On February 28, 2023 Fulgent Genetics, Inc. (NASDAQ: FLGT) ("Fulgent", or the "Company"), a technology-based company with a well-established clinical diagnostic business and a therapeutic development business, reported financial results for its fourth quarter and full year ended December 31, 2022 (Press release, Fulgent Genetics, FEB 28, 2023, View Source [SID1234627913]).

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

Fourth Quarter 2022 Results:

Total Revenue of $67.7 million
Core Revenue1 grew 97% year-over-year to $55.0 million
GAAP loss of $23.8 million, or $0.80 per share
Non-GAAP loss of $14.2 million, or $0.48 per share
Adjusted EBITDA loss of $15.1 million
Cash from operations of $33.2 million
Cash, cash equivalents, and investments in marketable securities, including investments pending settlement, of $872.0 million as of December 31, 2022
Repurchased approximately 815,000 shares of common stock at an aggregate cost of $29.1 million under the stock repurchase program announced in March 2022
Full Year 2022 Results:

Total Revenue of $619.0 million
Core Revenue1 grew 95% year-over-year to $181.5 million
GAAP income of $143.4 million, or $4.63 per share
Non-GAAP income of $179.4 million, or $5.79 per share
Adjusted EBITDA of $257.1 million
Cash from operations of $253.5 million
Repurchased over 1.8 million shares of common stock at an aggregate cost of $74.3 million under the stock repurchase program announced in March 2022
Note:

1) Core Revenue excludes revenue from COVID-19 testing products and services including COVID-19 NGS testing revenue.

Non-GAAP income (loss), non-GAAP income (loss) per share, and adjusted EBITDA income (loss) are described below under "Note Regarding Non-GAAP Financial Measures" and are reconciled to the most directly comparable GAAP financial measure, GAAP income (loss), in the accompanying tables.

Ming Hsieh, Chairman of the Board and Chief Executive Officer, said, "2022 was a transitional and transformative year for Fulgent, as we integrated the acquisitions of Inform Diagnostics and CSI Laboratories and acquired the Pharma business. As the COVID-19 pandemic continues to have a lesser impact, we are excited about the growth and momentum in our core business, with strength across our 3 business areas – precision diagnostics, anatomic pathology, and pharma services – and momentum in oncology and reproductive health, particularly with the expansion of oncologic carrier screening through Beacon787, also announced today. We have reorganized our Board of Directors and are on the path to transforming Fulgent from a genomic diagnostic service business into a fully integrated precision medicine company, focusing on oncology. In the meantime, we have a long runway of opportunity in the core business and see diagnostics as a dependable source of revenue and growth for Fulgent in the years ahead."

Paul Kim, Chief Financial Officer, said, "We are pleased with our results in 2022 and the trajectory of our core business. While the revenue profile of the Company without COVID testing revenue has implications for our bottom line, I believe we are poised for sustainable growth in the core business and to continue to generate cash. We are well positioned to execute our strategy while maintaining flexibility to capitalize on additional acquisition and strategic investment opportunities in the future."

Outlook:

For the first quarter of 2023, Fulgent expects:

Total Revenue of approximately $56.0 million
For the full year 2023, Fulgent expects:

Total Revenue of approximately $240.0 million
GAAP loss of approximately $2.50 per share
Non-GAAP loss of approximately $1.25 per share
Conference Call Information

Fulgent will host a conference call for the investment community today at 4:30 PM ET (1:30 PM PT) to discuss its fourth quarter and full year 2022 results. The call may be accessed through a live audio webcast in the Investor Relations section of the Company’s website, View Source An audio replay will be available at the same location.

