Investor Introduction & Discussion. January 2018

Transcription

1 Investor Introduction & Discussion January 2018

2 Table of Contents Introduction to Harvard Bioscience 5 Strategy 8 Financial Information 18 Executive Leadership 22 Appendix 24 2

3 Safe Harbor Statement This presentation 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 presentation 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 economic and political conditions generally and those affecting pharmaceutical and biotechnology industries, research funding levels from endowments at our university customers, our financial position, general economic outlook or other circumstances, the Company s failure to identify potential acquisition candidates, successfully negotiate favorable pricing and other terms with acquisition candidates to enable potential acquisitions to close, successfully integrate acquired businesses or technologies, complete consolidations of business functions, expand our product offerings, introduce new products or commercialize new technologies, unanticipated costs relating to acquisitions, unanticipated costs arising in connection with the Company s consolidation of business functions and any restructuring initiatives, decreased demand for the Company s products due to changes in our customers needs, our ability to obtain regulatory approvals, the seasonal nature of purchasing in Europe, economic, political and other risks associated with international revenues and operations, including expansion into Asia and other emerging markets, additional costs of complying with recent changes in regulatory rules applicable to public companies, our ability to manage our growth, our ability to retain key personnel, competition from our competitors, technological changes resulting in our products becoming obsolete, future changes to the operations or the activities of our subsidiaries due to manufacturing consolidations, our ability to meet the financial covenants contained in our credit facility, our ability to protect our intellectual property and operate without infringing on others intellectual property, potential costs of any lawsuits to protect or enforce our intellectual property, impact of any impairment of our goodwill or intangible assets, our ability to utilize deferred tax assets after the release of our valuation allowances, plus factors described under the heading Item 1A. Risk Factors in the Company s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 or described in the Company s 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. 3

4 Introduction to Harvard Bioscience, Inc.

5 History and Overview William Porter founded the Harvard Apparatus Company Becomes a for profit subsidiary of the Harvard Apparatus Foundation Harvard Bioscience, Inc. files a form S-1 with the SEC Acquired MCS and TBSI to become a market leader in the ephys and animal physiology markets Harvard Apparatus Company becomes a non-profit foundation Harvard Bioscience, Inc. forms executive leadership team Harvard Apparatus changes its name to Harvard Bioscience, Inc. Acquired HEKA; completed the consolidation of 5 manufacturing sites 5

6 Commercial Units Cell & Animal Physiology (CAP) 50% of 2016 Revenues Lab Products & Services (LPS) 26% of 2016 Revenues Molecular Separation & Analysis (MSA) 24% of 2016 Revenues Brands Brands Brands Harvard Apparatus Panlab Coulbourn Hugo Sachs CMA Warner HEKA MCS KDS TBSI Denville Biochrom Biodrop BTX Hoefer Scie-Plas Products In vivo and in vitro ephys recording, stimulation and analysis Syringe pumps Patch clamp systems Surgical and monitoring Organ perfusion Microdialysis Products Pipette tips Cell culture Tubes General lab supplies Products Spectrophotometers Amino acid analyzers Plate readers Electrophoresis Electroporation 6

7 Strategy

8 Strategy Commercial Excellence / Organic Growth Operational Efficiency Reinvigorating Product Development Business Development / Acquisitions 8

9 Commercial Brands Strong brands position HBIO as a leading competitor in the Life Science arena. 9

10 Commercial Metrics Data for FY 2016 Revenues by Channel Revenues by Customer Type Revenues by Geography 64% 36% 70% 30% 49% 18% 28% 5% Distributor Direct Other Academic Europe China ROW US 10

11 United States Funding Environment U.S. academic customers primarily funded through the National Institute of Health (NIH). The FY2015 budget for NIH was approx. $29 billion, with a budget increase of 6% for FY2016. The funding outlays were not appropriated for FY2016 and budget funds were slightly down YOY. Due to the weighting of our customer mix, there is a correlation between academic funding levels and revenue growth for the company. The company s revenue growth in the U.S. for the 9 months ended September 30, 2016 was 1%, while the NIH spending for the same period was 0.8%. 11

12 United States Funding Environment Future trends in the U.S. funding environment have the potential for a positive impact on the company s topline growth: An additional 4-6% increase in the FY2017 budget is proposed. Total funding outlays for FY2017 grew ~ 7%. The 21 st Century Cures Act passed in December 2016 and calls for $4.8 billion in incremental funding for the NIH over 10 years (~ 1.6% increase). The 21 st Century Cures Act will increase funding to the Cancer Moonshot initiative and invest in the BRAIN initiative. Due to the company s portfolio businesses in electrophysiology and neuroscience, the company is well positioned when the funding begins to be spent by researchers. 12

