• Revenue: $22 million in Q3 2024, down 13% year-over-year and 5% sequentially.
• Gross Margin: $12.8 million or 58.1%, close to the 60% target.
• Operating Loss (GAAP): $1.9 million.
• Adjusted Operating Income: $800,000 or 3.8% of revenue.
• Adjusted EBITDA: $1.3 million or 6% of revenue.
• Americas Revenue: Down 12% year-over-year in Q3 2024.
• Preclinical Sales: Declined 26% year-over-year.
• Cellular and Molecular Revenue Growth: 15% year-over-year.
• Europe Revenue: Down 12% year-over-year, stabilized sequentially.
• APAC Revenue: Down 20% year-over-year and sequentially.
• Adjusted EBITDA (Year-over-Year): Decreased from $2.2 million to $1.3 million.
• Cash Flow Used in Operations: $0.8 million in Q3 2024.
• Net Debt: Slightly above the end of 2023 levels.
• Full Year Revenue Guidance: Reduced to $93 to $96 million.
• Q4 Revenue Expectation: $23 to $26 million.
• Q4 Gross Margin Expectation: 59% to 60% range.
• Q4 Adjusted EBITDA Margin Expectation: Mid 10s percentage.

• Warning! GuruFocus has detected 2 Warning Signs with HBIO.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Harvard Bioscience Inc (NASDAQ:HBIO) has successfully transitioned and merged all US operations onto one modern P system, improving inventory and supply chain management.
• The company has introduced new products, such as the Soho family of telemetry devices and the Beva Mars neurobehavioral monitoring system, which are expected to drive future demand.
• Harvard Bioscience Inc (NASDAQ:HBIO) has taken actions to reduce operating expenses by an additional $1 million per quarter, aiming for self-funding operations even in low revenue quarters.
• The company is seeing a positive trend in global trailing three-month order profiles, indicating potential growth.
• New product introductions, such as the CGMP compliant amino acid analyzer system and mesh MEA organoid platforms, are positioned to support high growth in bioproduction and organoid research applications.

Negative Points

• Revenue in the third quarter was $22 million, a 13% decrease compared to the same quarter last year, primarily due to weakness in China and Asia Pacific.
• The company reported an operating loss of $1.9 million on a GAAP basis for the quarter.
• Adjusted EBITDA decreased from $2.2 million last year to $1.3 million this year, driven by lower gross margin dollars.
• Harvard Bioscience Inc (NASDAQ:HBIO) is currently unable to make additional borrowings under its revolver facility due to net leverage ratio limitations.
• The APAC market has been challenging, with a 20% revenue decline compared to the prior year, affecting sales in both preclinical and cellular and molecular products.

Q & A Highlights

Q: Could you discuss the dynamics with CROs and their impact on company revenue? A: James Green, President and CEO, explained that CRO revenue accounts for about a quarter of the company's global revenue. The CROs have been experiencing mixed results, with some seeing improved output and a return to normalized run rates. The tightening of budgets in big Pharma has affected spending, but the company expects a more stable demand in the second half of the year, particularly in Q4. The company is optimistic about 2025, expecting a positive market outlook while maintaining a lean operation to ensure self-funding even in low quarters.

Q: Can you provide insights into the potential growth of new products like electroporation and mesh MEA? A: James Green noted that the electroporation and bioproduction segment is about 10% of the business, with expected growth of 20% or more. The mesh MEA is a new business area, currently around $6-7 million, with fast adoption and potential for significant incremental growth. These new products are expected to drive high single to double-digit growth, contributing multiple points to the overall business growth.

Q: What are your thoughts on the core growth rate for BioPharma R&D? A: James Green indicated that assuming market stabilization, the core growth rate for BioPharma R&D is expected to be in the low to mid-single digits in a normalized year. The company's strategy focuses on adapting technologies to drive higher recurring revenue from consumables in BioPharma and CRO applications.

Q: Regarding China, what indicators suggest stabilization, and could the situation worsen? A: James Green acknowledged the unpredictability of the China market but noted that academic spending seems stable, with modest growth expected. The main challenge has been the reduced capital availability for CROs and Pharma companies, which has led to purchasing delays. However, quote rates are up, and Q4 is expected to be stable with slight growth. The company focuses on products with technological advantages to maintain pricing power in China.

Q: What is the order pattern and ramp-up potential for mesh MEA and organoid products? A: James Green explained that the company is carefully managing the ramp-up of mesh MEA products, with early adopters ramping up quickly. The potential growth could be $1-2 million per quarter, with significant consumable revenue expected. The company is preparing to increase production capacity tenfold by the second quarter of next year, positioning mesh MEA as a major growth driver.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.