Good afternoon, and welcome to Cryoport's Fourth Quarter and Full Year 2023 Earnings Conference Call. All participants will start in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the Operator. As a reminder, this call is being recorded. I will now turn the call over to your host, Todd Fromer from KCSA Strategic Communications. Please go ahead.

Thank you, Operator. Before I get started with this, I just want to correct the record. This is the Cryoport First Quarter Earnings Conference Call. Before we get started, I would like everyone to remind everyone that this conference call contains certain forward-looking statements. All statements that address our operating performance, events or developments that we expect or anticipate occurring in the future are forward-looking statements. These forward-looking statements are based on management's beliefs and assumptions and not on information currently available to our management team. Our management team believes that these forward-looking statements are reasonable as and when made. However, you should not place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future results or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results, events and developments to differ materially from our historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in Item 1A, Risk Factors, and elsewhere in our annual report on Form 10-K filed with the Securities and Exchange Commission and those described from time to time in other reports which we file with the Securities and Exchange Commission. It is now my pleasure to turn the call over to Mr. Jerrell Shelton, Chief Executive Officer of Cryoport. Jerry, the floor is yours.

Thank you, Todd. Good afternoon, ladies and gentlemen. Thank you for joining our first quarter earnings call today. With us this afternoon is our Chief Financial Officer, Robert Stefanovich; our Chief Scientific Officer, Dr. Mark Sawicki; and our Vice President of Corporate Development and Investor Relations, Thomas Heinzen. As a reminder, we have uploaded our first quarter 2024 in review document to our website. It can be found under Investor Relations in the News & Events section. This document provides a review of our financial and operational performance and a general business outlook. If you have not had a chance to read it, I would encourage you to go to our website and download it. I will provide you with a brief update on our business, and then we will take your questions. For the first quarter of 2024, we continued to experience a difficult environment globally. Our quarterly results were disappointing across the board, particularly in our life science products. However, as we stated when we initially provided our annual guidance, we anticipate our total revenue will progressively improve throughout the year, and we maintain our full year revenue guidance of $242 million to $252 million. I am sure some of you are asking, what makes us confident? Well, there are several things. For example, despite the near-term challenges, we are still quite positive based on the momentum we're seeing from our cell and gene therapy clients and from the growth of our BioStorage/BioServices revenue. If you look at our results, you will see that our first quarter commercial therapies rose 9%, while BioStorage and BioServices revenue also rose by the same amount. Both these service areas should continue to be growth drivers for Cryoport in 2024 and beyond. We're also encouraged by new clients slated in the biopharma market and some positive signs recently in the cryogenic systems market. As I indicated, our Life Science Services revenue growth for the first quarter was softer than anticipated, increasing 3% year-over-year. There is, however, a bright spot as the cell and gene therapy market seems to be gaining some momentum again. To date this year, 3 new therapies have been approved, 3 existing commercial therapies were approved to move to an earlier line of treatment, and 2 therapies were approved to expand their label or geographic territory. By combining the expected revenue ramps of existing and new commercial therapies, we believe we should see revenue acceleration from our cell and gene therapy clients over the remainder of the year. Currently, we think an additional 16 global regulatory filings will be completed before year-end. As of March 31 of this year, Cryoport supported a total of 675 global clinical trials, a net increase of 23 clinical trials over the same time last year. As of the quarter end, 77 of these trials were in Phase 3, along with 312 of them in Phase 2. As we have said before, our clinical trial portfolio represents a substantial long-term revenue growth opportunity for Cryoport as more therapies advance through the clinical trials towards commercialization. Our outlook for the rest of the year with commercial therapies looks strong with potentially 5 additional new therapy approvals and 3 additional labels or geographic expansions. Turning to our Life Science products, similar to last quarter, this business revenue was lower than in prior years. This is due to decreased demand for MVE Biological Solutions cryogenic systems. This in turn was attributable to a continued slowdown in capital equipment investment that began last year. Although global in nature, as we have reported previously, the most severe pullback in demand continues to be in China. While we expect MVE's cryogenic systems sales to be challenged throughout the remainder of this year as biotech funding, government budgets, and academic budgets are constrained, we expect to see gradual improvement in demand in the ensuing quarters. MVE is a well-managed business, and we want to remind investors that even in this difficult time, it continues to produce free cash flow for our company. MVE is the leading manufacturer of cryogenic systems worldwide, and we are confident in the long-term prospects of our products business. And when demand normalizes, and we believe it will, we will benefit from our position as the global leader in this space. In summary, and to put it plainly, there is simply no other company with the extensive resources Cryoport has in providing a full array of innovative, reliable end-to-end supply chain solutions for the life sciences. With advanced services, products and information systems focused on reducing risk and located in 50 locations in 17 countries, Cryoport is well prepared to support the expansion of the life sciences and especially the growing cell and gene therapy market. Based on our clients' forecast and fueled by industry indicators for cell and gene therapies and the life sciences, we continue to build out services, products and infrastructure to prepare ourselves to provide comprehensive and dependable supply chain support for these life-saving treatments. However, considering the current macroeconomic challenges and their impact on our financial results, we are implementing a number of initiatives to drive toward positive adjusted EBITDA and cash flow in the near term. These include improved alignment of our global organization, reduction in our workforce, leveraging lower-cost shared services, refining and reprioritizing planned initiatives, and delays in capital spending as a result of reprioritization. All of which should positively impact the second half of 2024. We are mindful of our need to maintain a strong balance sheet to support our future growth, and we ended the quarter with a cash balance of $448.5 million. This concludes my prepared remarks. Now we're going to be happy to take questions from you. Operator, please open the lines for questions.

