Full Year Sales $257.3
Million, Full Year Gross Margin Up 150 Basis Points to
43.2%
Full Year North America Lab Consumables Sales
Up 8.7%, Total Active Subscriptions Up 18%
LOVELAND, Colo., Feb. 28,
2023 /PRNewswire/ -- Heska Corporation (NASDAQ: HSKA;
"Heska" or "Company"), a leading global provider of advanced
veterinary diagnostic and specialty products, reported financial
results in two segments (North
America and International) for its fourth quarter and full
year ended December 31, 2022.
Fourth Quarter and
Full Year 2022 and Year Over Year ("YOY") Metrics
|
$ in millions
except Earnings Per Share ("EPS")
|
|
|
Q4
($)
|
Q4 (%)
YOY
|
FY
($)
|
FY (%)
YOY
|
Consolidated
Revenue
|
$66.3
|
(2.5) %
|
$257.3
|
1.4 %
|
|
|
|
|
|
|
Q4
(%)
|
Q4 YOY
bps1
|
FY
(%)
|
FY YOY
bps1
|
Consolidated Gross
Margin
|
41.9 %
|
100
|
43.2 %
|
150
|
Net
Margin2
|
(5.8) %
|
(560)
|
(7.2) %
|
(730)
|
Adjusted EBITDA
Margin3
|
9.4 %
|
(130)
|
10.6 %
|
(110)
|
|
|
|
|
|
|
Q4
($)
|
Q4 (%)
YOY
|
FY
($)
|
FY (%)
YOY
|
Net loss attributable
to Heska
|
$(4.2)
|
NM4
|
$(19.9)
|
NM4
|
Net loss
|
$(3.9)
|
NM4
|
$(18.4)
|
NM4
|
Adjusted
EBITDA3
|
$6.2
|
(14.7) %
|
$27.2
|
(8.5) %
|
EPS, Diluted
|
$(0.41)
|
NM4
|
$(1.92)
|
NM4
|
Non-GAAP EPS,
Diluted3
|
$0.55
|
57.1 %
|
$1.58
|
(1.9) %
|
1Basis Points is
"bps". 2Net margin
represents the ratio of net loss to
revenue. 3See "Use of Non-GAAP
Financial Measures" and related reconciliations provided
below. 4Not Meaningful is
"NM".
|
Report Highlights
- Full year consolidated revenue increased 1.4% on a reported
basis and 5.4% on a constant currency basis (see "Use of Non-GAAP
Financial Measures") to $257.3
million, driven by North America Point-of-Care ("POC") Lab
Consumables up 8.7% (up 9.0% in constant currency), POC Lab
Instruments & Other up 10.1% (up 16.7% in constant currency),
and POC Imaging & Informatics up 7.8% (up 13.0% in constant
currency).
- Consolidated gross margin up 150 bps year over year to 43.2%.
International gross margin up 420 bps year over year to 37.3% and
North America gross margin
approximately in line with prior year at 46.7%.
- Total Active Subscriptions up 18%, Months Under Subscription up
15%, and Minimum Contract Subscription Value ("CSV") up 17%.
- Over 270 Element AIM® analyzers installed in
2022, with over 370 total units now operating since general
commercial launch in the fourth quarter of 2021. Despite early
supply chain and International launch delays, Element
AIM® hit its stride by the fourth quarter- December was
the product's best month (>40), installed customer feedback and
clinical utility are favorable, utilization is growing, and we
continue to view Element AIM® as a significant
contributor to our high margin consumables and analyzer placements
growth for years to come.
- Fourth quarter global analyzer placements grew over 8%, led by
over 28% growth in premium chemistry placements. Full year global
analyzer placements grew over 2% excluding Element AIM®
and grew over 7% including Element AIM®.
- Fourth quarter North America
analyzer placements grew over 5% led by over 20% growth in premium
chemistry placements. Full year North
America analyzer placements grew over 18% excluding Element
AIM® and grew over 28% including Element
AIM®.
- Fourth quarter International analyzer placements grew over 10%,
led by over 30% growth in premium chemistry placements. Full year
International analyzer placements fell 6% excluding Element
AIM® and fell 4.5% including Element
AIM®.
- 2023 Outlook revenue growth of 8%-12%, includes POC Lab
Consumables growth of 12%-15%.
