Harvard Bioscience Inc (HBIO) 2009 Q2 法說會逐字稿

Good day, everyone, and welcome to the Harvard Bioscience, Inc.

second quarter 2009 conference call.

Today's conference is being recorded.

At this time I'd like to turn the conference over to Mr.

Tom McNaughton, Chief Financial Officer.

Please go ahead, sir.

Thank you, Erin.

Thank you for joining us to discuss our results for the second quarter of 2009.

Chane Graziano, our CEO, and David Green, our President, are also on the call today.

After the safe-harbor statement, I'll turn the call over to Chane and David, who will present an overview of the second quarter and comment on our outlook for the remainder of the year.

Lastly, I'll present some additional financial highlights related to our balance sheet.

Following those comments, we'll open the call for questions.

In our discussion today we will make statements that constitute forward-looking statements under the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.

Our actual results may differ materially from those projected due to risks and uncertainties, including those detailed in our annual report on Form 10-K for the fiscal year ended December 31, 2008, and other public filings.

Any forward-looking statements, including those related to our future results, represent our estimates as of today and should not be relied upon as representing our estimates as of any subsequent day.

Further information regarding forward-looking statements and risk factors is included in the press release issued earlier today reporting our second quarter results.

Please note that during this call we will discuss non-GAAP financial measures.

For each non-GAAP financial measure discussed, we've made available as part of our press release or on our Web site in the Investor Relations section a reconciliation to the most directly comparable GAAP financial measure.

Additionally, any material financial or other statistical information presented on the call which is not included in our press release will be archived and available in the IR section of our Web site.

Look on the Investor Relations section, then click on the IR Presentations or Web site icon as appropriate.

A replay of this call will also be archived at the same location on our Web site.

Our Web site is located at www.harvardbioscience.com.

Lastly, all financial information presented in this conference call relates to our continuing operation unless otherwise stated.

I'll now turn the call over to Chane.

Thank you, Tom, and good evening, everyone.

Our earnings results for the second quarter of 2009 were consistent with our expectations, although revenue was somewhat lower than expected.

The stronger dollar, tough year-to-year comparisons, and weakness in the economy were the major influences on our revenue.

As we look to the second half of the year, we are much more optimistic because June and July saw a strong pickup in orders, particularly at Harvard [Bioscience].

We have a larger-than-usual backlog of orders, including orders for a new advanced microliter spectrophotometer, which we expect will be shipping in the third quarter of 2009.

We expect to see a favorable impact from our program of continued productivity improvements from cost reductions and business consolidation, and we expect to see the effect of NIH stimulus package, particularly in the fourth quarter.

However, in view of our revenues during the first half of the year, we are narrowing our guidance on non-GAAP adjusted earnings per share for 2009 to $0.27 to $0.31 and reducing our revenue guidance for the year to $77 million to $80 million.

In the third quarter of 2009, we expect revenues in the $19 million to $20 million range and non-GAAP adjusted earnings per share in the $0.06 to $0.07 range.

David will now comment further on our second quarter results and our 2009 initiatives.

Thank you, Chane, and good evening, everyone.

Q2 was a transition quarter for Harvard Bioscience.

Although revenue was slightly less than our expectations, orders were within our guidance range.

Revenue was down 22% versus Q2 2008, of which 7% was due to foreign exchange.

Q2 2008 was an exceptionally strong quarter for shipments, and the comparison is not reflective of the trend in the business.

In fact, bookings in Q2 were up 6% versus Q1 2009 and 1.5% organically.

In addition, our order intake improved significantly throughout the quarter, with June being a particularly strong month after a relatively weak April and May.

These trends suggest to us that the worst of the recession may now be behind us.

Because we anticipated that the recession would ultimately prove temporary, we did not cut back our growth initiatives, and we've continued to invest in important growth initiatives like the establishment of a field sales force in the US for our Harvard Apparatus business, the support of distributors in the US for our Biochrom business, and the mailing of 28,000 Hoefer catalogues.

We've also continued to invest in new product development, and I'm pleased to report that we launched the first of these, the PHD Ultra series of syringe pumps in May.

The initial response to this product has been very positive.

We have additional products we intend to launch before the end of this year and into next year.