Thank you. Ladies and gentlemen, we will now conduct the question-and-answer session. (Operator Instructions) Your first question comes from Tejas Savant from Morgan Stanley.

This is Edmond on for Tejas. Thank you for the time. First question, could you guys provide some more color on how things played out at MVE? Where do customers stand today in terms of their need to expand their base capacity? And what do order books look like heading into the second half?

MVE? Okay, Tejas, repeat that question again, please. Just one second.

Sorry, Jerry, this is Edmond. But the question was, could you provide some more color on how things played out at MVE this quarter? Where do customers stand today in terms of their need to expand their fees and capacity? And what do order books look like heading into the second half of '24?

That's a great question. MVE regularly monitors its orders and maintains communication with its distributors and direct customers. Recently, there has been a decrease in funding from government agencies, institutions, and businesses, but we are starting to see signs of recovery. In the latter half of this quarter, we anticipate securing orders from large pharmaceutical companies and mid-sized biotechnology firms. Additionally, we expect some government spending to pick up in the second half of the year, which should lead to gradual improvements for MVE. Regarding our operations in China, the country is still facing a recession, and we do not foresee any improvement there for the rest of this year, likely extending into next year. The decline in biotech funding and new government programs have impacted our business as well. Nevertheless, we have strategies in place to effectively compete in the Chinese market. It's important to note that China currently contributes only about 5% of our total revenue.

Got it. That's very helpful. And then a higher-level question. Some of the traditional logistics companies such as UPS have recently expressed an interest in expanding into the healthcare vertical. Now, are there any opportunities for a company like Cryoport to work with those providers? Or do they represent more of a medium-term competitive threat to the business model?

Over the recent time, UPS has become more of a competitor or tried to at least. But we work with the integrators on a regular basis, and we have for 12 years since I took over the company. We've had strategic relationships with them, which we've talked about on a frequent basis. In some cases, we work more closely than in others. UPS has been the most aggressive due to the purchase of market, but they don't really pose a tremendous threat to us. We still use them as an integrator in many of our services.

They also use our equipment sets on a regular basis in conjunction with programs that they're supporting through their healthcare vertical.

That's an important point. That's MVE equipment.

Got it. And then one housekeeping question for the model. What percentage of the product revenue is from MVE and what percentage is from legacy Cryoport systems?