"Heska finished 2022 with great execution and growing momentum
for 2023," commented Kevin Wilson,
Heska's Chief Executive Officer and President, "to deliver full
year results ahead of expectations across most key metrics. Full
year revenue (constant currency) grew 5.4%, adjusted for
$10 million of foreign currency
effects. Heska again placed more new analyzers and converted more
customers to our high-margin, high-retention, sustainable
subscription model, especially in our International segment, where
Active Subscriptions rose 56%, Months Under Subscription were up
47%, and CSV was up 56%. We expect continued sustained
subscriptions growth from new and existing customers in 2023."
"In addition to our financial results, Heska invested heavily
throughout 2022 to prepare several major drivers of future growth,
proprietary differentiation, and scalable capabilities. Heska's
proprietary highlights now include the Element AIM®
urine and fecal analyzer, the Element i+® immunoassay
platform, Heska's Nu.Q® Vet Cancer Screen and Monitor
available exclusively at the point-of-care on Heska's Element
i+® in minutes and for under $50, and Heska's trūRapidTM Series of
tests designed to have the best performance for the best price.
These innovations, our acquisition of MBio Diagnostics, Inc.
("LightDeck"), the creator of our Element i+® platform,
our upcoming launch of new cloud-based Practice Information
Management Software ("PIMS") and related software from our recent
acquisition of and investments in VetZ GmbH ("VetZ"), and our other
announced and unannounced projects are set to contribute to our
growth, profitability, differentiation, scalability, and
competitiveness in 2023 and beyond."
"As the pet industry laps difficult comparable periods, Heska is
well positioned entering 2023, with strong 2022 analyzer placements
under subscription, price, gross margin, new products, and other
positives on tap to contribute to 2023," continued Mr. Wilson. "We
have invested tremendous energy and resources for ten years to
assemble the best assets in the global companion animal
point-of-care diagnostics and informatics market. Today, we possess
a full solutions stack, a highly scalable business model, an
exciting pipeline into big opportunities, strong intellectual
property, owned development and production capabilities, a steadily
growing subscriptions customer base, good and expanding margin
profile and leverage opportunity, a solid cash position, a
respected position in the key western markets, and a great team.
Now," concluded Mr. Wilson, "we set our focus firmly on our
long-articulated Act Three goals to Win at Scale and Win at
Innovation from 2023 through 2028. The work is hard and the
competition is very strong- but we are energized because the
rewards are meaningful and our success matters to pets and their
families, veterinarians and their teams, and every stakeholder
invested in our Heska mission. This is good work and work worth
doing- and Heska is well positioned to do it well."
POC Lab Consumables Subscriptions
POC Lab Consumables Subscriptions 2022. POC Lab
Consumables is Heska's largest, highest margin, and generally
fastest growing business. Heska grew key subscription metrics in
2022, including: (1) Active Subscriptions to 4,388 (+18%), (2)
Months Under Subscription to 178,050 (+15%), and (3) Minimum CSV to
$207.4 million (+17%). Several
factors contributed to the performance, including healthy installed
base and retention, positive new analyzer adoption and mix, above
target success with high volume hospitals, positive pricing, and
confidence from existing and new subscribers to increase
utilization commitments for Heska consumables products over long
time periods.
