Harvard Bioscience(HBIO) - 2020 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Q1 2020 revenue was $23.8 million, down $4.4 million or 15.7% from Q1 2019 [12] - GAAP gross margin was 54.6%, a decrease of 2.7% year-over-year [12] - Non-GAAP adjusted gross margin was also 54.6%, down 2.9% [12] - GAAP operating income was negative $3.3 million, while adjusted operating income was positive $500,000, resulting in an adjusted operating margin of 2% [12] - GAAP earnings per share was negative $0.12, and adjusted earnings per share was negative $0.01 [12] - Cash flow from operations improved to $2.9 million from $2 million in the prior year [25] Business Line Data and Key Metrics Changes - Revenue from cellular and molecular products, primarily for academic research labs, was down 15.7% due to lab shutdowns [14] - Preclinical revenue also declined primarily due to COVID-19 impacts, but CRO revenue saw year-over-year growth driven by North America and China [15] - Pharma revenue remained steady compared to last year, with excitement around new inhalation products [15] Market Data and Key Metrics Changes - The impact of COVID-19 was felt equally across geographies, with Asia affected through February, followed by significant impacts in Europe and North America in March [20] - Academic labs experienced significant revenue declines due to shutdowns, while CROs and pharma showed resilience and growth [20][36] Company Strategy and Development Direction - The company is focusing on strict cash and cost control to maintain strong cash flow and meet debt obligations [10] - A restructuring plan was initiated, including a global reduction in force of approximately 10%, expected to yield annualized savings of over $4 million [16] - The company is investing in high-potential areas such as CRISPR-related products and preclinical testing technologies [53] Management's Comments on Operating Environment and Future Outlook - Management expects further revenue decline in Q2, projecting a decrease of 20% to 30% year-over-year, with recovery anticipated in the second half as academic labs reopen [27] - The company has taken immediate actions to offset Q2 margin impacts and is committed to maintaining cash flows and meeting debt obligations [27] - Management expressed confidence in the recovery of the CRO and pharma segments, with indications of continued demand for products [34] Other Important Information - The company returned a $6 million PPP loan, indicating confidence in its liquidity and operational management [26] - New inhalation products are gaining interest, particularly from CROs and pharmaceuticals, with expectations for continued growth [52] Q&A Session Summary Question: Can you talk to the businesses again as you were moving into Q2? - Management noted that CROs started growing in Q1 despite COVID-19, with strong demand continuing from these segments [32] Question: Do you think academia may be bottoming now, but not necessarily recover? - Management believes the order intake from academia has dropped significantly but expects sequential improvement as labs reopen [39] Question: Can you talk about debt payments due this current quarter? - Management confirmed ongoing interest payments will be met, and they are focused on avoiding covenant issues [43] Question: Could you give us more color around the insulation-type products? - Management explained that new inhalation products are designed to measure aerosol delivery to the lungs, with growing interest from various customer segments [50] Question: Is the low-margin portfolio rationalization process complete? - Management indicated that the rationalization process is nearly complete, focusing on successful product lines moving forward [53] Question: How should we think about gross margins in the second quarter? - Management expects some downward pressure on gross margins due to volume decline but anticipates operating margins to return to normal levels [58]