Harvard Bioscience Q1 2026 Earnings Call - NPI Revenue Surge Offsets Academic Slowdown

Taylor Craftick, Senior Vice President, ICR Westwicke: Good day, and welcome to the Q1 2026 Harvard Bioscience, Inc. earnings conference call. I would like to turn the call over to Taylor Craftick, Senior Vice President at ICR Westwicke. Please go ahead.

Taylor Craftick, Senior Vice President, ICR Westwicke: Thank you, operator. Good morning, everyone. Thank you for joining the Harvard Bioscience first 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 and 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 Bioscience 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 therewithin. 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, President and Chief Executive Officer, Harvard Bioscience, Inc.: Thanks, Taylor. Good morning, everyone, and thank you for joining us. Overall, Q1 reflected continued progress on transforming Harvard Bioscience from a traditional tools provider into a leading supplier of the emerging translational science market. To summarize our Q1 financial performance, revenue was $20.8 million, in line with their expectations. Adjusted gross margin was 59%, growing nearly 300 basis points year-over-year, and adjusted EBITDA came in at $0.8 million, which was flat with Q1 last year. Our Q1 results were driven by growth in sales of our new product innovation pipeline, including Mesh MEA for organoids, BTX for electroporation, and SoHo telemetry products. We expect this suite of products will deliver double-digit revenue growth for the full year. These products are the centerpieces of our evolution into a leading supplier of translational science products.

As anticipated, growth in consumables and software products in our NPI portfolio is translating into higher margins. This puts us on a path towards consistent gross margins greater than 60% and recurring revenue approaching 60%. Our NPI products are also increasing opportunities with pharma and large biotech customers. Sales to these customers grew more than 20% in the quarter versus prior year. A key driver of sales to biopharma is an accelerating adoption of the new approach methodologies. As biopharma customers seek more predictive human relevant outcomes, demand is shifting towards technologies that can deliver deeper, more actionable insights and help form a stronger translational science bridge to traditional animal models. Our NPI portfolio is directly aligned with this shift.

Mesh MEA enables high resolution, long-term electrical recording of organoids and 3D tissue models, allowing researchers to study complex human biology in vitro with a level of fidelity not previously possible. BTX provides electroporation-enabled cell engineering and transfection solutions, supporting everything from gene editing to advanced cell-based development, critical tools for building and manipulating next-gen biological models. SoHo Telemetry delivers continuous real-time physiological monitoring in preclinical settings, generating rich data sets that help bridge in vivo insights with emerging in vitro approaches, improving the translational relevance of preclinical research. The industry’s growing need for more predictive models reinforces our confidence in the strategy and long-term growth trajectory of the company. We are pleased with the early results of the enhanced distribution agreement we signed in August of last year with Fisher North America. Sales through Fisher North America grew by high single digits in Q1.

We strengthened our leadership team by adding David Panzarella as our new SVP of Commercial. With 30 years of industry experience as a global growth-oriented sales leader across multiple life science tools companies, we believe he will be instrumental in driving overall revenue expansion and sales of our translational science platforms. We’re excited to have him on board. We’ve done much work in the past year to strengthen our leadership team and board, and we’re pleased with the deep expertise we’ve added as we work to scale the business. In China, Q1 revenue grew 3%, driven by increased CRO revenue. Incentives exist for Chinese companies to source domestically. As a result, we launched our Made in China initiative, beginning with our BTX electroporation products. We plan to expand this initiative to other products in 2026. Project Viking, our manufacturing consolidation initiative, remains on track.

As a reminder, this initiative includes the phased closure of our Holliston, Massachusetts facility into our sites in Minneapolis and Europe. In Q1, we moved 1 product line and are on track to move several product lines in Q2. We remain confident Project Viking will generate $3 million in savings in 2027 and $4 million annually thereafter. Looking ahead, Mark will provide additional details on our guidance. At a high level, in the second quarter, at the midpoints of our guidance, we anticipate mid-single-digit year-over-year revenue growth, continued margin expansion, and flat adjusted EBITDA on a year-over-year basis. We are reaffirming our full year 2026 guidance. For the full year, we expect continued growth of NPI with our Mesh MEA, BTX, and SoHo platforms. We expect continued growth with pharma and biotech customers and growth in China.

We remain committed to improving our operational efficiency and driving profitability. In summary, we’re excited about the path ahead and remain laser-focused on executing our translational science strategy to create long-term shareholder value. I will now turn the call over to Mark, who will go through the financials and our guidance in more detail. Mark.

Mark Frost, Chief Financial Officer, Harvard Bioscience, Inc.: Thank you, John. I will start my comments with our first quarter of 2026 financial results, the details of which can be found starting on slide 4 of the earnings presentation posted to our IR site. We had strong growth from pharma and biotech customers, as John mentioned, reflecting momentum from new products. Revenue was $20.8 million, in line with our $20 million-$22 million guidance, Below the $21.8 million we reported in the first quarter of 2025. The year-over-year decline was primarily due to lower sales from academic institutions in the Americas and distributors in APAC, although our Chinese business rebounded to growth in the first quarter.

