Cryoport, Inc.
Q3 2015 Earnings Call Transcript

Published: 5 Feb 2015

[Operator:]

Good day and welcome to the CryoPort's Third Quarter Fiscal 2015 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Todd Fromer, Managing Partner of KCSA. Please go ahead sir.

[Todd Fromer:]

Thank you. Good morning everyone and thank you for joining us. Before we begin, I'd like everyone to know that statements made during this call which are not purely historical including statements regarding CryoPort's intentions, hopes, beliefs, expectations, representations, projections, plans or predictions of the future are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. It is important to note that the company's actual results could differ materially from those in any such forward-looking statements. Factors that could cause actual results to differ materially include but are not limited to risks and uncertainties associated with the effective changing economic conditions, trends in the products market, associated with the effective variations in the company's cash flow, market acceptance risk and technical development risk. The company's business could be affected by a number of other factors including the risk factors listed from time-to-time in the company's SEC reports including but not limited to the annual report on Form 10-K for the year ended March 31, 2014. The company cautions investors not to place undue reliance on the forward-looking statements. CryoPort, Inc. disclaims any obligation and does not undertake to update or revise any forward-looking statements made during this call. Without anything further, I'd like to once again welcome you to the third quarter fiscal 2015conference call of CryoPort Incorporated. I'd like to now turn the call over to the company's Chief Executive Officer, Mr. Jerry Shelton. Jerry, the floor is yours.

[Jerrell Shelton:]

