Cryoport, Inc. - Quarter Report: 2023 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______.

Commission File Number: 001-34632

CRYOPORT, INC.

(Exact Name of Registrant as Specified in its Charter)


Nevada	88-0313393
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

112 Westwood Place, Suite 350

Brentwood, TN 37027

(Address of principal executive offices, including zip code)

(949) 470-2300

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:		Trading Symbol(s)		Name of each exchange on which registered:
Common Stock, $0.001 par value		CYRX		The Nasdaq Stock Market LLC (The Nasdaq Capital Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ☐


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 28, 2023 there were 48,879,018 shares of the registrant’s common stock outstanding.

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TABLE OF CONTENTS


	Page

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

Condensed Consolidated Balance Sheets at June 30, 2023 (Unaudited) and December 31, 2022	3

Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022	4

Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2023 and 2022	5

Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022	6

Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022	7

Notes to Condensed Consolidated Financial Statements (Unaudited)	8

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	37

ITEM 4. Controls and Procedures	37

PART II. OTHER INFORMATION	38

ITEM 1. Legal Proceedings	38

ITEM 1A. Risk Factors	38

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	38

ITEM 3. Defaults Upon Senior Securities	38

ITEM 4. Mine Safety Disclosures	39

ITEM 5. Other Information	39

ITEM 6. Exhibits	40

SIGNATURES	41

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Cryoport, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share data)


	June 30,		December 31,
	2023		2022
	(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	67,314	$	36,595
Short-term investments		437,360		486,728
Accounts receivable, net		43,076		43,858
Inventories		28,821		27,678
Prepaid expenses and other current assets		8,616		9,317
Total current assets		585,187		604,176
Property and equipment, net		69,008		63,603
Operating lease right-of-use assets		30,011		26,877
Intangible assets, net		194,992		191,009
Goodwill		149,308		151,117
Deposits		1,210		1,017
Deferred tax assets		934		947
Total assets	$	1,030,650	$	1,038,746

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and other accrued expenses	$	26,124	$	28,046
Accrued compensation and related expenses		8,717		8,458
Deferred revenue		927		439
Current portion of operating lease liabilities		4,234		3,720
Current portion of finance lease liabilities		191		128
Current portion of notes payable		61		60
Total current liabilities		40,254		40,851
Convertible senior notes, net of discount of $8.9 million and $10.1 million, respectively		407,992		406,708
Notes payable		347		355
Operating lease liabilities, net of current portion		27,520		24,721
Finance lease liabilities, net of current portion		624		216
Deferred tax liabilities		4,658		4,929
Other long-term liabilities		361		451
Contingent consideration		4,639		4,677
Total liabilities		486,395		482,908

Commitments and contingencies
Stockholders’ Equity:
Preferred stock, $0.001 par value; 2,500,000 shares authorized:
Class A convertible preferred stock — $0.001 par value; 800,000 shares authorized; none issued and outstanding		—		—
Class B convertible preferred stock — $0.001 par value; 585,000 shares authorized; none issued and outstanding		—		—
Class C convertible preferred stock, $0.001 par value; 250,000 shares authorized; 200,000 issued and outstanding		22,275		18,275
Common stock, $0.001 par value; 100,000,000 shares authorized; 48,879,018 and 48,334,280 issued and outstanding at June 30, 2023 and December 31, 2022, respectively		49		48
Additional paid-in capital		1,123,180		1,114,896
Accumulated deficit		(566,761)		(542,832)
Accumulated other comprehensive loss		(34,488)		(34,549)
Total stockholders’ equity		544,255		555,838
Total liabilities and stockholders’ equity	$	1,030,650	$	1,038,746

See accompanying notes to condensed consolidated financial statements.

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Cryoport, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Service revenues	$	35,204	$	34,585	$	71,040	$	67,495
Product revenues		21,817		29,568		48,798		48,960
Total revenues		57,021		64,153		119,838		116,455

Cost of service revenues		20,008		19,111		39,084		37,829
Cost of product revenues		12,280		16,204		28,949		27,447
Total cost of revenues		32,288		35,315		68,033		65,276
Gross margin		24,733		28,838		51,805		51,179

Operating costs and expenses:
Selling, general and administrative		38,802		30,563		72,043		57,185
Engineering and development		4,263		3,522		8,139		7,060
Total operating costs and expenses		43,065		34,085		80,182		64,245

Loss from operations		(18,332)		(5,247)		(28,377)		(13,066)
Other income (expense):
Investment income		2,647		2,048		5,114		3,312
Interest expense		(1,331)		(1,586)		(2,840)		(3,077)
Other income (expense), net		(704)		(4,028)		3,301		(9,045)
Total other income (expense), net		612		(3,566)		5,575		(8,810)
Loss before provision for income taxes		(17,720)		(8,813)		(22,802)		(21,876)
Provision for income taxes		(635)		(364)		(1,127)		(705)
Net loss	$	(18,355)	$	(9,177)	$	(23,929)	$	(22,581)
Paid-in-kind dividend on Series C convertible preferred stock		(2,000)		(2,000)		(4,000)		(4,000)
Net loss attributable to common stockholders	$	(20,355)	$	(11,177)	$	(27,929)	$	(26,581)
Net loss per share - basic and diluted	$	(0.42)	$	(0.23)	$	(0.58)	$	(0.54)
Weighted average shares outstanding – basic and diluted		48,709,384		48,792,559		48,536,901		49,467,691

See accompanying notes to condensed consolidated financial statements.

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Cryoport, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

(unaudited, in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net loss	$	(18,355)	$	(9,177)	$	(23,929)	$	(22,581)
Other comprehensive income (loss), net of tax:
Net unrealized gain (loss) on available-for-sale debt securities		(1,223)		(5,310)		2,452		(19,374)
Reclassification of realized loss on available-for-sale debt securities to earnings		532		14		631		46
Foreign currency translation adjustments		(4,226)		(7,558)		(3,022)		(8,605)
Other comprehensive income (loss)		(4,917)		(12,854)		61		(27,933)
Total comprehensive loss	$	(23,272)	$	(22,031)	$	(23,868)	$	(50,514)

See accompanying notes to condensed consolidated financial statements.

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Cryoport, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share data)

(unaudited)


	Class A			Class B			Class C										Other		Total
	Preferred Stock			Preferred Stock			Preferred Stock			Common Stock			Additional		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Paid–In Capital		Deficit		Loss		Equity (Deficit)
Balance at March 31, 2022	—	$	—	—	$	—	200,000	$	12,275	49,453,307	$	50	$	1,102,725	$	(489,294)	$	(16,322)	$	609,434
Net loss	—		—	—		—	—		—	—		—		—		(9,177)		—		(9,177)
Other comprehensive loss, net of taxes	—		—	—		—	—		—	—		—		—		—		(12,854)		(12,854)
Stock-based compensation expense	—		—	—		—	—		—	—		—		5,258		—		—		5,258
Issuance of common stock for Cell&Co acquisition	—		—	—		—	—		—	15,152		—		479		—		—		479
Paid-in-kind preferred stock dividend	—		—	—		—	—		2,000	—		—		(2,000)		—		—		—
Repurchase of common stock	—		—	—		—	—		—	(1,035,271)		(1)		(24,999)		—		—		(25,000)
Vesting of restricted stock units	—		—	—		—	—		—	22,517		—		—		—		—		—
Proceeds from exercise of stock options	—		—	—		—	—		—	26,797		—		284		—		—		284
Balance at June 30, 2022	—	$	—	—	$	—	200,000	$	14,275	48,482,502	$	49	$	1,081,747	$	(498,471)	$	(29,176)	$	568,424

Balance at March 31, 2023	—	$	—	—	$	—	200,000	$	20,275	48,501,406	$	48	$	1,118,172	$	(548,406)	$	(29,571)	$	560,518
Net loss	—		—	—		—	—		—	—		—		—		(18,355)		—		(18,355)
Other comprehensive loss, net of taxes	—		—	—		—	—		—	—		—		—		—		(4,917)		(4,917)
Stock-based compensation expense	—		—	—		—	—		—	—		—		5,800		—		—		5,800
Paid-in-kind preferred stock dividend	—		—	—		—	—		2,000	—		—		(2,000)		—		—		—
Vesting of restricted stock units	—		—	—		—	—		—	52,536		—		—		—		—		—
Proceeds from exercise of stock options	—		—	—		—	—		—	325,076		1		1,208		—		—		1,209
Balance at June 30, 2023	—	$	—	—	$	—	200,000	$	22,275	48,879,018	$	49	$	1,123,180	$	(566,761)	$	(34,488)	$	544,255

Balance at December 31, 2021	—	$	—	—	$	—	200,000	$	10,275	49,616,154	$	50	$	1,100,287	$	(467,541)	$	(1,243)	$	641,828
Net loss	—		—	—		—	—		—	—		—		—		(22,581)		—		(22,581)
Other comprehensive loss, net of taxes	—		—	—		—	—		—	—		—		—		—		(27,933)		(27,933)
Stock-based compensation expense	—		—	—		—	—		—	—		—		9,383		—		—		9,383
Paid-in-kind preferred stock dividend	—		—	—		—	—		4,000	—		—		(4,000)		—		—		—
Issuance of common stock for Cell&Co acquisition	—		—	—		—	—		—	15,152		—		479		—		—		479
Repurchase of common stock	—		—	—		—	—		—	(1,341,571)		(1)		(24,999)		(8,349)		—		(33,349)
Vesting of restricted stock units	—		—	—		—	—		—	80,912		—		—		—		—		—
Proceeds from exercise of stock options	—		—	—		—	—		—	111,855		—		597		—		—		597
Balance at June 30, 2022	—	$	—	—	$	—	200,000	$	14,275	48,482,502	$	49	$	1,081,747	$	(498,471)	$	(29,176)	$	568,424

Balance at December 31, 2022	—	$	—	—	$	—	200,000	$	18,275	48,334,280	$	48	$	1,114,896	$	(542,832)	$	(34,549)	$	555,838
Net loss	—		—	—		—	—		—	—		—		—		(23,929)		—		(23,929)
Other comprehensive income, net of taxes	—		—	—		—	—		—	—		—		—		—		61		61
Stock-based compensation expense	—		—	—		—	—		—	—		—		10,984		—		—		10,984
Paid-in-kind preferred stock dividend	—		—	—		—	—		4,000	—		—		(4,000)		—		—		—
Vesting of restricted stock units	—		—	—		—	—		—	209,124		—		—		—		—		—
Proceeds from exercise of stock options	—		—	—		—	—		—	335,614		1		1,300		—		—		1,301
Balance at June 30, 2023	—	$	—	—	$	—	200,000	$	22,275	48,879,018	$	49	$	1,123,180	$	(566,761)	$	(34,488)	$	544,255

See accompanying notes to condensed consolidated financial statements.