With regard to academics, we expect university-level approvals to increase in Q2 with the passage of the NIH budget on February 3rd, setting the stage for improved Q2 and Q3 results in the U.S. academic sector. These are use it or lose it funds and must be committed by the September 30th fiscal year-end, and we are seeing increased proposal activity. Gross margin of 59% was at the high end of our 57%-59% guidance range and up 300 basis points from 56% in Q1 of 2025. The improvement is attributable to cost actions related to employee costs and operational efficiencies that were implemented at the end of 2024 and in 2025 as well.

As well as higher margin NPI revenue, which grew to more than 12% of total revenue in the quarter from approximately 4% in the prior year quarter. Operating loss was $1.2 million compared to a loss of $49.7 million last year, which included $48 million from goodwill impairment. Adjusted operating income of $0.2 million was slightly down from $0.3 million last year. Adjusted EBITDA, EBITA of $0.8 million was flat year-over-year and came in slightly below our expectations due to higher investment in sales and marketing activities, which we believe will pay dividends in later quarters. A significant portion of the cost came in at the end of the quarter. Now moving to slide 5 for revenue results by geography.

Geographically, quarter 1 revenues in the Americas were down 9% year-over-year due to lower academic and government sales. In Europe, quarter 1 revenues were up 7% year-over-year, thanks to increased sales from our distribution partners and pharma customers. In APAC, quarter 1 revenues were down 9% year-over-year due to lower distributor sales in a number of our Asian markets. That said, as John Duke noted, we saw 3% year-over-year growth in China, driven primarily by CRO sales. We also piloted our Made in China initiative, which we anticipate will be a tailwind in this region as we implement additional products throughout the year. I will now move to slide 6 to discuss further financial metrics.

GAAP diluted EPS in quarter 1 was negative $0.77 compared to a loss of $11.42 last year. In quarter 1, adjusted EPS was negative $0.33 compared to negative $1.25 last year. The year-over-year comparisons have been retroactively presented to reflect the 1 for 10 reverse split that took effect in March. Last year’s figures reflect the $48 million goodwill impairment we recorded in the quarter. As 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 as our restructuring charges related to Project Viking. These differences between net loss and adjusted EBITDA are highlighted in the reconciliation tables on slide 10 and 11 and are all non-cash items except Project Viking costs.

Cash used in operations was $0.7 million in the quarter compared to cash generation from operations of $3 million in quarter 1 last year, due primarily to higher inventory. The increase in inventory stems from inventories built to support improving lead times for certain products and pre-build for Project Viking. There were also one-time administrative costs related to our reverse split and S3 filing to meet regulatory compliance around these corporate actions, which reduced operating cash. The cash balance itself decreased in the quarter by $1.5 million, reflecting payment of strategic debt costs from 2025.

Now, net debt is up roughly $1.9 million from prior year due to the recording of deferred finance costs related to our December 2025 debt deal, including deal fees, debt legal expense, warrant, fair value cost, and debt discount, with a debt balance reduced by principal payments made last year. The deferred financing costs will be amortized over the life of the credit facility. The amortization will be reflected on our interest expense each quarter through the end of the debt facility. In quarter 1, the amortization interest expense was $300,000 and is non-cash. In addition, we are recording exit fees each quarter of approximately $200,000, which will start being paid 2 years from the initiation of our credit facility. These are non-cash for the first 2 years.

I’ll now move to slide 8 to discuss our outlook for the second quarter and full year 2026. In the second quarter, we expect revenue between $20.5 million and $22.5 million, adjusted gross margin between 57% and 59%, and adjusted EBITDA between $1 million and $2 million. The midpoint of these ranges implies revenue growth of 5%, margin expansion of 160 basis points, and flat EBITDA. As a reminder, with the expected growth in the business in 2026, we have reinstated bonuses and merit-based compensation for our employees, which was suspended in 2025 due to macro headwind impacts. In addition, as the business has stabilized, we have increased sales activities to help drive the business, including trade shows and T&E, to get in front of customers and build relationships.

These will have an impact on our operating expenses and are built into our year-over-year adjusted EBITDA guidance. We’re maintaining our full year 2026 guidance of revenue growth of 2%-4%, gross margin of 58%-60%, and adjusted EBITDA growth of 6%-10%. Our performance in the quarter, as well as our line of sight to accelerated sales growth in the second half of the year, driven by high margin NPI revenue growth, driving bottom line improvement, gives us confidence in our outlook for the full year. We look forward to updating you on our progress next quarter. Now, before I turn it over, I want to mention that John and I will be attending and presenting at both the Sidoti Micro-Cap Conference next week and Benchmark’s Virtual Health Care Conference the following week.

