Q1 2020 Earnings Call
[music].
Good day, ladies and gentlemen, and once comes TZ Heska Corporation first quarter, she cost management G earnings call.
For your information today's conference is being recorded.
At this time I would love to turn the conference over to your host Mr. John Eckart. Please go ahead sorry.
Thank you and good morning, everyone. Welcome to Heska Corporation earnings call for the first quarter of 2020, I in Johnny Director of Investor Relations for Heska.
Prior to discussing hotspots first quarter 2020 resolved 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 for the company you need to caution you that any such forward looking statements are based on our current beliefs and expectations and involve known and.
I know risks and uncertainties, which may cause actual results performance to be materially different than that expressed or implied by such forward looking statements.
Factors that could cause or contribute took such differences are detailed in writing and that's mortgage I mean, it's really ask a corporation annual and quarterly filings with the <unk>.
Elsewhere.
Any forward looking statements speak only as of the time, there and they need and that's good does not intend and specifically disclaim any obligation or intention to update any forward looking statements to reflect the then that occurred after the times such statement was made.
We have what that this morning.
And walking husbands, Chief Executive Officer and President.
In cap and Grassman, that's goods Chief financial Officer.
You're welcome and that's Craftsman will provide details surrounding the results recorded and then we will open the call the question.
Before I turn the call over to Kevin I Wanna mention one item of housekeeping.
That's good had previously announced plans to open analyst and Investor Day on September 16 in New York City to discuss the company's growth strategy consolidated performance, including its recent major acquisition, how long that U.S. demonstration and multiyear outlook. That's good now plans to hold the analyst and Investor day.
Thursday November 12, 2020, either Inc. person in New York City, all remotely through multimedia up from our Loveland, Colorado headquarters and being further evaluation.
Sales surrounding this event will be forthcoming.
With that being said it is now my pleasure to turn call over to Kevin Wilson, that's good CEO and President Kevin.
Thanks, John and good morning, everyone.
As I indicated in this mornings release students with mixed emotions.
And I report that the first quarter 2020 was a strong quarter for Alaska.
Grace alone all of our 500 has got employees around the longer sakes employed in healthy we're extremely grateful.
Third and good fortune and agreed for the millions of people around the world have been directly and tragically effect.
Team.
Our business concerns and ambitions pale in comparison to their laws and it seems that this humbling minded Kathryn johnbull begin today's call.
Okay, let's begin.
While capital will cover the specifics of the quarter I wanted to take a few moments to comment on highlight reel <unk>.
We grew revenue.
Expanded margins.
Understood the biggest acquisition in our history.
Confirmed the benefits of the secure subscriptions model in a resilient animal health care space.
Improved our balance sheet.
Millions of dollars to our cash position.
And advanced our research and development projects, well know curious perfect and thanks to the global corporate banking crisis, our first quarter accomplishments in nearly all carriers met or exceeded our goals.
Our core businesses are doing well.
Our key point of care lab consumables business was up 15.7% over the prior year period.
Subscription results were solid.
And then a time or large competitors are still for a large ground campaign of hundreds of people visiting customer hospitals in person.
Our smaller and flexible sales team has become a comparable strength.
In fact in April which is near record performance in total contract subscription value achievement.
Which which celebrated last week on a video conference with over 100 of our ask teenage.
Well morale is high.
We've also now completed the acquisition of skill animal care company for $110 billion at a time when most global M&A transactions were caused or terminated.
Coming fresh on the heels of our acquisition of Cbm companies of spending than January.
We were on time with our skill animal care closing because these are wonderful assets in critical markets.
Well, one on for decades, and beans, all the people with whom we want to build our global business.
They are great people.
They are experts and they have thousands and thousands of decades long customer relationships.
And the anchor markets, but we want to be it.
If you haven't had a chance to review our releases and presentations around the skill animal care acquisition I encourage you to do so we love the steel and nothing at recent events no matter, how dire has changed our opinion.
Our candidates of customers just double.
Just before we were scheduled to double our product offerings.
Potential revenue streams are they selling to them.
