Harvard Bioscience, Inc.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Harvard Biosciences Incorporated Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star then 1 on your telephone keypad. I would now like to turn the conference over to your host, Mr. David Soroy. Sir, please begin.

Thank you, Howard, and good morning, everyone. Thank you for joining us for the Harvard Bioscience Second Quarter 2020 Earnings Conference Call. Before we begin, I would like to suggest that you take a moment and download a copy of a presentation that will be referred to during this call. The file is entitled Q2 2020 HBio Quarterly Earnings Presentation and can be located in the Investor Overview Events and Presentations section of our website. Leading the call today will be Jim Green, Chairman of the Board, President, and Chief Executive Officer. and Mike Rossi, Chief Financial Officer. Before I turn the call over to Jim, I will read our safe harbor statement. In our discussion today, we may make statements that constitute forward-looking statements. Our actual results and performance may differ materially from what we have projected due to risks and uncertainties, including those described in our annual report on Form 10-K for the period ended December 31, 2019, our quarterly report on Form 10-Q for the three months ended March 31, 2020, and our other public filings. Any forward-looking statements, including those related to the company's future results and activities, represent our estimates as of today and should not be relied upon as representing our estimates as of any subsequent day. Also, much of today's call will focus on our non-GAAP quarterly results, which we believe better represent the ongoing economics of the business, reflects how we set and measure our incentive compensation plans, and how we manage the business internally. The differences between our GAAP and non-GAAP results are outlined in the earnings release and today's presentation. These two documents can be found on our website under Investors, Overview, Events and Presentations. Additionally, any material, financial or other statistical information presented on the call, which is not included in our press release and presentation, will be archived and available in the Investor Relations section of our website. A replay of this call will also be available at the same location on our website, at HarvardBioscience.com. I will now turn the call over to Jim. Jim, please go ahead.

Thank you, Dave. Good morning, everyone. Let's move to slide four of the presentation and take a quick look at the highlights for Q2. Academic labs were down significantly as anticipated due to lab closures around the globe. I'm glad to say that our combined CRO and pharma revenue remains strong and growing. and that strict cost controls combined with product mix drove strong margins, and we continued to pay down our debt. As we look forward, we are carefully aligning our costs with revenue levels during this expected recovery. We will closely manage cash and expect to further pay down debt. Overall, we expect to be on track to our original September 2019 margin targets. Move to slide five. Quick look at the details. As expected, we were significantly impacted by the COVID-19 pandemic. Q2 revenue came in at $23.3 million, down $6.3 million, or 21.3% from Q2 last year. Gross margin on a gap basis measured 59.4%. That's an improvement of 550 basis points from prior year. Non-gap adjusted gross margin was 59.8%. Again, improving 550 basis points. This quarter had GAAP operating income of $600,000, or 2.4% of revenue. Our adjusted operating income was 4.1 million, so our adjusted operating margin improved to 17.7%. GAAP earnings per share was negative 4 cents, and our adjusted earnings per share was 5 cents, up 1 cent from Q2 last year. Our cash flow from operations was $2.4 million, and we paid down debt by $2.2 million in Q2. Move on to slide six. Take a quick look at our revenue by product family. Starting with the first row of the table, our cellular and molecular product revenue, which is primarily from academic research labs, was down 33%. worldwide as labs shut down and personnel working from home were largely unable to process orders or receive equipment. Looking at the second row of the table, our overall preclinical product revenues were up from last year. This in spite of business from academic customers being down. Growth came primarily from North America and China on expanded demand for our telemetry and system software. As I said, academic revenue in this segment was down due to lab shutdowns. Move to slide seven, and we'll look at restructuring activities and major actions that happened during Q2. Related to the restructuring plan that was announced in Q4 of fiscal 2019, the Connecticut Manufacturing Consolidation and UK Downsizing is on track to complete in Q3. The reduction in force of approximately 10 percent across overall business is substantially complete. As for actions in Q2, We took actions to incrementally save $3 million in Q2 through a combination of temporary and permanent cost reductions. And we see our cost basis for the second half supporting continued strong gross margins and operating margins. Now, I'll turn it over to Mike for a quick look at the key financials. Mike?