Harvard Bioscience (HBIO) Q3 2026 Earnings Call Transcript

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DATE

Tuesday, Nov. 10, 2026

CALL PARTICIPANTS

• President and Chief Executive Officer - John Duke
• Chief Financial Officer - Mark Frost

TAKEAWAYS

• Revenue -- $22.2 million, representing 8% growth year over year driven by preclinical platforms and products for organoids.
• Adjusted Gross Margin -- 57.1%, reflecting higher sales of lower-margin products and increased volume through distribution partners.
• Adjusted EBITDA -- $1.8 million, down from $2 million in the prior year due to product and channel mix.
• China Revenue -- $2.8 million, up 31% year over year following localization strategies and distribution partner performance.
• Americas Revenue -- $11.3 million, increasing 9% year over year because of growth from contract research organization (CRO) customers and Fisher Scientific.
• Europe Revenue -- $6.3 million, declining 5% year over year as the academic environment remained weak.
• New Product Innovation (NPI) -- 11% of total revenue, as researchers adopt organoid technologies for human-relevant data.
• Project Viking Savings -- $3 million in 2027 and $4 million annually thereafter, anticipated upon the completion of manufacturing consolidation.
• Inventory -- $23.5 million, an increase of approximately $3 million year-to-date to support prebuild requirements for Project Viking.
• Full Year Revenue Guidance -- 3% to 5% growth, reaffirmed based on commercial momentum across core platforms.
• Full Year Adjusted EBITDA Guidance -- Negative 1% to 4% growth, updated from previous guidance of 6% to 10% to reflect the impact of product mix.
• Net Debt -- $35.1 million, representing an increase of $7.6 million compared to the prior year.
• Cash and Cash Equivalents -- $4.9 million, compared to $8.6 million at the start of the year.
• Fisher Scientific Sales -- More than doubled year-to-date, following an expanded distribution agreement in the previous year.
• Operating Expenses -- Increased $0.8 million in the quarter, reflecting the restoration of a normalized salary and bonus structure.
• Telemetry Revenue -- Up mid-single digits year-to-date, driven by demand for in vivo safety monitoring.
• Micro Electrode Array (MEA) Products -- Achieved double-digit revenue gains, reflecting demand for organoid applications.
• Q4 Revenue Guidance -- $23.7 million to $25.5 million, implying mid-single-digit growth at the midpoint of $24.6 million.
• Q4 Adjusted Gross Margin Guidance -- 59% to 61%, representing expected sequential expansion from the current quarter.
• Q4 Adjusted EBITDA Guidance -- $3.8 million to $4.2 million, which represents 5% growth at the midpoint of the range.
• APAC Revenue -- $4.6 million, up 29% year over year driven by sales of respiratory and fluidic products through distributors.
• GAAP Diluted Loss Per Share -- Negative $0.58, compared to negative $0.28 in the third quarter of 2025.
• Adjusted Diluted Loss Per Share -- Negative $0.06, compared to negative $0.04 in the prior year period.
• Recurring Revenue -- 54% of total revenue, maintaining levels seen in previous quarters.
• Academic Market Exposure -- Approximately 40% of revenue, down from 50% as commercial channels expanded.

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RISKS

• Frost stated, "the academic environment in Europe continues to be weak," which contributed to negative regional growth in the quarter.
• Frost noted that "greater demand for some of our lower margin legacy products" and increased sales through distribution channels resulted in adjusted gross margins landing at the low end of the company's outlook range.

SUMMARY

Harvard Bioscience, Inc. (NASDAQ:HBIO) reported third quarter results that met management expectations, highlighting an 8% increase in revenue. Growth was driven by demand from contract research organizations (CROs) and performance in the China market, which offset ongoing weakness in the academic sector. The company is currently executing Project Viking, a manufacturing consolidation initiative intended to streamline operations and reduce annual costs starting in 2027. While revenue targets remain unchanged for the full year, management adjusted its profitability outlook to account for a product mix favoring lower-margin legacy items and higher distribution channel participation.

