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Harvard Bioscience Reports Second Quarter 2018 Financial Results

-Reports record GAAP and adjusted non-GAAP revenue of $31.5 million and $31.6 million, respectively, an increase of 66% and 25%, respectively-

HOLLISTON, Mass., July 26, 2018 (GLOBE NEWSWIRE) -- Harvard Bioscience, Inc. (Nasdaq:HBIO) (the “Company”), a global developer, manufacturer and marketer of a broad range of solutions to advance life science, reported financial results for the three and six months ended June 30, 2018.

“I am very proud of our execution this quarter, as we not only reported record revenue, but also reported strong growth in adjusted gross profit, adjusted operating income, and adjusted earnings per share”, said Jeffrey Duchemin, President and CEO of Harvard Bioscience. “With a strong first half of the year, we are well on our way to achieving our annual financial goals.”

Second Quarter Reported Results

Revenue, as measured under generally accepted accounting principles, or GAAP, for the three months ended June 30, 2018 was $31.5 million, an increase of 66%, or $12.6 million, compared to revenue of $19.0 million for the three months ended June 30, 2017.

Revenue, on a non-GAAP basis, which includes revenue generated by Denville Scientific, Inc., or Denville, for the periods presented prior to its sale, and excludes purchase accounting adjustments, was $31.6 million for the three months ended June 30, 2018, an increase of approximately 25%, or $6.4 million, compared to revenue of $25.2 million for the three months ended June 30, 2017.  For a reconciliation between GAAP and non-GAAP revenue and changes in revenue, refer to Exhibit 4 below.

Net loss, as measured under GAAP, was $1.5 million, or $0.04 per diluted share, for the three months ended June 30, 2018 compared to a net loss of $0.4 million, or $0.01 per diluted share, for the same quarter in 2017. The net loss for the three months ended June 30, 2018 was comprised of a $1.5 million loss from continuing operations and income of $34 thousand from discontinued operations.  The net loss for the three months ended June 30, 2017 was comprised of a $0.6 million loss from continuing operations and income of $0.2 million from discontinued operations.

Net income, on a non-GAAP basis, was $2.3 million, or $0.07 per diluted share, for the three months ended June 30, 2018, compared to $0.9 million, or $0.03 per diluted share, for the three months ended June 30, 2017. For a reconciliation between GAAP and non-GAAP net income, and between GAAP and non-GAAP diluted earnings per share, refer to Exhibits 7 and 8 below, respectively. 

Year-to-Date Reported Results
           
Revenues for the six months ended June 30, 2018 were $58.3 million, an increase of approximately 57%, or $21.2 million, compared to revenues of $37.0 million for the six months ended June 30, 2017.

Revenue, on a non-GAAP basis, which includes revenue generated by Denville for the periods presented prior to its sale, and excludes purchase accounting adjustments, was $59.3 million for the six months ended June 30, 2018, an increase of approximately 20%, or $9.9 million, compared to revenue of $49.4 million for the six months ended June 30, 2017.  For a reconciliation between GAAP and non-GAAP revenue and changes in revenue, refer to Exhibit 4 below.

Net loss, as measured under GAAP, was $5.5 million, or $0.15 per diluted share, for the six months ended June 30, 2018 compared to $1.4 million, or $0.04 per diluted share, for the six months ended June 30, 2017. The net loss for the six months ended June 30, 2018 was comprised of a $7.3 million loss from continuing operations and income of $1.8 thousand from discontinued operations.  The net loss for the six months ended June 30, 2017 was comprised of a $1.4 million loss from continuing operations and a loss of $0.1 million from discontinued operations.

Net income, on a non-GAAP basis, was $3.3 million, or $0.09 per diluted share, for the six months ended June 30, 2018 compared to $1.5 million, or $0.04 per diluted share, for the same period in 2017. For a reconciliation between GAAP and non-GAAP net income, and between GAAP and non-GAAP diluted earnings per share, refer to Exhibits 7 and 8 below, respectively.

Financial Guidance

Harvard Bioscience is reaffirming its non-GAAP financial guidance for the full year 2018, which was previously issued on May 2, 2018. The Company continues to expect 2018 adjusted revenue to be between $120 million and $123 million.

