HBIO

Strategic Focus & Execution Progress

• Over the past year since the current CEO took office, management has focused on sharpening strategy, aligning commercial operations, and enforcing operational discipline, including optimizing the sales organization and distribution channels, and executing manufacturing footprint consolidation via Project Viking.
• Double-digit revenue growth across the CMT and preclinical portfolios and solid operational execution in Q2 have validated the company's strategic direction, leading management to raise full-year 2026 revenue guidance.

Commercial Traction & Customer Segments

• Demand is solid overall, with particularly strong demand from CRO customers, and the academic segment showed improvement compared to Q1 2026. The U.S. academic funding environment is gradually improving following the release of NIH funding.
• The distribution agreement with Fisher Scientific continues to deliver strong results, generating double-digit Q2 revenue growth while expanding the company's customer reach.
• A newly appointed SVP of Commercial is optimizing commercial teams to prioritize the highest-growth opportunities: NPI platforms, AAA bioprocessing, and expanding market share with biopharma and CRO accounts.

Product & Recurring Revenue Strategy

• Increasing high-margin recurring revenue is a core long-term strategic focus, anchored by single-use consumables (telemetry implants, electroporation reagents) complemented by annual software licenses and service contracts. Expanding instrument install base for platforms like SOHO and BTX is driving steady quarterly recurring revenue growth.
• Researchers are increasingly adopting the company's products to generate more predictive human-relevant data and solve preclinical translational challenges, strengthening the company's position with pharmaceutical, biotech, and CRO customers.

Operational Initiatives

• Project Viking (manufacturing footprint consolidation) remains on schedule: two product lines were successfully transitioned out of the Holliston facility in Q2 2026, with two more transitions planned for Q3. The project is expected to deliver $3 million in annual cost savings starting in 2027, rising to $4 million annually thereafter. The company is actively marketing the vacant Holliston space for subtenancy, with no signed lease as of Q2 end.
• The Made in China localization initiative is progressing well: following the launch of the localized BTX electroporation line, the company is actively shipping units and meeting domestic demand. Additional products are undergoing regulatory certification for launch in H2 2026, positioning the company for growth in 2027.

Financial Performance

• Adjusted gross margin was 57% for Q2, slightly below expectations due to the mix shift toward lower-margin CMT products and higher China sales. Adjusted EBITDA was $1.7 million, up 11% year-over-year, hitting the high end of the company's prior outlook range.

• Full-year 2026 revenue growth guidance was raised to 3% to 5%, up from the prior guidance range of 2% to 4%, reflecting stronger-than-expected first-half performance and ongoing commercial momentum in NPI, telemetry, and CMT portfolios.
• Full-year 2026 adjusted gross margin guidance was revised downward by 1 percentage point to 57% to 59% (from the prior 58% to 60%), to reflect the current mix shift toward lower-margin CMT products and higher China sales. Management expects gross margin expansion beyond 2026 driven by a focus on higher-margin NPI and recurring revenue, as well as structural cost savings from Project Viking starting in 2027.
• Full-year 2026 adjusted EBITDA growth guidance of 6% to 10% is reaffirmed, supported by ongoing cost discipline, operational improvements, and operating leverage as revenue scales.
• Q3 2026 revenue guidance is set at $21.0 million to $22.6 million, with a midpoint of $21.8 million representing 6% year-over-year mid-single-digit growth. Q3 adjusted gross margin is expected to be 56% to 58%, and adjusted EBITDA is expected to be $1.5 million to $2.5 million.
• Management expects adjusted EBITDA to expand in the second half of 2026 compared to the first half, with the most significant acceleration in Q4 (historically the company's strongest quarter for revenue and EBITDA). Q4 2026 is expected to deliver 4% to 6% year-over-year revenue growth, with management noting guidance reflects a strong Q4 2025 baseline and the company hopes to outperform the implied range.

