With that out of the way, it's all yours, Jim Green.
Thanks, Jim. Good morning. Just do a quick background of myself. I joined the board of Harvard Bioscience a year ago, and then 10 months ago became the CEO. I've spent over 10 years in the life science tools area. I worked at Corning Incorporated, which has a billion-dollar life science tools business, where I had several roles, primarily on the sales side. Prior to joining Harvard Bioscience, I was the CEO of a PE-backed firm. Mark will introduce himself in just a moment when he takes the slides. As an overview, we are producing and selling tools, equipment, consumables to accelerate drug development through translational science. Mark?
All right. Thanks, Jim Green. Quick background on myself. First half of my career was at GE, at GE Capital, and then GE HealthCare. I then pivoted into the healthcare world, where I'd been both a public and private CFO for biotech, CDMOs, med tech, diagnostic imaging. I came to Harvard Bioscience last year, as a consultant, then became interim CFO, and was behind, which we'll talk about in a few minutes, the debt refinance, and then I became permanent about a month ago. If you look at us by the numbers, couple key things. We're about an $87 million business. We have projected to grow two-four percent this year. Our gross margins are pretty good, but we expect to further improve those by the new products, particularly that Jim Green will talk about in a little bit.
Our EBITDA is about 10%, and we're guiding to 6%-10% improvement of EBITDA in 2026. Couple other key points about us is 54% of our revenue is recurring through consumables, service, and software. We are a strong player in seven or 10 product lines where we're number one or two, and we have a pretty significant customer base. Now, a couple key actions we went through. There was a lot of change with Harvard Bioscience last year. The first, you've just heard, we have a new CEO and CFO. We made significant changes to our board of directors. We only have one board member left from first half of 2025. What we've done is bring on a number of key people who have life science backgrounds onto the board, to support Jim Green and I in managing the company.
The other item is we have announced our focus on translational science. Jim Green will talk about that in a minute. We were able to get a debt refinance done, which I will walk through in a second, in December last year. We announced also at the beginning of the year that we are streamlining our U.S. operations and we will be consolidating our Holliston site, and I will walk through a few more details on that in a couple pages. Our deal structure, which was announced in December, is a $40 million deal made up of three tranches, Term Loan A, B, and C. The deal is about four years out to 2029, although we have the ability actually to move it to five. There is a couple major deleveraging opportunities for us with this structure.
If you go to the conversion, you'll see some of the detail on that. The first I'll talk about is Term Loan C, which can be converted to equity, $10 at the lender's discretion and $15 automatically when we reach that stock price. The other portion which is important is Term Loan A, where we negotiated to put into the structure our ability to convert it to an ABL revolver, there's three benefits for that. The first is interest rate, where a revolver will probably be 400 - 500 basis points cheaper. Secondly, allows us the flexibility to scale down the debt. Thirdly, we have a reduced exit fee on Term Loan B if we do convert this to an ABL. A number of opportunities to reduce our leverage over the next four - five years with this facility.
The other key thing about it is in the next two years, it has reduced our debt service by $3 million, which we are using primarily in 2026 to fund Project Viking, which I'm going to talk about on the next page. Project Viking was something we were thinking about in the past, but we did not have a debt facility in place to support it. With the debt facility, this allowed us to make, be honest, a fairly obvious decision that it didn't make sense to have two large U.S. operations for a business of our size. We made a decision, we're going to consolidate Holliston over the next 15 months. Most of the production will go to our Minneapolis, Minnesota facility.
We're also, though, moving a couple products that had their start actually in Germany and the U.K., so it made sense to move it to their center of excellence. The expectation is that starting in 2027, we will generate about $3 million of cost savings and then add $1 million on a full year basis in 2028. It'll improve our EBITDA with revenue staying flat by 50% from $8 million-$12 million. A very significant catalyst to improve the profitability of the business. With that, I am going to turn it back to Jim Green to talk about our strategy. Jim Green?
Thanks, Mark. There's four key components of our strategy, that is I'm going to talk in the next slide about translational science, which is an important growth market in the life science tool space. The next is scaling our high-margin innovation. We spend about 10% of revenue on our new products through R&D, they are driving our revenue. One of the great things about that is they are north of 60% gross margin. The third is moving to a larger recurring revenue stream from consumable software and service, the fourth is continue to operate with discipline. Some of you may be familiar with the translational science market, what that is for decades, drug companies have been providing data to the FDA, which the data was generated in animal models.
