HBIO - Earnings call transcript Q2 2024 | Harvard Bioscience, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the Q2 2024 Harvard Bioscience, Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Kathryn Flynn, Corporate Controller.

Kathryn Flynn

good and Josh, you, morning, everyone. Thank for Earnings Conference you joining the XXXX Quarter Second Bioscience Call. Harvard Thank Leading the Officer. call Chief today will be Jim and Cote, Executive Green, Jennifer Chief Financial Officer; President and have In today's be during website Investors remarks conjunction our at the presentation is to of recorded we referenced posted with that section that provided call, investor.harvardbioscience.com. will a our

and risks future Litigation Please from are the to for assumes in are press are including release statements described revise facts, are made as refer not the note forward-looking historical performance the and other company's the Please today. to statements filings statements. that statements pursuant of to differ or Private statements financial and expectations made obligation today's made Actual any events Bioscience or uncertainties safe and in forward-looking Harvard of materially and forward-looking future Exchange Commission. today's publicly, may with expressed results are statements Reform discussion on implied. that provisions or XXXX. other or or update those Securities no harbor disclosures These Act Securities of factors management's

call, management which be operations reference considered measures a supplement to non-GAAP are in and not release. certain will non-GAAP information should can results. company's financial substitute. income earnings be to press related as measures evaluating measures, the condition provided our GAAP intended are also useful to Reconciliations and the non-GAAP During in These today's GAAP of financial

will please Jim. go Jim, turn ahead. over call to I now the

James Green

everybody. Thank Hello, you, Kathryn.

last the came $XX.X in Taking environment. a than our a on at tough market of the was more Revenue from had challenging to minute year. million. $X.X We Slide second year, X quarterly QX look move and Let's million down at quarter and presentation first the That's in half of expected. results. the

by our we're and some And the and be U.S., the sales shipments. of in do year. customers supply of product CRO slower spending Europe to over of expect China primarily also seeing saw of still and through chain in I'll impact Asia effects affected quarter. reduced resolve half second continued preclinical QX second to biopharma capital expected, this Pacific the the As our course our the able mention, the issues, which to which we of

XX.X%, $XXX,XXX target Our revenue of our X.X% of gross On and in in our fixed basis, strong loss of margin adjusted million. $X.X On million basis, GAAP to operating came or a remained primary revenue. X.X% at $X.X lower of with an absorption differences reported adjusted profit EBITDA measured expenses. came an of operating or we but at

said, focus we of which our continue and challenging -- our operating market product the environment. All on to new while that initiatives, weather structure we cost we

of second help operating took products. and these We're revenue in fruition in growth underpin April, starting new As to structure the streams them investments to double-digit support our goal. ongoing reduce cost advantage seeing expect long-term we add investments to revenue our half we announced and synergies operating our in and new come

later commercializations financial product the detail. more in to let our results turn discuss over new me in it to our to quarter Cote, second color But more CFO, some our Jen? presentation. give I'll first, Jennifer

Jennifer Cote

hello, you, Thank Jim, everyone. and

Let's our further into statements. dive financial

XXXX. Americas, family we Preclinical QX revenue as of drug to learned are the last rest from XX% equipment, with were a year. X, was at increases and optimism course this spending from mentioned, starting quarter sequentially related half QX the increased look in prior to compared raises Jim the still forward, we'll Starting recent are Please signs slightly the also revenue going down delaying for the and As challenging activity. sequentially down year region. sales are see was down Slide to with capital the product from QX. of QX quarter. where over But X% move biotech announcements, of for and and the by Pharma and and CROs, to while capital challenged as optimistic, reported we CROs on market development

to As this better. business improvements recovers, to get we cascade expect see things as our to

QX Molecular compared While down growth Cellular and X% was QX of year, compared sequential X% of CMT slightly last to showed to XXXX.