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Cryoport, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(unaudited, in thousands)


	For the Six Months Ended
	June 30,
	2023		2022
Cash Flows From Operating Activities:
Net loss	$	(23,929)	$	(22,581)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		13,127		10,845
Amortization of debt discount		1,283		1,286
Non-cash operating lease expense		2,281		1,834
Unrealized (gain) loss on investments in equity securities		(105)		8,556
Realized loss on available-for-sale investments		69		80
Stock-based compensation expense		10,984		9,383
Loss on disposal of property and equipment		190		304
Gain on insurance settlement		(2,642)		—
Change in credit losses		(133)		35
Excess and obsolete inventory		—		546
Insurance proceeds for operations		1,212		6,311
Change in contingent consideration		(68)		—
Changes in operating assets and liabilities:
Accounts receivable		1,104		(4,291)
Inventories		(1,247)		(9,476)
Prepaid expenses and other current assets		1,251		(1,043)
Deposits		(197)		27
Operating lease liabilities		(2,102)		(1,807)
Accounts payable and other accrued expenses		(2,874)		(4,283)
Accrued compensation and related expenses		248		(1,581)
Deferred revenue		488		(151)
Net deferred tax liability		(220)		(481)
Net cash used in operating activities		(1,280)		(6,487)

Cash Flows From Investing Activities:
Purchases of property and equipment		(18,243)		(9,060)
Insurance proceeds for loss of fixed assets		976		3,000
Software development costs		(2,534)		(564)
Purchases of short-term investments		—		(136,611)
Acquisitions		—		(2,107)
Sales/maturities of short-term investments		52,487		84,760
Patent and trademark costs		(391)		(358)
Net cash provided by (used in) investing activities		32,295		(60,940)

Cash Flows From Financing Activities:
Proceeds from exercise of stock options		1,300		597
Repurchase of common stock		—		(33,349)
Repayment of notes payable		(11)		(639)
Repayment of finance lease liabilities		(70)		(18)
Net cash provided by (used in) financing activities		1,219		(33,409)
Effect of exchange rates on cash and cash equivalents		(1,515)		(1,231)
Net change in cash and cash equivalents		30,719		(102,067)
Cash and cash equivalents — beginning of period		36,595		139,101
Cash and cash equivalents — end of period	$	67,314	$	37,034

Supplemental Disclosure of Cash Flow Information:

Cash paid for interest	$	1,725	$	1,884

Cash paid for income taxes	$	1,103	$	714

Supplemental Disclosure of Non-Cash Financing Activities:

Operating lease right-of-use assets and operating lease liabilities	$	5,603	$	2,103

Net unrealized gain (loss) on available-for-sale debt securities	$	2,452	$	(19,374)

Reclassification of realized loss on available-for-sale debt securities to earnings	$	(631)	$	(46)

Paid-in-kind preferred stock dividend, including beneficial conversion feature	$	4,000	$	4,000

Fixed assets included in accounts payable and accrued liabilities	$	822	$	397

Common stock issued for Cell&Co acquisition	$	—	$	479

See accompanying notes to condensed consolidated financial statements.

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Cryoport, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2023 and 2022

(Unaudited)

Note 1. Management’s Representation and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by Cryoport, Inc. (the “Company”, “Cryoport”, “our” or “we”) in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statement presentation. However, the Company believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (consisting primarily of normal recurring accruals) considered necessary for a fair presentation have been included.

Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

The Company has evaluated subsequent events through the date of this filing and determined that no subsequent events have occurred that would require recognition in the unaudited condensed consolidated financial statements or disclosure in the notes thereto other than as disclosed in the accompanying notes.

Note 2. Nature of the Business

Cryoport serves the life sciences industry as a provider of integrated temperature-controlled supply chain solutions supporting the biopharma/pharma, animal health, and reproductive medicine markets. Our mission is to support life and health worldwide and we are continuously developing, implementing, and leveraging our supply chain platform, which is designed to deliver comprehensive, unparalleled, highly differentiated temperature-controlled logistics, packaging, storage, cryogenic systems, informatics, and related services for life science products, regenerative medicine, cellular therapies, and treatments that require unique, specialized cold chain management.

The Company is a Nevada corporation and its common stock is traded on the NASDAQ Capital Market exchange under the ticker symbol “CYRX.”

Note 3. Summary of Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies during the six months ended June 30, 2023, as compared to the significant accounting policies disclosed in Note 2 – Summary of Significant Accounting Policies to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

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Foreign Currency Transactions

Management has determined that the functional currency of its subsidiaries is the local currency. Assets and liabilities of foreign subsidiaries are translated into U.S. dollars at the period-end exchange rates. Income and expenses are translated at an average exchange rate for the period and the resulting translation gain (loss) adjustments are accumulated as a separate component of stockholders’ equity. The translation loss adjustment totaled $3.0 million and $8.6 million for the six months ended June 30, 2023 and 2022, respectively. Foreign currency gains and losses from transactions denominated in other than respective local currencies are included in earnings.

Recently Adopted Accounting Pronouncements

In September 2022, the Financial Accounting Standards Board (“FASB”) issued ASU 2022-04, “Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations,” which is intended to enhance the transparency surrounding the use of supplier finance programs in connection with the purchase of goods and services. Supplier finance programs may also be referred to as reverse factoring, payables finance, or structured payables arrangements. The amendments in ASU 2022-04 require a buyer that uses supplier finance programs to disclose sufficient qualitative and quantitative information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. ASU 2022-04 is effective for all entities for fiscal years beginning after December 15, 2022, on a retrospective basis, including interim periods with those fiscal years, except for the requirement to disclose roll-forward information, which is effective prospectively for fiscal years beginning after December 15, 2023. We adopted ASU 2022-04 on January 1, 2023. The adoption of this standard did not have an impact on the Company’s consolidated financial statements or disclosures as the Company currently does not have supplier finance programs.

In March 2022, the FASB issued ASU 2022-02, “Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures,” which addresses and amends areas identified by the FASB as part of its post-implementation review of the accounting standard that introduced the current expected credit losses (“CECL”) model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current-period gross write offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. For entities, such as Cryoport, that had not yet adopted the CECL accounting model in ASU 2016-13, the effective date for the amendments in ASU 2022-02 is the same as the effective date in ASU 2016-13 (i.e., fiscal years beginning after December 15, 2022, including interim periods within those fiscal years). We adopted ASU 2022-02 on January 1, 2023. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements or disclosures.

In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” ASU 2021-08 requires contract assets and contract liabilities acquired in a business combination to be recognized and measured in accordance with Topic 606, Revenue from Contracts with Customers, on the acquisition date as if the acquirer had entered into the original contract at the same date and on the same terms as the acquiree. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years for public business entities. We adopted ASU 2021-08 on January 1, 2023. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements or disclosures.

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” This ASU replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information for credit loss estimates on certain types of financial instruments, including trade receivables. In addition, new disclosures are required. The ASU, as subsequently amended, is effective for the Company for fiscal years beginning after December 15, 2022, as the Company was a smaller reporting company as of November 15, 2019, the determination date. We adopted ASU 2016-13 on January 1, 2023. Based on the composition of the Company’s accounts receivable, investment portfolio, and other financial assets, including current market conditions and historical credit loss activity, the adoption of this standard did not have a material impact on the Company’s consolidated financial statements or disclosures. Specifically, the Company’s estimate of expected credit losses as of June 30, 2023, using its expected credit loss evaluation process described above, resulted in no adjustments to the provision for credit losses and no cumulative-effect adjustment to accumulated deficit on the adoption date of the standard.

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Accounting Guidance Issued but Not Adopted at June 30, 2023

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions,” which amends the guidance in Topic 820, Fair Value Measurement, to clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. In addition, the ASU introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years for public business entities. We are currently evaluating the impact of this standard on our consolidated financial statements.

Note 4. Revenue, Concentrations and Geographic Information

Customers

The Company grants credit to customers within the U.S. and international customers and does not require collateral. Revenues from international customers are generally secured by advance payments except for established foreign customers. The Company generally requires advance or credit card payments for initial revenues from new customers. The Company’s ability to collect receivables can be affected by economic fluctuations in the geographic areas and industries served by the Company. Credit loss reserves for uncollectible amounts are provided based on past experience and a specific analysis of the accounts, which management believes to be sufficient. Accounts receivable at June 30, 2023 and December 31, 2022 are net of provision for credit losses of $1.2 million and $1.3 million, respectively. Although the Company expects to collect amounts due, actual collections may differ from the estimated amounts. The Company maintains reserves for credit losses and such losses, in the aggregate, historically have not exceeded its estimates.

The Company’s customers are in the biopharma, pharmaceutical, animal health, reproductive medicine, and other life science industries. Consequently, there is a concentration of accounts receivable within these industries, which is subject to normal credit risk. There were no customers that accounted for more than 10% of net accounts receivable at June 30, 2023 and December 31, 2022.

The Company has revenue from foreign customers primarily in the United Kingdom, France, Germany, China and India. During the three months ended June 30, 2023 and 2022, the Company had revenues from foreign customers of approximately $25.9 million and $29.3 million, respectively, which constituted approximately 45.3% and 45.6%, respectively, of total revenues. No single customer generated over 10% of revenues during the three months ended June 30, 2023 and 2022.

During the six months ended June 30, 2023 and 2022, the Company had revenues from foreign customers of approximately $55.1 million and $53.7 million, respectively, which constituted approximately 45.9% and 46.1%, respectively, of total revenues. No single customer generated over 10% of revenues during the six months ended June 30, 2023 and 2022.

Revenue Disaggregation

The Company views its operations, makes decisions regarding how to allocate resources and manages its business as one reportable segment and one reporting unit. As a result, the financial information disclosed herein represents all of the material financial information related to the Company. When disaggregating revenue, the Company considered all of the economic factors that may affect its revenues. We consider sales disaggregated by end-market to depict how the nature, amount, timing and uncertainty of revenues and cash flows are impacted by changes in economic factors. The following table disaggregates our revenues by major markets for the three and six months ended June 30, 2023 and 2022 (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Biopharma/Pharma	$	46,533	$	52,591	$	97,655	$	95,601
Animal Health		7,873		9,285		16,736		16,079
Reproductive Medicine		2,615		2,277		5,447		4,775
Total revenues	$	57,021	$	64,153	$	119,838	$	116,455

Prior year amounts in animal health and reproductive medicine have been reclassified within revenue to biopharma/pharma. These reclassifications had no effect on the previously reported total revenues.

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Given that the Company’s revenues are generated in different geographic regions, factors such as regulatory and geopolitical factors within those regions could impact the nature, timing and uncertainty of the Company’s revenues and cash flows. Our geographical revenues, by origin, for the three and six months ended June 30, 2023 and 2022, were as follows (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Americas	$	31,164	$	34,893	$	64,781	$	62,771
Europe, the Middle East, and Africa (EMEA)		15,112		16,854		33,271		33,041
Asia Pacific (APAC)		10,745		12,406		21,786		20,643
Total revenues	$	57,021	$	64,153	$	119,838	$	116,455

Contract Liabilities (Deferred Revenue)

Contract liabilities are recorded when cash payments are received in advance of the Company’s performance. Deferred revenue was $0.9 million and $0.4 million at June 30, 2023 and December 31, 2022, respectively. During the three months ended June 30, 2023 and 2022, the Company recognized revenues of $0.5 million and $0.4 million, respectively, from the related contract liabilities outstanding as the services were performed.

Credit Losses

The accounts receivable balance on our consolidated balance sheet as of June 30, 2023 was $43.1 million, net of $1.2 million of allowances. The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected at June 30, 2023:


Balance at January 1, 2023	$	1,275
Change in expected credit losses		(10)
Write-offs, net of recoveries		(59)
Balance at June 30, 2023	$	1,206

Note 5. Net Loss Per Share

We calculate basic and diluted net loss per share using the weighted average number of common shares outstanding during the periods presented. In periods of a net loss position, basic and diluted weighted average common shares are the same. For the diluted earnings per share calculation, we adjust the weighted average number of common shares outstanding to include dilutive stock options, unvested restricted stock units and shares associated with the conversion of the Company’s 0.75% Convertible Senior Notes due in 2026 (the “2026 Senior Notes”), the Company’s 3.0% Convertible Senior Notes due in 2025 (the “2025 Senior Notes” and together with the 2026 Senior Notes, the “Convertible Senior Notes”) and convertible preferred stock outstanding during the periods.

The following shows the amounts used in computing net loss per share (in thousands except per share data):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net loss	$	(18,355)	$	(9,177)	$	(23,929)	$	(22,581)
Paid-in-kind dividend on Series C convertible preferred stock		(2,000)		(2,000)		(4,000)		(4,000)
Net loss attributable to common shareholders	$	(20,355)	$	(11,177)	$	(27,929)	$	(26,581)
Weighted average common shares issued and outstanding - basic and diluted		48,709,384		48,792,559		48,536,901		49,467,691
Basic and diluted net loss per share	$	(0.42)	$	(0.23)	$	(0.58)	$	(0.54)

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The following table sets forth the number of shares excluded from the computation of diluted loss per share, as their inclusion would have been anti-dilutive:


	Three Months Ended June 30,		Six Months Ended June 30,
	2023	2022	2023	2022
Stock options	3,012,284	3,457,046	3,100,326	3,845,882
Restricted stock units	1,093,390	709,481	1,093,390	709,481
Series C convertible preferred stock	5,778,389	5,552,919	5,778,389	5,552,919
Conversion of 2026 Senior Notes	3,422,780	3,422,780	3,422,780	3,422,780
Conversion of 2025 Senior Notes	599,954	599,954	599,954	599,954
	13,906,797	13,742,180	13,994,839	14,131,016

Note 6. Acquisitions

2022 Acquisitions

In April 2022, we completed the acquisition of Cell&Co BioServices in Clermont-Ferrand, France with additional operations in Pont-du-Château, France to further enhance our existing global temperature-controlled supply chain capabilities. Cell&Co BioServices is a bioservices business providing biorepository, kitting, and logistics services to the life sciences industry. The purchase consideration was €5.7 million ($6.2 million), comprised of upfront consideration of €3.2 million ($3.5 million) in cash, 15,152 shares of the Company’s common stock with a fair value of $0.4 million, and an earn-out provision with a fair value of €2.0 million ($2.2 million) based on achieving annual EBITDA targets through 2025, as defined in the share purchase agreement. Of the purchase consideration, $2.7 million was allocated to goodwill and $3.4 million to identifiable intangible assets. The acquired goodwill and intangible assets are not deductible for tax purposes.

