Harvard Bioscience Q4 2025 Earnings Call - Strategic reset: refinancing, footprint consolidation, and pivot to translational science driving margin recovery

Operator: day, and welcome to the fourth quarter and full year 2025 Harvard Bioscience Earnings Conference Call. All participants will be in a listen-only mode. After today’s presentation, there’ll be a question and answer session. Instructions will be given at that time. Please note this event is being recorded. I would like to turn the conference over to Taylor Krawczyk, Senior Vice President at Ellipses TA. Please go ahead.

Taylor Krawczyk, Senior Vice President, Ellipses TA: Thank you, operator, and good morning, everyone. Thank you for joining the Harvard Bioscience fourth quarter and full year 2025 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 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 expectations or future events or future financial performance, are forward-looking statements and are made pursuant to 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-K, which we expect will be filed within 24 hours of this call, 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, President and Chief Executive Officer, Harvard Bioscience: Thanks, Taylor, and good morning, everyone. Thank you for joining us for our fourth quarter and full year 2025 earnings call. On today’s call, I’ll review our recent actions, provide a brief overview of our fourth quarter financial results, and then discuss our priorities and outlook for 2026. 2025 was a pivotal year of foundation building. Over the past 8 months, we improved our financial flexibility, took action to reorganize operations and clarified our long-term strategic direction. To recap, we took several key actions to improve the health of the business. In December, we completed our comprehensive refinancing. This transaction extended our debt maturity to 2029, reduced annual debt service to $5 million, generating $3 million in annual cash savings and strengthened liquidity and financial flexibility.

Shortly thereafter, we announced a strategic consolidation of our manufacturing footprint with the phased closure of the Holliston facility and consolidation into Minneapolis and European centers of excellence. This is expected to generate $3 million in savings in 2027 and $4 million in savings thereafter. Since June, we have strengthened our governance by appointing four new board members, and we are in the process of establishing a product and scientific advisory board of experienced industry leaders. We also further solidified our executive leadership as we officially named Mark Frost as Chief Financial Officer. As many of you know, Mark is an experienced CFO and has held that role with several public companies. While we have more work to do, these actions are structural improvements that simplify our operating model and provide the foundation required to scale our business.

All of these actions were driven to drive improved financial results, which is what we saw in the fourth quarter. Revenue of $23.7 million was above the midpoint of our guidance range. Gross margin of 60% at the high end of guidance and Adjusted EBITDA of $3.8 million, reflecting 27% year-over-year growth. The drivers of this performance were favorable mix shift toward higher margin product lines, benefits from cost reductions, disciplined expense management and sharpened operational execution. We exited the year a leaner and more focused organization with a fortified balance sheet and a clear path to drive sustainable growth. Since I joined as CEO, I’ve spent considerable time engaging with customers, partners and employees. What became clear is the life science industry is undergoing a fundamental shift. Drug development remains inefficient.

Nearly 90% of candidates that succeed in animal models ultimately fail in human trials. Researchers, regulators, and biopharma customers, companies are increasingly embracing New Approach Methodologies, or NAMs, to improve translational relevance. Harvard Bioscience is uniquely positioned to bridge this gap. We’re evolving from a traditional life science tools provider into a leading enabler of translational science, connecting in vivo and in vitro research and helping customers generate more predictive, human relevant data earlier in the development cycle. This represents an evolution for a company’s products into the $10 billion translational science market. To capitalize on this opportunity, we are focused on executing against our four priorities. First, leading the translational science bridge. We are strengthening our position at the intersection of preclinical and organoid-based research. Our gold standard telemetry capabilities provide a natural extension into organoids and 3-D biology platforms. Second, accelerating high margin innovation.

Our new product innovation or NPI pipeline is centered on scalable, differentiated platforms such as SoHo Telemetry, BTX for bioproduction, Mesh MEA and Incub8. These platforms modernize preclinical and translational workflows and reinforce our evolution into a platform-based technology provider. Third, expanding consumables and recurring revenue. Today, approximately 55% of revenue is recurring. We are intentionally prioritizing higher margin consumables, service and software to improve revenue visibility, increase gross margins and create a more durable and predictable business model. This mix shift is already contributing to margin expansion, as evidenced by our Q4 performance and our outlook for 2026. Fourth, operational excellence and disciplined growth. Finally, we remain laser focused on cost discipline and operational efficiency. Manufacturing consolidation and refinancing enable us to improve profitability, fund innovation and continue deleveraging over time.

