Harvard Bioscience Inc 2026 Q2 Earnings Call

Please go ahead. Thank you, operator, and good morning, everyone.

Thank you for joining the Harvard Bioscience second 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 our 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, are 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 statement. Actual results may differ materially from those expressed or implied.

Please refer to today's press release, the Harvard Bioscience Form 10-Q, and others' 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. Thank you, Taylor, and good morning, everyone.

Since becoming CEO a year ago, our team has focused on sharpening our strategy, commercial alignment, and operational discipline, from optimizing our sales organization and distribution channels to executing footprint consolidation through Project Viking. That disciplined focus and execution helped us deliver strong second quarter performance, highlighted by double-digit revenue growth across our CMT and preclinical portfolios and solid operational execution that reinforced our confidence in raising our full year revenue outlook. To give a high level summary before Mark dives into the detailed financials, revenue came in strong at $22.7 million, representing 11% year-over-year. This performance was driven by solid demand, particularly from CRO customers and healthy sales across our CMT portfolio.

Adjusted gross margin was 57% for the quarter, slightly lower than anticipated due to higher than expected sales from our CMT products and sales in China, both of which carried lower relative gross margin. Adjusted EBITDA came in at $1.7 million, up 11% year-over-year. We are increasingly seeing our execution across our strategic focus translate into tangible operational progress across our customer mix, product portfolio, and recurring revenue profile. Researchers are adopting our products to generate more predictive, human relevant data and address key preclinical translational challenges. We remain focused on our highest growth customer opportunities and continue to strengthen our position with pharmaceutical, biotech, and CRO accounts. We also saw an improvement over the first quarter in our academic segment.

Looking at our product mix, we are seeing solid commercial traction and saw double-digit growth within our telemetry and CMT businesses, highlighted by growth in our AAA bioprocessing and electroporation products. Customers continue to show strong engagement across both preclinical and CMT platforms. Increasing high margin recurring revenue remains a key long-term focus. Our recurring revenue strategy is anchored around high margin, single use consumables such as telemetry implants and electroporation reagents, complemented by annual software licenses and service contracts. As our instrument install base expands with platforms like SoHo and BTX, we are generating a steady recurring revenue stream quarter after quarter. We saw our recurring revenue increase to 55% of total revenue in the first half as we continue to work towards our long-term target of 60%. Looking at broader industry demand patterns, preclinical drug candidate pipelines are growing, biopharma spending continues to increase, and CRO activity is expanding.

Additionally, our distribution agreement with Fisher Scientific continues to deliver strong commercial returns, generating double-digit growth in Q2 while broadening our customer reach. To build on this momentum, our recently appointed SVP of Commercial, David Panzarella, is optimizing our commercial teams to focus on our highest growth opportunities, specifically NPI platforms, AAA bioprocessing, and growing our market share within biopharma and CRO accounts. Our Project Viking manufacturing footprint consolidation remains on track. We successfully transitioned two product lines out of our Holliston facility in Q2 and are prepared to move two more in Q3. As a reminder, we expect Project Viking will deliver $3 million in cost savings in 2027 and $4 million annually thereafter. Our Made in China localization initiative is progressing well and contributing to strong regional performance.

Following the launch of our localized BTX line, we are actively shipping units and capturing domestic demand. Looking ahead, we continue to expand our BTX product line and are advancing certifications on additional products in the second half of the year, positioning us for growth in 2027. Turning to our outlook. Based on our strong performance in Q2 and expanding commercial momentum within our CMT product portfolio, we are raising our full year revenue growth guidance to 3%-5%. To account for the Q2 top-line performance and the near term mix shift towards our CMT product lines and higher China sales, we are revising our full year adjusted gross margin range by one percentage point to 57%-59%. Longer term, we remain confident that our strategic focus on higher margin NPI platforms and expanding recurring revenue will drive gross margin expansion beyond our 2026 baseline.

This trajectory will be further strengthened by structural cost savings from Project Viking beginning in 2027. Lastly, we are reaffirming our full year adjusted EBITDA growth guidance of 6%-10%, supported by continued cost discipline, operational improvements and operating leverage as revenue scales. Over the past year, we have strengthened our balance sheet, put a plan in place to simplify our operational footprint, and sharpened our strategic focus. We are seeing these deliberate actions reflected in meaningful top-line growth, a more differentiated product portfolio, stronger market engagement from our key customer segments, and improving operating performance. We believe Harvard Bioscience is becoming a fundamentally stronger, more profitable company. With that, I will turn the call over to Mark for a deeper review of the financials.

Mark? Thank you, John, and good morning, everyone.

I will start my comments with our second quarter 2026 financial results, the details of which can be found starting on slide 4 of the earnings presentation posted to our IR site. Revenue of $22.7 million was up 11% year-over-year, 10% on a constant currency basis and exceeded our guidance range. The growth was driven by increased demand from CRO customers, alongside solid execution through Fisher Scientific and other distributors. Our telemetry business was up double digits within the quarter and solid mid-single digit growth for the half. We saw strong performance across our AAA bioprocessing and electroporation platforms. NPI revenue continued to deliver per our expectation, with an 11% contribution versus 3% of revenue last year.

Lastly, on revenue, as John mentioned, we are continuing to focus on expanding our recurring revenue opportunities, which consist of our consumables, service, and software, which improved its contribution by 1% within the half to 55% of revenue. GAAP gross margin was 55.6%, and adding back restructuring for the quarter of 20 basis points brought our gross margin to 55.8%, compared to 56.4% in Q2 last year. The decline was caused by a product and geographic mix shift, with higher than expected CMT sales and strong demand in China, both of which carry relative lower gross margins. Going forward, we continue to focus on driving sales of our higher margin NPI products, but we are not going to downplay sales opportunities. Additionally, we expect to realize significant margin benefit from the completion of our manufacturing consolidation in early 2027.