And we'll get these things on the most of the global pandemic crisis in February and March Heska adjusted exceptional wall to covert 19 crisis.
Protected our employees and their families. We provided health care security for millions of pets and their families.
Sure many thousands of veterinary teams and all the while we pay careful attention to protect and Heskas commercial capacity.
Rand reputation and culture to keep our gross capacity fully intact.
Since continuity plans are working well.
I've been able to maintain full employment in full rates of pay for Heska employees over 85% upon my working remotely excellent results.
We believe Heska is well prepared and position for this current gold at 19 challenge until the recurring surges, we anticipate for the next several quarters.
My operating assumption is that we are in for the first round up the brutal match. It will continue well into 2021 and we are ready.
Our end markets remains fundamentally healthy no supply chain is with few exceptions strongly intact.
She is in great shape.
Our our cash on hand projections, even in severely down market scenarios.
We have the long term ability to perform financially and to pursue strategies with these foundations in place Heska has accomplished a great deal in the first period of 2020, and we continue to expect positive progress throughout the balance of the year.
Now I'd like to share a few thoughts on cobot 19, as it relates to veterinary medicine broadly and basket specifically.
Well I do not know how long cold in 19 related challenges will continue we have seen and do anticipate certain impacts and we think these observations on Christian.
First it's important to note that our five year plan remains intact, because the facts on the ground support this conclusion.
After acknowledging maximum pressure on our plans we continue to believe me on the right path as we approach to halfway point.
Our 2018 to 2023 five year plan.
I remind you we laid out three main goals for this period and they remain unchanged. Our first major growth initiative is to double the addressable customers and geography to serve.
Second major growth initiatives to double the addressable product revenue lines and serve.
These two initiatives in combination will have a multiplier effect.
Third major growth initiative is to continue to protect our wins to date and gain in our baseline business.
We've achieved our first goal.
2020, having launched into new markets organically and through acquisition as of last month with no doubled to customers in geography, who serve.
I'm thrilled with this accomplishment and the owners of Ark, One company now on a much more valuable asset.
And we are well on our way to accomplishing our second goal.
Expected double the product revenue streams, we offer I'd be ended the first half of 2021.
Well, we've experienced sporadic covert 19 related delays in receiving validation samples and device components as well as inefficiencies and remote collaboration and field testing our global release of element RC element I plus an element for continuing to progress substantially as planned.
While we anticipate these coping 19 delays will result in slippage of 90 to 120 days and commercial rollout schedules were taking additional time to improve product features and we're confident in each products updated timeline and prospects.
I'm proud to be adjustments our teams have made and I believe we're on the right track to achieve our major second goal of doubling our product revenue opportunities.
And when we accomplish this goal the owners of our foreign company alone and much more valuable asset.
Third major growth initiative is to continue to grow and our baseline business lines and geographies by building upon the past six years of consecutive market share gains in our core diagnostic sovereigns.
We expect to continue to achieve.
In this third goal throughout the second half of our five year plan.
Pet health care is essential and its holding up well anecdotally and across the spectrum from large corporate hospitals to individual hospitals, we consistently here three things.
The first relates to patient visits and procedures.
Visits during the darkest days of March and April dropped from between 10% and 20%, but not for all veterinarians and not for all types of visits.
Veterinarians are seeing that boarding travel related visits unless medically necessary procedures are being deferred but.
Furloughs decline meaningfully as the medical importance of procedures increases.
Sub segments I've been out.
Specific to Heska for medically important cases involving bloodwork, such as for wellness chronic disease management trauma and surgeries patient visits are holding up strongly and utilization and point of care diagnostics for those visits are similarly solid.
We are encouraged that our top veterinarians are convinced the point of care diagnostics utilization has is and will continue to be just fine.
The second thing that we here is that capital equipment expenditures, especially large ones like digital radiography and facilities Remodels will be more often deferred.
And for all equipment acquired and 2020, whether lab or imaging will be more difficult to schedule B onsite and service.
This will reduce test as revenue recognition from new equipment installs and 2020.
The third talk we often here is one of reassurance.