• Management confirmed Project Viking is on track for completion in the first quarter of 2027, with five of eight product lines already transitioned. CEO Duke stated, "we successfully completed the relocation of our amino acid analyzer product line to our Cambridge U.K. facility."
• The company established a dedicated key accounts group to expand relationships with large pharmaceutical and biotech customers. CEO Duke noted the group is "focused on managing and expanding relationships with our largest customers."
• A new Scientific Advisory Board held its first meeting in August to guide the technology road map. CEO Duke stated, "The input from this group of industry leaders will help guide our technology road map."
• Localization in China includes all three BTX electroporation product lines now being available and shipping. CEO Duke indicated that "all three localized BTX electroporation product lines are now fully available and shipping in the Chinese market."
• Management expects to launch a bioproduction version of its electroporation technology by mid-2027. CFO Frost stated, "We expect probably by midyear next year, we will be fully launching that product."
• The company is seeking to implement an asset-based revolver to refinance $10 million of its term loan. CFO Frost stated, "The conversion will provide interest savings, a reduction of our term loan B exit fee and further flexibility."

INDUSTRY GLOSSARY

• Project Viking: The company's strategic manufacturing consolidation plan intended to reduce annual operating costs.
• NPI (New Product Innovation): A portfolio of recently launched products focusing on new research approach methodologies.
• MEA (Micro Electrode Array): Systems used for extracellular recordings in cellular and molecular research.
• BTX: A brand of electroporation and electrofusion instruments for gene delivery and research.
• Fluidics: Technologies involved in the precise movement and control of small volumes of liquids.
• Telemetry: Implantable or external systems for monitoring and transmitting physiological data in organisms.
• CRO (Contract Research Organization): An organization that provides research services on a contract basis to the pharmaceutical and biotechnology industries.

Full Conference Call Transcript

Operator: Good day, and welcome to the Third Quarter 2026 Harvard Bioscience Earnings Conference Call. [Operator Instructions] Please note this call may be recorded. I would now like to turn the call over to Taylor Krafchik, Senior Vice President at Ellipsis. Please go ahead.

Taylor Krafchik: Thank you, operator. Good morning, everyone. Thank you for joining the Harvard Bioscience Third Quarter 2026 Earnings Conference Call. Leading the call today will be John Duke, President and Chief Executive Officer; and Mark Frost, Chief Financial Officer. In conjunction with today's recorded call, we have provided a presentation that will be referenced during our remarks that is posted to the Investor Relations section of our website at investor.harvardbioscience.com. Please note that statements made in today's discussion that are not historical facts, including statements on management's expectations of future events or future financial performance, are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements reflect the current views of Harvard Biosciences Management and Harvard Bioscience assumes no obligation to update or revise any forward-looking statements. Actual results may differ materially from those expressed or implied. Please refer to today's press release, the Harvard Bioscience Form 10-Q and other filings with the Securities and Exchange Commission for additional disclosures on forward-looking statements and the risks, uncertainties and contingencies associated therewith. During the call, management will also reference certain non-GAAP financial measures, which can be useful in evaluating the company's operations related to our financial condition and results. These non-GAAP measures are intended to supplement GAAP financial information and should not be considered a substitute.

Reconciliations of GAAP to non-GAAP measures are provided in today's earnings press release. I will now turn the call over to John. John, please go ahead.

John Duke: Thank you, Taylor, and good morning, everyone. In the third quarter, we delivered another solid quarter of top line performance with 8% revenue growth, driven by strength across key preclinical platforms in double-digit momentum in products for organoids, fluidics and our new product innovation. To give a high-level summary before Mark dives into the detailed financials, our results were in line with our expectations. Revenue came in at $22.2 million, representing 8% growth year-over-year, marking our second consecutive quarter of strong revenue growth. Adjusted gross margin was 57.1%, including higher volume in CMT products, increased sales through distribution partners and growth in China, which carried lower gross margins.

