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

Good day, and welcome to the third quarter 2026 Harvard Bioscience Earnings Conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question, you will need to press star-1-1 on your touch-tone telephone. Please note, this call may be recorded. I would like to turn the call over to Taylor Krafcik, Senior Vice President at Ellipsis. Please go ahead. Thank you, Operator. Good morning, everyone. Thank you for joining the Harvard Bioscience Third Quarter 2026 Earnings Conference Call. Leading the call today will be John Duke, President and Chief Executive Officer, and Mark Frost, Chief Financial Officer. In conjunction with today's recorded call, we have provided a presentation that will be referenced during our remarks that is posted to the investor relations section of our website at investor.harvardbioscience.com. Please note that statements made in today's discussion that are not historical facts, including statements on management's expectations of future events or future financial performance, are forward-looking statements and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-thinking statements reflect the current views of Harvard Biosciences Management, and Harvard B bioscience assumes no obligation to update or revise any forward- looking statements. Actual results may differ materially from those expressed or implied. Please refer to today's press release, the Harvard B Bioscience Form 10-Q, and other filings with the Securities and Exchange Commission for additional disclosures on forward-looking statements and the risks, uncertainties, and contingencies associated therewith. During the call, management will also reference certain non-GAAP financial measures, which can be useful in evaluating the company's operations related to our financial condition and results. These non-GAP measures are intended to supplement GAAP financial information and should not be considered a substitute. Reconciliations with GAAP to non-gap measures are provided in today's earnings press release. I will now turn the call over to John. John, please go ahead. Thank you, Taylor, and good morning, everyone. In the third quarter, we delivered another solid quarter of top-line performance with 8% revenue growth driven by strength across key preclinical platforms and double-digit momentum in products for organoids, fluidics, and our new product innovation. To give a high-level summary before Mark dives into the detailed financials, our results were in line with our expectations. Revenue came in at $22.2 million, representing 8% growth year over year, marking our second consecutive quarter of strong revenue growth. Adjusted gross margin was 57.1%, including higher volume in CMT products, increased sales through distribution partners, and growth in China, which carried lower gross margins. Adjustment EBITDA was $1.8 million, reflecting the same factors that impacted gross margin. Strong sales to CRO customers were driven by sales of our telemetry, respiratory, and inhalation products. CRO sales are up meaningfully year-to-date, reflecting healthy demand as biopharma customers increasingly rely on external research partners. We also saw continued growth from our biopharmacustomers. Across the broader drug development landscape, industry tailwinds remain supportive to drive future growth. Preclinical drug candidate pipelines are expanding as pharma and biotech companies prepare for the upcoming 2030 patent cliff, with industry forecasts projecting a 7% increase in clinical trial starts over the coming years. This steady demand is reflected in our telemetry business, which is up mid-single digits year-to-date, demonstrating that in vivo safety and efficacy monitoring remains an indispensable step. Turning to our product portfolio, we saw robust customer demand for our preclinical technologies. Double digit preclinal growth in the quarter was driven by exceptional performance in respiratory and inhalation. Looking at our CMT portfolio, were pleased to see strong double digit revenue gains in and our MEA products for organoids, both in Q3 and year-to-date. Our new product innovation portfolio continues to contribute meaningfully to our total revenue. Researchers are adopting our organoid technologies to generate highly predictive, human-relevant data, directly aligning our innovation pipeline with the industry's transition toward new approach methodologies. In China, our distribution partners and localization strategy are delivering results, as revenue grew 31% in Q3. All three localized BTX electroporation product lines are now fully available and shipping in the Chinese market. Looking ahead, we continue to make progress in localizing new product lines to position us for continued regional momentum. Our revamped commercial team is delivering encouraging results. Depending on the sales realignment led by our new head of commercial, we established a dedicated key accounts group, which is focused on managing and expanding relationships with our largest customers, specifically our top-tier pharmaceutical, CRO, and biotech customers. Sales through Fisher Scientific North America have more than doubled year-to-date following the expansion of our distribution agreement last year, reinforcing the strength of our diversified channel strategy turning to our operational initiatives we continue to make steady progress on project Viking our manufacturing consolidation plan which remains on target for completion in the first quarter of 2027 during the third quarter we successfully completed the relocation of our amino acid analyzer product line to our Cambridge UK facility we began shipping shipping Fluidics products out of our Minneapolis