Good afternoon, and welcome to Cryoport's Second Quarter 2025 Earnings Conference Call. 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 we begin today, I would like 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 events 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 to be filed with the Securities and Exchange Commission and those described from time to time in the other reports, which we file with the Securities and Exchange Commission. As a reminder, Cryoport has uploaded their second quarter 2025 in review document to the main page of the Cryoport website. These documents provide a review of Cryoport's financial and operational performance and a general business outlook. Before I turn the call over to Jerry, please note that because of the strategic partnership that has been established with DHL Group and the related sale of CRYOPDP to DHL, CRYOPDP's financials, which were previously a part of Cryoport's Life Science Services reportable segment are now presented as discontinued operations. Cryoport previously provided quarterly historical information on this basis for fiscal year 2024 and our first quarter 2025 review document which remains available on the Cryoport website. This information is intended to support the financial modeling efforts of those needing this information. Please note that unless otherwise indicated, all revenue figures discussed today will refer to continuing operations. This includes Cryoport's fiscal year 2025 revenue guidance. 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, everyone. 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. Today, Cryoport reported strong double-digit revenue growth across all revenue streams in our Life Sciences Services for the second quarter. Service revenue increased 21% year-over-year, accounting for 54% of total revenue from continuing operations. Notably, revenue from our support of commercial cell and gene therapies increased by 33% and BioStorage/BioServices grew 28%, underscoring the growing demand for our integrated temperature control supply chain platform. This growth continues to be fueled by the increasing adoption and scaling of cell and gene therapies, a positive trend we believe will continue for years to come. Turning to our Life Sciences products. We posted a solid performance with 8% year-over-year revenue growth, driven by improved demand, particularly from animal health customers during the quarter. We also continued to expand our product portfolio with the launch of our next-generation MVE SC 4/2 and SC 4/3 vapor shippers, which offer medical and animal health professionals improved safety and reliability for transporting and preserving sensitive biological materials at cryogenic temperatures. During the second quarter, we also recorded revenue in accordance with plan from sales of MVE's high-efficiency 800-seat cryogenic storage system, which was released earlier this year. This compact form factor freezer was designed for facilities with limited space that require high capacity and security. These innovations demonstrate our continued commitment to addressing the evolving needs of our clients globally and expanding our future revenue potential. For the second quarter, we had a 14% increase in total revenue from operations, and we delivered an increase in gross margin, along with a meaningful lift in our adjusted EBITDA as a result of our pathway to profitability initiatives. Given the strong execution across all our business units, we are reaffirming our full year 2025 revenue guidance as we move toward our goal of sustainable long-term profitability, which will accelerate as our capital projects mature. I'm pleased with all the progress of all of our business units, but I would be remiss if I didn't highlight one of the most significant achievements for the second quarter, which was our launch of our strategic partnership agreement with the DHL Group and DHL's acquisition of CRYOPDP in a transaction that included cash payments of approximately $200 million to Cryoport. Aside from a strong infusion of capital, this strategic partnership enhances our global biologics logistics capabilities and effectiveness by leveraging DHL's competencies, scale and reach in Asia Pac and EMEA. We will be increasingly well positioned to expand our life sciences business and deepen our leadership in the rapidly growing global regenerative medicine market. This strategic partnership is an initial step as we continue to work to develop a strong global partner network that complements our core capabilities through discussions with various global companies. Before we take your questions, I want to briefly address a unique situation with one of our clients that has received some immediate attention. One of our gene therapy clients temporarily paused the distribution of their commercial therapy for about a week in July. The therapy is now back on the market and shipping to patients. However, that company anticipates treating fewer patients than originally forecast in 2025. We do not expect this to have a material impact on our business. Our guidance that we reaffirm today considers an estimated revenue impact of approximately $2 million from this client for the remainder of the year. As of June 30, Cryoport supported a record 728 clinical trials, which is approximately 70% of the industry's cell and gene therapy trials. For the remainder of 2025, we anticipate up to an additional 20 application filings, one new therapy approval and an additional three approvals for label or geographic expansion. Also, we want to note that during the quarter, five of our clients that had filed for approval earlier this year or late last year received negative opinions from the FDA or MAA. All these clients have requested meetings with the regulators to find a pathway forward to bring their therapies to market. Given the need for these therapies, along with the recent changes within the FDA, many analysts are thinking more positively about their chances of gaining approval later this year or early in 2026. The strength and resilience of Cryoport's performance in the second quarter despite these challenges faced by a few of our clients is largely in the broad number of clinical trials we support and the scaling of the current commercial therapies we are supporting on a global basis. Our commercial revenue is expected to drive our growth for years as it is boosted by additional Cryoport-supported therapies as they reach commercialization, including the new cell therapy from our customer, Abeona Therapeutics, that was approved by the FDA during the second quarter. In summary, our second quarter was marked by strong revenue growth, improved margins and the beginning of the execution of a transformative strategic partnership agreement. We are entering the second half of the year with strong momentum and a clear focus on driving long-term shareholder value as we support the growth of the global regenerative medicine markets and the life sciences in general. As the regenerative medicine industry accelerates, the complexity and precision required to safely deliver personalized, often life-saving therapies has never been greater. Our global platform of temperature control supply chain solutions, coupled with real-time informatics and regulatory compliant processes, enable 728 active clinical trials and 18 commercial therapies worldwide. Whether supporting first-in-human studies or globally scaled commercial treatments, Cryoport ensures end-to-end integrity, from the laboratory to the manufacturer, to the points of care, to the patient's bedside. Our advanced packaging systems, BioStorage and Bioservices capabilities, biologistics and cryogenic infrastructure have become mission-critical to the industry's leading biopharma companies, CDMOs and researchers alike. In short, we form the connective tissue between researchers, manufacturers and the patients, enabling the secure preservation and movement of living regenerative therapies with real-time data, systems and a global reach. We do more than support the life sciences ecosystem; we make it responsive, resilient and ready for the future of medicine. This concludes my prepared remarks. So now I'll ask the operator to open the lines for your questions.