13 Footprint Corporate Office Distribution Center 1 Corporate Headquarters & Manufacturing 2 Hoefer 3 Denville 4 Warner 8 Panlab, S.L. 9 S.A.R.L. 10 Biochrom 11 Hugo Sachs Elektronik 12 CMA Microdialysis Manufacturing 5 Harvard Apparatus Canada 13 Multi Channel Systems Sales Office 6 Triangle Biosystems 7 HEKA Electronik 14 Shanghai Representative 15 Harvard Apparatus, Inc. 13

14 Reinvigorating Product Development The OxyletPro TM System The VentElite TM Ventilator Small Animal Physiological Monitoring System Innovative metabolic monitoring combining indirect calorimetry, food & drink intake, and activity Advanced ventilator designed for small animal research applications under safe and physiologically accurate ventilation conditions Superior monitoring instrument integrating multiple physiology parameters on one platform 14

15 Acquisitions (Data in millions) Purchase Price ~ 1.4X Annual Revenue Purchase Price ~ 1.3X Annual Revenue Purchase Price ~ 1.3X Annual Revenue $9.4 $6.75 $6.0 Purchase Price $4.5 At Acquisition Date, Expected 2015 Revenue $1.6 $1.25 MCS TBSI HEKA 15

16 Opportunity to Reinvest Capital $154M Revenue From Acquisitions $105M Legacy Revenue * Projections assume reinvestment of free cash flow into acquisitions at similar purchase price multiples and a similar level of debt as *Legacy Revenue assumes 2% growth for modeling purposes 16

17 Financial Information

18 2017 Financial Guidance Revenues The Company expects organic revenues, which excludes currency translation and the decline in revenues from the disposition of AHN, to grow 1% - 2% in the fourth quarter At current currency rates that equates to $27.2 million to $27.4 million. Non-GAAP EPS The Company expects to report non-gaap EPS for the fourth quarter 2017 of $ $0.06. * Based on estimated 35 million shares outstanding and 28%-30% expected tax rate 18

19 Balance Sheet: Leveraged, but Also Liquid September 30, 2017 $ and Share Data in Millions Total Cash $6 U.S. Cash $2 Foreign Cash $3 Total Assets $111 Total Debt $13 Revolver $0 Term Loan $13 Shareholder s Equity $77 Common Shares Outstanding 35 Balance Sheet Structured for Safety and Soundness Asset based loan / revolver: $0 Total available as of 09/30/17 ~ $6 Term loan: $13 Weighted effective interest rate of 4.6% at 09/30/17. On May 2, 2017, the Company entered into an amended credit agreement, maturing on 05/01/22, which converted the outstanding debt balance to a $14 term loan, while also providing for a $25 revolving line of credit. 19

20 Stock Information January 2, 2018 Exchange: NASDAQ Symbol: HBIO Stock Price $3.30 Market Cap $115m Shares Outstanding 34.9m Insider Ownership (Approximation) Institutional Ownership (Approximation) 3% 64% 20

21 Executive Leadership Team

22 Executive Leadership Jeffrey A. Duchemin President and CEO Prior to joining HBIO as President and CEO, Mr. Duchemin held the role of Global Business Director at Corning Life Sciences (NYSE: GLW). Preceding Corning, for sixteen-years he held progressive sales, marketing and executive leadership positions at Becton Dickinson (NYSE: BDX). Robert E. Gagnon Chief Financial Officer Before joining HBIO s Executive Leadership Team as CFO, Mr. Gagnon was CFO at Clean Harbors, Inc. (NYSE: CLH). Prior to Clean Harbors, he held progressive leadership positions with Biogen Idec, Inc. (NASDAQ: BIIB). Yong Sun Vice President / General Manager Yong Sun assumed the role of VP Commercial Operations on October 28, Previously, Mr. Sun held the position of VP Global Strategic Marketing, Business Development, and R&D. Prior to joining Harvard Bioscience, he served as VP of Global Marketing and Americas Sales at Beaver-Visitec International. Mr. Sun also held positions at Becton Dickinson, as Director of Global Marketing & U.S. Sales, as well as Eli Lilly- Marketing Manager, Global Life Sciences Market. 22

