HESKA CORPORATION INVESTOR PRESENTATION - HSKA MARCH 2020
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HESKA CORPORATION INVESTOR PRESENTATION
HSKA
MARCH 2020
01 SAFE HARBOR NOTICES
This 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
Today’s Presentation
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%-17%+ Consumables Target)
Pet Healthcare Universe Overview
(1) Point of Care (2) Reference Lab
(3) Rapid Singles (4) Imaging
Diagnostics Drives >25% of Care Diagnostics Drives “Test & Treat”
Diagnostics Drives Rx & Therapy
5
Supportive Growth Trends Global & Demographic
Average Canine Vet Visits per Year by Owner Age Global Veterinary Diagnostics Market > $2 Billion
incr ease CAGR
27%
2,574
9. 2%
3.3 2,352
2,154
1,976
2.6 2.6 2.6 1,813
Silent Generation Baby Boomers Gen X Mille nnials 2017 2018 2019 2020 2021
~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
DIAGNOSTICS IS CENTRAL & SCARCE
Reference Laboratory Point of Care
North America Reference Lab Share North America POC Share
≈ 50% ≈ 65%
≈ 48% ≈ 12%
≈ 2% ≈ 23%
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 Point of Care Diagnostics
• Humanization of pets globally • ~ 6%-8% Annual Global Veterinary Diagnostics Growth1
• Lifecycle “family member” juvenile, wellness and aging care • Major veterinarian revenue / profit center in 90% of hospitals
• Historically recession resistant • Diagnostics utilization is key (15% - 25%+ of hospital pet visits)1
• Positive regulatory, payor and demographic trends • Increases in hospital pet visits (~2% - 5%)1
• Accelerating industry investment and consolidation • Favored by veterinarians (veterinary licensure required)
• New point of care technologies 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.
Leading Point of Care Full Product Portfolio “Complete Voice of the Pet”
Element DC Element DC5X Element RC Element HT5 Element i+ Element POC Element COAG
Chemistry Chemistry Chemistry Hematology Immunoassay Gas & E-M Lyte Coagulation
Element UF Cloud Data Hospital Digital Portable Digital Digital Digital Vet/IV
Urine & Fecal Solution Radiography Radiography Ultrasound Endoscopy Infusion Pump
Heartworm Heartworm Allergy Diagnostic
Diagnostic Therapeutic Immunotherapy
9
02 ~90% of Heska POC Lab Consumables on Long-Term Subscription 1,2,3
Minimum contract subscription value ($MM)1
+41%
GR
28% CA $101.6
+28%
+11% $72.0
+34%
$56.4
$51.0
$38.0
2015 2016 2017 2018 2019
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%
Subscriber Retention >95%
1 Includes Corporate Accounts estimates similar to individual accounts CSV (Contract Subscription Value). 3 As of December 31, 2019.
2 Represents minimum contract subscription value / subscription monthsHeska Three Point Strategy for 2018 to 2023
Double Customers & Geography Served
Double Product & Revenue Streams Served
Continue Core Base Business Growth
(12%-17%+ Consumables Target)Double Customers and Geography
Expect $200 Million in Sales for 2020
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 differ
from 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.Now we Serve 25 Markets… and Growing.
United States Germany Spain Spain France
Canada Canada France
Australia Italy Netherlands
Latin America Czech Republic Poland
United Kingdom And More
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 from
third 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 any
misstatements 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 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.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 from
third 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 any
misstatements 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 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.New Global Presence to Double Customer Opportunities
2018 Sales Geography (2) 2020 Sales Geography (1)
Europe
37%
USA
91%
USA
55%
Europe 5% 7%
Canada
Canada 2%
RoW 2% RoW 2%
~26,000 hospitals (USA) ~65,000 hospitals (Intl)
1. 2020 is forward looking estimate subject to closing of scil Acquisition and
numerous other factors outlined in the Company’s press release of January 14,
2020 and Safe Harbor in this presentation. Amounts not GAAP and are estimates;
2. All amounts rounded and not GAAP. Refer to 10K ending December 31, 2018 for results may materially differ. Management believes this visual will assist investors to
GAAP, segments, revenue recognition, and other information relevant to (1) and (2). understand the Company’s business and strategy.International Acquired Sales Mix Favorable
Starting Ex-US Sales Mix(1)
Imaging
30%
Lab
60%
10% Other Core
Comp Animal
1. All amounts rounded and not GAAP and estimated for 2020; amounts are forward looking estimate subject numerous factors outlined in the Company’s press release of January 14, 2020 and Safe Harbor in this presentation. Actual results may
materially differ. Management believes this visual will assist investors to understand the Company’s business and strategy.Estimated Consolidated Sales Mix
2018 Sales Mix (2) 2020 Sales Mix(1)
Imaging Other Core
Imaging
18% Comp Animal
22% 25%
12% Other Core
Lab Comp Animal
15% Other 55%
Lab
45% Vaccine & Pharma 8%
Other
Vaccine & Pharma
2. All amounts rounded and not GAAP. Refer to 10K ending December 31, 2018 for GAAP, segments, 1. 2020 is forward looking estimate subject to closing of scil Acquisition and numerous other factors outlined in the
revenue recognition, and other information relevant to (1) and (2). Company’s press release of January 14, 2020 and Safe Harbor in this presentation. Amounts not GAAP and are
estimates; results may materially differ.Positive Proforma Capital Structure (Estimated)
$MM Proforma
① Accretive Acquisitions Combined Cash $66.0
Combined Debt $92.5
② Deleveraging Acquisitions
Net Debt $26.5
③ Strong Debt to Capitalization Ratios after Acquisitions
Market Cap (HSKA) $882.2
④ Common Stock Dilution provided for is less than 20%
Total Capitalization $974.7
Net Debt / Cap 2.7%
Total Debt / Cap 9.5%
Starting Cash and Combined Debt starting balance as of September 30, 2019. Acquisition of scil calculated on “debt free – cash free”. Market Cap starting balance from January 14, 2020 ($757.2MM) plus $125MM for scil Acquisition financing.