Veterinarians are not panicked as doctors trained in science, they understand the crisis and their call moving and carrying on with their mission.
They are making the necessary adjustments to protect themselves and others and they are proactively managing the health care of their patient populations within the communities.
They intuitively understand why pet adoptions have skyrocketed will stay at home orders.
They are firmly committed to delivering the health care required to support the human and animal bombs that is so obviously important to families at home.
After 30 years and the veterinary space I have to say I love, our customers and I love our employees that serve them.
Just good people doing good things.
And this just so happens to also be very good business. There was no place I'd rather be done at work with our Heska team how can I ask the veterinarians fulfilled their mission.
Meaningful ways lawmaking lives better in good times, and dad and that is essential.
I'll turn the call over the Catherine to detail the quarter's performance and provide you with additional information on our buys 2020 outlook Catherine.
Thanks, Kevin and good morning, everyone.
We're pleased to report a strong performance for the first quarter of 2020.
As we begin I'd like to point out, but I'll be discussing our results as reported on a GAAP and non-GAAP basis, but first quarter for both 2020 and 2019 non-GAAP results include certain adjustments that are detailed in a reconciliation of GAAP to non-GAAP schedule included in the form 8-K furnished with the Securities Exchange Commission as wasn't.
Press release.
Consolidated revenue for the first quarter was 30.7 million a 3.9% increase over the first quarter 2019, We report results in two segments core companion animal or CPGA, and other vaccines and pharmaceuticals for BP.
<unk> segment revenue increased 10.5% to 27.3 million for 24.7 million in the first quarter 2019 at 2.6 million increase was driven by 15.7% increase and point of care a lot consumables and an increase in PBB of 1.9 million related to a manufacturer.
Heartworm preventive try hard which had reduced customer demand in 2019.
These increases were partially offset by a 22.3% decrease the capital lease placements and out right. So the point of care a lot of instruments, and a 10.3% decrease and point of care imaging sales.
Our Ob P. segment revenue decreased 30.2% to 3.3 million in the first quarter 2020, compared to 4.8 million in the first quarter 2019. The decrease was driven primarily by reduced customer requirements as compared to the first quarter 2019.
Gross profit increased 7.2% to 13.4 million in the first quarter of 2020 compared to 12.5 million in the first quarter 2019 gross margin increased to 43.9% and the first quarter 2020, compared to 42.5% and the first quarter 2019, the increase in both.
Gross profit and gross margin was driven primarily by favorable product mix related to increased revenue from consumable sales.
Total operating expenses in the first quarter 2020 were 18.1 million compared to 12.6 million in the prior year <unk> entry is driven by 3.9 million, a onetime acquisition and restructuring costs related to the acquisition skill remaining variances related to increased investment in research and development associated with our new product.
Initiatives and an increase in sales and marketing as a result of international expansion, both organic and inorganic.
Net loss attributable attributable to happen with 5.3 million for the three months ended March 31st 2020 compared to net income attributable to have kept 800000 in the prior year period.
Net loss per share for the first quarter of 2020 with 70 cents compared to net income per diluted share for the first quarter between 19 attend club. In addition to the increased operating expenses I. Previously mentioned net income is lower in the current period due to cash interest and amortization charges relating to the convertible notes issued in the third quarter 2019.
Adjusted EBITDA for the first quarter 2020, with 900000, Werent adjusted EBITDA margin of 3% compared to 2.2 million for an adjusted EBITDA margin of 7.6% in the first quarter 2019.
Non-GAAP earnings per share with a loss of 14 cents per for the first quarter of 2020 compared to earnings of nine cents per share in the first quarter 2019. The decline in both metrics is due to purposeful investment in research and development in international expansion sales and marketing.
Please refer to the reconciliation of GAAP to non-GAAP included in the release.
But there are three months ended March 31st 2020, we've had 191.2 million of cash the increase in cash is due to 122 million and proceeds from the issuance of preferred stock any anticipation of the acquisition skill approximately 111 million with you subsequent to the ended the first quarter as consideration to close the acquisition.
