Cryoport, Inc. — Form 10-Q Summary
Business context and period. Cryoport provides cryogenic shipping, logistics management and shipment-tracking solutions to life-sciences customers. This filing covers the fiscal first quarter ended June 30, 2015, with comparisons to the three months ended June 30, 2014. Unless otherwise noted, dollar amounts are U.S. dollars.
Financial results and liquidity
| Metric | Q1 FY2016 | Prior-year quarter | Change / context |
|---|---|---|---|
| Revenue | $1.431 million | $0.937 million | Up 52.8%, primarily from more customers and shipments |
| Gross profit / margin | $488,000 / 34.1% | $339,000 / 36.2% | Margin declined, mainly due to freight costs and inventory transfers |
| Operating expenses | $2.104 million | $1.507 million | Up 39.6%; SG&A growth included sales-force expansion and stock compensation |
| Operating loss | $1.616 million | $1.168 million | Loss widened |
| Net loss | $1.924 million | $2.297 million | Loss narrowed, partly because interest expense fell |
| Loss attributable to common stockholders | $6.607 million; $1.31 per share | $3.067 million; $0.61 per share | Includes a $4.474 million preferred-stock beneficial-conversion charge and $208,000 of undeclared preferred dividends |
Interest expense was $304,000, down from $1.129 million, largely because the prior-year period included substantial amortization of debt discounts and financing costs. The company used $1.874 million in operating cash and $110,000 in investing cash; financing provided $2.965 million, primarily from preferred-stock proceeds, partly offset by debt repayments. Cash increased to $2.386 million from $1.405 million at March 31, 2015.
At June 30, 2015, working capital was approximately $1.539 million and total liabilities were $1.973 million. Current liabilities included $970,000 of related-party notes payable and accrued interest; non-related-party notes were repaid in April. Management said cash on hand, the subsequent public offering and expected revenue would fund planned operations for the next 12 months, but cautioned that profitability and access to future financing were not assured.
Material changes, outlook and risks
- Revenue from reproductive medicine rose 67% year over year to $335,200. Zoetis revenue was $257,400, down 10% from the prior-year quarter. One customer represented 18.1% of quarterly revenue; one customer accounted for 33.7% of net receivables at quarter-end.
- Cash operating costs increased with shipment growth, freight-price increases, transfers between U.S., Asian and European operations centers, and expansion of the shipping team. SG&A increased 41.9%; research and development was essentially flat.
- The company raised approximately $4.5 million gross, or $3.9 million net, from Class B preferred stock during the quarter. The preferred shares and related warrants create potential dilution; the filing reported about 10.5 million common shares reserved for future issuance at June 30.
- On July 29, 2015, the company completed a registered public offering of 2,090,750 common shares and warrants to purchase the same number of shares, raising approximately $6.8 million gross before expenses. The offering price was $3.25 per unit; warrants are immediately exercisable at $3.57. Common shares outstanding were 7,156,549 as of July 31.
- A 1-for-12 reverse stock split became effective May 19, 2015; share and per-share figures in the filing reflect the split.
- No formal revenue or earnings guidance was provided. Management’s 12-month liquidity outlook depends on planned operations, revenue generation and offering proceeds. The filing identifies commercialization, customer adoption and additional financing as important uncertainties.
- Contingencies include a consulting agreement with KLATU Networks: if Cryoport terminates it without cause or liquidates, additional compensation could be at least $2 million plus twice the agreement-defined cost of work. Management reported no legal matters expected to materially affect results; no material changes to previously disclosed risk factors were reported.
Important facts for investors to verify
- Whether revenue growth converts into improved gross margin and operating performance, given rising freight costs and operating expenses.
- Whether the company’s cash, public-offering proceeds and operating cash flows are sufficient to meet its stated 12-month needs without further financing.
- The extent of actual and potential dilution from preferred-stock conversions, warrants, options and the July offering.
- Customer concentration, including the quarter’s largest revenue customer and the customer representing 33.7% of receivables at quarter-end.
- The terms and potential financial impact of related-party debt and the KLATU agreement contingency.