Heska Corporation

Greetings. Welcome to the HESCA Corporation fourth quarter and full year 2022 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I'll now turn the conference over to your host, John Agard. You may begin.

Thank you, and good morning, everyone. Welcome to Heska Corporation's earnings call for the fourth quarter and full year of 2022. As a reminder, today's conference is being recorded. I am John Agard, Head of Investor Relations at Heska, and with us this morning, we have Kevin Wilson, Heska's Chief Executive Officer and President, and Catherine Grassman, Heska'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 Huska'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. HESCA Corporation's annual and quarterly filings with the SEC, and elsewhere. Any forward-looking statements speak only as of the time they are made and HESCA does not intend and specifically disclaims any obligation or intention to update any forward-looking statements to reflect events that occur after the time such statements were 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 fourth quarter and full year 2022 results, please note all references to growth refer to growth compared to the equivalent prior year period unless otherwise noted. Before I turn the call over to Kevin, I want to mention Heska's earnings presentation found on the investor resources page of the company's investor relations website. Please view this slide as a supplement to today's earnings release. And with that, It is now my pleasure to turn the call over to Kevin Wilson, Huska's 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. It's 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, so I'll be brief with my own thoughts this morning, some of which will echo our last call. To begin, I'm smiling this morning. We have a great release basically across the board and we like our outlook. We had a solid Q4 execution and we got an amazing amount of investment, good work and preparation done in 2022 for good momentum entering 2023. Heska again gained market share, greatly improved gross margin and delivered 15 to 18% growth in key subscription metrics. Supporting this subscriptions growth, Heska had another great year placing analyzers into competitive accounts and into our subscriber base with a particularly wonderful performance in premium chemistry analyzer placements, which were up 28% in the fourth quarter year over year. We also hit our stride on Element AIM. After working through supply chain and in-person team training delays and bumps in the road in our international and corporate accounts launches, in the fourth quarter, We finally got to rolling momentum and finished 2023 with over 370 analyzers in operation, over 40 of which were activated in the month of December alone. Customer feedback is positive. Utilization in both urine and fecal consumables is growing steadily. Systems are working as designed. Margin profiles are great. And Element AIM's economic contribution is growing nicely. We continue to view Element AIM as a significant contributor to our growth for years to come. and is a visible and important differentiator for HESCA in a very competitive market. Other key differentiators that are proprietary to HESCA are now also making a market difference for HESCA. HESCA's proprietary highlights now include the LMNI Plus immunoassay platform, which is now wholly owned by HESCA following the completion of our acquisition of LightDeck, the platform's inventor and manufacturer. With a new state-of-the-art manufacturing plant in Longmont, Colorado coming online this year, We will have the ability to manufacture up to 1 million tests per month on this exciting platform for key immunoassay tests and for our soon-to-launch HESCA NuQ vet cancer screen and monitor. Available exclusively at the point of care on LMNI Plus in minutes with a very small blood sample and for under $50, this menu innovation is revolutionary in the battle against pet cancers. Just in the United States alone, over 6 million dogs are diagnosed with cancer each year. with nearly 50% of all dogs over the age of 10 developing the disease. Early screening and detection is key, especially in pets that otherwise appear to be in good health, and HESCA is leading the charge. In recent peer-reviewed published papers, NUQ detected canine lymphosarcoma at a 77% rate and detected canine hemangiosarcoma at an 82% rate. And there's more to come. This is a big, important, and urgent need that veterinarians with LMNI Plus and new cue from HESCA can meet for screening and monitoring affordably and quickly at the point of care and with high clinical confidence. Rounding out our growth drivers for 2023 are HESCA's new TrueRapid series of single-use tests, HESCA's upcoming release of new cloud-based practice information management software and related software products, and our other announced and unannounced projects, which together we see driving profitability, differentiation, scalability, share gains, and competitiveness in 2023 and beyond. As I mentioned on our last call, to the extent that we were doing a forward probability exercise, many of the delays, headwinds, and oddities in prior year comparables that Heska experienced in 2022 are now set to flip into neutrals and positives in 2023. Pricing dynamics and our cost inputs are favorable. Year-over-year patient hospital visits and foreign exchange currency trends are expected to moderate or improve. Our new growth drivers are exciting, and we have momentum over the competition in long-term lines like chemistry and hematology. And the timing is good. For nearly five years, we have invested heavily. We have planned, worked, and publicly communicated that Heska was targeting to transition from our five-year build phase to our five-year win at scale and win at innovation phase in 2023. 2022 is behind us. 2023 is here. And we have assembled an amazing and very unique asset to win at scale and win at innovation. So with that, I'll turn the call over to Katherine to detail our quarter and the full year before we move to our Q&A time. Katherine?