HBIO - Earnings call transcript Q4 2018 | Harvard Bioscience, Inc.

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Operator

Hello, and welcome to the Fourth Quarter 2018 Harvard Bioscience Incorporated Earnings Teleconference. My name is Michelle, and I will be your operator for today's call. [Operator Instructions]. Please note that this conference call is being recorded. I would now turn the call over to Mr. Manchester. Corey begin. may you Sir,

Corey Manchester

Jeffrey you, Harvard Michelle, joining XXXX Thank for Chief will afternoon, Conference Officer; Chief and Kam and for the good Unninayar, be today us call Quarter Officer Leading everyone. President Harvard and Call. Executive of you Financial the Thank Duchemin, Bioscience. Bioscience Earnings Fourth

constitute I the call we read statement. harbor safe discussion turn over today, will Before In make may forward-looking that statements our to Jeff, statements. our I

we subsequent which represent focus performance day. be of reflects and projected and are including Also, annual much results Our XX, materially have and public those Press non-GAAP how ongoing for differ including internally. our compensation XXXX, of today, and actual forward-looking we statements, of what filings. we believe, XX-K measure December the may represents we we relied quarterly economics due business, the and from and on plans period Form those should today, results set how will to between other earnings outlined the our uncertainties, ended issued on incentive Releases. not found report can release our in and company's as the Any business risks as estimates on differences which detailed and estimates our representing our be on as to non-GAAP our our the activities, under better GAAP our upon any of related manage today's The call results, the future website results

Jeff on call this to harvardbioscience.com. website at the Jeff, location will our at replay please for same call will ahead. call, Investor our which other available statistical or in presented be now of be is release website. week over turn Relations our Duchemin. section go archived included not the A and will I material, the on in available press the any one financial of Additionally, information also

Jeffrey Duchemin

a year acquiring Thanks, Corey, We our you we and than selling the important really history earnings for and DSI. everyone, a everyone addressed has of more Bioscience. call. little us and thank joining from in moved good afternoon, year, a Denville for been today, QX XXXX Harvard

a diverse now reach, balanced and company improved customer play research with are global life a We science and pure profitability. more base

this team tremendous Our has done a job year.

as During the drove growth, simultaneously the for the activities profitability. transactions integration and well year, two closed team sustained initiatives as

$XX.X quarter spend of Before in will our The the record QX addressing remarks over million, for a a the revenue fourth for was quarter minutes the increase my our Bioscience for range. outlook XXXX, results. $X.XX EPS was discussing to $XX.X and I few as XX% quarter of revenue million and revenue revenue first above year. our and growth Harvard Fourth previously share, within results previously communicated XX% the operating range, was overall improvements quarter margins. which the as well a margins significant communicated gross for our improved in last

QX, the quarter bring performed our prior sales results like in channels. over with our that full revenue. increase Overall, and our $XXX DSI our for communicated year produced contributor year Bioscience. internal XX% quarter EPS primary acquisition geographies For against DSI the strong million especially Much future a $XX.X and business. this well in XXXX, plan The in close The improved revenue and of within in most fourth revenue the range strong our strong during previously DSI approximately while half of second will the QX from call. XX% communicated increase in $X.XX our quarterly above was a revenue revenue year million, to was the to year we range year, DSI the optimism to reinforces the year, our and about the Harvard EPS was our came a share. to XXXX. results, confidence full contributions of

the we and and $X.X company in major $X.X combined the about opportunity around cost the million early the sales last year year, spoke to revenue cost million of announced approximately synergies combined synergies. benefits to first postacquisition. One is in the When acquisition we

As of to expectations we months say met synergies realized today, our I'm within XX of over the ownership. and that range happy have first

legacy our to Turning business.

