Cryoport, Inc. — Q2 2022 Form 10-Q
Business context and reporting period. Cryoport provides temperature-controlled logistics, storage, packaging and equipment to life sciences, animal health and reproductive medicine customers. This unaudited quarterly report covers the three and six months ended June 30, 2022; comparisons are with 2021. The company reported one operating segment and supported 626 clinical trials and nine commercial therapies at quarter-end.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $64.2m | $56.2m | $116.5m | $109.5m |
| Gross margin | $28.8m; 45.0% | $25.4m; 45.2% | $51.2m; 43.9% | $50.0m; 45.6% |
| Operating loss | $(5.2)m | $(3.7)m | $(13.1)m | $(4.9)m |
| Net loss | $(9.2)m | $(5.4)m | $(22.6)m | $(8.9)m |
| Net loss attributable to common stockholders | $(11.2)m | $(7.4)m | $(26.6)m | $(13.1)m |
| Adjusted EBITDA (non-GAAP) | $6.0m | $6.0m | $8.0m | $13.2m |
- Q2 revenue mix: service revenue rose 16.5% to $34.6m and product revenue rose 11.5% to $29.6m. Biopharma/pharma revenue increased 13.7% to $51.7m; animal health increased 13.9% to $9.6m; reproductive medicine increased 24.1% to $2.9m.
- Cash flow: operating activities used $6.5m in the first half, versus $3.4m used in 2021. Investing activities used $60.9m, mainly reflecting net investment purchases, capital expenditures and the Cell&Co acquisition. Financing activities used $33.4m, including $33.3m of share repurchases.
- Liquidity: June 30 cash and cash equivalents were $37.0m, short-term investments $513.6m, and working capital $582.9m. Current assets were $625.8m and current liabilities $44.0m. Management said available liquidity and projected cash flows should cover operations and capital requirements for at least 12 months, while noting potential future capital needs before sustained profitability.
- Debt: convertible senior notes had $416.8m principal outstanding ($405.4m net carrying value): $402.5m of 0.75% notes due 2026 and $14.3m of 3.0% notes due 2025. There were no reported events of default. Notes payable and lease liabilities were additional obligations.
Material changes versus prior period
- First-half revenue grew 6.4%, with service revenue up 19.6%; product revenue fell 7.7%. The January New Prague manufacturing-site fire reduced first-quarter revenue by an estimated $9.4m. Production resumed in February and ramped up by late March.
- First-half gross margin fell 1.7 percentage points, with management citing global supply-chain constraints and higher costs. Q2 margin was broadly steady year over year.
- SG&A rose 24.1% in the first half to $57.2m, driven by staffing and infrastructure expansion, including new Houston and Morris Plains supply-chain centers. Engineering and development expense declined 19.5%.
- Other expense increased substantially, primarily reflecting $8.6m of unrealized investment losses and foreign-currency effects. Available-for-sale debt securities also had $19.3m of net unrealized losses recorded in other comprehensive loss.
- Cash and cash equivalents declined from $139.1m at year-end to $37.0m, while short-term investments increased to $513.6m. The company repurchased 1.34m shares for $33.3m under a program authorizing up to $100m through 2025.
- Cell&Co was acquired in April for stated consideration of approximately $6.2m, including cash, stock and contingent consideration. In July, after quarter-end, Cryoport acquired Polar Expres for approximately $1.4m and Cell Matters for approximately $4.0m.
Outlook, commentary and risks
- No consolidated full-year revenue or earnings guidance is provided in the filing. Management anticipated up to 15 additional therapy filings during the remainder of 2022, three new therapy approvals and five label or geographic expansion approvals; it forecast 20 combined BLA/MAA filings in 2023. These are expectations, not guaranteed outcomes.
- Management attributed demand growth to logistics, biostorage and equipment needs, including clinical-trial activity and commercial cell and gene therapies. It noted that currency movements reduced reported Q2 revenue by about $1.9m and first-half revenue by about $2.8m.
- The company expects insurance to cover restoration and business-interruption losses related to the New Prague fire. First-half cash flow included $6.3m of operating insurance proceeds and $3.0m of proceeds for fixed-asset losses.
- Risks highlighted include continuing COVID-19 effects and supply-chain constraints, inflation and sourcing costs, foreign-exchange volatility, Russia-Ukraine conflict and sanctions, acquisition integration and contingent consideration, and cyber threats. The company stated that the Ukraine conflict had not materially affected operations to date; future impacts remain uncertain. It disclosed that it does not have cybersecurity insurance.
- Management reported effective disclosure controls as of June 30, 2022, no material change in internal control over financial reporting, and no known legal proceeding expected to have a material adverse effect. The filing states there are no off-balance-sheet arrangements.
Investor verification priorities
- Track whether service growth continues to offset product-revenue volatility, and whether the New Prague facility operates at expected capacity without further material disruption.
- Assess margin recovery amid supply-chain, freight, labor and inflationary pressures, and compare operating losses and non-GAAP adjusted EBITDA with cash generation.
- Review liquidity deployment and investment exposure, including unrealized losses, share repurchases, capital spending and acquisition costs.
- Monitor convertible-note terms and potential dilution, Series C preferred dividends and conversion rights, and the remaining authorization under the repurchase program.
- Validate clinical-trial-to-commercial conversion and the timing of projected filings and approvals; these expectations may not translate into revenue on schedule.
- Follow acquisition integration and earn-out estimates, insurance recovery for the fire, foreign-exchange exposure, and any developments in cybersecurity or geopolitical risks.