Harvard Bioscience, Inc.

Good day and thank you for standing by. Welcome to the Q3 2021 Harvard Bioscience Inc. 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 1 on your telephone. If you require any further assistance, please press star 0. I'd now like to hand the conference over to your speaker today, Dave Zeroyf. Please go ahead.

Thank you, Alyssa, and good morning, everyone. Thank you for joining the Harvard Bioscience Third Quarter 2021 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 Q3 2021 HBio Quarterly Earnings Presentation and is 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 31st, 2020, our subsequent quarterly reports on Form 10-Q, 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 difference between our GAAP and non-GAAP results are outlined in the earnings release in today's presentation. These two documents, as well as a replay of this call, can be found on our website under Investor 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. I will now turn the call over to Jim. Jim, please go ahead.

Thanks, Dave. Good morning, everybody. Let's go ahead and move to slide four of the presentation, look at the highlights for the quarter. Revenue is up 23% over Q3 20 and up 8% over pre-COVID Q3 19. Our preclinical revenue was up 28% on strong global demand and across all key product lines. Cellular and molecular technology revenue was up 19%, continuing its recovery as labs reopened. Again this quarter, we saw strong order growth and backlog growth. However, we continued to have fulfillment delays from global supply chain disruptions and issues associated with it. Adjusted operating margin came in at 13%. That's versus 15 percent in Q320 and versus 12 percent in Q319. Adjusted gross margins came in at 56 percent, impacted by over three percentage points from higher COGS. And higher COGS continued from Q2 on global freight costs, material inflation, plus direct labor inefficiencies. Q320 was a difficult comparison due to the dramatic one-times cost reductions we took last year to handle the COVID headwinds. Let's move on to slide five. A look at the details of the quarter. As expected, we continued to see strong revenue growth. Q3 coming in at 29.7 million. That's up 23% over last year. Gross margin on a GAAP basis came in at 55%, down 110 basis points from last year on higher cost in the global supply chain. This quarter had GAAP operating income of half a million dollars. That's 1.8% of revenue. On an adjusted basis, our adjusted operating income is 3.9 million, so our adjusted operating margin measured 13.3% of revenue. GAAP earnings per share was zero, up from a negative 3 cents last year. Our adjusted earnings per share was 6 cents, up from 4 cents last year. Our cash flow from operations was negative $700,000. And our debt increased by 2.7 million as we prepare for a strong Q4. And our debt ratio measured 2.5 times EBITDA. Move on to slide six. Starting with the first row of the table, our cellular molecular technology revenue, which is primarily from academic research labs, is up 19% from last year, with orders and backlog up significantly. We experienced significant revenue shipment delays caused by global supply chain disruptions in a number of our materials. We're seeing fulfillment improving with added hiring, though this does drive direct labor and efficiencies until new staff get trained and staffing levels get optimized. Planned pruning or removal of lower value product revenues impacted reported revenue by approximately $1 million in the quarter. European labs are still slow, though we do see demand improving as we go forward in the remainder of this year. Looking to the second row of the table, our preclinical product revenue was up 28%, driven by strong order growth across our product lines for our core customer segments of CROs, pharma, and academic labs, and that's globally. Asia Pacific saw very strong growth, and EMEA was also up double digits. Sales growth in the Americas was also positive with strong pharma demand, though U.S. government continues to trend lower. Overall preclinical is now well above pre-COVID levels, up 27% from Q3 2019. Overall reported revenue grew 23% over last year and 8% over the same quarter in pre-COVID 2019. Moving to slide seven, we'll look at major activities in the quarter. Starting with the post-COVID operating environment, global supply chain and labor sourcing and retention challenges continue, similar to what we saw in Q2. Operations are stabilizing, improving as we continue hiring, but we are running high use of labor in order to fill in the gaps. Pricing actions have been initiated to help combat material inflation over the upcoming quarters. For our European sales organization, we've completed the design and aligned the structure similar to what we've done in North America. Realignment of territories similar to North America will add territories and expand the reach. And preclinical sales team will also now start to rep the behavior products the same as we did last year in North America, and it was very successful in helping drive growth. Now I'll turn the call over to Mike for a quick look at the key financials.