Cryoport, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Cryoport provides temperature-controlled logistics, storage, bioservices and cryogenic systems to life-sciences customers across biopharma/pharma, animal health and reproductive medicine. Amounts below are in U.S. dollars; financial-statement amounts are in millions unless stated otherwise.
Key financial results
| Metric | Q2 2023 | Q2 2022 | First half 2023 | First half 2022 |
|---|---|---|---|---|
| Revenue | $57.0 | $64.2 | $119.8 | $116.5 |
| Gross profit / margin | $24.7 / 43.4% | $28.8 / 45.0% | $51.8 / 43.2% | $51.2 / 43.9% |
| Operating loss | $(18.3) | $(5.2) | $(28.4) | $(13.1) |
| Net loss | $(18.4) | $(9.2) | $(23.9) | $(22.6) |
| Net loss attributable to common stockholders | $(20.4) | $(11.2) | $(27.9) | $(26.6) |
| Adjusted EBITDA (non-GAAP) | $(1.5) | $6.0 | $1.4 | $8.0 |
- Revenue mix: Q2 service revenue grew 1.8% to $35.2 million, while product revenue fell 26.2% to $21.8 million. First-half service revenue rose 5.3% to $71.0 million; product revenue was nearly flat at $48.8 million.
- Profitability: Q2 gross margin fell 1.6 percentage points year over year. First-half product gross margin declined to 40.7% from 43.9%, which management attributed mainly to manufacturing cost inflation and safety-stock-related unfavorable variances; service margin improved to 45.0% from 44.0%.
- Cash flow: First-half operating cash outflow was $1.3 million, improved from $6.5 million outflow a year earlier. Investing activities provided $32.3 million, mainly from investment maturities, while capital spending and software development used cash. Cash and cash equivalents increased $30.7 million to $67.3 million.
- Liquidity: At June 30, cash and cash equivalents were $67.3 million and short-term investments were $437.4 million, totaling $504.7 million. Working capital was $544.9 million. Current assets were $585.2 million versus current liabilities of $40.3 million.
- Debt: Convertible senior notes had $416.8 million principal outstanding ($407.992 million net carrying value): $14.3 million due 2025 and $402.5 million due 2026. Notes payable were $0.4 million. The filing reports no debt default.
Changes versus prior comparable periods
- Q2 revenue declined 11.1%, primarily as product revenue contracted, including a $5.8 million decrease in cryogenic-system sales through direct and indirect channels in China. Biopharma/pharma revenue fell 11.5% and animal-health revenue fell 15.2%; reproductive-medicine revenue rose 14.8%.
- Management cited clinical-trial start delays and slower-than-expected client ramps as offsets to growth in bioservices and commercial cell-and-gene-therapy support. Cryoport supported 668 clinical trials at quarter end, including 82 in Phase 3, and 12 commercial therapies.
- First-half revenue increased 2.9%, partly reflecting recovery from the 2022 New Prague manufacturing-facility fire, which management estimated reduced 2022 revenue by approximately $9.4 million, primarily in Q1. Q2’s product weakness offset first-half service growth.
- Q2 SG&A rose 27.0% to $38.8 million, including higher infrastructure and employee costs and $3.8 million more integration and acquisition costs, primarily related to exploring a strategic business opportunity. First-half SG&A rose 26.0% to $72.0 million.
- First-half other income benefited from $2.6 million of fire-related insurance gain and improved investment-related results versus 2022. Q2 and first-half common-stockholder losses included $2.0 million and $4.0 million, respectively, of paid-in-kind Series C preferred dividends.
Outlook, risks and unusual items
- Management expects significant expenses and operating losses in the near term as it invests in supply-chain initiatives, geographic expansion and technology. It believes available cash, investments and projected cash flows will cover operational and capital requirements for at least the next 12 months, while noting additional capital may be needed and may not be available on acceptable terms.
- No specific revenue, earnings or margin guidance is provided in the filing. Management expects clinical trials—particularly in cell and gene therapies—and commercialization of resulting therapies to support future growth, but this depends on trial progression and product approvals.
- Risks highlighted include weaker cryogenic-system demand, especially in China; clinical-trial delays and customer ramp timing; inflation and supply-chain constraints; foreign-exchange movements; and possible effects of the Russia-Ukraine conflict and COVID-19-related disruptions. The company has material exposure to international operations.
- The company received $15.1 million of insurance proceeds through June 30, 2023 related to the New Prague fire; the final $2.2 million payment was received in Q1 2023. First-half results included a $2.6 million gain related to business-interruption insurance.
- Management reported disclosure controls were effective as of June 30, 2023 and no material quarterly change in internal control over financial reporting. The company said it was not aware of legal proceedings expected to have a material adverse effect. Goodwill and intangible-asset impairment remain a risk if operating expectations weaken.
Important facts for investors to verify
- Whether the China-related product-sales decline stabilizes and whether service revenue can continue to offset product weakness.
- Progress of clinical trials, client ramps and commercial therapy launches, and how these translate into revenue and cash generation.
- Drivers and duration of elevated SG&A, integration and acquisition costs, and the path toward positive adjusted EBITDA and operating cash flow.
- Liquidity and investment-portfolio exposure, including interest-rate and foreign-exchange sensitivity, alongside the 2025 and 2026 convertible-note maturities.
- Potential dilution: approximately 18.3 million common shares were reserved for future issuance from options, restricted stock units, preferred stock and convertible notes.