Heska CorporationInvestor Presentation
June 2019
Investor Presentation 2019. Important Disclosure and Safe Harbor Notice.
This document and presentation (verbal or written) contains or incorporates by reference forward-looking statements regarding Heska Corporation (“Heska”) and its affiliates, including projections,
estimates, forecasts, plans and objectives. Although management believes that expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations
will prove to be correct. In addition, these statements are subject to certain risks, uncertainties and other assumptions that are difficult to predict and may be beyond our control. If one or more of these risks
or uncertainties materialize, or if underlying assumptions prove incorrect, then Heska’s actual results may vary materially from what management anticipated, estimated, projected or expected. The key risk
factors that may have a direct bearing on the Heska’s results of operations and financial condition are described in detail in Heska’s periodic reports most recently filed with the Securities and Exchange
Commission (“SEC”). Investors are encouraged to consider closely the disclosures and risk factors contained in Heska’s annual and quarterly reports filed from time to time with the SEC. Heska undertakes no
obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise except as required by applicable securities laws. Information
contained in this document and subsequent and associated verbal presentation speaks only as of the date hereof, is unaudited, and is subject to change. Forward-looking statements can be identified by the
use of words such as “expects,” “may,” “anticipates,” “intends,” “would,” “will,” “plans,” “believes,” “estimates,” “should,” and similar words and expressions and as noted “*” in footnotes and other
comments and as noted in relation to “Act Two” ”2019”, ”2020”. These statements are based on management’s current expectations and beliefs as well as numerous assumptions and estimates concerning
future events and are subject to a number of risks and uncertainties. Recipients are cautioned that there is an inherent risk in using past results, including trends, to predict future outcomes, including
financial results and perceived customer behavior; do not put undue reliance on forward-looking statements because actual results may vary materially from those expressed or implied. 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-party manufacturers and developers for its products; the
commercialization and development of new products; uncertainties related to attempts to expand into international markets; Heska's ability to measure and predict trends and effectiveness of commercial
relationships; future impact of recent business development activity; Heska’s ability to access capital on acceptable terms; Heska's reliance on outside suppliers, which is substantial; competition, which is
robust, varied, and well resourced; and the risks set forth in Heska's filings and future filings with the SEC, including those set forth in Heska's Annual Report on Form 10-K for the year ended December 31,
2018. Note: “High Value Add Sales” in this presentation includes POC Lab Consumables, POC Imaging and POC Lab Instruments except for Infusion Pumps. High Value Add Sales does not include PVD, except
for Allergy. “Low Value Add Sales” includes OVP, Infusion Pumps and PVD which includes Heartworm, except for Allergy. Amounts are not GAAP and not indicative of the Company’s segment reporting.
Management believes these details will assist investors to understand the Company’s business. Refer to 10K ending December 31, 2018 and 10K/A for 2017 for GAAP, segments and other information.
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Seriously Fun. Seriously Good Business.
1. Global Animal Healthcare Trends
2. Heska Position and Strategy
3. R&D and International Investments
4. 2019 Outlook Focus
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Investment Baseline Veterinary Healthcare
Veterinary Healthcare is a great (≈ 4% - 5%) place to be…
Humanization of Pets is an expanding Global & Demographic trend
Family Members need Baseline, Juvenile, Wellness & Aging care
Positive regulatory, insurance and payor trends
Growth… Supplies, OTC, Medicine $6.2B in 2001 to 15.5B 2018E 1
Accelerating industry investment & consolidation
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1. Source: American Pet Prod Assoc.
Investment Baseline Veterinary Diagnostics
Diagnostics is the best (≈ 6% - 9%) place to be….