Note Regarding Non-GAAP Financial Measures

Certain information set forth in this press release, including non-GAAP income (loss), non-GAAP income (loss) per share, and adjusted EBITDA income (loss) are non-GAAP financial measures. Fulgent believes this information is useful to investors because it provides a basis for measuring the performance of the Company’s business, excluding certain income or expense items that management believes are not directly attributable to the Company’s operating results. Fulgent defines non-GAAP income (loss) as net income (loss) calculated in accordance with accounting principles generally accepted in the United States of America, or GAAP, plus amortization of intangible assets, plus restructuring costs, plus acquisition-related costs, including banking fees and legal fees associated with the recent acquisitions, plus equity-based compensation expense, plus or minus the non-GAAP tax effect, and plus or minus other charges or gains, as identified, that management believes are not representative of the Company’s operations. The non-GAAP tax effect is calculated by applying the statutory corporate tax rate on the amortization of intangible assets, restructuring costs, acquisition-related costs, and equity-based compensation expense. Fulgent defines adjusted EBITDA income (loss) as GAAP income (loss) plus or minus interest (expense) income, plus or minus provisions (benefits) for income taxes, plus restructuring costs, plus acquisition-related costs, plus equity-based compensation expense, plus depreciation and amortization, and plus or minus other charges or gains, as identified, that management believes are not representative of the Company’s operations. Fulgent may continue to incur expenses similar to the items added to or subtracted from GAAP income (loss) to calculate non-GAAP income (loss) and adjusted EBITDA income (loss); accordingly, the exclusion of these items in the presentation of these non-GAAP financial measures should not be construed as an implication that these items are unusual, infrequent or non-recurring. Management uses these non-GAAP financial measures along with the most directly comparable GAAP financial measure of net income (loss) in evaluating the Company’s operating performance. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in conformity with GAAP, and non-GAAP financial measures as reported by Fulgent may not be comparable to similarly titled metrics reported by other companies.

On February 28, 2023 Tempus, a leader in artificial intelligence (AI) and precision medicine, reported a multi-year, strategic collaboration with Pfizer in which the two companies are working together to further AI and machine learning-driven efforts in therapeutic development (Press release, Tempus, FEB 28, 2023, View Source [SID1234627912]). The goal of this collaboration is to more precisely gather insights that will inform novel drug discovery and development in oncology.

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

Through this collaboration, Pfizer has access to Tempus’ AI-enabled platform and its library of de-identified, multimodal data to uncover insights that will power therapeutic development in oncology. Pfizer also has access to Tempus’ broad range of capabilities that support therapeutic R&D, to advance its own oncology portfolio, including AI-driven companion diagnostic offerings and Tempus’ clinical trial matching program, TIME, that rapidly activates studies for patients in communities across the country.

"Pfizer shares our commitment to bringing novel treatments to patients faster, and we look forward to working together to usher in the next generation of oncology therapeutics," said Eric Lefkofsky, Founder and CEO of Tempus. "This is the third strategic collaboration Tempus has established with a global pharmaceutical leader in the last year, as we believe that combining our technological capabilities with pharma’s deep R&D expertise will get us much closer in realizing the full potential of precision medicine."

On February 28, 2023 Nordic Nanovector ASA (OSE: NANOV) ("Nordic Nanovector" or the "Company") reported its results for the second half and full year 2022 (Press release, Nordic Nanovector, FEB 28, 2023, View Source [SID1234627911]). A presentation by Nordic Nanovector’s interim CEO & CFO, Ludvik Sandnes will be held in-person today in Oslo and webcast live beginning at 8:30am CET – details below.

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

Jon Magne Asmyr, Chair of the Board, commented: The Company’s future is still unclear, and since the turn of the year the new Board has prioritised four important tasks: to get a new CEO/CFO in place; to reduce burn rate; to map the potential of the CD37-targeted immunotherapy platform and the early-stage solid tumour project; and to find strategic solutions that safeguard the interests of shareholders. We are happy to have solved the CEO and CFO situation with the interim appointment of Ludvik Sandnes and to see that the cost base has been significantly reduced. We continue to further evaluate Nordic Nanovector’s pipeline, and, at the same time, we are pursuing all potential strategic options. We hope that this this process will materialise into a proposed transaction that would be acceptable to shareholders."

Ludvik Sandnes, Interim CEO & CFO, commented: "2022 was an extremely difficult year for Nordic Nanovector. The former board and management made strong efforts to safeguard shareholder and company values culminating in the agreed merger proposal with APIM Therapeutics that was not supported by the required majority of shareholders. The clear goal in 2023 is to ensure Nordic Nanovector’s continued operation and to position it for a possible transaction that would benefit the current organisation, employees and shareholders. We continue to work hard, with our financial advisors Carnegie, to assess strategic options that may be open to the Company and will put forward any recommended proposals for resolution by the Company’s shareholders in due course."