In July 2022, the Company completed the acquisition of Polar Expres based in Madrid, Spain, which provides temperature-controlled logistics solutions dedicated to the life sciences industry. Polar Expres operates logistics centers in Madrid and Barcelona supporting the rapidly growing life science market. This acquisition further expands CRYOPDP’s footprint which enhances our existing global temperature-controlled supply chain capabilities and provides us with additional growth opportunities in the EMEA region. The purchase consideration was €2.8 million ($2.8 million), comprised of cash consideration of €1.4 million ($1.4 million) and an earn-out provision with a fair value of €1.4 million ($1.4 million) based on achieving 2024 and 2026 EBITDA targets as defined in the share purchase agreement. Of the purchase consideration, $1.7 million was allocated to goodwill and $1.0 million to identifiable intangible assets. The acquired goodwill and intangible assets are not deductible for tax purposes.

In July 2022, the Company also completed the acquisition of Cell Matters based in Liège, Belgium, which provides cryo-process optimization, cryoprocessing, and cryopreservation solutions to the life sciences industry. The purchase consideration was €3.9 million ($4.0 million). The purchase consideration, including the reimbursement of financial indebtedness at the closing date, in the amount of €4.7 million ($4.7 million) in aggregate was allocated to goodwill. The value of this acquisition is assigned to Cell Matters’ assembled workforce which has significant expertise in cryo-process optimization and cryopreservation. Through June 30, 2023, the Company recorded a measurement period adjustment of $0.1 million comprised of a refund from the sellers following payments made from Cell Matters to the sellers between the locked box date and the closing date, in accordance with the locked box mechanism as defined in the share purchase agreement. The acquired goodwill is not deductible for tax purposes.

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Note 7. Cash, Cash Equivalents and Short-Term Investments

Cash, cash equivalents and short-term investments consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands):


	June 30,		December 31,
	2023		2022
Cash	$	34,168	$	34,752
Cash equivalents:
Money market mutual fund		33,146		1,843
Total cash and cash equivalents		67,314		36,595
Short-term investments:
U.S. Treasury notes and bills		150,810		190,718
Mutual funds		99,882		99,777
Corporate debt securities		186,668		196,233
Total short-term investments		437,360		486,728
Cash, cash equivalents and short-term investments	$	504,674	$	523,323

Available-for-sale investments

The amortized cost, gross unrealized gains, gross unrealized losses and fair value of available-for-sale investments by type of security at June 30, 2023 were as follows (in thousands):


	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
U.S. Treasury notes	$	149,221	$	1,621	$	(32)	$	150,810
Corporate debt securities		185,805		1,113		(250)		186,668
Total available-for-sale investments	$	335,026	$	2,734	$	(282)	$	337,478

The following table summarizes the fair value of available-for-sale investments based on stated contractual maturities as of June 30, 2023:


	Amortized Cost		Fair Value
Due within one year	$	125,428	$	127,084
Due after one year through five years		209,598		210,394
Due after five years through ten years		—		—
Total	$	335,026	$	337,478

The amortized cost, gross unrealized gains, gross unrealized losses and fair value of available-for-sale investments by type of security at December 31, 2022 were as follows (in thousands):


	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
U.S. Treasury notes	$	199,626	$	5	$	(8,913)	$	190,718
Corporate debt securities		210,764		1,243		(15,774)		196,233
Total available-for-sale investments	$	410,390	$	1,248	$	(24,687)	$	386,951

The following table summarizes the fair value of available-for-sale investments based on stated contractual maturities as of December 31, 2022:


	Amortized Cost		Fair Value
Due within one year	$	129,568	$	126,776
Due after one year through five years		280,822		260,175
Due after five years through ten years		—		—
Total	$	410,390	$	386,951

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The primary objective of our investment portfolio is to enhance overall returns in an efficient manner while maintaining safety of principal, prudent levels of liquidity and acceptable levels of risk. Our investment policy limits interest-bearing security investments to certain types of debt and money market instruments issued by institutions with primarily investment-grade credit ratings, and it places restrictions on maturities and concentration by asset class and issuer.

We review our available-for-sale investments for other-than-temporary declines in fair value below our cost basis each quarter and whenever events or changes in circumstances indicate that the cost basis of an asset may not be recoverable. The evaluation is based on a number of factors, including the length of time and the extent to which the fair value has been below our cost basis, as well as adverse conditions related specifically to the security such as any changes to the credit rating of the security and the intent to sell or whether we will more likely than not be required to sell the security before recovery of its amortized cost basis. Our assessment of whether a security is other-than-temporarily impaired could change in the future based on new developments or changes in assumptions related to that particular security.

The following table shows the Company’s gross unrealized losses and fair value of available-for-sale debt securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2023:


	Less than 12 Months				12 Months or More				Total
			Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
U.S. Treasury notes	$	2,675	$	(19)	$	148,135	$	(13)	$	150,810	$	(32)
Corporate debt securities		19,601		(33)		167,067		(217)		186,668		(250)
Total	$	22,276	$	(52)	$	315,202	$	(230)	$	337,478	$	(282)

For U.S. Treasury notes, the unrealized losses were caused by interest rate increases. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider the U.S. Treasury notes to be other-than-temporarily impaired at June 30, 2023. For corporate debt securities, the unrealized losses were primarily caused by interest rate increases. The Company does not intend to sell these debt securities that are in an unrealized loss position, and it is not more likely than not that the Company will be required to sell these debt securities before recovery of their amortized cost bases, which may be at maturity. Based on the credit quality of the debt securities, and the Company’s estimates of future cash flows to be collected from those securities, the Company believes the unrealized losses are not credit losses. Accordingly, the Company does not consider the corporate debt securities to be other-than-temporarily impaired at June 30, 2023.

During the three months ended June 30, 2023 and 2022 we had realized gains (losses) of $0.02 million and $(0.03) million on available-for-sale investments, respectively.

During the six months ended June 30, 2023 and 2022 we had realized losses of $(0.07) million and $(0.08) million on available-for-sale investments, respectively.

Equity Investments

We held investments in equity securities with readily determinable fair values of $99.9 million at June 30, 2023. These investments consist of mutual funds that invest primarily in tax-free municipal bonds and treasury inflation protected securities.

Unrealized losses during 2023 and 2022 related to equity securities held at June 30, 2023 and 2022 are as follows (in thousands):


	Six Months Ended June 30,
	2023		2022
Net losses recognized during the six months on equity securities	$	(1,405)	$	(8,556)
Less: net gains (losses) recognized during the year on equity securities sold during the period		1,510		—
Unrealized losses recognized during the six months on equity securities still held at June 30, 2023 and 2022	$	105	$	(8,556)

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Note 8. Fair Value Measurements

We measure fair value based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value. These tiers include the following:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data. These inputs include quoted prices for similar assets or liabilities; quoted market prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as consider counterparty credit risk in the assessment of fair value.

We did not elect the fair value option, as allowed, to account for financial assets and liabilities that were not previously carried at fair value. Therefore, material financial assets and liabilities that are not carried at fair value, such as trade accounts receivable and payable, are reported at their historical carrying values.

The carrying values of our assets that are required to be measured at fair value on a recurring basis as of June 30, 2023 and 2022 approximate fair value because of our ability to immediately convert these instruments into cash with minimal expected change in value which are classified in the table below in one of the three categories of the fair value hierarchy described above (in thousands):


	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
June 30, 2023
Assets:
Money market mutual fund	$	33,146	$	—	$	—	$	33,146
Mutual funds		99,882		—		—		99,882
U.S. Treasury notes		150,810		—		—		150,810
Corporate debt securities		186,668		—		—		186,668
	$	470,506	$	—	$	—	$	470,506
Liabilities:
Convertible Senior Notes	$	—	$	407,992	$	—	$	407,992
Contingent consideration		—		—		4,639		4,639
	$	—	$	407,992	$	4,639	$	412,631


	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
December 31, 2022
Assets:
Money market mutual fund	$	1,843	$	—	$	—	$	1,843
Mutual funds		99,777		—		—		99,777
U.S. Treasury notes		190,718		—		—		190,718
Corporate debt securities		196,233		—		—		196,233
	$	488,571	$	—	$	—	$	488,571
Liabilities:
Convertible Senior Notes	$	—	$	406,708	$	—	$	406,708
Contingent consideration		—		—		4,677		4,677
	$	—	$	406,708	$	4,677	$	411,385

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Our equity securities and available-for-sale debt securities, including U.S. treasury notes and U.S. treasury bills are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within the fair value hierarchy.

We did not have any financial liabilities measured at fair value on a recurring basis as of June 30, 2023.

We carry the Convertible Senior Notes (see Note 11) at face value less the unamortized discount and issuance costs on our consolidated balance sheets and present fair value for disclosure purposes only. We estimate the fair value of the Convertible Senior Notes using the net present value of the payments, discounted at an interest rate that is consistent with market and risk-adjusted interest rates, which is a Level 2 input.

The following table presents the estimated fair values and the carrying values (in thousands):


	June 30, 2023				December 31, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value
2026 Senior Notes	$	393,853	$	307,879	$	392,621	$	290,132
2025 Senior Notes	$	14,139	$	12,869	$	14,087	$	12,373

Under the terms of the CTSA acquisition, contingent consideration may be payable in cash based on the achievement of a certain EBITDA target for 2024, with no maximum limit as to the contingent consideration achievable. Under the terms of the F-airGate, Cell&Co, and Polar Expres acquisitions, contingent consideration may be payable in cash based on the achievement of certain future revenue and/or EBITDA targets during each annual period following the acquisition dates for a total of four years, up to a maximum of $6.1 million (undiscounted) in the aggregate. The fair value of the contingent consideration was measured at the end of each reporting period using Level 3 inputs. The fair value of the contingent consideration for the F-airGate and Polar Expres acquisitions was determined using a probability-weighted discounted cash flow model. The fair value of the contingent consideration for the CTSA and Cell&Co acquisitions was valued based on unobservable inputs using a Monte Carlo simulation. These inputs included the estimated amount and timing of projected future revenue, a discount rate, a risk-free rate, asset volatility and revenue volatility. Significant increases (decreases) in any of those inputs in isolation would result in a significantly higher (lower) fair value measurement. The contingent consideration was determined to have an aggregate fair value of $4.6 million and $4.7 million which is reflected as contingent consideration liability in the accompanying consolidated balance sheets as of June 30, 2023 and December 31, 2022, respectively. Certain assumptions used in estimating the fair value of the contingent consideration are uncertain by nature. Actual results may differ materially from estimates.

The losses recognized in earnings and the change in net assets related to the contingent consideration at June 30, 2023 were as follows (in thousands):


	Fair Value		Losses				Foreign		Fair Value
	December 31,		recognized in				Currency		June 30,
	2022		earnings		Payments		Adjustment		2023
2021 Acquisitions	$	902	$	126	$	—	$	(15)	$	1,013
2022 Acquisitions		3,775		77		(271)		45		3,626
	$	4,677	$	203	$	(271)	$	30	$	4,639

The losses recognized in earnings have been reported in operating expenses in the consolidated statement of operations for the six months ended June 30, 2023.