facility using a parallel build approach to ensure uninterrupted delivery to our customers. As a reminder, we remain on track for Project Viking to generate $3 million in cost savings in 2027 and $4 million annually thereafter. These savings will contribute directly to adjusted EBITDA. Additionally, our newly formed Scientific Advisory Board held its inaugural meeting in August. We will hold quarterly meetings going forward. The input from this group of industry leaders will help guide our technology roadmap. Since its creation, the members of the Scientific Advisory board have already provided me and our executive team with excellent industry insight and counsel. Turning to our outlook. Based on our year-to-date performance and our commercial momentum, we are reaffirming our full-year 2026 revenue guidance of 3% to 5% growth, as well as our adjusted gross margin target of 57% to 59%. As noted in our earnings release, we've updated our full year adjusted EBITDA range. This adjustment directly reflects the effect from higher sales volume of lower margin legacy products and of shipments in China, and through our distribution partners. While the product mix carries a lower gross margin, our operating expense remains disciplined and we are guiding to EBITDA growth in Q4 at the midpoint of our outlook. In summary, Harvard Bioscience delivered solid top-line performance in the third quarter. Our core platforms are performing well, our commercial initiatives are driving volume, and our operational milestones under Project Viking remain firmly on schedule. We are confident in the trajectory of the business and our positioning for 2027. With that, I will turn the call over to Mark for a detailed review of our financials. Mark? Thank you, John. I will start my comments with our third quarter 2026 financial results, the details of which can be found starting on slide four of the earnings presentation posted to our IR site. Slide 4, revenue of $22.2 million was up 8% year-over-year and towards the high end of our guidance range in the second quarter in a row of strong revenue growth. The growth was primarily attributable to continued demand from CROs and robust sales from our distribution partners. By product, we had a strong quarter in organoids, loetics, and respiratory devices. We're encouraged by the strong demand for organoid-related products with our broader new product innovation NPI portfolio attributing over 11% of total revenue as we work to expand our NPI contribution. In addition, we continue to see growth in telemetry in our preclinical platform. Now adjusted gross margin of 57.1% was at the low end of our Outlook range as we continue to see greater demand for some of our lower margin legacy products, had a higher contribution from our distribution channel, and saw continued strength in China where we generate a lower margin now as we stated last quarter driving sales of our higher margin NPI products is a priority but we're not going to miss opportunities to sell any of our products as we drive scale and we expect to realize significant benefits once our manufacturing consolidation is complete in early 2027 now as a reminder we have provided an adjusted gross margin reconciliation in the release to show the impact of restructuring, which is in the other line. Now, a point for our investors is we operate our business assuming the impact of depreciation, amortization, and stock compensation costs. In addition, as we expand our Made in China initiative, we expect to improve our margins in that market. OPEX increased $0.8 million in the quarter. As we have mentioned, we restored salaries, merit, and bonus potential this year, which was the primary reason for higher OPEx and reflects a normalized cost structure. This investment is offsetting our improvements from higher revenue, but we will see improved leverage in our returns in 2027. Operating loss was $1.2 million compared to income of $0.2 million in Q3 2025. Adjusted operating income was $ 1.2 billion, 5.3% operating margin, down from $1,500,000, 7.4% operating margins in Q2 last year. Adjusting operating income was lower permanently because of expenses being normalized. Now adjusted EBITDA came in within our guidance range at 1.8 million, 7.9% EBITTA margin, down from 2 million, 9.6% EBITA margin in Q3 2025. The lower EBIT was directly attributable to mix from products, channel, and China as discussed earlier in relation to gross margin. Now moving to slide five for results by geography, geographically Q3 revenues in America is 11.3 million, up 9% year-over-year, driven by strong growth from our Fisher contracts and CRO customers. In Europe, Q3 revenue is 6.3 million, down 5% year over year and 3% lower on a constant currency basis as the academic environment in Europe continues to be weak. Within APAC, Q3 revenues were $4.6 million, up 29% year-over-year, primarily driven by distribution sales of respiratory, organoid, and fluidic products. Within APAQ, China revenues were 2.8 million, and up 31% year over year. Our Made in China localization initiative also continues to progress nicely as we continue to work on rolling out additional localized product lines. Now on the academic front, while the funding environment has been slower to recover than anticipated that softness has been more than offset by robust demand across our CRO and distribution channels. Farm and biotech revenue also continue to grow well through both our direct and distribution chance. Now I'll now move to slide 6 to discuss further financial metrics. Gap diluted IPS in Q3 was negative 58 cents compared to negative 28 cents in Q 3 2025. Q3 adjusted EPS with negative 6 cents compared to a negative 4 cents in Q3 2025. All per share