Looking ahead, we’re introducing full year guidance for 2026 that forecasts low single-digit % growth in revenue and high single-digit % growth in Adjusted EBITDA, which will be driven by higher margin NPI growth as we focus on the translational science market. We continue to monitor NIH funding timing and global macro conditions. We believe our cost structure and diversified geographic footprint put us in a position to manage volatility. 2025 was a strategic reset, and 2026 will be a year of top and bottom line growth. With a technically deep global team, a refreshed board, improved financial flexibility, and a focused translational science strategy, Harvard Bioscience is well positioned to create long term shareholder value. I want to thank our employees for their dedication, our customers for their trust, and our shareholders for their continued support.

With that, I’ll turn the call over to Mark to review the financial results and outlook in more detail.

Mark Frost, Chief Financial Officer, Harvard Bioscience: Thank you, John. I’ll start my comments with our fourth quarter 2025 financial results, the details of which can be found in our Form 10-K, which we will expect to be filed within the next 24 hours, and in the earnings presentation that we posted to our IR site. Starting on slide 4 of the presentation, revenue was $23.7 million, just above the midpoint of our $22.5 million-$24.5 million guidance and below the $24.6 million we reported in the fourth quarter of 2024. The government shutdown of 43 days impacted our ability to overachieve within the quarter. Gross margin of 59.77% was at the high end of our 58%-60% guidance range and is up 260 basis points from 57.1% in the fourth quarter of 2024.

This is the highest gross margin we’ve recorded over the last seven quarters. We continue to improve our gross margin returns based on cost actions we took at the end of 2024 and in 2025 as well as the increasing benefit we are receiving from higher margin NPI revenue. Operating income of $1.7 million was up from flat last year, and adjusted operating income of $3.3 million was up from $2.5 million last year. The improvement in GAAP and adjusted operating income was primarily from cost reductions in manufacturing and SG&A. Now adjusted EBITDA was up 27% year-over-year to $3.8 million in the fourth quarter, driven by cost reductions including decreased costs related to manufacturing and SG&A headcount as well as expense management. Now moving to slide five for full year results.

Revenue of $86.6 million was down from $94.1 million, primarily from the impact of tariffs and the delayed NIH funding. Tariff impact started to subside later in the year, while NIH funding delays continued to impact timing of some orders, in particular our preclinical telemetry products. Gross margin of 57.77% was down from 58.2% last year due to lower revenue in 2025, but a larger margin impact was partially offset by our cost actions in manufacturing. Operating income of -$48.6 million was down from -$6.2 million last year, and adjusted operating income of $6.2 million was up from $5.3 million last year.

The GAAP difference stems from the goodwill impairment we took earlier in the year, and the improvement in adjusted operating income was due to cost reductions, improved expense management and favorable mix of higher margin products. Now Adjusted EBITDA increased 12.5% to $8.1 million from $7.2 million in 2024, as mentioned, due to cost reductions, improved expense management and strong execution throughout the year. Now looking at slide 6, I will outline the revenue results for the quarter and year by product, family and region. Overall revenue, revenues in the fourth quarter were up 15% sequentially and down 3% year-over-year. Full year revenue was down 8% over year-over-year. Geographically, quarter four revenues in the Americas were down 2% year-over-year, driven by lower pharma sales for preclinical and lower academic sales in CMT.

Full year revenues in the Americas were down 7% year-over-year, driven primarily by academic sales. In Europe, quarter four revenues were down 12% year-over-year due to lower academic sales. Full year revenues in Europe were down 6% year-over-year due to distribution and academic sales. In China and the Asia Pacific, quarter four revenues were up 10% year-over-year, thanks to growth in preclinical distribution. Full year revenues in China and Asia Pacific were down due to lower distribution revenue. Now I’ll move to slide 7 to discuss further financial metrics. GAAP EPS in quarter four was -$0.06 compared to flat last year, and quarter four adjusted EPS was flat compared to $0.06 last year.