What the FDA has now required is that for every drug submission, the data must be provided from not just from animal models, but also from models which are conducted in a laboratory, which are called New Approach Methodologies. This is significant because we have some technologies which play to this tailwind, meaning our organoids, you're going to hear more about that, but this is going to be a really nice momentum for us in the coming years. In terms of our global footprint, you hear Mark talk about the consolidation of our site in Boston, so that way in the U.S., our manufacturing will be in Minneapolis. We do have a site in Cambridge, U.K., which makes products for the bioproduction market. We have a manufacturing location in Stuttgart, Germany.
In terms of our customer breakdown, in 2025, half of our revenue went to academic institutes across the world, 28% of sales was to Pharma and Biotech, and 22% was to Contract Research Organizations. Let me emphasize that we have a concerted effort to grow our sales to Pharma and Biotechs as well as to CROs, and that was reflected actually in our Q1 results. In Q1, our revenue to Pharma and Biotech customers grew more than 20% versus prior year. This is important because, as you know, they are not limited to decisions by governments, whether that by NIH or other governments across the world. We expect Pharma Biotech to be a significant growth driver for us in the coming years. If you look at how we go to market, you'll see here on the left-hand side, 39% of our revenue last year was through distribution.
You'll recognize these names such as Fisher Scientific, VWR, 61% was sold direct. We did last year sign an enhanced supply agreement with Fisher Scientific North America, where we bought our way to a higher tier within their distribution framework. Then on the right-hand side, this shows where our 45 salespeople are located across the globe. 45 is a high number for a company our size, but we think that's really important because it allows us to get in front of researchers and sell our products effectively. If you look at our suite of products from left to right at the bottom here, we sell products beginning from compound creation all the way through cellular testing, organoid testing, and then into pre-clinical safety and toxicology, all the way through bioproduction. I want to highlight here, you've heard me say already about organoids.
We have a really nice portfolio targeting this market segment, which is growing 10%-20% year-over-year. On the lower left-hand side, you'll see our consumable, which is a microelectrode array, and it's a mesh. I won't go into the technical details today, but what it allows researchers to do is to get excellent data inside an organoid. In the middle, you'll see our piece of equipment, which uses that consumable. Third, we have a software package which is used to analyze the data generated from the system. Our new product innovation or NPI pipeline provides significant growth opportunities. Last year, NPI was four percent of our total revenue. This year, it's going to be between 10%-15%. Something is designated NPI, which has been launched within the past three years.
After three years, it's no longer part of the NPI portfolio. You'll see in the lower left-hand side, this is around our products for animal testing. Specifically, we came out with a new technology, which is called SoHo, which stands for social housing, which means companies are now able to test in a much smaller environment due to the fact that our transmitters and receivers are Bluetooth. On the right-hand side, you'll see here under bioproduction, we're coming out with in Q4 a electroporation system, which our customers have been asking us for that will be cGMP compliant. The right-hand side, I already talked about, we're continuing to come out with more products to address the growing organoid space. With that, Mark, I'll turn it over to you.
All right. I'll just talk about some attractive financial attributes of Harvard Bioscience. The first is recurring revenue. 46% of our revenue comes from the sale of instruments to our customers, but 54% comes from recurring revenue streams, consumables, service, and software. This is a clear strategy of ours, is to introduce products to have a razor-razorblade approach and have a significant consumable portion where we tend to have stronger margins than the equipment. If you look at the gross margin, you can see this, that we're approaching 60%, and we believe with the introduction of all these NPIs and their growth and executing the Project Viking, that we will be solidly by 2027 in the 60% gross margin range. The other key attribute of Harvard Bioscience is we have been a positive cash flow generator. Generated $7 million last year.
Now in 2026, it'll be flat to slightly up because of our investments both in inventory and the cost of Project Viking, but we expect in 2027 to return to robust cash flow generation again. With that, I will turn it over to Jim, and we will take questions. Jim?
Great. Thank you for the presentation. Start with one from Jim Green. You told us a little bit about your background, but I'm just curious, when you were considering the move to Harvard Bioscience, what were the things there that made you want to come?
Thank you for the question. A couple. Number one is, as Mark touched on at the very beginning, Harvard Bioscience has products which are number one or number two in 7 out of the 10 product categories, that very strong brand recognition is critical. Second is our strong portfolio of new products, that is having spent many years in sales and commercial roles, it's critical that you have differentiating new products to not only be able to sell your new products, but to help pull through sales of your existing. Those two things really were important to me, I guess the third was, I believe very strongly that the stock had been oversold, I looked at this as an opportunity to turn around a company and create significant value for shareholders in the coming years.
During the presentation, I think you indicated for 2026, you're looking for about two -four percent revenue growth. Is that the way we should think about Harvard Bioscience, or do you have more aggressive long-term growth targets?
Mark, would you like to comment or should I?
Yeah, go ahead, Jim Green. Take that.
