Cryoport, Inc. — Q1 2018 Form 10-Q
Business context and period. Cryoport provides temperature-controlled logistics, packaging, monitoring and related services for life-sciences materials, including cell and gene therapies. This unaudited report covers the three months ended March 31, 2018; comparisons are with Q1 2017 unless noted.
Key financial results
| Metric | Q1 2018 | Q1 2017 / prior date |
|---|---|---|
| Revenue | $4.02 million | $2.71 million |
| Gross profit / margin | $2.18 million / 54.3% | $1.25 million / 46.2% |
| Operating loss | $1.80 million | $1.77 million |
| Net loss | $2.68 million; $0.10 per share | $1.79 million; $0.10 per share |
| Cash used in operations | $1.06 million | $0.83 million |
| Cash and cash equivalents | $18.99 million | $15.04 million at December 31, 2017 |
| Working capital | $19.6 million | Prior comparable figure not provided in the filing text summarized here |
| Total liabilities | $2.63 million; no debt balance shown | $2.38 million at December 31, 2017 |
Investing activities used $0.28 million; financing activities provided $5.30 million, including $4.64 million net proceeds from the February warrant tender offer and $0.66 million from option and warrant exercises. Total assets were $25.08 million at March 31, 2018. Cash exceeded FDIC insurance limits by approximately $18.7 million.
Material changes versus Q1 2017
- Revenue increased 48.3%, led by biopharmaceutical revenue, up 62.3% to $3.28 million. Reproductive-medicine revenue rose 20.1%; animal-health revenue declined 12.1%.
- Management attributed biopharma growth to more customers and clinical-trial activity: Cryoport added approximately 24 biopharma clients, supported 236 trials versus 139, and supported 31 Phase III trials versus 17.
- Gross margin improved by approximately 8.1 percentage points, attributed to higher volume, pricing adjustments and lower freight costs as a share of revenue.
- Operating expenses increased, including sales and marketing up 48.1% and general and administrative up 21.5%. Operating loss was relatively flat, but net loss widened, in part because of a $0.90 million warrant inducement and repricing expense.
- The February tender offer repriced and exercised warrants for 1,580,388 shares at $3.00 per share, generating approximately $4.7 million gross proceeds and increasing shares outstanding. The filing reports 27,593,118 shares outstanding at quarter-end.
Outlook, risks and unusual items
- Management said current cash and projected cash flows were expected to fund operations and capital needs for at least the next 12 months, while noting that additional capital may be needed before sustained profitability and may not be available on acceptable terms.
- No specific revenue or earnings guidance was provided. Management said the increased clinical-trial activity could support future growth as trials advance and therapies are commercialized.
- Topic 606 was adopted January 1, 2018 using the modified retrospective method; adoption had no material financial-statement impact and no opening-equity adjustment was required.
- The $0.90 million warrant repricing charge was a non-cash unusual item associated with the tender offer. Stock-based compensation was $1.05 million.
- The company reported no material changes to the risk factors in its 2017 Form 10-K, no legal proceedings, and no material litigation matters known to management. It identified exposure to foreign-exchange movements related to European vendors and employees.
- Management reported disclosure controls were effective at March 31, 2018 and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether biopharma growth and the higher clinical-trial count translate into durable revenue and eventual commercial shipments.
- Cash-burn trends, the assumptions behind management’s at-least-12-month liquidity assessment, and potential future financing or dilution.
- The sustainability of the gross-margin improvement as shipment volume and freight costs change.
- The effects of warrant exercises and outstanding options and warrants on future share count and dilution.
- Cash concentration above FDIC limits, customer and industry credit exposure, and the terms and renewal or termination provisions of significant commercial agreements.