HSKA Investor Presentation - September 2020€¦ · operations; and new product development and...
Transcript of HSKA Investor Presentation - September 2020€¦ · operations; and new product development and...
HESKA CORPORATION INVESTOR PRESENTATION
HSKA
SEPTEMBER 23, 2020
SIDOTI & CO. FALL CONFERENCE 2020
01 SAFE HARBOR NOTICESThis presentation contains forward-looking information related to the Heska Corporation (the “Company”). This forward-looking information generally includes 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 future sales, sales split percentages, sales geography percentages,
market share, and strategic goals, the expected timing of the scil Acquisition and its funding and its anticipated benefits; the expected conversion of the Preferred Shares into
shares of Public Common Stock; anticipated investments and growth; and the number of customers that the Company will be able to acquire and retain. Such statements are
subject to risks and uncertainties, including, but not limited to, uncertainties related to the closing of the Acquisition; the obtaining of shareholder approval to increase the
number of shares of Public Common Stock authorized by the Company’s Certificate of Incorporation; the ability to achieve the anticipated benefits of the Acquisition
uncertainties related to supplier availability, competing suppliers, any product’s ability to perform and be recognized as anticipated, in particular when such product is under
development; uncertainties related to 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; and 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 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.
2
1. Pet Healthcare Universe and Heska Overview
2. Heska Three Point Strategy
- Double Customers & Geography Served
- Double Product & Revenue Streams Served
- Continue Core Base Business Growth
(~12% Consumables Target)
Today’s Presentation
Pet Healthcare Universe Overview
Diagnostics Drives “Test & Treat”Diagnostics Drives >25% of Care
Diagnostics Drives Rx & Therapy
(1) Point of Care (2) Reference Lab(3) Rapid Singles (4) Imaging
5
Supportive Growth Trends Global & Demographic
2.6 2.6 2.6
3.3
Silent Generation Baby Boomers Gen X Millennials
Average Canine Vet Visits per Year by Owner AgeAverage Canine Vet Visits per Year by Owner AgeAverage Canine Vet Visits per Year by Owner AgeAverage Canine Vet Visits per Year by Owner Age
1,813 1,976
2,154
2,352
2,574
2017 2018 2019 2020 2021
Global Veterinary Diagnostics Market > $2 BillionGlobal Veterinary Diagnostics Market > $2 BillionGlobal Veterinary Diagnostics Market > $2 BillionGlobal Veterinary Diagnostics Market > $2 Billion
~26,000 veterinary hospitals (USA) ~65,000 veterinary hospitals (Intl)
Amounts estimated. Source: American Pet Prod Assoc Generational Report; 2017-18 Pet Owners’ Survey; American Pet Products Association; Technavio Global Veterinary Diagnostics Market 2017-2021 report
Point of Care Reference Laboratory
DIAGNOSTICS IS CENTRAL & SCARCE
≈ 2%
≈ 48%
≈ 50%
North America Reference Lab Share
≈ 23%
≈ 12%
≈ 65%
North America POC Share
Information derived from publicly available information data disclosed by third-party sources, our own internal estimates based on such data, and our knowledge of the industry; it has not been independently verified and we cannot assure you of its accuracy or completeness. Our internal estimates have not been independently verified. While we are not aware of any misstatements regarding this information, we cannot guarantee its accuracy or completeness.
Veterinary Healthcare
• Humanization of pets globally
• Adoption rates at historic levels
• Lifecycle “family member” juvenile, wellness and aging care
• Greater awareness of pet health and pet symptoms
• Historically recession resistant
• Positive regulatory, payor and demographic trends
• Accelerating industry investment and consolidation
Point of Care Diagnostics
• ~ 6%-8% Annual Global Veterinary Diagnostics Growth1
• Major veterinarian revenue / profit center in 90% of hospitals
• Diagnostics utilization is key (15%-25%+ of hospital pet visits)1
• Increases in hospital pet visits (~2%-5%)1
• Prioritized and favored by veterinarians (veterinary licensure
required)
• New technologies and advancements pull tests to point of care
• Pricing tends to increase each year
• High priority spend item has revenue security in tight budgets
1. Information derived from publicly available information data disclosed by third-party sources, our own internal estimates based on such data, and our knowledge of the industry; it has not been independently verified and we cannot assure you of its accuracy or completeness. Our internal estimates have not been independently verified. While we are not aware of any misstatements regarding this information, we cannot guarantee its accuracy or completeness. Source: American Pet Prod Assoc Generational Report; 2017-18 Pet Owners’ Survey; American Pet Products Association; Technavio Global Veterinary Diagnostics Market 2017-2021 report.