H2’2022 Events

The former Board of Directors decided to discontinue the PARADIGME global Phase 2b trial of Betalutin (177Lu lilotomab satetraxetan) in 3rd-line follicular lymphoma (3L R/R FL) patients, refractory to RTX/anti-CD20 based treatments
Betalutin profile did not fully meet objectives set out for the PARADIGME study with only one out of every three patients (ORR 31.1%) responding to treatment and median duration of response of 6.4 months]
Only one in seven patients had a complete response at three months (CRR 14.8%) with a median DoCR of 8.5 months
Both of the above results failed to meet the threshold for study success, which were minimum ORR of 40% and minimum CRR of 25%
Profile determined to be no longer sufficiently competitive to bring Betalutin to the market in the 3L R/R FL indication within a timeframe that made financial and commercial sense for the Company
The former Board implemented a restructuring of the Company to reduce costs
Staff numbers reduced to six as of 28 February 2023 from 40 as of 30 June 2022
Formal close down of PARADIGME initiated and expected to be concluded by the end of Q1’2023. The study results will be published in the required public access databases thereafter
All larger contracts have been terminated.
Further commitments related to the closure of PARADIGME during 2023 and transaction costs related to the proposed APIM merger bring the current uncommitted net cash level to approximately NOK 60m at the beginning of 2023.
Carnegie Investment Bank appointed to explore strategic options for the Company to optimise shareholder value
Proposal to combine with APIM Therapeutics agreed by the former Board of Directors and the APIM Board (announced 9 November 2022)
Proposal rejected by Shareholders at Extraordinary General Meeting (EGM) on 1 December 2022
Post-period events

Board and Management changes
The former Board of Directors resigned at the EGM (3 January 2023) and a new Board consisting of Jon Magne Asmyr (Chairperson), Eddie Berglund and Tina Bjørnlund Bønsdorff was elected, as well as a new Nomination Committee consisting of Hans Peter Bøhn (Chairperson), Jan-Tore Pedersen and Vegard Aavik
Eddie Berglund resigned from the Board on 19 January 2023
Ludvik Sandnes, former Chairperson of Nordic Nanovector (2013-2019), was appointed interim CEO & CFO as from 1 February 2023 replacing Malene Brondberg who transitioned out of the Company
Financial Highlights

(Figures in brackets = same period 2021 unless otherwise stated)

Revenues for the second half 2022 amounted to NOK 0.0 million (NOK 0.0 million). Revenues for the full year 2022 were NOK 0.0 million (NOK 0.0 million).
Total operating expenses for the second half 2022 were NOK 114.2 million (NOK 237.4 million). Total operating expenses for the full year 2022 amounted to NOK 317.4 million (NOK 442.4 million).
Comprehensive loss for the second half 2022 amounted to NOK 111 million (loss of NOK 237.6 million). Comprehensive loss for the full year 2022 was NOK 307.1 million (NOK 441.7 million).
Cash and cash equivalents amounted to NOK 98.7 million 31 December 2022 compared to NOK 287.4 million on 30 June 2022, and NOK 277.7 million on 31 December 2021.
Outlook

Following the decisions made in 2022 to discontinue the PARADIGME study and implement a restructuring of the Company, Nordic Nanovector believes that the best interests of shareholders will be served by thoroughly exploring all strategic options that may be available with the help of Carnegie as expert financial advisor.

As a publicly quoted company with a listing in Norway, remaining cash resources and a pipeline of CD37-targeted assets, the Company believes that there is an opportunity to crystalise value for shareholders through a potential strategic transaction.

No assurances can be given as to the outcome or timing of the ongoing review process. The Company will put forward any recommended proposals for resolution by shareholders in due course.

Several measures have been implemented to reduce the burn rate, and the Company’s current net cash is expected to finance its ongoing operations into Q2 of 2024.

Presentation and Webcast

A presentation by Nordic Nanovector’s interim CEO & CFO, Ludvik Sandnes will be held in-person and webcast live today beginning at 8:30am CEST.

Venue: ADVOKATFIRMAET CLP DA, Sommerrogata 13, 0255 Oslo
The webcast can be accessed from www.nordicnanovector.com in the section: Investors & Media and a recording will also be available on this page after the event.

The results report and the presentation will be available at www.nordicnanovector.com in the section: Investors & Media/Reports and Presentation/Interim Reports/2022 from 7:00am CEST the same day.

IR enquiries

Ludvik Sandnes, Interim CEO & CFO
[email protected]

On February 28, 2023 RaySearch Laboratories reported that in the fourth quarter of 2022, order intake increased by 49 percent and net sales rose 40 percent. Operating profit amounted to SEK 21 M (-17) (Press release, RaySearch Medical, FEB 28, 2023, View Source [SID1234627910]).