And your first question comes from Kyle Crews with UBS.

Could you please provide a brief update on the non-cell and gene therapy demand that appears to be driving the product revenue beat in the quarter? And could you provide an update on IntegriCell and how the adoption there is going?

I think both those questions can be answered by Dr. Sawicki.

IntegriCell continues to progress nicely. I'm sorry, just give me one second. Could you please repeat the first part of the question?

The first part was on MVE, maybe I'll step in, Mark. MVE, we are feeling better than we were about 6 to 12 months ago. The revenue there did improve up 8%. We do continue to believe that the business stabilized in the quarter and in last quarter. Globally, markets have been disrupted by governmental policies. And we do expect the uncertainty to continue to impact capital spending, as you could see with other life science companies. In particular, at MVE, they had a very nice quarter from the animal health side, with cryogenic systems sales. Go ahead, Mark, on IntegriCell.

I apologize for the mix up. Yes. So IntegriCell is proceeding on track. We do anticipate the initiation of revenue production this quarter with meaningful revenue starting in 2026. We are actively tech transferring our first clients right now, which takes a little bit of time, but that’s going to start to help support the revenue contribution later this year and into next year.

Great. And then maybe as a follow-up there, you maintained the guidance but you had a really great quarter, and it seems like there's the market seems to have improved and there is upcoming revenue streams into 2H. Can you go through the phasing on your 2H guidance and maybe go over why you didn't increase the guide?

Yes. We did not raise the guidance because we want to be cautious, considering the uncertainties in the global economy, geopolitical issues, and administrative factors. After evaluating the market dynamics, we decided it was wiser to maintain our current guidance, which is why we reaffirmed it as it stands.

Your next question comes from David Saxon with Needham.

Great job on the quarter. I have a follow-up regarding guidance. For the third quarter, it seems like the comparison will be easier, but the fourth quarter might be a bit more challenging. How should we approach growth as we move toward the end of the year, and what are your initial thoughts on 2026 considering the momentum you're experiencing? I also have another question to ask.