numbers retroactively reflect the 1 for 10 reverse stock split completed in March. I've mentioned in the past the differences between GAAP EPS and adjusted EPS are typically the impact of stock compensation, amortization, and depreciation, as well now are restructuring charges related to Project Viking. These differences between net loss and adjusted EBITDA are highlighted in the reconciliation tables on slide 12 and 13 and are all non-cash items except project biking costs. Now cash used in operations through nine months was 0.6 million compared to cash generated of 6.8 million in the same period in 2025. This change was primarily driven by increased inventory to improve product lead times and support manufacturing pre-build requirements for project biking, as well as project biking restructuring charges and higher interest costs from our debt team. We closed the quarter with $4.9 million in cash and cash equivalents. Net debt stood at $35.1 million, up roughly $7.6 million year-over-year. Total debt was $37.2 million, reduced by $2.8 million in unamortized deferred financing costs associated with our December 2025 debt refinance, which will be amortized over the life of the facility. Non-cash deferred financing amortization was $0.3 million in each quarter with non-cache exit fee accruals running at $0 .2 million per quarter. Now to provide some context on our debt structure, we face no near-term principal obligations as amortisation does not commence until late December 2027 and the facility matures in December 2029. As we complete Project Viking in Quarter 1, 2027, the sunsetting transition costs alongside our expected $3 million in net savings will significantly improve our cash generation and balance sheet in 2027. Now, in addition, our debt deal provides Harvard Bioscience the ability to refinance term loan aid debt of $10 million with an asset-based revolver. We have made progress and hope to announce news pertaining to putting a revolver in place. The conversion will provide interest savings, a reduction of our term loan B exit fee, and further flexibility to manage our working capital. I'll now move to slide 8 to discuss our outlook for the close of the year. In the fourth quarter, we expect revenue between $23.7 million and $25.5 million. At the midpoint of $24.6 million, this represents mid-single year, year-over-year revenue growth. Adjusted gross margin between 59% and 61%, and adjusted EBITDA between $3.8 million and $4.2 million, which represents 5% growth at the midpoint. Now, turning to the full year, we are maintaining our full year revenue growth guidance at 3% to 5%, and our full-year adjusted gross margin target of 57% to 59%. We are lowering our full‑year adjusted EBITA growth guidance from 6% to 10% to negative of 1% to 4% to reflect the greater-than-expected demand of certain lower-margin legacy products and increase sales through our distribution channels into China customers. We're encouraged by our performance so far this year and confident in the trajectory of the business. We've seen a return to sales growth that we believe is sustainable, and once our manufacturing consolidation is complete, we'll see meaningful benefits to our bottom line in cash generation. The demand for our legacy products is strong, demand for MPI portfolio is growing, and we'll continue to operate the business with discipline. We want to thank all of our shareholders for their support, and we look forward to updating you on our finish to the year. With that, I'll turn the call back to our operator to take questions. Thank you. As a reminder, to ask a question, please press star 1-1. If your question has been answered and you'd like to remove yourself from the queue, press star 2-1 again. Our first question comes from Paul Knight with KeyBank. Your line is open. Thank you. Congrats on the quarter. Can you talk to electroporation and BTX? How did the business grow in the quarter, please? Yeah, absolutely. Thanks, Paul. In terms of how BTX electroperation grew, year to date, we are strong double digits. And as you know, much of it is due to both hardware as well as our consumables. And we're seeing growth really across the globe for those products. And that is obviously competing against Thermo and Lonza and MaxSight. Are you taking shares of the market growing? You know, I think it's hard to tell if we're taking share. Clearly, the market is growing. We really like our approach. And, you know, our BTX technology has been, you know, in the industry for decades. And we believe that, you know, we might be taking some share, but I don't want to comment relative to those big players. But as I said, we saw growth in all regions for our product portfolio. Yeah. And I'll just build on that, Paul. I mean, as you're aware, we haven't launched our bioproduction version. So we operate primarily in the research area. So to John's point, we might be taking a little share, but the companies you mentioned are stronger on the biopродuction side of things. So, we're not really playing against them today. Right. When will you have that GMP, I guess, approval to be in production? We expect probably by mid-year next year, we will be fully launching that product. Okay. And then Project Viking, you mentioned that the amino acid production is now in Cambridge, correct? Correct. And then I missed the other aspect of Viking that you've implemented. Could you talk to that again, please? Sure. So we have moved now five of the eight product lines, including we actually started doing parallel build of our fluidics platform of some of the major SKUs. So we're feeling pretty good that, you know, over the next five months, we will finish that transition, and then that will start leading to