Cash used in operating activities was 4.8 million in a three month ended March 31st 2020 compared to net cash provided by operating activities that 700000 for three months ended March 31st 2019.
As detailed in this mornings release and defined as 2020 combined outlook. We've introduced 2020 guidance ranges for revenue and adjusted EBITDA margin for Heska Corporation, which updates. Our previously provided guidance on February 20 to 2022 included the benefit of our recently completed acquisition of skill as well as incorporate preliminary assumptions really.
But to the expected adverse impacts of the current economic environment and corporate 19.
Well extremely difficult to assess the impact of a pandemic on our full year results, we are providing our revisions to the legacy business as well as the original combined company revenue guidance of 200 million to incorporate changes to assumptions that would be most susceptible to the restrictions in place that relate to the movement of people goods and services these revisions or base.
On the most current available information to us and we plan to provide updates like any material movement and these assumptions over the coming months.
We've got Heska Corporation's full year 2020 consolidated revenue range is between 175 to 185 million.
Our CCH segment revenue expectation is 160 to 170 million within P.A., our global point of care Laboratory range as one of the five to 115 million with our legacy consumable growth guidance provided on February 20 to 2020 intact at 12% to 17%, we anticipate global care.
Global point of care imaging revenue to be between 25 to 35 million R. Over P segment revenue expectation remains unchanged at 15 to 16 million. Finally, we've updated our adjusted EBITDA margin for the combined company to 4% to 6%.
Additionally, as a result of the current operating environment, we are reducing the legacy Heska met customer acquisition guidance provided on February 25th 2025, approximately 50% to 60%.
That concludes our financial review, we thought we would like open up a call for your question operator.
Thank you, ladies and gentlemen, if you'd like to ask a question at this time. Please press the star I asked tricks Keith thought about it did just one on your telephone.
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We will take our first question today, something you can rest impact of Guggenheim Securities. Please go ahead.
Thanks for taking the question good to hear your all safe and congrats I think that that the Q1 of them.
Pretty good on so I.
I I appreciate all the commentary about what's going on in the market.
Capital purchases as you mentioned could be delayed in the year. So when we're looking at maybe 2021.
That's our going through a little bit of financial distress. So can you talk about the subscription model and the use of me maybe that preserves cash flow, but it could also think about a scenario, where maybe maybe that C media contractors as being a.
Something to see or any kind of a post coping world. So can you just maybe talk about the just strategy that you have underlying on post Kobe paradigm for veterinarians.
Hey, David it's Kevin, Thanks, and ER and you've done great work.
On the industry. During this period, so I appreciate that as well.
In regards to your question about contracts, what we're seeing the opposite I can value.
Now matters more than anything.
One of our biggest challenges.
Pre covered was to get customers to focus on.
On the value of Concord diagnostics relative to their current provider.
And when things are great.
We're making more money staffs happy businesses rolling in focusing on those types of things can often seemed like a distraction and a and we found that now it's less of a distraction people are looking at that every line item and not panic, but they they want to be prudent and I think we offer the most pre.
<unk>.
Solution in the market.
And I think we're now getting more attention. So we've had a good April.
We've also seen our salesforce do very well remotely.
Because we have to leverage a smaller sales team Oh I've been has been able to adjust I think to remote work.
Quite well and then we've done some nice things for customers. We've we've gone to certain customers are generally smaller customers, a one or two doctor practices, they're having a harder time or some of the larger emergency care facilities are actually up.
Ah because the small facilities aren't seeing primary care patients are there disclose all they decided to shelter home close a and there are smaller practices.
I've struggled a little bit more and so we've gone to a few of them more than a few.
And a an offer to allow them to use point of care testing for several months for free.
And in exchange for that they've extended their subscription with us for 18 months.
So so extending their relationship, especially with people see that the they have the best value has really popping up an issue and then those conversations I was at hundreds of them oftentimes have actually led to total renewals 72 month extensions of their customer count.
Track so.
I I think the dynamic or probably doesn't hurt or the subscription model in the longer term contract or people want to lock it in the one secure it and we haven't seen an issue with that.
