LOVELAND, Colo., May 5, 2023
/PRNewswire/ -- Heska Corporation (NASDAQ: HSKA; "Heska" or
"Company"), a leading global provider of advanced veterinary
diagnostic and specialty products, reported financial results for
its first quarter ended March 31,
2023.
First Quarter 2023
and Year Over Year ("YOY") Metrics
|
$ in millions
except Earnings Per Share ("EPS")
|
|
|
Q1
($)
|
Q1 (%)
YOY
|
Consolidated
revenue
|
$62.4
|
(3.7) %
|
|
|
|
|
Q1
(%)
|
Q1 YOY
bps1
|
Consolidated gross
margin
|
43.9 %
|
(110)
|
Net loss
margin2
|
(15.7) %
|
(90)
|
Adjusted EBITDA
margin3
|
5.2 %
|
(670)
|
|
|
|
|
Q1
($)
|
Q1 (%)
YOY
|
Net loss attributable
to Heska
|
$(10.1)
|
(1.4) %
|
Net loss
|
$(9.8)
|
(1.8) %
|
Adjusted
EBITDA3
|
$3.3
|
(57.6) %
|
EPS, Diluted
|
$(0.97)
|
— %
|
Non-GAAP EPS,
Diluted3
|
$0.17
|
(37.0) %
|
|
1Basis Points is
"bps". 2Net loss margin
represents the ratio of net loss to
revenue. 3See "Use of Non-GAAP
Financial Measures" and related reconciliations provided
below.
|
|
Recent Merger Agreement Announcement
On April 3rd, 2023,
Heska and Antech Diagnostics, Inc. ("Antech"), a subsidiary of Mars
Incorporated, announced a definitive merger agreement under which
Antech will acquire Heska for $120
per share (the "Merger"). As a result, Heska will not host an
earnings call to discuss the Company's financial results for the
first quarter ended March 31, 2023.
Completion of the Merger is subject to approval by Heska's
shareholders, regulatory approvals, and other customary closing
conditions.
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 the Merger. 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 effect of the Merger and its pendency
and the conditions to and timeline for completing the Merger. 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, those set forth under "Risk
Factors" in the Company's most recent Annual Report on Form 10-K
and its Quarterly Report on Form 10-Q for the quarter ended
March 31, 2023.
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 first quarter 2023 and 2022 EBITDA (net loss 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.
HESKA CORPORATION
AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF LOSS
|
(in thousands, except
per share amounts)
|
(unaudited)
|
|
|
|
Three Months
Ended
March
31,
|
|
|
2023
|
|
2022
|
Revenue, net
|
|
$
62,381
|
|
$
64,800
|
Cost of
revenue
|
|
34,982
|
|
35,655
|
Gross profit
|
|
27,399
|
|
29,145
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
Selling and
marketing
|
|
12,449
|
|
11,997
|
Research and
development
|
|
3,088
|
|
12,456
|
General and
administrative
|
|
22,285
|
|
16,146
|
Total operating
expenses
|
|
37,822
|
|
40,599
|
Operating
loss
|
|
(10,423)
|
|
(11,454)
|
Interest and other
(income) expense, net
|
|
(272)
|
|
359
|
Loss before income
taxes and equity in losses of unconsolidated affiliates
|
|
(10,151)
|
|
(11,813)
|
Income tax (benefit)
expense:
|
|
|
|
|
Current income tax
expense
|
|
690
|
|
158
|
Deferred income tax
benefit
|
|
(1,065)
|
|
(2,366)
|
Total income tax
benefit
|
|
(375)
|
|
(2,208)
|
|
|
|
|
|
Net loss before equity
in losses of unconsolidated affiliates
|
|
(9,776)
|
|
(9,605)
|
Equity in losses of unconsolidated affiliates
|
|
(349)
|
|
(381)
|
Net loss attributable
to Heska Corporation
|
|
$ (10,125)
|
|
$
(9,986)
|
|
|
|
|
|
Basic loss per share
attributable to Heska Corporation
|
|
$
(0.97)
|
|
$
(0.97)
|
Diluted loss per share
attributable to Heska Corporation
|
|
$
(0.97)
|
|
$
(0.97)
|
|
|
|
|
|
Weighted average
