Q4 2021 IDEXX Laboratories Inc Earnings Call

Speaker 1: Good morning and welcome to the Idaq's Laboratories 4th quarter 2021 earnings conference call. As a reminder, today's conference is being recorded.

Good morning, and welcome to the IDEXX Laboratories fourth quarter 2021 earnings Conference call. As a reminder, today's conference is being recorded.

Speaker 1: participating in the call this morning, our Jay Muzelsky, President and Chief Executive Officer, Brian McKeehan, Chief Financial Officer, and John Ravens, Vice President and Investor Relief.

<unk> on the call. This morning are Jane Rozanski, President and Chief Executive Officer, Brian Mckeon, Chief Financial Officer, and John <unk>, Vice President Investor Relations IDEXX would like to preface the discussion today with a caution regarding forward looking statements listeners are reminded that our discussion during the call will include forward looking statements that are subject.

Speaker 1: I'd ex- would like to preface the discussion today with a caution regarding for-

Speaker 1: Listeners are reminded that our discussion during the call will include four looking statements that are subject to risk and uncertainties that could cause actual results to differ materially from those discussed today. Additional information regarding these risks and uncertainties is available under the four looking statements. Notice in our press release issued this morning as well as in our periodic filings with the Secretaries in Exchange Commission, which can be obtained from the SEC or by visiting the Investor Relations section of our website idics.com.

To risks and uncertainties that could cause actual results to differ materially from those discussed today.

Additional information regarding these risks and uncertainties is available under the forward looking statements notice in our press release issued this morning as well as in our periodic filings with the Securities and Exchange Commission, which can be obtained from the SEC or by visiting the Investor Relations section of our website IDEXX Dot com.

Speaker 1: During this call we will be discussing certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP.

During this call we will be discussing certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP.

Speaker 1: 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.

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.

Speaker 1: In reviewing our fourth quarter 2021 results, please note all references to growth, organic growth and comparable growth refer to growth compared to the equivalent period in 2020 unless otherwise known.

In reviewing our fourth quarter 2021 results. Please note all references to growth organic growth and comparable growth refer to growth compared to the equivalent period in 2020, unless otherwise noted.

Speaker 1: To allow brow participation in the Q&A, we ask that each participant limit their questions to one with one follow-up as necessary. We appreciate you may have additional questions, so please feel free to get back into the queue and if time permits will take your additional questions. I would now like to turn the call.

To allow broad participation in the Q&A, we ask that each participant limit their questions to one with one follow up as necessary. We appreciate you may have additional questions. So please feel free to get back into the queue and if time permits we'll take your additional questions I would now like to turn the call over to Brian Mckeon.

Speaker 2: Good morning, everyone. I'm pleased to take you through our fourth quarter and four year 2021 results and to provide an overview of our financial outlook for 2022.

Good morning, everyone I'm pleased to take you through our fourth quarter and full year 2021 results and will provide an overview of our financial outlook for 2022.

Speaker 2: In terms of highlights, IDEX delivered excellent financial performance in Q4, driven by double-digit top-line gains compared to very strong prior year results.

In terms of highlights IDEXX delivered excellent financial boards in Q4, driven by double digit topline gains compared to very strong prior year results.

Speaker 2: Revenue increased 11% is reported and 10.5% organically supported by 13% organic growth and Cag Diagnostics Recurring Revenue.

Revenue increased 11% as reported and 10, 5% organically supported by 13% organic growth in CAG diagnostics recurring revenues.

Speaker 2: Two-year average annual organic growth for CAD diagnostic recurring revenues was approximately 17% across U.S. and international regions. Consistent with the accelerated two-year growth trend seen throughout 2021.

Two year average annual organic growth for CAG diagnostic recurring revenues was approximately 17% across U S and international regions consistent with the accelerated two year growth trend seen throughout 2021.

Speaker 2: We achieved record premium instrument placements in Q4 with strong gains across our major platforms, supporting a 14% year-on-year expansion of our global premium instrument base.

We achieved record premium instrument placements in Q4 with strong gains across our major platforms supporting a 14% year on year expansion of our global global premium instrument base.

Speaker 2: Strong Revenue Growth Enable Delivery of $1.89. And EPS.

Strong revenue growth enabled delivery of $1 89 in EPS up.

Speaker 2: up 12% on a comparable basis as we advance planned investments in our commercial and innovation capability.

Up 12% on a comparable basis as we advanced planned investments in our commercial and innovation capability.

Speaker 2: Closer benefits from higher organic revenue growth in 2021 drove outstanding four-year financial performance above our long-term goal.

