Harvard Bioscience(US:HBIO)2022-08-07 14:52Financial Data and Key Metrics Changes - Revenue for Q2 2022 was $29 million, flat compared to Q2 2021, with a 17% growth in Cellular and Molecular offset by a 9% decline in preclinical revenue [9][10] - Adjusted operating margin was 11%, down from 15% in the previous year, impacted by order delays, inflation, and increased R&D and marketing investments [11] - Gross margins improved to 58%, up 100 basis points from last year, despite higher costs of goods sold [11][13] - GAAP earnings per share increased to $0.06 from a loss of $0.01 in the prior year, while adjusted earnings per share decreased to $0.05 from $0.06 [14] Business Line Data and Key Metrics Changes - Cellular and Molecular technology revenue increased by 17%, driven by strong direct sales performance in both the U.S. and Europe [15] - Preclinical revenue decreased by 9% due to lower demand in Europe and shipment delays in China, with expectations for recovery in Q4 [16][17] - The strong U.S. dollar negatively impacted revenue by approximately $900,000, affecting overall performance [10][17] Market Data and Key Metrics Changes - The U.S. market showed steady growth, while Europe experienced volatility, particularly in commercial biopharma sectors [19][20] - China remains a critical market, but the outlook has become ambiguous due to lockdowns and economic conditions, with a planned revenue-related cost base at a lower level [19] Company Strategy and Development Direction - The company is focusing on direct sales of high-margin cellular products and has announced actions to optimize its product portfolio by discontinuing non-strategic product lines [12][40] - The goal for 2023 includes achieving double-digit revenue growth, gross margins of 60%, and operating margins in the mid- to upper teens [47][41] - Investments in R&D for new product development are expected to support long-term growth [41] Management's Comments on Operating Environment and Future Outlook - Management expressed a conservative view on annual revenue growth, expecting a range of 1% to 5% year-over-year due to currency impacts and market volatility [40] - The company anticipates a return to growth in Q4, with improvements in free cash flow and reductions in net debt for the second half of the year [41][39] - Inflation and higher interest rates have been factored into the financial outlook, with expectations for continued impacts from currency fluctuations [48][51] Other Important Information - A global workforce reduction of approximately 5% is planned to optimize operations and reduce costs, with expected severance costs of about $1 million per quarter [12][30] - The company recorded a $4 million asset tied to convertible preferred stock as part of a litigation settlement, which is expected to positively impact cash flow [35][34] Q&A Session Summary Question: Impact of new guidance on long-term perspective - Management believes changes are designed to help achieve a growth structure for 2023, with Q4 expected to mark the beginning of recovery [45][46] Question: Changes in inputs or inflation - Management noted a $900,000 impact from currency, which is expected to continue affecting revenue [48] Question: Portfolio pruning impact - Currency impacts and portfolio rationalization are expected to affect margins, with a potential 300 basis point impact [53][55] Question: Products driving growth in Cellular and Molecular - Key products include high-end cellular testing products and new inhalation capabilities, which are expected to drive future growth [60][62]