to And some see our markets. so we're in to academic start growth return to encouraged

and the attribute sequentially Overall, Cellular including QX. and the was QX. pharma economic Europe. down Ukraine Both revenue to Preclinical to year CROs, last We tighter saw by was to war, but as QX companies spending are and Molecular large on flat the and overall versus XX% Europe reported versus rates, government. essentially Moving last year and flat essentially in energy sequentially year-over-year costs decline environment, the in to interest higher resulting declines

to sequentially are orders to further until Asia APAC year but information in Moving prior from funding market suggests China, for are erosion QX. stabilizing prior appear that sequentially the from XXXX and as QX. to is companies XX% XX% against to lower received. QX companies. delaying the pharma to apply to was prior continued these is China funds and QX be year into down of and and saw Cellular spend Preclinical sales Specific Pacific. Overall down compared due revenue QX, year compared shifting Molecular by impact to products but sequentially with QX and stimulus CRO improvements

shared. what We are consistent the with seeing have in activity levels industry increasing others quoting of

XX.X% QX share please XX% If to X, XXXX slide. year. will refer top this last compared in financial the metrics. Slide you can to margin middle of refer we Please QX was to additional Gross during

of absorption and preclinical also our year-over-year lower is a higher-margin by lower As sold by the earlier, fixed mainly Jim to mix of manufacturing driven CROs. products decrease costs mentioned

despite with the reflects remains in made expected that encouraged of quarter. a drop-down margin are impact close revenue. target our XX% and to we've challenging We structure our room revenue provides for improvements of increased This operating gross the improvements margin to our

our was gross adjusted down QX a driver of during to the million adjusted drop-down from dollars. graph refer last EBITDA margin primary If was $X.X year. this million to you lower EBITDA $X.X the top of year for slide, right The reduced

these Jim we earlier, focused efficiencies growth advantage approximately and of approximately during costs. our to continue while growth. we from to actions to in these QX, structure realized QX of investing and operating reduce development our $XXX,XXX managing product We of annual As actions our areas commercialization implemented $X to and stay expenses our take in early run savings our new about actively on ongoing in investments rate and expect fund operating spoke savings support of We actions during million.

these headwinds and operational of areas improvements through for manage to in the while drive growth investing continue market will We business. critical our

share. bottom to both show the where earnings loss Moving left, adjusted then and we reported per

primary describe Together, of differences in Slide the years reconciliation tables drivers which EPS share. primary but between continue our depreciation, items both differences and impact will on I amortization our and are EPS. and The GAAP be adjusted these between our compensation First, stock the noncash per XX, highlighted items. to by are adjusted both GAAP and $X.XX

QX, restructuring expense gross quarter. was the of the lower to and cost in compared the $X.XX actions During declines the partially offset sale interest on incurred Adjusted an primarily is tax to of the income costs on revenue, a loss attributed earlier which reduction difference with last benefit. year, impact investments by declined and margin of EPS from the $X.XX remaining lower

flow gears Switching cash to and liquidity.

of period refer million million year. the from bottom the driven you drop-down This middle last in impact to If $X.X of during the same the to graph flow the lower row, the first the operations of quarter. $X.X half in cash of is was again, sales compared the decline largely, for XXXX by

cash As credit last million, $X.X provided activities. Also for for from $X.X million benefit the cash during by down to support we employee first of to is investing all retention sell stock we quarter, of of we in commissions were the received which net sources CARES discussed end flow and of the the our of half HRGN $X.X XXXX, position in February able XXXX, million compared is net investment Act. of our helped included additional cash cash XXXX. These debt in our

As above be details we available leverage. in included debt and down continue release will we paying in revenue can XX-Q. stronger our non-GAAP press our found return quarters, be in tables the in the Further our improving to the this appendix path expect towards and reconciliation on presentation on items our our to and to

I'm now things to back hand happy to Jim.

James Green

Thank you, Jen.

you move into high-growth do minute going investments but applications Let's not to revenues. think business take to to we recurring and Slide of a with how I'm drain on our slide, significant X. expanding remind want consumable for whole and this to I base

designed deliver long-term Our growth. to base is business better-than-market

underpin bioproduction our double-digit with New new base forward. high-growth in begin MEA and applications and combined from the target Organoid growth second product streams half revenue revenue long-term going

progress to product in on discuss Now key our Slide to let's considerable move detail. X new launches our more

