Harvard Bioscience(US:HBIO)2023-03-09 17:05Financial Data and Key Metrics Changes - Reported revenue for Q4 2022 was $28.4 million, down 14% from Q4 2021, and down 11% when adjusting for a $1 million currency impact [17][65] - Adjusted gross margin recovered to 57%, consistent with historical margins, despite the impact of low-margin obsolete products [7][65] - Adjusted operating margin was 12%, with adjusted EBITDA at 13% of revenue [18] - Adjusted EPS was $0.04 per share, down from $0.08 in the previous year [18] - Cash flow from operations was $2.7 million, a significant increase from $100,000 in Q4 2021 [86] Business Line Data and Key Metrics Changes - Pre-clinical products revenue decreased by 19% in constant currency compared to a strong Q4 2021, with order demand recovering later in the quarter [19][61] - Cellular molecular technology revenue was roughly flat when adjusted for currency, with solid growth in Asia Pacific offset by slowness in the Americas [61] - New product launches included the U7500 Premium Spectrophotometer and a continuous glucose monitoring implant, expected to drive growth in 2023 [26][23] Market Data and Key Metrics Changes - The strong U.S. dollar compared to the euro and British pound resulted in a currency impact of $1 million [8] - China is anticipated to be a major growth driver, with improvements expected across product lines following the easing of lockdowns [82][94] Company Strategy and Development Direction - The company is focusing on portfolio optimization and cost reductions to support revenue growth targets of 58% to 60% gross margins and high-teen EBITDA margins [16][75] - There is a strategic shift towards expanding consumable and service offerings alongside new product introductions, particularly in bioproduction [31][98] - The company aims to reduce debt significantly in 2023, targeting a leverage ratio of 2x by year-end [88][74] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by inflation and currency fluctuations but expressed confidence in the company's ability to improve margins and operational efficiency [47][54] - The outlook for 2023 is positive, with expectations of low to mid-single-digit revenue growth and improved gross margins [76][75] - Management emphasized the importance of organic growth while also considering potential M&A opportunities to enhance business development [37][46] Other Important Information - Interest expense increased to $900,000 in Q4 2022 from $400,000 in Q4 2021, with plans to mitigate further expense growth through an interest rate swap [68] - The company is transitioning to report adjusted EBITDA instead of operating income, aligning with cash flow improvement focus [73] Q&A Session Summary Question: What is the expected cadence of gross margin improvement in 2023? - Management expects gross margin to improve almost immediately, targeting 58% to 60% by the end of the year, particularly with higher volumes in Q4 [79] Question: What is the outlook for the Chinese market? - Management sees China as a major growth driver, with anticipated growth across product lines despite past disruptions from lockdowns [82][94] Question: How will non-cash expenses change in 2023? - Non-cash expenses are expected to remain stable, with the primary change being the addition of depreciation in the new EBITDA reporting [91]