Thank you Todd and thank you, ladies and gentlemen for joining us on this call, this morning. For those of you who may be new to CryoPort, we provide the world's leading and most comprehensive cryogenic logistic solutions to the life sciences industry. And I'm sure some of you are saying what does that mean? Well it means that biologic materials must be shipped cryogenically that is at a temperature or at less at or less than minus 150 degree centigrade or in Fahrenheit terms minus 250 degrees. Shipping and storage of these temperatures provides viability of these materials and that is critical to many of the novel emerging personalized therapies moving through the market today. It's interesting I've had some people mentioned Ted Williams being cryogenically frozen with the life sciences industry and biotech industry as well as the doctors in the labs that help people and especially women with fertilization, it means much more it means temperature at which biologic material must be kept in order to remain viable. Market for cryogenic logistics is at least $1.7 billion by our estimates and CryoPort is the market leader in this space. In CryoPort, we combined world-class cryogenic packaging information technology and logistic services to the life sciences industry globally. These customers must need increasingly stringent requirements for shipping biologic materials that verifies the condition of the materials being shipped as well as ensuring that the custody of the material is known at all times. Additionally with individualized therapies, shipment failure is not an option as these therapies are not replaceable. And these cases dry ice logistics is a non-starter as dry ice is only minus 80 degree centigrade and not at a cryogenic level. In addition on average, dry ice has a 20% to 30% failure rate during transport. Neither these conditions is acceptable for the new personalized therapies. This is where CryoPort excels, as being the most reliable, effective, and efficient solution for cryogenic logistics in the world. We combined the very best technologies for maintaining cryogenic temperatures and our packaging from the moment at least point A to the moment it arrives at point B. We also provide the most comprehensive tracking in logistics care in the market today ensuring that each shipment can be tracked by our client care team and our customers so that we create audit trails for the chain of custody and if required chain of condition in case our client needs to provide proof for regulatory authorities or the recipient of the material. This is why FedEx, UPS and DHL chose CryoPort as their private label partner for cryogenic logistics. So if you hear FedEx Deep Frozen, UPS True Cryo, DHL Thermonet Cryo know that they are private label versions of a CryoPort solution under our powered by CryoPort sales strategy. Now before turning the call over to Robert Stefanovich, our CFO for more in-depth financial overview, I would like to review our third quarter and nine months revenues reported this morning from my point of view. In addition, I’d like to provide you our revenue guidance for fiscal 2016 to give you a sense of where we’re headed as a company. In the first nine months of fiscal year 2015 we had a record revenue growth of 50%. To sum, that is impressive. The CryoPort is just getting started, so today I am pleased to give you our fiscal year 2016 revenue guidance of $12 million. This is a 300% increase over where we anticipate ending 2015. In my first two years we have grown revenues by over 500% and in fiscal 2016, our guidance is that we will grow another 300% over fiscal 2015 to $12 million. I can give you this guidance because of the following. One, our expanding client base, two, the expanding life sciences market, three, the increased regulatory demands on the biotechnology community and four, our recently enhanced sales and marketing team. You may be asking yourself what exactly what does all that mean? Well it means we are experiencing unprecedented growth in the life sciences industry and that growth is driving demand for our services, this growth has been primarily made up of new curers, from innovations and immuno-oncology such as CAR-T cells and dendritic cell therapies. From advances in drug discovery, from our expanding focus on animal husbandry and a regulatory environment which must enforce conditions necessary for patient safety. For example in the CAR-T cell area we’re already working with Novartis on clinical trials and we’re in early stages with newer companies such as GeNO Therapeutics, Silicon Pharmaceuticals, Argus Therapeutics, BlueBird Bio and Kite Pharma. In addition, our newly expanded and improved sales and marketing team includes our new Chief Commercial Officer and five additional sales professionals with coaching experience. Dr. Mark Sawicki, our newly appointed Chief Commercial Officer as a result our new executive with a scientific background and proven success in business development. He is an effective leader that will lead our sales and marketing initiatives with this batch in adulation. He possess a tremendous knowledge of the life sciences industry having worked with AAI Pharma, CMC Biologics and Albany Molecular Research. In addition to his business background Mark is a published scientist with a Ph.D. in Biochemistry. In my opinion we are indeed fortunate to have a man of Mark's qualifications and accomplishment in this important leadership role. Dr. Sawicki has complemented our five additional season’s field sales professionals supplementing three existing sales personnel and one marketing person. This team will be a significant boost to our momentum, in fact, as of this month our sales force can now boast over 150 years of aggregated logistics experienced much of which is experiencing knowledge gain in the life sciences industry. They're all problem solvers who can bring the best cryogenic logistics solutions to our clients. That will make it more effective and competitive. These additions have enabled us to restructure our sales organization for better market penetration, client support and geographic development. And I would add all this and supported by the best logistics and operation staff in the industry. And all of this is enhanced by our important network partnerships. Two which are very recent. Under our powered by CryoPort umbrella we have partnerships with FedEx who has been our partners since 2011, DHL who signed in late last year and UPS who also entered in agreement with us late last year. DHL and UPS will be rolling out their respective introductions of their respective private label product offerings during the first-half of this calendar year. These organization or independent partners each as large and with its own respective strategy. It does take time to establish to get established with each of these large companies once establish their powerful movers in the market. While we do not have heavy dependence on our forecast on them individually or collectively for private label sales we do think that overtime each will prove to be an important contributor. After all they collectively provide 85% of all carefree services on the planet. Other partners include our outsourced solution partner such as Zoetis an animal vaccine manufacture and Liventa Bioscience, which supplies allergenic based treatments for orthopedist. Our study solution, client partners include Triangle Research Laboratory Cyntron and EBM low port. We also have a master service agreement with RBC and Ocasa and overtime we will continue to expand and strengthen our partners to further drive revenue growth. Now, Robert Stefanovich, our CFO will take you through our third quarter financials and then I'll come back for a brief closing comments and take some questions. Robert?

[Robert Stefanovich:]

