decline mainly to costs at newer logistics centers and higher freight expense.
- At June 30, cash and cash equivalents were $80.6 million, short-term investments $14.1 million, and working capital $95.9 million. Total assets were $133.1 million and stockholders’ equity $108.8 million.
- Liabilities included a $14.7 million convertible note, net of discount, and $4.5 million of operating lease liabilities. The note had a $15 million principal balance and generated $672,600 of first-half interest expense.
- Investing cash outflow was $27.1 million, including $20.4 million paid for Cryogene and purchases of property and equipment and investments. Financing provided $71.6 million, primarily from a June public offering that netted $68.8 million.
Changes, outlook and risks
- Q2 net loss was slightly higher than the prior-year quarter ($2.53 million versus $2.47 million), despite substantial revenue growth; first-half net loss improved from $5.15 million to $4.92 million. The 2018 half-year included $899,400 of warrant repricing expense; 2019 included $672,600 of convertible-note interest.
- Cryogene was acquired on May 14 for approximately $20.5 million cash, with $1 million placed in escrow. It contributed $576,500 in revenue and $158,700 in net income after acquisition. Preliminary purchase accounting recorded $11.15 million of goodwill; valuation remained subject to finalization.
- Management said existing cash, investments and projected cash flows were expected to fund operations and capital needs for at least 12 months. It also noted potential need for additional capital before sustained profitability; no specific revenue or earnings guidance was provided.
- On July 9, 2019, the convertible note was amended: interest was reduced to 6% after June 30 and mandatory conversion was set for December 14, 2019, among other changes. Verify the amendment’s terms and effect on dilution and debt obligations.
- Key risks include integrating Cryogene, business disruption or specimen-damage claims at its Houston facility, customer concentration, and execution of growth plans. Two customers represented 28.6% and 10.4% of Q2 revenue; two customers represented 28.1% and 26.3% of receivables at quarter-end. Management reported no material legal proceedings and no goodwill impairment trigger during the half year.
- Growth commentary cited increasing clinical-trial and commercial activity: Cryoport supported 413 clinical trials at June 30, including 52 Phase III trials. Management expected trial progression and commercialization to support future growth, but this is not a formal forecast.
Investor verification points
- Assess whether logistics revenue growth and commercial therapy shipments can offset lower gross margins and higher operating costs.
- Review Cryogene integration, final purchase-price allocation, facility resilience and customer specimen-protection controls.
- Track cash burn, capital spending, liquidity and the impact of the convertible-note amendment, including potential share dilution.
- Monitor major-customer and receivables concentration, as well as the timing and scale of anticipated commercial launches.