second the as preclinical demand, the announced commercial offering. in our neurobehavioral in VivaMARS housing we production will customers. enable Europe, testing in the system shared customer in devices, expand table this status additional in more The of we part products X expect initial likely This telemetry which especially the delivery systems largest Later bread-and-butter first shipments system highlights QX, of products the use Late lead we to row though of CRO our consider a our of of of additional half, their telemetry ship now Early believe, of we last SoHo really to environment. adopted groundbreaking locations. part they began one has to XXXX. their year, business. to VivaMARS these in base family new real-time of measurements monitoring our starting new CRO to This, animal we as

system as aside, results using customers we are other expect initial XXXX from show. expanding in biopharma Safety VivaMARS, to We're of encouraged CRO and sales an by beyond. the we describing seeing posters September at strong which testing supports initial and our expect also interest this see the to optimism response Society the and Pharmacology VivaMARS As

second process large the new an our We're use is bioproduction as BTX GMP very table system earnest to consideration million BTX year, customer number our exploring customer pharma the we of The the consumable the $X Last configured we revenue annual for of Electroporation the targeted drug company to BTX and adopted our by of big grown a for in original be also in We're of bioproduction bioproduction has selling could the in with to This for the as now This with of that year, began status applications. as commercial this approximately application, in see segment. current additional bioproduction. highlights electroporation bridge now pleased a run announced encouraged customers products which expectations. row bioproduction. line the to application. rate, our

Also in QX, analysis acid CGMP-compliant we began shipping for new amino applications. our bioprocessing system

AAA Biochrom expected bioproduction currently in leading Our operation to AAA well clinical system do our is an world the around is in and adaptation of labs in applications.

The third Organoid commercial of MeshMEA exciting the of the highlights status table row our new platform.

customers usage new from -- companies test reduce in-vitro toxicology new safety our data and systems streamline in to positioned analysis reduce of drug development believe in well reduce used longitudinal market-leading systems be support today. have to supporting organoid to to MEA adapted time We during the and academic by developments as the that's well as system analysis animal electrophysiology acquisition capable fundamental of costs, We addition organoids. and -- first long-life are the biopharma new programs and these testing our research expensive

toxicology on year, neuro first the at and began of and usage applications. beta customer focusing we installed X In half and sites cardiac this

planning I'd the additional in half and installations academic and with or recurring leveraging on research second with well-known pull-through to in revenue institutions well the to that this XXXX. For biopharma full we're to biotech revenues. QX to applications based larger adopters, like our point each of well-established more and large companies these with are significantly adapting early addition production launch on leading of We're XX technologies way of our new NIH. out pharma streams year, them high

the delay let's on for reducing light a year. to market $XXX to full weaker second on and recovery the Slide the year second approximately a in see at million. In we're Now move to outlook half, look full what take expected we summary of our XXXX X $XX million revenue and our outlook later quarter to

expense expected margin growth half supported sequential EBITDA XX% product new we management. our gross continued which the second expect In the expect revenue, reflecting of of margin by shipments, be loaded. to single XXXX now will expect on lower back-end full year We XX%, digits. heavily in high approximately spite We focus in adjusted

designed remained long-term environment. the all, development we've of to on focused a to double-digit revenue new meet Like academic growth. market industry, we've our many we've support in CROs fielding challenged and exciting -- goal seen the been of researchers, products the difficult by Through it market drug and needs

you. Thank

I'll the over open back Now operator for to turn to questions. call the line the

Operator

Markets. first from Our question with Paul Knight Instructions] comes [Operator KeyBanc Capital

Paul Knight

Jim, at this say that release is regarding APAC, guess revenue it. percent you the What China of in exposure APAC total most time? I of as

James Green

Historically, like total predominantly, Asia it predominantly our China. Korea of revenue Pacific but others has with been does is China, about but that's X/X predominantly few include Japan, a it and again,

Paul Knight

And outlook your there?