Thank you, Jerry. Good morning to everyone who have joined us today? I will first go through our year-to-date financial results and then I'll discuss our quarterly financials. As a reminder, our fiscal year end March 31, 2015 though we are reporting on the nine months and the third quarter of our fiscal year. Net revenues for the nine months period ending December 31, 2014 were $2.7 million an increase of 50% or $0.9 million as compared to $1.8 million reported for the same period last year. We generated revenues for customers in all of our target life sciences market such as biotech, diagnostic companies, pharmaceutical companies, central labs, contract research organizations, and the reproductive medicine market and research institutions. The increase in revenue was primarily driven by the growth and overall demand within our existing client base and the addition of new clients using our CryoPort Express Solution. Gross margin for the nine months period was 29%, or $0.8 million as compared to a gross margin of 16% or $0.3 million compared to the same period last year. This increase in gross margin illustrates the operating leverage in the business model as revenues continue to ramp. Operating expenses increased by $0.6 million or 18% to $4.7 million for the nine months ended December 31, 2014 as compared to the $4.1 million for the prior year period. The increase was for compensation expense and recruiting fees incurred to expand our sales force equity based compensation expense and other general operating expenses to support our sales efforts. Out net loss increased by 72% to $5.1 million, compared with the net loss of $18.1 million for the nine months ended December 31, 2013. The net loss for the fiscal year '14 period include a debt conversion expenses of $13.7 million. Moving on to our quarterly results, this is our highest quarterly revenue to-date. Net revenues increased 29% to $1 million compared to $0.8 million for the same period last year and up 18% on a sequential basis. The growing demand for cryogenic logistics solutions in the life sciences industry and an increase in our client based were the main contributors to this growth. Gross margin was 24% compared to 22% for the three months ended December 31, 2013, the increase in gross margin was primarily due to the operating leverage in the company resulting in improved economy of scale as revenues increased. Operating expenses increased $5.2 million or 12% to $1.6 million for the quarter as compared to $1.4 million for the prior year quarter. Our net loss decreased by 24% to $1.4 million in the quarter compared to a net loss of $1.8 million for the same period last year. A few final comments before I hand back to Jerry to discuss our guidance for fiscal 2016. Over the past year, we have experienced significant increase in demand for our solutions and expertise and we expect, we’ll continue to accelerate. Even was the tight range we have on our cost expenses we have managed to also take steps to leverage our position as the premier provider of cryogenic logistic excludes. In addition to the realignment and expansion of our sales and marketing team that Jerry mentioned earlier, we have also strengthened our operations team and setup new global operation centers in Europe and Asia to meet and exceed the growing demands of our global customer base. Also our business model is technology centric, which allows us to scale efficiently and apply our resources to revenue generating activity. Now, I’ll hand back to Jerry to discuss the guidance. Jerry?

[Jerrell Shelton:]

Thank you, Robert. As I referred in my earlier comments, we are at what I would call a point of inflection, a point for our revenue growth can and will accelerate rapidly. We’re confident of our guidance. We know, it will not happen with a lot of hard work, but we’re prepared for that and for continuing our revenue trajectory into next year and the years afterwards. We’re proud of our leadership position and excited about growing our position in the life sciences industry. We take very seriously our job of creating shareholder value and establishing a sustainable company that makes a real difference to the life sciences industry. I want to thank all of you for making time to join us this morning. Please thank CryoPort and be a part of our growth. Todd?

[Todd Fromer:]

We'd now like to open up the floor for questions. Operator could you please initiate that process.

[Operator:]

[Operator Instructions]. And we’ll take our first question from Brian Marckx from Zacks Investment Research.

[Brian Marckx:]

Hi, good morning Jerry and Robert.

[Jerrell Shelton:]

Good morning.

[Robert Stefanovich:]

Good morning.

[Brian Marckx:]

Congratulations on all the progress and the impressive guidance for 2016. And I do have a question on the guidance. Do you have any estimate of how much of the 10 million to 12 million is generated by the existing customer base and how much is coming from new business wins?

[Jerrell Shelton:]

Well, Brian that way we look at our forecast, as we break it down into two large buckets. One is projection and that’s of the existing customer base and the second part of that is prediction. And this is a large increase. So there is going to be more based on prediction and simple projection. We will grow in our existing customer base significantly, but most of the forecast is based on prediction based on the pipeline and the level of activity that we are currently experiencing and that will result in sales.

[Brian Marckx:]

Okay. So the majority from new business. Correct?

[Jerrell Shelton:]

Yes, yes.

[Brian Marckx:]

Yeah, okay, okay. And that kind of leads to my second question. The adoption process in the past one of prospective customer would evaluate the services with somewhat like the. So the way that the business is now you’ve got some high profile names of customers, DHL, UPS, FedEx and some others. Has that help to validate your service when you approach new customer and helped reduce the adoption timeline I guess?

