Financial Data and Key Metrics Changes - Revenue increased by 7% year-over-year, reaching $28.8 million, with pre-clinical revenue up 10% and Cellular Molecular Technology (CMT) revenue up 7% [5][8] - Adjusted operating margin decreased to 8% from 12% in the previous year, impacted by shipment delays, inflation, and growth investments [5][8] - Gross margin remained flat at 57%, with a GAAP gross margin of 56.2%, up 100 basis points from last year despite higher costs [6][8] - GAAP operating income was negative $6.7 million, including a $5 million charge related to litigation settlement, while adjusted operating income was $2.4 million [8][19] - Adjusted earnings per share was $0.04, down $0.01 from the prior year, and GAAP earnings per share reflected a loss of $0.17 [8] Business Line Data and Key Metrics Changes - Cellular and Molecular Technology revenue was impacted by shipment delays due to lockdowns in China, but order intake from North America remained strong [9][10] - Pre-clinical product revenue increased by 10%, although it faced similar shipment delays in China [10] - Currency fluctuations negatively impacted revenue by approximately $0.5 million [10] Market Data and Key Metrics Changes - Asia accounted for about 20% of total revenue, primarily from China, which is expected to recover in the second half of the year [28][29] - European orders were delayed due to COVID lockdowns but have started to recover [9] Company Strategy and Development Direction - The company aims for profitable double-digit growth and is focusing on integrating brands and products to address market needs [12][14] - Plans to prune low-quality non-strategic product sales are in place, with expectations of improving product mix and leveraging the business platform [24][39] - Continued investment in research and development is expected to drive future growth, with adjusted operating margins projected to improve to 14% to 16% [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in recovering order intake from China and anticipates a strong second half of the year [30][31] - The company expects year-over-year revenue growth in the range of 8% to 13% and gross margins to improve to 58% to 59% [23][25] - Management acknowledged ongoing supply chain challenges but emphasized efforts to mitigate costs and improve operational efficiency [16][18] Other Important Information - The company recorded a $5 million charge related to a litigation settlement, with cash outflows expected primarily in Q2 2022 [19] - Capital expenditures for 2022 are projected to be approximately $2 million, with $500,000 spent in Q1 [20] Q&A Session Summary Question: What percentage of company revenue comes from China? - Management clarified that approximately 20% of revenue is derived from Asia, with most of that from China [28][29] Question: If China recovers, what impact would that have on revenue guidance? - Management indicated that recovery in China could lead to achieving the upper end of revenue guidance, as delays are expected to convert into orders [30][31] Question: Is the target for 60% adjusted gross profit margins still achievable this year? - Management expressed confidence in reaching around 60% gross profit margins by the end of the year, despite challenges in Q1 [37] Question: How quickly can low-quality products be removed from the portfolio? - Management expects to see significant pruning of low-quality products in the second half of the year, with a focus on replacing them with more strategic offerings [39] Question: Are there any new products in the pipeline? - Management confirmed ongoing product development, with around 15 new products introduced in recent years, including upgrades to respiratory products [42][44]
Harvard Bioscience(HBIO) - 2022 Q1 - Earnings Call Transcript