Harvard Bioscience Announces Third Quarter 2022 Financial Results

2022-11-08

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“Fighting through challenging times while building the company and new technologies for the future.”

HOLLISTON, Mass., Nov. 08, 2022 (GLOBE NEWSWIRE) -- Harvard Bioscience, Inc. (Nasdaq: HBIO) (the “Company”) today announced financial results for the third quarter ended September 30, 2022.

Jim Green, Chairman and CEO, said, "Impacted by a challenging summer, our third quarter revenues were $26.9 million, down 9% from the same quarter prior year. Growth of 6% in our cellular/molecular product revenues were more than offset by a 17% reduction in sales of our higher margin pre-clinical products and a negative currency impact of approximately $1.0 million. Gross margin was down on lower revenue as well as higher costs of labor and materials, in addition to inventory charges related to the discontinuation of certain non-strategic products as a result of our previously communicated portfolio optimization. Operating margin was down from last year mainly on lower sales and lower gross margin.”

Green continued, “In spite of headwinds in the quarter, we expect sequential revenue growth and an improved product mix in Q4 resulting in our gross margins returning to first half levels. Q4 revenue is expected to be in the $30 million dollar range, with adjusted operating margin in the range of 14% to 15%.

We’re very pleased to see our continued investment in research and development deliver three new product introductions. First, our new Ultrospec 7500 is a premium spectrophotometer well known in the academic laboratories now also targeted to the pharma/CRO space. Second is our exclusive continuous glucose monitoring telemetry implants driving new demand in academic, pharma, and government labs focused on ever increasing diabetes. Lastly, we’re excited to see a large Q4 order for our BTX electroporation system using our unique Flat Pack Reaction Chamber to a top pharma company for use in bioproduction. Furthering these initial inroads, we see an emerging value proposition for our BTX system, which is often used in pharmaceutical research and development to create the initial strains of a therapeutic, to be used more broadly in production.”

Green concluded, “Looking to the future, we expect to complete our portfolio optimization and related cost actions in Q4, with anticipated annual improvements of approximately $4.0 million in gross margin and operating expense reductions of approximately $1.5 million as we enter 2023. This leaning activity, combined with improved pricing and exciting new product introductions, is expected to drive new growth and make 2023 the year the company becomes the profitable growth-oriented platform we envisioned.”

Quarterly Financial Results Summary Q3'22 Q3'21 Revenues $ 26.9million $ 29.7million Operating (Loss) Income (GAAP) $ (3.8)million $ 0.5million Adjusted Operating Income $ 0.7million $ 3.9million Operating Margin (GAAP) (14.0)% 1.8% Adjusted Operating Margin 2.6% 13.3% Diluted Loss Per Share (GAAP) $ (0.08) $ (0.00) Diluted Adjusted (Loss) Earnings Per Share $ (0.01) $ 0.06 Net Debt* $ 45.0million $ 40.9million * Debt outstanding less cash and cash equivalents For more details on performance for the three and nine months ended September 30, 2022, a slide presentation that will be referenced during the webcast referenced below will be posted to our Investor Relations website shortly before the webcast begins.

Please refer to the exhibits below for a reconciliation of certain non-GAAP to GAAP financial measures, including gross margin, operating income, net income and loss, diluted earnings per share and adjusted EBITDA. Please see “Use of Non-GAAP Financial Information” for additional information regarding our use of such adjusted financial information.

Webcast and Conference Call Details

Harvard Bioscience will be hosting a conference call and webcast today at 4:30 p.m. Eastern Time.

Covering Analysts who want to join the call and ask a question must register here. Once registered, you will receive the dial-in numbers and a unique PIN number.

Participants who want to join the audio-only webcast should go to our events and presentations on the investor website here.

Use of Non-GAAP Financial Information

In this press release, we have included non-GAAP financial information including adjusted operating income, adjusted operating margin, and adjusted earnings per share. We believe that this non-GAAP financial information provides investors with an enhanced understanding of the underlying operations of the business. For the periods presented, these non-GAAP financial measures have excluded certain expenses and income resulting from items that we do not believe are representative of the underlying operations of the business, such as amortization of intangibles related to acquisitions, costs related to acquisition, disposition and integration initiatives, impairment charges, severance, restructuring and other business transformation expenses, and stock-based compensation expense, and litigation settlement expenses. They also exclude the tax impact of the reconciling items. Management believes that this non-GAAP financial information is important in comparing current results with prior period results and is useful to investors and financial analysts in assessing the Company’s operating performance. Any non-GAAP financial statement information included herein is accompanied by a reconciliation to the nearest corresponding GAAP measure which are included as exhibits below in this press release.

