Heska Corp. (HSKA) 6 May 182018 Q1 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the Heska Corporation First Quarter 2018 Earnings Call. Please note, today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jon Aagaard, Director of Investor Relations with Heska. Please go ahead, Jon.

welcome of Corporation's XXXX. and the call everyone, quarter first morning, to earnings Heska for Good I'm Aagaard, Jon Director of Investor Relations. the remind company. the events or discussing first be made certain to company's financial to results, may quarter Prior future regards Heska forward-looking like statements to of performance listeners course during future with that this call, first would of the actual involve uncertainties, based by forward-looking our current expressed cause and statements which expectations and risks are that on and be known such those to unknown Any and and from performance materially results may beliefs forward-looking different statements. implied or Factors writing contribute in or and to in Heska including are Corporation's annual detailed the that could places, with quarterly such cause filings differences SEC. the does or and statement the are occur of Any forward-looking time time update they not that a and obligation any forward-looking to Heska statements intention disclaims to statements after such specifically any made, only events intend made. speak reflect was as

with followed Kevin have Chief this morning, Heska's I Grassman, Executive by Heska's results turn with and open Operating Mr. commentary with Officer Wilson, will for Accounting then President. Ms. questions At and the from Wilson final Wilson. Kevin Chief Grassman. Jason before call and today, President; surrounding Controller. to Chief Heska's remarks Grassman, additional will comments Wilson, the Napolitano, Kevin? Catherine And time, after Officer us reported Executive this Strategist; closing Ms. over President, and we'll call up Officer from and begin Chief Chief We Officer Vice the Heska's Mr.

our this with for XX% XXXX, On by a Core that the Companion call million, led sales XX.X% three out everybody. to clear morning. are our in I'm morning, XX% $XX.X I and Heska pleased increase imaging. which to revenue detailed slightly these XX.X% point-of-care for a Good Animal rose my segment, and healthy they results, discuss Jon. in pleased exceeded first year. expectations. increased quarter last jobs increase Thanks, by at we're very led a XXXX results release in our called consumables Net the in Today,

we in Reset our that win subscriptions. Heska plan emphasizes diagnostic continue are First, baseline to to domestic

in We this well doing area. are

our As entered laboratory growth. to point-of-care year, the for outlook consumables for we XX% was XX%

We as continue rose this to utilized quarter, by XX%, outlook customers quantities point-of-care In reasonable. consumables see above first the this while laboratory level. our rose

In improved benefits profitability flows. to model addition deliver growth, of demonstrating subscriptions margins cash points sales Reset the X.X Heska to to and growth, consumables and solid and laboratory XX%, gross instruments reliability percentage our

accounts rate point-of-care market this year we share as to we growth point-of-care share accounts individual laboratory, a begun for corporate and and continues see market diagnostics seeing X% now strong. share outlook X.X% Regarding from at to for gains with user appears customer goal, to hospital installations have our continue to demand gain the and be End we Heska consistent reasonable. gains, larger entered to our dry begun have specialty and quarter, accelerating is half of won were the already booked. year. Helping largest to with win of the we notable DCXX, the last which Heska wins the in of the chemistry grade, into industry's see most deliveries which DCXX coming high-volume powerful for on-track at preorders Element Element accounts, high-volume end back the is year, analyzer. the launch the

deliver Heska's year in higher the on XX% for is imaging growth last out called job to or line. product our report second The

year an exceeding We that this for and year are imaging. last resetting recall integration may currently Investors target. was

entered several we called for the to XXXX. imaging growth return drivers we As to positive year, out XX%

in of in on the that XX.X%. prior remain also tailwinds, the period for year, XX% performance percentage the positive a imaging begin of other an delivered new second quarter outperformed and margins we products gross half to year With confident first shipping in increase momentum over The XXXX. with X.X sales increase our goals the points goals tap in to

our job expansion work key to in the more Day several during in markets addressable product seeing third growth on expansion to update called initiatives States. and share subscriptions and having big Investor New updates program, on three strategy The We the outside Investor be Reset where growth geographic our progress initiatives out our extensions for to on step-ups at million, on Day slated York next our and investments a for opportunities excess scheduled and new deeper encouraging include investments year in report drive last line major we and major Heska's remotely covered which and XX to via believe the product geographic an May be will research growth. scheduled we to fully deliver provide City, shared forward Day at of useful you webcasting. to to on and XXXX These are will participate investors for understand launch Heska's key Investor level. in development will projects our initiatives strength or into seeking of United $XXX is Growth XXXX, at for you look

turn the I'll over the the call of to Catherine Now through quarter. go to details