Adjusted EBITDA was $1.8 million, reflecting the same factors that impacted gross margin. Strong sales to CRO customers were driven by sales of our telemetry, respiratory and inhalation products. CRO sales are up meaningfully year-to-date, reflecting healthy demand as biopharma customers increasingly rely on external research partners. We also saw continued growth from our biopharma customers. Across the broader drug development landscape, industry tailwinds remain supportive to drive future growth. Preclinical drug candidate pipelines are expanding as pharma and biotech companies prepare for the upcoming 2030 patent cliff with industry forecasts projecting a 7% increase in clinical trial starts over the coming years.

This steady demand is reflected in our telemetry business, which is up mid-single digits year-to-date, demonstrating that in vivo safety and efficacy monitoring remains an indispensable step. Turning to our product portfolio. We saw robust customer demand for our preclinical technologies. Double-digit preclinical growth in the quarter was driven by exceptional performance in respiratory and inhalation. Looking at our CMT portfolio, we were pleased to see strong double-digit revenue gains in our MEA products for organoids, both in Q3 and year-to-date. Our new product innovation portfolio continues to contribute meaningfully to our total revenue. Researchers are adopting our organoid technologies to generate highly predictive human relevant data directly aligning our innovation pipeline with the industry's transition towards new approach methodologies.

In China, our distribution partners and localization strategy are delivering results, as revenue grew 31% in Q3. All 3 localized BTX electroporation product lines are now fully available and shipping in the Chinese market. Looking ahead, we continue to make progress in localizing new product lines to position us for continued regional momentum. Our revamped commercial team is delivering encouraging results. Building on the sales realignment led by our new Head of Commercial, we established a dedicated key accounts group, which is focused on managing and expanding relationships with our largest customers, specifically our top-tier pharmaceutical CRO and biotech customers.

Sales through Fisher Scientific North America have more than doubled year-to-date, following the expansion of our distribution agreement last year, reinforcing the strength of our diversified channel strategy. Turning to our operational initiatives. We continue to make steady progress on Project Viking. Our manufacturing consolidation plan which remains on target for completion in the first quarter of 2027. During the third quarter, we successfully completed the relocation of our amino acid analyzer product line to our Cambridge U.K. facility. We began shipping fluidics products out of our Minneapolis facility using a parallel build approach to ensure uninterrupted delivery to our customers.

As a reminder, we remain on track for Project Viking to generate $3 million in cost savings in 2027 and $4 million annually thereafter. These savings will contribute directly to adjusted EBITDA. Additionally, our newly formed Scientific Advisory Board held its inaugural meeting in August. We will hold quarterly meetings going forward. The input from this group of industry leaders will help guide our technology road map. Since its creation, the members of the Scientific Advisory Board have already provided me and our executive team with excellent industry insight and counsel. Turning to our outlook.

Based on our year-to-date performance and our commercial momentum, we are reaffirming our full year 2026 revenue guidance of 3% to 5% growth as well as our adjusted gross margin target of 57% to 59%. As noted in our earnings release, we've updated our full year adjusted EBITDA range. This adjustment directly reflects the effect from higher sales volume of lower margin legacy products and of shipments in China and through our distribution partners. While the product mix carries a lower gross margin, our operating expense remains disciplined, and we are guiding to EBITDA growth in Q4 at the midpoint of our outlook. In summary, Harvard Bioscience delivered solid top line performance in the third quarter.

Our core platforms are performing well. Our commercial initiatives are driving volume and our operational milestones under Project liking remained firmly on schedule. We are confident in the trajectory of the business and our positioning for 2027. With that, I will turn the call over to Mark for a detailed review of our financials. Mark?

Mark Frost: Thank you, John. I will start my comments with our third quarter 2026 financial results, the details of which can be found starting on Slide 4 of the earnings presentation posted to our IR site. Slide 4, revenue of $22.2 million was up 8% year-over-year and towards the high end of our guidance range and the second quarter in a row of strong revenue growth. The growth was primarily attributable to continued demand from CROs and robust sales from our distribution partners. By product, we had a strong quarter in organoids, fluidics and respiratory devices.