Note 9. Inventory

Inventories consist of the following (in thousands):


	June 30,		December 31,
	2023		2022
Raw materials	$	17,357	$	18,287
Work-in-process		1,054		895
Finished goods		10,410		8,496
Total	$	28,821	$	27,678

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Note 10. Goodwill and Intangible Assets

Goodwill

The following table represents the changes in the carrying value of goodwill for the six months ended June 30, 2023 and 2022 (in thousands):


	June 30,
	2023		2022
Balance at beginning of year	$	151,117	$	146,954
Foreign currency adjustment		(1,809)		(4,369)
Goodwill related to CTSA and F-airGate acquisitions		—		2,616
Total	$	149,308	$	145,201

Intangible Assets

The following table presents our intangible assets as of June 30, 2023 (in thousands):


							Weighted
					Net		Average
	Gross		Accumulated		Carrying		Amortization
	Amount		Amortization		Amount		Period (years)
Non-compete agreement	$	390	$	318	$	72	1
Technology		47,178		9,086		38,092	10
Customer relationships		131,326		25,423		105,903	12
Trade name/trademark		818		180		638	12
Agent network		10,871		6,724		4,147	2
Order backlog		2,600		2,600		—	—
Land use rights		2,255		269		1,986	35
Patents and trademarks		44,166		12		44,154	—
Total	$	239,604	$	44,612	$	194,992

The following table presents our intangible assets as of December 31, 2022 (in thousands):


							Weighted
					Net		Average
	Gross		Accumulated		Carrying		Amortization
	Amount		Amortization		Amount		Period (years)
Non-compete agreement	$	390	$	280	$	110	1
Technology		36,592		8,056		28,536	9
Customer relationships		131,716		21,254		110,462	12
Trade name/trademark		820		158		662	13
Agent network		11,667		6,199		5,468	2
Order backlog		2,600		2,600		—	—
Land use rights		2,378		257		2,121	35
Patents and trademarks		45,181		1,531		43,650	—
Total	$	231,344	$	40,335	$	191,009

Amortization expense for intangible assets for the three and six months ended June 30, 2023, was $3.9 million and $7.7 million, respectively. Amortization expense for intangible assets for the three and six months ended June 30, 2022 was $3.7 million and $7.5 million, respectively.

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Expected future amortization of intangible assets as of June 30, 2023 is as follows:


Years Ending December 31,	Amount
Remainder of 2023 (excluding the six months ended June 30, 2023)	$	7,861
2024		15,124
2025		13,179
2026		12,928
2027		12,795
Thereafter		83,201
	$	145,088

Note 11. Convertible Senior Notes

Convertible Senior Notes payable consisted of the following at June 30, 2023 and December 31, 2022 (in thousands):


	June 30,		December 31,
	2023		2022
Principal amount of 2025 Senior Notes	$	14,344	$	14,344
Principal amount of 2026 Senior Notes		402,500		402,500
Less: unamortized debt issuance costs		(8,852)		(10,136)
Net carrying value of Convertible Senior Notes payable	$	407,992	$	406,708

Interest expense incurred in connection with the Convertible Senior Notes consisted of the following for the three and six months ended June 30, 2023 and 2022 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Coupon interest	$	862	$	872	$	1,725	$	1,734
Amortization of debt issuance costs		643		634		1,283		1,268
Total interest expense on Convertible Senior Notes	$	1,505	$	1,506	$	3,008	$	3,002

The Company’s 2025 Senior Notes and 2026 Senior Notes payable of $14.3 million and $402.5 million, respectively, are due and payable in 2025 and 2026, respectively.

See Note 10 – Convertible Senior Notes to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 for additional information related to the Company’s Convertible Senior Notes.

Note 12. Notes Payable

Notes payable consisted of the following at June 30, 2023 and December 31, 2022 (in thousands):


	June 30,		December 31,
	2023		2022
Principal amount of notes payable	$	408	$	415
Less: current portion of notes payable		(61)		(60)
Notes payable – long term	$	347	$	355

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Interest expense incurred in connection with the notes payable consisted of the following for the three and six months ended June 30, 2023 and 2022 (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Interest expense	$	1	$	2	$	2	$	2
Amortization of debt discount		—		11		—		21
Total interest expense on notes payable	$	1	$	13	$	2	$	23

Cell&Co Notes

In connection with the acquisition of Cell&Co, the Company assumed two notes payable totaling €0.4 million ($0.4 million) bearing interest rates of 0.6% and 1.06%, respectively, payable quarterly, maturing in July 2027 and September 2030, respectively.

Future note payments as of June 30, 2023 were as follows (in thousands):


Years Ending December 31,	Amount
2023 (excluding the six months ended June 30, 2023)	$	37
2024		76
2025		62
2026		63
2027		58
Thereafter		112
Total note maturities	$	408

Note 13. Leases

The Company has operating and finance leases for corporate offices and certain equipment. These leases have remaining lease terms of one year to approximately nine years, some of which include options to extend the leases for multiple renewal periods of five years each. Under the terms of the facilities leases, the Company is required to pay its proportionate share of property taxes, insurance and normal maintenance costs.

In October 2022, Cryoport Systems entered into a lease agreement commencing in 2024, for an administrative, global supply chain center and research and development center in Santa Ana, California, in the aggregate rental amount of $27.7 million spanning 10 years. This lease is not included in the balance sheet right-of-use asset and lease liability as it commences in 2024.

The components of lease cost were as follows (in thousands):


	Six Months Ended June 30,
	2023		2022
Operating lease cost	$	3,453	$	2,530
Finance lease cost:
Amortization of right-of-use assets		79		25
Interest on finance lease liabilities		19		3
		98		28
Total lease cost		3,551		2,558

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Other information related to leases was as follows (in thousands):


Supplemental Cash Flows Information	Six Months Ended June 30,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	3,323	$	2,444
Operating cash flows from finance leases	$	89	$	28
Financing cash flows from finance leases	$	70	$	18
Right-of-use assets obtained in exchange for lease liabilities (in thousands):
Operating leases	$	5,603	$	2,103
Finance leases	$	538	$	—


	June 30,		December 31,
	2023		2022
Weighted-Average Remaining Lease Term
Operating leases	11.8	years	12.4	years
Finance leases	4.4	years	3.4	years

Weighted-Average Discount Rate
Operating leases	9.3	%	9.5	%
Finance leases	8.4	%	7.8	%

Future minimum lease payments under non-cancellable leases that have commenced as of June 30, 2023 were as follows (in thousands):


	Operating		Finance
Years Ending December 31	Leases		Leases
2023 (excluding the three months ended June 30, 2023)	$	3,346	$	140
2024		6,508		222
2025		5,481		218
2026		4,750		191
2027		4,189		107
Thereafter		29,541		96
Total future minimum lease payments		53,815		974
Less imputed interest		(22,061)		(159)
Total	$	31,754	$	815


	Operating		Finance
Reported as of June 30, 2023	Leases		Leases
Current lease liabilities	$	4,234	$	191
Noncurrent lease liabilities		27,520		624
Total	$	31,754	$	815

Note 14. Commitments and Contingencies

MVE Biological Solutions Fire

On January 25, 2022, a fire occurred at the MVE Biological Solutions manufacturing facility (“New Prague fire”) located in New Prague, Minnesota. The New Prague facility manufactures aluminum dewars and is one of MVE Biological Solutions’ three global manufacturing facilities. There were no injuries reported and damage was limited to a portion of the facility. As a consequence of the fire damage, the New Prague manufacturing operations were curtailed on an interim basis until the necessary repairs were completed. Production was resumed at the facility during the week of February 14, 2022 and ramped up production toward the end of the first quarter of 2022. The Company estimated that the revenue impact of the New Prague fire was approximately $9.4 million and was primarily limited to the first quarter of 2022.

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The New Prague fire resulted in a loss of inventory, fixed assets, and other contents at the site. We have adequate property damage and business interruption insurance under which we filed a claim with the insurance carrier. As of June 30, 2023, the Company received a total of $15.1 million in insurance proceeds, of which the final payment of $2.2 million was received in the first quarter of 2023.

For the six months ended June 30, 2023, the Company recognized a gain of $2.6 million related to business interruption insurance proceeds. Proceeds from insurance settlements, except for those directly related to investing activities, were recognized as cash inflows from operating activities. The losses related to such an event are recognized as incurred. Insurance proceeds are recorded to the extent of the losses and then, only if recovery is realized or probable. Any gains in excess of losses are recognized only when the contingencies regarding the recovery are resolved, and the amount is fixed or determinable.

Employment Agreements

We have entered into employment agreements with certain of our officers under which payment and benefits would become payable in the event of termination by us for any reason other than cause, or upon a change in control of our Company, or by the employee for good reason.

Litigation

The Company may become a party to product litigation in the normal course of business. The Company accrues for open claims based on its historical experience and available insurance coverage. We record a loss contingency when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We also disclose material contingencies when we believe a loss is not probable but reasonably possible. Accounting for contingencies requires us to use judgment related to both the likelihood of a loss and the estimate of the amount or range of loss. The outcomes of our legal proceedings are inherently unpredictable, subject to significant uncertainties, and could be material to our financial condition, results of operations, and cash flows for a particular period.

Indemnities and Guarantees

The Company has made certain indemnities and guarantees, under which it may be required to make payments to a guaranteed or indemnified party, in relation to certain actions or transactions. The guarantees and indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated nor incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities and guarantees in the accompanying consolidated balance sheets.

The Company indemnifies its directors, officers, employees and agents, as permitted under the laws of the States of California and Nevada. In connection with its facility and equipment leases, the Company has indemnified its lessors for certain claims arising from the use of the facilities and equipment. The duration of the guarantees and indemnities varies and is generally tied to the life of the agreements.

Note 15. Stockholders’ Equity

Authorized Stock

The Company has 100,000,000 authorized shares of common stock with a par value of $0.001 per share, and 2,500,000 undesignated or “blank check” preferred stock, with a par value of $0.001, of which, 800,000 shares have been designated as Class A Convertible Preferred Stock, 585,000 shares have been designated as Class B Convertible Preferred Stock and 250,000 shares have been designated as 4.0% Series C Convertible Preferred Stock.

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Repurchase Program

In March 2022, the Company’s Board of Directors authorized a repurchase program (the “Repurchase Program”) through December 31, 2025, authorizing the repurchase of common stock and/or convertible senior notes in the amount of up to $100.0 million from time to time, on the open market or otherwise, in such quantities, at such prices, and in such manner as determined by the Company’s management at its discretion. The size and timing of any repurchase will depend on a number of factors, including the market price of the Company’s common stock, general market and economic conditions, and applicable legal requirements. The Company purchased 1,604,994 shares of its common stock under the Repurchase Program during the year ended December 31, 2022, at an average price of $23.63 per share, for an aggregate purchase price of $37.9 million. These shares were returned to the status of authorized but unissued shares of common stock. All share repurchases were made using cash resources and are reported in the period based on the settlement date of the applicable repurchase. No shares were purchased during the six months ended June 30, 2023.

Common Stock Reserved for Future Issuance

As of June 30, 2023, approximately 18.3 million shares of common stock were issuable upon vesting, conversion or exercise of stock options, restricted stock units, the Convertible Senior Notes and the Series C Preferred Stock, as follows:


Exercise of stock options		7,359,724
Vesting of restricted stock units		1,093,390
Conversion of Series C Preferred Stock		5,778,389
Conversion of convertible 2026 Senior Notes		3,422,780
Conversion of convertible 2025 Senior Notes		599,954
Total shares of common stock reserved for future issuances		18,254,237

Note 16. Stock-Based Compensation

Stock Options

During the three and six months ended June 30, 2023 and 2022, we granted stock options at exercise prices equal to or higher than the quoted market price of our common stock on the grant date. The fair value of each option grant was estimated on the date of grant using Black-Scholes with the following weighted average assumptions:


	June 30,
	2023	2022
Expected life (years)	3.8 - 5.2	3.8 - 5.2
Risk-free interest rate	3.5% - 4.1%	2.1% - 3.6%
Volatility	69.9% - 76.2	67.5% - 76.8%
Dividend yield	0%	0%

The expected option life assumption is estimated based on the simplified method. Accordingly, the Company has utilized the average of the contractual term of the options and the weighted average vesting period for all options to calculate the expected option term. The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected term of our employee stock options. The expected volatility is based on the average of the historical volatility and the implied volatility of our stock commensurate with the expected life of the stock-based award. We do not anticipate paying dividends on the common stock in the foreseeable future.