Catherine? Following we'll answer Catherine's open call questions. comments, the to your

Thanks, Kevin.

million of increase capital in revenue levels pump Revenue lower Vaccines, recognition revenue products of noncore Other increased XXXX, X% segment, $X.X Revenue of diagnostic XX.X% the revenue to in of Companion our imaging consumables quarter first the by sales. for increased XX.X% for lease quarter quarter a For the OVP, XXXX. revenue of Core or million CCA, XXXX, and and to of Products due XXXX, instrument largely first the first quarter from of primarily XXXX. and up of from first $XX.X XX%, of in million, driven Pharmaceuticals quarter first from of XX%, increase $XX.X increase first of million lower laboratory $XX.X segment, the in to decrease or Animal point-of-care a in offset our by quarter million XXXX, $X.X XX% we point-of-care in strong revenue $XX.X million up reported the

First X.X% XXXX. to $XX.X first quarter quarter profit XXXX gross of $XX.X compared to million the rose million in

extent impacted to resulting product the income related stock by related five XX.X% for of rate margin per quarter XX.X%, and but effective resulted vesting the of sales OVP timing to gross or or shipment. $X.X per decreased attributable impact of revenue was The affected XX% XX.X% Operating million XXXX, XXXX to result contract expense share development quarter quarter The manufacturing operating of of and than diluted a associated of the for in Total of This minus income margin a first $X.XX effect $X.X restricted a development in income period. quarter in $X.XX $XX.X expense in tax X.X% in to product benefits new vesting million points. the share first other underlying XXXX. XX% by related $X.X restricted the rate X.X of of to a services. the expenses The or of points XXXX. by Corporation benefit tax of quarter impacted $XX.X of the advisory first $X.XX was from and diluted research of $X.XX a margin the margin for to earnings with first and expense about margin compensation negatively of first a unfavorable exercises of tax to to quarter lower quarter million in gross to for of diluted recognized. estimates of The this units of of vesting stock with prior quarter quarter during benefits discrete XXXX per million related of XXXX in benefit quarter tax first that X.X% primarily approximately the mix, for the decline or discrete the expenses to XX.X% was to quarter earnings rate tax deduction sales unfavorable benefits were tax gross annual a to compared or gross the XXXX the product first to quarter XXXX. associated compared approximately per by mix. or XXXX. of of the fees Net tax the company but an were quarter benefits XX.X% Heska $X.X quarter the decline OVP of to restricted The from this discrete million year operating of to compensation the effective impact XX% compared of product excess of increased in the million to of XXXX decreased due XXXX. XXXX first tax first percentage in as discrete a the book the first which diluted share units Our the favorably product the units tax $X.X higher XX% recognition, first is XXXX. first of of compared company stock of quarter was for $X.X compared first This margin stock the first in lesser share option stock in has XX% first decline in from of percentage quarter of company's effective XXXX benefit consulting million million was Operating mix impacted in could

rates be XX% to associated While we'd your call to impacted be open could like to future on accounting quarterly tax the taxes in range, Operator? compensation awards. this opportunity due to by with and the At company basis expects effective the previous volatility this XX% underlying questions. income for these annual up take stock-based for to rates point, the a

Company. [Operator with our from Sidoti & Jim first question Instructions] take We'll Sidoti

quarter you spin Schein happened your First business? Henry that but how their plans question to want vet will off business, to in the I impact about anything really and not that about is you and their think ask

a the Health think So team. Animal first, it's I Henry positive Schein for

structure. think a I fantastic it's

and them think be more space impacts free I aggressive up to in more our the which focused, we positively. believe business it'll

with core international you basis anticipate on initiatives partnering -- as an we I a as well. exclusive companion business, laboratory the think, partnered them terms them of and in distribution on we with know, for

of we has and leadership with and their combination are the a software that's the they to the So market in powerful data. think the owner, pet combined Schein capability, And combination when very they share a a are practice vets partner solutions, the think more to valuable winner. think with especially skills valuable Henry choice more We management veterinarian Heska. analytics that the the their it's and first and as we

we it's So it. long way of very like saying a

Okay. up us give you force an call, you ramping think, that distribution going? on And I on your XXXX. the update about direct by, that's Can in sales about talked note, last XX% how