Year
|
Active
Subscriptions
|
%
Growth
|
Months
Under
Subscription
|
%
Growth
|
Min
CSV (Million)1
|
%
Growth
|
2013
|
370
|
|
|
|
|
|
2014
|
730
|
97 %
|
|
|
|
|
2015
|
1,235
|
69 %
|
54,200
|
|
$38.0
|
|
2016
|
1,665
|
35 %
|
68,750
|
27 %
|
$51.0
|
34 %
|
2017
|
1,950
|
17 %
|
75,950
|
10 %
|
$56.4
|
11 %
|
2018
|
2,175
|
12 %
|
90,844
|
20 %
|
$71.9
|
28 %
|
2019
|
2,376
|
9 %
|
100,249
|
10 %
|
$101.6
|
41 %
|
2020 Total
Actual
|
2,980
|
25 %
|
124,695
|
24 %
|
$131.4
|
29 %
|
2020 North
America
|
2,645
|
11 %
|
109,141
|
9 %
|
$121.0
|
19 %
|
2020
International
|
335
|
|
15,554
|
|
$10.4
|
|
2021 Total
Actual
|
3,717
|
25 %
|
155,022
|
24 %
|
$176.6
|
34 %
|
2021 North
America
|
2,793
|
6 %
|
105,845
|
(3) %
|
$143.6
|
19 %
|
2021
International
|
924
|
176 %
|
49,177
|
216 %
|
$33.0
|
218 %
|
2022 Total
Outlook
|
4,650
|
25 %
|
192,500
|
24 %
|
$219.0
|
24 %
|
2022 North
America
|
2,950
|
6 %
|
112,500
|
6 %
|
$165.0
|
15 %
|
2022
International
|
1,700
|
84 %
|
80,000
|
63 %
|
$54.0
|
64 %
|
2022 Total
Actual
|
4,388
|
18 %
|
178,050
|
15 %
|
$207.4
|
17 %
|
2022 North
America
|
2,949
|
6 %
|
105,716
|
— %
|
$155.9
|
9 %
|
2022
International
|
1,439
|
56 %
|
72,334
|
47 %
|
$51.5
|
56 %
|
2023 Total
Outlook
|
5,250
|
20 %
|
206,500
|
16 %
|
$245.0
|
18 %
|
2023 North
America
|
3,100
|
5 %
|
106,500
|
1 %
|
$170.0
|
9 %
|
2023
International
|
2,150
|
49 %
|
100,000
|
38 %
|
$75.0
|
46 %
|
1Contract subscription value
includes individual subscriber minimums as estimates for corporate
sites active.
|
POC Lab Consumables Subscriptions 2023 Outlook.
Heska anticipates subscriptions growth in 2023, similar to 2022,
with steady gains in North America
combined with significant International subscriptions expansion to
achieve in 2023: (1) Active Subscriptions to 5,250 (+20%), (2)
Months Under Subscription to 206,500 (+16%), and (3) Minimum CSV to
$245.0 million (+18%). Regarding
International, Heska occupies a stronger market share position in
International than it did in North
America when the Company made a similar effort in 2013-2015.
This leads us to again forecast faster International subscriptions
growth than our historical North
America 2013-2015 actuals. We expect to continue to see
positive gross margin and revenue expansion in our International
segment's POC Lab Consumables in 2023.
Fourth Quarter and Full Year Financial Results
Revenue
North America Segment Revenue
|
Q4
($)
|
Q4 (%)
YOY
|
FY
($)
|
FY (%)
YOY
|
North America
Revenue
|
$43.2
|
(0.3) %
|
$161.8
|
1.8 %
|
POC Lab Instruments
& Other
|
$5.4
|
11.1 %
|
$17.2
|
15.8 %
|
POC Lab
Consumables
|
$19.6
|
8.6 %
|
$78.3
|
8.7 %
|
POC Imaging &
Informatics
|
$7.7
|
(7.2) %
|
$27.3
|
(7.4) %
|
PVD1
|
$5.3
|
(30.5) %
|
$22.0
|
(11.7) %
|
OVP2
|
$5.2
|
15.0 %
|
$16.9
|
(3.9) %
|
1"PVD" is Pharmaceuticals,
Vaccines and Diagnostic, and includes
Tri-Heart® heartworm preventive and
Allercept® allergy testing and
therapeutics.
|
2"OVP" is former Other Vaccines
and Pharmaceuticals segment contract manufacturing products for
mainly herd animals.
|
Note: Numbers may
not foot due to rounding. North America segment is not materially
impacted by fluctuations in foreign exchange rates.
|
International Segment Revenue
|
Q4
($)
|
Q4 (%)
YOY
|
Q4 (%)
YOY
|
FY
($)
|
FY (%)
YOY
|
FY (%)
YOY
|
|
|
Reported
|
Constant
Currency
|
|
Reported
|
Constant
Currency
|
International
Revenue
|
$23.2
|
(6.5) %
|
2.8 %
|
$95.5
|
0.7 %
|
10.9 %
|
POC Lab Instruments
& Other
|
$4.4
|
4.6 %
|
16.8 %
|
$15.7
|
4.4 %
|
17.0 %
|
POC Lab
Consumables
|
$9.6
|
(9.3) %
|
1.7 %
|
$41.2
|
(10.5) %
|
0.2 %
|
POC Imaging &
Informatics
|
$8.4
|
(4.0) %
|
2.5 %
|
$35.2
|
23.6 %
|
32.8 %
|
PVD1
|
$0.8
|
(36.7) %
|
(33.7) %
|
$3.5
|
(34.9) %
|
(32.0) %
|
1"PVD" is Pharmaceuticals,
Vaccines and Diagnostic, and includes allergy testing and
therapeutics.
