Q3 2025 Harvard Bioscience Inc Earnings Call

Good day and welcome to the third quarter, 2025 Harvard bioscience earnings conference call.

All participants will be in listen-only mode.

After today's presentation, there will be an opportunity to ask questions to ask a question. Please press star 1 1 if your question hasn't answered and you would like to remove yourself from the queue. Please press star 1 again.

Please note this event is being recorded.

I'm not showing the conference over to Taylor, craft chick, senior vice president at ellipses. Ta please go ahead.

Thank you, operator. And good morning everyone. Thank you for joining the Harvard bioscience third quarter 2025 earnings conference call.

Leading the call today will be John Duke president and chief executive officer and Mark, Frost interim Chief Financial Officer in conjunction. With today's recorded call, we have provided the presentation that will be referenced during our remarks that is posted to the investor relations section of our website at investor bioscience.

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-looking statements reflect the current views of Harvard, biosciences management and Harvard 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 bioscience Forum. Thank you. And other filings with the Securities and Exchange Commission for additional disclosures on forward-looking statements and the risks uncertainties and contingencies Associated there with it.

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-gaap measures are intended to supplement. Gaap financial information and should not be considered a substitute.

Reconciliations of gaap to non-gaap measures are provided in today's earnings press release.

I will now turn the call over to John John. Please go ahead.

Thanks Taylor and good morning everyone.

I'm pleased to speak with you again as a report, our third quarter results and continue to execute on our 2025 priorities.

This quarter reflects operational, progress, consistent and execution and tangible Improvement in several key areas of our business.

After being appointed CEO in Late July, I outlined 3 priorities for 2025 number 1 maintain, Financial discipline, and positive, cast generation.

2 accelerate product adoption across our core growth platforms and 3. Strengthen our capital structure through a successful debt refinancing

I'm encouraged to report that we've Advanced meaningfully on each front. First the financial results. We delivered revenue of 20.6 million at the high end of our guidance range and with a slight sequential increase in what historically is a cyclically soft quarter

Gross margin of 58.4%. Improved sequentially and exceeded our guidance range.

This margin expansion, reflects disciplined execution, operational efficiency, and an improved mix towards higher margin products.

Adjusted. Even if I was also up sequentially to million dollars, our cost structure remains lean and we generated another quarter of positive operating cash flow.

Customer engagement remains High across our platforms.

Q3 marked the first time in more than 12 months, that we saw quarterly order growth on a year-over-year basis. Going into the fourth quarter, our backlog has reached its highest level in nearly 2 years. As demand has picked up considerably heading into the end of the year.

Turning to our products.

The Soho Telemetry rollout has expanded into additional key accounts and we've begun to see increased recurring consumable demand.

Our biochrom amino acid, analyzer for Bio production continues to perform well and we remain on Pace to exceed last year's consumable Revenue.

This quarter, we announced the launch of the incubate multi-well system.

Our new smart micro electrode array platform, designed to bring real-time monitoring to organoid and cell culture workflows with precise environmental control.

Incubate further, strengthens the growth of our existing electrophysiology portfolio.

By explaining our reach into high throughput applications including drug, screening safety, pharmacology and disease, research modeling research.

Initial customer response has been positive. As we have already received orders in shipped our first system.

In addition, we expanded our distribution agreement with Fisher Scientific significantly, broadening access to Harvard bioscience products across North America.

This partnership deepens, our commercial reach within academic and pharmaceutical research markets and enhances visibility for our full portfolio. Particularly our cellular, and molecular technology products through 1 of the most trusted laboratory. Distribution channels in the world.

Adoption of our mesh mea orgonite platform. Continues to build momentum supported by regulatory initiatives. Promoting new approach methodologies.

on our capital structure, we continue to make constructive progress and remain an active discussions with our lenders and advisors regarding our assessment of the potential options and proposals that we have received,

The process remains on track to complete the refinancing or repayment of the existing credit agreement in the fourth quarter.

Our operating performance and consistent cash generation have improved our position as we move toward completion.

The management team and the board of directors are aligned and remain committed to strengthening the balance sheet and positioning the business for long-term success.

NIH funding for the 2025 2026 budget is taking shape.

We're also monitoring the ongoing government shutdown, which may impact the timing of NIH funding distribution in the coming weeks, we'll have more clarity

In China orders were flat sequentially. The most recent developments in trade talks late, last week. Give us optimism that the worst of the Tariff disruption is behind us and we'll see increased activity. Moving forward.

The fourth quarter.