Amounts unaudited. While we are not aware of any misstatements regarding this information, we cannot guarantee its accuracy or completeness.Heska is a Good Owner of These Assets with Strong Management in First Five Year Plan (2013-2017)
Heska Heska
$MM, except p/share
2013 2017 Getting
Product
Revenue $78.3 $129.3
Right
Gross margin % 39% 45%
Getting Getting
Operating margin % (2%) 14% Narrative Team
Right Right
Operating Income ($1.43) $18.2
Earnings per share ($0.21) $1.3¹
Assets $93.6 $135.8 Getting Getting
Model Costs
Equity $47.1 $100.4 Right Right
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 31,201702 Strong Management Results First Five Year Plan (2013-2017)
Heska Heska Scil-CVM
$MM, except p/share
2013 2017 2020 Estimate Getting
Revenue $78.3 $129.3 < $75.0
Product
Right
Gross margin % 39% 45% < 35%
Getting Getting
Net Revenue CAGR 10.2% Narrative Team
Right Right
Gross Profit CAGR 13.1%
Core Supplies CAGR 12.9%
Getting Getting
Model Costs
Right Right
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 31,2017Double 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
2020 Major Product Expansion
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 Economics2020 Major Product Expansion
High Sensitivity Immunodiagnostics Multi Plex Analyzer (>$100M Target)
2020 Assays in Development 2020 Assays in Development
Non-Regulatory (USDA) Regulated (USDA)
Total T4 Canine Heartworm (4+ Plex)
Cortisol Canine Lyme (4+ Plex)
TSH Anaplasma (4+ Plex)
Progesterone Ehrlichia (4+ Plex)
Major Drivers2020 Major Product Expansion
(Mid 2020)
Urine Automatic Imaging (>$100M Target)
5 Million Urine Sedimentation Exams Annually
7,000+ Competitive Sediment Analyzers in validated market
Fecal Automatic Imaging (>$300M Target)
30 Million Manual Point of Care Fecal Floatation Exams
Roundworm, Hookworm, Tapeworm, Whipworm, Flukeworm, Giardia & more…
Major Drivers2020 Major Product Expansion
(Mid 2020)
Production and Development Plan Outlook
þ Test Supplies and Test Beds Validated
þ Alpha Instruments & Low Volume Test Supplies
þ Sales Training & Public Marketing
(VMX Orlando, WVC Las Vegas)
Q3 2020 Beta Instruments & Test Supplies Manufacturing in Volume
Q4 2020 Production Instruments in Volume Begins
Major DriversContinue Core Business Growth
Continue Core Business Growth (Organic and Acquired) 1) Grow Market Share 2) Grow Utilization in Existing Sites • Continue New Single User Subscriptions Wins • Launch New Tests on several Analyzers (2019-2020) • Continue Corporate Groups Sites Installs • Capture Positive Market Trends & Demographics • Continue Expanded Sales Teams • More Patient Visits & Hospital Growth • Expand into International POC Market Share • Higher % of Patient Visits doing a Diagnostic 3) Grow Price 4) Grow Products • Price (4%) Annual Escalators in Subscriptions • New and Upgrade Products from R&D • New Tests and Panels Launches • New and Upgrade Products from Acquisitions
04 Q4 and Full Year 2019 Highlights
Key Metrics Commentary
• $33.8MM Q4 Revenue • 6th straight year of net market share gains in end-user hospitals
• Core POC Lab Consumables up 19.7% v 12-17% Outlook
• $122.7MM FY Revenue
• Strong 2019 subscribers retention (95%), with Months Under
• Total Gross Margin 44.4% Subscription, Contract Subscription Value well above Outlook
• CCA Gross Margin up to 50.3% • 2020 major product launches, demand, & feasibility affirmed
• FY Consumables Growth up 19.7% YOY • Transformative geographic expansion
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