CryoPort, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Cryoport Second Quarter 2023 Earnings Conference Call. At this time, all lines are 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, Mr. Todd Cromer 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 due information or in 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 filed with the Securities and Exchange Commission, and those described from time to time in the other reports which we filed with the Securities and Exchange Commission. It is now my pleasure to turn the call over to Mr. Gerald Shelton, Chief Executive Officer of Cloudport. Jerry, the floor is yours.

Thank you, Todd. Good afternoon, ladies and gentlemen. We appreciate your joining our earnings call today. With us this afternoon is our Chief Financial Officer, Robert Stavanovich, 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 second quarter 2023 in review document to our website. It can be found under the investor relations in the events and presentation 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 download it at this time. I will provide you with a brief update on the business and then we will move on to answering your questions. Today, we reported second quarter revenue of $57 million, which was in line with the guidance that we had previously furnished. Our second quarter results reflected significantly weaker than expected demand for capital equipment from China and lower than expected ramps from certain clients during the second quarter. Specifically, China's economic condition and a significant drop in orders caused a second quarter decline in MBE Biological Solutions' China-derived revenue of 67%, or $5.8 million year-over-year. For the previous two years, the Chinese market has represented approximately 23% of MBE's total revenue and 10% of Cryoport's overall revenue. Based on our most recent conversations with our clients, as well as third-party sources, we expect these slowdowns to persist through the third and possibly the fourth quarter of this year. Given this, and after thorough consideration, we revised our full-year financial forecast with revenue now expected to be in the range of $233 to $243 million for 2023, as previously communicated. While this is disappointing in the short term, we have been working actively to mitigate the situation and serve our clients' changing needs. Our leadership team has been meeting with key partners and distributors. Management has recently been to China to meet with our MVE team based there along with key clients and distributors with the objective of reinforcing our strengths and relationships. As a part of this effort, we have devised mitigation plans we believe will help to build our MVE long-term market leading position. I also want to be very clear that we have confidence in our corporate strategy and that our long-term growth drivers are firmly intact despite these short-term challenges. We operate in a very resilient industry as life sciences treatments are a critical need and we have a very pivotal role in serving this industry. We are a clear leader in providing solutions to support life-saving cell and gene therapies, and today's commercially approved therapies represent the tip of the iceberg. Despite any short-term headwinds, we expect to benefit from the continued growth of the cell and gene therapy industry, which is expected to grow at a 10-year compounded annual growth rate greater than 20%. In addition to the positive dynamics of the cell and gene therapy market, we are continuing to make strategic investments and form relationships to further enhance our growth prospects. You can find further details on these investments and relationships in our second quarter 2023 in review document, which I mentioned earlier. We believe our growth prospects are stronger than ever, and we will continue to cement our leadership position in the cell and gene therapy industry as we move through current macroeconomic challenges that impacted our second quarter results. We are resolved to further strengthen our business and continue to position Crowdport for the long-term and profitable growth. This concludes my prepared remarks. Now we will be happy to take your questions. Operator, please open the line for questions.