BioHarvest (BHST) Q3 2026 Earnings Call Transcript

DATE

Thu, Nov. 12, 2026

CALL PARTICIPANTS

• Chief Executive Officer - Dr. Zaki Rakib
• Chief Financial Officer - Bar Dichter
• Head of Investor Relations - Justin Meiklem

TAKEAWAYS

• Revenue -- $7.9 million, representing a decrease from $9.1 million due to a deliberate shift toward selective customer acquisition and the timing of contract revenue.
• Gross Profit Margin -- 54%, down from 61% reflecting a revenue mix more heavily weighted toward lower-margin products compared to high-margin development services.
• R&D Expenses -- $1.8 million, up from $1.4 million driven by the acceleration of the rare fragrance development program.
• Sales and Marketing Expenses -- $4 million, down from $4.1 million as the company prioritized profitability and contribution margins over growth volume.
• Net Loss -- $3.3 million, or $0.15 per basic and diluted share, compared to a loss of $2.5 million, or $0.14 per share.
• Adjusted EBITDA Loss -- $2 million, widened from $400,000 as the company transitioned its marketing and development focus.
• CDMO Adjusted EBITDA Loss -- $1.4 million, compared to $200,000 reflecting the prioritization of internal development resources for the fragrance program.
• Products Adjusted EBITDA Loss -- $600,000, compared to $200,000 due to marketing channel shifts and lower revenue contribution.
• Cash and Equivalents -- $12.5 million as of Sept. 30, 2026, compared to $11 million at the same time last year.
• Consolidated Full Year Revenue Guidance -- $32 million to $33.5 million for 2026, reflecting updated expectations for both the product and services segments.
• VINIA Full Year Revenue Guidance -- $31 million to $32 million, revised as management implements a more selective customer acquisition strategy.
• External CDMO Full Year Revenue Guidance -- $1 million to $1.5 million, impacted by the allocation of resources to the fragrance manufacturing path.
• Consolidated Full Year Adjusted EBITDA Loss Guidance -- $5.5 million to $7.5 million for 2026.
• Estimated Fragrance Revenue -- $20 million to $30 million over 2027 and 2028, contingent upon the successful completion of development and production readiness.
• Fragrance Production Target -- 20 tons of composition, anticipated to begin in the first half of 2027.
• CapEx Budget -- less than $5 million for 2027, focused on a phased approach to capacity expansion to preserve cash.
• G&A Expenses -- $1.5 million, up from $900,000 due to a one-time income credit that lowered expenses in the prior year.
• Rare Fragrance Stage 2 Timeline -- six months to nine months for completion following its initiation in May 2026.
• Cumulative VINIA Sales -- more than $100 million since the US launch in May 2021.
• Fragrance Market Potential -- $150 million to $200 million over the next five years, based on management's analysis of the specific raw material costs and demand.

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RISKS

• Rakib stated, "The outcome will depend on successful development, production readiness and execution with our partners," warning that the projected fragrance revenue is subject to operational milestones.
• Management noted in the interim financial report that "a material uncertainty exists that raises substantial doubt about the Company's ability to continue as a going concern," due to a history of operating losses and the need for additional capital.

SUMMARY

BioHarvest Sciences Inc. (NASDAQ:BHST) reported a deliberate shift in its operational strategy during the third quarter. Management stated the company reduced customer acquisition activities for the VINIA product line to focus on contribution margins and higher-return marketing channels. The company also concentrated its technical resources on a rare fragrance program within its Contract Development and Manufacturing Organization (CDMO) segment, prioritizing programs with a clearer path to near-term manufacturing. Management indicated this transition resulted in lower consolidated revenue for the quarter but is intended to align capital allocation with commercial priorities for 2027.

• Rakib stated, "Preserving cash liquidity is our foremost near-term priority," during the company's discussion of its 2027 financial planning.
• Management expects the benefits of the current marketing realignment to become evident in the first quarter of 2027.
• The company plans to consolidate its development sites in 2027 as part of a broader initiative to reduce fixed operating costs.
• Management targets licensing at least one existing molecule asset in 2027 to generate non-manufacturing revenue.
• The company intends to add manufacturing capacity in phases aligned with demonstrated demand rather than building ahead of requirements.
• Management confirmed that development milestones were achieved for the natural sweetener program in partnership with Tate & Lyle.

INDUSTRY GLOSSARY

• VINIA: The company's proprietary red grape cell powder product rich in piceid resveratrol.
• Botanical Synthesis: A technology platform used to grow plant cells in bioreactors without cultivating the entire plant.
• CDMO: Contract Development and Manufacturing Organization, a company that provides development and manufacturing services to other firms.
• NAFLD: Non-alcoholic fatty liver disease, a condition referenced in the company's research into olive cell compounds.