[Jerrell Shelton:]

Alright. Yes, yes it has Brian. And in fact several of these have changes, not just the validation and support from the brand name customers that we have and the brand name partnerships. The industry is changing and cryogenics is no longer optional for the new therapies, especially the immune oncology therapies for the most part. So that’s a push in our direction that helps us in the adoption process. Don't misunderstand testing and validation is still important but that's a push for us. The second thing as we pick in a slightly different approach to the adoption process over this past year we've established a quality assurance department and we will have quality assurance talking with quality assurance which will definitely accelerate that process as well. So we expect the adoption cycles to be compressed from what we've experienced in the past.

[Brian Marckx:]

Okay and one last one on DHL and UPS you mentioned that should kick off in the first half. Does that mean that there has not been shipments through either yet and but we should expect by the first half?

[Jerrell Shelton:]

Sometimes there is a misunderstanding of these partnerships. These partnerships are broad partnerships and we are using all carriers at all times. Sometimes it's a combination of carriers depending on the destination and the lanes, the logistics lanes that we're - shipping lanes that we're moving through. But your question I think was related to their private label sales and each of these, the both UPS and DHL are taking an actual formal product rollout approach which is very much to our advantage. It is a bit more lengthy. But we expect that to be implemented in the first 6 months and we expect the shipments to gradually increase and that momentum of course - large companies have initial once projects are implemented and so we expect that to be a lasting source of new sales over for a long period of time. But there is not significant revenue coming from those private label sales at this point that is something as prospective.

[Brian Marckx:]

Okay. Alright. Thank you very much.

[Jerrell Shelton:]

Thank you, Brian.

[Operator:]

Our next question comes from Paul Scholes [ph], private investor.

[Unidentified Analyst:]

Hi, Jerry thanks for your good work. I just had a question concerning the current competition for the product and perhaps the software solution.

[Jerrell Shelton:]

Good morning, Paul. Tell me about that question little bit more. Could you amplify that just a bit more?

[Unidentified Analyst:]

Well the current competition with the CryoPort solution both the Dura and the software. Is there competition in the marketplace for what you are doing?

[Jerrell Shelton:]

Paul, we are actually unique. There is weak tracking software in the marketplace. There are doers in the marketplace and their data logger in the market. But no one puts the technology together the way we put it together. No one has the robustness in each of those categories that we have. So we actually do see competition coming in from various angles. But there is no head to head competitor in the marketplace today to our knowledge. That's why we think that we are considerably ahead of the curve. In my estimate it's 4 or 5 years ahead of the curve. In other words 4 or 5 years barrier to unaccountably substantial competitor being able to compete with us on a head on basis.

[Unidentified Analyst:]

Sure. Thank you, very much.

[Jerrell Shelton:]

Thank you, Paul.

[Operator:]

Next question comes from Larry Hopkins [ph], private investor.

[Unidentified Analyst:]

Good morning, Jerry and congratulations on a good quarter and finally taking traction. But not finally but taking tractions much over the last two years. My question is and I guess it's always been why don't the customers out there see the value of the product more readily in other words why don't they transfer from liquid nitrogen to our solution for transport?

[Jerrell Shelton:]

Larry, thank you for the question. The answer is generally its unfamiliarity. People just don't know about our capabilities or CryoPort. It's amazing when I talk with scientists and our companies around the world they're just are unfamiliar with us with our capabilities and the company. But new products are changing that the new immunotherapies and the new cell based therapies are changing that. they're changing it to where companies are actually seeking us out and we're actually getting phone calls more than we've ever gotten in the past because cryogenics has become a must-have rather than a should use and so it's creating somewhat of a tailwind and I think that was indicated in some of those companies as I mentioned earlier like [indiscernible] and Novartis and BlueBird and Kite and so forth.

[Unidentified Analyst:]

And one of my follow on question for that. As you think that CryoPort is ready for the capacity is going to need if you get bombarded with demand.

[Jerrell Shelton:]

Yeah every part we thought a lot about that of course. And every part of our company and our solution is capable. It's readily scalable and in fact we can put a new operating centers within two months and have them fully functional. We can handle all the volume that we can get. The volume won't come in instantly it will come in with some time because most of the new products for example are going through trials. And so they'll have a predictable trajectory to some degree on them and we'll have some time. I'm sure there will be times that we really have to hustle we do now. But we always have met the demand and we definitely think that we can meet considerably more demand we have thought about that a great deal. Thank you for that question.