component families, growth X% approximately combined, Ephys in PCMI mid-single-digit Our the decreased a legacy growth product quarter recorded remains strategy. the and key quarter. when of in our and electrophysiology,

which drive within life the As electrophysiology, and remarks in of in are compete. markets quarter, last space expect in Ephys my mentioned brands science growth niche will we outpaced our portfolio I positioned the we of products - uniquely markets

the health Looking DSI revenue in at our revenue the excluding approximately legacy quarter. teams U.S. from our was done largest bounce-back confident the our U.S. work the in reflects us a U.S. hard standpoint, and a the and geographic business in - quarter business of position good in remain geographic the grew have the the This in X% for for to from market. We execute in geographic our

excluding China approximately the legacy quarter. XX% in DSI in business revenue our Our for grew

year. is Our market China assumptions executed for we the and term, growth lumpy The into however, sustained teams long XXXX to expect well to built over be quarter-to-quarter, in our that outlook. to China continues see finish the our

for Europe after four growing on fourth quarters. pulled to Revenue back in in quarter Moving Europe. previous the

revenue extensions products developments excluding an strategy. year-over-year Our DSI market We in of comparable these products our believe European and declined part mid-single decline products. moment incremental important the legacy XXXX. remain quarter, has new we the introduced the was Spending digits, XX% strong and a two introduced mostly in the will that result and provide new a year. continue product in will grew last the approximately that we DSI on quarter, several and beyond. in the Despite business period of in and XXXX new

exceptional studies. repeatability an during and creates high-yield is which allows exposure saves for accurate studies. respiration time highly first tower, which is through system real-time efficient, The This inhalation monitoring

monitor. The the research now Through will drugs, to lead second new will glucose telemetry, ultimately new of is adoption therapies. devices continuous better of development data customers that our analyze and monitor able our to studies to product the to and be perform glucose highlight continuous preclinical

- call Society across preparing Multi-Channel from brand products Systems utilizes market Neuroscience technological launched been example on I the hardware a including debut few data mentioned and portfolio the to Two to products Ephys show, our family Smart address and just our advances a neurological TBSI which at products monitoring for last our studies show It technologies market and System, in was have need. During trade recording new for the system those acquisition call, Ephys brand. of November. first since one from neurological is of software devices our software full and the our combining a

is by application Ephys control Warner Much with usability. is providing specs. display from like The and a touch the system brand. There other same addresses valve Smart flexibility direct Ephys the researchers' valve our the Warner-branded product system and new needs marketplace System, from no this in enhanced competition

to the line add growth new be and extensions, product about excited We product and which launches continue profitability. will incrementally

collaborative teams for together have is in a and further way, growth done there Our and a innovation. job room good coming research

Bioscience's to call to our Unninayar, take the XXXX Harvard new over outlook. comment like on turning a I'd Kam moment to Before CFO,

top the while of committing down, the to profitability a growth, year we operating level Brexit, U.S. Although, and impact through around in are specifically funding of there Government full XXXX line China gross margin uncertainty and shut is expansion. improving market tariffs

revenue cross-selling top major as and as region line growth to our market expect from well including growth from in coming We come synergies. expansion regions, geographic the Asia

Our initiatives dividends drive combined commercial teams collaboration, to are week further that portfolio. spend we cross-training programs develop and to drive pay very meeting strongly the XXXX on and as We throughout as alignment time during will to growth activities next cross-selling. group these consolidated our believe

measures brand in profitability took our to expansion as QX. manufacturing the place by continue recent On improvement our corporate prudent facility. be margins facility moved moved In U.S., two margins HEKA from we cost in Systems in small-site gross Both we well consolidations. Massachusetts and the Hoefer as of to our driven side, its In from Holliston, Germany, California headquarters. operating moves our will Electronik these to Multi-Channel our site previous containment

of over is closing, the the Bioscience been QX acquisition In company. DSI exceptional related in Danville, respects. the of years foundation the we five Kam, begin improvements Harvard go many We turn will an With shape Through it that beyond. please year has significantly believe since that, I to ago. truly of ahead. in cost divestiture in to incremental Kam. see I and best the I started was will XXXX of changed discussion and composition the