|
Note: Numbers may
not foot due to rounding.
|
Profitability
Full year consolidated gross margin improved approximately 150
bps to 43.2% (110 bps in constant currency). International
gross margin improved approximately 420 bps to 37.3% as we
continued our ongoing product rationalization efforts to replace
lower margin legacy products acquired as part of the 2020
acquisition of scil animal company ("scil"), particularly within
POC Lab. The addition of PIMS and other software to our product
portfolio from our acquisition of VetZ in early 2022 also increased
gross margin. Increased installations of Element
AIM® in our North
America segment along with unfavorable product mix offset
margin gains in our POC Lab Consumables resulting in neutral gross
margin year over year.
Full year operating margin was negative 7.9%, a 750 bps decline.
We invested $13 million more in
research and development projects, the majority of which is
attributed to our planned launch of a point-of-care cancer
screening and monitoring test in the first half of this year.
Additionally, we incurred higher acquisition related costs and
other non-recurring items and extraordinary charges not indicative
of ongoing operations.
Adjusted EBITDA margin, which excludes stock-based compensation
and acquisition related costs, non-recurring items and
extraordinary charges not indicative of ongoing operations,
declined 110 bps (140 bps on a constant currency basis) driven by
increased operating costs from investment in growth and new
technologies, such as the ongoing development of a cloud-based PIMS
and our new trūRapidTM portfolio.
Liquidity
We continue to demonstrate a strong liquidity position with cash
of $156.6 million. On January 3, 2023, we closed the acquisition of
LightDeck, utilizing cash of approximately $22 million.
2023 Outlook
The table below introduces the Company's fiscal year 2023
guidance ("2023 Outlook") for revenue and adjusted EBITDA margin
and other key financial metrics:
|
2023
Outlook
|
Consolidated
Revenue
|
$278-$288
million
|
POC Lab
Revenue
|
$165-$175
million
|
POC Imaging &
Informatics Revenue
|
$60-$70
million
|
Adjusted EBITDA
Margin1
|
12%+
|
Adjusted EBITDA
Margin1 inclusive of LightDeck
|
~10%
|
Dollars in millions.
2023 Outlook are forward looking statements. Foreign currency
exchange rate assumptions for 2023 are (in U.S. dollars): Euro
$1.07 and Canadian dollar $0.74.
|
1Excludes estimates for taxes,
interest, depreciation and amortization, purchase accounting,
acquisition and other one-time costs, and stock-based compensation.
Heska is unable to provide a reconciliation of the non-GAAP
guidance measure to the corresponding GAAP measure on a
forward-looking basis without unreasonable effort due to the high
variability and low visibility of most of the excluded items.
Material changes to any one of these items could have a significant
impact on future GAAP results. Heska believes the non-GAAP
presentation is more in-line with future ongoing operating
performance.
|
- Reported and constant currency revenue growth of 8%-12%.
- North America segment is
approximately 60% of full year 2023 Outlook consolidated revenue,
which includes estimated POC Lab Consumable revenue growth rate of
approximately 12%-15%.
- International segment is approximately 40% of full year 2022
Outlook consolidated revenue, which includes estimated POC Lab
Consumable revenue growth rate of approximately 12%-14% on a
reported basis and 9%-11% on a constant currency basis.
- Gross margin expansion of 100 bps to 200 bps excluding the
impact of the LightDeck acquisition.
- Expanded research and development capabilities and
manufacturing capacity as part of our acquisition of LightDeck will
be dilutive to 2023, impacting adjusted EBITDA margin by
approximately 200 bps. Product pipeline expansion and cost
rationalization is underway.
Heska's Commitment to Corporate Responsibility and
Stewardship
Heska is committed to corporate responsibility and stewardship.
