EX-99.1 2 ex99-1earningsreleaseq12023.htm EX-99.1 Document

Exhibit 99.1
Heska Corporation
heskalogoa05a.jpg
Jon Aagaard
Investor Relations
970.619.3033
investorrelations@heska.com
Heska Corporation Reports First Quarter 2023 Results
LOVELAND, CO, May 5, 2023 -- 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$62.4(3.7)%
Q1 (%)
Q1 YOY bps1
Consolidated gross margin43.9%(110)
Net loss margin2
(15.7)%(90)
Adjusted EBITDA margin3
5.2%(670)
Q1 ($)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,
 20232022
Revenue, net$62,381 $64,800 
Cost of revenue34,982 35,655 
Gross profit27,399 29,145 
Operating expenses:  
Selling and marketing12,449 11,997 
Research and development3,088 12,456 
General and administrative22,285 16,146 
Total operating expenses37,822 40,599 
Operating loss(10,423)(11,454)
Interest and other (income) expense, net(272)359 
Loss before income taxes and equity in losses of unconsolidated affiliates(10,151)(11,813)
Income tax (benefit) expense:  
Current income tax expense690 158 
Deferred income tax benefit(1,065)(2,366)
Total income tax benefit(375)(2,208)
Net loss before equity in losses of unconsolidated affiliates(9,776)(9,605)
         Equity in losses of unconsolidated affiliates(349)(381)
Net loss attributable to Heska Corporation$(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 Corporation10,390 10,273 
Weighted average outstanding shares used to compute diluted loss per share attributable to Heska Corporation10,390 10,273 


HESKA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
 March 31,December 31,
 20232022
ASSETS
Current Assets:  
Cash and cash equivalents$125,209 $156,618 
Accounts receivable, net of allowance for losses of $1,190 and $1,129, respectively26,054 29,493 
Inventories64,183 60,050 
Net investment in leases, current, net of allowance for losses of $190 and $182, respectively8,173 7,433 
Prepaid expenses6,239 5,514 
Related party convertible note receivable, net2,312 — 
Other current assets6,451 5,926 
Total current assets 238,621 265,034 
Property and equipment, net55,030 32,171 
Operating lease right-of-use assets13,101 6,897 
Goodwill145,403 135,918 
Other intangible assets, net65,813 62,393 
Deferred tax asset, net31,483 23,684 
Net investment in leases, non-current29,605 27,499 
Investments in unconsolidated affiliates592 3,959 
Related party convertible note receivable, net— 2,224 
Promissory note receivable from investee, net— 13,511 
Other non-current assets13,067 12,526 
Total assets$592,715 $585,816 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:  
Accounts payable$12,246 $16,403 
Accrued liabilities20,866 15,149 
Operating lease liabilities, current4,049 2,944 
Deferred revenue, current, and other5,137 5,081 
Total current liabilities42,298 39,577 
Convertible note, non-current, net84,579 84,467 
Notes payable11,130 11,130 
Deferred revenue, non-current5,422 4,096 
Operating lease liabilities, non-current9,674 4,528 
Deferred tax liability16,629 16,438 
Other liabilities5,312 3,372 
Total liabilities175,044 163,608 
Total stockholders' equity417,671 422,208 
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,
 20232022
Net loss(1)
$(9,776)$(9,605)
    Income tax benefit(375)(2,208)
    Interest (income) expense, net(423)440 
    Depreciation and amortization3,974 3,300 
EBITDA$(6,600)$(8,073)
    Acquisition-related and other non-recurring/extraordinary costs(2)
7,135 11,032 
    Stock-based compensation3,077 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,
 20232022
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 compensation0.29 0.48 
    Loss on equity investee transactions0.03 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 calculations10,521 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.