Cryoport, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Unaudited consolidated results; amounts below are in millions of U.S. dollars unless stated otherwise.
Business context
Cryoport provides temperature-controlled logistics, storage, packaging, informatics and cryogenic equipment for life sciences markets, with emphasis on biopharma and cell and gene therapies. Results include MVE Biological Solutions and CRYOPDP, acquired in October 2020, for the full first half of 2021. In Q2, the company also acquired Critical Transport Solutions Australia and F-airGate to expand its APAC and EMEA capabilities.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $56.2 | $9.4 | $109.5 | $19.2 |
| Gross profit | $25.4 | $5.1 | $50.0 | $10.4 |
| Gross margin | 45.2% | 54.6% | 45.6% | 54.2% |
| Operating loss | $(3.7) | $(5.8) | $(4.9) | $(9.4) |
| Net loss | $(5.4) | $(5.8) | $(8.9) | $(9.7) |
| Net loss attributable to common stockholders | $(7.4) | $(5.8) | $(13.1) | $(9.7) |
| Basic and diluted loss per share | $(0.16) | $(0.15) | $(0.29) | $(0.26) |
Q2 revenue included $29.7 million of services and $26.5 million of products; product revenue was primarily from MVE. For the first half, service revenue was $56.4 million and product revenue was $53.0 million. Management attributed the revenue increase mainly to MVE and CRYOPDP, with organic revenue growth of 55% in Q2 and 44.9% for the first half. Gross margin declined year over year, which management attributed primarily to the acquired businesses’ margin profiles.
Selling, general and administrative expense was $24.7 million in Q2 and $46.1 million in the first half; engineering and development expense was $4.5 million and $8.8 million, respectively. Higher acquisition-related amortization, staffing, infrastructure and development spending contributed to expense growth. Adjusted EBITDA, a non-GAAP measure, was $5.9 million for Q2 and $12.9 million for the first half, compared with losses of $2.5 million and $4.8 million in the corresponding 2020 periods.
For the six months, operating cash flow was $(3.4) million, investing cash flow $(246.3) million and financing cash flow $273.3 million. Investing outflows included $242.0 million of short-term investment purchases and $5.0 million for the Q2 acquisitions; financing inflows primarily reflected $269.8 million net proceeds from a January public offering. Cash and cash equivalents were $60.4 million at June 30; short-term investments were $289.1 million. Working capital was $373.6 million.
Total assets were $825.3 million and stockholders’ equity was $648.0 million at June 30. Debt included $115.0 million principal of 3.00% convertible senior notes due 2025, carried net at $111.7 million, and a $4.6 million net note payable assumed in the CRYOPDP acquisition. The notes’ disclosed estimated fair value was $109.4 million. Series C preferred stock generated $4.2 million of paid-in-kind dividends in the first half, increasing loss attributable to common stockholders.
Material changes, outlook and risks
- Revenue growth was substantially acquisition-driven: management attributed $26.4 million of Q2 revenue to MVE and $15.2 million to CRYOPDP; first-half contributions were $52.9 million and $28.8 million, respectively.
- The company supported 561 clinical trials at June 30, 2021, compared with 491 a year earlier, including 69 Phase III trials. Management noted four supported therapies had filed for approval in the first half and anticipated up to 11 additional MAA or BLA submissions in the second half of 2021 and 10 in 2022. These are activity expectations, not financial guidance; the filing provides no specific revenue or earnings guidance.
- Management said cash, short-term investments and projected cash flows should meet operating and capital requirements for the foreseeable future, while noting possible additional capital needs for acquisitions and no assurance that financing would be available on acceptable terms.
- COVID-19’s future effects remained uncertain, including potential renewed restrictions, clinical-trial disruption and supply-chain costs or delays. The company identified semiconductor and other electronic-component shortages, including exposure in MVE products and SmartPak systems, as a risk; certain components are sole-sourced or have limited supply arrangements.
- Foreign currency exposure includes $18.1 million of foreign-denominated cash and long-term euro intercompany balances. The filing also notes customer and industry concentration: one customer represented 11.2% of first-half revenue, and one customer was 10.8% of receivables at June 30.
- CTSA and F-airGate had combined purchase consideration of $6.8 million, including $0.6 million of contingent consideration tied to future EBITDA targets. Acquisition purchase-price allocations remained subject to finalization for MVE and CRYOPDP.
- The company reported no material legal proceeding known to it and no impairment of goodwill or intangible assets during the first half. Management concluded disclosure controls were effective, but its assessment excluded MVE and CRYOPDP.
Important facts for investors to verify
- How much of subsequent revenue and growth is organic versus attributable to MVE, CRYOPDP and newer acquisitions, and whether acquired margins improve.
- Progress of supported clinical trials toward approvals and commercialization, and whether anticipated filings translate into customer activity and revenue.
- Cash generation, investment liquidity and funding needs, including acquisition spending and the scheduled CRYOPDP note repayments.
- Exposure to component shortages, customer concentration, COVID-related disruption and foreign-exchange movements.
- Potential dilution from the convertible notes, Series C preferred stock, options and restricted stock units; approximately 18.1 million common shares were reserved for future issuance at June 30, 2021.