LOVELAND, Colo., Nov. 2, 2017 /PRNewswire/ -- Heska
Corporation (NASDAQ: HSKA - News; "Heska" or the "Company"), a
provider of advanced veterinary diagnostic and specialty products,
today reported financial results for its third quarter ended
September 30, 2017. The Company
posted third quarter revenue of $31.4
million compared to $33.4
million in the third quarter of 2016. Core blood diagnostics
revenue rose 16%, offset by an expected 32% decline in revenue from
Other Vaccines, Pharmaceuticals and Products segment and a 27%
decline in digital imaging revenue.
On a year to date basis, revenue rose 6.2% to $96.1 million, as compared to $90.5 million through nine of months of 2016.
Revenue from core blood diagnostics rose 23% in the first nine
months of 2017 as compared to the same period in 2016.
Kevin Wilson, Heska's Chief
Executive Officer and President, commented, "We delivered 16%
year-over-year growth in our blood diagnostics business, adding
multi-year subscribers to our portfolio, and delivered higher gross
profit margins and earnings per share that were in line with our
expectations. Overall, revenue growth for the quarter was dampened
by an expected drop in revenue from our Other Vaccines,
Pharmaceuticals and Products segment, which had been far ahead of
schedule after delivering 42% growth in the first half of the year.
While we have seen slower than expected sales of our digital
imaging products, we anticipate a good 4th quarter
finish and a return to growth in imaging in 2018, backed by our
largest imaging product release cycle in years, new imaging service
contract revenues beginning this quarter from sales in 2012, and
identified savings from our integration efforts through the third
quarter."
Mr. Wilson added, "We remain confident in our long-term growth
strategy. In a highly competitive environment, Heska continues to
win and bolster its competitive advantage, as evidenced by this
week's announced win in over 100 PetVetCare Centers hospitals and
by the launch of the new Element COAG analyzer, which represents an
entirely new line for Heska. These announcements reinforce Heska's
position as a leader in our broadly growing and healthy veterinary
healthcare space. While execution and timing of some items in the
third quarter could have been better, our team remains confident in
our growth prospects as we focus on closing out 2017 well and
growing strongly in 2018. I look forward to updating investors on
our upcoming release call about the details of the quarter, the
status of our substantial product and business development
initiatives and our plans for 2018 and beyond. I remain incredibly
proud of the hard work of the Heska team, and confident in our
current position and sustained success."
Third Quarter Operating Performance
Core Companion Animal Health ("CCA") segment revenue increased
1% in the third quarter of 2017 to $26.7
million, from $26.4 million in
the third quarter of 2016, and increased 5.4% to $78.3 million on a year to date basis, as
compared to $74.3 million in 2016.
The main business of CCA, blood diagnostics instruments and
consumables subscriptions, rose 16% in the period, which was offset
by declines in smaller imaging and heartworm product lines. Coming
off a first half year over year increase of 42%, as expected, Other
Vaccines, Pharmaceuticals and Products ("OVP") segment revenue
decreased 32% in the third quarter of 2017 to $4.8 million, down from $7.0 million in the third quarter of 2016,
bringing OVP year to date growth to 9.8% at $17.8 million on a year to date basis, as
compared to $16.3 million in 2016.
OVP is expected to finish 2017 with a mid to high single digit
growth performance for the year.
Third quarter gross profit was $13.6
million, compared to $13.7
million in the prior year. Third quarter gross margin was
43.1%, 210 basis points better than the 41.0% posted in the third
quarter of 2016. On a year to date basis, gross profit was
$41.7 million, or 43.4%, a 10.2%
increase over $37.8 million, or
41.8%. The increase in gross margin percentage in both periods was
primarily driven by a positive trend of mix favoring higher margin
and faster growing blood diagnostic sales that offset declines in
other revenue streams with lower margins.
Operating income was $3.8 million
for the third quarter of 2017, compared to $4.5 million in the third quarter of 2016.
Operating income for the first nine months of 2017 was $11.1 million, an 11.1% increase over
$10.0 million in the same period last
year.
Net income attributable to Heska Corporation was $3.1 million, or $0.40 per diluted share, in the third quarter of
2017, compared to $3.3 million, or
$0.45 per diluted share, in the third
quarter of 2016. For the first nine months of 2017, net income
attributable to Heska Corporation rose 56.2% to $11.0 million, or $1.45 per diluted share, as compared to
$7.1 million, or $0.97 per diluted share, in the same period of
2016.
Cash flow from operations was $0.9
million in the third quarter of 2017 and $6.3 million for the first nine months of 2017,
up 232% as compared to $1.9 million
in the first nine months of 2016.