[Unidentified Analyst:]

Thank you Jerry. Continue to good luck.

[Jerrell Shelton:]

Thank you very much Larry.

[Operator:]

Next question comes from Elmer [ph], private investor.

[Unidentified Analyst:]

Thank you for taking my question. Question I have is the good performance from the relationship with FedEx, how do you expect UPS or DHL to be a different.

[Jerrell Shelton:]

Well Elmer how are you this morning? Thank you very much for attending and for that question. And I guess different people have different expectations but the way we look at our relationship with FedEx and UPS and DHL is that our relationship with all of these integrators is extremely important. Each of their relationships is separate. They absolutely have nothing to do one to the other they're confidential they're comprehensive and they're very valuable to the business. And in addition to each of them with private label solutions, we also work collaboratively with each of these on accounts and on referrals. Some of the prospects have existing relationships and discount quotes if they want to work with the - they want to work hard to keep and to be younger and because of that we also because we integrate it with all three we can let and keep their relationship and keep their discount that they earn through that relationship and use our solutions. So sometimes a sale that’s to FedEx, DHL, UPS doesn't have their private label on it but it's important that we use their account number for the clients benefited. So additionally DHL and UPS are rolling out their own respective solutions and we think that we think that they will be successful. Our relationship with these relationships are very important to us and so what I try to explain is that they are more comprehensive than just the private label sales, they're important from other aspects as well. We are dealing with a net out that controls 85% of the world's airfreight shipments and that's the primary means by which we transport. So those relationships are very important and we'll be negotiating further relationships to cover that other 15%.

[Unidentified Analyst:]

Thank you very much.

[Jerrell Shelton:]

Thank you Elmer for the question.

[Operator:]

Our next question comes from Thomas Mike [ph] with Emergent Financial Group.

[Unidentified Analyst:]

Good morning Jerry. Great results and wonderful forecast. Thank you.

[Jerrell Shelton:]

Thank you.

[Unidentified Analyst:]

Question for you Jerry. What is your biggest challenge in growing that revenue that you are forecasting?

[Jerrell Shelton:]

The biggest challenge in growing the revenue, well there is only I mean the margins is right now I mean the biggest risk is really one thing and it’s one thing only and it lies with us and it’s a matter of execution. We are proven CryoPort has over 20,000 shipments in over 80 countries actually 90 countries and we validate our cryogenic solutions are validated in fact that’s why those integrators we talked about earlier chose us DHL, UPS and FedEx search the world over for partners for their cryogenic solution gap and they chose us. So I think execution is our biggest risk and I know that our team is up to the challenge and I know that we can grow our company to our guidance and beyond that.

[Unidentified Analyst:]

Thank you, Jerry.

[Jerrell Shelton:]

Thank you, Tom.

[Operator:]

Our next question comes from Louis Dory [ph] private investor.

[Unidentified Analyst:]

Well thank you, and thanks again Jerry for you and your team for the work you have done. The question I have is the question that is already been addressed and that rose with the relationship with FedEx and the expectation of UPS and DHL and I feel you had really responded to my question already, so thank you.

[Jerrell Shelton:]

Thank you very much.

[Operator:]

Our next question comes from Howard Lansky [ph] a private investor.

[Unidentified Analyst:]

Hi, good morning Jerry.

[Jerrell Shelton:]

Good morning, Howard.

[Unidentified Analyst:]

My question was already answered too I had a question about competition with most of the product and the solution sites and thank you for you guys this morning. I appreciate it.

[Jerrell Shelton:]

Well, thank you. Thank you very much, thanks for your confidence.

[Unidentified Analyst:]

Yes, sir.

[Operator:]

Our next question comes from Greg [ph], a private Investor.

[Unidentified Analyst:]

Good morning, Jerry.

[Jerrell Shelton:]

Good morning, Greg.