Flow through benefits from higher organic revenue growth in 2021 drove outstanding full year financial performance above our long term goals.

Speaker 2: I'd actually achieved 16% overall organic revenue growth for the full year, driven by 18% gains in CAG diagnostics recurring revenue.

I'd executed, 60% overall organic revenue growth for the full year, driven by 18% gains in CAG diagnostics recurring revenues.

Speaker 2: Fully-operating margins reach 29% and increase of 220 basis points on a comparable basis. And we delivered Fully-repes of $8.60 per share of 29% on a comparable basis.

Full year operating margins reached 29% an increase of 220 basis points on a comparable basis and we delivered full year EPS of $8 60 per share up 29% on a comparable basis.

Speaker 2: The well-positioned to build on this strong financial performance in 2022. We're targeting revenue gains at the higher end of our long-term goals. We've reflected in our outlook for 10 to 12% overall organic revenue growth, and 12 to 14% organic growth in Cag Diagnostics with current revenue.

We are well positioned to build on this strong financial performance in 2022.

Targeting revenue gains at the higher end of our long term goals reflected in our outlook for 10% to 12% overall organic revenue growth and 12% to 14% organic growth in CAG diagnostics recurring revenues.

Speaker 2: We're also targeting a 50 to 100 basis point improvement in operating margins on a comparable basis, building on the strong profit gains through the pandemic, as we continue to invest towards the long-term development of companion animal healthcare globally.

We're also targeting a 50 to 100 basis point improvement in operating margins on a comparable basis building on the strong profit gains through the pandemic as we continued to invest towards the longer development of companion animal health care globally.

Speaker 2: Our EPSL look of $9.27 to $9.59 per share reflects 12 to 16% comparable EPS growth, including an estimated 15 cents per share or 2% EPS growth impact related to higher projected international tax rates.

Our EPS outlook of $9 27 to $9 59 per share reflects 12% to 16% comparable EPS growth, including an estimated <unk> 15 per share or 2% EPS growth impact related to higher projected international tax rates.

We will discuss our 2022 financial outlook later in my comments, let's begin with a review of our fourth quarter and full year results.

Speaker 2: We'll discuss our 2022 financial I look later in my comments. Let's begin with a review of our fourth quarter and four year results.

Speaker 2: Fourth quarter organic revenue growth of 10.5% was driven by 13% overall Caggames and 13% growth in our water business.

Fourth quarter organic revenue growth of 10, 5% was driven by 13% overall CAG gains and 13% growth in our water business.

Speaker 2: These gains were moderated as expected by a 19% organic decline in LPD revenues, reflecting comparisons to high prior year results that benefited from the ramping of African swine fever testing in China, as well as by a $5 million year-on-year decline in human COVID PCR testing revenues.

These gains were moderated as expected by a 19% organic decline in <unk> revenues.

Comparisons to high prior year results that benefited from the ramping of African swine fever testing in China.

As well as by a $5 million year on year decline in human Covid human Covid PCR testing revenues.

Speaker 2: Strong Cag Diagnostic Recurring Revenue Growth reflected 13% organic gains across U.S. and international regions compared to 21% organic growth levels in the fourth quarter of 2020.

Strong CAG diagnostic recurring revenue growth reflected 13% organic gains across U S and international regions compared to 21% organic growth levels in the fourth quarter of 2020.

Speaker 2: Strong key for Cag results were also supported by 21% gains in IDEC's VET lab instrument revenues and 13% organic growth in veterinary software and diagnostic imaging revenues in addition to benefits from a recent Easy VET acquisition.

Strong Q4 in CAG results were also supported by 21% gains in IDEXX lab instrument revenues and 13% organic growth in veterinary software and diagnostic imaging revenues. In addition to benefits from our recent easy bet acquisition.

Speaker 2: For the four-year 2021, overall CAAG revenues increased 19% organically, driven by 18% organic growth and CAAG diagnostic-required revenues, reflecting high gains across our major modalities and regions.

For the full year 2021, overall CAG revenues increased 19% organically driven by 18% organic growth in CAG diagnostic recurring revenues, reflecting high gains across our major modalities and regions.

Speaker 2: Strong U.S. Cag Diagnostics recurring revenue growth in the fourth quarter was aided by solid year-on-year gains in clinical visits and continued positive demand trends which are supporting high levels of clinical revenue growth at the practice level.

Strong U S. CAG diagnostics recurring revenue growth in the fourth quarter was aided by solid year on year gains year on year gains in clinical visits.