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. These differences between net loss and adjusted EBIT are highlighted in the reconciliation tables on slide 10 and are all non-cash items. For the full year, GAAP loss per share was $1.28, compared to -$0.28 in 2024. Adjusted loss per share was -$0.02 compared to adjusted earnings per share of $0.03 in 2024. The majority of the higher GAAP loss was from the goodwill charge we took in the first quarter. Cash flow from operations ended the year at $6.7 million, up from $1.4 million at the end of 2024.

The significant improvement in the year is due to disciplined working capital management, improved operating income, and our efforts on payroll tax refunds. Net debt is down $1.8 million from last year to $31.4 million, reflecting payments made on our prior syndicated debt facility, as well as additional liquidity we gained as part of the new agreement. Now, as John discussed in the fourth quarter, we were pleased to announce the completion of our debt refinancing with a structured deal. The deal completed repayment of our prior credit facility, extended the maturity of our debt, and enhanced our financial flexibility as we work to position the company for growth, including reducing our debt service in the first two years by $3 million. Full details on the deal can be found in our December seventeenth press release and accompanying SEC filing.

Now, another significant accomplishment during 2025 was the successful remediation of material weaknesses and the one significant deficiency. This is another step in building the foundation of a healthier business. I’ll now move to slide 9 to discuss our outlook for the first quarter and full year 2026. Now first, a few call-outs. We are introducing full year guidance as we are taking a more long-term oriented view of the business and helping us manage our broader expectations as we go through the year. We are also introducing adjusted EBITDA guidance on both a quarterly and a full year basis. This is a key metric for us, as one that we believe helps demonstrate our core operating performance. This metric is also linked to a key covenant in our recently structured debt agreement that we thought would be helpful for investors to have visibility.

We were reporting GAAP and adjusted gross margin in 2026 due to the restructuring impact from our manufacturing consolidation. Now lastly, 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. This reinstatement will have an impact on our year-over-year adjusted EBITDA comparison, which is already built into our full year guidance. We appreciate our employees and all their hard work as they have supported us through a difficult time for the business. With that, let’s dive into the outlook. In the first quarter, we expect revenue between $20 million and $22 million, adjusted gross margin between 57% and 59%, and adjusted EBITDA between $1 million and $2.2 million. I would note that Q1 of last year only saw minimal impact from NIH challenges.

For the full year 2026, we expect revenue growth of 2%-4%, gross margin of 58%-60%, and Adjusted EBITDA growth of 6%-10%. Additional color as we expect revenue to ramp throughout the year on a year-over-year percentage basis, supported by stronger NPI revenue. Now to sum up the performance, we’re pleased with the fourth quarter and believe the improvements we’ve made to date with our operational efficiency sets us up well for the future. With streamlined costs and a focus on high margin products in an emerging market, we expect to realize increased profitability going forward, and we’re proud to have been able to demonstrate a glimpse of that in a year where macro conditions were challenging.

Lastly, I’m excited to have been appointed CFO on a permanent basis and look forward to continuing to work with John, the Harvard Bioscience team, our board, and engaging further with our customers and investors. To that point, we’ll be attending the KeyBanc Healthcare Forum next week, and I look forward to seeing some of you there. I’ll now turn the call back to our operator to take questions. Operator?

Operator: Thank you. To ask a question, please press star one one. If your question has been 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 Capital Markets. Your line is open.

Paul Knight, Analyst, KeyBanc Capital Markets: Hi. Yeah, thanks for the question. Regarding the NIH, you know, that was finally approved February third or so. How quickly do you think that approval turns into a better academic environment for you?

Mark Frost, Chief Financial Officer, Harvard Bioscience: Yeah. Paul, thanks for the question. As you could imagine, would love for it to turn into a better academic environment in one day. We have, as you know, about 20 salespeople in North America who call on, you know, biopharma as well as academic customers.