If you look at the product revenue, a significant majority, over 95% of the revenue, comes from MVE cryogenic systems.

Your next question comes from Matt Stanton from Jefferies.

I appreciate the color on focus near term on EBITDA and cash flow. It sounds like you have a number of initiatives in motion around that. Can you just help us quantify what the impact could start to look like on OpEx as we move into the back half of the year? Just trying to get a better understanding of what total cost savings or improvements we could start to bake into the P&L here.

Yes. No, thanks for the question. Look, at the current time, we obviously just provide guidance related to our annual revenue. But with that said, I can provide a little bit of information overall. We have been and are taking continuous actions and review of our initiatives, of our CapEx spending, pushing out some of the CapEx spending that is not driving kind of near-term revenue or is not critical to our near-term initiatives. If you look at the overall operating expense, a couple of things. One, we've been building out our infrastructure over the last couple of years as you know. And we're looking to see leverage of that infrastructure and capabilities that we built out. We expect to have that substantially complete in 2026. As revenue grows, we're going to see better operating leverage of the overall infrastructure that we set up. In terms of the specific question and modeling out the second half of the year, I would expect a drop in operating expenses. I can't tell you exactly the percentage. We'll provide some more clarity there. But certainly, we do expect to see an impact in the second half on the operating expenses.

Okay. Thanks. That's helpful. And then maybe back over to MVE. You talked about how sales kind of remain challenging there and a gradual improvement through the year. I think prior you guys have baked in kind of flattish growth in MVE for the year. Just given kind of the slower start, should we still expect MVE to be flattish in '24? Or is it down for the year? And I guess if it is now down in '24, what other areas are potentially offsetting that to reiterate the guide for the full year?

No, Matt, I think you can expect MVE to be flattish for 2024, and so you'll see that improvement in the last half, which will create that. And then I think we'll have some progression in 2025. Look, we went into a situation where the market pulled back in the second half of 2023 severely, and that probably had to do with some extra capacity buildup from COVID plus the economic situation, which caused people to pull back on budget and governments pulling back and so forth. But some of that is freeing up. At some point, you have to have more capacity. We do think it will be flattish in 2024 and improving in '25.

And the driver really for the revenue, especially in the second half of the year, is related to our services offering and revenue.

Okay, great. And maybe just one last quick one. The Phase 3 trials dropped to 77. I know you expect some normal kind of fallout in there. Any more color you can provide on just the gross and net numbers for Phase 3 in the quarter? And did it have any impact on 1Q revenue given those programs are generally a bit more meaningful than some of the earlier phase programs? Thank you.

We're still experiencing significant churn related to clinical trial activities. Looking at the results from the previous quarter, we terminated 42 trials, with 20 being completed and 22 being halted; most of the terminations were due to cash constraints. This has obviously affected some of our Phase 3 trials. However, we also reinstituted 42 programs, though there is a lag as they begin operations. Nonetheless, we did observe an impact from a few terminations in Phase 3, which influenced our expectations for growth, resulting in relatively flat results. The positive aspect is that the new programs being initiated are well-diversified and will start to contribute in the upcoming months.

Your next question comes from Puneet Souda from Leerink Partners.

This is Philip on for Puneet. Maybe just a high-level kind of question. Coming off a softer first quarter, you got an implied ramp in the second half that's a bit steeper. Can you just maybe give a bit more color on sort of the levers that gives you confidence to reiterate your guidance? Kind of if you expect MVE to improve sequentially in the second quarter, or if that still hasn't bottomed out? Or just kind of what are the different levers that will take us to the low end versus kind of like the high end of the guidance? Thank you.

Sure. I'll begin the response and then Robert and Mark may want to add their thoughts. Our outlook is informed by current industry trends as well as what we are observing from our cell and gene therapy clients. Considering these factors and given the current economic and geopolitical climate, we are optimistic. Numerous clients with commercial therapies are projecting a strong ramp-up in the second half of the year. Additionally, several new therapies have been approved recently, and their ramp-up should also contribute to our revenue growth later this year. There has been a significant increase in biotech funding in the first quarter, which we expect will have an impact later this year. We also plan to launch new products and services throughout the year that will generate additional revenue. Overall, we believe all our business segments will experience growth in 2024. As mentioned in the press release, our service business is expected to lead this growth, and I think Robert touched on that earlier. Robert, would you like to add anything?