Total Q2 2026 revenue was $22.7 million, representing an 11% year-over-year increase. By product segments: 1. CMT (Cellular & Molecular Technologies): Delivered double-digit year-over-year revenue growth, with strong performance across AAA bioprocessing and electroporation product lines. CMT products carry a lower gross margin than the company's average, and higher-than-expected CMT sales pulled down overall quarterly gross margin. 2. Preclinical portfolio: Achieved double-digit year-over-year revenue growth, led by the telemetry business which grew double digits in Q2 and delivered solid mid-single-digit growth for the first half. 3. New Product Innovation (NPI): Contributed 11% of total Q2 revenue, up from just 3% in Q2 2025. 4. Recurring revenue (consumables, software licenses, service contracts): Represented 55% of total revenue in the first half of 2026, up 1 percentage point year-over-year, on track toward the long-term target of 60%. By geographic segments: 1. Americas: Q2 revenue of $11.4 million, up 13% year-over-year, driven by strong telemetry growth at CRO customers. 2. Europe: Q2 revenue of $6.8 million, up 3% year-over-year (1.5% constant currency), with CRO/pharma/distribution growth offsetting declines in academic/government channels. 3. APAC: Q2 revenue of $4.6 million, up 24% year-over-year, with China contributing $3.1 million (up 29% year-over-year) driven by CRO demand and localized product launches.

• Actual future results may differ materially from management's forward-looking guidance and expectations, due to known and unknown risks, uncertainties, and contingencies referenced in the company's SEC filings (including the 10-Q and earnings press release).
• Product and geographic mix shifts toward lower-margin CMT products and China sales are currently pressuring overall gross margins, delaying gross margin expansion relative to prior expectations.
• The company has not yet secured a subtenant for the vacant Holliston facility space from the Project Viking consolidation, with a deal not expected to close until Q4 2026 or Q1 2027, leaving open uncertainty around capturing early cost savings from the consolidation.
• Cash used in operations for the first half of 2026 was $0.3 million, compared to $5.7 million cash generated in the year-ago period, driven by inventory builds to improve lead times and support Project Viking transitions, as well as higher interest costs from recent debt refinancing. The company ended Q2 with $6.5 million in cash and cash equivalents, with net debt of $33.5 million.

Q: Analyst Paul Knight asked for the quarterly growth rate of the electroporation and organoid mesh MEA product lines, and for details on China demand including product drivers and sales channels. / A: John Duke confirmed both electroporation and organoid multichannel systems delivered strong double-digit Q2 growth. He added that China growth came from a lower year-ago baseline due to 2025 Q2 retaliatory tariffs, with strong growth across multiple categories: organoid systems, BTX electroporation, telemetry, and respiratory inhalation products. Mark Frost noted that nearly all of the company's China sales are handled through third-party distributors, standard for the region.

Q: Knight asked what year-over-year growth rate is implied for Q3 2026, and what growth is implied for Q4 2026. / A: Mark Frost confirmed Q3 guidance implies mid-single-digit year-over-year growth, and John Duke added the Q3 revenue midpoint of $21.8 million represents 6% year-over-year growth. Mark Frost noted Q4 2026 guidance implies 4% to 6% year-over-year growth, as the guidance incorporates a very strong Q4 2025 baseline, and management expects to potentially outperform this implied range.

Q: Analyst Bruce Jackson asked for an update on the academic market outlook following the release of NIH funding, including how the company is positioned to capture growth in this segment. / A: John Duke stated the U.S. academic market is gradually improving, and the company is actively targeting newly released funding pockets via both direct sales teams and distributor partners. He noted the company is well positioned to deliver year-over-year academic sales growth in the second half of 2026.

Q: Jackson asked if the company has secured a subtenant for the Holliston facility lease as part of Project Viking. / A: Mark Frost responded that the company has engaged a broker and is actively marketing the space, and has received site visits from interested parties, but no lease has been signed yet. He added the company does not expect a deal to close until Q4 2026 or Q1 2027, as the full space will not be vacated until Q1 2027.