Got it I don't think that's very helpful is particularly around I think there's a lot of confusion on on how flexible you can be with minimum use purchases. So that clears up a lot here. So can you talk about also a the Detroit heart it looks like it is this officially.
That is back to 2018 levels on on a go forward basis I'm can you talk about what we should suspect there.
You know it was zero you know last year and before that it had been running kind of into 14 15 range.
And I think which we've tried to guide, but it's it's not going to return to that range. So I think about it closer in the seven ish million dollar range, but half.
I I suspect, that's probably where it will land there could be some seasonality to it.
I don't know that it's.
Ray straight to that number, but but that's certainly better than zero last year, while they are they worked down there.
Stocking issue, but we do think the stocking issues resolved.
With your purchase orders and and they're doing a good job in the <unk> the sell through of the product into the channel.
Even last year was good Lucas.
Allowing our partner to sweat off the excess inventory they built up while there were acquiring 15 billion here as opposed to maybe get normal run rate.
And that seven to 10 range.
Thank you very much and I'll just ask one the jump back in one last one inch jump back into queue. So I would be with the acquisition of skill I mean, I think that I believe there northern Italy and and.
Dread, our two important cities for that that franchise.
So it's tough to see through the headlines or somebody who's sitting on sheltering at home in the U.S. So can you qualitatively maybe talk about what's going on in those markets and kind of just given us assurance that supply chains are great.
Are you seeing spend we expect when when shelter at home.
It is embedded in those markets that you feel comfortable attacking everything is as normal.
Every markets them differently and so I don't think I don't think I would say anything is great and Lombardi.
Or Madrid, particularly I think the human toll is.
Is incredible I think the psychological toll is incredible.
Our people are super resilient, a they were actually imported masks from Asia from some of our supply channels and donating onto the community no. So there were spending their time doing things like that.
Oh.
And they and and I kept morale up but I don't expect will be attacking.
Anything in those markets aggressively.
There are there are times and there are places too.
To let your People's Park Center.
And protection reputation and protect your brand and it shows really.
What your real values are especially when there's a stress around here and we're well enough people to do that they are deeply involved in their communities.
And and we think.
Rotor sales and Dri chemistry sales and those things will.
Well come back, but we don't want to push certain markets.
Having said that Germany is much more like our expense United States.
And it's doing quite well and I think they have less of a psychological.
Below the population has less aging stay at home less multi generational.
Living in the same and the same apartments things like that.
So we're seeing something in Germany, which fortunately as the growth driver or steel business I'm, a little bit more like what we're seeing United States. So it's it's market by market and I would say, France is probably somewhere in between.
But I would be cautious on that and these are these things are all reflected in the numbers I I get probably two or three email some day updating from our Spanish team.
And and can get a pretty good pretty good handle on it but they're going to be a slower.
Path so to normalcy.
I think I'm going to jump back in queue and that's the rest.
Okay.
[noise] thinking we take our next question from entry Cooper of Raymond James. Please go ahead.
Hey, everybody. Thanks for the questions I guess first just to kind of jump in on on they've sort of question on Ah.
Subscription model.
Given that's the case I mean, what do you attribute of 50% to 60% reduction in what you're seeing it isn't really just hey, we can physically getting to a lot of these that they're not taking.
Okay sweating sales folks come in and we're having a tough time songs and that's the effects here or is it you know settled out of whenever you're not getting arc capital or the end of third or is it corporate account case, if the ball.
Kinda varying the thought of subscription being if anything more attractive right now with that your commentary around what.
New customer wins.
Yeah. So nuance in the question so subscriptions for people who are already in subscriptions I I heard David's question more about to people want to commit long term enough.
And as scary environment, and that's a dynamic that.
So we think is proving to be okay for us we don't think that's an issue.
New customer acquisition.
It's going to be difficult.
Can be more difficult for everybody I think the I think the default position.
Because you can't you can't easily go in and.
Pull out old equipment, we install and training for new equipment, because that's an onsite interaction.
And I think that's that's going to be more difficult for everybody. So I suspect market churn probably.
Reduces a fair amount this year.
