Harvard Bioscience(HBIO) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics - GAAP operating profit was $300,000, up from a negative$500,000 last year [4] - Adjusted operating profit measured $3.3 million or 11.6$28.2 million, down a modest 1% from last year on an as reported basis [53] - Adjusted EBITDA measured as $3.7 million or 13$0.04 loss, again same as last year [27] - Adjusted EPS measured a positive $0.04 a share, again same as last year [27] - Gross margin improved to$16.3 million or 58% of revenue, up 230 basis points from the same period last year [83] - Cash flow from operations came in at $4.3 million, up from$2.7 million last year [54] Business Line Data and Key Metrics - In the Americas, revenue was up 4.1% as reported and included a 2.1% net reduction from discontinued products [5] - Pre-clinical had strong growth in core telemetry and Ponemah enterprise software [5] - Cellular and molecular products were up in electroporation and bioproduction and up in cell-based testing [5] - EMEA revenue was up 3.1% as reported and included 2.1% net reduction from discontinued products and a positive currency effect of 4.1% [60] - Pre-clinical systems showed modest growth and was helped by the first installation of the new high-capacity VivaMARS Behavioral System at a large CRO operation [60] Market Data and Key Metrics - Q4 reported revenue in China and Asia Pacific was down 15% [28] - Adjusting for currency and discontinued products, Asia Pacific was down about 10% [28] - Telemetry and Ponemah enterprise software held their own in Asia Pacific [28] - Cellular and molecular products saw another tough quarter similar to Q3 in Asia Pacific [28] - The weakness in China is expected to continue into Q1 2024 [28] Company Strategy and Industry Competition - The company's first focus is to strengthen its base business, which is the vast majority of its business [6] - The company introduced its new SoHo Shared Housing Telemetry Family of implantables and latest Ponemah software at the Society for Neuroscience last November [6] - The company is focusing on commercializing its leadership position in advanced cellular applications [7] - The company launched the Mesh MEA Organoid Platform at the Society for Neuroscience and is showcasing it at the Society of Toxicology conference [7] - The company's second focus is expanding to high-volume industrial applications [29] - The company introduced VivaMARS, the high-capacity behavioral system at the Society for Neuroscience in Q4 [29] - The company's third focus is expanding to the bioproduction with its leading electroporation and electrofusion technology [86] - The company established a commercial and application science team dedicated to bioproduction and advances in electroporation in January [86] - The company released its GLP/cGMP compliant amino acid analyzer for bioproduction quality control in February [86] Management Commentary on Operating Environment and Future Outlook - The company expects flat to modest revenue growth for the full year 2024 [11] - The company expects weakness in the first half of 2024 versus a strong and very difficult prior-year comparison [11] - The company expects China revenue to be down significantly in Q1 2024 [11] - The company expects meaningful growth from new product commercializations [33] - The company expects China funding to improve going into the second half of 2024 [33] - The company expects gross margins in the 60% range, up from 59% [33] - The company expects adjusted EBITDA margins improving to the mid-teens, up from 13% [33] - The company expects strong second half growth versus the first half of 2024 and versus the second half of 2023 [66] Other Important Information - The company received a net cash benefit of $2.6 million for the employee retention credit provided by the CARES Act in February 2024 [10] - The company's full year gross margin finished at 58.9$10.5 million and exceeded expectations of $10 million [89] - Net debt at year-end compared to prior year is down$10.4 million [89] - Net leverage finished the year at 2.3 times compared to 4 times at the end of last year [89] Q&A Session Question: What portion will the SoHo product and other products be of the incremental growth in 2024? [12] - The SoHo product and other products are expected to be a significant part of the incremental growth in 2024 [13] - The company expects the SoHo product to double again going into 2025 [13] - The company expects the behavioral product with VivaMARS to become part of the base business [13] - The company expects the MEA business to grow dramatically, with north of 30% growth [14] Question: What is the landscape for potential partnerships or small M&A activity? [23] - The company is looking at potential partnerships and small M&A activity to bolster current and future offerings [76] - The company is interested in licensing out technologies in areas where it does not have the capacity or funding to go after all of it [76] - The company is exploring acquisitions in areas like consumables and buffers needed by its products [77] Question: What is the long-term growth rate target? [96] - The company targets to be double digits, with a base business growth rate of 5% to 7% and new growth areas adding another 4% to 5% [72] - The company expects the new growth areas with bioproduction and organoids to determine how far above or below 10% it will be [72] Question: What is the ramp for new product launches? [98] - The new product launches are expected to be more back-end loaded, with conversion to shipments and revenue starting to happen in the second half of 2024 [75] - The company expects the new products to drive the trajectory of growth from the second half of 2024 and going forward [71]