Just on '26, obviously, on '26, we'll give guidance typically at year-end. We are providing some outlook in our review, please that's posted on our website related to the expectations on BLA/MAA filings and approvals. So I'd encourage you to look at that document as well. I think you're looking at the second half of the year, as Jerry mentioned, we're holding to our guidance for the full year. There's certainly upside opportunity there. But typically, we would expect obviously a stronger Q4 compared to the Q3 revenue growth. I think overall, in terms of the general performance the first half of the year and the second quarter, obviously, we made significant improvements in terms of gross margins, both on products and services, bringing total gross margin to 47%. So that's a significant increase over prior year. And then from a bottom line perspective as well, if you look at the adjusted EBITDA from continuing operations for Q2 we had a negative $0.9 million from a negative $5.6 million in the prior year or a negative $2.8 million in Q1 of this year. So everything is moving in the right direction. Revenue growth, gross margins as well as the bottom line. And we certainly want to push that forward during the second half as well. So that's I think as much as we can say at this point.

Okay. Great. No, that was super helpful. And then I guess, just on the balance sheet, I mean, $426 million in cash post the sale of PDP, looks like you did some smaller share repurchases over the last couple of months, but I would love just an update on how you're thinking about capital allocation philosophy. You've done M&A in the past, you took a pause there. So would love your updated thoughts there.

Yes, David, we did buy back some common stock in the second quarter and we'll continue to take our usual prudent approach to deploying capital. We'll be thoughtful, opportunistic and we'll also be strategic with all the funds that we have, but we'll continue to consider buying back our stock as we think it's significantly undervalued in the market.

Just to put a number on it, we did buy back 1 million shares since our last report.

Yes. And may just to add, obviously, cash is king in this environment. We did pay back the 2025 convertible notes about $14 million during the second quarter, and we obviously would want to maintain a strong balance sheet while evaluating the various options that we have to apply our capital.

Okay. And if I could just, I guess, follow up on that. So any change in your appetite for M&A, or you just want to kind of protect the balance sheet and maybe do some opportunistic share repurchases, is that the message?

David, we'll be opportunistic. And if an acquisition comes along, that's compelling, it's accretive and meets our profile, we'll certainly consider it. But our focus right now is internal. We have some initiatives going on that we need to execute on. And so we're constantly getting opportunities presented to us. We look at them. And if they're compelling, we will definitely consider them. But there's no plan for any acquisitions at this point.

Your next question comes from Matt Stanton with Jefferies.

I wanted to kind of zoom out for a higher level question, maybe for Jerry. Just in terms of the late quarter FDA update on the REMS and certain indications of approved CAR-Ts, what's the early feedback that you've heard from customers? And is there any way to kind of talk about the impact or potential impact this could do to patient volumes and any more color on timing as it relates to that update that we got late in the quarter?

The impact of the ruling on REMS is very positive, and everyone views it that way. It's still early to determine the exact implications, but we believe it will significantly facilitate processes for everyone in the system. It will definitely help with rural points of care and so on. Mark might want to provide additional insights on this.

Yes, I mean, Jerry is absolutely correct. It should have a definitively beneficial impact. And some of our key clients have already reported on it in a positive way and others are still to report. We would expect to see updated forecasts from our clients and any impact on that during the third quarter. So we should have more clarity at the next earnings call.

Okay. Great. And then maybe just on biopharma, I think for the product side, you're talking about animal health, but just in terms of your biopharma customers, either buy product or region pretty robust trends in the quarter. What are you hearing from customers in terms of appetite to spend, how that might vary? We've seen kind of mixed signals from CROs and spend on certain projects, capital-related projects may be being pulled back given the macro, but would just love some updated color in terms of your discussions with your biopharma customers globally.

Certainly, there's enough capacity for manufacturing in the industry right now. And I think that Mark might want to comment on that further.