The Company expects to report a full-year 2018 GAAP diluted loss per share of approximately $0.12 to $0.15 and non-GAAP diluted earnings per share of approximately $0.20 to $0.23. The Company’s non-GAAP diluted earnings per share guidance remains unchanged from that which was previously issued on May 2, 2018.

The Company may incur charges, realize gains, or experience other events in 2018 that could cause actual results to vary from this guidance. Refer to Exhibit 9 below for a reconciliation between the GAAP and non-GAAP diluted earnings per share guidance.

Webcast and Conference Call Details

Harvard Bioscience will be hosting a conference call and webcast today at 4:30 pm ET. On that call, management may respond to questions from the audience and provide information on any of a number of topics related to the business, including operations, plans and outlook.

Participating in the call will be Jeffrey A. Duchemin, President and Chief Executive Officer, and Robert Gagnon, Chief Financial Officer, of Harvard Bioscience. Investors can access the live conference call by dialing the following phone numbers: toll-free 1-888-771-4371, or international: 1-847-585-4405, and referencing the conference ID# 47296710.

The conference will be simultaneously webcast and can be accessed through the Harvard Bioscience website. To listen to the webcast, log on to the webcast at http://investor.harvardbioscience.com/ and click on the Earnings Call icon. Financial information presented on the call, including the earnings release, will also be available on the investor relations section of the website.

If you are unable to listen to the live conference call, the webcast will be available on the Company's website through August 2, 2018.

To add this meeting to your calendar visit: http://investor.harvardbioscience.com/ and click “remind me”.

Use of Non-GAAP Financial Information

In this press release, we have included non-GAAP financial information including adjusted revenue, adjusted gross profit, adjusted operating income, adjusted net income and adjusted earnings per diluted 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 of revenue and income have excluded certain revenue and expenses and income primarily resulting from purchase accounting or events that we do not believe are related to the underlying operations of the business such as currency translation, amortization of intangibles related to acquisitions, costs related to acquisition, disposition and integration initiatives, impairment charges, gains or losses from divestitures, forensic investigation and remediation costs, severance and restructuring expenses, and stock-based compensation expense. They also exclude the tax impact of the reconciling items. This non-GAAP financial information approximates information used by our management to internally evaluate the operating results of the Company. Tabular reconciliations of our non-GAAP adjusted revenue, non-GAAP adjusted gross profit, non-GAAP adjusted operating income, non-GAAP adjusted net income and non-GAAP adjusted earnings per diluted share for the three and six months ended June 30, 2018 and 2017 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 global developer, manufacturer and marketer of a broad range of solutions to advance life science. Our products are sold to thousands of researchers in over 100 countries through our global sales organization, websites, catalogs, and through distributors. We have sales and manufacturing operations in the United States, the United Kingdom, Germany, Sweden, Spain, France, Canada and China. For more information, please visit our website at www.harvardbioscience.com.

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of the federal securities laws. 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, the impact of acquisitions, or potential acquisitions, the outlook for the life sciences industry, 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. Factors that may cause the Company's actual results to differ materially from those in the forward-looking statements include reductions in customers’ research budgets or government funding; the Company’s failure to successfully integrate acquired businesses or technologies, including DSI; domestic and global economic conditions; economic, political and other risks associated with international revenues and operations; newly enacted U.S. government tax reform; currency exchange rate fluctuations; economic and political conditions generally and those affecting pharmaceutical and biotechnology industries; the seasonal nature of purchasing in Europe; the Company's failure to expand into foreign countries and international markets; the Company's inability to manage its growth; competition from the Company's competitors; failure or inadequacy of the Company's information technology structure; impact of difficulties implementing our enterprise resource planning systems; information security incidents or cybersecurity breaches; the Company's failure to identify potential acquisition candidates and successfully close such acquisitions with favorable; unanticipated costs relating to acquisitions and known and unknown costs arising in connection with the Company's consolidation of business functions and any restructuring initiatives; failure of any banking institution in which the Company deposits its funds or the institution's failure to provide services; the Company's substantial debt and its ability to meet the financial covenants contained in its credit facility; the Company's failure to raise or generate capital necessary to implement its acquisition and expansion strategy, expand operation and invest in new products; the failure of Biostage, Inc., f/k/a Harvard Apparatus Regenerative Technology, Inc., or Biostage, to indemnify the Company for any liabilities associated with Biostage’s business; impact of any impairment of the Company's goodwill or intangible assets; the Company's ability to retain key personnel; rising commodity and precious metals costs; the Company's ability to protect its intellectual property and operate without infringing on others' intellectual property; exposure to product and other liability claims; plus factors described under the heading "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2017 or otherwise described in our other public filings. 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.