We recognize stock-based compensation cost on a straight-line basis over the vesting period. Stock-based compensation expense is recognized only for those awards that ultimately vest.

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Total stock-based compensation expense related to all of our share-based payment awards is comprised of the following:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Cost of revenues	$	575	$	711	$	1,050	$	1,178
Selling, general and administrative		4,766		4,056		9,070		7,347
Engineering and development		459		491		864		858
	$	5,800	$	5,258	$	10,984	$	9,383

A summary of stock option activity is as follows:


				Weighted-
		Weighted-		Average
		Average		Remaining	Aggregate
	Number of	Exercise		Contractual	Intrinsic
	Shares	Price/Share		Term (Years)	Value (1)
Outstanding — December 31, 2022	7,340,521	$	15.10	—		—
Granted (weighted-average fair value of $12.65 per share)	376,197		21.43	—		—
Exercised	(335,614)		3.87	—		—
Forfeited	(21,380)		35.02	—		—
Outstanding — June 30, 2023	7,359,724	$	15.87	4.8	$	43,495
Vested (exercisable) — June 30, 2023	6,097,926	$	12.94	4.4	$	43,378
Expected to vest after June 30, 2023 (unexercisable)	1,261,798	$	30.04	6.2	$	117

(1)	Aggregate intrinsic value represents the difference between the exercise price of the option and the closing market price of our common stock on June 30, 2023, which was $17.25 per share.

Total intrinsic value of options exercised during the six months ended June 30, 2023 and 2022 was $5.9 million and $3.1 million, respectively.

As of June 30, 2023, there was unrecognized compensation expense of $21.1 million related to unvested stock options, which we expect to recognize over a weighted average period of 2.1 years.

As of June 30, 2023, the Company had 813,811 shares available for future awards under the Cryoport Inc. 2018 Omnibus Equity Incentive Plan.

Restricted stock units

A summary of our restricted stock unit activity is as follows:


		Weighted Average
	Number of Restricted	Fair Value per
	Stock Units	Share
Outstanding – December 31, 2022	727,984	$	38.32
Granted	603,261		20.31
Share issuance	(209,124)		37.6
Forfeited	(28,731)		33.43
Outstanding – June 30, 2023	1,093,390	$	28.65

For the three months ended June 30, 2023 and 2022, we recorded stock-based compensation expense on our issued restricted stock units of $2.5 million and $2.1 million, respectively. For the six months ended June 30, 2023 and 2022, we recorded stock-based compensation expense on our issued restricted stock units of $4.6 million and $3.5 million, respectively. As of June 30, 2023 there was unrecognized compensation expense of $28.2 million related to unvested restricted stock units, which we expect to recognize over a weighted average period of 2.9 years.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

In this Quarterly Report on Form 10-Q (this “Quarterly Report”), the terms “Cryoport,” “Company” and similar terms refer to Cryoport, Inc. and its consolidated subsidiaries, unless the context suggest otherwise.

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS:

This Quarterly Report contains forward-looking statements that have been made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995 and concern matters that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. In some cases, you can identify these statements by terminology such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or similar words which are intended to identify forward-looking statements, although not all forward-looking statements contain these words. Reference is made in particular to forward-looking statements regarding our expectations about future business plans, new products or services, regulatory approvals, strategies, development timelines, prospective financial performance and opportunities, including potential acquisitions; expectations about future benefits of our acquisitions and our ability to successfully integrate those businesses and our plans related thereto; liquidity and capital resources; projected trends in the market in which we operate; anticipated impacts from the coronavirus strain COVID-19 (“COVID-19”) on us, including to our business operations, results of operations, cash flows, and financial position, and our future responses to the COVID-19 pandemic; our expectations relating to current supply chain impacts; inflationary pressures and the effect of foreign currency fluctuations; expectations relating to the impacts on our operations resulting from the ongoing war between Russia and Ukraine; anticipated regulatory filings or approvals with respect to the products of our clients; expectations about securing and managing strategic relationships with global couriers or large clinical research organizations; our future capital needs and ability to raise capital on favorable terms or at all; results of our research and development efforts; and approval of our patent applications.

Although we believe that our opinions and expectations reflected in the forward-looking statements are reasonable as of the date of this Quarterly Report, we cannot guarantee future results, levels of activity, performance or achievements, and our actual results may differ substantially from the views and expectations set forth in this Quarterly Report. You should be aware that these statements are projections or estimates as to future events and are subject to a number of factors that may tend to influence the accuracy of the statements, including, but not limited to, risks and uncertainties associated with the effect of changing economic conditions, including as a result of the COVID-19 pandemic and its variants, supply chain constraints, inflationary pressures, the ongoing war between Russia and Ukraine and the effects of foreign currency fluctuations, trends in the products markets, variations in the Company’s cash flow, market acceptance risks, and technical development risks. These forward-looking statements should not be regarded as a representation by the Company or any other person that the events or plans of the Company will be achieved. You should not unduly rely on these forward-looking statements, which speak only as of the date of this Quarterly Report. We undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this Quarterly Report or to reflect the occurrence of unanticipated events. You should, however, review the factors and risks we describe in the reports we file from time to time with the Securities and Exchange Commission (“SEC”), including those contained in this Quarterly Report, in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on February 28, 2023 (the “2022 Annual Report”), and those reports filed after the date of this Quarterly Report. Actual results may differ materially from any forward-looking statement due to, among other things, the factors and risks described in our reports filed with the SEC.

The following management’s discussion and analysis of the Company’s financial condition and results of operations (“MD&A”) should be read in conjunction with the condensed consolidated balance sheet as of June 30, 2023 (unaudited) and the consolidated balance sheet as of December 31, 2022 (audited) and the related unaudited condensed consolidated statements of operations, comprehensive loss, and stockholders equity for the three and six months ended June 30, 2023 and 2022, and cash flows for the six months ended June 30, 2023 and 2022 and the related notes thereto (see Part I, Item 1. Financial Statements), as well as the audited consolidated financial statements of the Company for years ended December 31, 2022, 2021 and 2020, included in the Company’s 2022 Annual Report.

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Overview

Cryoport is a leading global provider of innovative products and services supporting the life sciences in the biopharma/pharma, animal health, and reproductive medicine markets. Our mission is to enable the future of medicine for a new era of life sciences. With 48 strategic locations covering the Americas, EMEA (Europe, the Middle East and Africa) and APAC (Asia Pacific), Cryoport's global platform provides mission-critical bio-logistics, bio-storage, bio-processing, and cryogenic systems to over 3,000 customers worldwide. Our platform of solutions and services together with our global team of over 1,000 dedicated colleagues delivers a unique combination of innovative supply chain technologies and services through our industry-leading brands, including Cryoport Systems, IntegriCellTM, CryoStork®, MVE Biological Solutions, CRYOPDP, and CRYOGENE.

Cryoport’s advanced temperature-controlled supply chain platform is designed to support the global distribution of high-value commercial biologic and cell-based products and therapies regulated by the United States Food and Drug Administration (FDA), the European Medicines Association (EMA) and other international regulatory bodies. Cryoport’s solutions are also relied upon for the support of pre-clinical, clinical trials, Investigational New Drug Applications (IND), Biologics License Applications (BLA), and New Drug Applications (NDA) with the FDA, as well as global clinical trials initiated in other geographies, where strict regulatory compliance and quality assurance is mandated.

Over the last several years, we have grown to become a leader in supporting the clinical trials and commercial launches of cell and gene therapies globally. As of June 30, 2023, we supported 668 clinical trials, of which 82 were in Phase 3, and twelve (12) commercial therapies. We believe regenerative medicine advanced therapies that successfully advance through the clinical trial process and receive commercial approval from the respective regulatory agencies will represent opportunities to become significant revenue drivers for us as the majority of them will require comprehensive temperature-controlled supply chain support and other services at commercial scale. Additionally, we expect that most will select us as their critical supply chain solution partner as a result of our work in connection with their respective clinical trials and our long track record of innovation and market responsiveness.

In addition, Cryoport also supports the animal health market and the human reproductive market on a global basis with its advanced supply chain platform. The animal health market is mainly composed of supporting animal husbandry, as well as companion and recreation animal health. The human reproductive market is largely composed of In-Vitro Fertilization (IVF) support for patients and clinics.

Cryoport’s mission is to enable the life sciences to save and improve lives around the world by providing certainty throughout the temperature-controlled supply chain. Our people, innovative solutions, and industry leading technologies have been designed to exceed current standards to deliver certainty and de-risk the process across the entire temperature-controlled supply chain for the life sciences.

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The Markets We Serve

Cryoport serves the life sciences industry as a trusted provider of integrated temperature-controlled supply chain solutions supporting the biopharma/pharma, animal health, and reproductive medicine markets.

Biopharma/Pharma. In the biopharma/pharma market, we are focused on supporting biopharma/pharma companies, primarily, in the saving of lives. From clinical research and development to clinical research organizations, to clinical trials for cell and gene therapies, to the storage and delivery of life-saving commercial cell and gene therapies, to the customers of biopharmaceutical /pharmaceutical organizations, to crucial points of care, we strive to address fundamental to advanced temperature-controlled storage, transport, packaging, fulfillment, and information challenges. Cell and gene therapies have become a rapidly growing area of biological drug development, with over $12 billion in funding raised in 2022. There were 1,457 cell and gene therapy developers worldwide, as reported by the Alliance for Regenerative Medicine (ARM) in its State of the Industry Briefing published on January 9, 2023. These developers have certain supply chain challenges that we believe our solutions are well tailored to address.

●

Cell Therapies. As per ARM, cell therapy is “the administration of viable, often purified cells into a patient’s body to grow, replace, or repair damaged tissue for the treatment of a disease. Cell therapies may be autologous, meaning that the patient receives cells from their own body, or they may be allogeneic, meaning the patient receives cells from a donor. Allogeneic cell therapies are often referred to as off-the-shelf therapies, as they are derived from a donor who is not the patient, enabling advance preparation and available to the patient immediately at the time of need.”

●

Gene Therapies. As per ARM, “gene therapy seeks to modify or introduce genes into a patient’s body with the goal of durably treating, preventing, or potentially even curing disease, including several types of cancer, viral diseases, and inherited disorders.”

Animal Health. In the animal health market, we provide support for animal reproduction, which primarily involves the production of protein. We also support medicine for the health of recreational and companion animals. Animal disease prevention and control rely on the safe transport and storage of vaccines and other biological materials around the world. Our secure temperature-controlled supply chain solutions are designed to help avoid costly delays through nonstop monitoring and complete fleet management from and to the origin and destination points as well as provide cryobiological storage equipment.

Reproductive Medicine. In the human reproductive medicine market, we are focused on supporting the creation of human life. This is primarily accomplished by supporting IVF, and related technologies, along with fertility networks globally. IVF materials receive one-on-one handling and individualized attention during the entire logistics process.

Impact of COVID-19

In late 2019, a novel strain of coronavirus that causes coronavirus disease (COVID-19) was reported to have surfaced in Wuhan, China, which has since spread globally. Subsequently, new variants of COVID-19, which are significantly more contagious than previous strains, have emerged. The spread of these new strains initially caused many government authorities and businesses to reimplement prior restrictions, or impose new restrictions, in an effort to lessen the spread of COVID-19 and its variants. While many of these restrictions have been lifted, there continues to be significant uncertainty related to the ultimate duration and impact that this global pandemic will have on future results of our operations, including due to future actions that may be taken by government authorities and businesses in response to surges in COVID-19 cases. Further, virus containment efforts as a result of governmental actions or policies or other initiatives have led to the disruption in the global supply chain and as a result, we have experienced difficulties sourcing materials and equipment, have experienced delays in transportation and increased transportation costs and may incur additional direct costs to provide our solutions in the future. See “Risk Factors—Risk Related to Our Business—We depend on the availability of certain component products used in our solutions; delays or increased costs in the procurement of components manufactured by third parties could adversely affect our business operations, financial performance and results of operations, and we may experience customer dissatisfaction and harm to our reputation” in Part I, Item 1A of our 2022 Annual Report for additional information. Additionally, during the course of the pandemic, certain of our facilities have experienced disruptions such as our MVE Biological Solutions manufacturing facility in Chengdu, China that was temporarily impacted by COVID lockdowns in China during the third quarter of 2022 and similar disruptions could occur in the future.