Driven by oversight from Heska's Board of Directors and executive
leadership, we are dedicated to promoting and engaging
environmental, social and governance (ESG) priorities throughout
the organization in order to align activities and resources with
sound practices and accountability. In so doing, we hold ourselves
to high standards to empower and enrich the lives of our employees,
foster a culture that values diversity and inclusion, enhance
sustainability in our facilities and operations, and contribute to
the communities in which we serve. Heska has developed the
necessary framework, roadmap and objectives to promote our
commitment and produce meaningful results in the years ahead
including its Corporate Responsibility Task Force consisting of
management across key functional areas. The Company has begun to
disclose practices and data using the framework of industry-leading
standards such as Sustainability Accounting Standard Board (SASB)
guidelines, United Nations Sustainable Development Goals (UN SDGs),
and Heska will consider the recommendations of the Task Force on
Climate-related Financial Disclosures (TCFD) as it pursues its
objectives. For more information, please visit:
https://ir.heska.com/heska-esg-initiative/.
Earnings Conference Call
Heska management will host a conference call on February 28, 2023 at 9:00
a.m. MT (11:00 a.m. ET) to discuss the Company's fourth
quarter and full year 2022 financial results. The call may be
accessed by dialing 1-877-451-6152 within the United States and 1-201-389-0879 outside
of the United States and by
referencing conference identification number 13736218. The call
will also be webcast online at https://ir.heska.com/events/. A
telephonic replay of the conference call will be available through
March 14, 2023. The replay may be
accessed by dialing 1-800-512-2921 within the United States or 1-412-317-6671 outside of
the United States and by
referencing replay identification number 13736218. The webcast will
be archived on the Company's website for 90 days.
About Heska
Heska Corporation (NASDAQ: HSKA) sells, manufactures, markets,
and supports diagnostic and specialty products and solutions for
veterinary practitioners. Heska's portfolio includes point-of-care
diagnostic laboratory instruments and consumables including rapid
assay diagnostic products and digital cytology services;
point-of-care digital imaging diagnostic products; local and
cloud-based data services; practice information management software
(PIMS) and related software and support; reference laboratory
testing; allergy testing and immunotherapy; heartworm preventive
products; and vaccines. Heska's primary focus is supporting
companion animal veterinarians in providing care to their patients.
Heska's business is composed of two operating and reportable
segments: North America and
International. North America
consists of the United States,
Canada and Mexico. International consists of geographies
outside of North America,
primarily in Germany, Italy, Spain,
France, Switzerland, Australia and Malaysia. The Company's strategic focus on
point-of-care diagnostic laboratory and imaging products is
included in both segments. The North
America segment also includes the contract manufacturing of
vaccines and pharmaceutical products and a small veterinary
laboratory, and the International segment includes PIMS business
and veterinary laboratories. 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,
Lacuna, BiEsseA, Biotech, and VetZ acquisitions. 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 recent acquisitions; supplier availability; competing
suppliers; any product's ability to performed 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 businesses 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 and
global economic conditions on our business, results of operations
and financial condition; the success of third parties in marketing
our products; 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 dependence on third parties to
successfully develop new products; 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; and 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.
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 fourth quarter and full year 2022 and 2021 EBITDA
(net income before income taxes, interest, depreciation and
amortization), Adjusted EBITDA, Adjusted EBITDA Margin and Non-GAAP
earnings per share, 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.
Constant currency is a non-GAAP measure utilized by Heska
management to measure performance, excluding the impact of
translational movements, and is intended to be indicative of
results in local currency. As we operate in various foreign
countries where the local currency may strengthen or weaken
significantly versus the U.S. dollar, we utilize a constant
currency measure as an additional metric to evaluate performance
without consideration of foreign currency movements. This
information is non-GAAP and should be viewed as a supplement to
(not a substitute for) our reported results of operations under
U.S. GAAP. We calculate the impact of foreign exchange by
translating our current period local currency results throughout
the year at the average exchange rates during the respective prior
year period. The result is the current period results in U.S.
dollars, as if foreign exchange rates had not changed from the
prior year period.