I look forward to meeting some of you there. With that, I’ll turn the call back to our operator to take questions. Michelle?

Taylor Craftick, Senior Vice President, ICR Westwicke: Thank you. As a reminder, to ask a question, please press star one one. If your question hasn’t answered and you’d like to remove yourself from the queue, please press star one one again. Our first question comes from Paul Knight with KeyBanc. Your line is open.

Paul Knight, Analyst, KeyBanc: Hi, John. I think you had mentioned that, Mesh MEA, SoHo, and BTX, what you said those three product lines would grow, double digits in the year.

John Duke, President and Chief Executive Officer, Harvard Bioscience, Inc.: Yes. That’s right, Paul.

Paul Knight, Analyst, KeyBanc: Yeah. What portion of the company are those three businesses? A quarter, a third, 20%, or a range?

Mark Frost, Chief Financial Officer, Harvard Bioscience, Inc.: Yeah, Paul, this is Mark. It’s about 15%-20% of our revenue right now.

Paul Knight, Analyst, KeyBanc: Okay. When I look at your comments around academia, they have to spend it by the end of this federal fiscal year. Are you seeing activity on bidding going up? What are your clues as you look here or sit here in 2Q?

John Duke, President and Chief Executive Officer, Harvard Bioscience, Inc.: Yes. We’re definitely seeing what I would call an unthawing, basically, funds, as you know, the reconciliation bill got approved February third. Until then, many academics were unsure if they were gonna be able to spend their money. Now that the budgets were locked in, we have seen orders come through. As you know, our sales cycle is such that, you know, if we get many of the orders, let’s say, which come in March, those would translate into revenue in Q2. We have a significant sales presence in North America, and, you know, that’s fairly consistent across the country.

Paul Knight, Analyst, KeyBanc: Are you seeing CROs starting to spend due to the financing we’re seeing from biotech?

John Duke, President and Chief Executive Officer, Harvard Bioscience, Inc.: Yes. Our sales to these contract research organizations increased. You know, Mark mentioned both in China, but we’re also seeing that in the Americas and Europe.

Paul Knight, Analyst, KeyBanc: Okay. Thank you.

John Duke, President and Chief Executive Officer, Harvard Bioscience, Inc.: You’re welcome.

Taylor Craftick, Senior Vice President, ICR Westwicke: Thank you. Our next question comes from Bruce Jackson with StoneX. Your line is open.

Bruce Jackson, Analyst, StoneX: Hi. Thank you for taking my questions. The Asia numbers were pretty encouraging. It’s been kind of a tough spot for you over the past few years. What is the outlook for this particular region this year? Can it actually start to move back up, or is flat the new up for you? How does that look?

Mark Frost, Chief Financial Officer, Harvard Bioscience, Inc.: Yeah, Bruce, based on the Made in China initiative, as well as we’re getting some progress as well on some of our NPI products, we do expect to be able to get it flat to growth in Asia for the year.

Bruce Jackson, Analyst, StoneX: In terms of the types of projects that are being initiated or, that they’re purchasing for, would you say, are these, like, new development projects, or are these restarted development projects? What are the characteristics of the business that they’re purchasing for?

John Duke, President and Chief Executive Officer, Harvard Bioscience, Inc.: For APAC, it’s both. It’s some restarting of business, but also we have some clients who have opened new facilities, expanded, and as a result, need more of our products.

Bruce Jackson, Analyst, StoneX: Okay, great. Same question for the United States with the CRO business. Are these new projects that are coming in? Are these the sort of the continuation of maybe previous projects that were slowed down a bit?

John Duke, President and Chief Executive Officer, Harvard Bioscience, Inc.: It is mostly, what I call a restarting of projects which had slowed. You know, from all indications that we have, that it’s, you know, their spending in North America and Europe will be up versus prior year.

Bruce Jackson, Analyst, StoneX: Okay. Great. Last question for me. The expense control and the gross margins looked quite good. If we were to get a lift in revenue, would those continue to be sustainable?

John Duke, President and Chief Executive Officer, Harvard Bioscience, Inc.: Yeah, Bruce. You know, because of our new products and they’re all at higher margins, as well as there’s a larger portion of recurring revenue, disposable service, and software, we believe this is a cornerstone of how we’re gonna be able to push gross margins into the 60% plus range as we move forward over the next couple of years, Bruce.

Bruce Jackson, Analyst, StoneX: Okay, great. That’s it for me. Thank you.

Taylor Craftick, Senior Vice President, ICR Westwicke: Thank you. That’s all the questions we have for today. Please proceed with any closing comments.

John Duke, President and Chief Executive Officer, Harvard Bioscience, Inc.: No. Thank you for joining today.

Taylor Craftick, Senior Vice President, ICR Westwicke: Thank you. This does conclude the program. You may now disconnect. Everyone, have a great day.