Cryoport, Inc. — Q1 2022 Form 10-Q
Business context and reporting period. Cryoport provides temperature-controlled logistics, packaging, storage and equipment for life sciences, animal health and reproductive medicine. This unaudited report covers the three months ended March 31, 2022; comparisons are with Q1 2021. Unless noted otherwise, amounts below are in U.S. dollars.
Key financial results
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Service revenue | $32.9 million | $26.8 million |
| Product revenue | $19.4 million | $26.5 million |
| Total revenue | $52.3 million | $53.3 million |
| Gross profit / margin | $22.3 million / 42.7% | $24.6 million / 46.1% |
| Operating loss | $7.8 million | $1.1 million |
| Net loss | $13.4 million | $3.5 million |
| Net loss attributable to common stockholders | $15.4 million; $0.31 per share | $5.7 million; $0.13 per share |
| Adjusted EBITDA (non-GAAP) | $1.8 million | $7.2 million |
| Operating cash flow | $0.5 million provided | $6.0 million used |
SG&A rose 24.5% to $26.6 million, while engineering and development expense fell 17.8% to $3.5 million. Service gross margin improved to 43.1% from 41.9%; product gross margin declined to 42.0% from 50.3%.
Balance sheet and liquidity at March 31, 2022
- Cash and cash equivalents: $134.4 million; short-term investments: $465.1 million; combined: $599.5 million.
- Working capital: $621.3 million. Total assets were $1.081 billion and stockholders’ equity was $609.4 million.
- Convertible senior notes had a $404.8 million net carrying value, against $416.8 million aggregate principal; the notes mature in 2025 and 2026. The company also reported a $1.0 million note payable.
- Cash and short-term investments declined from $628.8 million at year-end 2021. Q1 cash used in financing was $8.0 million, primarily for share repurchases.
Material changes versus Q1 2021
- Total revenue decreased 1.8%, despite service revenue growth of 23.0%, as product revenue fell 26.9%.
- Management attributed approximately $9.4 million of Q1 revenue impact to a January fire at MVE’s New Prague, Minnesota facility. Production resumed in February and reached full production by the end of Q1.
- Gross margin fell 3.4 percentage points, primarily reflecting global supply-chain cost pressures and lower product margins. Management said the fire-related revenue impact was expected to be limited to Q1.
- Net loss widened by $9.9 million. Other expense included $4.9 million of unrealized losses on equity investments and foreign-currency effects. Separately, available-for-sale debt securities generated $14.1 million of net unrealized losses reported in other comprehensive loss.
- Cash from operations improved to $0.5 million provided from $6.0 million used, but included $3.0 million of insurance proceeds for operating impacts of the fire. Inventory increased $7.7 million, partly as the company built inventory to address supply-chain risks.
- The company repurchased 306,300 shares for $8.3 million during Q1 under a program authorizing up to $100 million of common-stock and/or convertible-note repurchases through December 31, 2025.
Outlook, commentary and risks
- Management stated that available cash, investments and projected cash flows were expected to fund operating and capital needs for at least the next 12 months. It also noted that additional capital may be needed before sustained profitability, with no assurance of availability on acceptable terms.
- The company supported 609 clinical trials and nine commercial therapies at quarter-end. Management anticipated up to 15 additional BLA or MAA filings, three new therapy approvals and five label or geographic expansions during the remainder of 2022, and forecast 20 total filings in 2023. These are expectations, not assured outcomes.
- Management cited COVID-19-related sourcing constraints, potential cost increases and ongoing global supply-chain disruption. It also discussed possible effects of the Russia-Ukraine conflict, sanctions, logistics disruption, inflation, foreign-exchange movements and cybersecurity threats; it said the conflict had not materially affected operations as of the filing.
- The New Prague facility fire curtailed production temporarily. The company expected insurance to cover restoration and reopening costs and related business-interruption losses; it reported $5.0 million of insurance proceeds in Q1 cash flows.
- In April 2022, Cryoport completed the acquisition of Cell&Co BioServices for consideration of €6.1 million, including cash, shares and a potential earn-out. It also reported additional April share repurchases of 600,000 shares for $14.5 million.
- No material legal proceeding was identified in the filing. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether service growth and the expansion of clinical-trial and commercial-therapy activity translate into sustained revenue growth, particularly after the temporary fire disruption.
- Whether product margins recover as supply-chain constraints ease, and whether inventory growth reflects prudent preparation or creates obsolescence and working-capital risk.
- The composition, maturity profile and sensitivity of the $465.1 million short-term investment portfolio: Q1 included significant unrealized losses, both in earnings and in other comprehensive loss.
- Cash generation relative to operating losses, capital spending, share repurchases and potential acquisition needs; the company’s stated 12-month liquidity assessment depends on projected cash flows.
- The terms and potential dilution or cash obligations associated with convertible notes and Series C preferred stock, including the preferred stock’s paid-in-kind dividends.
- Whether management’s therapy filing and approval expectations are achieved, and the impact of COVID-19, geopolitical events, foreign exchange, cybersecurity and international operating risks.