And things of corporates or they want to convert a truck product schedule. We also have to be sensitive to the idea that no. Good company wants to.
Just a force external interactions on their employees, especially in the next say 90 days.
You're probably not saying Hey, these 20 hospitals that we wanted to get converted from from brand data Heska.
We have to do it next week, because that's what our counter says and we're going to plot your equipment and we're going to get the team of six veterinary technicians, together and get them in service on the new equipment.
And then similarly, we don't want to be flying our people and pushing them to be in clinics as well. So we've baked a lot of those assumptions and they could prove to be conservative.
But my baseline assumption is we're not really out of the leaves and I think there will be some surges.
And I think there'll be some reaction and so emotional reaction to some of those surges. So we've kind of big some of those those into that number and just said.
Let's take a moderate.
Hundred approach to the estimate that's why we took the number down.
Okay fair enough that stuff so far I, just wanted to kind of into how you're thinking about it I guess that's too long.
It was did you see 12% to 17% reiterated for.
Core Heska consumables.
Even despite no having I guess.
So some of those new installs that.
What are you assuming that in terms of visit volume assumptions and diagnostic utilization kind of relative to say what you saw in April how do you think about that and sort of how that flows through.
So Catherine you want to take that I can give some detail, but maybe not all of it but you have to.
Catherine.
Yeah sure sure.
I mean, we certainly think about it in terms of near a shorter term in longer term impact you know that full year, 12% to 17%.
Really reflecting on.
2018.
20, my team's performance and then looking at what we're seeing.
Pardon ended March into April had certainly reflected dot and no worries baby previously I would've said, we would be mid to high in that 12% to 17% range I would clearly not shut that down to the lower end of that range as result of lower utilization and in what we would think would be either.
The.
Short term near term.
Okay. That's that's helpful. I mean, I guess, maybe just one more budget at all or guidelines and I'll hop back into the queue that if you think about.
Sort of where you reduce the guide obviously it wasn't consumables.
It at least in terms of the range, but.
Where is that they get them back and you think about the 20 million reduction from call. It 200 gets to 180 at the midpoint, obviously imaging Joe's likes the most obvious place and I know there was an imaging business that was acquired internationally that probably is.
Falling out with that range, saying the same but can you give us a little bit more tolerant and what buckets do you as most impacted nurse, maybe a little bit less so.
But also the placement of lot of equipment and in new customer locations would be a similar and not regard.
Okay and in terms of what you're assuming on on skill I guess just.
Are you assuming a transition kind of on on day, one to subscription salary or or was there some amount of sort of capital installations that you had expected that would have been kinda, though you know impacted as well.
The latter definitely at the transition right now to none of them yet.
Fair enough I will stop there and go back into the queue X.
[noise] trend Karen next question comes from Ben Haynor, Our Alliance Global Partners. Please go ahead.
Morning, guys. So you know it sounds like the business from a team are holding up pretty well. So that's a that's good to hear.
[noise], Turkey can really kind of HM characterize the what do you expect on the consumable side from school I know the 12% 70%.
A little growth are you haven't though the release and you talked about is really only applies to the heska standalone.
Hi, presumably you know some of the model switching to more of a rent reset program has some impacts to what still will be able to generate year over year.
But I mean is there a <unk>.
So she can give us you know what maybe consumable volume growth might look like for skill or anything on that front. So you can.
Sure would be helpful.
So broadly speaking skill mirrors heska reasonably well.
Well, so it's not perfect down along but and people are trying to.
I'd figure out how this integration goes the biggest difference and skill is the gross margin gross margin profile slow.
And I think we can do a very good job.
We've already done a very good job in the first month I think I think working with them, we will improve the gross margin profile the business reasonably quickly.
They haven't imaging business that is meaningful.
And it's gonna be affected in the exact same way that our U.S. engine businesses and so when we stick those two things together.
We don't realize as much growth.
As as we'd hope so we don't get to 200 or we get to the range that we guided to because you know two imaging businesses capital equipment, whether they're in Europe, or whether the United States are going to experience, saying.
The same headwinds.
