Heska Corporation Reports Third Quarter 2020 Results

LOVELAND, Colo., Nov. 5, 2020 /PRNewswire/ -- Heska Corporation (NASDAQ: HSKA; "Heska" or "Company"), a leading provider of advanced veterinary diagnostic and specialty products, reported financial results in two segments (North America and International) for its third quarter ended September 30, 2020. Point of Care is "POC" and scil animal care company GmbH is "scil" in this release.

Third Quarter 2020 Highlights

• Record quarterly revenue growth led by strong POC Lab Consumables and recent scil acquisition. North America POC Lab Consumables sales up 15.2% in period and up 9.7% year to date.
• As anticipated, consolidated gross margin was impacted by acquired lower scil margin. Year-over-year, North America quarterly sales rose 16.4% at 48.3% gross margin (+430 bps compared to prior year) and International sales and gross margin met the Company's targets.
• Net loss and diluted EPS impacted by income tax, stock-based compensation, one-time transaction costs, interest associated with convertible debt, and other expenses relating primarily to the acquisition of scil. Non-GAAP diluted EPS impacted by income tax expense and cash interest charge in the current period.
• Research, development, and commercial launch of key strategic initiatives advanced in-line with previously stated timelines.
• Heska management to present strategic plan, new product demonstration and launch roadmap, multi-year financial targets, and other key considerations at the Company's virtual Investor Day on November 18 at 9:00 a.m. MT.

Kevin Wilson, Heska's Chief Executive Officer and President, commented, "Heska's third quarter followed through on a solid 2020 first half. Our teams delivered record revenue and near-universal outperformance across key metrics that lead us to believe that we will perform at the top of the ranges for most, if not all, of the full-year targets we shared in our second quarter earnings release. In the third quarter, Heska's North America POC Lab Consumables sales accelerated nicely, our International segment performed wonderfully, and our margins, cost discipline, cash management, and other key areas were all excellent. Heska and the animal health industry continue to reaffirm a decades-long resiliency. Pet visits and veterinary trends have generally outpaced most forecasted estimates. Heska end-user demand remains strong, our current subscribers continue to increase utilization of key tests, and our teams, logistics, and supply chain continue to meet demand well, even from a partial work-from-home posture."

"In addition to Heska's strong financial results," continued Mr. Wilson, "we met and advanced key non-financial objectives. Research and development initiatives progressed in-line with previously stated timelines, and commercial launch plans further solidified across several projects. Integration with our recent international acquisitions progressed in-line with our expectations and we are confident in our ability to meaningfully grow and improve the profitability of these businesses over time. We remain convinced we will succeed in the core tenets of our five year strategic plan (2018-2023) to: (1) double the geographies and customers we serve, (2) double the products and revenue lines we offer, and (3) continue to grow our core business. We are grateful for our industry, customers, employees, and investors, and we are humbly thankful for our good fortune as we continue to accomplish our plans, which we will share with you in more detail at our Investor Day on November 18th. We hope to 'see' you there (virtually)," concluded Mr. Wilson.

Third Quarter Financial Results

Revenue

North America Segment Revenue

International Segment Revenue

Operating Expenses    

Total operating expenses in the third quarter of 2020 were $23.2 million, compared to $13.5 million in the third quarter of the prior year. The increase is driven primarily by the impact related to the consolidation of our acquisitions' operations of approximately $6.5 million, an increase in stock-based compensation of $2.9 million, and one-time acquisition costs of $0.8 million. 

Liquidity

We continue to demonstrate a strong liquidity position with cash of $84.5 million.

2020 Investor Day

The Company plans to host a virtual Investor Day on November 18, 2020 at 9:00 a.m. MT (11:00 a.m. ET) to present the Company's strategic growth plan, new product demonstration and launch roadmap, multi-year financial targets, and other key considerations. To register for the event, please visit https://ir.heska.com/heska-2020-investor-day/.

