Cryoport, Inc. — Q2 2017 Form 10-Q
Reporting period: Three and six months ended June 30, 2017. Cryoport provides cryogenic logistics, shipping, monitoring and related services for life-sciences materials, including cell therapies, biologics and reproductive materials.
Financial performance
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Revenue | $2.92 million | $1.92 million | $5.63 million | $3.47 million |
| Gross profit / margin | $1.39 million / 47.8% | $0.78 million / 40.8% | $2.65 million / 47.0% | $1.36 million / 39.3% |
| Operating loss | $1.86 million | $1.98 million | $3.63 million | $4.60 million |
| Net loss | $1.86 million | $3.93 million | $3.65 million | $6.64 million |
| Net loss per share | $0.08 | $0.28 | $0.18 | $0.54 |
- Revenue grew 52.1% in Q2 and 62.1% for the first half. Biopharmaceutical revenue was the largest contributor, rising 69.0% in Q2 and 82.3% for the first half. Reproductive medicine and animal-health revenue also increased.
- Management attributed gross-margin improvement to higher volume, pricing adjustments, lower freight costs as a share of revenue and reduced fixed manufacturing costs.
- First-half operating costs were $6.28 million, versus $5.97 million a year earlier. G&A increased 7.7%; engineering and development increased 71.5%, including testing and qualification work. Sales and marketing expense decreased 5.6%.
- The lower net loss partly reflects the absence of the $1.93 million warrant-repricing expense recorded in the first half of 2016. The 2016 comparison also included $75,460 of preferred dividends in loss attributable to common shareholders.
Cash, liquidity and capital
- At June 30, cash and cash equivalents were $12.85 million, compared with $4.52 million at December 31, 2016. Working capital was $12.5 million; total current assets were $14.49 million and current liabilities $1.97 million.
- For the first half, operating cash use was $1.40 million and investing cash use was $1.05 million. Financing provided $10.78 million, principally from the March public offering, which generated approximately $11.4 million net proceeds; the company also repaid $656,221 of related-party notes.
- Related-party notes were fully repaid in April 2017; no principal balance remained at June 30. Total liabilities were $2.16 million.
- Common shares outstanding were 23.99 million at June 30. Approximately 12.07 million shares were reserved for future issuance under options and warrants, indicating potential dilution.
Changes, outlook and risks
- Management said it added approximately 19 biopharma clients in Q2 and 46 in the first half, and supported 172 clinical trials, including 17 Phase III trials. It expects trial activity to support future growth as trials advance and therapies are commercialized; this is not quantified guidance.
- Management believed cash on hand and projected cash flows would fund operations and capital needs for at least 12 months. It also cautioned that additional capital may be required before sustained profitability and that financing may not be available on acceptable terms.
- International reproductive-medicine revenue was down year over year, which management attributed to regulatory uncertainty. Foreign customers represented approximately 12.7% of first-half revenue; no single customer exceeded 10% of first-half 2017 revenue.
- G&A included a $125,800 increase for legal settlements. The filing reports no legal proceedings and states management did not expect known legal matters to materially affect financial condition or results.
- In July 2017, the company received $1.8 million from exercise of 605,114 supplemental warrants. The filing also identifies ongoing business risks, but reports no material changes to the risk factors in its prior annual filing.
- Management reported effective disclosure controls as of June 30, 2017 and no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether revenue growth—particularly in biopharma clinical trials—converts into sustained profitability and operating cash generation.
- Cash burn, the 12-month liquidity assessment and the potential need for additional financing.
- Gross-margin sustainability and the impact of freight, shipment volumes and pricing.
- Potential share dilution from outstanding options and warrants, including the July warrant exercises.
- Exposure to international regulatory uncertainty, customer and market concentration, and the effects of legal-settlement costs.