[Unidentified Analyst:]

A couple of question is it safe to say based on the comments that you made earlier regarding the ship wards of 85% of CryoPort’s revenue thereabout come through one of those three shipments...

[Jerrell Shelton:]

Well it doesn’t actually come through it we do as - they control 85% of the airfreight shipments in the world and of course when we ship we use a network we use a combination of airfreight carriers specially carriers so we it’s very invariably will be used in a very, very high percent of our business so, yes, they are very important to us and it will be close to that 5% level for sure.

[Unidentified Analyst:]

Okay. I know it would be a fairly good conservative but first and about that you are going at them and project a $12 million of revenue for next year they are very encouraging first of all of - you are going to actually achieve that I don’t you know how you are going to do it you feel that do you feel that you are ready okay do that and secondly if that does that and - company in terms of profitability.

[Jerrell Shelton:]

Well it depends on how much we invest in the business and what the exact conditions are at the time but our breakeven point is around $12 million to $14 million so it’s our objective to reach that breakeven in fiscal 2016. It’s time to get there the market is right we have got the right team we have got the right capabilities so, I think if we get that fiscal year 2016 is important too and I think we will be right at cash flow positive if not in the cash flow territory but into that year based on that revenue guidance.

[Unidentified Analyst:]

That’s it. Thanks Jerry, you have done a great job and that’s helpful --

[Jerrell Shelton:]

Thank you, very much Greg, thank you for your support.

[Operator:]

Your next question comes from Paul Song [ph] with [indiscernible] Partners.

[Unidentified Analyst:]

Hi I wondered if you can tell me two things one is how much cash do we have on hand and how much cash will we need to raise if any in order to fund our operations through cash flow breakeven?

[Jerrell Shelton:]

Well Paul the cash on hand is in our financial report that varies from time to time so telling you how much cash we have on hand I couldn’t do that - it’s in the financial report that came out this morning. I think we will have to raise funds in the future, how much actually I'm telling you exactly how much because it depends on a lot of business variables I mean in terms of terms of deals we strike with customers any kind of forward relationship or whatever we have to raise funds yes we carefully will have to raise funds, but hopefully it will be at every increasing value of the stock price and minimize any impact on our current shareholder base but we will definitely have to raise additional funds.

[Unidentified Analyst:]

Okay could you just I think in the very beginning of your conversation this morning you talked about when you thought the total addressable market was for your services I think I missed that could you give me could you repeat that?

[Jerrell Shelton:]

Yeah sure I can, we think it’s at least $1.7 billion a couple of years ago when I took over the company as CEO I looked for information and it didn’t exist it’s not probation so we actually created the information using a consulting group that I’ve worked with over a long period of time and they did this they created a very extensive report based on a lot of interviews and then the exhaustive search of the literature and came up with the sizing of the market and two years ago it was 1.5 we think it’s at least 1.7 at this time we know it’s growing at 17% to 20% in our segment which is considerably faster than the rest of the cold - which is drilling at about6% to 7%. So this is why DHL, UPS and FedEx are all interested, this is one in us because it’s one of the faster growing segments of the cold chain servicing biotech and healthcare.

[Unidentified Analyst:]

What would you think would be the market is now obviously it’s not that big today?

[Jerrell Shelton:]

It’s about $1.7 billion today.

[Unidentified Analyst:]

And then so if you’re capturing $2 million or $3 million of it who are the people capturing obviously a huge amount who is capturing that part of the market?

[Jerrell Shelton:]

Well competition is, it’s sometime it take different technologies and the biggest portion of that technology is dry ice and the other portion of that is in liquid nitrogen. Both of those consider as it is and their royalty and their more expensive too than we are we’re much more efficient in effective solution. These technologies were okay when the sciences were different, sciences is continuing to advance and as it continues to advance it gets more gradual as for temperature sensitive and that’s where we come in because I guess the necessity the regulation becomes tighter and tighter we have those answers, so that’s where the competition is.

[Unidentified Analyst:]

I got it. Alright, thank you very much.

[Jerrell Shelton:]

Thank you.

[Operator:]

Your next question comes from Morris Steller [ph], a Private Investor.

[Unidentified Analyst:]

Good morning Jerry.

