Welcome to the Q4 2016 Harvard Bioscience Inc. Earnings Conference Call. My name is Ally and I will be your operator for today’s call. At this time all participants are in a listen only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Corey Manchester, Director of Finance and Investor Relations. Corey, you may begin.

Thank you, Ally, and good afternoon, everyone. Thank you for joining us for the Harvard Bioscience fourth quarter 2016 earnings conference call. Leading the call today will be Jeffrey Duchemin, President and Chief Executive Officer, and Robert Gagnon, Chief Financial Officer of Harvard Bioscience. Before I turn the call over to Jeff, I will read our Safe Harbor statement. In our discussion today, we may make statements that constitute forward-looking statements. Our actual results and performance may differ materially from what we have projected due to risks and uncertainties, including those detailed in our annual report on Form 10-K for the period ended December 31, 2015 and our other public filings. Any forward-looking statements, including those related to the company's future results and activities, represent our estimates as of today and should not be relied upon as representing our estimates as of any subsequent date. I will now turn the call over to Jeff. Jeff, please go ahead.

Thank you, Corey. Good afternoon, everyone. Thank you for joining us for our fourth quarter 2016 earnings call. I will begin today by providing comments on our Q4 and 2016 results as well as some overall business updates. I will then turn the call over to our CFO, Rob Gagnon, who will provide more details on our financials and guidance. We will then open it up for questions. 2016 was not without its challenges. Despite that, we made important operational progress on improving profitability. More specifically, during 2016 we encountered headwinds throughout the year related to currency translation, softness in the European funding environment and slower than expected NIH funding outlays in the U.S., which adversely impacted our top line. Throughout this, we were able to execute on our priorities aimed at leveraging our infrastructure, exercising tight controls on our business and expanding our margins. Looking to operational successes. Our profitability improved in the quarter and year as we realized the benefits from our site consolidation and cost containment measures. Non-GAAP operating expenses declined $1.5 million this year. Our non-GAAP gross margins for the year improved 60 basis points from 2015, while our non-GAAP earnings per share increased 15%. Our balance sheet continues to strengthen as we generate operating cash, focus on working capital and pay down our debt. During 2016 we generated over $5 million in operating cash. We reduced inventory by more than $2 million, reduced accounts receivables by approximately $2 million, and reduced overall debt balance by $5 million. Additionally, at the beginning of January, we went live on our ERP platform at our largest German subsidiary, Multi Channel Systems. The cross-functional team that worked on this effort did an excellent job. We are pleased with the implementation and look forward to the future benefits that will…

Thanks, Jeff. So consistent with previous quarters, much of my focus will be on the non-GAAP quarterly results which we believe better represent the ongoing economics of the business, reflects how we set and measure our incentive compensation plans, and how we measure and manage the business internally. However, I will briefly review the GAAP results, the differences of which are outlined in the earnings release we issued today which can be found on our Web site under press releases. 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. And a replay of this call will also be archived at the same location on our Web site at harvardbioscience.com. Now beginning with the top line. Revenues in the fourth quarter were $26.4 million, a decrease of approximately $2 million or 7% compared with revenues of $28.4 million in the fourth quarter of last year. Excluding the negative impact of the strengthening U.S. dollar, revenues in the fourth quarter would have decreased 4% or by $1 million compared with the fourth quarter of last year. Included in that decline is the revenue impact from the divestiture of AHN in October, which accounted for approximately half of that amount. So excluding foreign currency and AHN, the organic decline for Q4 was 1.8%. For the full year 2016, revenues were $104.5 million, a decrease of approximately $4.1 million or 4% compared with revenues of $108.7 million in 2015. Excluding the negative impact of the strengthening U.S. dollar, revenues for the full year would have decreased by 2% or $2 million compared with full year 2015. And again, excluding foreign currency and AHN, the organic decline for 2016 was…

[Operator Instructions] And our first question comes from Paul Knight with Janney. Please go ahead, your line is open.

This is actually [Bill] [ph] on for Paul. So first question, just as you guys continue to execute on some of the operational improvements and the gross margins continue to expand. How do you think about reinvesting some of those savings back into the R&D and sales channel? And then maybe just as a bigger picture question in that, kind of within R&D, what are you guys working on there?

Bill, yes. So we are going to continue down the path of our current strategy that’s in place. And one of the areas where we will reinvest is Asia. Asia has been growing very fast for us. We believe that we have strength in Asia moving forward, specifically China. So we are going to continue to invest in China. Channel expansion is an area of focus right now. Countries like Japan, Korea and even southeast Asia are area where we can expand our distribution partnerships. It's just one example of reinvesting dollars into a region that’s growing. We are also doing the same thing in terms of specific product lines that are growing fast for us, such as our electroporation and electrofusion product lines. These are two products that -- or product category that continues to grow rapidly. It's related to CRISPR gene editing and immuno-oncology research. So just two examples of reinvesting dollars into areas or regions and products that are growing rapidly for us.

Got it. And then on the top line, obviously Europe has been weak. What are you guys seeing in that end market? Has that continued to soften and then as you think about NIH funding, is there any -- are you starting to see some of those dollars flow through?