Income Taxes
The Company's effective income tax rate was 18.5% for the third
quarter of 2017. The effective tax rate for this quarter included a
partial valuation allowance of $1.3
million to offset, in part, a portion of ASU 2016-09 stock
compensation related tax benefits which could affect the Company's
ability to use some of its deferred tax assets in the future.
Management will continue to monitor these tax related items.
Future Outlook
Based on current forecasts, management's updated full year
outlook for revenue is $137-139
million, representing full-year growth of 5-7% compared to
2016 and compared to prior guidance of $140-144 million. This outlook includes impacts
from third quarter imaging revenue softness ahead of major new
product launches on November
17th which may cause some shipments to occur in
2018 and delay into the first half of 2018 growth in heartworm
testing revenue expected from the upcoming launch of a higher
margin, more competitively priced reformulated heartworm test,
which was until recently anticipated in late 2017. Imaging and
heartworm product lines are expected to return to growth in
2018.
Management is increasing the guidance for diluted earnings per
share. The Company now expects diluted earnings per share of
$2.02 to $2.06, compared to prior
guidance of $2.00 to $2.05 and up at
least 41% compared to the $1.43 in
diluted earnings per share recorded in 2016, supported in part by
higher gross margins on a larger mix of revenue from core blood
diagnostics instruments and consumables.
Investor Conference Call
Management will conduct a conference call on November 2, 2017 at 9 a.m.
MDT (11 a.m. EDT) to discuss the third quarter 2017
financial results. To participate, dial 1-877-718-5106 (domestic)
or 1-719-325-4747 (international) and reference conference call
access number 8739825. 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 through November 9,
2017. The telephone replay may be accessed by dialing 1-
844-512-2921 (domestic) or 1-412-317-6671 (international). The
replay access number is 8739825. The webcast will also be archived
on www.heska.com for 90 days.
About Heska
Heska Corporation (NASDAQ: HSKA - News) sells advanced
veterinary diagnostic and specialty products. Heska's
state-of-the-art offerings include blood testing instruments and
supplies, digital imaging products, software and services,
vaccines, local and cloud-based data services, allergy testing and
immunotherapy, and single-use offerings such as in-clinic
diagnostic tests and heartworm preventive products. The Company's
core focus is on supporting veterinarians in the canine and feline
healthcare space. For further information on Heska and its
products, visit www.heska.com.
Forward-Looking Statements
This announcement contains forward-looking statements
regarding Heska's future financial and operating results. These
statements are based on current expectations and are subject to a
number of risks and uncertainties. Investors should note that there
is an inherent risk in using past results, including trends, to
predict future outcomes, including financial results and perceived
customer behavior. Factors that could affect the business and
financial results of Heska generally include, but are not limited
to, the following: risks related to reliance on third parties to
develop and manufacture products for Heska; risks related to the
commercialization of new products; uncertainties related to
attempts to expand into international markets, including, but not
limited to, uncertainties related to timing, profitability and
currency effects; uncertainties related to Heska's ability to
measure and predict trends in the veterinary market; uncertainties
related to Heska's ability to measure and predict the effectiveness
of commercial relationships; uncertainties related to the future
impact of recent business development activity; risks related to
Heska's reliance on third-party suppliers, which is substantial;
competition; and the risks set forth in Heska's filings and future
filings with the Securities and Exchange Commission, including
those set forth in Heska's Quarterly Report on Form 10-Q for the
period ended June 30, 2017.
