Investor Presentation 2019. Important Disclosure and Safe Harbor - - PowerPoint PPT Presentation

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Investor Presentation 2019. Important Disclosure and Safe Harbor - - PowerPoint PPT Presentation

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


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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, the 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. 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/A for the year ended December 31, 2017 and 10-Q ending September 30, 2018.

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Seriously Fun. Seriously Good Business.

  • 1. Global Animal Healthcare Trends
  • 2. Heska Position and Strategy

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SLIDE 3

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Integrated Global Animal Health Cycle

Positive regulatory, payor, & demographic trends Accelerating industry investment & consolidation

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SLIDE 4

Investment Baseline Veterinary Healthcare

Veterinary Healthcare is a great (5% - 6% growth) place to be… Humanization of Pets with Global expansion of the trend Family Member Pets need Juvenile, Wellness & Aging care Historically recession resistant

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SLIDE 5

Strong Industry Performance through the Cycle

3% 5% 7% 15% 15% 16% 16% 25% 11% 1% 7% 10% 6% 6% 8% 8% 11% 11% 27% 3% 14% 35% 13% 31% 25% 17% 5% 18% 15% 9% 16% 25% 8% 4% 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

IDEXX Abaxis VCA

Revenue 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% 5% 10% 9% 14% 17% 19% 20% 21% 21% 21% 19% 18% 20% 20% 21% 24% 23% 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

Source: Company filings; IDEXX FYE 12/31; ABAXIS FYE 3/31; VCA FYE 12/31; EBITDA calculated as operating income plus D&A; VCA acquired by Mars Inc in September 2017.

(10%)

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SLIDE 6

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Source: FactSet as of 1/3/2019

1 Animal Health Index includes Zoetis, Phibro Animal Health, Idexx Laboratories, Abaxis, Neogen, Dechra Pharmaceauticals, Virbac, Vetoquinol and VCA.

(Abaxis was acquired by Zoetis in July 2018) (VCA was acquired by Mars in September 2017)

2 Pharna Index includes Pfizer, Johnson & Johnson, Merck, Bristol-Myers Squibb, AbbVie and Eli Lilly. 3 Diagnostics/ Point of Care Index includes Alere, Abbott Laboratories, Thermo Fisher, Quidel and Cepheid. (Alere was acquired by Abbott Laboratories in October 2017)

Share price performance over time

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SLIDE 7

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Historical multiples evolution (NTM P/E)

0.0x 5.0x 10.0x 15.0x 20.0x 25.0x 30.0x 35.0x 40.0x Jan-02 Feb-04 Apr-06 May-08 Jul-10 Aug-12 Oct-14 Nov-16 Jan-19

Averages Since 2002 10-years 5-years 3-years 1-year Animal Health Index 22.0x 22.3x 23.9x 24.4x 25.5x Pharma Index 14.7x 13.5x 16.0x 15.9x 15.1x Diagnostics / Point of Care Index 20.8x 17.5x 18.3x 18.9x 21.1x

1 2 3

Source: FactSet as of 1/3/2019

1 Animal Health Index includes Zoetis, Phibro Animal Health, Idexx Laboratories, Abaxis, Neogen, Dechra Pharmaceauticals, Virbac, Vetoquinol and VCA.

(Abaxis was acquired by Zoetis in July 2018) (VCA was acquired by Mars in September 2017)

2 Pharna Index includes Pfizer, Johnson & Johnson, Merck, Bristol-Myers Squibb, AbbVie and Eli Lilly. 3 Diagnostics/ Point of Care Index includes Alere, Abbott Laboratories, Thermo Fisher, Quidel and Cepheid. (Alere was acquired by Abbott Laboratories in October 2017)

20.7x 23.0x 14.1x

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Share price in key pullback periods

1 1 2 2 3 3

Share price performance 10/1/2007 – 3/31/2009 Share price performance 9/1/2015 – 12/31/2016 Animal Health Index performance by company

Company Returns Company Returns IDEXX Laboratories (35.6%) Virbac (15.3%) Abaxis (24.3%) Vetoquinol (52.6%) Neogen (10.2%) VCA Inc. (46.2%) Dechra Pharmaceuticals 23.8%

Source: FactSet as of 1/3/2019

1 Animal Health Index includes Zoetis, Phibro Animal Health, Idexx Laboratories, Abaxis, Neogen, Dechra Pharmaceauticals, Virbac, Vetoquinol and VCA; Left chart excludes Zoetis and Phibro which went public on 8/13/2012 and 3/10/2014, respectively. 2 Pharna Index includes Pfizer, Johnson & Johnson, Merck, Bristol-Myers Squibb, AbbVie and Eli Lilly. 3 Diagnostics/ Point of Care Index includes Alere, Abbott Laboratories, Thermo Fisher, Quidel and Cepheid. (Alere acquired by Abbott Laboratories in October 2017)
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SLIDE 9