Continued positive demand trends, which are supporting high levels of clinical revenue growth at the practice level.

Speaker 2: Same story, US clinical visit growth was 2.2% in Q4 compared to high prior year growth level.

Same store U S clinical visit growth was two 2% in Q4 compared to high prior year growth levels.

Speaker 2: On a two-year basis, U.S. saves for a clinical business increased at 5.5% with all gains across wellness and non-womest categories.

On a two year basis U S same store clinical business increased at five 5% with solid gains across wellness and non wellness categories.

Speaker 2: An increased focus on healthcare services, including diagnostics, supported in 8% same-store increase in overall veterinary clinic revenues in Q4, and nearly 10% gain in clinical diagnostic revenues, which increase 14% on an average two-year basis.

An increased focus on health care services, including diagnostics supported an 8% same store increase in overall veterinary clinic revenues in Q4, and nearly 10% gains in clinical diagnostic revenues, which increased 14% on an average two year basis.

Speaker 2: Expanding demand for clinical services and benefits from IDEC's innovation and commercial engagement supported a 1,050 basis point premium of IDEC's U.S. Cagdogdastic Recurring Revenue Growth to U.S. Clinical Physical Growth in the quarter.

Expanding demand for clinical services and benefits from IDEXX innovation and commercial engagement supported a 1050 basis point premium of IDEXX U S. CAG diagnostic recurring revenue growth to use clinical visit growth in the quarter.

Speaker 2: In terms of practice level trends, we did see some modest impact from the recent Omicron wave on clinical testing volumes in international regions in Q4, which has continued in early 2022.

In terms of practice level trends, we did see some modest impact from the recent omicron wave on clinical testing volumes in international regions in Q4.

Which has continued in early 2022.

Speaker 2: We've also seen some moderation in clinic, visit growth in January in the US, including near-term impacts from higher COVID cases on practice level staffing.

We've also seen some moderation in clinic visit growth in January and then in the U S, including near term impacts from higher Covid cases on practice level staffing.

Speaker 2: We're monitoring these dynamics which we don't see as indicative of changes in strong underlying demand.

We're monitoring these dynamics, which we don't see as indicative of changes and strong underlying demand trends.

Speaker 2: Globally, IDECS achieve strong organic gains across our major testing modalities in Q4, resulting in exceptional for your growth results.

Globally, IDEXX achieved strong organic gains across our major testing modalities in Q4, resulting in exceptional full year growth results.

Speaker 2: A dexglobal reference lab revenues increase 12% organically in Q4 reflecting double digit gains in the US and high-fangled digit organic growth in international regions compared to strong prior year growth bubble.

IDEXX Global reference lab revenues increased 12% organically in Q4, reflecting double digit gains in the U S and high single digit organic growth in international regions compared to strong prior year growth levels.

Speaker 2: Reference lab gains continue to be driven by solid, same-survying roads, including benefits from the expansion of I-Dex 360 program agreement.

Reference lab gains continued to be driven by solid same store volume growth, including benefits from the expansion of IDEXX 360 program agreements.

Speaker 2: For the full year 2021, global lab revenues increase 70% organically, reflecting consistent high gains across US and international regions.

For the full year 2021, global lab revenues increased 17% organically, reflecting consistent high gains across U S and international regions.

Speaker 2: IDEX VET Lab Consumer Revenue increased 15% on an organic basis in Q4, reflecting double digit gains across U.S. and international regions.

I would ask about lab consumable revenues increased 15% on an organic basis in Q4, reflecting double digit gains across U S and international regions.

Speaker 2: Strong Pensum will grow through flex increases in testing utilization, sustained high customer retention levels, and expansion of our global premium instrument install base.

Strong consumable growth reflects increases in testing utilization sustained high customer retention levels and expansion of our global premium instrument installed base.

Speaker 2: These dynamics supported 20% for your organic growth at IDEX FET Lab consumable revenues in 2021.

These dynamics supported 20% full year organic growth at IDEXX vet lab consumable revenues in 2021.

Speaker 2: I'd actually had another quarter of outstanding instrument placements building on this momentum. We achieved 5,258 premium instrument placements in Q4 of 29% from prior year levels. We've left in robust gains across U.S. and international regions.

<unk> had another quarter of outstanding instrument placements building on this momentum.

We achieved 5258 premium instrument placements in Q4 up 29% from prior year levels, reflecting robust gains across U S and international regions.

Speaker 2: We achieved strong global placement growth across our major platforms, platform zero and year with catalysts up 8%, set of you up 20% and premium hematology up 72%. Supported by the continued global rollout of ProSide 1.