We're encouraged by the strong demand for organoid-related products with our broader new product innovation NPI portfolio attributing over 11% of total revenue as we work to expand our NPI contribution. In addition, we continue to see growth in telemetry in our preclinical platform. Our adjusted gross margin of 57.1% was at the low end of our outlook range as we continue to see greater demand for some of our lower margin legacy products had a higher contribution from our distribution channel and saw continued strength in China, where we generate a lower margin.

As we stated last quarter, driving sales of our higher-margin NPI products is a priority, but we're not going to miss opportunities to sell any of our products as we drive scale and we expect to realize significant benefits once our manufacturing consolidation is complete in early 2027. As a reminder, we have provided an adjusted gross margin reconciliation in the release to show the impact of restructuring, which is in the other line. Now a point for our investors as we operate our business, assuming the impact of depreciation, amortization and stock compensation costs. In addition, as we expand our Made in China initiative, we expect to improve our margins in that market.

OpEx increased $0.8 million in the quarter. As we have mentioned, we restored salaries, merit and bonus potential this year, which is the primary reason for higher OpEx and reflects a normalized cost structure. This investment is offsetting our improvements from higher revenue, but we will see improved leverage in our returns in 2027. Operating loss was $1.2 million compared to income of $0.2 million in quarter 3 2025, adjusted operating income was $1.2 million, 5.3% operating margin, down from $1.5 million, 7.4% operating margin in Q3 last year. Adjusted operating income was lower primarily because of expenses being normalized.

Now adjusted EBITDA came in within our guidance range of $1.8 million, 7.9% EBITDA margin down from $2 million, 9.6% EBITDA margin in quarter 3, 2025. The lower EBITDA was directly attributable to mix from products channel in China as discussed earlier in relation to gross margin. Now moving to Slide 5 for results by geography. Geographically, Q3 revenues in the Americas were $11.3 million, up 9% year-over-year, driven by strong growth from our Fisher contract and CRO customers. In Europe, Q3 revenues were $6.3 million, down 5% year-over-year and 3% lower on a constant currency basis as the academic environment in Europe continues to be weak.

And in APAC, Q3 revenues were $4.6 million, up 29% year-over-year, primarily driven by distribution sales of respiratory, organoid and fluidic products. Within APAC, China revenues were $2.8 million, up 31% year-over-year. Our Made in China localization initiative also continues to progress nicely as we continue to work on rolling out additional localized product lines. Now on the academic front, while the funding environment has been slower to recover than anticipated, that softness has been more than offset by robust demand across our CRO and distribution channels. Pharma and Biotech revenue also continued to grow well through both our direct and distribution channels. Now I'll now move to Slide 6 to discuss further financial metrics.

GAAP diluted EPS in Q3 was negative $0.58 compared to negative $0.28 in Q3 2025. Q3 adjusted EPS was negative $0.06 compared to a negative $0.04 in Q3 2025. All per share numbers retroactively reflect the 1-for-10 reverse stock split completed in March. I've mentioned in the past, the differences between GAAP EPS and adjusted EPS are typically the impact of stock compensation, amortization and depreciation as well now or restructuring charges related to Project Viking. These differences between net loss and adjusted EBITDA are highlighted in the reconciliation tables on Slide 12 and 13 and are all noncash items, except Project Viking costs.

Our cash used in operations through 9 months was $0.6 million compared to cash generated of $6.8 million in the same period in 2025. This change was primarily driven by increased inventory to improve product lead times and support manufacturing prebuild requirements for Project Viking as well as project Viking restructuring charges and higher interest costs from our debt deal. We closed the quarter with $4.9 million in cash and cash equivalents. Net debt stood at $35.1 million, up roughly $7.6 million year-over-year. Total debt was $37.2 million, reduced by $2.8 million in unamortized deferred financing costs associated with our December 2025 debt refinance, which will be amortized over the life of the facility.

Noncash deferred financing amortization was $0.3 million in each quarter with noncash exit fee accruals running at $0.2 million per quarter. Now to provide some context on our debt structure, we face no near-term principal obligations as amortization does not commence until late December 2027 and the facility matures in December 2029. As we complete Project Viking in quarter 1 2027, the sunsetting transition costs alongside our expected $3 million in net savings will significantly improve our cash generation and balance sheet in 2027. And in addition, our debt deal provides Harvard Bioscience, the ability to refinance term loan to aid debt of $10 million with an asset-based revolver.

