Cryoport, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2019; filed November 12, 2019. Cryoport provides temperature-controlled logistics and biostorage services for life sciences customers. The May 2019 acquisition of Cryogene added a Global Bioservices segment alongside Global Logistics Solutions.
Financial performance and position
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $9.58 million | $5.29 million | $24.70 million | $13.94 million |
| Gross margin | $4.63 million; 48.3% | $2.74 million; 51.8% | $12.42 million; 50.3% | $7.42 million; 53.3% |
| Loss from operations | $(12.35) million | $(2.16) million | $(16.80) million | $(6.42) million |
| Net loss | $(12.47) million | $(2.14) million | $(17.38) million | $(7.30) million |
| Loss per share, basic and diluted | $(0.35) | $(0.07) | $(0.54) | $(0.26) |
- Q3 revenue increased 81.3%; nine-month revenue increased 77.2%. Biopharmaceutical revenue was the largest source, reaching $7.46 million in Q3 and $20.06 million year to date.
- At September 30, cash and cash equivalents were $44.6 million and short-term investments were $48.9 million, totaling $93.5 million. Working capital was $96.5 million.
- Cash used in operations was $2.1 million for the first nine months, compared with $3.0 million in 2018. Cash used in investing was $63.7 million, including the Cryogene acquisition and purchases of investments and property and equipment. Financing provided $73.1 million, primarily from the June public offering.
- Total liabilities were $24.7 million, including a convertible note with a net carrying value of $14.7 million and operating and finance lease liabilities totaling about $4.9 million.
Material changes and unusual items
- Cryoport acquired substantially all Cryogene assets for approximately $20.4 million in May. Cryogene contributed $1.7 million of revenue and $285,000 of net income during the period since acquisition. Preliminary purchase accounting included $11.1 million of goodwill and $5.28 million of acquired intangible assets.
- Global Bioservices contributed $1.17 million of Q3 revenue and $1.75 million for the nine-month period. One customer represented 82.7% of that segment’s Q3 revenue and 10.1% of consolidated Q3 revenue.
- Revenue growth reflected increased commercial shipments for therapies supported by Novartis and Kite/Gilead, expansion in biopharma customers and clinical trials, and the Cryogene acquisition. Management reported support for 425 clinical trials at September 30, versus 323 a year earlier.
- Gross margin declined year over year, which management attributed to higher logistics-center operating costs and accelerated stock-option vesting. The company recorded $10.8 million of accelerated stock-based compensation after meeting defined performance criteria, including positive adjusted EBITDA for two consecutive quarters. Total stock-based compensation was $12.7 million in Q3 and $16.1 million for the nine months.
- The June 2019 public offering generated $68.8 million net proceeds from 4,312,500 shares sold at $17.00 per share. Common shares outstanding rose to 35.84 million at September 30 from 30.32 million at December 31, 2018.
Outlook, risks and contingencies
- Management stated that cash, investments and projected cash flows were expected to fund operating and capital requirements for at least the next 12 months. It also said additional capital may be needed before sustained profitability and that future financing may not be available on acceptable terms.
- The $15 million convertible note was amended in July: the interest rate became 6% after June 30, accrued interest is convertible into shares, and the mandatory conversion date is December 14, 2019. The filing estimated approximately 1.16 million shares for principal conversion, with additional shares possible for accrued interest. Conversion and potential share sales may dilute holders and affect the stock price.
- In October, the board authorized repurchases of up to $15 million of common stock through December 31, 2020, subject to management discretion and market conditions.
- Risks include customer concentration, collection of receivables, integration and realization of benefits from Cryogene, and disruption or specimen damage at Cryogene’s Houston storage facility, including risks from natural disasters and power outages. Two customers represented 29.9% and 23.6% of net receivables at quarter-end.
- The company reported no legal proceedings and stated that existing legal matters were not expected to materially affect its financial position or results. Management reported effective disclosure controls; its assessment excluded Cryogene in accordance with SEC guidance for a recent acquisition.
Important facts for investors to verify
- Whether commercial therapy shipments and clinical-trial growth continue to translate into revenue and improved gross margins.
- The pace of Cryogene integration, customer retention, facility reliability and progress toward the expected acquisition benefits.
- The note’s December 2019 conversion, final share issuance including accrued interest, and resulting dilution.
- Cash burn, capital expenditures and investment liquidity relative to management’s stated 12-month funding outlook.
- The persistence and future accounting impact of stock-based compensation, including any further accelerated vesting.