For investor inquiries, please call (508) 893-8066. Press releases may be found on the Harvard Bioscience website.

 
 
Exhibit 1
HARVARD BIOSCIENCE, INC.
Condensed Consolidated Balance Sheet Information
(unaudited, in thousands)
    
    
 June 30, December 31,
 2018 2017
Assets   
    
Cash and cash equivalents$5,624 $5,192
Trade receivables19,593 13,382
Inventories25,644 16,848
Property, plant and equipment5,493 3,743
Goodwill and other intangibles104,394 47,610
Other assets4,302 4,215
Assets held for sale- 18,364
Total assets$165,050 $109,354
    
Liabilities and Stockholders' Equity   
    
Total liabilities$87,453 $28,454
Stockholders’ equity77,597 80,900
Total liabilities and stockholders’ equity$165,050 $109,354
 


Exhibit 2
HARVARD BIOSCIENCE, INC.
Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)
 
 Three Months Ended  Six Months Ended
 June 30,  June 30,
 2018  2017  2018  2017
           
Revenues$31,522   $18,958   $58,281   $37,044 
Cost of revenues 16,167    9,885    29,657    18,394 
Gross profit 15,355    9,073    28,624    18,650 
           
Sales and marketing expenses 6,309    3,550    11,955    7,028 
General and administrative expenses 5,258    4,114    10,642    8,902 
Research and development expenses 2,758    1,296    5,160    2,581 
Amortization of intangible assets 1,412    382    2,515    758 
Total operating expenses 15,737    9,342    30,272    19,269 
           
Operating loss (382)   (269)   (1,648)   (619)
           
Other expense:          
Foreign exchange 345    (272)   (2)   (415)
Interest expense, net (1,483)   (180)   (2,377)   (343)
Other expense, net (347)   (11)   (3,085)   (105)
Other expense, net (1,485)   (463)   (5,464)   (863)
           
Loss from continuing operations before income taxes (1,867)   (732)   (7,112)   (1,482)
Income tax (benefit) expense (369)   (115)   236    (122)
Loss from continuing operations (1,498)   (617)   (7,348)   (1,360)
Discontinued operations          
Income (loss) from discontinued operations 24    270    937    (23)
Income tax (benefit) expense (10)   34    (883)   64 
Income (loss) from discontinued operations, net of tax 34    236    1,820    (87)
Net loss$(1,464)  $(381)  $(5,528)  $(1,447)
           
Loss per share:          
Basic loss per common share from continuing operations$(0.04)  $(0.02)  $(0.21)  $(0.04)
Discontinued operations -    0.01    0.05    - 
Basic loss per common share$(0.04)  $(0.01)  $(0.15)  $(0.04)
           
Diluted loss per common share from continuing operations$(0.04)  $(0.02)  $(0.21)  $(0.04)
Discontinued operations -    0.01    0.05    - 
Diluted loss per common share$(0.04)  $(0.01)  $(0.15)  $(0.04)
           
Weighted average common shares:          
Basic 36,082    34,695    35,774    34,638 
           
Diluted 36,082    34,695    35,774    34,638 
 


 
Exhibit 3
HARVARD BIOSCIENCE, INC.
Condensed Consolidated Cash Flow Information
(unaudited, in thousands)
     
 Six Months Ended
 June 30,
 2018  2017
     
Cash flows from operations:    
Net loss$(5,528)  $(1,447)
Changes in assets and liabilities 2,038    (2,286)
Other adjustments to operating cash flows 4,630    3,598 
Net cash provided by (used in) operating activities 1,140    (135)
     