The non-GAAP financial information provided in this press release should be considered in addition to, not as a substitute for, the financial information provided and presented in accordance with GAAP and may be different than other companies’ non-GAAP financial information.

About Harvard Bioscience

Harvard Bioscience is a leading developer, manufacturer and seller of technologies, products and services that enable fundamental research, discovery, and pre-clinical testing for drug development. Our customers range from renowned academic institutions and government laboratories, to the world’s leading pharmaceutical, biotechnology and contract research organizations. With operations in North America, Europe, and China, we sell through a combination of direct and distribution channels to customers around the world.

For more information, please visit our website at www.harvardbioscience.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995. You can identify these statements by our use of such words as "will," "guidance," "objectives," "optimistic," "potential," "future," "expects," "plans," "estimates," "continue," "drive," "strategy," "potential," "potentially," "growth," "long-term," "projects," "projected," "intends," "believes," "goals," "sees," "seek," "develop" "possible" "new," "emerging," "opportunity," "pursue" and similar expressions that do not relate to historical matters. Forward-looking statements in this press release or that may be made during our conference call may include, but are not limited to, statements or inferences about the Company's or management's beliefs or expectations, the Company's anticipated future revenues and earnings, the strength of the Company's market position and business model, industry outlook, the impact of the COVID-19 pandemic and related supply chain disruptions on the Company’s business, the Company's business strategy, the positioning of the Company for growth, the market demand and opportunity for the Company's current products, or products it is developing or intends to develop, and the Company's plans, objectives and intentions that are not historical facts. These statements involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Investors should note that many factors, as more fully described under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, and in our other filings with the Securities and Exchange Commission and as otherwise enumerated herein or therein may cause the Company's actual results to differ materially from those in the forward-looking statements. The forward-looking statements in this press release are qualified by these risk factors. The Company's results may also be affected by factors of which the Company is not currently aware. The Company may not update these forward-looking statements, even though its situation may change in the future, unless it has obligations under the federal securities laws to update and disclose material developments related to previously disclosed information.

Investor Inquiries:

Michael Rossi

Chief Financial Officer

(508)893-8999

mrossi@harvardbioscience.com

HARVARD BIOSCIENCE, INC.

Consolidated Statements of Operations

(unaudited, in thousands, except per share data)

Three Months Ended

Nine Months Ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Revenues$26,922 $29,663 $84,908 $85,849 Cost of revenues 14,750 13,355 39,922 37,757 Gross profit 12,172 16,308 44,986 48,092 Operating expenses: Sales and marketing expenses 5,819 6,183 19,093 17,299 General and administrative expenses 6,324 5,458 18,630 18,190 Research and development expenses 2,763 2,660 9,480 7,848 Amortization of intangible assets 1,572 1,459 4,492 4,388 Settlement of litigation, net (544) - (233) - Total operating expenses 15,934 15,760 51,462 47,725 Operating (loss) income (3,762) 548 (6,476) 367 Other expense: Interest expense (749) (373) (1,648) (1,161) Other expense, net (179) (130) (163) (477) Total other expense (928) (503) (1,811) (1,638) (Loss) income before income taxes (4,690) 45 (8,287) (1,271) Income tax (benefit) expense (1,285) 215 (437) (22) Net loss$(3,405) $(170) $(7,850) $(1,249) Loss per common share: Basic and diluted$(0.08) $(0.00) $(0.19) $(0.03) Weighted-average common shares: Basic and diluted 41,637 40,754 41,353 40,202

HARVARD BIOSCIENCE, INC.Condensed Consolidated Balance Sheets(unaudited, in thousands) September 30, 2022 December 31, 2021 Assets Cash and cash equivalents$5,144 $7,821 Accounts receivables 15,023 21,834 Inventories 26,116 27,587 Other current assets 5,535 4,341 Total current assets 51,818 61,583 Property, plant and equipment 3,555 3,415 Goodwill and other intangibles 77,315 85,074 Other long-term assets 14,325 12,272 Total assets$147,013 $162,344 Liabilities and Stockholders' Equity Current portion, long-term debt$2,720 $3,235 Other current liabilities 18,640 22,081 Total current liabilities 21,360 25,316 Long-term debt, net 46,534 45,095 Other long-term liabilities 7,140 8,532 Stockholders’ equity 71,979 83,401 Total liabilities and stockholders’ equity$147,013 $162,344

