Cryoport, Inc. — Form 10-Q Summary
Reporting period: Three months ended June 30, 2016, Cryoport’s first quarter of fiscal 2017. The filing was signed August 15, 2016. Cryoport provides cryogenic logistics, packaging, monitoring and related services to life sciences customers.
Financial performance and position
| Metric | Q1 FY2017 | Q1 FY2016 |
|---|---|---|
| Revenue | $1.918 million | $1.431 million |
| Gross profit / margin | $782,000 / 40.8% | $488,000 / 34.1% |
| Operating loss | $1.979 million | $1.616 million |
| Net loss | $3.935 million | $1.924 million |
| Net loss per share, basic and diluted | $0.28 | $0.28 |
| Cash used in operations | $1.450 million | $1.874 million |
The 2016 loss per share was $0.28; the comparable 2015 loss attributable to common shareholders was $1.31 per share, reflecting preferred-stock conversion and dividend charges in that period. The filing reports net loss per share of $0.28 for 2015 before those charges.
- Cash and cash equivalents were $4.526 million at June 30, 2016, up from $2.793 million at March 31. Working capital was $3.3 million.
- Investing activities used $194,000, primarily for shippers, SmartPak II monitoring systems and computer equipment. Financing activities provided $3.377 million net, mainly from the tender offer and rights offering.
- Related-party notes had aggregate principal of $867,200 at quarter-end. The balance sheet reports $863,557 of current related-party notes and accrued interest, net of discount; no related-party notes were classified as long-term at June 30.
- Total assets were $7.692 million and total liabilities were $2.607 million. Accumulated deficit was $117.1 million.
Changes versus the prior-year quarter
- Revenue increased 34.0%. Biopharmaceutical revenue grew 59.5% to $1.319 million; reproductive-medicine revenue rose 10.4% to $370,000; animal-health revenue fell 14.9% to $229,000.
- Gross margin improved 6.7 percentage points, which management attributed to higher volume, pricing adjustments, lower freight as a share of revenue and lower fixed manufacturing costs.
- Operating expenses rose: general and administrative expense by 25.2%, sales and marketing by 35.2%, and research and development by 74.7%. Management cited increased stock compensation, staffing, marketing and facility costs.
- Net loss increased primarily because of a $1.930 million non-cash warrant-repricing expense tied to the tender offer. Interest expense declined to $21,000 from $304,000, largely because the prior-year period included debt-discount amortization.
Outlook, risks and notable items
- Going concern: Management stated that cash on hand and projected service revenue were expected to support planned operations through the third quarter of fiscal 2017, but additional capital would be needed thereafter. The filing says these conditions raise substantial doubt about the company’s ability to continue as a going concern. Financing availability and terms are not assured.
- Management expected continued operating losses while commercializing its Cryoport Express solutions and said it was pursuing additional capital and cost reductions.
- The quarter included a tender offer that generated $2.5 million gross proceeds from exercise of 2,020,597 repriced warrants, and a rights offering that generated $1.3 million gross proceeds for 841,873 shares. The warrant repricing produced the $1.930 million expense.
- Shares issued and outstanding rose to 15,120,479 from 12,251,313 at March 31, 2016. At quarter-end, 14.0 million additional shares were reserved for options and warrants, indicating potential dilution.
- Business developments included launches of temperature-controlled logistics consulting, biostorage services and a laboratory relocation service, as well as a new strategic partnership with Worthington Industries and a storage partnership with Pacific Bio-Material Management.
- One customer represented 14.4% of net accounts receivable at June 30. No customer generated more than 10% of quarterly revenue. Foreign customers contributed approximately 16.4% of revenue.
- The company reported no material legal proceedings and no material changes to the risk factors in its latest Form 10-K. Management concluded disclosure controls were effective; no material change in internal control over financial reporting was reported.
Important facts for investors to verify
- Whether Cryoport can obtain sufficient additional financing before its stated cash runway expires, and on what terms.
- Whether revenue growth—especially biopharma growth from 28 new clients and support for 81 clinical trials—converts into sustainable cash generation and improved operating results.
- The drivers and durability of gross-margin improvement, given higher shipment volumes and continued operating-expense growth.
- The terms, repayment status and related-party nature of outstanding notes, including the note repaid July 1, 2016.
- The dilution impact of the offerings, outstanding warrants and options, and the substantial unrecognized stock-option compensation expense.