Financial Performance - Revenues for the fiscal year ended December 31, 2018, were $120.774 million, an increase from $77.407 million in 2017, representing a growth of approximately 55.8%[138] - Revenues for the year ended December 31, 2018, were $120.8 million, an increase of 56.0%, or $43.4 million, compared to $77.4 million for the same period in 2017[152] - The increase in revenues included approximately $42.6 million from the acquisition of DSI and a positive impact of $1.3 million from currency translation[153] - Cost of revenues for 2018 was $57.593 million, accounting for 47.7% of total revenues, compared to 49.4% in 2017[138] - Cost of revenues increased by $19.4 million, or 50.6%, to $57.6 million for the year ended December 31, 2018, primarily due to the acquisition of DSI[155] - Gross profit margin as a percentage of revenues increased to 52.3% for the year ended December 31, 2018, compared to 50.6% for 2017[155] - Research and development expenses increased to $10.988 million in 2018, representing 9.1% of revenues, up from 7.3% in 2017[138] - Research and development expenses were $11.0 million for the year ended December 31, 2018, an increase of $5.4 million, or 94.7%, compared to $5.6 million for 2017[158] - For the year ended December 31, 2018, the company reported a net loss of $2.9 million, compared to a net loss of $0.9 million in 2017[169] Acquisitions and Divestitures - Harvard Bioscience, Inc. has completed five acquisitions since Q4 2014, including the acquisition of Data Sciences International, Inc. for approximately $71.1 million in January 2018[15] - The company sold substantially all assets of Denville Scientific, Inc. for approximately $20.0 million in Q1 2018, which included a $3.0 million earn-out provision[16] - The company acquired Data Sciences International, Inc. for approximately $71.1 million, diversifying its customer base and increasing gross profit margins[135] - The company sold the operations of Denville for approximately $20.0 million on January 22, 2018, which included a $3.0 million earn-out provision[163] Research and Development - Harvard Bioscience, Inc. generated approximately $11.0 million in research and development expenses for the year ended December 31, 2018, compared to $5.6 million in 2017, indicating a significant investment in innovation[35] - The company aims to continue pursuing a balanced development portfolio strategy, focusing on both internal research and strategic acquisitions[35] - The company is investing in new product development, but the speed of technological change may hinder the recovery of development costs[87] Sales and Revenue Sources - The company's PCMI product family accounted for approximately 47.3% of global revenues for the year ended December 31, 2018[24] - The DSI product family contributed approximately 35.2% to global revenues for the year ended December 31, 2018[26] - The Electrophysiology product family represented approximately 17.5% of global revenues for the year ended December 31, 2018[29] - Direct sales to end-users made up approximately 59% of total revenues for the year ended December 31, 2018, while distributor sales accounted for about 41%[32] Financial Position and Debt - The company had borrowings of $62.4 million under a Financing Agreement as of December 31, 2018, with financial covenants relating to leverage and fixed charges[65] - The company’s ability to make scheduled payments on its debt depends on its financial and operating performance, which may be adversely affected by various factors beyond its control[68] - The company has a significant unused borrowing capacity, but any failure to comply with financial covenants could negatively impact its financial condition[67] - As of December 31, 2018, total debt, net of cash and cash equivalents, was $52.6 million, compared to $6.5 million at December 31, 2017[166] - The company expects its available cash, cash generated from operations, and debt capacity to be sufficient to finance operations for the next 12 months[184] Market and Economic Conditions - The company derives a significant portion of its revenues from pharmaceutical and biotechnology companies, which are subject to risks such as government regulation and reductions in research and development expenditures[69] - The company’s financial performance is dependent on the prevailing economic conditions and the financial health of its customers, particularly in the pharmaceutical and biotechnology sectors[70] - The company faces risks related to foreign investment regulations and economic conditions in China, which may impact its expansion efforts[75] - Recent U.S. tax reforms reduced the corporate tax rate from 35% to 21%, which could adversely affect future operations[77] Operational Risks - The company faces risks related to customer uncertainty following acquisitions, which could delay purchasing decisions and affect business performance[71] - The company is exposed to product liability claims, which could result in substantial financial liability if insurance coverage is inadequate[107] - The company may be involved in costly and time-consuming lawsuits to protect its patents, which could divert resources from normal operations[108] - Information technology infrastructure failures could adversely affect day-to-day operations and decision-making processes[90] Workforce and Employment - As of December 31, 2018, the company employed 547 employees, an increase from 434 employees in 2017, primarily due to the acquisition of Data Sciences International, Inc. (DSI) in 2018[51] - The company’s workforce is geographically distributed, with 346 employees in the United States and 201 employees in other countries as of December 31, 2018[53] - The company may face challenges in retaining key personnel, which is critical for achieving product development and growth strategies[104] Regulatory and Compliance Issues - The company is not subject to direct governmental regulation for its current products, which are not required to undergo pre-market approval by the FDA[50] - The company is subject to new U.S. foreign investment regulations that may limit certain investors' ability to purchase its common stock, potentially affecting stock attractiveness[119] - The implementation of GDPR may increase business costs and impose severe penalties, which could materially harm the company's operations and reputation[118] Competitive Landscape - Increased competition in the life sciences industry from both established and new companies poses a challenge to the company's market position[85] - Rapid technological changes in the industry necessitate continuous product development to remain competitive[86] - The company faces challenges in acquiring other businesses due to competition and potential financing limitations, which could hinder growth[94] Asset Management - The company has goodwill and intangible assets totaling $103.1 million, representing 61% of total assets, with no impairment reported[102] - The estimated fair value of the business significantly exceeded its carrying value, indicating no impairment of goodwill[198] - The fair value of unamortized intangible assets also significantly exceeded their carrying amounts[198] Cash Flow and Investments - Cash provided by operating activities increased to $2.9 million in 2018 from $1.1 million in 2017, despite a decrease in net cash flow due to increased net loss and changes in working capital[171] - Investing activities used cash of $53.8 million in 2018, primarily due to a $68.5 million acquisition of DSI, while only $0.9 million was used in 2017[172] - Financing activities provided cash of $53.1 million in 2018, a significant increase from cash used in financing activities of $1.8 million in 2017[173] Stock and Shareholder Issues - The company has a staggered board of directors, making it difficult for stockholders to change management, which may limit share price appreciation[113] - The company’s stock price has experienced significant fluctuations, influenced by various market factors and operational performance[98] - The company does not anticipate paying cash dividends in the near future, focusing instead on retaining earnings for business expansion[117] Future Outlook - The company anticipates that its financial resources will be sufficient to finance operations and capital expenditures for at least the next twelve months[96] - The company is expanding its business into foreign markets, but success is uncertain and may require significant resources[84]
Harvard Bioscience(HBIO) - 2018 Q4 - Annual Report