HARVARD BIOSCIENCE, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited, in thousands)

Nine Months Ended

September 30, 2022 September 30, 2021 Cash flows from operating activities: Net loss$(7,850) $(1,249) Adjustments to operating cash flows 5,165 8,547 Changes in operating assets and liabilities 1,158 (6,153) Net cash (used in) provided by operating activities (1,527) 1,145 Cash flows from investing activities: Additions to property, plant and equipment (1,355) (837) Additions to intangible assets - (150) Net cash used in investing activities (1,355) (987) Cash flows from financing activities: Borrowing from revolving line of credit 7,800 2,500 Repayment of revolving line of credit (4,650) (4,000) Repayment of term debt (2,436) (1,500) Payments of debt issuance costs - (102) Proceeds from exercise of stock options and stock purchases 346 2,909 Taxes related to net share settlement of equity awards (1,167) (2,653) Net cash used in financing activities (107) (2,846) Effect of exchange rate changes on cash 312 (81) Decrease in cash and cash equivalents (2,677) (2,769) Cash and cash equivalents at the beginning of period 7,821 8,317 Cash and cash equivalents at the end of period$5,144 $5,548

HARVARD BIOSCIENCE, INC.

Reconciliation of GAAP to Non-GAAP Financial Measures (unaudited)

Three Months Ended September 30, 2022

(in thousands, except per share data)

Settlement,

Restructuring,

Stock-Based

Acquired Assets

Transformation

Income

Statement of OperationsGAAP

Compensation

Amortization

& Other

Taxes

ADJUSTED

Revenues$26,922 - - - - $26,922 Cost of revenues14,750 - (7) (1,441) - 13,302 Gross profit12,172 - 7 1,441 - 13,620 Gross Margin45.2% 50.6% Operating expenses: Sales and marketing expenses5,819 (147) (1) 120 - 5,791 General and administrative expenses6,324 (919) (8) (942) - 4,455 Research and development expenses2,763 (73) (8) (10) - 2,672 Amortization of intangible assets1,572 - (1,572) - - - Settlement of litigation, net(544) - - 544 - - Total operating expenses15,934 (1,139) (1,589) (288) - 12,918 Operating Expenses - % of Revenues59.2% 48.0% Operating (loss) income(3,762) 1,139 1,596 1,729 - 702 Operating Margin-14.0% 2.6% Other expense: Interest expense(749) - - - - (749) Other expense, net(179) - - (80) - (259) Total other expense(928) - - (80) - (1,008) Loss before income taxes(4,690) 1,139 1,596 1,649 - (306) Income tax benefit(1,285) - - - 1,244 (41) Net loss$(3,405) $1,139 $1,596 $1,649 $(1,244) $(265) Loss per share$(0.08) $(0.01) Diluted weighted average common shares41,637 41,637

HARVARD BIOSCIENCE, INC.

Reconciliation of GAAP to Non-GAAP Financial Measures (unaudited)

Three Months Ended September 30, 2021

(in thousands, except per share data)

Stock-Based Acquired Assets Restructuring, Income Statement of Operations

GAAP Compensation Amortization Transformation Taxes ADJUSTED Revenues$29,663 - - - - $29,663 Cost of revenues13,355 (32) (15) (94) - 13,214 Gross profit16,308 32 15 94 - 16,449 Gross Margin

55.0% 55.5% Operating expenses: Sales and marketing expenses6,183 (149) (2) (261) - 5,771 General and administrative expenses5,458 (790) (16) (426) - 4,226 Research and development expenses2,660 (33) (10) (113) - 2,504 Amortization of intangible assets1,459 - (1,459) - - - Total operating expenses15,760 (972) (1,487) (800) - 12,501 Operating Expenses - % of Revenues53.1% 42.1% Operating income548 1,004 1,502 894 - 3,948 Operating Margin1.8% 13.3% Other expense: Interest expense(373) - - - - (373) Other expense, net(130) - - - - (130) Total other expense(503) - - - - (503) Income before income taxes45 1,004 1,502 894 - 3,445 Income tax expense215 - - - 580 795 Net (loss) income$(170) $1,004 $1,502 $894 $(580) $2,650 (Loss) income per share$(0.00) $0.06 Diluted weighted average common shares40,754 43,500

HARVARD BIOSCIENCE, INC.

