Harvard Bioscience(HBIO) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q3 2022 was $26.9 million, a decrease of 9% from the previous year, with a 6% growth in cellular/molecular technology offset by a 17% decline in preclinical sales [9][11] - Adjusted operating margin fell to 2.6% from 13.3% year-over-year, while gross margins decreased to 51% from 56% due to inflation and lower absorption [11][20] - Free cash flow from operations was $700,000, and net debt remained flat [12][27] Business Line Data and Key Metrics Changes - Cellular/molecular technology revenue increased by 6% on a constant currency basis, driven by strong direct sales, while preclinical products saw a 17% decline [13][14] - The U.S. experienced slower telemetry sales to CROs, although there is an expectation for improvement in Q4 [15][56] Market Data and Key Metrics Changes - The strong U.S. dollar negatively impacted revenue by approximately $1 million, particularly affecting sales in Europe and Asia Pacific [15][28] - The company noted a recovery in China, although it faced tough comparisons to prior year sales [14][61] Company Strategy and Development Direction - The company is focused on restructuring and portfolio actions to achieve targeted gross margins of 58% to 60% and EBITDA margins in the high teens by FY '23 [12][35] - New product introductions, including the BTX Electroporation systems and the U7500 spectrophotometer, are expected to drive future growth [16][18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging Q3 but expressed optimism for sequential revenue improvement in Q4, projecting revenue in the $30 million range [34] - The company anticipates a return to mid- to upper single-digit organic growth in 2023, despite the impact of discontinued low-margin products [39][35] Other Important Information - Restructuring costs for Q3 were $1.7 million, with expectations for additional charges in Q4 [29][30] - The company is planning for significantly lower transformation costs in 2023 as restructuring initiatives are completed [36][30] Q&A Session Summary Question: What is the goal for organic growth potential? - Management aims for mid- to upper single-digit growth on a reported basis, with a pro forma view suggesting around 10% to 11% growth [39] Question: Is there more pipeline behind the BTX Electroporation configuration? - Yes, there is a significant pipeline, with the BTX system being used in the development of various new drugs, including COVID vaccines [40][43] Question: How much of the current downturn in the inhalation business is due to economic conditions? - Management indicated that the downturn is partly due to a normalization of sales following the COVID-19 spike, with expectations for growth based on new capabilities [48][49] Question: Were there any discontinued products impacting the top line in Q3? - Yes, the company began phasing out certain low-margin products in Q3, which affected sales [50] Question: What types of studies are seeing an upturn in the CRO pipeline for Q4? - The implantable telemetry continuous monitoring systems are recovering, and the introduction of new glucose products is expected to augment growth [51][52]