Yes. So you've got to take a look at where the pullback is occurring. The vast majority of the pullback is really directed through the NIH and ties into really preclinical and late preclinical activity. So R&D and preclinical. Our focus is really on the clinical and commercial space. And the vast majority of our clients are well-funded and have significant relationships with large pharmas and others. So we don't anticipate a negative impact from that perspective. And in fact, obviously, I think the demonstration of the continued increase in acceleration of the clinical trials supported up to 728 and an increase of 44 year-over-year, an increase in Phase III trials demonstrates the continued support of that portfolio, which will have significant benefit for us over time.

And maybe just one more if I could sneak in. Just, Robert, on gross margins in the back half of the year, obviously, the implied guide has revenues kind of coming down a bit from 2Q levels. First half saw a lot of good progress on gross margins. Should we expect gross margins to step down modestly in the back half of the year from kind of that 46% in the first half? Or do you think that's kind of a sustainable level going forward given the numbers?

I think we're certainly going to try to sustain it during the second half. Typically, we would expect gross margins to increase further just due to operating leverage. But we do have some newer initiatives, as you're aware, like IntegriCell and building out some of the facilities in Paris and Belgium and ultimately, California. So that will have some impact on gross margins as they start ramping up. So I would look for modeling purposes to keep it relatively flat.

It would be a temporary impact.

Yes. Our stated goal based on reaching operating leverage is really to get to gross margins in excess of 55% with adjusted EBITDA margins of 30%.

And we think that's highly achievable, Matt, over time. It just takes a little time.

Your next question comes from Paul Knight with KeyBanc.

Mark, as you've seen this commercial market accelerate, what are you seeing in terms of competitive dynamics? Are there will major players trying to be there are some customers wanting to home brew? What are you seeing or learning as the commercial side grows faster?

To be honest, we're seeing more and more of folks that really want the security supply and the scalability that we offer. We're supporting the vast majority of the commercial space today and are actually engaged in discussions around expansion of what we're doing beyond traditional biologistics into our other service areas. That's why you see the nice step-up in our Bioservices revenue. We're also very active on integration. So most of the bigger players that you may be referring to actually want to work with us, not against us. They want us to be a component of their offering because of the strength that we have in the space, and the DHL deal that Jerry talked about is an example of that. You'll see more of those types of announcements in the coming months and quarters as other larger players in the space want to work with us collaboratively, not competitively.

Yes, and you shouldn't underestimate the power of that integration, Paul. The integrated solution is increasingly sought after. Our clients are looking to simplify their efforts, and our integrated temperature-controlled supply chain solutions are gaining momentum.

And Jerry, on MVE, do you feel like in the biopharmaceutical market that, I guess it was destocking post-COVID? Do you think that's starting to be bottoming at this juncture?

Well, my thinking is that most of that excess capacity that was built up during COVID has been burned off and that the market is stabilizing. We've had three good quarters at MVE with a solid 8% growth this past quarter. And so I think it's returning to normalcy.

And then lastly, Robert, I guess we should expect some continuing EBITDA margin expansion because I'm assuming you have a lot of your infrastructure built in, except for IntegriCell. So top line should drive natural EBITDA progression? Is that kind of the logic?

I believe you're correct. The achievement of EBITDA in Q3 and Q4 will largely depend on our top line growth. We have a few initiatives underway, including IntegriCell, as well as the expansion of our facilities in Paris and enhancements to our capabilities in Belgium. As a result, I anticipate an increase in headcount and expenses later in the second half. Overall, we are definitely focused on achieving profitable revenue and positive EBITDA.

Your next question comes from David Larsen with BTIG.

This is Jenny on for Dave. I apologize if you already spoke about this in the beginning of the call; I'm juggling a couple of calls here. But can you just talk about your updated view on tariffs, your expectation for costs, whether you're passing along the full costs or partial costs to customers and what their appetite to accept those higher costs has been?

We've seen really no real impact on tariffs across the business. Any tariffs that we do have an impact on our business, we would absolutely pass through. And we have a precedent for that through historical COVID, which our clients are well aware. So if there is any impact from a tariff standpoint, it would be passive, but we haven't seen anything material to date.