Kamalam Unninayar

fourth for year XXXX. with above financial as million, of results measures. our Jeff, on focus well quarter adjusted our of like you, for afternoon, quarters, and discussion the $XX.X guidance providing previous Starting reporting are everyone. the increase will as basis. year-over-year the and quarter Revenue of full for quarter XXXX the million Today, non-GAAP top range was $XX with $XX.X we end a to finished our guidance the financial high the year XXXX million. Thank XXXX financial a our revenue third We reported fourth quarter on and most of Much good XX% line.

results electrophysiology and business quarter growth in were solid driven record fourth strong our a DSI our by Our in business. quarter

$XX.X of the driving for $XXX,XXX, the in million. divestiture fourth scientific of X% Revenue while acquisition and fourth declined business. foreign our DSI Danville strong scientific the of in $X.X the organic quarter, this was currency the quarter Danville successful our million growth in impact was reflecting integration the approximately of DSI acquisition, in headwinds for quarter. Excluding XXXX revenue of Revenue

revenue year-over-year also increase reflects full guidance our a reported range in $XXX end million came of quarter XXXX, an year the $XXX.X the million, This at of million. basis. to third high For of XX% of on $XXX above

gross adjusted to margins. Turning

profit a the over of in million quarter quarter was Our fourth XX% for the XXXX. adjusted the increase fourth $XX.X million, $XX.X gross

came with at impact gross gross last an synergies and margin, increase XXX range XX% cost basis volume, margins XX% DSI productivity of the basis We continued sequentially, in of increase XXX improvement year Our in XXXX. full with ended versus points across gross of year see our of related the margin in measures adjusted gross year. adjusted acquisition points margins XX%. end of company. Also, to full XX.X%, adjusted came too reflecting QX of the compared to we guidance adjusted XX.X%, This higher to in at continue an the XXXX the

XXX a successfully Now our as year highlight let's over year compared to XXX% ongoing XX.X%, a and income to to year basis adjusted with XXXX drive our performance margins operating of the Adjusted basis to last operating DSI point of an million, full finished move quarter, the and of QX in in operating to full increase year. operating range compared be We a margin, continue we at QX financial acquisition end last points Adjusted of $X.X QX the XX.X%, Operating to of was was X.X%. integrate increase also XXXX year almost increase expected margins. sequential of and continue XX% margins XX%. adjusted reflect improvements higher growth. of our XXX

XXXX XX% for $X.X earnings compared ended $X.XX diluted quarter increase net of for prior to increase tax reflecting diluted per Adjusted year income XXXX. impact of Our XX% turning for we was adjusted period was QX $X.XX million, XXXX to in in adjusted from share from came tax the beneficial U.S. share, with and tax Adjusted the the And a QX same per year. a at EPS. fourth reform. full now primarily rate XX.X%, XX.X%, adjusted of rate the

flow. DSI time to $X closing. approximately For approximately XXXX. continued the to of of focus compared to sheet. XXXX, now with now Diluted to in we a QX brings million the X.Xx reduction million We our than January finished This increase since reflects to balance our in XXXX. our This full in less acquisition the weighted few were balance I'll Xx closed QX at came earnings turn quarter leverage year XXXX. gross cash XXXX share $XX.X a science a life XX.X through cash, million our for shares recap successfully DSI adjusted from to our in million, divesting our strengthen XXXX, compared outstanding average financial Scientific. our $X.X highlights the deployed of while on Denville end capital To debt XX.X strategic in XX% acquisition reduce $X.XX, at leveraging debt by we QX was per and highlights at our reflecting of million the portfolio

guidance our Our XXXX. and in down our revenue than year operating provided of good the to came Xx. continue margins progress, our at full servicing make end debt, And QX in bringing to higher we less leverage

to year revenue Today, basis. reported $XXX.X X% XXXX. range in turn the setting our XXXX on to $XXX for at a a outlook like to reflecting our of guidance of financial I'd million we Now to full X% are growth million, range

expect per the with a share growth projections, adjusted of to $X.XX X% to XX% over these growth we between With earnings $X.XX year. range prior

of improvement throughout come quarterly in our QX low with incremental of end expect at guidance, terms In we the average for our the phasing to annual year.