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

FOURTH QUARTER (OCTOBER – DECEMBER 2022)

Order intake SEK 514.4 M (345.0)
Net sales SEK 264.4 M (188.6)
Operating profit SEK 20.7 M (-16.6))
Profit after tax SEK 14.1 M (-16.0)
Profit per share before/after dilution SEK 0.41 (-0.47)
Cash flow SEK 42.8 M (-20.1)
Order backlog SEK 1,940.1 M (1,362,9) at the end of the period
TWELVE MONTHS (JANUARY – DECEMBER 2022)

Order intake SEK 1,218.5 M (807.8)
Net sales SEK 843.6 M (641.7)
Operating profit SEK 42.7 M (-53.3)
Profit after tax SEK 23.8 M (-47.3)
Profit per share before/after dilution SEK 0.69 (-1.38)
Cash flow SEK 46.8 M (-71.7)
SIGNIFICANT EVENTS DURING THE FOURTH QUARTER

RaySearch received its largest order ever when Ion Beam Applications S.A. (IBA) placed an order of 17.3 MEUR for RayStation and RayCare for installation at nine proton centers in Spain.
University Hospitals Seidman Cancer Center/Case Western Reserve University in Cleveland, Ohio, in the United States, placed an order for RayStation.
CGN Medical Technologies placed an order for RayStation, which CGN sold together with IBA’s proton treatment system to Yangzhou Hospital in China.
Ohio State University Comprehensive Cancer Center – Arthur G. James Cancer Hospital and Richard J. Solove Research Institute (OSUCCC – James) in the United States, placed an order for RayStation.

On February 28, 2023 Heska Corporation (NASDAQ: HSKA; "Heska" or "Company"), a leading global provider of advanced veterinary diagnostic and specialty products, reported financial results in two segments (North America and International) for its fourth quarter and full year ended December 31, 2022 (Press release, Heska, FEB 28, 2023, View Source [SID1234627909]).

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

Fourth Quarter and Full Year 2022 and Year Over Year ("YOY") Metrics

$ in millions except Earnings Per Share ("EPS")

Q4 ($)

Q4 (%) YOY

FY ($)

FY (%) YOY

Consolidated Revenue

$66.3

(2.5) %

$257.3

1.4 %

Q4 (%)

Q4 YOY bps1

FY (%)

FY YOY bps1

Consolidated Gross Margin

41.9 %

100

43.2 %

150

Net Margin2

(5.8) %

(560)

(7.2) %

(730)

Adjusted EBITDA Margin3

9.4 %

(130)

10.6 %

(110)

Q4 ($)

Q4 (%) YOY

FY ($)

FY (%) YOY

Net loss attributable to Heska

$(4.2)

NM4

$(19.9)

NM4

Net loss

$(3.9)

NM4

$(18.4)

NM4

Adjusted EBITDA3

$6.2

(14.7) %

$27.2

(8.5) %

EPS, Diluted

$(0.41)

NM4

$(1.92)

NM4

Non-GAAP EPS, Diluted3

$0.55

57.1 %

$1.58

(1.9) %

1Basis Points is "bps". 2Net margin represents the ratio of net loss to revenue. 3See "Use of Non-GAAP Financial Measures" and related reconciliations provided below. 4Not Meaningful is "NM".