John Duke, President and Chief Executive Officer, Harvard Bioscience: From what we have heard, there was a lot of grant submissions which were waiting to be approved, and we expect to start to see, you know, a positive impact both towards the end of Q1 as well as going into Q2.

Paul Knight, Analyst, KeyBanc Capital Markets: NIH is what? About 40% of the company now?

Mark Frost, Chief Financial Officer, Harvard Bioscience: No, I’ll clarify. It is about NIH revenue is about 20% of our U.S. revenue, Paul. One point I’ll just build on John’s point, is we are a build-to-order business, so we’re starting to see improvement in orders. In order to get the revenue, it actually needs to come in in the first half of a quarter. Most of the benefit we’ll start seeing probably in second quarter from the NIH release.

Paul Knight, Analyst, KeyBanc Capital Markets: Yeah. Okay. Then, I know BTX and Mesh MEA are some of your key products. Could you talk about your growth in there and, you know, specifically, what’s your expected growth for these focus businesses in 2026?

John Duke, President and Chief Executive Officer, Harvard Bioscience: Yes. You are correct. They are a key part of our NPI, and we expect both of them to grow in double digits this year.

Paul Knight, Analyst, KeyBanc Capital Markets: Okay. That schedule, you know, is there a quarterly pay down you’re targeting or what do you wanna do?

John Duke, President and Chief Executive Officer, Harvard Bioscience: A quarterly pay down? Could you re-clarify, Paul?

Paul Knight, Analyst, KeyBanc Capital Markets: Pay down your debt this year or are you just kind of?

Mark Frost, Chief Financial Officer, Harvard Bioscience: Oh.

Paul Knight, Analyst, KeyBanc Capital Markets: Yeah.

Mark Frost, Chief Financial Officer, Harvard Bioscience: Yeah, no. The structure of the deck was structured in a couple ways. One, to allow us flexibility that there’s no amortization in the first two years of the deal. We also, Paul, have the ability to convert Term Loan A to an ABL, which will give us likely a lower interest rate and more flexibility. Then the Term Loan C is structured that potentially could be converted to equity, which would reduce, you know, which would deleverage us in the future.

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

Operator: Thank you. Our next question comes from Bruce Jackson with StoneX. Your line is open.

Bruce Jackson, Analyst, StoneX: Hi. Good morning. Thanks for taking my questions. We got a nice pop in the Asia Pac revenue this quarter. I was wondering if and we’ve had some issues in the past with Asia Pac, is this the sign of a turnaround? Can you tell us a little bit about what your expectations are for 2026?

Mark Frost, Chief Financial Officer, Harvard Bioscience: Yeah. It’s a good question, Bruce. You’re well aware last year when the tariffs hit, the China business ground to a halt. We started to definitely see improvement, and those orders came in and were filled in the fourth quarter, so we had a fair amount of catch up, not fully. Our expectation is we will get back to a normal cadence in Asia, notwithstanding obviously if there’s further news on the tariff front that changes that situation, Bruce.

Bruce Jackson, Analyst, StoneX: Okay. Got it. Last quarter you spoke about a backlog. Have you seen any changes in that during the fourth quarter?

Mark Frost, Chief Financial Officer, Harvard Bioscience: Yeah. We actually ended up the year, Bruce, with the highest backlog we’ve had in over two years, and we’ve continued to maintain that. Yeah, we’re pretty positive of where we are on our backlog.

Bruce Jackson, Analyst, StoneX: Okay. Last question over on the pharmaceutical biotech CRO side of the business. How would you characterize that business? We’ve been hearing that, for example, some of the large cap pharma companies are kinda back to normal, while some of the smaller biotech type companies are not due to the uncertainty around the pharmaceutical reimbursement. Where are you seeing the demand right now for your products on the pharmaceutical drug development side of the business?

John Duke, President and Chief Executive Officer, Harvard Bioscience: Bruce, yeah, thanks for asking that. You know, year to date, we are seeing that portion of the market, the pharma and biotech, that business is up, and we expect that to continue, which, you know, clearly factored into our guidance for the year.

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

Operator: Thank you. I’m showing no further questions. This does conclude the question and answer session, and you may now disconnect. Everyone, have a great day.