Okay. Yeah, we've guided, as you can see here, for a full year, two -four percent revenue growth and part of that was we expected in Q1 we were going to be down versus prior year. As we look at this long term, our target from an organic perspective is to be able to grow mid-single digits and then, as we consider what I call portfolio both pruning as well as additions, we could potentially go above that.
You've done some pruning already. Is there more to come?
I was trained that every single year you should look at your portfolio to see what should either be pruned or what you should add to it. I think that's just a normal part of our business.
All right. Mark, you mentioned that recurring revenue now is about 54% of your total revenue. Where do you think this goes long term, and how does it affect the margins?
Yeah. Our expectation is in the next two years with the NPI launches to get towards 60% of recurring revenue. That actually I forgot to mention that. That's a third driver of why we think we'll be in strong 60%+ gross margins because they will have a higher portion of consumables, which are at margins greater than 60%. That's what gives us confidence in our ability to move the needle on our gross margins, and obviously that will affect the bottom line as we grow the business, as that will drop through at that level to EBITDA.
One of the topics the past year or so, most of my companies have been dealing with is tariffs. Has that impacted Harvard Bioscience, and how do you mitigate the impact if it has?
Yeah. I'll take that question. You both have incoming and you have tariffs on the sales end. On the incoming side, we did not have that much exposure, on our inputs. It was less than seven figures. We've mitigated that in our supply chain of having multiple sources. Of course, we've had some impact from it, but it has not been material. Where it did hit us hard last year was where countries responded with retaliatory tariffs, and that happened in China. In the Q2 last year, our China business basically went to zero. Now when the retaliatory tariffs went back to a reasonable number of 10%, our business started to come back. That is a risk, but our sense is no other countries are thinking about retaliatory tariffs.
We do have plan B there, Jim, where we've looked at moving, our sites for where products are produced, and with having a global footprint, we do have the capability to do that. We have built that action plan in case you do have that kind of situation in the future, Jim.
Are there specific product lines that would make sense to go over there? Or can you give us any detail?
Yeah. Yes. Some of the key, hardware and instruments. One of the things we did announce, Jim, on our call is we have, initiated a Made in China activity where we do the final assembly, and this has been signed off. Made in China was like Made in USA. If you didn't have enough portion of the product built there, your local customers can't buy it. We're not setting up a manufacturing. We've hired a company to help us to do the last portion of assembly. As we said, that was launched. We had our first product shipped, and we are looking at some other products in China to potentially do that. Obviously, that would be something we'd have to think about if other markets, but right now we're not worried about that for other markets. China's been the one we've been most worried about, yeah.
Right now, when it comes to your customer base, I know the academic customers, they've been under pressure, like you said, because of the NIH cutbacks. That was a big deal in 2025. Have you seen any improvement in 2026?
Yeah, I can take that. As you're probably aware, the budget reconciliation bill passed February 3rd, which then funded a one percent increase to NIH budgets. From the time that got passed, we did start to see some orders come through in the end of Q1. Our sales cycle is such that for many of our products, it's a three to six-week lead time from the time we get orders to when we ship product. That will start to show an impact in Q2 results.
With your non-academic customers, are the products used primarily in product development? Or when a drug does get into production, is the product continued to be used?
The vast majority of our products are not used when a drug has gone then to what I call into large scale manufacturing. Ours are used up through preclinical testing. With the exception of, we do have what's called a AAA product, which is amino acid analyzers. What that does is it measures the amount of amino acid and the types being used because many of these drugs are developed through cells, cell-based production, and that is used there. That's a small portion of our portfolio.
Just to build on what Jim Green said, Jim, we do in the electroporation have a couple products that move us into bioproduction, with one of them not coming to the bigger one coming in the Q4 , which as Jim Green had said, today a lot of researchers use our electroporation product, but when they go into phase I, they have to drop us. They're all asking, "We don't want to have to revalidate on new equipment." That product will come out in the Q4 , which will increase our exposure to the bioproduction world.
You talked a little bit about the distribution deal you signed with Fisher last year. Neil, can you give us an update how that's going?
Yeah, happy to. Actually, very pleased. We signed it in August of last year. For those who are familiar with how most distributors work in the life science space is you pay to play, meaning that you pay whether you want to be in the silver, gold, or platinum category. The way that works is if you're at a higher category or status, then the Fisher or VWR sales reps are paid a higher commission on your product. In Q1 of this year, our sales through Fisher North America were up nine percent versus prior year, which we're pleased with, and we expect that momentum to continue. Just to put it into perspective, we have roughly 20 salespeople in North America. Fisher has over 800. It's a significant reach expansion.
Do your sales folks interact at all with the Fisher Scientific team?
Yes. That's a key part of our strategy is we have the email, the cell number of each of the salesperson's contact information in North America, and then they work with their local Fisher sales team.
