CRYO-CELL INTERNATIONAL, INC. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended May 31, 2023; unaudited. Cryo-Cell provides private cord blood and tissue processing and storage, PrepaCyte CB products, and public cord blood banking. It is also investing in Duke-licensed cell therapies and related facilities.
Financial performance
| Metric | Three months ended May 31, 2023 | Six months ended May 31, 2023 |
|---|---|---|
| Revenue | $7.77 million | $15.60 million |
| Operating income | $1.03 million | $2.71 million |
| Net income | $0.22 million; $0.03 per diluted share | $0.99 million; $0.12 per diluted share |
| Operating margin | 13.2% | 17.4% |
| Net margin | 2.8% | 6.3% |
| Operating cash flow | $3.63 million for the six-month period |
Against the comparable 2022 periods, quarterly revenue rose 2% and six-month revenue rose 5%; quarterly net income fell 65% and six-month net income fell 33%. Six-month gross margin was approximately 73.0%, versus 71.1% a year earlier. Higher SG&A, research spending, interest expense, and a new swap loss weighed on earnings.
At May 31, 2023, cash and cash equivalents were $1.12 million and marketable securities were $0.57 million. Current assets were $10.31 million versus current liabilities of $19.71 million (current ratio approximately 0.52). Net notes payable were $8.66 million and the revolving credit balance was $1.77 million. Stockholders’ deficit was $0.86 million. Deferred revenue totaled $48.11 million, including $9.46 million classified as current.
Six-month cash flows were $3.63 million provided by operations, $2.78 million used in investing, and $1.44 million used in financing. Investing included $1.83 million of property and equipment purchases; financing included $0.79 million of share repurchases.
Material changes versus prior comparable periods
- Recurring annual storage fee revenue increased 5%, but new domestic cord blood specimens processed decreased 10% over six months and 13% in the quarter.
- Public banking revenue increased to $0.39 million for six months from $0.20 million; the segment nevertheless reported a $0.30 million operating loss, an improvement from $0.59 million.
- Six-month SG&A increased 9% to $7.92 million, while research and development expense rose to $0.38 million from $0.23 million, including Duke study and manufacturing-laboratory costs.
- Six-month interest expense increased to $0.94 million from $0.58 million. The company recorded a $0.22 million loss on its interest rate swap in 2023.
- The company repurchased 213,342 shares during the six months. The share count outstanding was 8,287,169 at May 31, 2023.
Outlook, risks, and unusual items
- Management anticipates approximately $10 million of discretionary capital expenditures over the next 12 months, including facility build-out, equipment, Duke obligations, software, and clinical-trial costs. It expects cash, securities, operating cash flows, and external capital sources to fund known needs for at least 12 months; the risk factors also state the company believes it has capital for at least 12 to 18 months. Additional financing may be needed.
- Due to equipment delivery delays, the Cryo-Cell Institute for Cellular Therapies is projected to open and begin infusions during fiscal 2024. Clinical outcomes, FDA approvals, commercialization, and profitability are uncertain.
- The Susser credit agreement provides a $10 million revolving facility and an original $8.96 million term loan. The revolver matures July 2025 and the term loan July 2032; the company must meet leverage and debt-service coverage covenants. The term loan had a 6.96% stated rate at May 31, 2023, with an interest-rate swap intended to manage variable-rate exposure.
- Duke-related commitments include monthly IMPACT Study payments and future minimum royalties that rise to $5 million annually under the amended schedule. Further clinical-trial and development spending is anticipated.
- A putative class action filed in Florida alleges the company’s advertising misrepresented its services. The company disputes the claims and has moved to compel arbitration; damages are unspecified, and an unfavorable outcome could be material.
- Management reported disclosure controls were effective and no material change in internal control over financial reporting. The filing identifies risks including demand and competition, clinical and regulatory uncertainty, financing needs, specimen-storage disruptions, cybersecurity, and litigation.
Important facts for investors to verify
- Whether new enrollments and recurring storage revenue can offset the decline in new domestic specimens processed.
- Cash availability, revolver capacity, covenant compliance, and financing required for the planned $10 million investment program.
- Actual costs, timing, and regulatory progress for the Duke program, clinic, and manufacturing plans.
- Developments in the advertising class action and any resulting financial exposure.
- Public banking unit sales, inventory valuation, and the variability of contingent earnout payments.