Q3 2026 Harvard Bioscience, Inc. Earnings Conference Call - HARVARD BIOSCIENCE INC

Financial Performance:

• Third Quarter 2026 revenue reached $22.2 million, representing an 8% year-over-year growth.
• Adjusted gross margin was 57.1%, slightly below the 57%-59% guidance range due to a mix shift toward lower-margin legacy products, increased distribution sales, and lower-margin shipments in China.
• Adjusted EBITDA was $1.8 million (7.9% margin), down from $2.0 million (9.6% margin) in Q3 2025, primarily driven by product and channel mix.
• Operating loss was $1.2 million compared to a $0.2 million income in the prior year period; adjusted operating income was $1.2 million.
• GAAP diluted EPS was -$0.58 and adjusted EPS was -$0.06 (retroactively adjusted for a 1-for-10 reverse stock split).
• Cash used in operations for the nine months ended Q3 2026 was $0.6 million, compared to $6.8 million generated in the prior period, driven by increased inventory for Project Viking and higher interest costs.
• Net debt increased to $35.1 million; total debt stood at $37.2 million with no principal amortization required until late December 2027.

Guidance and Future Outlook:

• Reaffirmed full-year 2026 revenue guidance of 3% to 5% growth.
• Maintained full-year adjusted gross margin target of 57% to 59%.
• Lowered full-year adjusted EBITDA growth guidance from 6%-10% to -1% to 4% to reflect the impact of lower-margin product sales and channel mix.
• Provided Q4 2026 guidance: Revenue between $23.7 million and $25.5 million (midpoint $24.6M, mid-single-digit growth), adjusted gross margin between 59% and 61%, and adjusted EBITDA between $3.8 million and $4.2 million.
• Projected gross margins to reach the 60% range in 2027 following the completion of Project Viking manufacturing consolidation in Q1 2027.
• Anticipated cash generation to significantly improve in 2027 due to $3 million in annual cost savings from Project Viking and the sunsetting of transition costs.
• Management is considering refinancing $10 million of term loan debt with an asset-based revolver to secure interest savings and working capital flexibility.

Business Segments and Product Lines:

• Preclinical/Telemetry: Telemetry revenue grew mid-single digits year-to-date; strong demand driven by in vivo safety monitoring needs.
• Organoids & New Product Innovation (NPI): Double-digit growth in CMT (MEA) products for organoids; NPI portfolio contributed over 11% of total revenue.
• BTX Electroporation: Delivered double-digit year-to-date growth in hardware and consumables across all regions.
• Fluidics & Respiratory: Key drivers of the double-digit quarterly growth.
• China Localization: Revenue grew 31% in Q3; all three localized BTX electroporation product lines are now shipping in China, with further localization planned for 2027.
• Distribution Partners: Sales through Fisher Scientific North America more than doubled year-to-date.

Market and Competitive Landscape:

• Industry tailwinds include expanding preclinical drug pipelines and a projected 7% increase in clinical trial starts driven by the approaching 2030 patent cliff.
• Academic funding remains a challenge, particularly in Europe where revenue declined 5%, though CRO and biopharma demand has offset this softness.
• Competition in the electroporation space includes Thermo Fisher, Lonza, and MaxSight; the company notes it currently operates primarily in research, while competitors have stronger presence in the GMP bioproduction sector.
• Bioproduction version of BTX electroporation expected to launch fully by mid-2027.

Risks and Challenges:

• Margin Compression: Continued mix shift toward lower-margin legacy products, distribution channels, and China shipments is pressuring short-term profitability.
• Geopolitical/Regional: Weak academic environments in Europe negatively impacted regional revenue; China growth is strong but relies on localization progress for future margin improvement.
• Execution Risk: Project Viking manufacturing consolidation must be completed on schedule (Q1 2027) to realize projected savings; delays could impact cash flow.
• Debt Costs: Higher interest costs from existing debt structure reduced operating cash flow in the first nine months of 2026.

Management Commentary and Tone:

• Management expressed confidence in the business trajectory, citing solid top-line performance, strong commercial execution, and disciplined operations.
• Tone was pragmatic regarding margin headwinds but optimistic about the long-term impact of Project Viking and the growing NPI portfolio.
• New Scientific Advisory Board was established to guide technology roadmaps and provide industry insight.
• Revamped commercial team and dedicated key accounts group are showing encouraging results.

Analyst Questions and Answers:

• Paul Knight (KeyBank): Asked about BTX growth and competition; confirmed double-digit YTD growth in hardware/consumables globally. Inquired about Project Viking progress; confirmed 5 of 8 product lines moved to Cambridge, with parallel builds starting for Fluidics, targeting full completion by Q1 2027. Discussed academic market share, now representing ~40% of direct business.
• Bruce Jackson (Stonex): Asked about Europe's performance; cited light academic demand and weaker CMT product demand as factors. Requested recurring revenue info (~54%); asked about telemetry growth (mid-single digits). Projected gross margins to reach ~60% in 2027 as Project Viking expenses roll off.
• Jim Sidoti (Sidoti & Company): Asked about political impacts on NIH/academic spending; management noted potential upside if Democrats control Congress but provided no guidance assumption. Discussed $3M inventory increase linked to Project Viking, expected to drop significantly after Q1 2027 transition. Confirmed recent growth is run-rate based, not one-time or pipeline-filled sales.

Other Key Points:

• Project Viking is on track to generate $3 million in cost savings in 2027 and $4 million annually thereafter.
• The company completed the relocation of the amino acid analyzer product line to its Cambridge, UK facility in Q3.
• Recurring revenue for the quarter remained stable at approximately 54%.
• Management highlighted the strategic importance of aligning innovation with industry trends toward New Approach Methodologies (NAMs) for human-relevant data.
• A 1-for-10 reverse stock split completed in March affects all per-share numbers reported.