No, I think you mentioned most of it. We do expect progressive improvement, and yes you're right, especially in the second half. And if you look at some of the core revenue drivers, commercial revenue, BioStorage/BioServices revenue. And even maybe a clarification on commercial revenue, you look at the commercial revenue growing 9% year-over-year, but we also take a look at the trailing 12 months revenue because you have some lumpiness there in terms of timing. When you look at 12 months over 12 months for Q1 over the 3 and 12 months last year, it grew about 27%. If you look at that, plus the additional BLA filings, MAA filings and expected approvals that we see this year, you'll see continuous momentum that will keep driving the services revenue to meet or beat our revenue guidance for the year.

Yes. Let me just add to that. Obviously, a lot of our commercial folks have come out with earlier line approvals. Obviously, BMS and J&J. Sarepta might have a significant expansion coming out after the end of the second quarter, all of which should contribute to increasing activities as it relates to commercial. And then obviously, the recent approvals for Iovance, CRISPR/Vertex, Bluebird, ImmunityBio and Atara are also going to start to contribute in a more meaningful way.

Got it. That makes sense. And then maybe just one follow-up housekeeping question. I guess I know you guys don't have too much exposure to China, but have you thought about kind of how much risk there is for the BIOSECURE Act and any retaliation to that for your business? Any initial disruption there?

Yes, we have given it considerable thought and have studied China extensively. China is the second most influential country globally and has a greater number of trading partners than the United States. It plays a crucial role and is here to stay. We have an investment in China, including a plant that is operated by skilled personnel. We are implementing an initiative to enhance our competitiveness in China, particularly in response to President Xi's push for domestic production. As a result, we will be manufacturing freezers in China for that market in the future. While there are risks associated with the Chinese market, we need to stay informed about the regulations and adapt accordingly. We won't return to a situation reminiscent of the 1930s and 1940s with China. It is essential to find ways to engage with that economy, evaluate the risks, and proceed with our plans. Currently, only about 5% of our revenue is exposed in China, but we believe there is significant potential for growth over time. The Chinese economy is in a recession now, but we expect it to recover eventually.

Your next question comes from Lucas Baranowski from UBS.

This is Lucas on for Dan Leonard at UBS. I guess to start things off, there's definitely been an increase in oil prices since the start of the year. Given that increase in costs, are you finding that you're able to pass that on to customers? And should we expect any kind of a margin impact there over the near term?

On extraordinary situations, we do have surcharges that we pass on where we pass on extra costs. I don't think you should expect margin impact from the petroleum increase.

Okay. And then just one more here. I guess going back to the China theme, you touched on it a bit, the initiative you have to begin manufacturing locally a little more over there. Are there any updates you can provide on how that's progressing and when that new capacity could come online?

Well, of course, it's a small initiative given the entirety of our company, and we are not in any hurry to make that investment right at this particular time. Although that motion is still active. You would see probably mid next year, you'd probably see made in China product coming out of the Chinese factory. In addition to doors, it would be freezers as well.

Your next question comes from David Larsen from BTIG.

Can you talk a little bit more about these cost reduction efforts? And I know that you've been very reluctant to reduce labor across your firm. That's certainly very admirable. But just any more color there would be helpful. Do you expect to become EBITDA positive by say 4Q of '24? Or any sense for the number of positions that might be reduced? Or anything like that would be very helpful. Thank you.

I want to share a few general thoughts before passing it to Robert for more detailed insights, David. Firstly, we are open to adapting our business based on our assessments of the circumstances. We take great pride in responsibly managing our business and the assets of our shareholders. It is our duty to act responsibly, and we take that commitment very seriously. As business conditions change, we adjust accordingly, as I outlined in my opening remarks with those specific initiatives. Now, to provide you with more details on your questions, I'll hand it over to Robert.