Investing activities:    
Additions to property, plant and equipment (634)   (437)
Acquisitions, net of cash acquired (68,019)   - 
Dispositions, net of cash sold 15,754    - 
Other investing activities (13)   (39)
Net cash used in investing activities (52,912)   (476)
     
Financing activities:    
Proceeds from issuance of debt 68,500    2,000 
Repayments of debt (17,247)   (2,552)
Other financing activities (548)   (77)
Net cash provided by (used in) financing activities 50,705    (629)
     
Effect of exchange rate changes on cash 958    368 
Decrease in cash and cash equivalents (109)   (872)
Cash and cash equivalents at the beginning of period,
including cash included in assets held for sale
 5,733    5,596 
Cash and cash equivalents at the end of period$5,624   $4,724 
 


 
Exhibit 4
HARVARD BIOSCIENCE, INC.
Reconciliation of GAAP Revenue to Non-GAAP Adjusted Revenue
(unaudited, in thousands)
 
 Three Months Ended  Six Months Ended
 June 30,  June 30,
 2018 2017 Change (%)  2018 2017 Change (%)
             
GAAP revenue$31,522 $18,958 66%  $58,281 $37,044 57%
             
Adjustments:            
             
Denville revenue reported within
discontinued operations
- 6,255 -100%  893 12,325 -93%
             
Deferred revenue valuation
adjustments on acquisition
77 - 100%  129 - 100%
             
Non-GAAP adjusted revenue$31,599 $25,213 25%  $59,303 $49,369 20%
             
Foreign exchange effect on Non-
GAAP adjusted revenue
    2%      3%
 


 
Exhibit 5
HARVARD BIOSCIENCE, INC.
Reconciliation of GAAP Gross Profit to Non-GAAP Adjusted Gross Profit
(unaudited, in thousands)
 
 Three Months Ended  Six Months Ended
 June 30,  June 30,
 2018  2017  2018  2017
           
GAAP gross profit$15,355  $9,073  $28,624  $18,650
           
Adjustments:          
           
Denville Non-GAAP adjusted gross profit-  2,216  360  4,139
           
Deferred revenue valuation charges on acquisition77  -  129  -
           
Inventory valuation step-up charges on acquisition2,238  -  3,729  -
           
Severance and restructuring charges7  66  20  78
           
Stock-based compensation expense15  16  26  28
           
Non-GAAP adjusted gross profit$17,692  $11,371  $32,888  $22,895
           
GAAP gross profit percentage48.7%  47.9%  49.1%  50.3%
           
Non-GAAP adjusted gross profit percentage56.0%  45.1%  55.5%  46.4%
 


 
Exhibit 6
HARVARD BIOSCIENCE, INC.
Reconciliation of GAAP Operating Loss to Non-GAAP Adjusted Operating Income
(unaudited, in thousands)
 
 Three Months Ended  Six Months Ended
 June 30,  June 30,
 2018  2017  2018  2017
           
GAAP operating loss$(382)  $(269)  $(1,648)  $(619)
           
Adjustments:          
           
Amortization of intangible assets1,412  382  2,515  758
           
Denville Non-GAAP adjusted operating income-  519  17  530
           
Deferred revenue valuation charges on acquisition77  -  129  -
           
Inventory valuation step-up charges on acquisition2,238  -  3,729  -
           
Forensic investigation and remediation costs-  150  -  386
           
Severance and restructuring charges226  134  447  201
           
Stock-based compensation expense734  782  1,596  1,622
           
Non-GAAP adjusted operating income$4,305  $1,698  $6,785  $2,878
 


 
Exhibit 7
HARVARD BIOSCIENCE, INC.
Reconciliation of GAAP Net Loss to Non-GAAP Adjusted Net Income
(unaudited, in thousands)
   
 
  Three Months Ended  Six Months Ended
  June 30,  June 30,
  2018  2017  2018  2017
            
GAAP net loss$(1,464) $(381) $(5,528) $(1,447)
            
Adjustments:           
            
Amortization of intangible assets 1,412   382   2,515   758 
            
Denville Non-GAAP adjustments included in discontinued operations (A) (24)  249   (920)  550 
            