outstanding shares used to compute basic loss per share
attributable to Heska Corporation
|
|
10,390
|
|
10,273
|
Weighted average
outstanding shares used to compute diluted loss per share
attributable to Heska Corporation
|
|
10,390
|
|
10,273
|
HESKA CORPORATION
AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(in
thousands)
|
(unaudited)
|
|
|
|
March
31,
|
|
December
31,
|
|
|
2023
|
|
2022
|
|
|
|
|
|
ASSETS
|
Current
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
125,209
|
|
$
156,618
|
Accounts receivable,
net of allowance for losses of $1,190 and $1,129,
respectively
|
|
26,054
|
|
29,493
|
Inventories
|
|
64,183
|
|
60,050
|
Net investment in
leases, current, net of allowance for losses of $190 and $182,
respectively
|
|
8,173
|
|
7,433
|
Prepaid
expenses
|
|
6,239
|
|
5,514
|
Related party
convertible note receivable, net
|
|
2,312
|
|
—
|
Other current
assets
|
|
6,451
|
|
5,926
|
Total current
assets
|
|
238,621
|
|
265,034
|
|
|
|
|
|
Property and equipment,
net
|
|
55,030
|
|
32,171
|
Operating lease
right-of-use assets
|
|
13,101
|
|
6,897
|
Goodwill
|
|
145,403
|
|
135,918
|
Other intangible
assets, net
|
|
65,813
|
|
62,393
|
Deferred tax asset,
net
|
|
31,483
|
|
23,684
|
Net investment in
leases, non-current
|
|
29,605
|
|
27,499
|
Investments in
unconsolidated affiliates
|
|
592
|
|
3,959
|
Related party
convertible note receivable, net
|
|
—
|
|
2,224
|
Promissory note
receivable from investee, net
|
|
—
|
|
13,511
|
Other non-current
assets
|
|
13,067
|
|
12,526
|
Total assets
|
|
$
592,715
|
|
$
585,816
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
12,246
|
|
$
16,403
|
Accrued
liabilities
|
|
20,866
|
|
15,149
|
Operating lease
liabilities, current
|
|
4,049
|
|
2,944
|
Deferred revenue,
current, and other
|
|
5,137
|
|
5,081
|
Total current
liabilities
|
|
42,298
|
|
39,577
|
|
|
|
|
|
Convertible note,
non-current, net
|
|
84,579
|
|
84,467
|
Notes
payable
|
|
11,130
|
|
11,130
|
Deferred revenue,
non-current
|
|
5,422
|
|
4,096
|
Operating lease
liabilities, non-current
|
|
9,674
|
|
4,528
|
Deferred tax
liability
|
|
16,629
|
|
16,438
|
Other
liabilities
|
|
5,312
|
|
3,372
|
Total
liabilities
|
|
175,044
|
|
163,608
|
|
|
|
|
|
Total stockholders'
equity
|
|
417,671
|
|
422,208
|
Total liabilities and
stockholders' equity
|
|
$
592,715
|
|
$
585,816
|
HESKA CORPORATION
AND SUBSIDIARIES
|
RECONCILIATION OF
GAAP NET LOSS TO NON-GAAP ADJUSTED EBITDA
|
($ in
thousands)
|
(unaudited)
|
|
|
Three Months
Ended
March
31,
|
|
2023
|
|
2022
|
Net
loss(1)
|
$
(9,776)
|
|
$
(9,605)
|
Income tax benefit
|
(375)
|
|
(2,208)
|
Interest (income) expense, net
|
(423)
|
|
440
|
Depreciation and amortization
|
3,974
|
|
3,300
|
EBITDA
|
$
(6,600)
|
|
$
(8,073)
|
Acquisition-related and other non-recurring/extraordinary
costs(2)
|
7,135
|
|
11,032
|
Stock-based compensation
|
3,077
|
|
5,110
|
Equity in losses of unconsolidated affiliates
|
(349)
|
|
(381)
|
Adjusted
EBITDA
|
$ 3,263
|
|
$ 7,688
|
Net loss
margin(3)
|
(15.7) %
|
|
(14.8) %
|
Adjusted EBITDA
margin(3)
|
5.2 %
|
|
11.9 %
|
|
(1) Net loss
used for reconciliation represents the "Net loss 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 $7.1 million for the three months ended March
31, 2023, and of $11.0 million for the three months ended March 31,
2022. These costs in the three months ended March 31, 2023 were
incurred as a result of the proposed Merger discussed in Note 1 to
the Condensed Consolidated Financial Statements included in Part I.