Yes, we are indeed working towards achieving positive EBITDA. This goal is primarily driven by our cost reduction initiatives and efforts to boost topline revenue. We regularly focus on these areas, but to provide some context, in Q1, we experienced a cash burn of just over $8 million, with more than $4 million allocated to CapEx expenditures. We're reducing some of the CapEx as previously mentioned, particularly in areas that are not high priority. Nevertheless, we continue to invest in key projects like IntegriCell and the cryopreservation processing platform, along with other important offerings that we have partially launched in the market. As with any company, especially one that has undergone multiple acquisitions, we are looking to maximize our existing capabilities and resources. Yes, we can leverage shared services, and we are working on refining and streamlining our resources. These efforts have already begun and we anticipate they will positively impact our EBITDA in Q2. We are also committed to maintaining a robust balance sheet and strong cash reserves, which is essential for our operational capabilities and investments.

Okay. That's helpful. And then can you maybe talk a little bit about the revenue that's being generated from BioStorage, BioServices and also IntegriCell? And any update on storing allogeneic therapies? I know obviously, 1/3 of your trials are allogeneic in nature, but in terms of storing that actual cell tissue, has that started yet? Any revenue coming from that yet?

Mark and Robert may have some additional comments here. They will provide those, David. However, IntegriCell is not generating revenue at the moment since it will not be operational until the latter half of the year, which will mark the start of a ramp-up period. Following that, you can expect to see significant revenue growth from IntegriCell over time. It is a much-needed service, and our partnerships and factory developments are progressing well. We have high hopes for IntegriCell. Regarding other matters, particularly BioServices, Mark is better positioned to discuss its progress.

I would like to address your question regarding allogeneic therapy and the related need for storage and fulfillment capabilities. Over the past year and a half, we have developed competencies in secondary labeling and packaging that are essential for distributing allogeneic therapy. These capabilities are currently utilized by both clinical and commercial clients in the U.S. and Europe. We have effectively transitioned our investment to provide direct support within the cell and gene therapy sector. At present, the only allogeneic product available is Atara, which targets a low-volume indication, meaning there won't be a significant financial impact in the near term. However, we anticipate that there will be contributions to BioServices in the long run for autologous therapies, as we are providing backup doses and other support, which could lead to additional revenue opportunities over time.

Lastly, maybe just to add there, you were looking for a dollar amount. The BioServices revenue grew 9% year-over-year to $3.5 million in the first quarter.

Okay. And I think that there were 2 large facilities that are fairly new that came online recently. One in Texas, one in New Jersey. Are those profitable now?

Look, we're still in the early stages of our BioServices initiatives. And both of those were introduced, and so we're really working towards filling up and bringing up the revenue in BioStorage/BioServices. We're in the early stages. When Mark was talking about utilizing them for the commercial therapies for example, this is all just now commencing. We're not, obviously not fully utilized at this point in time.

David, once we open those facilities, which occurred about a year ago in June, it typically takes 6 to 18 months for clients to start coming in. They need to conduct their audits and trial runs, and also adjust their traffic accordingly. We are just now beginning to ramp up. In BioServices, we always expected to see exponential growth, and I believe we are still near that critical point of growth, so you should see an increase over time.

I just want to comment on this. Over the last 12 months in those facilities, we've actually onboarded 27 clients.

Okay. And then just one more quick one. I think on last quarter's call, you talked about 9 new therapies for 2024 and 17 filings in 2024. Does that mean 9 new commercial therapies that you're supporting coming online in 2024? Is that what that means? And how is that number as of today? Is it still 9 and 17?

We have had, so far this year, 3 new therapies get approved. That's Casgevy, the CRISPR Vertex product, AMTAGVI from Iovance, and most recently, Anktiva from ImmunityBio. In our reporting today, we're saying we can see 5 more new therapies approved this year, so that would give you 8. But it has one I'll call it pushed out. It hasn't gone away. It's probably going to be a 2025. And right now, we're seeing 16 more filings in 2024.