Reconciliation of GAAP to Non-GAAP Financial Measures (unaudited)

Nine Months Ended September 30, 2022

(in thousands, except per share data)

Settlement,

Restructuring,

Stock-Based

Acquired Assets

Transformation

Income

Statement of Operations

GAAP

Compensation

Amortization

& Other

Taxes

ADJUSTED

Revenues$84,908 - - - - $84,908 Cost of revenues39,922 (88) (27) (1,598) - 38,209 Gross profit44,986 88 27 1,598 - 46,699 Gross Margin

53.0% 55.0% Operating expenses: Sales and marketing expenses19,093 (493) (4) (250) - 18,346 General and administrative expenses18,630 (2,633) (38) (2,861) - 13,098 Research and development expenses9,480 (187) (27) (137) - 9,129 Amortization of intangible assets4,492 - (4,492) - - - Settlement of litigation, net(233) - - 233 - - Total operating expenses51,462 (3,313) (4,561) (3,015) - 40,573 Operating Expenses - % of Revenues60.6% 47.8% Operating (loss) income(6,476) 3,401 4,588 4,613 - 6,126 Operating Margin-7.6% 7.2% Other expense: Interest expense(1,648) - - - - (1,648) Other expense, net(163) - - (80) - (243) Total other expense(1,811) - - (80) - (1,891) (Loss) income before income taxes(8,287) 3,401 4,588 4,533 - 4,235 Income tax (benefit) expense(437) - - - 1,409 972 Net (loss) income$(7,850) $3,401 $4,588 $4,533 $(1,409) $3,263 (Loss) income per share$(0.19) $0.08 Diluted weighted average common shares41,353 42,665

HARVARD BIOSCIENCE, INC.Reconciliation of GAAP to Non-GAAP Financial Measures (unaudited)Nine Months Ended September 30, 2021(in thousands, except per share data) Stock-Based

Acquired Assets

Restructuring,

Income

Statement of Operations

GAAP

Compensation

Amortization

Transformation

Taxes

ADJUSTED

Revenues$85,849 - - - - $85,849 Cost of revenues37,757 (83) (51) (247) - 37,376 Gross profit48,092 83 51 247 - 48,473 Gross Margin56.0% 56.5% Operating expenses: Sales and marketing expenses17,299 (373) (6) (375) - 16,545 General and administrative expenses18,190 (2,593) (49) (2,380) - 13,168 Research and development expenses7,848 (87) (32) (408) - 7,321 Amortization of intangible assets4,388 - (4,388) - - - Total operating expenses47,725 (3,053) (4,475) (3,163) - 37,034 Operating Expenses - % of Revenues55.6% 43.1% Operating income367 3,136 4,526 3,410 - 11,439 Operating Margin0.4% 13.3% Other expense: Interest expense(1,161) - - - - (1,161) Other expense, net(477) - - - - (477) Total other expense(1,638) - - - - (1,638) (Loss) income before income taxes(1,271) 3,136 4,526 3,410 - 9,801 Income tax (benefit) expense(22) - - - 2,365 2,343 Net (loss) income$(1,249) $3,136 $4,526 $3,410 $(2,365) $7,458 (Loss) income per share$(0.03) $0.17 Diluted weighted average common shares40,202 43,113

HARVARD BIOSCIENCE, INC.

Reconciliation of GAAP to Non-GAAP Financial Measures (unaudited)

(in thousands)

Three Months Ended

Nine Months Ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Operating income$(3,762) $548 $(6,476) $367 Stock-based compensation expense 1,139 1,004 3,401 3,136 Acquired asset amortization 1,596 1,502 4,588 4,526 Settlements, restructuring and transformation costs 1,729 894 4,613 3,410 Adjusted operating income 702 3,948 6,126 11,439 Depreciation expense 364 420 1,122 1,311 Adjusted EBITDA$1,066 $4,368 $7,248 $12,750