Diagnostics is Voice of Pet & first Spend (necessary & secure)
Diagnostics is a veterinarian major revenue-profit center (≈ 20%)
Diagnostics utilization occurs in (≈ 15% - 25%) Hospital Pet Visits
Hospital Pet Visits are rising (≈ 2% - 5%)
Trend of Point of Care Technologies pulling Tests to Point of Care
Diagnostics favored by Veterinarians (Veterinary Licensure Required)
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Supportive Growth Trends Globally & Demographically
2.6 2.6 2.6
3.3
Silent Generation Baby Boomers Gen X Millennials
Average Canine Vet Visits per Year by Age Segment
1,813 1,976
2,154 2,352
2,574
2017 2018 2019 2020 2021
Global Veterinary Diagnostics Market ($M)
68% of US households own at least one pet or other animal
An estimated $72.1bn will be spent on pets in the U.S. in 2018
Source: American Pet Prod Assoc Generational Report; 2017-18 Pet Owners’ Survey; American Pet Products Association; Technavio Global Veterinary Diagnostics Market 2017-2021 report
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Strong Industry Performance through the Cycle
3% 5%
7%
15% 15% 16% 16%
25%
11%
1%
7%
10%
6% 6%
8% 8% 11% 11%
12%
27%
3%
14%
35%
13%
31%
25%
17%
5%
18% 15%
9%
16%
25%
8% 4%
8% 8%
20%
13%
10%
13%
24% 25%
17%18%
10%
3%5%
8%
14%
6% 6%
11%
18%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
IDEXX Abaxis VCARevenue growth evolution over time: IDEXX, Abaxis and VCA
EBITDA margin evolution over time: IDEXX, Abaxis and VCA
20% 20% 21%
21%
23% 22% 21%
19%
22% 22% 23% 23%
24% 23%
21% 24%
26% 27% 26%
5%
10% 9%
14%
17% 19%
20% 21% 21% 21%
19% 18%
20% 20%
21%
24%
23%
19% 19% 19% 18%
22%23% 22%
21%
22% 23% 22% 22%19%
18%
17%
19%
20%
20%21%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: Company filings; IDEXX FYE 12/31; ABAXIS FYE 3/31; VCA FYE 12/31; EBITDA calculated as operating income plus D&A; VCA was acquired by Mars Inc in September 2017
(10%)
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Diagnostics Drives Consolidating Global Animal Health Cycle
Leading Portfolio & Pipeline in POC Diagnostics
Blood Chemistry, Hematology, Gasses, Immunoassays, Coagulation, Infectious Disease
Urine Exclusive combined with Fecal (2020 Release Target)
Fecal Exclusive combined with Urine (2020 Release Target)
Imaging Digital Radiography, Ultrasound, Endoscopy
Allergy Diagnostics and Immunotherapy
Data Cloud & Local PACS and Data. (All core solutions have Two-Way PIMS capability)
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2019 $105MM Outlook
(CCA) Core Companion Animal Markets Focus
POC Lab & Imaging Diagnostics
Allergy Testing and Immunotherapy
Loveland, Colorado: 215 FTE
2019 $18MM Outlook
(OVP) Animal Health Contract Manufacturing Focus
Vaccines (Food Animal Health)
Biologics and Pharmaceuticals
Des Moines Iowa: 125 FTE
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Core Companion Animal Segment Other Vaccines & Pharma Segment
POC Lab
48%
HW & Allergy
26%
Imaging
26%
Customers
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$44.9
$38.1
$22.4
$-
$10.0
$20.0
$30.0
$40.0
$50.0
2017 2018 2019
Non-CoreOVP Segment, CCA: Pumps & PVD (except Allergy)
35% 30% 18%% of All Sales
$84.4
$89.3
$100.5
$75.0
$80.0
$85.0
$90.0
$95.0
$100.0
$105.0
2017 2018 2019
Core of Core Companion AnimalPOC Lab Consumables & Instruments, Imaging, Allergy
65% 70% 82%% of All Sales
2019 is forward looking Outlook. “Core” include CCA Segment POC Lab Consumables & Imaging & Lab Instruments, not Infusion Pumps and not PVD, except for Allergy. “Non-Core” include OVP, Infusion Pumps and
PVD including Heartworm, except for Allergy. Amounts not GAAP and not indicative of the Company’s segment reporting. Management believes this visual and data will assist investors to understand the
Company’s business. Refer to 10K ending December 31, 2018 and 10K/A for 2017 for GAAP, segments and other information. 2019 is Outlook.
+5.9%
+12.5%-15.2%
-41.2%Million
s Million
s
POC Lab Diagnostics Subscriptions is Core of Core
Heska Reset Subscriptions
Reset Benefits for 80% of Hospital’s Testing
Assets Ownership Retained by Heska
6 Year Subscription with Auto-Renewal 2 Years
Price Protection 4%
Monthly Minimum ≈ $1,000 to $1,500+ per Month
Subscriptions cover >90% of Heska POC Lab Users
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1) POC Lab Diagnostics Consumables Growth $50MM to $52.5MM (12% - 17%)
(Estimate is for 95-99% of 2019 Consumables Sales to Multi-Year Subscribers)
2) POC Lab Diagnostic Hospital Share Growth +1.0% - 1.5% (US equivalent)
3) POC Lab Diagnostic 95% Subscribers Retention
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2019 Outlook Highlights
Core Products and Non-Core Products and related numbers are not GAAP and are not indicative of the Company’s segment reporting and are are presented because Management believes they will assist investors to understand the Company’s business in 2019. Please refer to 10K ending December 31, 2018 and 10K/A for 2017 for GAAP, segments and other information.
1) Reaffirm 2019 Full Year Outlook
2) Highest number of new POC Lab Subscriptions since Q1 2016
3) Higher POC Lab utilization trends under new 2019 promotions
4) Active Subscriptions Metrics in-line with full year Outlook
5) International Heska Australia and Heska France launched
6) New 2019 & 2020 product launches on target
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Q1 2019 Report Highlights
Core Products and Non-Core Products and related numbers are not GAAP and are not indicative of the Company’s segment reporting and are are presented because Management believes they will assist investors to understand the Company’s business in 2019. Please refer to 10K ending December 31, 2018 and 10K/A for 2017 for GAAP, segments and other information.