James Green

We much pretty there. feel we've the like reached bottom

Our funnels are up. good. pretty Early indications I quote got going we look growing. mean rates

we're and more struggling growth first seems type to the biopharma academics. industrial in side. to to have academic that recovery So on We we in with companies just really do stabilized -- back China. was be expect move come more been part things the The CRO from side to has Asia little a and the seen have starting there, be have -- the

again, problem has growing, the funnel. through The seeing is velocity are but seen funnels the we've we're outlook the what there, been the

things So we funnel that slower. measure math has things on quote been we quote, like the from That's like remained time aging, order. -- look to the at and

thinking again, as So in going maybe that that's taken stream. second far mentioned, to more vector probably time. point this later for it's the on growth, revenue as little real fairly moving stable as as at that's growth XXXX we're far that into back a the Jen half, stream. as But And

Paul Knight

to and years these 'XX. in second any got heat force products Are And getting going be early Slide the 'XX -- up. you X, of then force the [indiscernible] sales most now, think your of sales here I half orders introduced of are that ago

James Green

last the the market Yes. to end Great at -- starting question. SFN We introduced last actually of year. near

We've as better working I one So -- selling. we've to than -- each products been look this be about of in We're orders at these in base the growth. getting expect that already segments. overall us what are is targeted we -- collecting And we market talked -- these giving are now business, toward these be to areas.

been large you in to base buy base these Now support new devices, look areas when first to CRO system, you'll they're VivaMARS that's see who of at And growth to business, bought SoHo issue. then the adding the the our course, the we're implantable the customer market last But the has new the going business. announcements -- article X an our going of at now. for year, starting SPS first more in

in to half going year. that's second So the be expanding revenue growth here of this

products And and in moving So also up, at looking that's are have for this CROs their now. testing. -- the technology acquisition other lining we towards neuro companies those process biopharma

been has that us. In sale, entry for It's we the side, know bioproduction little that's well. but a been longer a quite growing nice

today. have drug. them about now another pharma one to to adoption drug new with large now move that of this working We're expect We consumables another announced just right toward -- like the in spending that's drug -- same $X million now consuming on company with

added customers be could business And with as this -- there side. very book production. large of the us the a working to out another biotechs to number we're bridge an So seeing initial bioproduction we're using of of

another get do do manufacturer doing the on of we through the or to So of to very with size systems? for a course, have volume theory, go that's do we're in used of -- the them -- least and effective, have large But levels late-stage And we're clinical proposition as -- what depending us for our the then real to production, phases. make low creation, for level Or that into demand. if with to they of base to through them to when and we to decision, bioproduction, volume more demand to way testing. compound working preclinical they they cGMP barrier at toward expand need that move used they to then, value get the medium a be of move low bioproduction try is it's kind initial BTX and they

And and And are with adopters be inexpensive. not piece to in who organoid now and We've these already then algorithms. I in I of half. And that customers, going $XXX,XXX up X systems time, most the I and shipped are I to the got of targeting space XX the again, mean a are -- early the large sell proving new out or we -- system -- interesting running a I picking said for sites -- be systems I'm the up. work. this third to the most up is, I've started important consumable here these -- as second is is systems would the and can to expect number think get more these last

of starting an kind companies the -- going neuro we are going safety So they're be with in-vitro starting optimizing pharmacology for up, towards see to but see opportunity and testing. with picking testing the applications, this the you're for moving this to really tox they're and cardiac,

going interesting this We're to this production with we'll full starting and see early half. start heavily installations QX second you're next some talking buying really in QX, in real and So into names year. adopters and then

whether And where proxy non-destructively whole is you So -- of measure one how cardiac, for longitudinal the new how studies, months. it's a so kind a at looking over can this start area it's us. it a performing of neuro for is an the you're or organ, a

organoid? like not state? compounds. a positive brain. Is see disease with organ, can of to You to it it healthy various an healthy is And Is a negative how they a react it

dollars to decision preclinical go phases. you really compounds is are making into a way the potential of start a new it the once of the spent millions So that before filter start to

Paul Knight

which companies is the be? would at Bioscience's question growth saying, or what Harvard market Jim, is X%, market growth, this do the is sector you is in of year if X% kind most last maybe next goes are if the normalized, to think what

James Green

great products. I that's Yes, these development a roughly expect areas new in question. I with double-digit give me it to The is, model my new way product growth

here. me reasonably can double the get new able is That flat, to X%, somewhere have arguably driving should to have much I vector at double It's few, market a count then so with own. market we've digits got up I business. if new if on And then new that growth towards XX% XX-plus the this low products over it. if So the technologies If incremental competitors growing in position these to the stays any, that new on at leverage is be count are not And that in. I I long-term around where exciting market my things. growth. are and for very business I've on are its years. areas can digits products least developed underpin the these These going areas