Your next question comes from Subbu Nambi with Guggenheim Securities.

This is Thomas on for Subbu. I just want to touch on the guide again. Can you just talk about where the offset is to that headwind from lower Sarepta revenue in the reiterated guide? Is that just stronger performance across the portfolio?

I think in general, it's just a strong portfolio. You can see we had increases, obviously, in commercial revenue, we had increases in clinical trial revenue and in clinical trial count, so we've really seen increases across the board in our services lines as well as the product lines.

Okay. And then how much of the second half guide for revenue depends on pharma, clinical and commercial milestones that may be out of your control? Or is that largely derisked at this point?

Any new approvals that occur recently will take some time to ramp up, so they are not a factor in our guidance.

Okay. And then if I could just sneak one more in on China here. Any updates you can share on how you're progressing there and any milestones you can point us to as we look for growth in that region for you guys?

We're not expecting our market to expand in China or any recovery in 2025, and that's reflected in our guidance. We continue to monitor our customers there and the various domestic government stimulus programs, but nothing really has changed that much.

Our next question comes from Mac Etoch with Stephens Inc.

Now that the DHL transaction is closed. Can you comment on how your customers are responding to Cryoport becoming a little bit more carrier agnostic? And what has the feedback been thus far?

Overall, it's been extremely positive. Folks are excited to see what the lift benefit from DHL will be as it relates to, obviously, logistics solutions and flexibility. It also provides them the ability to continue to work with their carriers of choice. And to weave in DHL competencies on a complementary basis. So overall, I think very, very positive.

Mac, this is just the beginning. We have just started the launch, and DHL is a massive company nearing $100 billion in revenue. It takes some time to implement these changes. This process isn’t instantaneous; it requires a bit of time to establish. However, Mark is correct about the overall direction.

I appreciate that. And just following up on IntegriCell, obviously, it's a little margin dilutive at the moment as you ramp. But I was kind of curious if you could give some qualitative aspects of what you expect the long-term margin profile for that business line.

I'll turn it over to Mark. IntegriCell is just ramping up, and it's a revolutionary service. The way we've put it together, the cryopreservation service, is impressive. We're currently doing some tech transfers in both Houston and Belgium, and we expect to see some revenue in the third or fourth quarter of this year, with significantly more revenue anticipated in 2026. The development is progressing on schedule, and we're very enthusiastic about it. It has a promising financial outlook for the future, and I'll let Mark discuss that further.

As Jerry had mentioned, we've historically discussed gross margins in the 60% range at maturity for our service business, and we expect the IntegriCell business at maturity to be in line with that expectation.

Your next question comes from Puneet Souda with Leerink Partners.

I wanted to clarify that there was a $2 million setback annually for Sarepta. Were you considering any impacts for 2026? Additionally, are you observing any general caution or delays among the AAV gene therapy programs or clients? You mentioned five programs you are supporting, which received negative opinions from the FDA. I want to ensure that these two issues are related.

I will hand over the technical and gene aspects to Mark in just a moment. However, Puneet, we have not included anything for 2026 in our comments. We will address that later in the year after our budgeting process is completed. So, we'll hold off on that for now. Mark, would you like to respond to the other part of the question?

Yes. I see this primarily as a result of a change in administration and a new FDA leadership, which understandably takes time to acclimate. Some of the data you've encountered likely reflects their efforts to familiarize themselves with the area and to better manage the costs associated with data for certain filings. While there is a degree of caution, we are also observing positive feedback from the FDA regarding aspects like REMS. Overall, we do not anticipate any significant impact on our historical expectations for the market potential related to cell and gene commercialization. I'm not sure if, Tom, you would like to add anything to that.

Just Puneet, to, I think, maybe clarify one. The $2 million headwind from Sarepta is for the second half of the year only, not for the full year.

Got it. Okay. And then on MVE, could you clarify which end market where you saw the most growth. The animal side? Is it the pharma? Maybe just walk us through which business line actually drove MVE growth for you, maybe in the distributor channel.

