High-flying Heska talks up business overhaul at NYC investor event

When veterinary diagnostics maker Heska ($HSKA) announced strong third-quarter results in late October, some analysts gave its executives a bit of a hard time for not doing enough to make the company more visible. So it was not surprising when, on Friday, the Colorado company took a major step into the spotlight by holding an Investor Day at Nasdaq MarketSite in New York's Times Square.

The event came just two weeks after Heska announced that its earnings in the third quarter rose 24% from the same period a year ago to $21.8 million and its net income more than doubled to $513,000. Heska recently introduced a 5-part hematology testing instrument called Heska Element HT5, and it struck a distribution agreement with Henry Schein Animal Health. Investors have been pleased, pushing the company's stock up from $6.70 to $15.50 over the last year.

During the investor event, which was also webcast, Heska CEO Kevin Wilson spent some time walking attendees through the new business model that the company has been implementing over the last year. He explained that Heska is reducing its reliance on capital equipment sales and switching to a system where much of its revenues come from recurring sales, much like a software-as-a-service model.

In a Q&A session, investors focused on Heska's new distribution model. During the company's recent earnings call, Wilson had stated that the new relationship with Schein would allow Heska to gain access to veterinary clinics that don't currently carry its products by leveraging Schein's 300 sales reps rather than having to build up its own sales force of about 60 reps.

Some analysts were concerned, however, that the Schein deal would force Heska to sacrifice a portion of its profit margins. Wilson acknowledged that it can be a bad move for a company to share its profits with a distributor, particularly if competitive pressure forces prices down. But he said he was confident his company's cost of sales would decline, helping to preserve profit margins.

When one analyst asked what Wilson thought of his competition, he admitted he doesn't focus on it much, and answered not by comparing Heska's product attributes to those of rivals, but rather by paraphrasing a common business adage. "If you focus on your competition," he said, "you doom yourself to mediocrity."

- access the webcast of Heska's Investor Day here

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