Heartworm
Therapeutic
Heartworm
Diagnostic
Element DC
Chemistry
Vet/IV
Infusion Pump
Element DC5X
Chemistry
Element RC
Chemistry
Element HT5
Hematology
Element i+
Immunoassay
Element POC
Gas & E-M Lyte
Element COAG
Coagulation
Element UF
Urine & Fecal
Cloud Data
Solution
Hospital Digital
Radiography
Portable Digital
Radiography
Digital
Ultrasound
Allergy Diagnostic
Immunotherapy9
Leading Point of Care Full Product Portfolio “Complete Voice of the Pet”
Digital
Endoscopy
~90% of Heska POC Lab Consumables on Long-Term Subscription (1), (2), (3)
1. Includes Corporate Accounts estimates similar to individual accounts CSV (“Contract Subscription Value”). 2. As of December 31, 2019.
3. Represents minimum contract subscription value / subscription months
Subscriber Retention >95%
Minimum contract subscription value ($MM)3
+34%+34%+34%+34%+11%+11%+11%+11%
+28%+28%+28%+28%
02
2015201520152015 2016201620162016 2017201720172017 2018201820182018 2019201920192019
Subscriptions 1,239 1,667 1,950 2,175 2,376
% Growth N/A 35% 17% 12% 9%
Months Under Subscription 54,200 68,750 75,950 90,850 100,249
% Growth N/A 27% 10% 20% 10%
Monthly Contract Subscription Value $701 $742 $743 $792 $864
% Growth N/A 13% 0% 7% 9%
+41%+41%+41%+41%
$38.0
$51.0$56.4
$72.0
$101.6
- Double Customers & Geography Served
- Double Product & Revenue Streams Served
- Continue Core Base Business Growth
(~12% Consumables Target)
Heska Three Point Strategy for 2018 to 2023
Expect $175 - $185 Million in Sales for 2020 (consolidated)
Over 500 Professionals with over 150 Direct Sales
Direct Sales Teams in 10 Countries
Logistics and Operations in 7 Countries
Installations of over 30,000 Analyzers
Information from Heska data and internal estimates of scil data provided to Heska from scil. Direct Sales teams include RM, TM, ISAM, FSR, Imaging, Sales Management, and Other. Heska has not independently verified the data from third party and cannot assure its accuracy or completeness,and Heska internal and scil estimates have not been independently verified. Sales estimate based on scil closing date on or before April 1, 2020, adjustments anticipated for equipment portion of revenue recognition under subscriptions agreements, integration effects, and other variabilities;estimate may materially deviate from actual performance. While Heska is not aware of any misstatements regarding this information, Heska cannot guarantee its accuracy or completeness. Information regarding future sales are forward-looking statements and actual results can materially differfrom those noted, due to several factors, including but not limited to market, currency, integration, supplier, distributor, scil, and Heska performance and those mentioned in Safe Harbor and forward-looking statements disclaimer herein.
Double Customers and Geography
Now we Serve 25 Markets… and Growing.
United States
Canada
Australia
Latin America
Germany Spain
Canada France
Italy Netherlands
Czech Republic Poland
United Kingdom and More
Spain France
Information regarding market share and market position is derived from data from publicly available information disclosed by third party sources and Heska internal estimates based on such data, scil data, and Heska’s knowledge of the industry. Heska has not independently verified the data fromthird party sources and cannot assure its accuracy or completeness, and Heska internal and scil estimates have not been independently verified. Data specifically excludes items not point of care, including central reference laboratories and single use “rapid” tests. While Heska is not aware of anymisstatements regarding this information, Heska cannot guarantee its accuracy or completeness. Information regarding future sales, sales split percentages, sales geography percentages, and goals are forward-looking statements and actual results can materially differ from those noted, due toseveral factors, including but not limited to market, currency, integration, supplier, distributor, scil, and Heska performance and those mentioned in Safe Harbor and forward-looking statements disclaimer herein.