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We continue to monitor the evolving situation caused by the COVID-19 pandemic, and we may take further actions required by governmental authorities or that we determine are prudent to support the well-being of our employees, customers, suppliers, business partners and others. The degree to which COVID-19 impacts our business operations, financial performance and results of operations will depend on future developments, which are highly uncertain, continuously evolving and cannot be predicted, including, but not limited to, the duration and spread of the COVID-19 outbreak and its variants; its severity; the actions to contain the virus or treat its impact, such as the availability and efficacy of vaccines (particularly with respect to emerging strains of the virus), and the potential hesitancy to utilize them; other protective actions taken to contain the virus or treat its impact, such as restrictions on travel and transportation; general economic factors, such as increased inflation; supply chain constraints; labor supply issues; and how quickly and to what extent normal economic and operating conditions can resume. See “Risk Factors—Risk Related to Our Business—Our business operations, financial performance and results of operations, have been adversely affected and could in the future be materially adversely affected by the COVID-19 pandemic” and the other risk factors discussed in Part I, Item 1A of the 2022 Annual Report for additional information.

MVE Biological Solutions Fire

On January 25, 2022, a fire occurred at the MVE Biological Solutions manufacturing facility located in New Prague, Minnesota (“New Prague fire”). The New Prague facility manufactures aluminum dewars and is one of MVE Biological Solutions’ three global manufacturing facilities. There were no injuries reported and damage was limited to a portion of the facility. As a consequence of the fire damage, the New Prague manufacturing operations were curtailed on an interim basis until the necessary repairs were completed. Production was resumed at the facility during the week of February 14, 2022 and ramped up production toward the end of the first quarter of 2022. The Company estimated a revenue impact of approximately $9.4 million, primarily limited to the first quarter of 2022.

Russian Invasion of Ukraine

On February 24, 2022, Russian forces launched significant military actions against Ukraine, and sustained conflict and disruption in the region is likely. Additionally, the U.S. and foreign government bodies in jurisdictions in which we operate have implemented targeted sanctions and export control measures and have announced potential additional sanctions and export control measures, which have and could in the future result in, among other things, severe or complete restrictions on exports to and other commerce and business dealings involving Russia, certain regions of Ukraine, and/or particular entities and individuals. The impact of these government measures, as well as any further retaliatory actions taken by Russia and the U.S. and foreign government bodies, is currently unknown. Potential impacts related to the conflict could include additional unilateral or multilateral export control and sanctions measures, market disruptions, including significant volatility in commodity prices, credit and capital markets, supply chain and logistics disruptions, adverse global economic conditions resulting from escalating geopolitical tensions and the exclusion of Russian financial institutions from the global banking system, volatility and fluctuations in foreign currency exchange rates and interest rates, inflationary pressures on raw materials and heightened cybersecurity threats, which could adversely impact our business, financial condition or results of operations, in particular, CRYOPDP’s business activities in Russia, as well as our other European business operations.

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Results of Operations

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

The following table summarizes certain information derived from our unaudited condensed consolidated statements of operations (in thousands):


	Three Months Ended June 30,
	2023		2022		$ Change		% Change

	($ in 000’s)
Service revenues	$	35,204	$	34,585	$	619	1.8	%
Product revenues		21,817		29,568		(7,751)	(26.2)	%
Total revenues		57,021		64,153		(7,132)	(11.1)	%

Cost of service revenues		(20,008)		(19,111)		(897)	4.7	%
Cost of product revenues		(12,280)		(16,204)		3,924	(24.2)	%
Total cost of revenues		(32,288)		(35,315)		3,027	(8.6)	%

Gross margin		24,733		28,838		(4,105)	(14.2)	%
Selling, general and administrative		(38,802)		(30,563)		(8,239)	27.0	%
Engineering and development		(4,263)		(3,522)		(741)	21.1	%
Investment income		2,647		2,048		599	29.2	%
Interest expense		(1,331)		(1,586)		255	(16.1)	%
Other income (expense), net		(704)		(4,028)		3,324	(82.5)	%
Provision for income taxes		(635)		(364)		(271)	74.6	%

Net loss	$	(18,355)	$	(9,177)	$	(9,178)	100	%
Paid-in-kind dividend on Series C convertible preferred stock		(2,000)		(2,000)		—	—	%
Net loss attributable to common stockholders	$	(20,355)	$	(11,177)	$	(9,178)	82.1	%

Total revenues by market (in thousands):


	Three Months Ended June 30,
	2023		2022		$ Change		% Change
Biopharma/Pharma	$	46,533	$	52,591	$	(6,058)	(11.5)	%
Animal health		7,873		9,285		(1,412)	(15.2)	%
Reproductive medicine		2,615		2,277		338	14.8	%
Total revenues	$	57,021	$	64,153	$	(7,132)	(11.1)	%

Revenues. Revenues decreased by $7.1 million, or 11.1%, from $64.2 million to $57.0 million for the three months ended June 30, 2023, as compared to the same period in 2022.

Revenues by type

Service revenues increased by $0.6 million, or 1.8%, from $34.6 million to $35.2 million for the three months ended June 30, 2023, as compared to the same period in 2022. Bioservices revenue increased by $0.9 million, or 38%, to $3.2 million and revenue from the support of commercial cell and gene therapies increased by $0.4 million, or 9.2%, to $4.3 million. These increases were partially offset by clinical trial start delays and slower than expected ramps from certain clients.

Product revenues decreased $7.8 million, or 26.2%, from $29.6 million to $21.8 million for the three months ended June 30, 2023, as a result of decreased demand for cryogenic systems, particularly in China where product revenues through direct and indirect channels decreased by $5.8 million, or 67%. Product revenues consists primarily of revenue from our portfolio of cryogenic stainless-steel freezers, aluminum dewars and related ancillary equipment used in the storage and transport of life sciences commodities, which includes the rapidly growing cell and gene therapy market through a global network of distributors and direct client relationships.

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Revenues by market

Revenue from the biopharma/pharma market decreased $6.1 million, or 11.5%, from $52.6 million to $46.5 million for the three months ended June 30, 2023, as compared to the same period in 2022. Revenue was impacted by decreased demand for cryogenic systems, particularly in China, where product revenues through direct and indirect channels decreased by $4.9 million, or 81%, clinical trial start delays; and slower than expected ramps of products from certain clients. This was partially offset by the support of commercially launched therapies as well as demand for our bioservices solutions. We now support 668 clinical trials, of which 515 trials are in the Americas, 109 are in EMEA and 44 are in APAC, compared to 626 clinical trials supported as of June 30, 2022 (488 in the Americas, 104 in EMEA and 34 in APAC). The number of Phase 3 clinical trials supported was 82 trials as of June 30, 2023, of which 58 were in the Americas, 22 in EMEA, and 2 in APAC. This compares to 81 Phase 3 trials (59 in the Americas, 20 in EMEA and 2 in APAC) supported as of June 30, 2022. The activity in the clinical trial space, particularly in the Cell and Gene Therapy market is expected to drive future revenue growth as these clinical trials advance and resulting therapies are commercialized on a global basis.

Our revenue from the animal health market decreased $1.4 million, or 15.2%, from $9.3 million to $7.9 million for the three months ended June 30, 2023, as compared to the same period in 2022. This decrease was a result of weaker than expected demand for cryogenic systems from breeders.

Revenues in the reproductive medicine market increased $0.3 million, or 14.8%, from $2.3 million to $2.6 million for the three months ended June 30, 2023, as compared to the same period in 2022. This increase was driven by demand for our CryoStork^® logistics solution. In April 2023, Cryoport signed a three-year agreement with Boston IVF, a fertility treatment provider. Utilizing Cryoport's end-to-end supply chain solutions, Boston IVF plans to integrate its regional and satellite labs across the United States. In addition, in June 2023, Cryoport was selected by IVFAustralia as its exclusive supply chain solutions partner for its global reproductive material shipments.

Gross margin and cost of revenues. Gross margin for the three months ended June 30, 2023 was 43.4% of total revenues, as compared to 45.0% of total revenues for the three months ended June 30, 2022. Cost of total revenues decreased $3.0 million to $32.3 million for the three months ended June 30, 2023, as compared to $35.3 million in the same period in 2022, as a result of the decrease in revenue over the prior year.

Gross margin for our service revenues was 43.2% of service revenues, as compared to 44.7% of service revenues for the three months ended June 30, 2022. Our cost of revenues is primarily comprised of freight charges, payroll and associated expenses related to our global logistics and supply chain centers, depreciation expenses of our Cryoport Express^® Shippers and supplies and consumables used for our solutions.

Gross margin for our product revenues was 43.7% of product revenues, as compared to 45.2% of product revenues for the three months ended June 30, 2022. Product revenues, related cost of revenues and resulting gross margins were primarily driven by our MVE Biological Solutions business. Our cost of product revenues were primarily comprised of materials, direct and indirect labor, inbound freight charges, purchasing and receiving, inspection, and distribution and warehousing of inventory. In addition, shop supplies, facility maintenance costs and depreciation expense for assets used in the manufacturing process were included in cost of product revenues.

Selling, general and administrative expenses. Selling, general and administrative (“SG&A”) expenses include the costs associated with selling our services and products, costs required to support our marketing efforts including legal, accounting, patent, and shareholder services, amortization of intangible assets and other administrative functions.

SG&A expenses increased by $8.2 million, or 27.0% as compared to the same period in 2022. This increase was driven by the further buildout of our competencies and infrastructure to support the continuing scaling of our business and demand for Cryoport’s systems and solutions and integration and acquisition costs. Integration and acquisition costs increased by $3.8 million for the three months ended June 30, 2023 as compared to the same period in 2022, primarily a result of actively exploring a strategic business opportunity. Wages and associated employee costs increased $1.4 million from $13.3 million in 2022 to $14.7 million in 2023. Facility and other overhead allocations increased $1.0 million, primarily driven by our facility expansions in Houston, Texas and Morris Plains, New Jersey, depreciation and amortization increased $0.7 million, primarily due to additional fixed assets purchased or acquired in our recent business acquisitions and the launch of Cryoportal® 2 Logistics Management Platform, stock-based compensation expense increased $0.5 million and public company-related expenses (including legal, audit and internal control audit fees) increased $0.5 million.

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Engineering and development expenses. Engineering and development expenses increased $0.7 million, or 21.1%, for the three months ended June 30, 2023, as compared to the same period in 2022. The increase was primarily due to an increase of $0.3 million in consulting, prototype and development costs directed at further enhancing our logistics and supply chain solutions and $0.3 million in wages and associated employee costs to add software development and engineering resources. We continually strive to improve and expand the features of our Cryoport Express® Solutions and portfolio of services and suite of temperature-controlled products. Our primary developments are directed towards facilitating the safe, reliable and efficient transport and storage of life science commodities through innovative and technology-based solutions. This includes significantly enhancing our Cryoportal® Logistics Management Platform and related technology solutions as well as developments to expand our Cryoport Express® and Cryoport ELITE™ shipper fleet, such as the Cryoport ELITE™ Ultra Cold, an advanced shipper targeted for the gene therapy market and the Cryoport ELITE™ Cryosphere™ shipper, a cryogenic dry-vapor shipper targeted for the cell therapy market utilizing patent pending technology that passively stabilizes the payload through an internal gravitational sphere, thereby further mitigating transport risks for high valued, lifesaving cell therapies. In addition, engineering and development efforts are also focused on MVE Biological Solutions’ portfolio of advanced cryogenic systems, including stainless-steel freezers, aluminum dewars, monitoring systems and related ancillary equipment used in the storage and transport of life sciences commodities. We supplement our internal engineering and development resources with subject matter experts and consultants to enhance our capabilities and shorten development cycles.

Investment Income. Investment income increased by $0.6 million for the three months ended June 30, 2023, as compared to the prior year as a result of higher average invested cash balances and higher interest rates on such invested cash balances.

Interest expense. Interest expense remained flat at $1.3 million for the three months ended June 30, 2023, as compared to the prior year.

Other income (expense), net. Other income (expense), net increased by $3.3 million for the three months ended June 30, 2023, as compared to the prior year. This was primarily due to an increase of $2.3 million in short-term investment net gains, and an increase in foreign currency fluctuations of $0.9 million.