quarter earnings $X.XX outlook to XXXX of per Our in of revenue adjusted $XX first of the for $X.XX. the is million with to $XX million range range share for

see to adjusted in expect adjusted and year-over-year margin We continued expansion, both that today's is margins, margin and in operating reflected gross guidance.

gross range year, of expected adjusted to of XX% XX% in margin four and we across the operating range adjusted in to During the we the - expect the quarters. XX% margin XX%

had Xx we with of make that, good in we less. our to line operator servicing finish progress goals. and year to towards summary, XXXX will continue the turn finished around to Operator? leverage for with and confident debt a to are questions. In call efforts expect XXXX in gross our a And now or back and strong, open our I the XXXX achieving the We the

Operator

Instructions]. [Operator

Paul. with The from Janney. hear I'm sorry, your the muted? Paul first question response. We queue Is in line cannot comes Knight

Paul Knight

guys. me hear you Can

Jeffrey Duchemin

can Yes, Yes. hear you, Paul. we

Paul Knight

What and the your in Jeff? of was implied XXXX? the quarter, DSI the organic core what's two segments And then for fourth in

Jeffrey Duchemin

digits. breaking DSI. for DSI, expectations be as for you quarter the little in And a bit we the we the owned down first slow in QX, would the Yes, terms expectations that business gate, two right range, finished year. went - that out Paul, the quarters the year quarters were so in acquired out remember, absolutely for of company, DSI, our of the was organic last when with met which they DSI the we but record mid-single

and turn be had a that billings in we bookings There they'd are what a we businesses. bit Ephys a job. life us. slow doing, level exceeds businesses line they're back that. had legacy rationalization bounce they're and as to so very for lines. So of things right QX in terms business progressing we a product of The other we XXXX. the both had it's mentioned. did forward thought in doing cycle, orders. great at and And are two the nice product thought PCMI, Those PCMI lines, we're continuing are product business had our more that all and on And came there Ephys was like improvements we believe are a PCMI as in we'll comeback with where in But out make flow year with some QX and Ephys and you all large in was legacy and product that a nice good of QX, soft, little know, related timing world through it would of into be. in some a QX. around orders see the simply regions a divestitures

Paul Knight

expansion, cost, margin this guidance tax conservative anticipating the range? you earnings puts higher takes anything earnings interest here. Are What seems like operating and like overall with are then higher guidance it on fairly rate? And a

Kamalam Unninayar

it I thank of that Paul, our say the we one XXXX, see spending are adjusting to thing our consider an expenses, we and at you the after DSI. month think have you to as is to would concerned acquisition. So, and flat far as that down for for some for comes expecting But for month in question. extra spending relative I XXXX inflation extra look our will the accommodating XXXX, in DSI when to to January operating is when -

Paul Knight

level maybe any And interest guess, X.X run have assume with reduced cost, we you kind what as any target should what, tax? year? a declining little your in - of, this reduction is that year? I change on rate And a Will you that, also, this debt

Kamalam Unninayar

the we leverage XXXX, or expecting of end with gross by are our year year. three to of the In close ratio the around less

for year. in million of in our And rate, as now as far reduction So our somewhere is the will to guidance range the right in XX% tax implied the be XX% our debt the range. mid-$XX

Operator

in comes Bruce The question Company. The queue next Jackson Benchmark with the from

Bruce Jackson

a Just DSI in with wanted questions. hone other couple to on

the a XXXX. expect Do So I had you for similar mean mid-single-digit XXXX? you growth rate for rate growth

