Cryoport, Inc. — Form 10-Q Summary
Reporting period: Fiscal quarter and six months ended September 30, 2015. The filing is dated November 16, 2015. Figures are unaudited; share and per-share amounts reflect the May 2015 1-for-12 reverse stock split.
Business context and results
Cryoport provides cryogenic logistics, reusable shipping containers and shipment-management technology for life sciences customers. Its offerings support areas including cell therapies, reproductive medicine, pharmaceuticals and animal health.
| Metric | Three months ended Sep. 30, 2015 | Six months ended Sep. 30, 2015 |
|---|---|---|
| Revenue | $1.437 million, up 74.2% year over year | $2.868 million, up 62.8% |
| Gross margin | $436,000; 30.4% of revenue, versus 27.3% | $924,000; 32.2% of revenue, versus 32.0% |
| Operating loss | $1.822 million | $3.438 million |
| Net loss | $2.425 million, versus $1.385 million | $4.350 million, versus $3.682 million |
| Net loss attributable to common stockholders | $2.665 million; $(0.41) per share | $9.272 million; $(1.61) per share |
| Cash used in operations | $2.942 million for the six-month period |
Financial position and material changes
- Cash and cash equivalents were $7.060 million at September 30, up from $1.405 million at March 31, 2015. Working capital was approximately $5.8 million.
- Six-month investing cash outflow was $335,000; financing cash inflow was $8.932 million. Financing included $5.938 million net proceeds from the July public offering and $3.897 million from preferred stock issuance, partly offset by debt repayments.
- Total liabilities were $2.197 million, including $956,557 of current related-party notes payable and accrued interest. Other notes payable shown on the balance sheet had been repaid. Related-party notes have stated maturities principally in March 2016; one amended note is due in May 2016.
- The July offering raised approximately $6.8 million gross and issued 2,090,750 common shares plus warrants to buy an equal number of shares. The Class B preferred financing generated approximately $3.9 million net. Common shares outstanding rose to 7,170,364 from 5,025,577 at March 31.
- About 12.3 million additional common shares were reserved for conversion or exercise of preferred stock, options and warrants. Preferred stock carried aggregate liquidation preferences of approximately $12.6 million at September 30.
- Revenue growth reflected more customers and shipments; reproductive-medicine revenue increased 74.7% in the quarter and 70.9% year to date. Animal-health revenue was flat for the quarter and down 4.8% for the six months.
Management outlook, risks and unusual items
- Management believed cash on hand, revenues and projected cash flows would fund planned operations and capital needs for the next 12 months. It cautioned that profitability is not assured and additional financing may not be available on acceptable terms or when needed.
- Quarterly SG&A rose 42.8%, mainly from equity-based compensation, sales-force expansion, marketing and offering-related travel. Six-month SG&A rose 42.4%.
- Quarterly interest expense included a $521,100 charge for a beneficial conversion feature on related-party notes; six-month interest expense also included debt-discount amortization. These financing-accounting items materially affect comparison of reported losses. The six-month preferred beneficial-conversion charge and undeclared preferred dividends increased loss attributable to common stockholders.
- Gross margin improved in the quarter, but freight costs, freight price increases and added shipping-team capacity pressured costs. Operations continued to consume cash.
- One customer represented 28.8% of receivables at September 30; one customer contributed 16.0% of six-month revenue. Management cited customer adoption and commercialization execution as factors affecting future capital needs.
- The FedEx agreement was scheduled to expire December 31, 2015, subject to its terms; FedEx could terminate for convenience on 180 days’ notice. The company also disclosed a new seven-year Irvine facility lease, with initial rent of about $21,600 monthly, beginning after the stated commencement conditions.
- Cryoport paid $200,000 and accrued a further $200,000 for the Cryoportal intellectual-property purchase from KLATU. The amended services agreement included a minimum $25,000 monthly service fee. Management reported no material legal proceedings or material changes to the previously disclosed risk factors.
Important facts for investors to verify
- Whether revenue growth and shipment volumes continue, and whether gross-margin gains persist after freight and operating-cost increases.
- Cash burn against management’s 12-month liquidity expectation, and the timing and terms of any future financing.
- Related-party note repayment and maturity arrangements, including the remaining preferred-stock liquidation preferences and cumulative dividends.
- Potential dilution from warrants, options, preferred conversion and the July offering; compare reserved shares with current common shares outstanding.
- Renewal or continuation of the FedEx relationship and the economics and operating commitments of the new facility and KLATU agreements.