We have made progress and hope to announce new as pertaining to putting a revolver in place. The conversion will provide interest savings, a reduction of our term loan B exit fee and further flexibility to manage our working capital. I'll now move to Slide 8 to discuss our outlook for the close of the year. In the fourth quarter, we expect revenue between $23.7 million and $25.5 million at the midpoint of $24.6 million, this represents mid-single year-over-year revenue growth. Adjusted gross margin between 59% and 61% and adjusted EBITDA between $3.8 million and $4.2 million, which represents 5% growth at the midpoint. Now turning to the full year.

We are maintaining our full year revenue growth guidance of 3% to 5% and our full year adjusted gross margin target of 57% to 59%. We are lowering our full year adjusted EBITDA growth guidance from 6% to 10% to negative 1% to 4% to reflect the greater-than-expected demand of certain low margin -- lower margin legacy products, increased sales through our distribution channels into China customers. We're encouraged by our performance so far this year and confident in the trajectory of the business. We've seen a return to sales growth that we believe is sustainable. And once our manufacturing consolidation is complete, we'll see meaningful benefits to our bottom line and cash generation.

Demand for our legacy products is strong. Demand for our NPI portfolio is growing and will continue to operate the business with discipline. I want to thank all of our shareholders for their support and we look forward to updating you on our finish to the year. With that, I'll turn the call back to our operator to take questions.

Operator: [Operator Instructions] Our first question comes from Paul Knight with KeyBanc.

Paul Knight: Can you talk to electroporation and BTX, how did the business grow in the quarter, please?

John Duke: Yes, absolutely. Thanks, Paul. In terms of how BTX electroporation grew, we -- year-to-date, we are strong double digits. And as you know, much of it is due to both hardware as well as our consumables. And we're seeing growth really across the globe for those products.

Paul Knight: And that is obviously competing against Thermo and Lonza and MaxCyte. Are you taking shares at the market growing?

John Duke: I think it's hard to tell if we're taking share. Clearly, the market is growing. We are -- we really like our approach. And our BTX technology has been in the industry for decades, and we believe that we might be taking some share, but I don't want to comment relative to those big players. But as I said, we saw growth in all regions for our product portfolio.

Mark Frost: Yes. And I'll just build on that, Paul. I mean as you're aware, we haven't launched our bioproduction version. So we operate primarily in the research area. So to John's point, we might be taking a little share, but the companies you mentioned are stronger on the bioproduction side of things. So we're not really playing against them today.

John Duke: Correct.

Paul Knight: When will you have that GMP, I guess, approval to be in production?

Mark Frost: We expect probably by midyear next year, we will be fully launching that product, Paul.

Paul Knight: Okay. And then Project Viking, you mentioned that the amino acid production is now in Cambridge, correct?

Mark Frost: Correct.

Paul Knight: And then I missed the other aspect of Viking that you've implemented. Could you talk to that again, please?

Mark Frost: Sure. So we have moved now 5 of the 8 product lines including, we actually started doing parallel build of our fluidics platform of some of the major SKUs. So we're feeling pretty good that over the next 5 months, we will finish that transition and then that will start leading to savings of basically $1 million a quarter. So $3 million in '27 starting in quarter 2, Paul.

Paul Knight: Okay. And then lastly, of course, a major market for you is academia. Is that still growing zero or what's happening with the academic market?

John Duke: Yes, you are spot on, Paul. The academic both just in the U.S. as well as Europe continues to face challenges. And those academic environment being challenging, we demonstrated good growth in Q3. And if the academic environment changes, in the future, then that will be a really nice tailwind for us.

Paul Knight: It's still, what, 40% of Harvard Bio revenue? Or is that kind of in the ballpark?

Mark Frost: Yes, it was 50%. It's dropped to a lower portion towards that 40% of our direct business, Paul. And what I would say is in Europe the lower academics is part of the reason we had negative growth in EMEA. So as John said, if we can get even modest growth in academics, that will become a tailwind for us.