Jeffrey Duchemin

When we're X%. they the they that the and a to higher I acquired able Yes. year Jeff. to as is end said, so that a start. extremely in finished from We And was believe XXXX. Bruce, company, this strong, range, of we CAGR that to we they're X% within off be that should range great expecting the be had do anywhere hopefully that to

Bruce Jackson

you the where during then this was a business to it had And integrate year.

piece progress targets of you of Or going you do terms where cost to this still the is in to an it, your in to savings is in business made cost investment terms it's of do - business? what DSI You see done you've you savings. now XXXX? in more and to - continue be efficient business great wanted the hitting type make Would opportunities of a this

Jeffrey Duchemin

side, Well, October renegotiation as opportunities. $X.X to of was We've which ownership. the synergies the stated on of In XXXX. first met completed quite in months expected sales the there. those. comments, cost major of I was the lease, million the XX my But we the $X.X bit there's regards synergies, And side, there's in a to synergy of still in sale savings in synergies opportunity had million

Next week, Europe. I'll be in

meeting Harvard continue programs part among to global meeting, global three a synergies to off and and all sales of businesses. is We sales Bioscience the kick have the initiatives

Bruce Jackson

that's nice question the next about to segue and my a Okay, business. core

- the help to you're things invested investing in doing are but and had where it you've lumpy, What in been of in XXXX core some before. product flow, out it's being that the here, some business? the new also challenges wasn't So it's been

Jeffrey Duchemin

Well, are to had comments launched. synergies we my of I that some in see the innovation. products in continue And mentioned being new

software that and state-of-the-art products the and the synergies mice the They line head one businesses a of head synergies acquired launched only sale from. new for Multi-Channel a a software marketplace. Systems I'd and product stage stage not TBSI is from This program TBSI. two rats, combination was mentioned combined of TBSI the in Systems of We has One Multi-Channel where - example from Systems come makes had Multi-Channel just we and program. the or innovation. but that and

teams help drive new bring our all in working will growth out business products So are together that to R&D three units.

your PCMI which the you have So is legacy business, business.

You the have the you electrophysiology X the X have combination which of is then of that data business, we've sciences. made, acquisitions and

work products on lot So help three platforms. that all come growth new three collaboratively now drive going of our to among there's right in launch teams to a R&D together will

Operator

question comes the in next from Lisa The queue Springer.

Lisa Springer

yesterday. We Jeff just participating Singular the for appreciated wanted you and really Corey, again Conference your thank to in input.

Jeffrey Duchemin

problem. no Yes,

Lisa Springer

And the the I Okay. in you expect XXXX? geographic it customer XXXX do to mix wanted same was to and ask you, roughly in be as

Jeffrey Duchemin

Yes.

Lisa Springer

you business are electrophysiology And what main could XXXX? in to for on the comment growth drivers think then the going Okay. be you

Jeffrey Duchemin

leader. Well, once remain again, and as to market we is you to a the of that really stay talk a innovation, about highly new products, innovative forefront business that's in have

products of from Electronik launching we new HEKA Systems, of for the us, be very And the well the combined Multi-Channel So make that see to Multi-Channel TBSI up the there. then and what electrophysiology. business units I to manufacturing and HEKA more expect now the business. has you main have done Warner driver, efficient expect Electronik four a we've largest into process that is Systems it's

XXXX. expect and things electrophysiology see better-than-market platform together I business, coming rates market growth are that from with So really to think in coming we to

Operator

are this no at further queue questions time. There in

proceed, the now call So Please to over closing for any Duchemin Mr. I Jeff turn will sir. remarks.

Jeffrey Duchemin

call Michelle. shareholders for our And XXXX. all I everyone, expectations thank great We global for want you, you, exceeding to a of Thank today. XXXX. forward Thank joining our to just employees and the look in

Operator

teleconference. participating. for and you this concludes today's Thank gentlemen, Ladies

You may now disconnect.

Harvard Bioscience (HBIO) 28 Feb 192018 Q4 Earnings call transcript