Provision for income taxes. The provision for income taxes increased $0.3 million for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, resulting in effective tax rates of negative 3.6% and negative 4.1%, respectively. The increase in tax expense and effective tax rate for the three months ended June 30, 2023, as compared to the prior year is due to higher taxable foreign earnings and a decrease in our domestic losses. The negative effective tax rate of 3.6% for the three months ended June 30, 2023, differed from the U.S. federal statutory rate of 21% primarily due to changes in the valuation allowance that we maintain against our deferred tax assets, income earned by certain foreign subsidiaries being taxed at different rates than the U.S. federal statuary rate, and excess tax benefits associated with share-based compensation.

Paid-in-kind dividend on Series C convertible preferred stock. The paid-in-kind dividend relates to the private placement of Series C Preferred Stock with Blackstone.

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Six months ended June 30, 2023 compared to six months ended June 30, 2022:

The following table summarizes certain information derived from our unaudited condensed consolidated statements of operations (in thousands):


	Six Months Ended June 30,
	2023		2022		$ Change		% Change

	($ in 000’s)
Service revenues	$	71,040	$	67,495	$	3,545	5.3	%
Product revenues		48,798		48,960		(162)	(0.3)	%
Total revenues		119,838		116,455		3,383	2.9	%

Cost of service revenues		(39,084)		(37,829)		(1,255)	3.3	%
Cost of product revenues		(28,949)		(27,447)		(1,502)	5.5	%
Total cost of revenues		(68,033)		(65,276)		(2,757)	4.2	%

Gross margin		51,805		51,179		626	1.2	%
Selling, general and administrative		(72,043)		(57,185)		(14,858)	26.0	%
Engineering and development		(8,139)		(7,060)		(1,079)	15.3	%
Investment income		5,114		3,312		1,802	54.4	%
Interest expense		(2,840)		(3,077)		237	(7.7)	%
Other income (expense), net		3,301		(9,045)		12,346	(136.5)	%
Provision for income taxes		(1,127)		(705)		(422)	59.9	%

Net loss	$	(23,929)	$	(22,581)	$	(1,348)	6.0	%
Paid-in-kind dividend on Series C convertible preferred stock		(4,000)		(4,000)		—	—	%
Net loss attributable to common stockholders	$	(27,929)	$	(26,581)	$	(1,348)	5.1	%

Total revenues by market (in thousands):


	Six Months Ended June 30,
	2023		2022		$Change		% Change
Biopharma/Pharma	$	97,655	$	95,601	$	2,054	2.1	%
Animal health		16,736		16,079		657	4.1	%
Reproductive medicine		5,447		4,775		672	14.1	%
Total revenues	$	119,838	$	116,455	$	3,383	2.9	%

Revenues. Revenues increased by $3.4 million, or 2.9%, from $116.5 million to $119.8 million for the six months ended June 30, 2023, as compared to the same period in 2022. This increase over the prior year period was a result of the recovery from the New Prague Fire that negatively impacted the first quarter of 2022 by approximately $9.4 million. This increase was partially offset by decreased demand for cryogenic freezer systems during the second quarter of 2023, particularly in China.

Revenues by type

Service revenues increased by $3.5 million, or 5.3%, from $67.5 million to $71.0 million for the six months ended June 30, 2023, as compared to the same period in 2022. This increase was driven by customer demand for our supply chain solutions provided by Cryoport Systems, CRYOPDP, and CRYOGENE.

Product revenues decreased 0.3% from $49.0 million to $48.8 million for the six months ended June 30, 2023. Product revenues consists primarily of revenue from our portfolio of cryogenic stainless-steel freezers, aluminum dewars and related ancillary equipment used in the storage and transport of life sciences commodities, which includes the rapidly growing cell and gene therapy market through a global network of distributors and direct client relationships.

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Revenues by market

Revenue from the biopharma/pharma market increased $2.1 million, or 2.1%, from $95.6 million to $97.7 million for the six months ended June 30, 2023, as compared to the same period in 2022. This increase was driven by revenue growth from the support of global clinical trials and commercially launched therapies as well as demand for our bioservices solutions, partially offset by decreased demand for cryogenic freezer systems during the second quarter of 2023, particularly in China. The activity in the clinical trial space, particularly in the Cell and Gene Therapy market is expected to drive future revenue growth as these clinical trials advance and resulting therapies are commercialized on a global basis.

Our revenue from the animal health market increased $0.7 million, or 4.1%, from $16.1 million to $16.7 million for the six months ended June 30, 2023, as compared to the same period in 2022. This increase reflects the impact of the New Prague Fire of approximately $2.4 million in the first quarter of 2022. This New Prague manufacturing facility ramped back up to full production by the end of March 2022.

Revenues in the reproductive medicine market increased $0.7 million, or 14.1%, from $4.8 million to $5.4 million for the six months ended June 30, 2023, as compared to the same period in 2022. This increase was driven by demand for our CryoStork^® logistics solution and cryogenic shippers.

Gross margin and cost of revenues. Gross margin for the six months ended June 30, 2023 was 43.2% of total revenues, as compared to 43.9% of total revenues for the six months ended June 30, 2022. Cost of total revenues increased $2.8 million to $68.0 million for the six months ended June 30, 2023, as compared to $65.3 million in the same period in 2022.

Gross margin for our service revenues was 45.0% of service revenues, as compared to 44.0% of service revenues for the six months ended June 30, 2022. Our cost of revenues is primarily comprised of freight charges, payroll and associated expenses related to our global logistics and supply chain centers, depreciation expenses of our Cryoport Express^® Shippers and supplies and consumables used for our solutions.

Gross margin for our product revenues was 40.7% of product revenues, as compared to 43.9% of product revenues for the six months ended June 30, 2022. The decrease was driven by unfavorable manufacturing variances during the first quarter of 2023, primarily as a result of inflationary pressures related to certain manufacturing costs and the buildup of safety stock during the second half of 2022, partially offset by favorable product mix. Product revenues, related cost of revenues and resulting gross margins were primarily driven by our MVE Biological Solutions business. Our cost of product revenues were primarily comprised of materials, direct and indirect labor, inbound freight charges, purchasing and receiving, inspection, and distribution and warehousing of inventory. In addition, shop supplies, facility maintenance costs and depreciation expense for assets used in the manufacturing process were included in cost of product revenues.

Selling, general and administrative expenses. Selling, general and administrative (“SG&A”) expenses include the costs associated with selling our products and services and costs required to support our marketing efforts including legal, accounting, patent, shareholder services, amortization of intangible assets and other administrative functions.

SG&A expenses increased by $14.9 million, or 26.0% as compared to the same period in 2022. This increase is driven by the further buildout of our competencies and infrastructure to support the continuing scaling of our business and demand for Cryoport’s systems and solutions. There was an increase in integration and acquisition costs of $4.8 million as compared to the same period in 2022. Wages and associated employee costs increased $4.7 million from $24.8 million in 2022 to $29.4 million in 2023. Facility and other overhead allocations increased $2.0 million, primarily driven by our facility expansions in Houston, Texas and Morris Plains, New Jersey, stock compensation expense increased $1.4 million, depreciation and amortization increased $1.2 million, primarily due to additional fixed assets purchased or acquired in our recent business acquisitions and the launch of Cryoportal^® 2 Logistics Management Platform in May 2023.

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Engineering and development expenses. Engineering and development expenses increased $1.1 million, or 15.3%, for the six months ended June 30, 2023, as compared to the same period in 2022. The increase was primarily due to an increase of $0.4 million in wages and associated employee costs to add software development and engineering resources, an increase of $0.2 million for consulting, prototype and development costs directed at further enhancing our logistics and supply chain solutions and an increase in facility costs and other overhead allocations of $0.1 million. We continually strive to improve and expand the features of our Cryoport Express^® Solutions and portfolio of services and suite of temperature-controlled products. Our primary developments are directed towards facilitating the safe, reliable and efficient transport and storage of life science commodities through innovative and technology-based solutions. This includes significantly enhancing our Cryoportal^® Logistics Management Platform and related technology solutions as well as developments to expand our Cryoport Express^® and Cryoport ELITE™ shipper fleet, such as the Cryosphere™ shipper, a cryogenic dry-vapor shipper utilizing patent pending technology that passively stabilizes the payload through an internal gravitational sphere, thereby further mitigating transport risks. In addition, engineering and development efforts are also focused on MVE Biological Solutions’ portfolio of advanced cryogenic stainless-steel freezers, aluminum dewars and related ancillary equipment used in the storage and transport of life sciences commodities. We supplement our internal engineering and development resources with subject matter experts and consultants to enhance our capabilities and shorten development cycles.

Investment Income. Investment income increased by $1.8 million, for the six months ended June 30, 2023, as compared to the prior year as a result of higher average invested cash balances and higher interest rates on such invested cash balances.

Interest expense. Interest expense remained flat at $2.8 million for the six months ended June 30, 2023, as compared to the prior year.

Other income (expense), net. Other income (expense), net increased by $12.3 million for the six months ended June 30, 2023, as compared to the prior year. This was primarily due to an increase of $8.7 million in short-term investment net gains, a gain on insurance claim of $2.6 million related to the New Prague fire, an increase in foreign currency fluctuations of $0.8 million and an increase in realized and unrealized gains of $0.6 million.

Provision for income taxes. The provision for income taxes increased $0.4 million for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, resulting in effective tax rates of negative 4.9% and negative 3.2%, respectively. The increase in tax expense and effective tax rate for the six months ended June 30, 2023, as compared to the prior year is due to higher taxable foreign earnings and a decrease in our domestic losses. The negative effective tax rate of 4.9% for the six months ended June 30, 2023, differed from the U.S. federal statutory rate of 21% primarily due to changes in the valuation allowance that we maintain against our deferred tax assets, income earned by certain foreign subsidiaries being taxed at different rates than the U.S. federal statuary rate, and excess tax benefits associated with share-based compensation.

Paid-in-kind dividend on Series C convertible preferred stock. The paid-in-kind dividend relates to the private placement of Series C Preferred Stock with Blackstone.

Non-GAAP Financial Measures

We provide adjusted EBITDA and revenue at constant currency, both non-GAAP financial measures, as supplemental measures to U.S. GAAP measures regarding our operating performance. Non-GAAP financial measures are not calculated in accordance with U.S. GAAP, are not based on any comprehensive set of accounting rules or principles and may be different from non-GAAP financial measures presented by other companies. Non-GAAP financial measures, including adjusted EBITDA and revenue at constant currency, should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP.

Adjusted EBITDA

Adjusted EBITDA is defined as net loss adjusted for interest expense, income taxes, depreciation and amortization expense, stock-based compensation expense, acquisition and integration costs, investment income, unrealized gain or loss on investments, foreign currency gain or loss and charges, gain on insurance claim, or gains resulting from non-recurring events.

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Management believes adjusted EBITDA provides a useful measure of our operating results, a meaningful comparison with historical results and with the results of other companies, and insight into our ongoing operating performance. Further, management and our board of directors utilize adjusted EBITDA to gain a better understanding of our comparative operating performance from period-to-period and as a basis for planning and forecasting future periods. Management believes adjusted EBITDA, when read in conjunction with our U.S. GAAP financials, is useful to investors because it provides a basis for meaningful period-to-period comparisons of our ongoing operating results, including results of operations, against investor and analyst financial models, identifying trends in our underlying business and performing related trend analyses, and it provides a better understanding of how management plans and measures our underlying business.

A reconciliation of adjusted EBITDA to net loss, the most directly comparable U.S. GAAP financial measure, is presented below.