Report Highlights

Full year consolidated revenue increased 1.4% on a reported basis and 5.4% on a constant currency basis (see "Use of Non-GAAP Financial Measures") to $257.3 million, driven by North America Point-of-Care ("POC") Lab Consumables up 8.7% (up 9.0% in constant currency), POC Lab Instruments & Other up 10.1% (up 16.7% in constant currency), and POC Imaging & Informatics up 7.8% (up 13.0% in constant currency).
Consolidated gross margin up 150 bps year over year to 43.2%. International gross margin up 420 bps year over year to 37.3% and North America gross margin approximately in line with prior year at 46.7%.
Total Active Subscriptions up 18%, Months Under Subscription up 15%, and Minimum Contract Subscription Value ("CSV") up 17%.
Over 270 Element AIM analyzers installed in 2022, with over 370 total units now operating since general commercial launch in the fourth quarter of 2021. Despite early supply chain and International launch delays, Element AIM hit its stride by the fourth quarter- December was the product’s best month (>40), installed customer feedback and clinical utility are favorable, utilization is growing, and we continue to view Element AIM as a significant contributor to our high margin consumables and analyzer placements growth for years to come.
Fourth quarter global analyzer placements grew over 8%, led by over 28% growth in premium chemistry placements. Full year global analyzer placements grew over 2% excluding Element AIM and grew over 7% including Element AIM.
Fourth quarter North America analyzer placements grew over 5% led by over 20% growth in premium chemistry placements. Full year North America analyzer placements grew over 18% excluding Element AIM and grew over 28% including Element AIM.
Fourth quarter International analyzer placements grew over 10%, led by over 30% growth in premium chemistry placements. Full year International analyzer placements fell 6% excluding Element AIM and fell 4.5% including Element AIM.
2023 Outlook revenue growth of 8%-12%, includes POC Lab Consumables growth of 12%-15%.
"Heska finished 2022 with great execution and growing momentum for 2023," commented Kevin Wilson, Heska’s Chief Executive Officer and President, "to deliver full year results ahead of expectations across most key metrics. Full year revenue (constant currency) grew 5.4%, adjusted for $10 million of foreign currency effects. Heska again placed more new analyzers and converted more customers to our high-margin, high-retention, sustainable subscription model, especially in our International segment, where Active Subscriptions rose 56%, Months Under Subscription were up 47%, and CSV was up 56%. We expect continued sustained subscriptions growth from new and existing customers in 2023."

"In addition to our financial results, Heska invested heavily throughout 2022 to prepare several major drivers of future growth, proprietary differentiation, and scalable capabilities. Heska’s proprietary highlights now include the Element AIM urine and fecal analyzer, the Element i+ immunoassay platform, Heska’s Nu.Q Vet Cancer Screen and Monitor available exclusively at the point-of-care on Heska’s Element i+ in minutes and for under $50, and Heska’s trūRapidTM Series of tests designed to have the best performance for the best price. These innovations, our acquisition of MBio Diagnostics, Inc. ("LightDeck"), the creator of our Element i+ platform, our upcoming launch of new cloud-based Practice Information Management Software ("PIMS") and related software from our recent acquisition of and investments in VetZ GmbH ("VetZ"), and our other announced and unannounced projects are set to contribute to our growth, profitability, differentiation, scalability, and competitiveness in 2023 and beyond."

"As the pet industry laps difficult comparable periods, Heska is well positioned entering 2023, with strong 2022 analyzer placements under subscription, price, gross margin, new products, and other positives on tap to contribute to 2023," continued Mr. Wilson. "We have invested tremendous energy and resources for ten years to assemble the best assets in the global companion animal point-of-care diagnostics and informatics market. Today, we possess a full solutions stack, a highly scalable business model, an exciting pipeline into big opportunities, strong intellectual property, owned development and production capabilities, a steadily growing subscriptions customer base, good and expanding margin profile and leverage opportunity, a solid cash position, a respected position in the key western markets, and a great team. Now," concluded Mr. Wilson, "we set our focus firmly on our long-articulated Act Three goals to Win at Scale and Win at Innovation from 2023 through 2028. The work is hard and the competition is very strong- but we are energized because the rewards are meaningful and our success matters to pets and their families, veterinarians and their teams, and every stakeholder invested in our Heska mission. This is good work and work worth doing- and Heska is well positioned to do it well."

POC Lab Consumables Subscriptions

POC Lab Consumables Subscriptions 2022. POC Lab Consumables is Heska’s largest, highest margin, and generally fastest growing business. Heska grew key subscription metrics in 2022, including: (1) Active Subscriptions to 4,388 (+18%), (2) Months Under Subscription to 178,050 (+15%), and (3) Minimum CSV to $207.4 million (+17%). Several factors contributed to the performance, including healthy installed base and retention, positive new analyzer adoption and mix, above target success with high volume hospitals, positive pricing, and confidence from existing and new subscribers to increase utilization commitments for Heska consumables products over long time periods.