savings of basically a million and a quarter, so $3 million in 27, starting in quarter two, Paul. Okay. And then lastly, you know, of course, a major market for you is academia. Is that still growing zero or what's happening with the academic market? Yeah, you are spot on, Paul. The academic, both just in the U.S. as well as Europe, continues to face challenges. And with the academic environment being challenging, we've demonstrated good growth in Q3. And if the academic environmental changes in the future, then that will be a really nice tailwind for us. It's still, what, 40% of Harvard Bio revenue, or is that kind of in the ballpark? Yeah, it was 50%. It's dropped to a lower portion towards that 40% of our direct business, Paul. And, you know, what I would say is in Europe, lower academics is part of the reason we had negative growth in EMEA. So as John said, if we can get even modest growth in academics, that will become a tailwind for us. Okay. And then last, I know there's only a couple of us in line. So the China comments that you made, all three product lines available in China now, where was that a year ago? What product lines were available then? Or could you kind of give us a little chronological color on what you've done in China? Sure. So it's BTX, so all three versions of BTX. We started that in the first quarter, and as we enter 27, Paul, and we'll have more color probably, we will have more color on our next call, we are going to be localizing other product lines in China in 2027 to drive both revenue and margin improvement. And I'll just add to that the demand for our products, not just the localized, but all of our products continues to be very strong, and Wex, we want to be able to capitalize on that growth in China by having more of our product portfolio localized okay thank you thank you our next question comes from Bruce Jackson with stone X your line is open hi good morning and thanks for taking my question just to round out the discussion on Europe what were some of the other factors that contributed to their performance in Europe you want to take them sure I can take that so in terms of Europe the academic demand was light as was mentioned and if I look specifically at our product portfolio the there were several areas in our CMT product category where demand was lighter than expected. Okay okay and I didn't catch the recurring revenue percentage what was that this quarter? So the recurring revenue for the quarter was similar to the past level of about 54% Bruce. Okay Super. All right. And I just wanted to go back to China real quick. How's telemetry doing? It was a strong contributor last quarter. Is that still continuing to be strong? Yes. In telemetRY for the quarter, we were in the mid-single-digit growth. Okay. Then last question for me. As the organization expenses roll off in 2027, what would you expect the effect to be on gross margins as we move through the year? Yeah, I'll answer that. Our expectation is about 75% of biking is gross margin related. Most of that should flow through, as well as increasing MPI and recurring. So we're feeling very good, Bruce, that we'll be in the 60% range for gross margin in 27. Okay. All right. Great. That's it for me. Thank you. Thanks, Bruce. Thank you, Bruceie. Our next question comes from Jim Sidoti with Sidoti & Company. Your line is open. Hi. Good morning. Thanks for taking the questions. I'm going to start off with a kind of a big picture question. You know, with the elections from last week and the change in Congress, do you expect any impact on NIH spending or academic spending over the next couple of years? Thanks, Jim. Now, you can never predict what politicians are going to do. However, if you look historically, typically when Democrats have been in control of the House, there has been a more positive funding environment for NIH, which would be beneficial to our business. But once again, you can't, you know, past performance is not necessarily indicative of future performance. Yeah. And Jim, as far as our guidance, we are not assuming that benefit. So if that happens, that would be an upside to our numbers. Okay. All right, now a more specific question. Inventory's gone up about $3 million this year. Is that related to Project Viking, and where do you think they level off? Yeah, it is primarily related to project Viking as well as we've done some things with lead times. We expect that to start dropping significantly as we finish the transition in first quarter, And it'll be one of the reasons why cash generation will significantly improve in 27, Jim. Okay. Now, you've put up two very good quarters, you know, low double-digit, high single-digIT growth. You know, is this a trend you see continuing for the next several quarters? Thanks, Jim, we're really happy with our performance in Q2 and Q3. You know we've, Mark provided guidance. The midpoint of the range is 4% growth for Q4. We're feeling really good about our commercial execution, and we're not providing guidance for 2027, but we're confident in our growth for the business. Okay. And then the last one, were there any one-time sales in the quarter, or is this all continuing sales you expect to continue at this pace? Yeah, it's all run rate. We don't tend to have one-off orders or shipments in our business, and there wasn't really any in quarter three. And there's no pipeline-filled type sales to Fisher or anything like that? No, that's all run right, Jim. We don'T tend to get big blocks of shipments to any of the distributors. All right. Thank you. Thank you for your participation. Thank you, Jim, for your time. This concludes the question-and-answer session. Thank you for your participation. You may now disconnect. Good day.