Investment Baseline Veterinary Diagnostics

Diagnostics is the best (7% - 8% growth) place to be…. Diagnostics is a veterinarian major revenue-profit center (+/- 20%) Diagnostics utilization occurs in (+/- 15%) Hospital Pet Visits Hospital Pet Visits are rising (+/- 5%) Diagnostics favored by Veterinarians (Veterinary Licensure Required) New Point of Care Technologies pull Tests to Point of Care Diagnostics Subscriptions Price Lift 4% per Year Diagnostics is the first Spend (security in tight budgets)

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Integrated Global Animal Health Cycle

Multiple Approaches Integration Consolidation

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(1) Pharmaceutical (2) Vaccine (3) Therapy (4) Device (1) Hospital (2) Home (3) Telemedicine (4) Mobile (1) Supermarket (2) Premium (3) Prescription (4) Therapy (1) Point of Care (2) Reference Lab (3) Single Use (4) Imaging

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Point of Care & Single Use Reference Laboratory

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Puppy Town DrPet Vet Anan Ainuo Chong Fuxin Ringpai National Veterinary

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(1) Pharmaceutical (2) Vaccine (3) Therapy (4) Device (1) Hospital (2) Home (3) Telemedicine (4) Mobile (1) Supermarket (2) Premium (3) Prescription (4) Therapy (1) Point of Care (2) Reference Lab (3) Single Use (4) Imaging

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Paws in Key Segments

Loveland, Colorado Team: 215 FTE (CCA) Core Companion Animal (+/- 90% REV / 45%GM)* Companion Animal Diagnostics Companion Animal Therapeutics Des Moines Iowa Team: 125 FTE OVP Vaccines, Pharmaceuticals (+/- 10% REV / 20%GM)* Production Animal Health Contract Manufacturing Vaccines (Food Animal Health) Biologics and Pharmaceuticals Private Label and Partnerships

FTE number and type subject to change. *Historical range approximations; may vary substantially; not forward looking guidance.

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Get Product Right Get Team Right Get Costs Right Get Model Right

Get

Narrative

Right

50% of Revenue Growth Traceable to New Products Since June 2013

2013 - 2017

2013 2017 REV $78.3M $129.3M GM% 39% 45% OM% (2%) 14.1% OP INC ($1.43M) $18.2M EPS ($0.21) $1.30* Assets $93.6M $135.8M Equity $47.1M $100.4M Share* +/- 3% +/- 10% HSKA $5 (l) $115 (h)

Act One: 2013 through 2017

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* POC Core Lab Analyzer USA Market Share Estimate. 2017 U.S. Tax Reform impacts of +/- ($5.9M) included, as further discussed in our Form 8-K February 28, 2018.

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Analyzer Family: Two-Way PIMS Communication to +/- 90% PIMS

HT5 (1H 15) EPOC (2H 13) DC (1H 14) I (1H 16) COAG (1H 18) Imaging (1H 13)

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Core Companion Animal Segment Focus

1) Point of Care Blood & Imaging Diagnostics 2) TriHeart Heartworm & Allercept Immunotherapy (PVD) 3) Infusion Pumps and Other

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Act One: 2013 through 2017

2013 - 2017

Heska Reset Subscriptions

Reset Benefits for 80%-90% of Hospital’s Testing Assets Ownership Retained by Heska Managed Upgrades, Updates, Extend, Renew 6 Year Subscription with Auto-Renewal 2 Years Price Protection 4% ACH Sweep Prepaid Monthly Monthly Minimum +/- $1,000 to $1,500 per Month

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A Strong Foundation to Begin Act Two

Year Subscriptions + Months Under Subscription + Min Est CSV (Million)

+

Est Subscription Monthly CSV + 2013 370

  • 2014

730

97%

2015 1,235

69%

54,200

  • $38.0
  • $655
  • 2016

1,665

35%

68,750

27%

$51.0

34%

$742

13.3%

2017 1,950

17%

75,950

10%

$56.4

11%

$743

0.1% (est. target)

2018* 2,370

22%

88,100

16%

$65.9

17%

$748

0.7%

Subscriber Retention ‘18 (end) >95%

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*Q2 2018 projections at Investor Day; subject to change based on actual results.

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SLIDE 22

Act Two: 2018 to 2022

2017 2022* REV $129M$216M (+68%) GM% 45% 49.5% OM% 14.1% 20.1% OPINC $18.1M $43.4M (+140%) 22

*Q2 2018 projections at Investor Day. Includes International estimates & announced product & growth Initiatives Amounts & projections are estimates and subject to change

REVENUE GROW MARGIN

GROW PRODUCTS GROW GEOGRAPHY GROW TEST SUPPLIES ACQUIRE

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Rotor Chemistry (Q2 ‘19) Immunodiagnostics (Limited) (Q2 ’19) Urine & Fecal AI Imaging (Q2 ‘20)

Major Drivers

2019 Expanding Products: Major Growth Initiatives

GROW PRODUCTS

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GROW PRODUCTS

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

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Lower Cost. Smaller. Faster. Higher Sensitivity. Broad Menu Roadmap Wide Dynamic Range & Sensitive Multiplexing Test Cards Quantitative Readout. Two-way data communication Single Use (Lateral Flow and ELISA) Competitive Test Replacement Substantially Lower Cost per Test Global Animal and Veterinary Health with Manufacturing Rights