|
HESKA CORPORATION
AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF (LOSS) INCOME
|
(in thousands, except
per share amounts)
|
(unaudited)
|
|
|
|
Three Months
Ended December
31,
|
|
Twelve Months
Ended December
31,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Revenue, net
|
|
$
66,338
|
|
$
68,068
|
|
$ 257,307
|
|
$ 253,739
|
Cost of
revenue
|
|
38,519
|
|
40,260
|
|
146,140
|
|
147,945
|
Gross profit
|
|
27,819
|
|
27,808
|
|
111,167
|
|
105,794
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Selling and
marketing
|
|
12,619
|
|
11,143
|
|
47,661
|
|
45,284
|
Research and
development
|
|
2,589
|
|
1,893
|
|
19,753
|
|
6,982
|
General and
administrative
|
|
15,240
|
|
13,654
|
|
64,051
|
|
54,521
|
Total operating
expenses
|
|
30,448
|
|
26,690
|
|
131,465
|
|
106,787
|
Operating (loss)
income
|
|
(2,629)
|
|
1,118
|
|
(20,298)
|
|
(993)
|
Interest and other
expense, net
|
|
456
|
|
1,373
|
|
1,536
|
|
2,448
|
Loss before income
taxes and equity in losses of unconsolidated affiliates
|
|
(3,085)
|
|
(255)
|
|
(21,834)
|
|
(3,441)
|
Income tax expense
(benefit):
|
|
|
|
|
|
|
|
|
Current income tax
expense
|
|
838
|
|
277
|
|
1,288
|
|
891
|
Deferred income tax
benefit
|
|
(73)
|
|
(421)
|
|
(4,698)
|
|
(4,464)
|
Total income tax
expense (benefit)
|
|
765
|
|
(144)
|
|
(3,410)
|
|
(3,573)
|
|
|
|
|
|
|
|
|
|
Net (loss) income
before equity in losses of unconsolidated affiliates
|
|
(3,850)
|
|
(111)
|
|
(18,424)
|
|
132
|
Equity in losses of unconsolidated affiliates
|
|
(371)
|
|
(443)
|
|
(1,465)
|
|
(1,280)
|
Net loss attributable
to Heska Corporation
|
|
$
(4,221)
|
|
$
(554)
|
|
$ (19,889)
|
|
$
(1,148)
|
|
|
|
|
|
|
|
|
|
Basic loss per share
attributable to Heska Corporation
|
|
$
(0.41)
|
|
$
(0.05)
|
|
$
(1.92)
|
|
$
(0.11)
|
Diluted loss per share
attributable to Heska Corporation
|
|
$
(0.41)
|
|
$
(0.05)
|
|
$
(1.92)
|
|
$
(0.11)
|
|
|
|
|
|
|
|
|
|
Weighted average
outstanding shares used to compute basic loss per share
attributable to Heska Corporation
|
|
10,379
|
|
10,212
|
|
10,343
|
|
10,015
|
Weighted average
outstanding shares used to compute diluted loss per share
attributable to Heska Corporation
|
|
10,379
|
|
10,212
|
|
10,343
|
|
10,015
|
|
|
|
HESKA CORPORATION
AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(in
thousands)
|
(unaudited)
|
|
|
|
December
31,
|
|
December
31,
|
|
|
2022
|
|
2021
|
|
|
|
|
|
ASSETS
|
Current
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
156,618
|
|
$
223,574
|
Accounts receivable,
net of allowance for losses of $1,129 and $874,
respectively
|
|
29,493
|
|
27,995
|
Inventories
|
|
60,050
|
|
49,361
|
Net investment in
leases, current, net of allowance for losses of $182 and $137,
respectively
|
|
7,433
|
|
6,175
|
Prepaid
expenses
|
|
5,514
|
|
5,244
|
Other current
assets
|
|
5,926
|
|
7,206
|
Total current
assets
|
|
265,034
|
|
319,555
|
|
|
|
|
|
Property and equipment,
net
|
|
32,171
|
|
33,413
|
Operating lease
right-of-use assets
|
|
6,897
|
|
5,198
|
Goodwill
|
|
135,918
|
|
118,826
|
Other intangible
assets, net
|
|
62,393
|
|
56,705
|
Deferred tax asset,
net
|
|
23,684
|
|
19,429
|
Net investment in
leases, non-current
|
|
27,499
|
|
20,128
|
Investments in
unconsolidated affiliates
|
|
3,959
|
|
5,424
|
Related party
convertible note receivable, net
|
|
2,224
|
|
6,800
|
Promissory note
receivable from investee, net
|
|
13,511
|
|
8,448
|
Other non-current
assets
|
|