Financial Table Follows:
HESKA CORPORATION
AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
(in thousands, except
per share amounts)
|
(unaudited)
|
|
|
|
Three Months
Ended September 30,
|
|
Nine Months
Ended September 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Revenue:
|
|
|
|
|
|
|
|
|
Core companion animal
health
|
|
$
|
26,670
|
|
|
$
|
26,386
|
|
|
$
|
78,299
|
|
|
$
|
74,284
|
|
Other vaccines,
pharmaceuticals and products
|
|
4,758
|
|
|
7,044
|
|
|
17,847
|
|
|
16,257
|
|
Total revenue,
net
|
|
31,428
|
|
|
33,430
|
|
|
96,146
|
|
|
90,541
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenue
|
|
17,875
|
|
|
19,712
|
|
|
54,455
|
|
|
52,699
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
13,553
|
|
|
13,718
|
|
|
41,691
|
|
|
37,842
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Selling and
marketing
|
|
5,815
|
|
|
5,490
|
|
|
17,908
|
|
|
16,495
|
|
Research and
development
|
|
601
|
|
|
507
|
|
|
1,576
|
|
|
1,605
|
|
General and
administrative
|
|
3,359
|
|
|
3,229
|
|
|
11,081
|
|
|
9,724
|
|
Total operating
expenses
|
|
9,775
|
|
|
9,226
|
|
|
30,565
|
|
|
27,824
|
|
Operating
income
|
|
3,778
|
|
|
4,492
|
|
|
11,126
|
|
|
10,018
|
|
Interest and other
expense (income), net
|
|
(6)
|
|
|
14
|
|
|
(186)
|
|
|
(85)
|
|
Income before income
taxes
|
|
3,784
|
|
|
4,478
|
|
|
11,312
|
|
|
10,103
|
|
Income tax
expense:
|
|
|
|
|
|
|
|
|
Current income tax
expense
|
|
8
|
|
|
123
|
|
|
25
|
|
|
284
|
|
Deferred income tax
expense
|
|
693
|
|
|
1,012
|
|
|
762
|
|
|
2,287
|
|
Total income tax
expense
|
|
701
|
|
|
1,135
|
|
|
787
|
|
|
2,571
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
3,083
|
|
|
3,343
|
|
|
10,525
|
|
|
7,532
|
|
Net income (loss)
attributable to non-controlling interest
|
|
—
|
|
|
(4)
|
|
|
(498)
|
|
|
477
|
|
Net income
attributable to Heska Corporation
|
|
$
|
3,083
|
|
|
$
|
3,347
|
|
|
$
|
11,023
|
|
|
$
|
7,055
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share attributable to Heska Corporation
|
|
$
|
0.43
|
|
|
$
|
0.49
|
|
|
$
|
1.58
|
|
|
$
|
1.05
|
|
Diluted earnings per
share attributable to Heska Corporation
|
|
$
|
0.40
|
|
|
$
|
0.45
|
|
|
$
|
1.45
|
|
|
$
|
0.97
|
|
|
|
|
|
|
|
|
|
|
Weighted average
outstanding shares used to compute basic earnings per share
attributable to Heska Corporation
|
|
7,139
|
|
|
6,871
|
|
|
6,985
|
|
|
6,727
|
|
Weighted average
outstanding shares used to compute diluted earnings per share
attributable to Heska Corporation
|
|
7,668
|
|
|
7,454
|
|
|
7,580
|
|
|
7,299
|
|
HESKA CORPORATION
AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(in
thousands)
|
|
|
|
September
30,
|
|
December
31,
|
|
|
2017
|
|
2016*
|
|
|
UNAUDITED
|
|
|
ASSETS
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
7,423
|
|
|
$
|
10,794
|
|
Accounts receivable,
net of allowance for doubtful accounts of
$196 and $237,
respectively
|
|
13,492
|
|
|
20,857
|
|
Due from – related
parties
|
|
22
|
|
|
100
|
|
Inventories,
net
|
|
30,013
|
|
|
20,395
|
|
Other current
assets
|
|
6,022
|
|
|
3,127
|
|
Total current
assets
|
|
56,972
|
|
|
55,273
|
|
|
|
|
|
|
Property and
equipment, net
|
|
16,147
|
|
|
16,581
|
|
|
|
|
|
|
Goodwill
|
|
26,688
|
|
|
26,647
|
|
Other intangible
assets, net
|
|
2,055
|
|
|
2,346
|
|
Deferred tax asset,
net
|
|
20,299
|
|
|
21,122
|
|
Other non-current
assets
|
|
13,485
|
|
|
8,875
|
|
Total
assets
|
|
$
|
135,646
|
|
|
$
|
130,844
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
|
10,374
|
|
|
$
|
7,154
|
|
Accrued
liabilities
|
|
4,649
|
|
|
6,469
|
|
Current portion of
deferred revenue
|
|
3,466
|
|
|
3,439
|
|
Obligation to
purchase minority interest
|
|
—
|
|
|
14,602
|
|
Line of credit and
other short-term borrowings
|
|
6,313
|
|
|
750
|
|
Total current
liabilities
|
|
24,802
|
|
|
32,414
|
|
Long-term
liabilities
|
|
9,817
|
|
|
11,455
|
|
Total
liabilities
|
|
34,619
|
|
|
43,869
|
|
|
|
|
|
|
Stockholders'
equity
|
|
101,027
|
|
|
86,975
|
|
Total liabilities and
stockholders' equity
|
|
$
|
135,646
|
|
|
$
|
130,844
|
|
|
|
|
|
|
* December 31, 2016
amounts are derived from the December 31, 2016 audited Consolidated
Financial Statements
|
|
|
|
|
|
View original
content:http://www.prnewswire.com/news-releases/heska-reports-third-quarter-results-300548127.html
SOURCE Heska Corporation