Cryoport, Inc. — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017; comparisons are with Q1 2016 unless stated otherwise. Cryoport provides cryogenic logistics, packaging, monitoring and related services to life sciences customers.
Financial results and liquidity
| Metric | Q1 2017 | Q1 2016 / prior date |
|---|---|---|
| Revenue | $2.712 million | $1.556 million |
| Gross profit / margin | $1.253 million / 46.2% | $0.582 million / 37.4% |
| Operating expenses | $3.023 million | $3.206 million |
| Operating loss | $1.769 million | $2.624 million |
| Net loss | $1.789 million | $2.710 million |
| Net loss per share, basic and diluted | $0.10 | $0.26 |
| Cash used in operating activities | $0.830 million | $1.970 million |
| Cash used in investing activities | $0.641 million | $0.405 million |
| Cash provided by financing activities | $11.480 million | Cash used: $0.080 million |
| Cash and cash equivalents | $14.533 million at March 31, 2017 | $4.525 million at December 31, 2016 |
| Working capital | $13.8 million at March 31, 2017 | Not stated for the comparable date |
| Total liabilities | $2.834 million at March 31, 2017 | $2.432 million at December 31, 2016 |
Q1 2017 revenue grew 74.4%. Biopharmaceutical revenue rose 99.7% to $2.022 million; reproductive medicine revenue increased 26.4% to $0.418 million; and animal health revenue increased 28.3% to $0.272 million. Management attributed growth mainly to more biopharma customers and shipment frequency. The company added approximately 27 biopharma clients and supported 139 clinical trials, including 17 in Phase III.
Gross margin improved by about 8.8 percentage points, which management attributed to higher volume, pricing adjustments, lower freight costs as a share of revenue and lower fixed manufacturing costs. Operating expenses declined overall: general and administrative expense fell 6.1%, and sales and marketing fell 14.2%; engineering and development expense increased 72.9%. Stock-based compensation was $0.770 million.
Capital, debt and material changes
- On March 31, 2017, the company completed a public offering of 6.325 million shares at $2.00 per share, raising approximately $11.4 million net. Shares issued and outstanding increased to 23.938 million from 17.604 million at December 31, 2016.
- Cash rose primarily because of the offering. Operating cash use improved year over year but remained substantial; capital expenditures and related investing outflows were $0.641 million.
- Related-party notes had $554,300 principal outstanding at March 31, 2017, plus accrued interest. The company reported that the notes were repaid in full in April 2017.
- At March 31, 2017, approximately 11.3 million shares were reserved for future issuance under options and warrants. The filing reports 4.523 million options and 6.820 million warrants outstanding.
Outlook, risks and contingencies
Management said current cash and projected cash flows were expected to fund operations and capital needs for at least the next 12 months, but noted that additional capital may be needed before sustained profitability and that financing may not be available on acceptable terms. The filing provides no quantified revenue, earnings or profitability guidance.
Management cited growth potential as clinical trials advance and therapies are commercialized. This is forward-looking and not assured. Risks include execution and customer demand, collection exposure in concentrated life-sciences industries, regulatory uncertainty affecting international reproductive-medicine revenue, and the possibility of needing additional financing. One customer represented 13.4% of net accounts receivable; no single customer generated more than 10% of Q1 2017 revenue. Foreign customers generated approximately 12.9% of revenue.
The filing reports no material changes to the risk factors in the company’s prior Form 10-K, no pending legal proceedings, and no legal matters management believed would materially adversely affect financial condition or results. Certain officer employment agreements provide for payments and benefits upon specified termination or change-in-control events. The company also disclosed indemnities and guarantees for which maximum potential payments are not limited; no related liabilities were recorded. Management reported disclosure controls were effective as of March 31, 2017.
Important facts for investors to verify
- Whether revenue growth and improving gross margin continue, particularly as clinical trials progress and commercial therapies emerge.
- Cash burn, capital spending and the assumptions supporting management’s stated minimum 12-month liquidity outlook.
- The impact of the 6.325 million-share offering and potential dilution from outstanding options and warrants.
- Completion and terms of the April 2017 repayment of related-party notes.
- Customer concentration, international regulatory exposure and any need for additional financing.