Well, it was a solid second quarter, but it was really overall balanced demand. The animal health market was particularly strong on the dewar side. They had a record amount of dewar sold on the animal health side, but it was also solid for cryogenic systems sales in the APAC outside of China and in EMEA.

So majority of the growth was in APAC. Just wanted to clarify because we're constantly hearing about capital equipment challenges, so I wanted to square that and make sure I understand correctly, where the MVE growth is coming from?

So it's APAC outside of China, EMEA, North America was okay. It wasn't a record or anything like that. And then on the dewar side, it was balanced across animal health companies across the globe.

Got it. Okay. And then maybe just last one for me. You highlighted DHL, but just wondering, are you seeing any change in the competitive landscape overall? You have a number of other logistics companies that have been looking at these markets. Just wanted to get a sense of if you're seeing any change in the competitive dynamics or the market share for clinical trials?

Nothing significant. Everything we see is positive, and we do have a distribution strategy. The first part of that was DHL. We're talking about the global companies in addition to what we already have. And actually, we can support most of those companies that you were talking about or referring to. So nothing significant there to talk about other than it's positive.

Yes. And as you can see from the data, we're continuing to increase the number of clinical trials we support, we're continuing to fortify our leadership position via the expanded solutions. And you can see the BioStorage/Bioservices has grown significantly in Q2 by 28%. So really, everything points to us continuing to build out our leadership position, really being the dominant player for cell and gene supply chain solutions.

And your next question comes from David Larsen with BTIG.

I hopped on the call a little late on traveling. Can you just talk about how MVE results came in relative to your own expectations? It looks like it's up 8% year-over-year on expensive range; any more color there would be very helpful. And it looks like it's kind of turned around and it's now growing again.

Yes. I think, look, MVE performed well with 8% growth year-over-year. We have seen certainly improved demand for MVE's products. And as we said in our press release as well, MVE is also bringing out new products into the market. So there's also innovation going on that we believe will drive demand and further demand as well. On the margin side, they're showing strong, robust margins. They've grown margins over the prior year, about 2.6 percentage points to 44.9%. So it's a strong, good business. It's a profitable business. And as you know, it's by far the leader globally for cryogenic systems. So that includes the dewars, the freezers and related accessories on a global basis.

That's great. Can you discuss the broader market? Earlier this year, the CRO space faced significant pressure due to uncertainty around the IRA, several executive orders, and tariffs. It seems the CROs might be rebounding as demand progresses. Could you share your observations regarding your customers' overall sentiment and the demand for clinical trial activities, particularly for dewars? Additional insight would be very helpful.

Yes. Our clinical trial count clearly indicates that the market remains resilient and positive for us in the cell and gene clinical engagement sector. We have strong collaboration with both the CRO and CDMO communities. The CDMO community has delivered impressive results, showcasing the sector's strength as they play a key role in the production of many clinical materials that we transport. Overall, the sentiment in the cell and gene environment remains favorable, despite some short-term funding challenges in earlier phase programs and issues with the FDA. Our portfolio and the CDMO community have not been affected. We are feeling very positive about the situation overall.

Good quarter. Congrats.

There are no further questions at this time. I'm pleased to turn the call back over to Jerrell Shelton.

You ended there pretty quickly. Thank you very much for your questions, all of you, and thanks for the discussion. In closing, we delivered a strong second quarter performance across all areas of our Life Sciences business. The Life Sciences Services business, which is key to our future growth, grew 21% year-over-year, led by a 28% increase in BioStorage/BioServices revenue and a 33% gain in commercial cell and gene therapy support. We also saw an increase in demand in our life sciences products, which generated a solid 8% revenue growth for the quarter. We want to thank you for joining us today. It was a great quarter, and we appreciate your continued support, interest in our company, and we look forward to speaking with you again when we report on our third quarter financial results. We wish you all a good evening.

Ladies and gentlemen, this concludes today's conference call. Thank you so much for your participation. You may now disconnect.