Investor Conference Call

Management will conduct a conference call on November 5, 2020 at 9:00 a.m. MT (11:00 a.m. ET) to discuss the third quarter 2020 financial results. To participate, dial 1-866-548-4713 (US) or 1-323-794-2093 (international) and reference conference call access number 9707717. The conference call will also be broadcast live over the Internet at www.heska.com. To listen, simply log on to the web at this address at least ten minutes prior to the start of the call to register and download and install any necessary audio software. Telephone replays of the conference call will be available for playback until November 19, 2020. The telephone replay may be accessed by dialing 1-844-512-2921 (US) or 1-412-317-6671 (international). The replay access number is 9707717.  The webcast will also be archived on www.heska.com for 90 days.

About Heska

Heska Corporation (NASDAQ: HSKA) manufactures, develops and sells advanced veterinary diagnostic and specialty healthcare products through its two business segments: North America and International. Both segments include Point of Care Lab testing instruments and consumables, digital imaging products, software and services, data services, allergy testing and immunotherapy, and single-use offerings such as in-clinic diagnostic tests and heartworm preventive products. The North America segment also includes private label vaccine and pharmaceutical production under third-party agreements and channels, primarily for herd animal health. For more information, please visit www.heska.com.

Forward-Looking Statements

This document contains forward-looking information related to the Company. These forward-looking statements generally include statements that are predictive in nature and depend upon or refer to future events or conditions, and include words such as "believes," "plans," "anticipates," "expects," "intends," "strategy," "future," "opportunity," "may," "will," "should," "could," "potential," or similar expressions. All of the statements in this document, other than historical facts, are forward-looking statements and are based on a number of assumptions that could ultimately prove inaccurate and cause actual results to materially deviate from forward-looking statements. Forward-looking statements in this document include, among other things, statements with respect to Heska's future financial and operating results, future sales, sales split percentages, sales geography percentages, market share, and strategic goals, the anticipated benefits of the scil acquisition; anticipated investments and growth; and the number of customers that the Company will be able to acquire and retain. Such statements are based on current expectations and are subject to a number of risks and uncertainties, including, but not limited to, risks and uncertainties related to the ability to achieve the anticipated benefits of the scil acquisition; supplier availability, competing suppliers, any product's ability to perform and be recognized as anticipated, in particular when such product is under development; Heska's ability to sell and market its products in an economically sustainable fashion, including related to varying customs, cultures, languages and sales cycles and uncertainties with foreign political and economic climates; the Company's ability to integrate the acquired scil business within its existing operations; and new product development and release schedules.

Other factors that could cause actual results to differ materially from those matters expressed in or implied by such forward-looking statements include, among others, risks and uncertainties related to: the impact of the COVID-19 pandemic on consumer demand, our global supply chain and our financial and operational results; the success of third parties in marketing our products; outside business interests of our Chief Executive Officer; our reliance on third party suppliers and collaborative partners; our dependence on key personnel; our dependence upon a number of significant customers; competitive conditions in our industry; our ability to market and sell our products successfully; expansion of our international operations; the impact of regulation on our business; the success of our acquisitions and other strategic development opportunities; our ability to develop, commercialize and gain market acceptance of our products; cybersecurity incidents and related disruptions and our ability to protect our stakeholders' privacy; product returns or liabilities; volatility of our stock price; our ability to service our convertible notes and comply with their terms. Such factors are set forth under "Risk Factors" in the Company's most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q.

Use of Non-GAAP Financial Measures

In addition to financial measures presented on the basis of accounting principles generally accepted in the U.S. ("U.S. GAAP"), we also present third quarter 2020 and 2019 EBITDA (net income before income taxes, interest, depreciation and amortization), and Adjusted EBITDA, Adjusted EBITDA Margin, Non-GAAP earnings per share and adjusted effective tax rate, excluding acquisition and other one-time charges, which are non-GAAP measures. These measures should be viewed as a supplement to (not substitute for) our results of operations presented under U.S. GAAP. The non-GAAP financial measures presented may not be comparable to similarly titled measures of other companies because they may not calculate their measures in the same manner. A reconciliation of non-GAAP financial measures and most directly comparable GAAP financial measures is included in this release. Our management has included these measures to assist in comparing performance from period to period on a consistent basis.

SOURCE Heska Corporation