We believe these investments position us well for growth in 2010 and beyond as the economy recovers.

While we've maintained the investments in growth initiatives, we have continued the program of operational improvements.

During Q2 we completed a restructuring at our Biochrom subsidiary, which has been the hardest hit by the recession, eliminating 12 positions and making other smaller reductions in personnel and work hours throughout the business to align the cost structure with the current level of business.

In addition, we are close to completing the relocation of the Scie-Plas manufacturing facility in the UK to our Hoefer operation in San Francisco.

We expect to continue the program of operational improvements, and we're currently evaluating additional options.

In addition to the organic growth programs and operational improvements, we believe that one of the best opportunities for us to grow is through acquisition.

We currently have a robust pipeline of candidates, which we are advancing through the acquisition process.

We have a strong balance sheet and line of credit to support our acquisition strategy.

In short, while we face challenging business conditions in 2009 and a significant foreign exchange headwind, we believe that through execution of our strategy of organic growth, tuck-under acquisitions and operational improvements, we'll be able to strengthen the company and position ourselves well for when the economy recovers.

I'll now turn the call over to Tom for some additional comments.

Thank you, David.

As David mentioned, the company has a strong balance sheet.

At June 30, 2009, our cash and cash equivalents net of debt totaled $16.3 million, which represented an increase of $4 million from the beginning of this year.

During the second quarter we repurchased approximately 378,000 of our shares for approximately $1.2 million.

Since we initiated our current share repurchase program in the third quarter of last year, the company has now repurchased 1.7 million, or 5.5%, of our shares for approximately $5 million.

Today there are 29.5 million HBIO common shares outstanding compared with 31.1 million common shares on this date a year ago.

We ended the second quarter with no balance outstanding on our $20 million senior credit facility.

We're currently negotiating with our banks to extend that facility to three years and we expect to execute that new revolving credit line soon.

We will now open the call to any questions.

(Operator instructions.) And our first question today will come from Forrest St.

Clair with Pyramis.

Hey, gentlemen, thanks for taking the time to do a call for us.

Can you just talk about the outlook for acquisitions?

Clearly that has been a focus for the company for the last couple years, and we have not seen a lot of fruits from what seems like a lot of, I guess, near misses, so to speak.

Can you just talk about the outlook there and the likelihood of getting a deal done in 2009 and what the profile looks like to help put some of those proceeds to work?

Yes, Forrest, this is Chane.

We -- last year we did have some near misses.

As you recall, we took some things off the table at the end of the year based on the economic environment we were in.

This year we do have a pipeline of prospects, we do anticipate we will be able to close some, but until they're closed, they're not done.

I don't see any major issues today in achieving our goals going forward because I think we do have, as David said, a very robust pipeline, and they're moving through the system.

Our policy is, until it's done, it's not done, so we really don't talk about it other than that.

Okay.

Can you give us the -- I guess your best guess when we would likely see a return to positive organic growth net of FX?

Yes, Forrest, this is David.

I think our overall forecast for the year -- the reduced forecast we've just given for revenues is equivalent to a low single-digit negative organic growth for the year.

I think the second half will be stronger than the first half, quite significantly so, based on the kind of things that Chane and I both mentioned in the call.

So I think with the benefit of the NIH stimulus package, in particular, and we've already started to see some positive effects of that, and I think that will build through the third quarter.

I don't think it'll have a major effect on the third quarter, but I think it could have a significant effect on the fourth quarter.

I think the fourth quarter could be a very strong quarter for us, and I think, going into 2010, with the benefit of some of the things we've talked about -- the new product introductions, which we've not held back during this difficult period; the benefit of the investments we've made on the sales and marketing side, which, again, we've not held back during this difficult period -- I think those combined with the pickup in demand, which we see coming through the NIH in particular -- I think that positions us very well for growth -- organic growth, in particular, in 2010.

Great.

Thanks very much.

(Operator instructions.) And we have no other questions at this time, gentlemen.

All right.

If there aren't any questions, I want to thank everyone for joining our call today.

Despite the weak economy, Harvard Bioscience is in strong financial condition.

We remain committed to use our strength to increase long-term growth in revenues and profits.

Good night everyone.

Again, that does conclude our conference.

We do thank you for joining us.