When Fisher sells a product, do you know who the end customer is?
We find out, they share data with us after the product is shipped.
Okay. All right. The other thing you talked about was the manufacturing consolidation. Can you give us an update on how that's going and when you think that'll be complete?
Sure. I'll take that. We have moved already one of the lines, and we're going to move a couple in Q2 . Right now, we are on track to finish the consolidation by the end of Q1 2027. Everything is on track as we speak today.
should we expect some modest charges in the Q1 , but then after that, those charges?
Yeah
will subside?
The cost will come over the 15-month. We started having some of the restructuring charges in Q1 . The larger amount of them will happen in Q4 r, Q1 . One of the big items, Jim, is what happens with the lease in Holliston. We've built a worst case in the restructuring guidance we gave, which is $3.4 million-$4.4 million. 30% of that is related to that lease. We have recently hired a broker to help us market the facility. It's on the market as we speak. They are giving us positive feedback, but until you get a new lease in place, you won't know. That cost wouldn't happen till 2027, if we have to pay it.
I assume that consolidation is a big part of how you get the margins up north of 16%.
Absolutely. That's probably one of the biggest parts, the other part is what you asked about before, NPI and a higher recurring revenue portion also is a key contributor to improving the gross margins.
Let me just add on that as well, given our focus on pharma and biotech, the pricing to that market is different than it is to some of the government-funded academic institutions. That's a higher gross margin selling to them.
Okay, that kind of leads into my next question. Those industries, to me, they tend to be kind of a boom or a bust. Where would you rate them today?
They're definitely on an upward trajectory, and that's driven by the fact that in 2030 and 2031, there are numerous drugs that are going to go off patent. As a result, the pharma industry is spending a significant amount of money both now through the next five years to be able to bring drugs to market, which will compensate for that revenue drop-off.
You indicated that you were free cash flow positive in 2025. You think that moderates a little this year, but then you get back to that in 2027.
27, yeah. We'll be break even to up a little bit in 2026, Jim, because we got to pay for. One of the key things of Project Viking is ensuring there's no disruption to our customers, so we are building excess inventory. That will be sold, obviously, in 2027. We also have a fair amount of restructuring costs we're going to have to pay for in 2026, that will absorb the cash. In 2027, we'll be back, I don't know if we'll get to the 2025 level, but towards that level of cash flow in 2027.
You indicated that you structured the new debt so that it's pretty easy to pay it down. Will that be the primary use of the cash, or do you have other plans?
That will be one of them. I would say one of the things we'll look at is we know, particularly like in the organoid space, that it's very fragmented. We will start more aggressively looking at inorganic potential in 2027, maybe more likely in 2027. Obviously, if things come across the chance, we'll look at it. That would be potentially a use of excess cash as we go out into future years, Jim.
Okay. We have two questions from the audience. One's related to AI, and if AI shortens the timeline for drug development, what does that mean to Harvard Bioscience, and are you seeing that?
In terms of shortening the time to drug development, we have not seen AI impact it to that point. Actually, AI we view would be beneficial to us, and the reason being is because if pharmaceutical companies can bring drugs to market faster, that means they're going to have to conduct more tests on these drugs coming to market, meaning we sell products which go into animal testing, and we sell products which go into organoid and New Approach Methodology testing. That would actually be a tailwind for us.
I assume your products are conducive to AI, that it makes it easier.
Yes, that is correct.
All right. Another question is, how much of your business is actually tied to federal funding, and where do you see that going long term?
Mark, you want to touch on that one?
Yeah, I'll take it. 50% of our business is academics. 20% of that's in the U.S., Half of that is NIH. From an exposure standpoint, it's about 10% of our total revenue, about $9 million. That has come down over the last few years, so it's significant, but it's something we think is manageable as we move forward.
All right. We're down to just about one minute left. Jim Green, do you have any closing comments you want to make? I know there've been a ton of changes. I've known this company for well over 10 years. What can you tell investors about Harvard Bioscience, and why is it different than the one they might have looked at 10 or 15 years ago?
There's a couple things that are different. First of one, we have a stable balance sheet, which is really important. The second one, which is critical, is we actually have launched new products. Many companies will talk about, "Hey, I'm going to be coming out with new products in a year or two." We have new products which are selling well, that will not only drive revenue of those, but our legacy products. The third, this New Approach Methodology in translational science is a significant tailwind for us, and that's going to drive growth of our organoids and other platforms in the coming years.
All right, good. We are at time. I want to thank you for taking the time today. I know we've kept you busy with meetings. I appreciate that. I appreciate everybody for tuning in as well. Thank you, and hope to hear from you soon and get another update.
Thank you.
Thanks, Jim.