Cryoport, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020; filed May 8, 2020. Cryoport provides temperature-controlled logistics and biostorage services to life-sciences markets. The quarter includes Global Bioservices revenue from Cryogene, acquired in May 2019, so comparisons with Q1 2019 are not fully like-for-like.
Financial performance
| Metric | Q1 2020 | Q1 2019 | Change |
|---|---|---|---|
| Revenue | $9.77 million | $6.65 million | +46.9% |
| Gross profit / margin | $5.26 million / 53.8% | $3.45 million / 51.9% | Margin +1.9 percentage points |
| Operating expenses | $8.84 million | $5.59 million | +58.1% |
| Operating loss | $(3.59) million | $(2.14) million | Loss widened |
| Net loss | $(3.94) million | $(2.39) million | Loss widened 65.2% |
| Loss per share, basic and diluted | $(0.11) | $(0.08) | — |
| Cash from operating activities | $1.06 million | $(0.19) million | Improved |
- Revenue growth was led by biopharmaceutical logistics: $7.52 million, up 33.3%. Global Logistics Solutions revenue was $8.50 million; Global Bioservices contributed $1.27 million.
- Commercial revenue rose to $2.9 million from $1.4 million. Management also reported 17 new biopharma clients and 29 net additional clinical trials; 465 trials were supported at quarter-end versus 383 a year earlier.
- Operating costs rose faster than revenue. Engineering and development expense increased to $1.73 million from $0.49 million, largely due to logistics-solution consulting and added development resources. General and administrative expense rose 49.4%; sales and marketing rose 28.0%.
- Interest expense fell to $2,451 from $338,728 following conversion of the convertible note in December 2019. Other expense included a $793,175 realized loss on equity securities.
Financial position and liquidity
- At March 31, 2020, cash and cash equivalents were $50.62 million and short-term investments were $46.81 million, totaling $97.43 million. Working capital was $98.0 million.
- Total assets were $140.12 million; total liabilities were $12.82 million. The filing reports no conventional convertible-note balance after its conversion; lease liabilities totaled $6.60 million, including $6.38 million of operating leases and $0.22 million of finance leases.
- Operating cash flow was positive $1.06 million. Investing cash flow was $(0.54) million in the cash-flow statement, including equipment purchases and net short-term investment activity. Financing cash flow was $2.86 million, mainly proceeds from option and warrant exercises.
- Common shares outstanding were 37.93 million at quarter-end. The company reported 7.79 million options and 0.64 million warrants outstanding, in addition to other reserved shares.
Changes, outlook, risks, and unusual items
- Management attributed revenue growth to commercial launches by Novartis and Kite/Gilead, broader biopharma customer use, clinical-trial activity, and Cryogene. Reproductive medicine revenue declined 2.8%; animal-health revenue was approximately flat.
- COVID-19 disrupted customer clinical trials and reproductive-medicine activity late in the quarter, adversely affecting revenue growth. Cryoport remained open as an essential business. Management said the longer-term impact was uncertain, while reporting that it expected revenue to ramp gradually as some restrictions eased. No quantitative revenue or earnings guidance is provided.
- Management believed cash, investments, and projected cash flows would fund operations and capital requirements for at least 12 months, but said additional equity or debt financing might be needed before sustained profitability; availability and terms are not assured.
- Key risks include further COVID-related demand, operating, shipping, and supply-chain disruption; customer and receivables concentration; and execution of growth investments. One customer represented 82.9% of Global Bioservices revenue and 10.8% of consolidated revenue. Two customers represented 36.2% and 13.6% of receivables.
- The filing reports no legal proceedings and no goodwill or intangible-asset impairment in the quarter. The share repurchase program authorized up to $15 million, but no shares had been repurchased through March 31, 2020.
- Management reported effective disclosure controls, but its assessment excluded Cryogene, which represented about 18% of assets and 13% of quarterly revenue. The MD&A describes net investing cash use as $1.5 million, while the cash-flow statement reports $0.54 million; the filing text does not reconcile this difference.
Important facts for investors to verify
- How COVID-19 affected subsequent clinical-trial, reproductive-medicine, and shipping activity, and whether the anticipated gradual revenue recovery occurred.
- Whether the growth in revenue and clinical-trial support translated into improved operating performance, given rising expenses and a wider net loss.
- The duration and financial impact of customer concentration, especially the Bioservices customer representing 82.9% of segment revenue.
- The cash-flow statement versus MD&A investing-cash-flow discrepancy and the nature and timing of planned capital spending.
- Available liquidity and potential financing needs, along with dilution from outstanding options, warrants, and future equity awards.