Year

Active
Subscriptions

%
Growth

Months
Under
Subscription

%
Growth

Min
CSV (Million)1

%
Growth

2013

370

2014

730

97 %

2015

1,235

69 %

54,200

$38.0

2016

1,665

35 %

68,750

27 %

$51.0

34 %

2017

1,950

17 %

75,950

10 %

$56.4

11 %

2018

2,175

12 %

90,844

20 %

$71.9

28 %

2019

2,376

9 %

100,249

10 %

$101.6

41 %

2020 Total Actual

2,980

25 %

124,695

24 %

$131.4

29 %

2020 North America

2,645

11 %

109,141

9 %

$121.0

19 %

2020 International

335

15,554

$10.4

2021 Total Actual

3,717

25 %

155,022

24 %

$176.6

34 %

2021 North America

2,793

6 %

105,845

(3) %

$143.6

19 %

2021 International

924

176 %

49,177

216 %

$33.0

218 %

2022 Total Outlook

4,650

25 %

192,500

24 %

$219.0

24 %

2022 North America

2,950

6 %

112,500

6 %

$165.0

15 %

2022 International

1,700

84 %

80,000

63 %

$54.0

64 %

2022 Total Actual

4,388

18 %

178,050

15 %

$207.4

17 %

2022 North America

2,949

6 %

105,716

— %

$155.9

9 %

2022 International

1,439

56 %

72,334

47 %

$51.5

56 %

2023 Total Outlook

5,250

20 %

206,500

16 %

$245.0

18 %

2023 North America

3,100

5 %

106,500

1 %

$170.0

9 %

2023 International

2,150

49 %

100,000

38 %

$75.0

46 %

1Contract subscription value includes individual subscriber minimums as estimates for corporate sites active.

POC Lab Consumables Subscriptions 2023 Outlook. Heska anticipates subscriptions growth in 2023, similar to 2022, with steady gains in North America combined with significant International subscriptions expansion to achieve in 2023: (1) Active Subscriptions to 5,250 (+20%), (2) Months Under Subscription to 206,500 (+16%), and (3) Minimum CSV to $245.0 million (+18%). Regarding International, Heska occupies a stronger market share position in International than it did in North America when the Company made a similar effort in 2013-2015. This leads us to again forecast faster International subscriptions growth than our historical North America 2013-2015 actuals. We expect to continue to see positive gross margin and revenue expansion in our International segment’s POC Lab Consumables in 2023.

Fourth Quarter and Full Year Financial Results

Revenue

North America Segment Revenue

Q4 ($)

Q4 (%) YOY

FY ($)

FY (%) YOY

North America Revenue

$43.2

(0.3) %

$161.8

1.8 %

POC Lab Instruments & Other

$5.4

11.1 %

$17.2

15.8 %

POC Lab Consumables

$19.6

8.6 %

$78.3

8.7 %

POC Imaging & Informatics

$7.7

(7.2) %

$27.3

(7.4) %

PVD1

$5.3

(30.5) %

$22.0

(11.7) %

OVP2

$5.2

15.0 %

$16.9

(3.9) %

1"PVD" is Pharmaceuticals, Vaccines and Diagnostic, and includes Tri-Heart heartworm preventive and Allercept allergy testing and therapeutics.

2"OVP" is former Other Vaccines and Pharmaceuticals segment contract manufacturing products for mainly herd animals.

Note: Numbers may not foot due to rounding. North America segment is not materially impacted by fluctuations in foreign exchange rates.

International Segment Revenue

Q4 ($)

Q4 (%) YOY

Q4 (%) YOY

FY ($)

FY (%) YOY

FY (%) YOY

Reported

Constant
Currency

Reported

Constant
Currency

International Revenue

$23.2

(6.5) %

2.8 %

$95.5

0.7 %

10.9 %

POC Lab Instruments & Other

$4.4

4.6 %

16.8 %

$15.7

4.4 %

17.0 %

POC Lab Consumables

$9.6

(9.3) %

1.7 %

$41.2

(10.5) %

0.2 %

POC Imaging & Informatics

$8.4

(4.0) %

2.5 %

$35.2

23.6 %

32.8 %

PVD1

$0.8

(36.7) %

(33.7) %

$3.5

(34.9) %

(32.0) %

1"PVD" is Pharmaceuticals, Vaccines and Diagnostic, and includes allergy testing and therapeutics.

Note: Numbers may not foot due to rounding.

Profitability

Full year consolidated gross margin improved approximately 150 bps to 43.2% (110 bps in constant currency). International gross margin improved approximately 420 bps to 37.3% as we continued our ongoing product rationalization efforts to replace lower margin legacy products acquired as part of the 2020 acquisition of scil animal company ("scil"), particularly within POC Lab. The addition of PIMS and other software to our product portfolio from our acquisition of VetZ in early 2022 also increased gross margin. Increased installations of Element AIM in our North America segment along with unfavorable product mix offset margin gains in our POC Lab Consumables resulting in neutral gross margin year over year.