12,526
|
|
10,146
|
Total assets
|
|
$
585,816
|
|
$
604,072
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
16,403
|
|
$
15,374
|
Accrued
liabilities
|
|
15,149
|
|
19,424
|
Operating lease
liabilities, current
|
|
2,944
|
|
2,227
|
Deferred revenue,
current, and other
|
|
5,081
|
|
6,901
|
Total current
liabilities
|
|
39,577
|
|
43,926
|
|
|
|
|
|
Convertible note,
non-current, net
|
|
84,467
|
|
84,034
|
Notes
payable
|
|
11,130
|
|
15,900
|
Deferred revenue,
non-current
|
|
4,096
|
|
3,854
|
Operating lease
liabilities, non-current
|
|
4,528
|
|
3,509
|
Deferred tax
liability
|
|
16,438
|
|
12,667
|
Other
liabilities
|
|
3,372
|
|
4,328
|
Total
liabilities
|
|
163,608
|
|
168,218
|
|
|
|
|
|
Total stockholders'
equity
|
|
422,208
|
|
435,854
|
Total liabilities and
stockholders' equity
|
|
$
585,816
|
|
$
604,072
|
|
|
|
HESKA CORPORATION
AND SUBSIDIARIES
|
RECONCILIATION OF
GAAP NET (LOSS) INCOME TO NON-GAAP ADJUSTED EBITDA
|
($ in
thousands)
|
(unaudited)
|
|
|
Three Months
Ended December
31,
|
|
Twelve Months
Ended December
31,
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Net (loss)
income(1)
|
$
(3,850)
|
|
$ (111)
|
|
$ (18,424)
|
|
$
132
|
Income tax expense (benefit)
|
765
|
|
(144)
|
|
(3,410)
|
|
(3,573)
|
Interest (income) expense, net
|
(498)
|
|
979
|
|
613
|
|
2,404
|
Depreciation and amortization
|
3,639
|
|
3,471
|
|
13,966
|
|
13,555
|
EBITDA
|
$
56
|
|
$ 4,195
|
|
$
(7,255)
|
|
$
12,518
|
Acquisition-related and other non-recurring/extraordinary
costs(2)
|
2,827
|
|
117
|
|
19,919
|
|
238
|
Stock-based compensation
|
3,693
|
|
3,402
|
|
16,004
|
|
18,263
|
Equity in losses of unconsolidated affiliates
|
(371)
|
|
(443)
|
|
(1,465)
|
|
(1,280)
|
Adjusted
EBITDA
|
$ 6,205
|
|
$ 7,271
|
|
$
27,203
|
|
$
29,739
|
Net
margin(3)
|
(5.8) %
|
|
(0.2) %
|
|
(7.2) %
|
|
0.1 %
|
Adjusted EBITDA
margin(3)
|
9.4 %
|
|
10.7 %
|
|
10.6 %
|
|
11.7 %
|
|
(1) Net
(loss) income used for reconciliation represents the "Net (loss)
income before equity in losses of unconsolidated
affiliates."
|
|
(2) To
exclude the effect of acquisition related costs, non-recurring
items and extraordinary charges not indicative of ongoing
operations of $2.8 million and $19.9 million for the three and
twelve months ending December 31, 2022, and of $0.1 million and
$0.2 million for the three months and twelve months ended December
31, 2021. These costs in the three months ended December 31, 2022
were incurred as a result of the $0.4 million provision for credit
losses for a convertible note receivable, the $0.5 million
mark-to-market adjustment of the fair value of the embedded
derivative on the convertible note receivable and other
acquisition-related and non-recurring costs. These costs in
the twelve months ended December 31, 2022 were incurred as a result
of the $3.9 million provision for credit losses for a convertible
note receivable, the $1.0 million mark-to-market adjustment of the
fair value of the embedded derivative on the convertible note
receivable, a $10.0 million licensing payment and $2.2 million
related to the acquisitions of LightDeck and VetZ as well as other
acquisition-related and non-recurring charges, partially offset by
a reduction in contingent consideration of $1.3 million for the
year ended December 31, 2022.
|
|
(3) Net
margin and adjusted EBITDA margin are calculated as the ratio of
net (loss) income and adjusted EBITDA, respectively, to
revenue.