[Jerrell Shelton:]

Good morning Morris.

[Unidentified Analyst:]

I was curious do you have any kind of plan to uplift to a different exchange for the stock and then do you have a timeframe for that that you might be able to do that?

[Jerrell Shelton:]

Well it’s a simple answer and I can’t be more specific because Morris but the answer is yes we want to uplift to a better exchange as soon as we possibly can and that is much as I can say at this point. What we absolutely do want to uplift and get to a better exchange in a better environment.

[Unidentified Analyst:]

I have another question, and I know that you’ve talked about DHL but I guess I'm a little curious about what how the market if you have an idea of how they’re going to go above market and I know that we talk about $0.65. I mean do they have a marketing plan in place and how many sales people will that... do they have to use worldwide address that market?

[Jerrell Shelton:]

I can talk to you most about what is public. We are bound by confidentiality agreements and not to disclose anything on that company on the company’s behalf. Not just DHL but also with UPS and Pro Express. As you know that they were previously competitive and it's a real honor for us to be in a position of serving all three of those. But to answer your question and this is really public information DHL is strong in the international markets, they are not as strong in United States as the other two but they are very strong outside the United States and they are the largest in terms of reported revenues of any of the integrator. Their strategy is using Thermonet centers and they have 45, installing another 15 and bringing that up to 60, that will be completed by the end of this year I am told. That's in press release. So you could read that information in those press release. So they will have 60 centers at the end of the year. I can tell you that they are very serious about healthcare and about being a global rider for healthcare and we feel that they will put the appropriate resources behind it and we are very impressed with their sophistication, their understanding of the market, their healthcare conferences, their scientific approach and we hold great prospects out for our relationship with DHL.

[Unidentified Analyst:]

Okay. Well, thank you and good luck on your guidance.

[Jerrell Shelton:]

Thank you very much. Thank you.

[Operator:]

Our next question comes from Craig Stevenson [ph] a private investor.

[Unidentified Analyst:]

Hi, Jerry.

[Jerrell Shelton:]

Good morning, Craig.

[Unidentified Analyst:]

One of my question has already been answered but two others. Do you feel the private label sales for DHL, UPS and FedEx as cannibalizing our own sales or is this simply an expansion of everything?

[Jerrell Shelton:]

Well, I do. We as a small company are limited in with our sales force in what we can invest in that sales and marketing activity this time. So it's definitely an expansion, it's definitely an advantage and I definitely do not consider it cannibalization. That's on the one count. The second count is, I don't consider cannibalization because we work together with those folks and I think that the relationship with DHL, FedEx and UPS covering 85% of the airfreight creates what I would call an exoskeleton and outside skeleton. So if whether they get it. They get the sale to private label or we get it directly by direct call CryoPort benefits. So I think it’s definite advantage.

[Unidentified Analyst:]

Okay, that's what I was hoping for there. What are the strongest markets for CryoPort going forward to the next year, is it in vitro fertilization is the new CAR-T therapies, is it.... where is it? Where we going to see the growth and where does it going to come from?

[Jerrell Shelton:]

Well, every segment of the life science is growing. I mean there is not... it's not just one area and it's not just in human it's also in animal husbandry as well. So we and these things come in waves and sometimes they are longer waves, sometimes they are shorter. But they come in waves. But life science is growing in every segment and will be after every segment. Certainly you will see growth in EVL [ph] I mean we are big opportunity in the EU and Asia which we have yet to capture. We are growing in the United States very handsomely but we've got 2/3rd the rest of world to go in the [indiscernible] animal husbandry we are seeing activity in that area and we definitely will be growing in the animal husbandry area and of course the hottest thing is these new therapies that you read about on a daily basis those the autologous and allergenic therapies that are coming out to especially to fight cancer and that's what CAR-T cells and dendritic treatments come in. so we expect growth in all the segments.

[Unidentified Analyst:]

Great. How about gross margins, do you look for expansion there, are you expecting that, or are we going to stay fairly constant in that 20%, 22%, 23% range.