Full Conference Call Transcript

Operator: Good morning, and welcome to the BioHarvest Sciences Third Quarter 2026 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I will now hand the call over to Justin Meiklem, Head of Investor Relations. Please go ahead.

Justin Meiklem: Greetings, and welcome to the BioHarvest Sciences third quarter 2026 financial results conference call. With us on the call this morning are Dr. Zaki Rakib, Chief Executive Officer; and Bar Dichter, Chief Financial Officer. Before we begin, I'd like to remind you that management will be making projections and forward-looking statements on the call today regarding future events. Any statements that are not historical facts are forward-looking statements. These statements are made pursuant to and within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995.

We encourage you to review BioHarvest Sciences SEC filings, including the company's most recent Form 6-K, which identify risks and uncertainties that may cause future actual results or events to differ materially. These filings can be found on the company website as well as the SEC's website at www.sec.gov. Please note that the forward-looking statements made during today's call speak only to the date they are made, and BioHarvest Sciences undertakes no obligation to update them. And with that, I would like to now turn the call over to Dr. Zaki Rakib, Chief Executive Officer of BioHarvest.

Zaki Rakib: Thank you, Justin, and thank you all for joining us. Our third quarter results reflect a period of deliberate transition. We took a more selective approach to customer acquisition for VINIA, scaling back lower return activities. We also concentrated our CDMO resources on advanced programs with near-term manufacturing potential. Those decisions affected revenue in the quarter, while lower CDMO development revenue also weighed on consolidated gross margin. We are aligning our capital allocation and operating expenses with our commercial priorities. Preserving cash liquidity is our foremost near-term priority. We intend to grow VINIA with better economics and focus our CDMO development capabilities on programs that we believe can reach manufacturing sooner.

BioHarvest Botanical Synthesis platform technology enables us to produce plant-based ingredients without growing the plant itself. We apply that technology through our VINIA products business and our CDMO development and manufacturing business. Our task now is to translate the capabilities we built into better operating results and stronger cash economics. Today, we'll explain the quarter's results and the priorities shaping our plans for 2027. Cash preservation is central to those plans alongside the investments required to advance our most important commercial opportunities. Bar will begin with the financial results, and I'll then discuss our business priorities. Bar?

Bar Dichter: Thank you, Zaki, and good morning, everyone. I will provide you with a summary of our financial results. A full breakdown is available in our SEC filings and in the press release that crossed the wire before market opened today. Please note that all figures are in U.S. dollars unless stated otherwise. Revenues for the third quarter of 2026 were $7.9 million compared to $9.1 million in the same year ago quarter. The decrease reflects our planned shift to profitable growth in the product business unit and the timing of CDMO development revenue. Cost of revenue was $3.6 million compared to $3.5 million for the same period last year.

Gross profit in the third quarter of 2026 was $4.2 million or 54% of total revenue as compared to $5.6 million or 61% of total revenue in the same year ago quarter. The change reflects the mix of revenue in the quarter, which was weighted towards the product business unit revenue with a lower contribution from higher-margin CDMO development revenue. R&D expenses totaled $1.8 million for the third quarter of 2026 compared to $1.4 million for the same period last year. The increase was primarily driven by higher technology development expenditures within the CDMO service business unit due to the need to accelerate the development of the rare fragrance composition in light of the supply agreement that was signed.

Sales and marketing expenses totaled $4 million for the third quarter of 2026 compared to $4.1 million for the same period last year. G&A expenses totaled $1.5 million for the third quarter of 2026 compared to $900,000 for the same period last year. The increase is primarily driven by a onetime income of $400,000 recognized during the third quarter of 2025, which offset expenses in the comparative period. Net losses for the third quarter of 2026 totaled $3.3 million or $0.15 per basic and diluted share compared to a net loss of $2.5 million or $0.14 per basic and diluted share for the same period last year.

Adjusted EBITDA loss, a non-IFRS measure, totaled $2 million compared to $400,000 for the same quarter last year. Under the 2 lens approach, the adjusted EBITDA loss of the CDMO services division is $1.4 million and $600,000 for the product division for the third quarter of 2026 compared to a loss of $200,000 and $200,000 in the same year ago quarter, respectively. Cash and cash equivalents together with bank deposits as of September 30, 2026, totaled $12.5 million compared to $11 million as of September 30, 2025. I would like now to turn the call back to Zaki.

Zaki Rakib: Thank you, Bar. I want to begin with VINIA. Our objective is to build a business that can grow while making a stronger contribution to the company's financial position. That requires us to be more selective about how we acquire customers, improve retention and evaluate marketing investment against contribution margin. Towards the end of the second quarter, we began implementing changes to VINIA's marketing and sales strategy to improve profitability. We deliberately reduced customer acquisition activity where returns did not meet our objectives. We anticipated a moderate decline in revenue as part of that transition, and we expect the benefits of these changes together with revenue growth to begin becoming evident in the first quarter of 2027.