Now we are #1, #2, or #3 Key Markets… and Growing.
United States #3 ≈ 12.5%
Canada #3 ≈ 13.0%
Germany #1 ≈ 40.0%
Spain #1 ≈ 40.0%
France #2 ≈ 30.0%
Information regarding market share and market position is derived from data from publicly available information disclosed by third party sources and Heska internal estimates based on such data, scil data, and Heska’s knowledge of the industry. Heska has not independently verified the data fromthird party sources and cannot assure its accuracy or completeness, and Heska internal and scil estimates have not been independently verified. Data specifically excludes items not point of care, including central reference laboratories and single use “rapid” tests. While Heska is not aware of anymisstatements regarding this information, Heska cannot guarantee its accuracy or completeness. Information regarding future sales, sales split percentages, sales geography percentages, and goals are forward-looking statements and actual results can materially differ from those noted, due toseveral factors, including but not limited to market, currency, integration, supplier, distributor, scil, and Heska performance and those mentioned in Safe Harbor and forward-looking statements disclaimer herein.
New Global Presence to Double Customer Opportunities
2018 Sales Geography(2)
North America
~60%-65%
Europe~30%
RoW ~3%
Canada
~7%
RoW 2%Canada 2%
Europe 5%
USA91%
2020 Sales Geography(1)
1. 2020 is forward-looking estimate subject to numerous factors outlined in the Company’s Second Quarter Financial Results press release of August 4, 2020 and Safe Harbor in this presentation. Amounts not GAAP and are estimates; results may materially differ. Management believes this visual will assist investors to understand the Company’s business and strategy.
2. All amounts rounded and not GAAP. Refer to 10K ending December 31, 2018 for GAAP, segments, revenue recognition, and other information relevant to (1) and (2).
~26,000 hospitals (USA) ~65,000 hospitals (Intl)
Estimated Consolidated Sales Mix
2018 Sales Mix (2)
15%POC Lab
45%
POC Imaging18%
Other Vaccine & Pharma
Other Core Comp. Animal
22%
2020 Sales Mix(1)
~8%
POC Lab~60%
POC Imaging~20%
~12%
Other Vaccine & Pharma
Other Core Comp. Animal
1. 2020 is forward-looking estimate subject to numerous factors outlined in the Company’s Second Quarter 2020 Financial Results press release of August 4, 2020 and Safe Harbor in this presentation. Amounts not GAAP and are estimates; results may materially differ.
2. All amounts rounded and not GAAP. Refer to 10K ending December 31, 2018 for GAAP, segments, revenue recognition, and other information relevant to (1) and (2).
Heska is a Good Owner of These Assets with Strong Management in First Five Year Plan (2013-2017)
1. 2017 U.S Tax Reform impacts of +/- ($5.9M) included, as further discussed in our Form 10-K/A for the year ended December 31,2017. 2. 2020 Outlook referred to as “2020 Recast Outlook” in Company’s Second Quarter Financial Results press release is forward-looking estimate subject to numerous factors outlined in the Company’s Second Quarter Financial Results press release on August 4, 2020 and Safe Harbor of this presentation.