|
|
|
|
HESKA CORPORATION
AND SUBSIDIARIES
|
RECONCILIATION OF
GAAP TO NON-GAAP NET (LOSS) INCOME PER DILUTED SHARE
|
($ in
thousands)
|
(unaudited)
|
|
|
Three Months
Ended December
31,
|
|
Twelve Months
Ended December
31,
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
GAAP net (loss) income
attributable to Heska per diluted share
|
$ (0.41)
|
|
$ (0.05)
|
|
$ (1.92)
|
|
$ (0.11)
|
Acquisition-related and other one-time
costs(1)
|
0.27
|
|
0.01
|
|
1.89
|
|
0.02
|
Amortization of acquired intangibles(2)
|
0.31
|
|
0.16
|
|
0.81
|
|
0.60
|
Purchase accounting
adjustments related to inventory and fixed asset
step-up(3)
|
0.05
|
|
—
|
|
0.22
|
|
0.03
|
Amortization of debt discount and issuance costs
|
—
|
|
—
|
|
—
|
|
0.01
|
Stock-based compensation
|
0.35
|
|
0.32
|
|
1.52
|
|
1.75
|
Loss
on equity investee transactions
|
0.04
|
|
0.04
|
|
0.14
|
|
0.12
|
Estimated income tax effect of above non-GAAP
adjustments(4)
|
(0.06)
|
|
(0.13)
|
|
(1.08)
|
|
(0.81)
|
Non-GAAP net income per
diluted share
|
$
0.55
|
|
$
0.35
|
|
$ 1.58
|
|
$ 1.61
|
|
|
|
|
|
|
|
|
Shares used in diluted
per share calculations
|
10,446
|
|
10,663
|
|
10,523
|
|
10,407
|
|
(1) To exclude the effect of
acquisition related costs, non-recurring items and extraordinary
charges not indicative of ongoing operations of $2.8 million
and $19.9 million for the three and twelve months ending December
31, 2022, and of $0.1 million and $0.2 million for the three months
and year ended December 31, 2021. These costs in the three months
ended December 31, 2022 were incurred as a result of the $0.4
million provision for credit losses for a convertible note
receivable, the $0.5 million mark-to-market adjustment of the fair
value of the embedded derivative on the convertible note receivable
and other acquisition-related and non-recurring costs. These
costs in the twelve months ended December 31, 2022 were incurred as
a result of the $3.9 million provision for credit losses for a
convertible note receivable, the $1.0 million mark-to-market
adjustment of the fair value of the embedded derivative on the
convertible note receivable, a $10.0 million licensing payment and
$2.2 million related to the acquisitions of Lightdeck and VetZ as
well as other acquisition-related charges and non-recurring,
partially offset by a reduction in contingent consideration of $1.3
million for the year ended December 31, 2022.
|
|
(2) To
exclude the effect of amortization of acquired intangibles of $3.2
million and $8.6 million in the three and twelve months ended
December 31, 2022, compared to $1.7 million and $6.3 million in the
three and twelve months ended December 31, 2021. These costs were
incurred as part of the purchase accounting adjustments for recent
acquisitions.
|
|
(3) To
exclude the effect of purchase accounting adjustments for inventory
step up amortization of $0.6 million and $2.3 million for the three
months and year ended December 31, 2022, compared to zero and $0.3
million in the three months and year ended December 31,
2021.
|
|
(4)
Represents income tax expense utilizing an estimated effective tax
rate that adjusts for non-GAAP measures including:
acquisition related, non-recurring and extraordinary costs
(excluding costs which are not deductible for tax of $0.2 million
and $0.3 million for the three months and year ended December 31,
2022, respectively, compared to benefits of $0.3 million and $1.0
million for the three months and year ended December 31, 2021,
respectively), amortization of acquired intangibles, purchase
accounting adjustments, amortization of debt discount and issuance
costs, and stock-based compensation. This incorporates the discrete
tax impacts related to stock-based compensation of $0.9 million
expense and $0.6 million expense for the three months and year
ended December 31, 2022, respectively, compared to $0.1 million
expense and $1.6 million benefit for the three months and year
ended December 31, 2021, respectively. Adjusted effective tax rates
are approximately 25% for all periods presented.
|
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SOURCE Heska Corporation