Deferred revenue valuation charges on acquisition 77   -   129   - 
            
Inventory valuation step-up charges on acquisition 2,238   -   3,729   - 
            
Forensic investigation and remediation costs -   150   -   386 
            
Severance and restructuring charges 226   134   447   201 
            
Acquisition, disposition and integration costs 170   -   2,845   74 
            
Stock-based compensation expense 734   782   1,596   1,622 
            
Income taxes (B) (1,022)  (447)  (1,534)  (655)
            
Non-GAAP adjusted net income$2,347  $869  $3,279  $1,489 
 
(A)  For the three months ended June 30, 2018, the Non-GAAP adjustments reported in discontinued operations related to the sale of Denville included a $24 gain on sale. For the three months ended June 30, 2017, the Non-GAAP adjustments reported in discontinued operations related to the sale of Denville included $222 in amortization of intangible assets, $1 in severance and restructuring charges, and $26 in stock-based compensation expense. For the six months ended June 30, 2018, the Non-GAAP adjustments reported in discontinued operations related to the sale of Denville included a $1,251 gain on sale, $47 in amortization of intangible assets, $132 in disposition costs, and $150 in stock-based compensation expense. For the six months ended June 30, 2017, the Non-GAAP adjustments reported in discontinued operations related to the sale of Denville included $445 in amortization of intangible assets, $54 in severance and restructuring charges, and $49 in stock-based compensation expense.
 
(B)  Income taxes includes the tax effect of adjusting for the reconciling items using the calculated effective tax rate, including the post-2017 impact of tax reform, in the jurisdictions in which the reconciling items arise.
 


 
Exhibit 8
HARVARD BIOSCIENCE, INC.
Reconciliation of GAAP Diluted Loss Per Common Share to Non-GAAP Adjusted Diluted Earnings Per Common Share
(unaudited)
 
 Three Months Ended  Six Months Ended
 June 30,  June 30,
  2018    2017    2018    2017 
           
GAAP diluted loss per common share$(0.04)  $(0.01)  $(0.15)  $(0.04)
           
Adjustments:          
           
Amortization of intangible assets0.04  0.02  0.08  0.02
           
Denville Non-GAAP adjustments included in discontinued operations-  0.01  (0.03)  0.02
           
Inventory valuation step-up charges on acquisition0.06  -  0.10  -
           
Forensic investigation and remediation costs-  -  -  0.01
           
Severance and restructuring charges0.01  -  0.01  0.01
           
Acquisition, disposition and integration costs-  -  0.08  -
           
Stock-based compensation expense0.03  0.02  0.04  0.04
           
Income taxes (A)(0.03)  (0.01)  (0.04)  (0.02)
           
Non-GAAP adjusted diluted earnings per common share$0.07  $0.03  $0.09  $0.04
           
(A)  Income taxes includes the tax effect of adjusting for the reconciling items using the calculated effective tax rate for the consolidated entity and any changes to valuation allowances.
 


 
Exhibit 9
HARVARD BIOSCIENCE, INC.
Reconciliation of Guidance for 2018 GAAP Diluted Loss per Common Share to Non-GAAP Adjusted Diluted Earnings per Common Share
(unaudited)
   
   
GAAP diluted loss per common share (A)$(0.12) - (0.15)
   
Adjustments:  
   
Amortization of intangible assets 0.16
   
Denville Non-GAAP adjustments included in discontinued operations (0.03)
   
Deferred revenue valuation charges on acquisition 0.01
   
Inventory valuation step-up charges on acquisition 0.11
   
Severance and restructuring charges 0.01
   
Acquisition, disposition and integration costs 0.08
   
Stock-based compensation expense 0.10
   
Income taxes (B) (0.09)
   
Non-GAAP adjusted diluted earnings per common share (A)$0.20 - 0.23
   
(A)  This guidance excludes, among other things, the impact of future acquisitions, acquisition costs, restructuring charges,  or other one time charges.
 
(B)  Income taxes includes the tax effect of adjusting for the reconciling items using the calculated effective tax rate, including the post-2017 impact of tax reform, in the jurisdictions in which the reconciling items arise and any changes to valuation allowances.
 


 
 CONTACTS:

Corey Manchester
Corporate Controller

Tel: 508 893 8999
Thursday, July 26, 2018 - 16:01