23 Appendix

24 Financial Reconciliations Exhibit 1 Three Months Ended Year Ended December 31, December 31, GAAP net loss $ (1,320) $ (17,140) $ (4,307) $ (19,039) Adjustments: HARVARD BIOSCIENCE, INC. Reconciliation of GAAP Net Loss to Non-GAAP Adjusted Net Income (unaudited, in thousands) Amortization of intangible assets ,722 2,819 Inventory valuation step-up charges on acquisition Forensic investigation costs - - 1,663 - Impairment charges Loss on sale of AHN 1,190-1,190 - Severance and restructuring charges ,849 Acquisition costs ,187 Stock-based compensation expense ,497 2,755 Income taxes (A) (129) 16,344 (553) 14,035 Non-GAAP adjusted net income $ 1,315 $ 1,167 $ 4,980 $ 4,405 Exhibit 2 HARVARD BIOSCIENCE, INC. Reconciliation of GAAP Diluted Loss Per Common Share to Non-GAAP Adjusted Diluted Earnings Per Common Share (unaudited) Three Months Ended Year Ended December 31, December 31, GAAP diluted loss per common share $ (0.04) $ (0.51) $ (0.13) $ (0.57) Adjustments: Amortization of intangible assets Inventory valuation step-up charges on acquisition Forensic investigation costs Impairment charges Loss on sale of AHN Severance and restructuring charges Acquisition costs Stock-based compensation expense Income taxes (A) (0.01) 0.42 Non-GAAP adjusted diluted earnings per common share $ 0.04 $ 0.03 $ 0.15 $ 0.13 (A) Income taxes includes the tax effect of adjusting for the reconciling items using the calculated effective tax rate in the jurisdictions in which the reconciling items arise and any changes to valuation allowances. (A) Income taxes includes the tax effect of adjusting for the reconciling items using the calculated effective tax rate in the jurisdictions in which the reconciling items arise and any changes to valuation allowances. 24

25 Financial Reconciliations Exhibit 3 Exhibit 4 Exhibit 5 Three Months Ended Nine Months Ended September 30, September 30, GAAP net loss $ (417) $ (1,638) $ (1,864) $ (2,987) Adjustments: HARVARD BIOSCIENCE, INC. Reconciliation of GAAP Net Loss to Non-GAAP Adjusted Net Income (unaudited, in thousands) Amortization of intangible assets ,825 2,099 Forensic investigation and remediation costs ,663 Impairment charges Severance and restructuring charges 129 (10) Acquisition costs Stock-based compensation expense ,604 2,596 Income taxes (A) (212) 374 (867) (425) Non-GAAP adjusted net income $ 1,061 $ 1,107 $ 2,549 $ 3,663 (A) Income taxes includes the tax effect of adjusting for the reconciling items using the calculated effective tax rate in the jurisdictions in which the reconciling items arise. Three Months Ended Nine Months Ended September 30, September 30, GAAP diluted loss per common share $ (0.01) $ (0.05) $ (0.05) $ (0.09) Adjustments: HARVARD BIOSCIENCE, INC. Reconciliation of GAAP Diluted Loss Per Common Share to Non-GAAP Adjusted Diluted Earnings Per Common Share (unaudited) Amortization of intangible assets Inventory valuation step-up charges on acquisition Forensic investigation and remediation costs Impairment charges Severance and restructuring (credits) charges Acquisition costs Stock-based compensation expense Income taxes (A) (0.01) 0.01 (0.03) (0.01) Non-GAAP adjusted diluted earnings per common share $ 0.03 $ 0.03 $ 0.07 $ 0.11 (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. HARVARD BIOSCIENCE, INC. Reconciliation of Guidance for Fourth Quarter 2017 GAAP Diluted Loss per Common Share to Non-GAAP Adjusted Diluted Earnings per Common Share (unaudited) GAAP diluted loss per common share (A) $ (0.01) Adjustments: Amortization of intangible assets 0.03 Stock-based compensation expense 0.03 Income taxes (B) - Non-GAAP adjusted diluted earnings per common share (A) $ (A) This guidance excludes the impact of future acquisitions, acquisition costs, restructuring charges, forensic investigation and remediation costs, or other one time charges. (B) Income taxes includes the tax effect of adjusting for the reconciling items using the calculated effective tax rate in the jurisdictions in which the reconciling items arise and any changes to valuation allowances. 25