Full year operating margin was negative 7.9%, a 750 bps decline. We invested $13 million more in research and development projects, the majority of which is attributed to our planned launch of a point-of-care cancer screening and monitoring test in the first half of this year. Additionally, we incurred higher acquisition related costs and other non-recurring items and extraordinary charges not indicative of ongoing operations.

Adjusted EBITDA margin, which excludes stock-based compensation and acquisition related costs, non-recurring items and extraordinary charges not indicative of ongoing operations, declined 110 bps (140 bps on a constant currency basis) driven by increased operating costs from investment in growth and new technologies, such as the ongoing development of a cloud-based PIMS and our new trūRapidTM portfolio.

Liquidity

We continue to demonstrate a strong liquidity position with cash of $156.6 million. On January 3, 2023, we closed the acquisition of LightDeck, utilizing cash of approximately $22 million.

2023 Outlook

The table below introduces the Company’s fiscal year 2023 guidance ("2023 Outlook") for revenue and adjusted EBITDA margin and other key financial metrics:

2023 Outlook

Consolidated Revenue

$278-$288 million

POC Lab Revenue

$165-$175 million

POC Imaging & Informatics Revenue

$60-$70 million

Adjusted EBITDA Margin1

12%+

Adjusted EBITDA Margin1 inclusive of LightDeck

~10%

Dollars in millions. 2023 Outlook are forward looking statements. Foreign currency exchange rate assumptions for 2023 are (in U.S. dollars): Euro $1.07 and Canadian dollar $0.74.

1Excludes estimates for taxes, interest, depreciation and amortization, purchase accounting, acquisition and other one-time costs, and stock-based compensation. Heska is unable to provide a reconciliation of the non-GAAP guidance measure to the corresponding GAAP measure on a forward-looking basis without unreasonable effort due to the high variability and low visibility of most of the excluded items. Material changes to any one of these items could have a significant impact on future GAAP results. Heska believes the non-GAAP presentation is more in-line with future ongoing operating performance.

Reported and constant currency revenue growth of 8%-12%.
North America segment is approximately 60% of full year 2023 Outlook consolidated revenue, which includes estimated POC Lab Consumable revenue growth rate of approximately 12%-15%.
International segment is approximately 40% of full year 2022 Outlook consolidated revenue, which includes estimated POC Lab Consumable revenue growth rate of approximately 12%-14% on a reported basis and 9%-11% on a constant currency basis.
Gross margin expansion of 100 bps to 200 bps excluding the impact of the LightDeck acquisition.
Expanded research and development capabilities and manufacturing capacity as part of our acquisition of LightDeck will be dilutive to 2023, impacting adjusted EBITDA margin by approximately 200 bps. Product pipeline expansion and cost rationalization is underway.
Heska’s Commitment to Corporate Responsibility and Stewardship

Heska is committed to corporate responsibility and stewardship. Driven by oversight from Heska’s Board of Directors and executive leadership, we are dedicated to promoting and engaging environmental, social and governance (ESG) priorities throughout the organization in order to align activities and resources with sound practices and accountability. In so doing, we hold ourselves to high standards to empower and enrich the lives of our employees, foster a culture that values diversity and inclusion, enhance sustainability in our facilities and operations, and contribute to the communities in which we serve. Heska has developed the necessary framework, roadmap and objectives to promote our commitment and produce meaningful results in the years ahead including its Corporate Responsibility Task Force consisting of management across key functional areas. The Company has begun to disclose practices and data using the framework of industry-leading standards such as Sustainability Accounting Standard Board (SASB) guidelines, United Nations Sustainable Development Goals (UN SDGs), and Heska will consider the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) as it pursues its objectives. For more information, please visit: View Source

Earnings Conference Call

Heska management will host a conference call on February 28, 2023 at 9:00 a.m. MT (11:00 a.m. ET) to discuss the Company’s fourth quarter and full year 2022 financial results. The call may be accessed by dialing 1-877-451-6152 within the United States and 1-201-389-0879 outside of the United States and by referencing conference identification number 13736218. The call will also be webcast online at View Source A telephonic replay of the conference call will be available through March 14, 2023. The replay may be accessed by dialing 1-800-512-2921 within the United States or 1-412-317-6671 outside of the United States and by referencing replay identification number 13736218. The webcast will be archived on the Company’s website for 90 days.