In September, we launched single-dose VINIA Daily Chews. This format complements our existing portfolio and broadens customer choice. It has so far shown all the hallmarks of a premium high-value winner. Turning to the CDMO. We are concentrating development resources on a smaller group of programs with a clearer path to manufacturing and commercialization. During the quarter, we prioritized the rare fragrance program for which a supply agreement has been signed over progress on other development projects. This allocation of resources reflected our assessment of the program's future profitability potential and contributed to the limited external development revenue recognized in the quarter. We recognize the near-term financial impact of that decision.

The commercial rationale is to focus our technical resources where we believe they can generate the greatest long-term value. The outcome will depend on successful development, production readiness and execution with our partners. In August, we signed our CDMO division's first manufacturing and supply agreement. This exclusive agreement extends an existing development program for a rare high-value plant-based fragrance ingredient. The source plant is endangered because of overharvesting and habitat loss. The ingredient is among the world's most valuable fragrance raw materials with premium grades commanding prices above tens of thousands of dollars per kilogram. Our program seeks to provide a manufacturing pathway using Botanical Synthesis. We completed Stage 1 in March and initiated Stage 2 in May.

Stage 2 is expected to be completed within 6 months to 9 months of its initiation. The supply agreement provides for anticipated production of 20 tons of the fragrance composition, and we anticipate that limited production could begin in the first half of 2027, subject to successful completion of development. As described in our earnings release, we estimate that the agreement could generate $20 million to $30 million of revenue over 2027 and 2028. This is an estimate tied to the expected execution of the program and the timing and amount of revenue remains subject to development and commercial execution.

Our 2027 priorities include completing development of 3 advanced projects, the rare fragrance ingredient, the Saffron compound and the natural sweetener molecule for Tate & Lyle. We also aim to license our unique developed molecules assets. Turning to our manufacturing strategy. We intend to add manufacturing capacity gradually in phases aligned with demonstrated demand. This approach is designed to preserve cash while supporting commercial requirements. We also plan to reduce fixed operating costs, including through consolidation of development sites in 2027. Let me now address our updated outlook for 2026. The actions we began taking at the start of the third quarter have changed our expectations for this year as we position the business for 2027.

We have revised full year VINIA direct-to-consumer revenue guidance to $31 million to $32 million. As stated in the release, the direct-to-consumer adjusted EBITDA outlook remains unchanged. For external CDMO revenue, we now expect $1 million to $1.5 million for the full year with an adjusted EBITDA loss of $4 million to $5 million. Accelerating the fragrance program has required a greater allocation of development resources, affecting the pace of other revenue-generating development activity. On a consolidated basis, we now expect full year 2026 revenue of $32 million to $33.5 million and an adjusted EBITDA loss of $5.5 million to $7.5 million.

Our immediate focus is to improve execution with the resources we have, advance the CDMO programs we have prioritized and strengthen the economics of VINIA. We understand that investors will assess our progress through results, and we look forward to reporting against those priorities. Thank you for your continued interest in BioHarvest. Operator, please open the call for questions.

Operator: [Operator Instructions] Your first question comes from the line of Matt Hewitt from Craig-Hallum Capital Group. [Operator Instructions] Your next question comes from the line of Sean McGowan from ROTH Capital Partners.

Sean McGowan: Are you able to hear me?

Operator: Yes, we are.

Sean McGowan: Just checking. Yes. I guess my first question is I'm a little puzzled on capital allocation. I saw in the filing that subsequent to the quarter, you repurchased some shares. And yet the discussion strategically seems to be about cash preservation. So why is buying back stock the best thing to do with cash at this point when it looks like we're deferring some opportunities because you're trying to preserve cash? Can you help me with that?

Zaki Rakib: The question is well taken. And at the time when the decision was made for buyback of shares, we have felt that a certain limited allocation of financial resources for that purpose was adequate. Ultimately, we have -- what we have done so far in the market has been very, very moderate, and we don't intend to employ or deploy a lot of financial resources for that purpose in line with the strategy we have for cash preservation. So you're not going to see any depletion of cash at any accelerated rate whatsoever as a result of the buyback program.

Sean McGowan: Okay. And then a follow-up, could you help us with what you expect to be the timing during next year of some of the cash flow related to the CDMO contracts? That seems to be an important thing. Like when do you start getting some of that cash in?

Zaki Rakib: We expect to see a revenue next year on the CDMO side from 3 different sources. There will be some more development revenue coming from the existing programs that we have. And we've been clear about those programs, the sweetener program, the Saffron program and the continued development effort on the fragrance program. So there's still some more development revenue that are coming to BioHarvest within that particular program. We also expect to be able to license at least one of our existing molecules that we've already developed, and that would generate an additional significant amount of revenue.