I interesting So time start see take a fun develops. to company to It's and how to just organoids very really for and -- is this exciting to this going over. me, be the how

small does what the at be and efficient pharma -- safer alternative it less -- that scientist pulling costly need is animals run testing, building organs a them is look again, for under the make and used such lot do. through state-of-the-art, the various do not a they you and companies. an them efficient. you're the organoids lot to volumes high a out only today. are with that kind lot Normally, looking efficient that Today, to a to then today's of that to way microscope, can that the large that to should do system PhD of automation population more use a is at and for you get of makes an this that's But you're take this able And thing with you you're if proxies there's

watch. this about So be is I'm one it. going excited to to the really

Operator

Jackson Our from with Benchmark next The question Company. comes Bruce

Bruce Jackson

thought like what be year, your flat if low it the on finish single be? is next single digits? Would just could digits, market would you high growth your If

James Green

close arguably would the think to products Well, at new rate market And in whatever especially should doing. would to like MeshMEA out, first new growth X% they the look put of business of at total these and products, -- when of be -- I these expect to mean the that coming look new inside of -- the growth out X% is they year, products, I I on growth independent I get if XX% these even and the expanding. Organoid new put areas them, between of you bioproduction somewhere the -- should should

I I'm it's or the side, organoid So revenue stream. -- at expect revenue or look mean, that I but $X $X -- a this CAGR would on maybe somewhere stream low year that's today, around I out, mean, it's million million for a I base, the XX% better targeting

points. So first adding or you year X points, look X it the year the in adds another maybe next you're X X in or

So And business needle. -- simply at growing substantially. VivaMARS we've and moves added you base our anyway if that served expands the like is better there and it's do say, this the don't product, if X, growing even now our -- because that opportunity think really I the pretty than I should base this business --

it that alone base well to sits to itself outperform as is market So today. cause business just the our going

thing exciting, the see drivers. then and incremental, how a just it's that a sustainable These we that, of that's ride these new, let's get well, kind we're it. to of this. it's and main X% growth This And success of make growth aren't things me, is to going market is to So great are out.

Bruce Jackson

like to be we the Okay. you could bit into product marketing Got organoid here. if about a to more business strategy it. moving little and going build go talk just detail a and it's Obviously, deliberately. for the And is of very you're a lead intend more Can important some like you some market? here this little then the how going. users publications build kind strategy and bit you looks it's It just

James Green

sure. Sure,

and And comes used the -- the units whether because technology bread-and-butter great that's beta they're were prove for customer. If papers safety with academic on papers these focusing of and we peer-reviewed what And initially of tox that technology. all primary even That's are researchers. small testing also our where we're CRO with posters users, there is the use on first X compounds and or -- the testing. out X in we to to a first the this you who of beta the are exposure used have the

safety is a a going for large to neuro not be market into us cardiac researchers. we'll critical going this has be pharmacology have potentially adapting now going area the big and researchers. driver is So populations only real to the -- large a of tox That's after for get that the to of We'll researchers, through of today for small multibillion-dollar to us. But animals. go volume what then happen toward

the adopters if be of to NIH up show see and researchers. to that's We the year, but lining why not we are the can second companies. half now one it's so in biopharma be the And here, that, of you'll just going then academic

to I press let me work a who they the to want unless expect their talk me -- -- -- with to you have lot have see I to is guys it announce is -- to this of names are to don't like to be it. little the mentioned going able about because leverage want their a to You're they can But big able and publicly on I times on tough. I a and of they if it, they're pharma release, be part if get agreement going have gets

some see are to very interesting interesting going where going. see and places, and you're names very things these So you'll

So on neuro at big certainly is, very the I the markets -- looking side. we're here think growth the revenue it's that growth

University a to at tox see places again, other neuro massive is adapting right right organoids. that or You one. is what's customers our wheelhouse few going and pharmacology now to to. applications, with a Cardiac it's and with big in it then market, sell neuro But we and a that already Texas safety, happening of be

Bruce Jackson

that. of expect coming last later in Would you studies follow-up year out And on to Okay. then more XXXX? Great. this see question or these

James Green

of some see to going You're them.

