Harvard Bioscience, Inc.

Good day and welcome to the first quarter 2025 Harvard Bioscience, Inc. Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the Start key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2. Please note this event is being recorded. I would now like to turn the conference over to Catherine Flynn, the Corporate Controller. Please go ahead.

Thank you, Betsy, and good morning, everyone. Thank you for joining the Harvard Bioscience First Quarter 2025 Earnings Conference Call. Leading the call today will be Jim Green, President and Chief Executive Officer, and Mark Frost, the incoming Interim 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 the Investor section of our website at investor.harvardbioscience.com. Please note that statements made in today's discussion that are not historical facts, including statements or expectations or 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. Actual results may differ materially from those expressed or implied. Please refer to today's press release for other disclosures on forward-looking statements. These factors and other risks and uncertainties are described in the company's filings with the Security and Exchange Commission. Harvard Bioscience assumes no obligation to update or revise any forward-looking statements publicly, and management statements are made as of today. 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 Mark. Mark, please go ahead.

Thank you, Catherine. Good morning, everyone. I'm Mark Frost, the interim CFO for Harvard Bioscience, effective tomorrow. With us is Jennifer Cote. the current CFO for Harvard Bioscience. We'd like to thank Jen for her support of the company the last three years and her willingness to spend the last month helping me in the transition. Now, for those of you who are not familiar with my background, I spent the first half of my career at General Electric in a wide variety of businesses, including GE Capital and healthcare. After GE, I transitioned to the healthcare space and have been a public CFO at four companies including when I worked with Jim at Analogic. I'm excited to be here and look forward to working with the team at Harvard Bioscience. I'll now move to our first quarter 2005 results on slide three. Now, revenue at 21.8 was below 24.5 million in the prior year. This result was aligned with the higher end of our guidance communicated in March for Q1. I'll go through color on the revenue in the next slide. Gross margin was 56% versus 60.3% in 2024, and I will provide detail later as well. Now, excluding a non-cash goodwill impairment charge, which I'll discuss in a moment, operating expense declined $3.2 million from prior year, driven by the operating actions we took in 2024, as well as further actions in the first quarter. The operating loss of $49.7 million versus a $2.3 million loss in Quarter 1-24 was caused primarily by the goodwill impairment charge. Now, without the goodwill charge, our adjusted operating income was $0.3 million below prior year's $1.2 million, reflective of the cost actions we executed to offset anticipated lower revenue. Quarter 1 adjusted EBITDA was $0.8 million versus $1.6 million in Quarter 1-24, with a major driver being lower revenue, partially offset by our cost actions. Now, turning now to the goodwill impairment, we had noted indicators of a possible impairment as we exited 2024. Due primarily to the decrease in our market capitalization in Quarter 1, we performed additional impairment testing as we exited the quarter. As a result, our quarter one results include a non-cash goodwill impairment charge of $48 million, which is reflected in operating expense. More detail is provided in the 10-Q. Now I'll move next to slide four and revenue results for the quarter by product family and region. So overall revenues in the first quarter showed an expected seasonal decline from quarter four finishing at $21.8 million compared to $24.6 million in the prior quarter, quarter four. Year-over-year revenue was down from $24.5 million last year's quarter one. Now let's now break it down to look at regional results. So starting with the Americas, revenue in the first quarter declined sequentially by 5.4% from quarter four, and we're down 9.4% versus revenues in the first quarter of last year. As shown in the light blue, CMT did not see the typical quarter four seasonal bump and continued to stay slow in quarter one, which we attribute to the lack of budget clarity for academics and NIH funding. Our preclinical sales declined sequentially mid-single digits, driven by lower CRO sales. Now, moving on to Europe, overall revenue in Europe in the first quarter declined 29% sequentially as we exited 2024 with a strong seasonal end-of-year bombing. Now, compared to last year, Q1, Europe revenues were down 9%. Cellular and molecular sales declined sequentially and year-on-year, but we continue to see growth in cell-based testing and are excited to see the impact of early adopters of our new MEA systems. Now, our preclinical sales were down sequentially in Q1, following the quarter four bump with lower CRO and academic sales, but stayed relatively consistent with the middle quarters of 2024. Now, moving to China and the Asia Pacific, overall in the first quarter, APAC revenue was sequentially up by 6.6 percent over the previous quarter, though APAC revenue was down 17 percent compared to the prior year, quarter one. The APAC market has been especially difficult this past year. Quarter one was our second sequential quarter of improvement, but we don't see this continuing in quarter two, given the immediate softening of revenue in China following the tariff announcements in early April. We have considered this in our guidance for quarter two. Now, cellular and molecular APAC products showed some minor declines in the third quarter, sequentially and year over year. Preclinical APAC sales in quarter one saw sequential growth over sales in quarter four, but we're down compared to quarter one of the prior year, which is a strong quarter for shipments. I'll now move to slide five to discuss further financial metrics. Now, looking at gross margin first, gross margin during quarter one 2025 was 56% compared to 60.3% in quarter one 2024. During last year, we had a change in accounting methods that benefited our gross margins by 1.6 points. The gross margin decline compared to last year quarter one was also impacted by lower absorption of fixed manufacturing overhead and nominally by mix. Now if you refer to the top right graph, our adjusted EBITDA during quarter one finished at $0.8 million compared to $1.6 million in last year's first quarter. Compared to the prior year quarter one, reduced gross profit of $2.6 million was partially offset by lower operating expenses of $1.8 million. Now, moving to the bottom left, where we show both reported and adjusted loss earnings per share. Now, as mentioned in the past, I'll remind you of the typical differences between GAAP EPS and adjusted EPS is the impact of stock compensation, amortization, and depreciation. Now, as I mentioned earlier, during quarter one, we also recorded an impairment in our goodwill balance. These differences between net income loss and adjusted EBITDA are highlighted in the reconciliation tables on slide 10 and are all non-cash items. Now, moving to the bottom middle graph, cash flow from operations were $3 million during quarter one 2025 compared to $1.4 million in quarter one last year. The primary driver for the improved cash flow from operations was improvements in our working capital management. Now, net debt is down $1 million from quarter one 2024 and $2.4 million from year-end 24, from $33.2 million to $30.8 million. This reflects our quarterly principal payment of $1 million and improved operating cash flow. I'll now turn from our liquidity commentary to an update on our efforts to refinance our debt facility. We are making progress, and we have received indications of interest from multiple providers. We are in process of evaluating the proposals and are moving forward with the intention to close per our amendment timing. So I'll now turn it back over to Jim to discuss our new product introductions. Jim?