Item 1 of the Quarterly Report on Form 10-Q for March 31, 2023 and
the acquisition of LightDeck. The costs for the three months
ended March 31, 2022 are primarily related to a $10.0 million
licensing expense as well as acquisition-related
charges.
|
|
(3) Net loss
margin and adjusted EBITDA margin are calculated as the ratio of
net loss and adjusted EBITDA, respectively, to revenue.
|
|
HESKA CORPORATION
AND SUBSIDIARIES
|
RECONCILIATION OF
GAAP TO NON-GAAP NET LOSS PER DILUTED SHARE
|
($ in
thousands)
|
(unaudited)
|
|
|
Three Months
Ended
March
31,
|
|
2023
|
|
2022
|
GAAP net loss
attributable to Heska per diluted share
|
$ (0.97)
|
|
$ (0.97)
|
Acquisition-related and other one-time
costs(1)
|
0.68
|
|
1.04
|
Amortization of acquired intangibles(2)
|
0.24
|
|
0.21
|
Purchase accounting
adjustments related to fixed asset step-up(3)
|
0.05
|
|
0.05
|
Stock-based compensation
|
0.29
|
|
0.48
|
Loss
on equity investee transactions
|
0.03
|
|
0.04
|
Estimated income tax effect of above non-GAAP
adjustments(4)
|
(0.15)
|
|
(0.58)
|
Non-GAAP net income per
diluted share
|
$
0.17
|
|
$
0.27
|
|
|
|
|
Shares used in diluted
per share calculations
|
10,521
|
|
10,605
|
|
(1) To
exclude the effect of acquisition related costs, non-recurring
items and extraordinary charges not indicative of ongoing
operations of $7.1 million for the three months ended March 31,
2023, and of $11.0 million for the three months ended March 31,
2022. These costs in the three months ended March 31, 2023 were
incurred as a result of the proposed Merger discussed in Note 1 to
the Condensed Consolidated Financial Statements included in Part I.
Item 1 of the Quarterly Report on Form 10-Q for March 31, 2023 and
the acquisition of LightDeck. The costs for the three months
ended March 31, 2022 are primarily related to a $10.0 million
licensing expense as well as acquisition-related
charges.
|
|
(2) To
exclude the effect of amortization of acquired intangibles of
$2.5 million in the three months ended March 31, 2023,
compared to $2.2 million in the three months ended March 31,
2022. These costs were incurred as part of the purchase accounting
adjustments for recent acquisitions.
|
|
(3) To
exclude the effect of purchase accounting adjustments for step up
amortization of $0.5 million for the three months ended
March 31, 2023, compared to $0.6 million in the three months
ended March 31, 2022.
|
|
(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 items
which are not deductible for tax of $5.2 million for the three
months ended March 31, 2023, compared to $0.1 million for the
three months ended March 31, 2022), amortization of acquired
intangibles, purchase accounting adjustments, amortization of debt
discount and issuance costs, and stock-based compensation. This
incorporates the discrete tax related to stock-based compensation
of $0.6 million expense for the three months ended March 31,
2023, compared to benefits of $0.6 million for the three months
ended March 31, 2022. This also includes the tax benefits
related to R&D tax credit of $0 for the three months
ended March 31, 2023, compared to $0.8 million for the three
months ended March 31, 2022. Adjusted effective tax rates are
approximately 25% for both periods presented.
|
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SOURCE Heska Corporation