Your next question comes from Paul Knight from KeyBanc.

Mark, I have a question for you to start. The customer count for the Phase 3 trial increased significantly by 5.6% according to that press release. Does this suggest that biotech is starting to receive funding and reenter the early stage trial business?

Well, we are seeing a lot of new money starting to come back into the space. We still see a lot of volatility and churn, as we had mentioned. We had a net add of 42 trials in the quarter with a net removal of 42 trials. Our whole focus is around playing the portfolio, which means the collective average so that we will have winners and users as it relates to those. But as long as we're supporting the vast majority of those trials in the space, then we're on the upside, and we remain confident in that. And with the funding position seeming to stabilize and improving in Q1, obviously we need to see if that's sustainable, that's a positive indicator.

And then I think the conference Deltia had around 8,000 employees, which is clearly a record. There were also non-employees and attendees, and I believe it was the American Society of Cell & Gene Therapy. Are you noticing an increase in potential customer interest?

Yes. I mean there's a lot of new start-ups, and so a significant percentage of those 42 new programs came from new clients, which is a very good sign.

What do you envision for the business in a few years, Jerry, considering the $7.7 million EBITDA loss? Are you aiming for a 30% EBITDA margin or a 25%?

Paul, our goals have not changed. I mean our goals are 55% to 60% gross margin and 30% adjusted EBITDA. Our goals have not changed, and we do examine them often, so that's the metrics that you should be looking for from us.

Your next question comes from Yuan Zhi from B. Riley.

Can you help us better understand the weakness in biologics services in 1Q? Was it because of lower volume? And how about the visibility and confidence in 2Q and beyond? And I have a follow-up.

Mark's going to answer your question, but this has to do with the report that you put out just recently I assume?

No, he's talking about BioServices. I'm sorry, can you repeat the question, guys? Because we're confused. I think it was a little garbled over here. I thought you said biologics and Jerry thought you said BioServices.

No, I thought you said biologics, he mentioned BioServices. Can you please repeat the question?

Yes. Can you help us better understand the weakness in bio logistics services? Was it because of lower volume? And how about the visibility and confidence in 2Q and beyond?

Okay, good. Okay, Mark can answer it now.

Biologistics revenue was softer than anticipated because we saw those 42 trial terminations and many of those were established programs with active volume that was ongoing. Those were replaced by 42 new starts, but those 42 new starts take time to ramp. And so just because we onboard them in the quarter, usually it's 1 to 2 quarters later before we start seeing a contribution as it relates to financial contribution. We'll see progressive improvement on that as those new programs come online.

Got it. And then on MVE, it seems now it's dropping from the last quarter and I'm just curious, was it because of canceling of orders or was it because the customers are not just there yet?

There was demand softness, continued demand softness. And again, mostly out of China, it was not cancellation of orders.

Got it. And one last one from us. For the goals to reduce some capital costs or reducing some costs in second half, I'm curious, will that impact the revenue part? Because if you are cutting workforce in sales and sales, it could have a certain degree of impact.

No. If you look at the actions that we're looking at related to as I mentioned, some of the CapEx that we're moving out, these are not initiatives that will have an impact on our near-term revenue. They're not the high-priority initiatives that we're working on. Same with some of the headcount review. This is not something that we expect to have any impact on our revenue as well as on our client relationships. Again, this is seen more as in the organization taking a closer look, especially after the number of acquisitions that we've completed, and then kind of refining and the organizational structure.

Your next question comes from David Saxon from Needham.

Great. I've been in between calls, so I apologize if I am repeating any questions. But Jerry, maybe I'll start with you. On the fourth quarter earnings call back in mid-March, you did seem to confirm expectations for sequential growth from the fourth quarter into the first quarter. Over the 2 weeks before quarter end, were there any orders that got pushed out into the second quarter? Or what were the factors that drove the shortfall of sequential growth?