Yes.

head tiny little that for on called out start We've November. we probably a through So that. June got

the is we if primarily folks And you Jim, and I want product. think, situation two losing not that, year. know, but there, a of one we're happening do laboratory a core jump a roughly a are add probably that product and see June, one a that the see force hit bit the new that is we that. what a we've they -- begun bag here or launches where distinction increase adding and promoting want to towards that, a our as think to you the sales you sales for and you opportunistically we're the It's on little don't size related getting force problem. avoid I always of don't of brand-new value draw that carrying, That's quite have is XX%. while of number I And net end that their being they to of but

while companion to synchronized new those they benefits the So we think that territory lab of sell in, while releases. you number addresses you X.X% items which density and that their feel to of kind increasing of sales into confident X%, decreasing get make doing way that size a the we increasing the sure of core incremental product the get and then have of in growth

which we're So that sales that's related the with. really distribution to It's comfortable behind strategy, increase. the force not reason

we'll weeks the Day? at more in new And couple hear launches a Okay. about assume I product the Investor

correct. That's Yes.

All right. then And question last me. for

Is activity? some fees is color? the that the sales about little products? new the strategy Or or talked quarter. You in related give M&A related to Can consulting that to you us a

It's little tax, bit bit probably development, structure. business of of little

is And of of these pursuing. when we development fees. help times some there contemplate I that's correct make majority outside we are outside that our As think structure that, need to the those things, probably for sure the we're

some in year us XXXX on force the operating hires any year? you relative margin to expand modestly you last of you end Okay. And gross will give and with that commented these for other margin the the you think Can where guidance sales to expect expenses.

we're want And Investor give Yes, on pieces. sure thoughtful thoughtful to I as a to that moving update going Jim. it's a make we got try answer. We've think Day well, and a lot question. We of

on of these and some I spends early Day. it to far margin the so quarter We're precise been going is is the able good. thought Investor demand what timing those think, first the with parts, get bit second all think, in user we'll for margin, gross Product quarter, our sales good. good. that on moving on has of be message we of try more I into a be some little precise are. and was are more things, these to but little And track End

I that and does and is important. context it to margin I want defer operating to days, a those around couple what spends So because think for timing

little So to earnings we Day be be we call. our on more a on have than can Investor fulsome

today question Westenberg come next King. Our will from with CL David

tempting refrain in get to from Investor front about on of it I'm don't Day. because to going I I As know products want asking as you is,

has year-over-year. my expectations? -- So might that which I might year-over-year. Or what of grew at it we above you was that down think suggested OVP, So least, help kind about X%? was even at and down about saw anyway, going think you just expectations? OVP have just talk us Or -- model be it -- Can

out number. I million. discrete was a $XX to called I pretty want think, it we year-over-year, say Yes,

out And is so as well. there the number last year for

So gross specific margin. down And pretty a also number. called we we out number it out and is year-over-year, think pretty specific a I on called

product news So of are basis, have we're the out a we good timing means of is, most of on providing product mix, for manufacturing manufacturing comes but good with that timing parties. visibility of third because the that yearly which feel on business contract that like the agreements, facility we

product the in to so the shipment that that much is And of first higher we large product margin margin year. gross gross a throughout had quarter, tied larger relationship X% ships a

of not that gross annual So hope affects but obligation margin. that margin X% the quarterly sense. margin gross gross makes timing I

Yes. has for Schein them develop merger lot it. just Schein But to Got something brewing then asked follow-up of in strength their U.S. Henry a to a Henry really question a also Henry that's the And industry. actually outside the as help going Jim has Schein, the

