Harvard Bioscience Inc (HBIO) 2009 Q4 法說會逐字稿

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  • Operator

  • Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Q4 2009 Harvard Bioscience, Incorporated Earnings conference. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions). As a reminder, this conference is being recorded.

  • I would now like to introduce your host for today's conference, Mr. Tom McNaughton, CFO. Sir, please go ahead.

  • Tom McNaughton - CFO

  • Thank you, Karen. Good afternoon. Thank you for joining us to discuss our results for the fourth quarter and full year 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 fourth quarter and comment on our outlook for 2010. Lastly, I'll present some additional financial highlights related to our balance sheet. Following those comments, we will open the call for any 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 (sic) and our 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 of any subsequent date. Further information regarding forward-looking statements and risk factors is included in the press release issued earlier today reporting our fourth quarter and full-year 2009 results.

  • Please note that during this call we will discuss non-GAAP financial measures because we believe those measures provide an enhanced understanding of how businesses are performing. These non-GAAP measures approximate information used by our management to infernally evaluate the operating results of the Company. For each non-GAAP financial measure discussed, we have 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 Investor Relations section of our web site. Look on the Investor Relations section of our web site and then click on the Investor 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 on this conference call relates to our continuing operations unless otherwise stated.

  • I'll now turn the call over to Chane.

  • Chane Graziano - CEO

  • Thank you, Tom. Good evening, everyone.

  • Despite the tough economic conditions of 2009, revenues in the fourth quarter were up 20% and non-GAAP adjusted diluted earnings per share was $0.10, flat with fourth quarter of 2008. For the year on a constant currency basis, revenues were up 3% and non-GAAP adjusted diluted earnings per share were $0.31 or off only $0.01 from a record level of 2008. This performance was achieved by completing a major acquisition, repurchasing shares under a share buyback program, and restructuring some of our core businesses. We accomplished this while continuing to invest in key growth initiatives, especially by developing new products and expanding our direct selling organization.

  • As we look forward, we are optimistic about our future as we continue to drive our growth strategy of acquisitions, internal development of new products, and operational improvements. Therefore, in 2010, we expect revenues to be up 27% to 30% in the $109 million to $112 million range and non-GAAP adjusted diluted earnings per share to be up 20% to 27% in the $0.36 to $0.38 range at July 31, 2010 exchange rates.

  • For the first quarter of 2010, we expect revenues to be up 31% to 41% in the $25 million to $27 million range and non-GAAP adjusted diluted earnings per share to be up 14% to 29% in the $0.08 to $0.09 range, again, at January 31, 2010 exchange rates.

  • David will now comment further on the Denville business and our 2010 initiatives.

  • David Green - President

  • Thank you, Chane, and good evening, everyone.

  • One of the major drivers of our success in Q4 and for 2009 was the acquisition of Denville. The acquisition of Denville was as we expected accretive to our non-GAAP adjusted EPS in Q3, Q4, and for the full year. The integration of Denville has gone smoothly so far and Denville performed well in Q4. In Q4, Denville added approximately $5.7 million in revenue and $0.016 to our non-GAAP adjusted earnings per share.

  • Our plan for Denville is to continue to operate it at a separate subsidiary within our molecular biology group. We will continue to implement a successful growth strategy of expanding the product line, adding to the sales force, and building the Denville brand name.

  • Clearly Denville had a positive impact on the fourth quarter. In addition, excluding Denville, the core business also strengthened during Q4 with the order rate increasing 27% over Q3 2009. The order increase was widespread and not isolated to any particular product line. We expect the main drivers of organic growth going forward to be our continued expansion of our distribution channels and the introduction of new products.

  • Throughout last year, despite the recession, we maintained our investments by adding field salespeople in both the Harvard Apparatus and Biochrom businesses and introducing new products. In 2009, we launched two new research syringe pumps at our Harvard Apparatus business and we anticipate launching further new research syringe pumps in the first half of 2010. Also in the first half of 2010, we expect to launch a major new product at our Biochrom business. We think that these new products will help to drive organic growth during 2010 and beyond. We expect our R&D investment in 2010 to be approximately 5% of revenue as it was in 2009.