We expressed confidence in the fourth quarter, but we were uncertain about how the first quarter would unfold. We did not claim to have a strong start to the first quarter; instead, we provided revenue guidance indicating progressive improvement over the quarters. Ultimately, the guidance turned out to be better than we had expected. We recognized the market's weakness at that time, which is why we projected gradual improvement throughout the year. I confirmed our guidance today. The market was indeed slow, and it was slightly slower than we had anticipated. We were disappointed with the first quarter results, but Mark may have additional insights on this topic.

Yes. Obviously, we don't give guidance on a quarterly basis. We're really looking at the entirety of the year itself. And across the board between ourselves and other players in the space, we do strongly anticipate a continuous progression in the second half of the year. You look at uptick in consumables for the life sciences. That's a very strong indicator as it relates to pickup. And that was picked up in Q1, which does indicate development of therapies that will need biologistics and biostorage through the rest of the year. Sequencing itself is sometimes difficult to ascertain because you can't have rollover from one quarter to the next. And the question is, things that come in towards the end of the quarter, even if they have a P.O. or something else that slips that you don't anticipate, it could have a fairly significant impact on that end of the quarter revenue. We did see some P.O.s and things like that slip out of the first quarter into the second quarter.

Okay. Maybe, Mark, I'll follow up with some of the comments you just made. And I appreciate the cadence might be kind of difficult to predict, but I thought you said you expect continuous improvement in the second half. Should we think about the second quarter being kind of flattish sequentially? And then we see some sequential growth in the second half to get to the guidance range? And then I'll just ask my second question here. This might be for both Jerry and Robert. On Bluebird Express, I'd love to hear how that integration is going. And then by my estimate at least, revenue contribution was around $3 million. Is that in the right ballpark? And is that a good base that we can see growth off of? Thank you.

I'll let Robert comment.

Yes. Maybe talk about your first question. Just if you look at what we experienced in Q3, Q4 of last year, we saw actually a slight improvement in Q4. Hence, our outlook was the way we described it at year-end. With that drop off, as Tom mentioned, particularly in Asia Pac in Q1, some of that was certainly unexpected. But what we did talk about is to see a progressive improvement throughout the year, and that progressive improvement really weighted towards the second half of the year. I can't give you specifics related to Q2, but I can give you those 2 datapoints as the progressively improving and then weighted towards the second half of the year.

Yes, Bluebird Express is integrating very well with CRYOPDP. It's a small acquisition, but we have done business with Bluebird Express for a number of years at Cryoport Systems, and it's a known quantity, it's having a very positive impact. It knows the U.S. market and it's having an impact on the development of CRYOPDP. We're opening 3 new logistics centers in the U.S. to build out that network and I think we'll have a good year at CRYOPDP.

Okay, and so it sounds like $3 million might be the right ballpark for contribution?

Probably at the lower end, but I think for modeling purposes that's fine.

There are no further questions at this time. Speakers, please proceed with your closing remarks.

Okay, thank you. Thank you for your questions and our discussions. Our first quarter results echoed a challenging global environment. Though market improvements and through market improvements and our actions, we expect our results will progressively improve during the remainder of the year. And based on the recent momentum we've seen with cell & gene therapy approvals, we are encouraged and feel confident in our full year 2024 revenue guidance. Cryoport is well positioned to capitalize on the growth of the life sciences and particularly the cell and gene therapy industry as more therapies receive FDA approval and achieve commercialization in our services and product initiatives take effect. Even with the current economic and geopolitical climate, the market is expected to expand substantially over the next few years, and Cryoport is built to support its rapid growth. In summary, while our start in 2024 was softer than we would have liked, we will remain focused on our strategic priorities, continuing to expand our position in our top accounts, delivering innovation and differentiated new services and products, and remaining diligent on cost controls and productivity improvements to support increases in margins as we move through 2024. Thank you for joining us today. We appreciate your continued support and interest in our company. We look forward to updating you on our progress again next quarter. We hope you have a good evening. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for joining. You may now disconnect.