Heska Corporation

Please stand by. Excuse me. Good day and welcome to the Heskett Corporation third quarter 2022 conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. John Agard, Director, Investor Relations. Please go ahead, sir.

Thank you, and good morning, everyone. Welcome to Heskett Corporation's earnings call for the third quarter of 2022. As a reminder, today's conference is being recorded. I am John Agard, Head of Investor Relations at HESCA, and with us this morning, we have Kevin Wilson, HESCA's Chief Executive Officer and President, and Katherine Grassman, HESCA's Chief Financial Officer. Mr. Wilson and Ms. Grassman will provide details surrounding the results reported, and then we will open the call to questions. Prior to discussing HESCA's results, and before I turn the call over to Kevin, I would like to remind you that during the course of this call, we may make certain forward-looking statements regarding future events or future financial performance of the company. We need to caution you that any such forward-looking statements and opinions are based on our current beliefs and expectations and involve known and unknown risks and uncertainties, which may cause actual results and performance to be materially different from that expressed or implied by those forward-looking statements. Factors that could cause or contribute to such differences are detailed in writing in this morning's earnings release Hesket Corporation's annual and quarterly filings with the SEC, and elsewhere. Any forward-looking statements speak only as the time they are made, and Hesket does not intend and specifically disclaim any obligation or intention to update any forward-looking statements to reflect events that occur after the time such statement was made. Also during this call, we will be discussing certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is provided in our earnings release, which may also be found by visiting the investor relations section of our website. In reviewing our third quarter 2022 results, please note all references to growth refer to growth compared to the equivalent period in 2021, unless otherwise noted. With that being said, it is now my pleasure to turn the call over to Kevin Wilson, ESCA CEO and President.

Kevin? Hey, thanks, John, and good morning, everyone. Before I begin, I'd like to encourage participants to review this morning's release. I think you'll find it detailed and helpful, and I'll try to refrain from unnecessarily reading it to you now. As usual, Catherine will cover the financial results from the quarter, and I'll take some time now to share a few of my own thoughts. To begin, there's a lot of great performance in last quarter's results, especially in profitability year over year. North America POC lab consumables were up 11.4%. Gross margins on a consolidated basis up 180 basis points. Gap EPS up 78.9%. And adjusted EBITDA up 12.3% are all fantastic results, especially in light of some softness in reported revenue. Well, it's always great to beat and beat in today's macro environment and in HESCA's specific progress. Overall, I'm pleased. and I congratulate our team on controlling so strongly the things within their control and mitigating those things that are less controllable. We are a much, much stronger and better positioned company today than we were in January. As we dive in further, I think it's helpful to frame the period's impacts into two categories, the first being the macro drivers, or what we have less control over, and the second being HESCA-specific, or what we have more control over. The macro drivers are widely known Foreign exchange is a big one. Inflation, interest rates, pandemic revenge travel, labor constraints, supply chain, energy inflation, and vet visit trends round out the list. HESCA is impacted by each, and in my opinion, done an admirable job mitigating each. The third quarter for HESCA fits squarely into what we are seeing and hearing within the industry, and this is reflected in our guide for the whole year result. I won't drone on about any of these broadly felt trends here, but we'll be happy to answer questions or provide more commentary around those of interest to participants in the Q&A. Specific to HESCA and the things we can and should control, we have done well in many but can do better. So far in 2022, we were slower than intended in launching and accelerating traction for things like RAPIDS internationally, Heartworm domestically, and element AIM into Europe and into North America corporate contracts as quickly as intended and in time to make a financial impact on 2022 that could overcome the accumulated macro headwinds. That's the demerit for today, and it's reflected in our guide for the whole year result. The good news is that the calendar is now our friend entering 2023 as we lap these demerits and they turn into positive contributors. Rapids are in our warehouse and ready to go, with a full menu internationally and heartworm approved by regulators for sale domestically. Element AIM is in our international warehouses. Sales and marketing materials and teams in each core country are ready, and orders are being placed and filled. In North America, as of November, after a longer process than anticipated, Elliman AIM is now authorized for hospital selection and installation in nearly all of our corporate contracts to serve good demand rising up from the hospital level from some of our largest customers. Chief medical officers are convinced. Performance has been very well received. Our CE seminars are extraordinarily well attended. Our pipeline is great, and placements and utilization are growing regularly and consistently. pointing to Element AIM being a solid, differentiating, and growing success that we see strongly contributing to our financial and portfolio performance for many, many years. To the extent we are doing a forward-looking probability exercise, these 2022 delays are now all set to reliably flip into strong, reported, and comparable contributors in 2023. Add to these the growth that we expect from 2023 launches of our new cloud-based PIMS and our exclusive NUQ Vet Cancer Screening, all supported by what we anticipate to be more favorable trends and prior year comparables. And our line of sight for 2023 growth becomes clearer and confident. The timing is good. For nearly five years, we have planned and publicly communicated that HESCO is targeting 2023 to transition from our five-year build phase to our five-year win at scale and win at innovation phase. We have assembled an amazing and very unique asset. The time is ripe, and we are ready to go. With that, I'll turn the call over to Catherine to detail the quarter before we move into our Q&A time. Catherine?