Looking ahead, we anticipate Continuum momentum in the fourth quarter as product adoption and the demand uptick support revenues into the end of the year.

Our priorities continue to be Financial discipline, driving demand, and our high-value products and strengthening our capital structure.

Harvard bioscience is a fundamentally stronger company today than it was to start the year.

Leaner more focused and better aligned with long-term growth opportunities.

Our third quarter results, demonstrates solid improvement over the first half of the year.

And we look forward to continued Improvement heading into 2026.

I'm proud of our team's progress and grateful for the continued Partnership of our customers, shareholders and employees.

We appreciate your support as we continue to execute our plan.

And with that I'll turn it over to Mark. Who will go into more detail on the financials mark?

Thank you, John. Um, I'll start my remarks with our third quarter of 2025 Financial results. The details of which can be found on slide 4, the earnings presentation that we posted to the to our IR site.

Revenue was 20.6 Million at the high end of our 19 to 21 million guidance and below the 22 million. We reported in the prior Year's third quarter

gross margin was 58.4% versus 58.1% in the third quarter of 2024 and exceeded our guidance of 56 to 58%

operating expenses, decline, 1.4 million, from prior year driven by actions taken in 2024. And the first quarter of 2025 to 1 move to 1 US Erp system, 2 lean out, our sgna organization and 3 re re re prioritize NPI projects. These actions led to an improvement in adjusted operating income of 1.5 million for a 0.8 million in quarter 3224 adjusted e, but I was 2 million versus 1.3 million quarter 324 with a major driver, being the reduction in operating expenses which more than offset. The volume in fact from the lower year-over-year Revenue

Now, looking aside 5, I will outline the revenue results for the quarter by product, family and region.

Overall revenues in the third quarter, showed a slight increase from quarter, 2 finishing at 20.6 million compared to 20.5 million in the prior quarter. Um, 25 notley. This is a positive trend as we historically, see a decline from quarter 2 to quarter 3.

Now, turning to the geographical results, starting with the Americas Revenue in the third quarter, increased sequentially by 3.6% and was down 4.4% versus the third quarter of last year.

As shown in the light blue on the slide uh CMT saw sequential and year-over-year decline. Our pre-clinical sales, increase sequentially and year-over-year. Due to increases in Telemetry and respiratory product lines.

Now, moving on to Europe, overall Revenue in Europe, and the third quarter increased 0.3% sequential sequentially reflecting, stronger pre-clinical academic shipments.

Compared to quarter 3 last year, European revenues were essentially flat.

Cellular and molecular sales, decreased sequentially 0.7% and year-over-year. 13%

Now, our quarter 3 pre-release and year-over-year.

Now, moving to China and the asia-pacific and the third quarter, we saw Improvement in APAC, excluding China.

With China Revenue was down sequentially, 6.3% and year-over-year 19.6% with last week's news. We expect tariff headwinds to subside going forward.

Now, cellular and molecular APAC, products were flat sequentially and decreased year-over-year. Pre-clinical Apex products also declined, sequentially and year-over-year. Now I moved to slide 6 to discuss further Financial metrics

Looking at gross margin first.

Gross margin during quarter 3, 2025 was 58.4%. Compared to 58.1% in quarter 3 2024, and up 200 basis points, sequentially from 56.4 and quarter to 25. Despite the flat Revenue, the gross margin expansion compared to last year. Quarter 3 was mainly due to better absorption of fixed manufacturing, overhead costs, and the leading out of our manufacturing cost structure. The sequential margin increase was due to improve mix of higher margin Revenue. In particular, Telemetry as well as better absorption of fixed manufacturing. Overhead costs.

Quarter compared to the prior year lower gross profit of 0.7 million was fully offset by the 1.4 million reduction in operating expense.

And moving to the bottom left, where we show both reported and adjusted loss earnings per share. As I've mentioned in the past, typically the difference between gaap EPs and adjusted EPS are the impact of stock. Compensation, amortization and depreciation, these differences between net loss, and adjusted debit are highlighted, and the reconciliation tables on slide 10, and are all non-cash items.

Now, moving to the bottom middle graph year to date. Cash flow from operations was strong at 6.8 million compared to negative -.3 million and the same period with 1.1 million of operating cash generated. In the third quarter, the primary drivers for the improved cash flow from operations were working Capital Management and operating expense reductions. We expect to see positive operation, operating cash again in the fourth quarter.

Now, debt, net debt was down over 6 million from the year and 24 to 27.5 million from 33.8 million.