Paul Knight: Okay. And then last, I know there's only a couple of us in line. So the China comments that you made, all 3 product lines available in China now where was that a year ago? Where -- what product lines were available then? Or could you kind of give us a little chronological color on what you've done in China?

Mark Frost: Sure. So it's BTX. So all 3 versions of BTX. We started that in the first quarter. And as we enter '27, Paul, we'll have more color probably. We will have more color on our next call. We are going to be localizing other product lines in China in 2027 to drive both revenue and margin improvement.

John Duke: And I'll just add to that, the demand for our products, not just the localized but all of our products continues to be very strong, and we want to be able to capitalize on that growth in China by having more of our product portfolio localized.

Operator: Our next question comes from Bruce Jackson with StoneX.

Bruce Jackson: Just to round out the discussion on Europe, what were some of the other factors that contributed to the performance?

Mark Frost: Europe, you want to take that?

John Duke: Sure. I can take that. So in terms of Europe, the academic demand was light as was mentioned. And if I look specifically at our product portfolio, the -- there were several areas in our CMT product category, where demand was lighter than expected.

Bruce Jackson: Okay. And I didn't catch the recurring revenue percentage. What was that this quarter?

John Duke: So the recurring revenue for the quarter?

Mark Frost: Was similar to the past level of about 54%, Bruce.

Bruce Jackson: Okay. Super. All right. And I just wanted to go back to China real quick. How is telemetry doing? It was a strong contributor last quarter. Is that still continuing to be strong?

John Duke: Yes. telemetry for the quarter, we were in the mid-single-digit growth.

Bruce Jackson: Okay. Then last question for me. As the reorganization expenses roll off in 2027, would you -- what would you expect the effect to be on gross margins as we move through the year?

Mark Frost: Yes, I'll answer that. Our expectation is about 75% of Viking is gross margin related. Most of that should flow through as well as increasing NPI and recurring. So we're still -- we're feeling very good, Bruce, that we'll be in the 60% range for gross margin in '27.

Operator: Our next question comes from James Sidoti with Sidoti & Company.

James Sidoti: I'm going to start off with a kind of a big picture question. With the election from last week and the change in Congress, do you expect any impact on NIH spending or academic spending over the next couple of years?

John Duke: Thanks, Jim. Now you can never predict what politicians are going to do. However, if you look historically, typically, when Democrats have been in control of the house, there has been a more positive funding environment for NIH, which would be beneficial to our business. But once again, you can't -- past performance is not necessarily indicative of future performance.

Mark Frost: Yes. And Jim, as far as our guidance, we are not assuming that benefit. So if that happens, that would be an upside to our numbers.

James Sidoti: Okay. Now a more specific question. Inventories gone up about $3 million this year. Is that related to Project Viking? And where do you think they level off?

Mark Frost: Yes. It is primarily related to Project Viking as well as we've done some things with lead times. We expect that to start dropping significantly as we finish the transition in the first quarter and will be one of the reasons why cash generation will significantly improve in '27, Jim.

James Sidoti: Okay. And you put up 2 very good quarters, low double-digit, high single-digit growth. Is this a trend you see continuing for the next several quarters?

John Duke: Thanks, Jim. We're really happy with our performance in Q2 and Q3. Mark provided guidance, the midpoint of the range is 4% growth for Q4. We're feeling really good about our commercial execution, and we're not providing guidance for 2027, but we're confident in our growth for the business.

James Sidoti: Okay. And then the last one, were there any onetime sales in the quarter? Or is this all continuing sales you expect to continue at this pace?

Mark Frost: Yes, it's all run rate. We don't tend to have one-off orders or shipments in our business, and there wasn't really any in quarter 3.

James Sidoti: And there's no pipeline fill type sales to Fisher or anything like that?

Mark Frost: No, that's all run rate, Jim. We don't tend to get big blocks of shipments to any of the distributors.

Operator: This concludes the question-and-answer session. Thank you for your participation. You may now disconnect. Good day.

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