already to And In neuro bigger out. in started the with use see see Pharmacology papers you'll of fact, I'd at MEA in There MR system. Society, with first our the place working have that some to first. this there September. we're a that's the to systems our more large a this CRO well-known ones Safety also say And going of into you should with with you're who's some who the it testing see few come them -- sold of labs. now adopted technology few more we their

you'll So there. it see

get to and coming see to MeshMEA that's for and start you when Neuroscience, really SFN, posters you papers When Society out the the the organoids. on use of

mind, That's one be I March. think then with full at So By MeshMEA. should the and for neuroscience you there American could that's we licenses. looking The up the in in very see going type, revenue this for depending are big then you'll the These be to this, have keep a customer -- consumable services, system, safety. these -- are consumable arguably then large stream those systems. software the And Toxicology. The on in be of we're last to on plus $XXX,XXX these College revenue cheap for have where systems. would not product. -- then, be you really rollout on production of And by And

with papers way are out initial So look the that work in started, it the comes already beta at is those now. testers again, progress I the have

Toxicology, College You'll Pharmacology. at see whether it's coming shows, of various SFN, the the those Safety out

of see also then and with see Summit. The our Bioprocessing out come to -- you'll starting stuff You'll more

bioproduction things organoid board, we're selling. to going and that big the And across these These MeshMEAs. So with the are now be not work about. just we're that talking again, drivers are then things the are

Operator

from with Sakai Chris comes question next Research. Singular Our

Joichi Sakai

academic expected? coming you China? Can in talk back you've Is research like it about

James Green

Yes. Yes, it is.

I if did we did think that right, Pacific. I think look that the there see fact, we recovery Is business slide, CMT the that in one in Asia we'll see In Jen? the QX, even on actually see some

Jennifer Cote

the companies And wanting see of Jim. I we're or take more that's timed right, advantage those starting funding delays, in with I activity academic -- available. think And that's to Yes, take to quoting. to of those more groups wanting Yes. think, are terms the

they're So their to the about parallel in through but application us talking going business. process,

James Green

Yes.

academic the side, starting So pharma CRO taken That's companies. commercial some starting a longer. with we and feel to bottomed little on it's see we're like it's side out already -- the recovery and

with XXXX. are second expected us larger to seeing funnel, the so not revenue there, growth works into half we get that's But really opportunities. We later for or the budgeting until way in more even hit maybe the

Joichi Sakai

Okay.

recurring guess then revenue, good. that for regarding I a do target you Sounds for And year? the have

James Green

started We Yes. we started -- year, a we measuring about as we XX%. first it, at were above little were the

that on all purchases, recurring. to at seen pressure closer probably right XX% given now capital point Now we're we've this

as would that then you'll And you'll recurring on still whether when notice million drug. the and mesh of purchases, less talked of equipment, cost of customer pressure in are maintain pull-through. revenue. X consumable you bioproduction especially we've purchase it's or see that that talked capital you'll about, and systems, expect, you're products talking each higher first whether So I bioproduction. these today, products of there's but new much $X your it's about I mean, mean, we these electroporation for were that all one have heavy organoid, with just that there

quickly the as market. adopted the more the recurring there those become as changes changes percentage products far massively more revenue being leverage So ratio of into our the as and and -- from

Joichi Sakai

Okay. then items? you the we to cost Great. million line the should on expect that see for And where mentioned, savings $X

James Green

annualized. million It's well, -- Yes. about it's $X

operational I in it think about OpEx, side. overall It's saw we but on is QX. the heavy $XXX,XXX

think, cost in on So part going of be, it straight it up goods, of OpEx I be the to of but line. is much would

Jennifer Cote

it's the margins through that's bleeding of Chris. half, probably you'll piece through time, operational, half R&D. coming the start it it, about see rest There's you'll and see Yes, -- SG&A, over it whereas to

Operator

for Thank to to closing turn you. like Jim remarks. back the I over would now call any Green

James Green

us. November results join presentation. the in you joining We for for you our Thank This today's Thank very hope ends ends Yes. This quarter much. fiscal for us you'll third presentation. XXXX.

Operator

This for Thank the concludes Thank you. conference. participation. your you

You disconnect. may now

Harvard Bioscience (HBIO) 8 Aug 242024 Q2 Earnings call transcript