So outside you I potential mean, any Schein? that do own see with relationship your very that fact for U.S. could the strengthening Schein given you a leverage of you strong the products, have Henry already

do. We

I quite have with most we in they Schein think U.S. partner it's for the would anticipation we Henry been reasonable a have that folks globally busy. as Obviously, probably

a But busy, so announcements as little that we'll any We haven't towards I moves quite bit been well. on talk about Day Investor have we made that. and more think,

just I'll more. one then And ask

account corporate of lot wins. a noted You've

high for good that's product volume. a have You

than have than less rate. market or consumables You expensive that are cheaper

So and other trying same-store that to clinic. opening are veterinary also you sales drive these stores and Petcos have

talk can there last any maybe kind your about in products do see brewing? for my of opportunity question. And you what you of those will kind settings for opportunity So have growth And if you relationships there? that be the

hospitals. Yes, David, full-service veterinary focused I more we're think on

of accurate a Our professional-grade be precise, equipment, to product. very acknowledged of kind is very I and think, generally type

tend consumer and of not ease-of-use, when think, medicine, more drive purchase you of factor, form types I decisions. to really those the price where think, maybe into end some things get veterinary of of I full-served it's smaller market those the

hospitals. the vet that really care last at of are to got folks end full-served higher-end, like other of -- And we we the will pet on hospitals. veterinary veterinary we year, veterinary folks high-quality So the those those kind think and focusing are acquire continue full-served

And Petcos so there, lot places more but we're like kind false of less tangible focused starts I some the versus consumer of we'll versus seen a haven't grow a that of I I of the opportunity. alongside Walmarts but see lot PetSmarts opportunity, on there's the in of guess, versus them

Banfield of has that Heska. But opportunity is seen that well, -- of Mars haven't entity, the executed more that's for much think, part family. executed I than I the terms the entity in

going the focus veterinary we're So to on hospitals. full-served

Our question Cooper Instructions] Andrew from Raymond will come next James. [Operator with

couple me. a Just for

instrument down. First, kind were of looking at revenues front, the

were we And expected little just a then the then the talk some I before. you think we've piece in bit you number that's something give about And all sort could you to line? that to with that. us called out -- on tracking of don't a ancillary But what the heard sort of you install X.X% color was on just I little thinking. there. general think pumps much color of X%

Yes.

great of important. is always installs in that's So the and mix the were The The question. installs line. nature

revenues recognition, So the lower recognition current be differently capital will equipment period. than lease drive operating instrument which would revenues in

to So installs, the capital accounts the versus corporate operating hospitals under lease, under lease be vary. mix, whereas lease, to of can for operating tend lease individual capital mix instance, and be tend

it deal, the a think new I In business. less portion, into a accounting different driving factors equipment has which parts install that. far, of the straight over important instruments the that help. revenue really a to moving and taking people on have as more the health existing in is hundreds just XX-month hospitals call much say the new into will in Day their Non-core the so have these pumps will subscription. market the infusion things pump there well in And and leading understand -- Day bought balance weakness affect area extensions addition that, to to pretty of understanding our which treatment also it's thousands all that. effort think fair we deal They out, Investor should portion current is because or traditional we big on that it you're to rolling we We return far of many people instrument of have their indicate Investor devices that think And for we in is explain to and help detail are that but of don't will I years.

these major timing a pumps, the also sell distributors that's of question. All and

at might it pump the because for might we meaningfully So in quarters, in year-over-year, that some orders $X quarters, did numbers stocked those when And million some quarter you get in distributor moves orders, that as in this level. are call the and get $XXX,XXX you. you pump out

it pump in $XXX,XXX think compared I quarter to was XXXX. difference approximately the first quarter the for deliveries for distribution of

So we wanted to it meaningful was a it number, call so out.

kind the there, or no in landscape end correct? of But change competitive market

Yes, correct.