This reflects our quarterly, principal payment of 1 million and improved, operating cash flow.

Now, with respect to our credit facility, as John noted, we have made progress, are in the process of reviewing the multiple proposals. We have received, we are negotiating towards the most favorable deal for our company and our shareholders. And we expect to have resolution within the fourth quarter. We will provide more information when we are able to

Now, I'm going to move to slide 8 to discuss our outlook for quarter 4.

A key factor supporting our guidance is mid-single-digit order growth in the third quarter year-over-year.

in, for consecutive months of year-on-year growth, this result has positioned the company of our strongest backlog, since the first quarter of 2023,

We are guiding to a range of 22.5 to 24.5 million Revenue, resulting in potentially flat revenue for the fourth quarter, at the high, end of the range.

the lower end of the range, reflects the potential risk of a prolonged US Government shutdown lasting through year end

Now, we expect a corresponding Improvement in gross margin in quarter, 4 from the higher volume and our guiding to a gross margin range. Of 58 to 60% improved demand and a strong backlog. Support our confidence to project continued sequential Improvement in the fourth quarter.

Now, I'll now turn the call back to our operator to take questions.

Thank you. Our first question comes from Lucas bearing out. With keybanc capital markets, your line is open.

Hi. This is Lucas on for Paul Knight at KeyBank uh first off when we look at the uptick that was seen in pre-clinical systems uh during the quarter was that primarily driven by crows gearing up to run more studies, or was it some other factor? That was driving the uptake.

Thank you for the question. We benefited from Broad uptick in demand for our Telemetry products and it was not just in 1 region. It was a cross regions as well as across, uh, different customer groups.

Excellent. And in the press release, you had a comment about backlog being the highest in 2 years. When you look at that backlog, would you say the mix is similar to your existing product mix? Or is there a product, like, say mesh, ma that's a disproportionate percentage of it.

Yeah. Lucas it, it it as John indicated, we had broad-based increase in orders across geographies and products.

And we did see, uh, an improved benefit from all the NPI we've launched this year. So, it wasn't one specific product or region that drove, uh, the backlog. It was just a uniform increase, uh, across our geographies and products.

Excellent. And then maybe just one final question. You know some of the larger tools companies have noted that they're seeing early signs of improvement in the academic and government market. What are you seeing on that front?

Yes, we have seen Improvement, which is reflected in our, uh, Q3 results as well as in our strong backlog going into Q4.

A Q4 results.

Excellent. That's all I had. Thank you.

Thanks Focus.

Thank you. Our next question comes from Bruce Jackson with the Benchmark Company. Your line is open.

Hi. Thank you for taking my questions. Um, if we could just um dive into the Donnie H, funding a little bit more. Um, so the guidance um, do you are you contemplating an end to the government shutdown during the fourth quarter?

Yeah. Bruce uh this is Mark. We we have billed in

To the lower range that it does. If it does go to the year end. That would be the potential, um, Benchmark. No pun intended, bench? Correct. We would get to in the quarter. So we have assumed some impact from that in our guidance, Bros.

Okay. And then, um, if the funds don't get released in the, the fourth quarter then would they would you anticipate getting that those funds flowing through sales in the first quarter of next year?

Yeah. Bruce. Yeah. As you probably well know, the funds are not lost. It's a timing impact that it just moves out a quarter 4 into 26.

So we would expect the orders and, you know, depending on the orders come in, it would come in and and first quarter or second quarter next year.

And then, um, last question on NIH. Um, do the customers have visibility on the funding? So do you feel like you've got good line of sight on the projects and that the customers also have line of sight on the funding?

But it's customer dependent, I mean uh some customers have shared with us that it there's no 1 even to talk to at the NIH right now and so they're still trying to get visibility whereas others do have visibility and they're just waiting for their funds to be released.

Okay, great. Um and then if I may just 1 question um, the um Erp project. Um, where are you in that project right now? And, um, how should we be thinking about either the the spending for additional Erp work or the the flow, through from the benefits?

Yeah, we actually finished the project in quarter 4. We um and moved to 1 US platform. We actually did the same thing in Europe which I didn't mention and that was completed in quarter 4. So the benefits have started to roll through um both our manufacturing side and our and our GNA side in 25 and it's contributing to why we've been able to reduce the expenses this year. Bruce

Okay. Um, that's it for me. Thank you.

Thanks for the questions.

Thank you. There are no further questions at this time. This concludes our question and answer session, you may now disconnect everyone have a great day.