Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue from commercial cell and gene therapies increased by 51% year-over-year and 20% sequentially, indicating strong demand.
- Cost management initiatives are expected to result in approximately $22 million in annualized cost savings, moving towards profitability and positive adjusted EBITDA in 2025.
- CryoPort Inc (CYRX, Financial) ended the quarter with a strong cash balance of $427 million, ensuring financial stability.
- Sequential revenue growth is anticipated for the second half of 2024 and into 2025, driven by clinical and commercial cell and gene therapies.
- New services and products launching this year are expected to diversify revenue streams and support clients comprehensively.
Negative Points
- MVE Biological Solutions continues to experience lower overall product demand, with anticipated softness extending into 2025.
- Full-year 2024 revenue guidance has been revised down to $225 million to $235 million due to current market conditions.
- China's market is expected to remain challenged through 2025, impacting overall revenue growth.
- Forecasting remains challenging due to the unpredictable nature of the life sciences products and services market.
- Cost reduction and capital realignment measures may delay or modify the pace of infrastructure build-out, potentially impacting future growth.
Q & A Highlights
Q: On the guidance, can you help me understand the magnitude of each impact relative to the $17 million reduction at the midpoint? How much was it driven by the lower lifetime service ramp versus continued muted environment for MVE?
A: (Robert Stefanovich, CFO) The reduction is about 6.9% midpoint to midpoint, driven by lower demand for MVE Biological Solutions products. We don't expect demand to pick up in 2024 but anticipate sequential growth starting in 2025. Services are expected to grow, with significant growth in commercial revenue clients in the cell and gene therapy space.
Q: Could you provide some color on what provides you with confidence in the second half and your revised guidance?
A: (Robert Stefanovich, CFO) We've taken a more muted approach for the second half based on discussions with distributors and clients. On the services side, we have weekly discussions with clients about commercial launches and clinical trials, which show sequential growth. We expect services to continue growing progressively in 2024.
Q: On the new cost actions, can you clarify which facilities have been delayed or canceled? How will these actions impact your ability to establish infrastructure and capacity ahead of the expected cell and gene therapy inflection?
A: (Mark Sawicki, CSO) Both IntegriCell facilities are on track and will start contributing to revenue by the end of this quarter. Other facilities are progressing, but we've modified the pacing of infrastructure in some areas to align with market demand. No facilities have been canceled.
Q: What do you think were the factors behind the tough comp on MVE, and what do you think a long-term growth rate looks like there?
A: (Jerrell Shelton, CEO) During COVID, there was a lot of fear buying and government grants, leading to capacity build-up. Now, with higher money costs and no government grants, people are delaying capital expenditures. We expect demand to return as this excess capacity is used up.
Q: Can you talk about the number of commercial products you're now supporting and the revenue contribution from them in the quarter?
A: (Robert Stefanovich, CFO) Commercial revenue for the quarter was $6.5 million, a 51% increase year-over-year and a 20% increase sequentially. (Mark Sawicki, CSO) We have several products ramping up, including those from Gilead, BMS, J&J, and Sarepta, which will drive continued growth.
Q: How is the order book for MVE trending? Have month-over-month trends been improving or stabilizing sequentially?
A: (Jerrell Shelton, CEO) Order trends are stabilizing at a lower level but are steady. China demand is low, accounting for about 4% of the business. We expect sequential growth starting in 2025.
Q: On the positive adjusted EBITDA in 2025, does that assume a certain level of growth or revenues with the cost actions?
A: (Robert Stefanovich, CFO) We expect to achieve positive adjusted EBITDA even with a modest increase in revenues based on the cost actions we've taken. The timing will depend on the revenue ramp.
Q: How do you measure the excess capacity in MVE, and how confident are you in calling for growth in 2025?
A: (Jerrell Shelton, CEO) Measuring excess capacity is challenging. We rely on order patterns, client conversations, and government budgets. It's an art, not a science, but we believe the order trends are stabilizing, and we expect growth to resume in 2025.
Q: Any trends observed from IVF and fertility clinics? Was there an increased cryo-storage demand from those customers recently?
A: (Jerrell Shelton, CEO) We focus on cryo transportation, not storage, for reproductive medicine. We've seen consistent improvement in volumes due to significant relationships with large clinic networks.
Q: What was the free cash flow for the quarter, and how should we think about cash burn for 2024?
A: (Robert Stefanovich, CFO) Cash used in operations was $11.2 million for the first half, with CapEx at $7.8 million. We expect cash burn to go down in the second half, with some costs related to restructuring. We have significant cash reserves to operate our business and pursue strategic activities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