And a as look the stock then this in off about of plans as some right in of moving we I think layering the set to one's at of? have housekeeping to growing basis terms of well sales of force comp in that go go-forward kind the investments right the to -- we sort in of and fees just bit think what's consulting but was and little those OpEx, for R&D sure the make

Yes.

want have it I'll fully thoughtful and question Investor discussing person. place to those affect do because, to Day, think, I and be regards operating think those I our we strategic that response clearly, the and at opportunity more caller's to last operating back in to and discuss we margins, Kevin's defer plans clearly in about -- the margin in

have be what Head know it That similar really but that me Schein some and for And there's of can I kind helpful. kind last already you're thinking a of a is? I one And that about anything hire believe. answer of then give be International Friday, OUS and hire would people of asked the sort we just about you being saw of but may of more and color, if

Yes.

also of which my by couple size recently most from, where I comments, Siemens, multiples, managing almost of is reporting XX out into a think hire Jason than being fantastic the London but larger Heska. Europe, a based So prepared point-of-care put of recently, Heska. in I it was, He he comes years He Aroesty Germany. diagnostics, in was has experience for most

to of to an the and the it of not the of a to world mine. he's think ideal I but tie is, together he's been U.S. him whole tickled of rest have while, what I with strategy So about until that say logistics we him. can't marketing executive kind trying expansion. lot but our lead friend I'm officially, for a outside get I've a more

like think you him of him, when I meet a him. highly very and think you'll lot I

question will from Myers Our with next Benchmark. Raymond come

this. I've low almost wanted OVP your excuse to a Kevin, if I such but ship the came has where margin to to margin? to covered please if it ask question so late quarter me, gross point why already I you've in -- the you the low call, gross being about even product a

relationship a with segment, very It's have that an the question. have our overall part part we that as product a There's we relationship in of and customer large OVP is ship that them. great of to obligation

a So good to as million And we them. very million as that agree ship well. year to products that ship they a need every for product, X% or margin that some $X $X.X we and large produce when for partner, high-margin customer

ship that OVP $XX sales of XX% year. overall margin So gross every that's to part answer million and the does as It's in it. why the

to past. product us. into multiple quarter. the we so maybe X% on It up just doesn't stacked quarter the And stacked it than it which it as one ships. if And more quarter depends into quarters surprise greatly has obviously, show And as quite year, not to it's ships this opposed that shipped in a over one was it

us very you Can be more help helpful. this to margin know X% year? to shipped whether of That's there's the

the Napolitano. Jason COO. is I'm Yes, there is. This

You'll that this out go [indiscernible] year. see more of

sense is coming it give Or later? the in it magnitude? you any can Is out us mostly mostly of And QX?

of in that sensitive in number million I financials. Obviously, you is we that outlook, XX% general. see sort customers' think of outlook giving any the $XX product into of mix changing. we're we've kind and Ray, don't given and it's built terms to particular it

more loaded consolidated which outlook. bit over year [indiscernible] quarter, little into It year. a margin. down it's this full where or the -- but gross dragged is the probably only the So normalizes It

the vet about questions What's them Heska's to care progress pet in last my facility. the converting And equipment?

so converting. much not There's

their all are have of batch once process contract completed for conversions percentage calls gentle to But that. We getting those slower you a them XXXX, than hospitals groundwork high a convert that the contracted those to a very installed within always in you see of what be so with laying and the and first of is more XXXX. get momentum in

I and not on in So side. you'll much of of of see as increases question have and kind swapouts, shipping think logistics logistics things. higher is conversion so but we a They and installation installations, those and it's training communication it terms training their question and have and

very first was the quarter So light.

in think XXXX. be conversions first XX% by of the in will heavier targeted to of quarter terms along kind And and fourth quarter that I get second will third installs The or right quarter. be to

back to questions we And our closing further time, speakers at additional remarks. for over the no or conference have queue. this our in turn We'll any

to you. I'm work want that thank of did. took who first listen entire proud quarter Heska and to us. to I'm time call everybody with I results, and the Thank our the to the pleased our team follow

most and Investor of owners the built what pet value certainly for I improved and next Heska's we our about think during and remain about XX excited York I lives pets. I veterinarians like, excited the in May remain and on five years super We New next on future. the five to everybody updating years bright importantly, looks investors. to details share why Day forward look we

look and with a Thanks great can I in soon. join or speaking either to us, So by you and hope have forward person you day. we webcast,

and today, and for gentlemen. you Thank you, ladies our conclude does again, participation. conference thank your for This