Sam will be true for new customer acquisitions for analyzer installs. So so again it really is mostly related to the capital equipment utilized underlying utilization.
Has has been good.
And not every market just like not every mark in United States. It's the same so we might struggle more New York City.
And we might be doing great and now the Midwest.
And so it's going to be the same thing we might struggle in Madrid.
And we're gonna do great in Germany.
And so I think we're seeing those trends.
Consumables will will grow this year the skill.
And the gross margins will grow up for all the products that they have so.
I hope that answers the question I mean, we're not.
Teaching that out that Granularly right now, but like I think I think answer the question.
No that's definitely helpful.
The little Catherine can you kind of sure on it.
What the DNA of the stock based comp expectation so that go into the adjusted EBITDA margin outlook.
[noise] I, yeah, I can I can show that.
C.
[noise], let's see so I would I would say and of course you nominated do similar ranges here around that Oh, probably add a soft yeah. That's the fact, they count went a little more difficult at this point, so I'm not sure I might need for about one.
But the DNA actually you know what then.
Pre.
Pre.
Step up in intangible value, a it's a little bit easier. We just completed our purchase price allocation right. So we are going to be flowing through quite a bit of amortization as it relates to intangibles acquired.
So, let's just go with like a as seven to 10 range on DNA.
And then a stock comp expenses like I said, it's it's a bit in progress.
Probably not too far off from prior years has got Standalone.
But well have picked up.
Okay.
That's helpful and then just what actually for me.
Yes, I was quite the.
A broad line of laboratory diagnostics and you know it looks like there are some interesting products in there that.
You know might be a political pole outside of a Europe for instance, the Oh.
Well holographic urine sediment analyzer is 30 plan to bring some of these things to other geography is.
Ah yes.
So they do a good products that they also have a great internal R&D team their technical team and its extraordinary.
And they had some very nice projects and progress.
And so so yeah, we do see you do see innovation going in both directions, and we do think the you're in.
That's a mission that you're referring to.
We have very very good complement to the problem at U.S., our year in and people analyzer.
So, but we haven't really unpack that yet we're still doing product line rationalization, but there will be products coming from their direction to ours.
Okay, Great and then just one quick follow up on that since you mentioned those R&D team over there is there a you know maybe anything that do we might be or maybe we should expect for product line additions beyond what's been disclosed obviously you're right.
We're not gonna get into.
Specific but you don't come November.
Are we gonna see softer than that.
Seems to come out a lot feel just because of the sort of just spend a couple of they've been working on for sometime.
I'm, we're probably not yeah, I think I probably pass on that one.
Okay, we've been really for come in with a their R&D schedule now even to the point, where I think we're kind of making the sausage and public were.
We're.
And now, saying very discrete timelines and ER and I think the products that we've announced will meet our goal to double our product line.
Revenue streams or.
So, we'll probably just leave it at that for now.
Okay fair enough that's right.
Thanks for taking the questions guys and stay safe.
Thanks I appreciate it.
Thank you run next question today comes from Jim Sidoti of Sidoti and company. Please go ahead.
Hi, Good morning, good it's good to hear your all well.
Me too Kim.
A couple of course and to start the mechanics are good feel I believe you converted the preferred shares to our common shares.
Couple of weeks ago. So.
When we look at a diluted share count on for the back half a 2020 to 2021, what what's a good number for that.
The around 9 million.
No I know you.
So will there be any interest our go forward or is all did that paid off.
As it relates that her.
That was not used to <unk> to pay off any that convertible that we'll still have the continued.
Interest on the a comfortable rates in September of last year.
And what does that really good.
3.75%.
Okay.
Right and then mix.
Yeah, Kevin do you can clarify the 3.33 quarters is on the 86 million dollar rate.
Okay, no associated to teach a dividend interest anything on the preferred placement.
Okay.
And then I know you know what are a good too granular on contributions from school going forward, but can you break it out would ER cbm contributed during the first quarter.
Right.
It's very light a member CVM his focus entirely on Spain.
So in this basically locked down all of February or March.
So I think it was extremely light and broken it out but.