Well, let's start with Europe first. Europe was very challenging last year. Everything from Brexit to just delayed funding throughout the region. Germany was down, England was down and we feel that as though that this year what we are seeing, what we are hearing, beginning of the year could be soft. Backend of the year we could see some progress moving forward in terms of NIH. The good news is, the last few months of the quarter, Q4, the outlay of funds were increasing. January had a strong outlay of funds. So three consecutive months in a row of consistent outlay of funds is a good sign. The question is, what if the delay period from the time the funds reach our customers to when they actually spend on instrumentation and consumables. So we like what we are seeing from the NIH. It looks as though it should be a favorable year if this trend continues. Just a matter of predicting timeline of when the dollars will be used.

Got it. And then just one last one. Maybe more so for Rob. You guys have done a very good job this year of controlling inventory and receivables and improving the cash conversion cycle, paying down debt. Is there more room to go with additional ERP implementation, kind of maybe just free cash flow. How do you guys continue to grow that number, deleverage the balance sheet and then as you think about M&A, as cash continues to build, what areas, whether it's a product line or geographic region, are you guys evaluating potential targets. Thanks guys. Have a good evening.

Yes. Thanks, Bill. So, Bill, I think there is room for improvement on the balance sheet. I think we have made a lot of progress this year. I wouldn’t expect that to continue in 2017-2018 at that same level but there is definitely improvements to be made on our working capital and we will go and get that and get that done. I think the opportunity to improve cash flow is probably more around gross margins and operating expenses. And so there has been a lot of change in this business in fiscal '15 and early '16 around sight consolidations and improvements and we really started to realize those benefits in the back half of fiscal '16. And so I think we will see that continuing to '17 and that of course will convert into greater free cash flow. In terms of deployment around M&A, I think we are looking across a number of different geographies and opportunities for our business and you are well aware of the three product families we have today. We find all three product families equally interesting and there is opportunities in all three. Some of those opportunities are more domestic others may be over in Europe. But we have a pretty good pipeline as well. So I will leave it at that. Thanks.

Thank you. And our next question comes from Raymond Myers from Benchmark. Raymond, your line is open, please go ahead.

Let me first ask just a real specific question. I see your cash balance increased a little bit again. That's great. What was yearend debt?

Yes. It was just over $13 million, Ray. So 13 and change.

Good. So down a couple of million more sequentially.

Ray, it was $13.9 million. Sorry, I am just getting the exact number for you. $13.9 million, yes. Yes, it's down as well. That’s right.

Yes. Well, that's good, you're generating cash. Let's talk about the business lines. You talked about which geographies were performing better and worse. What about the specific business lines? Which were the best performing lines of business and which were the most challenging?

Ray, our instrumentation product line which is majority of our revenue, actually did well in the U.S. last year, slightly up. Europe is really where the issues for this business came. The funding challenges that existed all year long led to really reduced revenue results across the board throughout our instrumentation line. But if you look at Asia, we had strong growth in Asia as we noted in our comments earlier. The U.S. was slightly up. So we are happy with the performance there. It's really overcoming what's going on in Europe and I think we have some plans in place, some sales and marketing plans in place that will help us drive growth, drive market share expansion. And those initiatives are underway right now so we hope the results in Europe are better. And as the funding environment changes in a positive light, which we are starting to hear it will, I think we are going to benefit from them moving forward.

Good. I hear that the funding environment appears to be improving, perhaps dramatically actually, in the U.S. What is happening in Europe that Germany and England are down so much? Is it still heavily currency related or are there other specific issues in Europe?

Yes. I think there is a bunch of things going on in Europe. I was at a conference this week. I was at the PITTCON Conference and there an analyst speaking from the Cleveland Research Group and he had mentioned Germany and the inflow of refugees. The government had to delay some budget, had to alternate spending in certain areas to put initiatives together to be able to sustain the amount of refugees flowing into the country. I mean things like that we are hearing. And maybe that impacted our business. I mean there is so many different -- there is so much information flowing around what's going on, but really the currency is what's driving the ability for our customers to have money to spend. As the dollar strengthened, our U.S. manufactured products became more expensive to purchase for European customers. So like I said, we have initiatives in place to offset that. We feel confident that we will see better results in Europe this year and we will go from there.

Okay, understood. So the U.S. is better and Asia is better. Are there specific investments in sales or new products, or anything at all, that where you could deploy some of this cash that you're generating to get back to a positive organic growth footing?

Yes. I think I mentioned it earlier. We are going to look to accelerate our growth in Asia and that could be some resource, additional resources added to that region. We are going to look to do potentially add some resources on specific product lines that are growing double digits for the business. Our electroporation product lines are very fast growing category for us. So we are going to possibly do some different things there this year. So we are looking at everything across the board in terms of how we can continue to grow in Asia, have better results in the U.S. and really improve sales and marketing programs in Europe to offset any budgeting issues.

And as we have no further audio questions at this time, I will turn it back over to Jeff for closing remarks.

Thank you, Ally. Thank you, everyone for joining us today. We look forward to speaking with all of you soon. I appreciate your continued support. Thank you.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.