  • In addition to these new products for 2010, we're investing to create new products to address a longer-term growth opportunity in the emerging field of regenerative medicine. Regenerative medicine is a new field that covers applications from cell therapy to tissue engineering to whole organ transplants. Many of our research products are already being used by leading scientists in investigating new approaches to regenerative medicine. Some of our most popular products for this research include our market-leading Harvard Apparatus research syringe pumps and our market-leading isolated bioreactors within our Hugo Sachs product line, which is also part of our Harvard Apparatus business unit.

  • Some of this research is now starting to move from the animal research stage to the clinical research stage. By working with leading researchers in the field, we're developing new versions of our current products, including a modified version of one of our research syringe pumps that is specialized to cell therapy injections, i.e., the injection of living cells into damaged tissue. For use on humans, this product will require clearance to market from the US Food and Drug Administration. We intend to complete the engineering work on this product during 2010 and submit it to the FDA for approval under the 510(k) process in early 2011.

  • As always, we continue to pursue acquisition candidates and have a pipeline of potential candidates. We expect that if completed these acquisitions would add to our growth in revenue and profits.

  • In short, we're very pleased with our results, for both the fourth quarter and the year. To achieve near-record non-GAAP EPS in the worst market since the Great Depression is a major accomplishment. We're also very pleased to see the new products we've been investing in starting to be launched. And finally, the new cell therapy injector and organ bioreactors give us a platform for long-term growth in the very promising new market of regenerative medicine.

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

  • Tom McNaughton - CFO

  • Thank you, David.

  • When we made the Denville acquisition, the agreement called for the purchase price to be made in three payments. We paid $12.8 million at the closing. The purchase agreement called for two contingent payments to be made at later dates. The payments will be calculated based on Denville's 2009 operating earnings. At the time of the closing, we estimated those remaining payments to total $12.5 million. During the fourth quarter of 2009, we made the first of those two payments for $7.9 million. We expect to make the final payment in the second quarter of 2010. However, we now expect that the final payment will be approximately $2 million. This represents a $2.6 million reduction in the total acquisition cost compared with our estimate at the time of the transaction's closing in September. In accordance with recent acquisition accounting rule changes, we recognized a $2.6 million gain in Q4 '09 to reflect the reduction in the value of the contingent acquisition liability. This gain has been excluded from our non-GAAP adjusted earnings per share calculation due to its nonrecurring nature.

  • At December 31, 2009, our cash and cash equivalents net of debt totaled $3.3 million. During the first two quarters of 2009, we repurchased 812,000 shares of the Company's common stock. We did not repurchase any shares during the second half of the year. Since we began repurchasing shares in the third quarter of 2008, we have repurchased approximately 1.7 million or 5.5% of the Company's shares. Today we have 29.6 million common shares outstanding compared with 31 million shares at the end of the third quarter of 2008.

  • Our non-GAAP income tax rate for the fourth quarter of 2009 was 30.5% compared with 31.2% for the fourth quarter of 2008. The slightly lower rate was due to the recognition of some R&D tax credits that our Biochrom and Panlab subsidiaries being partially offset by the effect that Denville's presence had in weighting or geographic earnings mix more to the US, which has a higher tax rate than many of the jurisdictions in which we operate.

  • We will now open the call to any questions.

  • Operator

  • (Operator Instructions). I see no questions in queue at the moment.

  • Chane Graziano - CEO

  • Okay. If there are no questions, I want to thank everyone for joining our call tonight and we are pleased with our results for 2009 and we're very optimistic about the outlook for growth in 2010 and beyond.

  • Thank you. Goodnight.

  • Operator

  • Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may now disconnect. Everyone have a good evening. Thank you.