[Jerrell Shelton:]

No that wouldn't be very exciting at all. Our gross margin target is 60% and our out year projections give us up to around 62%as the matter of fact. And as Robert said, we are technology centric so that gives us the ability to expand on a very economic basis if you will. And when we get to that $12 million $13 million level you will see gross margins in the 60% range.

[Unidentified Analyst:]

That sounds great. It seems like if position CryoPort I've been an investor for a long time. It seems like CryoPort is in about strongest position I've seen the company since I have started investing. So congratulations on that and I'm looking forward to some excitement on the next year or so. Thanks Jerry.

[Jerrell Shelton:]

And thank you. Thank you very much for your support and for your ability. We are indeed in the strongest position we've ever been in and that's why I can make the - give you the guidance that I gave you today.

[Unidentified Analyst:]

Appreciate that. Thanks.

[Operator:]

The next question comes from Glen Reed [ph] of Private Investor.

[Unidentified Analyst:]

Good morning Jerry, good morning Robert.

[Jerrell Shelton:]

Hi Glen.

[Unidentified Analyst:]

How are you this morning?

[Jerrell Shelton:]

Good.

[Unidentified Analyst:]

So a couple of questions I see a lot of focus on FedEx and UPS and DHL. And correct me if I'm wrong but. And I think the importance don't take it the wrong way but are they not more of a distribution vehicle than actually part of the driving success to meet some of the goals and expectations you've lead out. Because I see I'm in sales and marketing and distribution and to me they're an important part of the equation but to me also the awareness demand and value needs to be pointed towards about technology companies of the fertility or blood or pharmaceutical or whatever opportunities that may exists. I just see again they're very competitive so a part of reason there are the vehicle and I think it was very smart to go get those relationships but in order to drive and meet expectations and some of the goals that you've laid out. I still think it's a belly-to-belly [ph] business-to-business sales focused on the technology companies themselves because you know as well as I do have the demand awareness is created at the production or the biotechnology companies FedEx, DHL and UPS are going to get more and more address it. Is that fair to say or do you agree?

[Jerrell Shelton:]

You held it I mean you said exactly the right things your questions are exactly the right questions. I was trying to emphasize this morning what we will be doing as a company and those partnerships do get intention because you're dealing with a $90 billion $60 billion and a $45 billion company I mean these are large companies. So people tend to get go - toward those companies picking that they're going to be the greatest thing for us. Well there are great things for us and we do value those partnerships and they are important but we don't know one about ourselves we have to get to the manufacturers we have to get to the originators we have to get. So we have to go from the research all the way through clinical trials to the manufacturers that's how we grow our business. We now we have to upgrade the business these are just partners that can help us in and they can help us in the ways that you articulated. And you held it and you're right on target, I mean we're not we do not have a high dependence on them baked into our forecast absolutely do not.

[Unidentified Analyst:]

Fair enough, okay. The other thing that I see and he's be an investor is just the volume assures traded and I think somebody alluded to the particular exchange but, is there any money in the budget to help elevate in terms of sales marketing public relations to help increase the volume and then investors on the existing exchange Jerry or is that just other priorities that there is other priorities that always important today.

[Jerrell Shelton:]

We are working with our slash PR firm on that very --. As you know in this marketplace when you have offerings open you sometimes are restricted so what you can do in terms of - and bringing visibility and so forth. We view this is very important and you will be seen more presumably she's coming out on more things that we're doing. But we definitely are working on a visibility it's a real challenge and we're and I appreciate that question but we definitely are working on that and hopefully we'll be successful in getting more interest in the marketplace and so forth. The trading of the shares is another thing I mean we do have a conservative shareholder base and I think we have a lot of believers in CryoPort and a lot of folks just don't sale they've held onto the stocks. So you have some trading volume after some band trades and then you have others that are holding on for the long-term because they believe in what we're doing. And so…

[Unidentified Analyst:]

No I think you guys are going to continue. I appreciate your time.

[Jerrell Shelton:]

Thank you.

[Operator:]

And at this time there are no further questions over the phone.

[Jerrell Shelton:]

Well thank you everyone for joining the call. Thank you for your questions and your interest and your support. And we look forward to performing and we look forward to our next update call.

[Operator:]

Thank you for your participation. This does conclude today's call.