Cryoport, Inc. and Subsidiaries

Adjusted EBITDA Reconciliation

(Unaudited, in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
GAAP net loss	$	(18,355)	$	(9,177)	$	(23,929)	$	(22,581)
Non-GAAP adjustments to net loss:
Depreciation and amortization expense		6,723		5,480		13,127		10,845
Acquisition and integration costs		4,372		566		5,629		823
Investment income		(2,647)		(2,048)		(5,114)		(3,312)
Unrealized (gain)/loss on investments		1,388		3,728		(36)		8,636
Gain on insurance claim		—		—		(2,642)		—
Foreign currency (gain)/loss		(753)		271		(596)		431
Interest expense, net		1,331		1,586		2,840		3,077
Stock-based compensation expense		5,800		5,258		10,984		9,383
Income taxes		635		364		1,127		705
Adjusted EBITDA	$	(1,506)	$	6,028	$	1,390	$	8,007

Revenue at Constant Currency

We believe that revenue growth is a key indicator of how our Company is progressing from period to period and we believe that the non-GAAP financial measure “revenue at constant currency” is useful to investors in analyzing the underlying trends in revenue. Under U.S. GAAP, revenues received in local (non-U.S. dollar) currency are translated into U.S. dollars at the average exchange rate for the period presented. As a result, fluctuations in foreign currency exchange rates affect the results of our operations and the value of our foreign assets and liabilities, which in turn may adversely affect results of operations and cash flows and the comparability of period-to-period results of operations. When we use the term “constant currency,” it means that we have translated local currency revenues for the current reporting period into U.S. dollars using the same average foreign currency exchange rates for the conversion of revenues into U.S. dollars that we used to translate local currency revenues for the comparable reporting period of the prior year.

Recent fluctuations in foreign currency exchange rates, including the increased strength of the U.S. dollar against the Euro, British Pound, Chinese Yuan, and Indian Rupee has adversely impacted our results of operations and cash flow from our operations in EMEA and APAC. For the three and six months ended June 30, 2023, our revenues would have been approximately $0.3 million and $1.7 million higher, respectively, in constant currency.

However, we also believe that data on constant currency period-over-period changes have limitations, particularly as the currency effects that are eliminated could constitute a significant element of our revenue and could significantly impact our performance. We therefore limit our use of constant currency period-over-period changes to a measure for the impact of currency fluctuations on the translation of local currency revenue into U.S. dollars. We do not evaluate our results and performance without considering both period-over-period changes in non-GAAP constant currency revenue on the one hand and changes in revenue prepared in accordance with U.S. GAAP on the other. We caution the readers of this report to follow a similar approach by considering revenue on constant currency period-over-period changes only in addition to, and not as a substitute for, or superior to, changes in revenue prepared in accordance with U.S. GAAP.

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Cryoport, Inc. and Subsidiaries

Revenues by Market at Constant Currency

(Unaudited, in thousands)


	Three Months Ended June 30, 2023
	Biopharma/			Animal			Reproductive
	Pharma			Health			Medicine			Total
As Reported	$	46,533		$	7,873		$	2,615		$	57,021
Non-GAAP Constant Currency		46,710			7,997			2,612			57,319
FX Impact [$]	$	(177)		$	(124)		$	3		$	(298)
FX Impact [%]		(0.4)	%		(1.6)	%		0.1	%		(0.5)	%


	Six Months Ended June 30, 2023
	Biopharma/			Animal			Reproductive
	Pharma			Health			Medicine			Total
As Reported	$	97,655		$	16,736		$	5,447		$	119,838
Non-GAAP Constant Currency		98,994			17,129			5,453			121,576
FX Impact [$]	$	(1,339)		$	(393)		$	(6)		$	(1,738)
FX Impact [%]		(1.4)	%		(2.4)	%		(0.1)	%		(1.5)	%

Liquidity and Capital Resources

As of June 30, 2023, the Company had cash and cash equivalents of $67.3 million, $437.4 million in short-term investments and had working capital of $544.9 million. We expect to continue to incur significant expenses in the foreseeable future and to incur operating losses in the near term while we make investments in new supply chain initiatives, geographic expansion and technology to support our anticipated growth. Historically, we have financed our operations primarily through sales of equity securities and debt instruments.

The Company’s management recognizes that the Company may need to obtain additional capital to fund its operations and potential acquisitions until sustained profitable operations are achieved. Additional funding plans may include obtaining additional capital through equity and/or debt funding sources. No assurance can be given that additional capital, if needed, will be available when required or upon terms acceptable to the Company. The Company’s management believes that, based on its current plans and assumptions, the current cash and cash equivalents on hand, short-term investments, together with projected cash flows, will satisfy our operational and capital requirements for at least the next twelve months.

Cash flows Summary


	For the Six Months Ended June 30,
	2023		2022		$ Change

		(in thousands)
Operating activities	$	(1,280)	$	(6,487)	$	5,207
Investing activities		32,295		(60,940)		93,235
Financing activities		1,219		(33,409)		34,628
Effect of exchange rate changes on cash and cash equivalents		(1,515)		(1,231)		(284)
Net increase in cash and cash equivalents	$	30,719	$	(102,067)	$	132,786

Operating activities

For the six months ended June 30, 2023, our cash used in operating activities of $1.3 million, reflects the net loss of $23.9 million offset by non-cash expenses of $26.2 million primarily comprised of $13.1 million of depreciation and amortization, $11.0 million of stock-based compensation, $2.3 million of non-cash operating lease expense, insurance proceeds of $1.2 million for operations related to the fire at our New Prague, Minnesota manufacturing plant in January 2022 which was partially offset by a gain on the insurance settlement of $2.6 million. Also contributing to the cash impact of our net operating loss, excluding non-cash items was a decrease in accounts payable and accrued expenses of $2.9 million, a decrease in operating lease liabilities of $2.1 million, and an increase in inventory of $1.2 million, which were partially offset by a decrease in prepaids and other current assets of $1.3 million and a decrease in accounts receivable of $1.1 million.

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Investing activities

Net cash provided by investing activities of $32.3 million during the six months ended June 30, 2023 was primarily due to the maturity of short-term investments of $52.5 million which was partially offset by software development costs for our Cryoportal^® 2 Logistics Management Platform, facility expansions (including leasehold improvements, furniture and equipment) and additional purchases of Cryoport Express^® Shippers, Smart Pak II^TM Condition Monitoring Systems, freezers and computer equipment for $20.8 million.

Financing Activity

Net cash provided by financing activities totaled $1.2 million during the six months ended June 30, 2023, as a result of proceeds of $1.3 million from the exercise of stock options partially offset by the repayment of notes payable and capital lease obligations.

Repurchase Program

On March 11, 2022, the Company announced that its board of directors authorized a repurchase program (the “Repurchase Program”) through December 31, 2025, authorizing the repurchase of common stock and/or convertible senior notes in the amount of up to $100.0 million from time to time on the open market or otherwise, in such quantities, at such prices, and in such manner as determined by the Company’s management at its discretion. The size and timing of any repurchase will depend on a number of factors, including the market price of the Company’s common stock, general market and economic conditions, and applicable legal requirements. The Company purchased an aggregate of 1,604,994 shares of its common stock under the Repurchase Program through December 31, 2022, at an average price of $23.63 per share, for an aggregate purchase price of $37.9 million. The Company purchased 1,341,571 shares of its common stock under the Repurchase Program during the six months ended June 30, 2022, at an average price of $24.84 per share, for an aggregate purchase price of $33.3 million. These shares were returned to the status of authorized but unissued shares of common stock. There were no shares repurchased during the six months ended June 30, 2023.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk for the effect of interest rate changes, foreign currency fluctuations, and changes in the market values of our investments.

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio and our long-term debt. Our long-term debt is carried at amortized cost and fluctuations in interest rates do not impact our consolidated financial statements. However, the fair value of our debt, which pays interest at a fixed rate, will generally fluctuate with movements of interest rates, increasing when interest rates are declining and declining when interest rates are increasing. We invest our excess cash in high investment grade money market funds and investment grade short to intermediate-term fixed income securities. Fixed income securities may have their fair market value adversely affected due to a rise in interest rates, and we may suffer losses if forced to sell securities that have declined in market value due to changes in interest rates. As of June 30, 2023, the estimated fair value of the Convertible Senior Notes was $320.7 million. For additional information about the Convertible Senior Notes, see Note 11 in our accompanying consolidated financial statements.

Foreign Exchange Risk

We operate in the United States and other foreign countries, which creates exposure to foreign currency exchange fluctuations. Net sales and related expenses generated from our international business are primarily denominated in the functional currencies of the corresponding subsidiaries and primarily include Euros, British Pounds, Chinese Yuan, and Indian Rupee. The results of operations of, and certain of our intercompany balances associated with, our internationally focused business are exposed to foreign exchange rate fluctuations. Upon consolidation, as foreign exchange rates vary, revenues and other operating results may differ materially from expectations and we may record material gain or losses on the remeasurement of intercompany balances. For example, for the six months ended June 30, 2023, revenues from our international business, which accounted for 39% of our consolidated revenues, decreased by $0.2 million in comparison with the same period in the prior year as a result of fluctuations in foreign exchange rates. The impact of fluctuations in foreign exchange rates is derived by applying the average currency rates for the same period of the prior year to the current period revenues.

We have foreign exchange risk related to foreign-denominated cash and cash equivalents. Based on the foreign-denominated cash balance of as of June 30, 2023, of $25.9 million, an assumed 5%, 10%, and 20% adverse change to foreign exchange would result in declines of $1.3 million, $2.6 million and $5.2 million, respectively, reported as accumulated other comprehensive income (loss) and included as a separate component of stockholders’ equity.

We have foreign exchange risk related to our long and short-term foreign-denominated intercompany loan balances. Based on the long-term intercompany loan balances as of June 30, 2023, an assumed 5%, 10%, and 20% adverse change to foreign exchange would result in losses of $4.2 million, $8.4 million, and $16.8 million, respectively, reported as accumulated other comprehensive income (loss). Based on the short-term intercompany loan balances as of June 30, 2023, an assumed 5%, 10%, and 20% adverse change to foreign exchange would result in losses of $1.7 million, $3.5 million, and $6.9 million, respectively, reported as “Other income (expense), net”.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2023. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2023.

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In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in internal control over financial reporting.

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the ordinary course of business, we are at times subject to various legal proceedings and disputes, including product liability claims. We currently are not aware of any such legal proceedings or claim that we believe will have, individually or in the aggregate, a material adverse effect on our business, operating results or cash flows. It is our practice to accrue for open claims based on our historical experience and available insurance coverage.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors described in Part I, Item 1A, Risk Factors, in the 2022 Annual report which could materially and adversely affect our business, financial condition and results of operations. These risk factors do not identify all of the risks that we face. Our business, financial condition and results of operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial.

Risks Related to Our Business

An impairment of our goodwill or intangible assets could have a material non-cash adverse impact on our results of operations.

We assess goodwill for impairment on an annual basis in the fourth quarter or more frequently if we believe indicators of impairment exist. In addition, intangible assets and their related useful lives are reviewed at least annually to determine whether there are any adverse conditions that would indicate the carrying value of these assets may not be recoverable. Our valuation methodology for assessing impairment requires management to make judgments and assumptions based on experience and to rely heavily on projections of future operating performance. Because we operate in highly competitive environments, projections of our future operating results and cash flows may vary significantly from our actual results. If in future periods we determine that our goodwill or intangible assets are impaired, we will recognize a non-cash impairment charge with respect to these assets, which would adversely affect our results of operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent Sale of Unregistered Securities

There were no unregistered sales of equity securities during the quarter ended June 30, 2023.

Issuer Purchases of Equity Securities

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

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ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable

ITEM 5. OTHER INFORMATION

Insider Trading Arrangements and Policies

During the three months ended June 30, 2023, none of our directors or officers (as defined in Exchange Act Rule 16a-1(f)) adopted or terminated a “Rule 10b5–1 trading arrangement” or a “non-Rule 10b5–1 trading arrangement,” each as defined in Item 408 of Regulation S-K of the Securities Act of 1933, as amended.

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ITEM 6. EXHIBITS


Exhibit
Index

10.1		First Amendment to Employment Agreement dated March 24, 2023 between Cryoport, Inc. and Robert Stefanovich. Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated March 28, 2023.

16.1		Letter to Securities and Exchange Commission from Ernst & Young LLP, dated March 15, 2023. Incorporated by reference to Exhibit 16.1 of the Company’s Current Report on Form 8-K dated March 15, 2023.

31.1+		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2+		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1+		Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS+		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH+		Inline XBRL Taxonomy Extension Schema Document.

101.CAL+		Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF+		Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB+		Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE+		Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104+		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

+	Filed or furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	Cryoport, Inc.

Dated: August 9, 2023

	By:	/s/ Jerrell W. Shelton
		Jerrell W. Shelton
		President and Chief Executive Officer

Dated: August 9, 2023

	By:	/s/ Robert S. Stefanovich
		Robert S. Stefanovich
		Chief Financial Officer