Harvard Bioscience Inc (HBIO) 2010 Q1 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the First Quarter 2010 Harvard Bioscience, Inc. Earnings Conference Call. (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.

Thank you, [Giovan]. Good morning. Thank you for joining us to discuss our results for the first quarter 2010. Chane Graziano, our CEO, and David Green, our president, are also on the call today. After our safe harbor statement, I will turn the call over to Chane and David, who will present an overview of the first quarter and comment on our outlook for the second quarter of 2010. Lastly, I will present some additional financial highlights related to our balance sheet. Following those comments we will open the call to 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 details in our annual report on Form 10-K for the fiscal year ended December 31, 2009, 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 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 first quarter results.

Please note that during this call we will discuss non-GAAP financial measures because we believe that those measures provide an enhanced understanding of how our businesses are performing. These non-GAAP measures approximate information used by our management to internally 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 website in the Investor Relations section 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 website. Look on the Investor Relations section of our website and then click on the Investor Presentations or website icon as appropriate. A replay of this call will also be archived at the same location on our website. Our website is located at www.harvardbioscience.com.

Lastly, all financial information presented on this conference call relates to our continuing operations unless otherwise stated. I will now turn the call over to Chane.

Thank you, Tom, and good morning, everyone. First quarter 2010 was an outstanding quarter for Harvard Bioscience. Revenues were up 38% and non-GAAP adjusted diluted earnings per share was up 29%, driven by both the acquisition of Denville and the strong market demand across all major product lines. Organic growth in revenues was 4% and in orders was 8%. This performance was against the strong first quarter 2009.

As we look forward, we continue to be optimistic about our future as we drive our growth strategy of acquisitions, internal development of new products, and regenerative medicine. We are maintaining our guidance for the full year and 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. The year's guidance was calculated using January 31, 2010 exchange rates, and we remain comfortable with the stated revenue and earnings ranges.

For the second quarter 2010, we expect revenues to be up 39% to 50% from the second quarter of 2009, in the $25 million to $27 million range, and non-GAAP adjusted diluted earnings per share to be up 60% to 80% in the $0.08 to $0.09 range at April 23, 2010 exchange rates. Our guidance does not include the impact of any acquisitions.

David will now comment further on the first quarter results and our current business outlook.

Thank you, Chane, and good morning, everyone. One of the lead drivers of success in Q1 was the acquisition of Denville. Denville continues to perform well and has been accretive to our earnings per share in every quarter since the acquisition. In addition Denville's positive effect on the quarter, the core business also performed well. Basically, in Denville, as Chane already mentioned, we delivered 4% organic growth in the quarter and orders showed 8% organic growth.

The order growth was widespread. We were particularly pleased to see increases in the sale of our new syringe pumps launched last year. We expect the main drivers of organic growth going forward to be our continued expansion of our distribution channels and introduction of new products. Throughout last year and continuing into Q1, we maintained our investments by adding field salespeople in the Harvard Apparatus, Biochrom and Denville business, and introducing new products.

In 2009 we launched two new research syringe pumps at our Harvard Apparatus business, which, as I mentioned, has contributed to our revenue growth in Q1, and we expect to launch the third in this series in Q2.

Also during Q2, we expect to launch a major new spectrophotometer at our Biochrom business. Spectrophotometry is the core of the Biochrom product line and this new product platform provides both improvements to the technical specifications such as accuracy and reproducibility, as well as ease of use by adding a color touch screen user interface. This new product has been designed as a platform that enables us to significantly expand the range of our products at very little extra cost.

In addition to our traditional strength in single beam spectrophotometers, we will now be adding dual-beam instruments which are inherently more accurate than single-beam instruments, and variable bandwidth instruments, which provide significant extra flexibility to the user. With these new products we seek to access a larger segment of the $500 million spectrophotometer market. Initial response from our distributors has been very positive. We believe that these new products will help us to drive organic growth during 2010 and beyond.

In addition to new products for our traditional markets, we announced at our year-end call we have started investing to create new products to address a longer-term growth opportunity in the emerging field of regenerative medicine. Regenerative medicine is using stem cells to repair damaged organs -- for example, spinal cord or heart, and also growing tissue -- for example, bladder or bronchus, and even whole organs such as heart and lung outside the body for transplant.

The US Department of Health and Human Services in its report "2020 Vision -- a Future for Regenerative Medicine" states, "This revolutionary technology has the potential to develop therapies for previously untreatable diseases and conditions. Examples of diseases that regenerative medicine can cure include diabetes, heart disease, renal failure, osteoporosis, and spinal cord injuries. And the current world market for replacement organ therapies is in excess of $350 billion, and the projected US market for regenerative medicine is estimated at $100 billion."

While the large market potential for regenerative medicine is in the future, there have already been transplants of regenerated tissue to repair dysfunctional bladders and bronchial tubes. In fact, in the case of the bronchial repair we have licensed the bioreactor technology used to perform the first human surgery of this kind. A bioreactor refers to the chamber that provides life support and growth system to the cells as they grow and merge to form tissue.

We officially launched this product called the "In Breath" bioreactor at the Regenerative Medicine Conference in April. While it is still very early days in this field, we are very pleased with the initial response from the research community to this new product.

We believe that the market potential for regenerative medicine is large. Our strategy is to supply tools to the researchers and surgeons who are pioneers in this field. We are already collaborating with several of the world's leading researchers to develop the next generation of these products.

We are building these tools on technologies we already own, such as our market-leading Hugo Sachs Isolated Organ Research Systems, and our market-leading Harvard Apparatus Research Syringe Pumps. Because we already own the technology base for these regenerative medicine products, we believe we can keep the investment lower than would be the case of any company trying to enter the market from scratch. We also believe our well known brand names and existing global distribution channels will facilitate the commercialization of these products.

In addition to the bioreactors I described, we also started the development of the clinical version of one of our market-leading Harvard Apparatus Research Syringe Pumps. We anticipate that this pump will be used to inject cells into damaged tissue in stem cell therapy. Used on humans, this product will require clearance to market from the FDA. I am very pleased to announce that in April we hired an experienced clinical engineering manager to oversee this project and apply the 510(k) approval from the FDA.

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

In short, we are very pleased with our results for the first quarter. Revenue, operating profit and non-GAAP adjusted earnings per share all increased over 28%. We are also very pleased to see the effect of the launch by new syringe pumps and anticipate growth from the launch of our new spectrophotometer.

And, finally, we are investing for long-term growth in the very promising new market for regenerative medicine.

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

Thank you, David. As a result of our strong cash flow, we have already started to repay the debt incurred to make the Denville acquisition, and our net cash increase by approximately $2 million during the first quarter. Our debt outstanding at the end of the first quarter was less than one times or 2009 non-GAAP pre-tax operating profit.

As Chane and David have mentioned, acquisitions continue to be an important part of our business strategy. Looking forward, we believe that with our cash balances, operating cash flows and bank borrowing capabilities that we can finance up to 20% annual revenue growth through acquisition.

We will now open the call to any questions.

Thank you. (Operator Instructions) And, sir, I am showing no questions in the queue.

Okay, thank you. I'd like to thank everyone for joining our call today. We are pleased with our results for the first quarter. We are optimistic about the outlook for growth in the remainder of 2010 and beyond. Thank you and good day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may all disconnect. Everyone have a great day.