Okay, there's not a big there.
Okay. That's now.
Alright, thank you.
You're welcome Thanks, Jim.
Thanks, Kim makes a gentleman asked timeline there to ask a question today. Please press star one.
We now take a follow up question from Texas West impact Guff Guggenheim Securities. Please go ahead.
Hi, Thanks for taking the follow up so you know you are going to be almost essentially doubling the company and you know it's impossible to kind of know that the the curve balls that can be thrown from a you know doubling up with us the size of the company. So maybe I I've been asked in in this kind of way.
Kevin when you're thinking about your time over the next.
Here I mean, how much of a dedication do you need to give to skilled does it need to be greater than 50 50 in order to get that thing I'm, you know up to Heska standards or is this something where it's going to be on something you feel it's already very comfortable and you can kind of split your time.
A fairly evenly or any kind of color in terms of how much management attention needs to be on this new portion of the business.
Well, that's a great question and I appreciate the opportunity I'm, because maybe a little bit of contracts will help investors.
Skill is actually it's not a matter of bringing scale up to our standards or.
They actually exceed our standards and the number of areas. There they were in a fantastic business.
I I think it was just embedded inside much larger companies that had much larger things going on a spin outs and you know distribution models and direct to consumers and think things it just didn't fit.
Diagnostics focus on so.
I think we bring that focus we certainly bring volume a in terms of diagnostics with suppliers and R&D and licensing opportunities.
But I'm open to a world where.
510 years from now our European businesses as bigger bigger than on North America business, So I'm not entirely sure.
The were.
We're not going to be in that world I think the growth that they have ahead of them.
It's substantial.
So I think that's one important thing, but we've done basic things. So so Canada is a skilled business and we work with them. When they were owned by skill they've obviously rolled into our North America operations quite well.
I think they close like a million dollar.
A million dollar multi site account like last week.
And so they're doing great. It's not that's not an integration how do we fix it.
I think that's important second thing is.
We've got a fantastic general manager moving to Bernheim, Germany.
Ali Baker.
That's her name and a and she is on schedule to do that.
We have a fantastic team and Bernheim, Germany and.
They're all in place, they're all staying sales leadership is extraordinary a financial team is fantastic. So so trying to fix it job. We can help with product innovation I think we're investing more but but I again I would go back to the idea that were diagnostics focused company.
So so they have ideas have opportunities and now I think they'll they'll get focus and maybe a little bit of all resources than having to pass to go deeper some of those ideas.
It.
Does that help.
That helps thank you very much.
Thank you asked me if no further questions I would like to turn the call back over to Mr. covenant with them for his final remarks.
Oh, Thank you operator, and thanks, everybody, who joined the call Oh I appreciate the questions as well.
I'd like to reiterate something important from this mornings release.
Uh huh properly prepared companies and structuring sound industries like a better health care.
Indesit more people and their capabilities during difficult times like these.
I believe we'll be in a position for above market performance when the uncertainty received.
And we intend to be one of those companies, so our where to place our capabilities in our markets are intact.
And while no business will be left untouched by covert 19, we are well positioned our abilities are intact and more scalable.
I'm pleased and logistics and supply chain and operations all continue to operate well remotely and perhaps more importantly, there solidly prepare for a stage to return.
And then also prepared to go back to remote if we have additional issues will cover 19.
Our balance sheet is super strong or end markets are fundamentally healthy our geography as of customers have doubled our innovation pipeline although delayed.
By about 90 to 120 days on some of these major product launches is progressing and it's doing well and it will launch in 2020 and 2021, so we're well positioned to grow.
Health care and broadly Heska, specifically I think are wonderful places in which to invest for the future.
And especially in an uncertain times and a and I'm excited to continually and do so so I look forward to big New again in a couple of months about our progress until then thank you for your interest in heska be safe and cautious attitude lessons.
Take your pet to the that it's good for your pet could perhaps go.
And ER and do something nice for somebody we appreciate it thanks Bye bye.
Mike King, ladies and gentlemen that was kind of trade today's conference call. Thank you for your participation you may now disconnect.
And.
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