As far as the revenue from manufacturing of the fragrance, which is the most likely scenario to take place in terms of non-VINIA manufacturing, we expect to generate revenue in the second half of next year. The amount of that revenue depends on the timing of the completion of the development program. So I'm not ready yet to guide with specifics for that program, but we do expect with very high likelihood to generate revenue from that program.

Potentially, one of the molecules that we license, if that license takes place earlier and all work has been completed, for example, with one of the products that we announced the completion of the regulatory part, it could lead to additional manufacturing revenue towards the last quarter. And we are adjusting our manufacturing capacity to be able to meet the demand by, albeit limited, but to meet that demand in 2027.

And obviously, additional capacity would be created in 2028 at a moderate pace compared to what we thought earlier, and that is also in line with our cash preservation program of not building too much capacity earlier than it is required, and that helps us managing our cash and yet delivering on all commitments we have to customers and for the growth of VINIA.

Operator: Your next question comes from the line of Matt Hewitt from Craig-Hallum Capital Group.

Matthew Hewitt: Hopefully, this works better. I'm not sure what was happening there. Regarding the guidance, and I apologize if you just answered this, your new guidance implies roughly $7 million in product revenues in Q4. It does sound like you expect some of the changes implemented on the sales and marketing side for DTC to take effect in Q1. So should we view Q4 as the low watermark with a return to growth starting in Q1?

Zaki Rakib: Yes. I expect the revenue to be a little higher than what you've mentioned for the D2C side. But you're right. I mean what we've done is truly gearing things towards back to growth on different principles that we have applied in the latter part of 2025 and the first half of 2026. So there's been a big shift in the allocation of the marketing resources by the different channels and different agencies. So that shift takes time. And that's why we needed Q3 and Q4 to be moderately lower than what we've done before and what we've guided in order to gear things up and get them ready for growth in Q1 of 2027. That's the planning indeed.

Matthew Hewitt: Got it. And then maybe my follow-up. Regarding -- I completely appreciate and understand the need to focus on cash preservation. But maybe explain how do you determine areas that you still need to invest in, because ultimately, there's a huge growth opportunity here. So how are you balancing that need to invest and move programs forward, particularly on the CDMO side with that cash preservation piece?

Zaki Rakib: So the cash preservation is mostly going to come from the timing of the increase in capacity. If you remember, when we raised money late last year, it was predominantly for purpose of the increase in capacity. It remains true, but it's the pace at which we want to use this cash while we're still incurring operating loss resulting from the changes we're making on the VINIA side and focusing on only fewer programs in the CDMO, which will bring in much faster revenue because of the speed at which they move to manufacturing. So you should look at it this way. I am not really not spending on the critical programs.

And it's also a matter of focus of the team. But I am going to be spending on the manufacturing facility, the newer manufacturing facility at a more moderate pace, trying to maximize what I can do with the existing facility and manage it better so that we can delay a little bit or spend more moderately the cash for purpose of bringing in additional capacity to support not just the VINIA growth, but also the others. So I'm not necessarily reducing the potential of the company, because in any case, the focus now is required.

Even if I had more resources in R&D, for example, I would still want to be extremely focused on a program that as we stated many times, just this fragrance program, every analysis we've done, including with the customer, is looking at anywhere between $150 million to $200 million in the course of the next 5 years. So I'd be foolish not to have all the focus on this program, which is because of the nature of that particular fragrance and the raw material and the cost, as I highlighted in my talk a few minutes ago, looking at a really high-end type of product that we can command significant margins. So I do believe it's the right focus.

We're concentrating the efforts that increases dramatically the chances of success, which would bring the manufacturing part for those programs much faster. And as I said, the cash preservation will come mostly from the area of reducing the speed at which I build capacity. And some of it's true also from the VINIA of less spending on sales and marketing, adjusting it better to the revenue and to the revenue growth.

Operator: [Operator Instructions] Your next question comes from the line of Sean McGowan from ROTH Capital Partners.

Sean McGowan: And kind of following up on Matt's question and part of your response, can you be more specific on what the CapEx plans are for next year, given what seems to be a shift in some timing?

Zaki Rakib: So we're -- for 2027, in particular, we're trying to cap the CapEx to be below $5 million.

Operator: There are no further questions at this time. I will now turn the call back to Dr. Zaki Rakib, Chief Executive Officer, for closing remarks.

Zaki Rakib: Thank you for your questions and for joining us today. We remain focused on preserving cash, improving VINIA's contribution and advancing our selected CDMO programs towards commercialization. We appreciate your continued support and look forward to updating you on our progress next quarter.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

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