$MM, except p/shareHeskaHeskaHeskaHeska
2013201320132013
HeskaHeskaHeskaHeska
2017201720172017
HeskaHeskaHeskaHeska
2020 Outlook2020 Outlook2020 Outlook2020 Outlook2222
RevenueRevenueRevenueRevenue $78.3 $129.3 $175 - $185
Gross margin %Gross margin %Gross margin %Gross margin % 39% 45%
Operating margin %Operating margin %Operating margin %Operating margin % (2%) 14%
Operating IncomeOperating IncomeOperating IncomeOperating Income ($1.43) $18.2
EarningsEarningsEarningsEarnings per shareper shareper shareper share ($0.21) $1.3¹
Adjusted EBITDA MarginAdjusted EBITDA MarginAdjusted EBITDA MarginAdjusted EBITDA Margin 4% - 6%
AssetsAssetsAssetsAssets $93.6 $135.8
EquityEquityEquityEquity $47.1 $100.4
Getting Product
Right
Getting TeamRight
GettingCostsRight
Getting ModelRight
Getting
NarrativeRight
Double Products and Revenue Streams
Research and Growth Development Investments
2018 $19MM R&D Business Development Investments
• Core Technologies and Inventions for Product Pipeline
• Sales Team Expansion
• Prepare Heska to Manufacture Heska POC Diagnostics Test Cards
2019 Accelerated R&D up +190% YOY
• New Analyzer Platforms for 2nd Half 2019 & FY2020
International Markets 2020
Global Veterinary and Animal Health
20 Tests per Rotor (v 14 Tests on Launch)
Two way wireless and Ethernet
Superior run-time and performance
Under 12 pounds (5.5kg)
Superior Heska Reset Economics
2020 Major Product Expansion
Major Drivers
2020 Assays in DevelopmentNon-Regulatory (USDA)
Total T4
Cortisol Canine
TSH
Progesterone
2020 Assays in DevelopmentRegulated (USDA)
Canine Heartworm (4+ Plex)
Lyme (4+ Plex)
Anaplasma (4+ Plex)
Ehrlichia (4+ Plex)
High Sensitivity Immunodiagnostics Multi Plex Analyzer (>$100M Target)
2020 Major Product Expansion
Major Drivers
5 Million Urine Sedimentation Exams Annually
7,000+ Competitive Sediment Analyzers in validated market
2020 Major Product Expansion
Urine Automatic Imaging (>$100M Target)
30 Million Manual Point of Care Fecal Floatation Exams
Roundworm, Hookworm, Tapeworm, Whipworm, Flukeworm, Giardia & more…
(Mid 2021)
Fecal Automatic Imaging (>$300M Target)
Major Drivers
� Test Supplies and Test Beds Validated
� Alpha Instruments & Low Volume Test Supplies
� Sales Training & Public Marketing
(VMX Orlando, WVC Las Vegas)
Q4 2020 Beta Instruments & Test Supplies Manufacturing in Volume
Q2 2021 Production Instruments
Production and Development Plan Outlook
(Mid 2021)
2020 Major Product Expansion
Continue Core Business Growth
Continue Core Business Growth (Organic and Acquired)
1) Grow Market Share
• Continue New Single User Subscriptions Wins
• Continue Corporate Groups Sites Installs
• Continue Expanded Sales Teams
• Expand into International POC Market Share
3) Grow Price
• Price (4%) Annual Escalators in Subscriptions
• New Tests and Panels Launches
2) Grow Utilization in Existing Sites
• Launch New Tests on several Analyzers (2019-2021)
• Capture Positive Market Trends & Demographics
• More Patient Visits & Hospital Growth
• Higher % of Patient Visits doing a Diagnostic
4) Grow Products
• New and Upgrade Products from R&D
• New and Upgrade Products from Acquisitions
Q2 2020 Highlights
Key Metrics
• Revenue up 62.4% to $45.7MM
• Consolidated Gross Margin: 39.1%
• North America Gross Margin: 44.0%
• Adjusted EBITDA Margin: 9.1%
Commentary
• Record quarterly revenue benefited by growth in POC Lab Consumables and
recently completed scil acquisition
• Research, development, and commercial launch of key projects progressed in-line
with previously stated timelines
• CSV up 17% in period to record levels
• Subscriber retention strong and in-line with Company targets
• Reporting segments changed to reflect recent acquisitions and revenue profile
• Reaffirm 2020 Combined Outlook(1)(2) and other key targets
• Consolidated revenue ($175-$185 million), global POC Lab revenue ($105-$115
million), global POC Imaging revenue ($25-$35 million), former OVP segment revenue
($15-$16 million), Adjusted EBITDA Margin (4%-6%), and POC Lab Consumable growth
rate (~12%)
26
04
1. 2020 Combined Outlook is forward-looking estimate subject to numerous factors outlined in the Company’s First Quarter 2020 Financial Results press release on May 7, 2020 and Safe Harbor of this presentation. 2. 2020 Outlook referred to as “2020 Recast Outlook” in Company’s Second Quarter Financial Results press release is forward-looking estimate subject to numerous factors outlined in the Company’s Second Quarter Financial Results press release on August 4, 2020 and Safe Harbor of this presentation.