Major Drivers

2019 Major Product Expansion

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(Q2 ‘19) High Sensitivity Immunodiagnostics Multi Plex Analyzer (>$100M Target)

GROW PRODUCTS

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Major Drivers

2019 Major Product Expansion

High Sensitivity Immunodiagnostics Multi Plex Analyzer (>$100M Target)

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(Q2 ‘19)

2019-2020 Assays in Development Non-Regulatory (USDA)

Total T4 (Q2 ‘19 Launch) Cortisol (Q2 ‘19 Launch) Canine TSH

2019-2020 Assays in Development Regulated (USDA)

Canine Heartworm (4+ Plex) Lyme (4+ Plex) Anaplasma (4+ Plex) Ehrlichia (4+ Plex)

GROW PRODUCTS

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SLIDE 27

Major Drivers

5 Million Urine Sedimentation Exams Annually 7,000+ Competitive Sediment Analyzers Placed in 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)

GROW PRODUCTS

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SLIDE 28

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 Line in Volume Q2 2020 Production Instruments in Volume. Commercial Release.

Production and Development Plan

2020 Major Product Expansion

(Q2 ‘20)

GROW PRODUCTS

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International Expansion Begun (Q4 ‘18)

Heska Australia 2019.

  • Direct Presence & Team Established.
  • Leadership Trained.
  • Revenues Targeted for Q1 ‘19

Major Drivers

GROW GEOGRAPHY

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International Expansion Begun (Q4 ‘18)

Heska International Country-Area Target Partners 2019.

  • 5 Partners in Identification & Startup Process
  • Revenues International Partners Targeted Q3 ’19
  • Non-Direct Markets and Regions
  • Portions of Eastern Europe, Middle East, Eurasia
  • Latin and South America
  • Broader Asia
  • Scandinavia
  • United Kingdom

Major Drivers

GROW GEOGRAPHY

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France Acquisition Geographic Expansion

Acquisition (France)

Agreement to Acquire Signed January ’19* Expected to Close in Q1 ‘19 Market Leading new Products to Heska +/- 900 Customers (Primarily in France) Headquarters and Team in Paris, France +/- €4.0 Million Sales 2018 Expected neutral to EPS 2019; Accretive thereafter

Major Drivers

*Subject to closing conditions, approval, additional diligence, and other items; Sales not forward looking guidance.

ACQUIRE GROW GEOGRAPHY

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2019 Growing Test Supplies (15% - 20%)

Grow Market Share a. New Single User Subscriptions b. New Corporate Groups c. Corporate Groups Acquisitions Convert to Heska d. Share Gainer ±3% (‘14) to ±10% (‘18) in POC (USA) e. Expanded N America Sales Team 25% (’18) (85 to 105) f. Expand International POC Market Share from +/-0%

GROW TEST SUPPLIES

GROW MARKET SHARE

GROW UTILIZATION

GROW PRICE GROW PRODUCTS

Incremental Drivers

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2019-2020 Growing Test Supplies (15% - 20%)

Grow Utilization on Existing Installs a. New Tests Launched on several Analyzer Platforms b. Leverage over 2,000 Subscriptions for Launches c. More Patient Visits (+5%) drive Hospital Growth d. 15% of Patient Visits result in a Diagnostic (75bps)

Incremental Drivers

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GROW TEST SUPPLIES

GROW MARKET SHARE

GROW UTILIZATION

GROW PRICE GROW PRODUCTS

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SLIDE 34

2019-2020 Growing Test Supplies (15% - 20%)

Grow Price a. Price Protection for Installed Base (4%)

GROW TEST SUPPLIES

GROW MARKET SHARE

GROW UTILIZATION

GROW PRICE GROW PRODUCTS

Incremental Drivers

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2019-2020 Growing Test Supplies (15% - 20%)

Grow Products a. New products from R & D b. New products from Acquisitions c. New Tests to Installed Base of Instruments

GROW TEST SUPPLIES

GROW MARKET SHARE

GROW UTILIZATION

GROW PRICE GROW PRODUCTS

Incremental Drivers

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Act Two: 2018 to 2022

2017 2022* REV $129M$216M (+68%) GM% 45% 49.5% OM% 14.1% 20.1% OPINC $18.1M $43.4M (+140%) 36

*Q2 2018 projections at Investor Day. Includes International estimates & announced product & growth Initiatives Amounts & projections are estimates and subject to change

REVENUE GROW MARGIN

GROW PRODUCTS GROW GEOGRAPHY GROW TEST SUPPLIES ACQUIRE

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SLIDE 37

Positioned to Grow in a Consolidating & Integrated Global Market

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REVENUE GROW MARGIN

GROW PRODUCTS GROW GEOGRAPHY GROW TEST SUPPLIES ACQUIRE