HARVARD BIOSCIENCE INC Q3 FY2026 earnings call

• Top-Line Growth: Delivered solid top-line performance with 8% revenue growth in Q3, marking the second consecutive quarter of strong growth. Performance was driven by strength in preclinical platforms, organoids, fluidics, and new product innovations.
• Product Demand: Double-digit growth in preclinical products, specifically respiratory/inhalation and MEA products for organoids. Telemetry business grew mid-single digits year-to-date. New Product Innovation (NPI) portfolio contributed over 11% of total revenue.
• Geographic Expansion: China revenue grew 31%, supported by a localization strategy where all three BTX electroporation lines are now fully available and shipping locally. Distribution partners, particularly Fisher Scientific in North America, saw more than double the sales year-to-date.
• Operational Efficiency (Project Viking): Manufacturing consolidation is on track for completion in Q1 2027. The amino acid analyzer line has moved to Cambridge, UK, and Fluidics products are being shipped from Minneapolis via parallel builds. The project aims to generate $3 million in cost savings in 2027 and $4 million annually thereafter.
• Commercial Strategy: A revamped commercial team established a dedicated key accounts group for top-tier pharma, CRO, and biotech customers. A newly formed Scientific Advisory Board held its inaugural meeting to guide the technology roadmap.
• Academic vs. CRO Shift: While academic funding remains soft, particularly in Europe, robust demand from CROs and biopharma customers has offset this weakness. CRO sales are up meaningfully year-to-date.

• Total Revenue: $22.2 million, representing 8% year-over-year growth.
• Americas Revenue: $11.3 million (51% of total), up 9% year-over-year, driven by Fisher Scientific distribution and CRO demand.
• Europe Revenue: $6.3 million (28% of total), down 5% year-over-year (down 3% on constant currency basis), impacted by weak academic funding.
• APAC Revenue: $4.6 million (21% of total), up 29% year-over-year, driven by respiratory, organoid, and fluidics product sales; China revenue was $2.8 million (13% of total), up 31% year-over-year.

• Full-Year 2026 Revenue: Maintained guidance for 3% to 5% growth.
• Full-Year 2026 Adjusted Gross Margin: Maintained target of 57% to 59%.
• Full-Year 2026 Adjusted EBITDA: Lowered guidance range from previous 6% to 10% growth to negative 1% to 4% growth. This revision reflects higher volume of lower-margin legacy products, increased sales through distribution channels, and lower margins in China.
• Fourth Quarter 2026 Revenue: Expected between $23.7 million and $25.5 million (midpoint $24.6 million), representing mid-single-digit year-over-year growth.
• Fourth Quarter 2026 Adjusted Gross Margin: Expected between 59% and 61%.
• Fourth Quarter 2026 Adjusted EBITDA: Expected between $3.8 million and $4.2 million, representing 5% growth at the midpoint.
• 2027 Outlook: Management anticipates gross margins improving into the 60% range in 2027 as Project Viking completes and NPI/recurring revenue increases.

• Margin Pressure: Increased sales of lower-margin legacy products, reliance on distribution channels, and lower-margin operations in China have compressed adjusted gross margin and EBITDA.
• Academic Funding Dependency: Continued weakness in academic funding, particularly in Europe, poses a risk to direct sales if not offset by CRO/biopharma demand.
• Debt Costs: Higher interest costs from debt refinancing and non-cash exit fee accruals are impacting cash flow.
• Inventory Build-up: Significant inventory increases related to Project Viking pre-builds and lead time improvements are currently using cash, though expected to normalize post-consolidation.
• Political Uncertainty: Changes in political control may impact NIH spending and academic funding environments, although management notes past correlations are not guarantees.

Q: Paul Knight asked about the growth drivers for BTX electroporation, market share dynamics against major competitors like Thermo and Lonza, and the timeline for GMP approval for bioproduction versions. / A: John Duke reported strong double-digit YTD growth across global regions for both hardware and consumables. Mark Frost clarified that Harvard Bioscience primarily competes in the research area, not the bioproduction side where larger players dominate. They expect to fully launch the GMP-approved bioproduction version by mid-2027.

Q: Paul Knight inquired about the progress of Project Viking, specifically which product lines have moved, and the current status of the academic market's contribution to revenue. / A: CFO Mark Frost confirmed five of eight product lines have moved, including parallel builds for Fluidics, with full transition expected in Q1 2027 to drive savings starting Q2. CEO John Duke noted academia faces challenges in the US and Europe, while CFO Mark Frost stated academic revenue has dropped from 50% to roughly 40% of direct business, with European weakness partly attributed to this sector.

Q: Bruce Jackson asked about factors affecting Europe's performance, recurring revenue percentages, telemetry trends in China, and the projected impact of Project Viking on 2027 gross margins. / A: CEO John Duke cited light academic demand and softer-than-expected CMT product demand in Europe. CFO Mark Frost noted recurring revenue is ~54%. Telemetry grew mid-single digits. Frost expects ~75% of Viking savings to be gross margin-related, targeting 60% gross margins in 2027 as NPI and recurring revenue grow.

Q: Jim Sidoti questioned the potential impact of recent US elections on NIH/academic spending, the reasons behind the $3 million inventory increase, and whether recent sales growth represents a sustainable trend or one-off events. / A: John Duke stated that historically Democratic control correlates with positive NIH funding, but this is not assumed in guidance. Mark Frost confirmed the inventory build is linked to Project Viking and lead times, expecting significant drops in Q1 2027. Both executives affirmed the growth is organic and recurring, with no one-off or large block shipments to distributors like Fisher.