$29.5M Revenue
Total Gross Margin +190bps
CCA Gross Margin +140bps
Grow Market Share
Continue to Gain Share (1.0 – 1.5% USA equivalent)
Retain Current Reset Subscribers (95%)
Expanded Sales Teams (25%)
Expand International POC Market Share (≈0%)GROW
GROW MARKET SHARE
GROW UTILIZATION
GROW
PRICE
GROW PRODUCTS
Incremental Drivers15
2019 Growing Test Supplies (12% - 17%)
Grow Utilization on Existing Installs
New Tests into ≈750 - 2,200 installed analyzers
(1) Progesterone (2) BUN (3) Plus e-Wrap
Market-wide Trends Supporting Grow Utilization
More Patient Visits drive Hospital Growth (≈ 2% - 5%)
More Patient Visits result in a Diagnostic (≈ 15% - 25%)
Incremental Drivers16
GROW
GROW MARKET SHARE
GROW UTILIZATION
GROW
PRICE
GROW PRODUCTS
2019 Growing Test Supplies (12% - 17%)
Grow Price
Price Protection for Installed Base (4%)
Test Menu Enhancements (examples) (+$1)
GROW
GROW MARKET SHARE
GROW UTILIZATION
GROW
PRICE
GROW PRODUCTS
Incremental Drivers17
2019 Growing Test Supplies (12% - 17%)
GROW
GROW MARKET SHARE
GROW UTILIZATION
GROW
PRICE
GROW PRODUCTS
Incremental Drivers18
Grow Products
New and Upgrade Products from R&D
2019 Growing Test Supplies (12% - 17%)
2018 Research and Growth Development Investments
1) $1.3MM Increase in R&D
2) $1.5MM Increase in Sales and Marketing Expansion and International
3) $3.0MM Investment in Core Technology for Element i+
4) $5.0MM Investment in Core Technology Innovation Project
5) $8.2MM Investment Acquisition of Core Software Technology
6) Prepare Heska to Manufacture New Heska Owned POC Diagnostics
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Major Drivers
2019 Expanding Products: Major Growth Initiatives
Rotor Chemistry (International) (Q2 ‘19)
Immunodiagnostics (Limited) (Q2 ’19)
Urine & Fecal AI Imaging (Q2 ‘20)
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2019 Major Product Expansion
International Focused Launch (Q2 ‘19)
Global Veterinary and Animal Health
20 Tests per Rotor (v 14 Tests on Market)
Two way wireless and Ethernet
communication
Superior run-time and performance
Under 12 pounds (5.5kg)
Superior Heska Reset Economics
Major Drivers
Major Drivers
2019 Major Product Expansion
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2019-2020 Assays in Development
Non-Regulatory (USDA)
Total T4 (Q2 ‘19 Launch)
Cortisol (Q2 ‘19 Launch)
Canine TSH
Progesterone
2019-2020 Assays in Development
Regulated (USDA)
Canine Heartworm (4+ Plex)
Lyme (4+ Plex)
Anaplasma (4+ Plex)
Ehrlichia (4+ Plex)
GROW PRODUCTS (Q2 ‘19)
High Sensitivity Immunodiagnostics Multi Plex Analyzer (>$100M
Target)
Major Drivers
5 Million Urine Sedimentation Exams Annually
7,000+ Competitive Sediment Analyzers have validated market
2020 Major Product Expansion
Urine Sediment Full Automatic Imaging (>$100M Target)
Fecal Flotation Full Automatic Imaging (>$300M Target)
30 Million Manual Point of Care Fecal Floatation Exams
Roundworm, Hookworm, Tapeworm, Whipworm, Flukeworm, Giardia & more…
(Q2 ‘20)
Major Drivers
CaOx Crystal
Cocci
Rods
White Blood Cell
HookwormDiphyllobothrium
Giardia
Major Drivers
Q1 2019 Test Supplies and Test Beds Validated
Q3 2019 Alpha Instruments and Low Volume Test Supplies
Q4 2019 Beta Instruments and Test Supplies Manufacturing in Volume
Q2 2020 Production Instruments in Volume. Commercial Release.
Production and Development Plan Outlook
2020 Major Product Expansion
(Q2 ‘20)
Leading Portfolio & Pipeline in POC Diagnostics
Blood Chemistry, Hematology, Gasses, Immunoassays, Coagulation, Infectious Disease
Urine Exclusive combined with Fecal (2020 Release Target)
Fecal Exclusive combined with Urine (2020 Release Target)
Imaging Digital Radiography, Ultrasound, Endoscopy
Allergy Diagnostics and Immunotherapy
Data Cloud & Local PACS and Data. (All core solutions have Two-Way PIMS capability)
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2019 Focus for POC Lab Diagnostics
• Test Consumables Growth 12% - 17% ($50.0 - $52.5MM)
• Market Site Gains 1.0-1.5% (USA equivalent)
• Retention of 95% of Subscribers
• Continue Geographic Expansion
• Launch New Element i+® and Element RC® and Others
• Prepare 2020 Element UF
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