Strong global placement growth across our major platforms platforms year on year with catalysts up 8% set of you up 20% and premium hematology up 72%.

Supported by the continued global rollout of Procyte one.

Speaker 2: The breadth and quality of CAG instrument placements supported strong gains in our economic value metric.

The breadth and quality of CAG instrument placements supported strong gains in our economic value metrics.

Speaker 2: New instrument placements and continued very high customer retention levels drove a 14% increase in our global premium instrument install base in 2021, setting a foundation for continued strong, consumable growth as we move forward.

New instrument placements and continued very high customer retention levels drove a 14% increase in our growth global premium instrument.

The instrument installed base in 2021.

Setting a foundation for continued strong consumable growth as we move forward.

Speaker 2: Rapid assay revenue increased 10% organically in Q4, reflecting continued solid gains in the US, aligned with broader increases in demand for diagnostic testing, and high growth in internationally.

Rapid assay revenue increased 10% organically in Q4, reflecting continued solid gains in the U S aligned with broader increases in demand for diagnostic testing and high growth in international regions for.

Speaker 2: For the full year 2021, Rapid Asset, Organic, Revenue, Growth, was 17% supported by high volume gains for K940X, Feline, and specialty tests.

For the full year 2021 rapid assay organic revenue growth was 17%.

Supported by high volume gains for canine 40, ex feline and specialty testing.

CAG diagnostic recurring revenue growth remains primarily volume driven augmented by moderate net price improvement of approximately 3% in key regions like the U S.

Speaker 2: Cag Diagnostic Recording Revenue Growth Remains primarily volume driven and augmented by moderate net price improvement of approximately 3% in key regions like the US.

Looking ahead to 2022, we're planning for net price improvement in the range of 3% to 4%, reflecting higher list price increases to reflect higher service costs and continued investment in service quality and product innovation.

Speaker 2: Looking ahead to 2022, we're planning for net price improvement in the range of 3 to 4 percent, reflecting higher list price increases to reflect higher service costs, and continued investment in service quality and product innovation.

Speaker 2: In other areas of our CAG business, our veterinary software and diagnostic imaging revenues increased 13% organically and 30% is reported in Q4, including benefits from the easy that acquisition.

In other areas of our CAG business, our veterinary software and diagnostic imaging revenues increased 13% organically and 30% as reported in Q4, including benefits from the easy that acquisition.

Speaker 2: Continued strong gains in recurring software and diagnostic imaging services, and high comparable growth in PIMS placements were moderated to a degree by top-compers related to strong prior year diagnostic imaging place.

Strong gains in recurring software and diagnostic imaging services and high comparable growth in <unk> placements were moderated to a degree by tough compares related to strong prior year diagnostic imaging placements.

Speaker 2: For the four-year 2021 veterinary software and diagnostic imaging revenues expanded to over 200 million, of 15% organically and 27% is reported, as we continue to advance integration of information technology and insight as a key feature of our diagnostic solutions.

For the full year 2021, veterinary software and diagnostic imaging revenues expanded to over $200 million of 15% organically and 27% as reported as we continued to advance the integration of information technology and insight is a key feature of our diagnostic solutions.

Speaker 2: During child-of-the-business segments, water revenues increased 13% organically in Q4 compared to flat organic growth in last year's fourth quarter. As this business continues to track back towards pre-COVID growth level.

Turning to other business segments water revenues increased 13% organically in Q4 compared to flat organic growth in last year's fourth quarter. As this business continues to track back towards pre COVID-19 growth levels.

Speaker 2: Business growth was supported by solid gains across compliance and non-compliance testing categories.

Business growth was supported by solid gains across compliance and noncompliance testing categories.

Speaker 2: For the 4-year 2021 water revenues increased 8-12% organically compared to a 2% organic decline in 2020.

For the full year 2021, water revenues increased 12% organically compared to a 2% organic decline in 2020.

Speaker 2: Livestock, poultry, and dairy revenues decreased 92% organically in Q4 compared to 13% organic growth levels in Q4 of 2020.

Livestock poultry and dairy revenues decreased 19% organically in Q4 compared to 13% organic growth levels in Q4 of 2020.

Speaker 2: As expected, dynamics in our China LPD business, including the lapping of high prior year demand for African swine fever testing, offset growth in other global regions.

As expected dynamics in our China, LCD business, including the lapping of high prior year demand for African swine fever testing offset growth in other global regions.

Speaker 2: For the four year 2021, LPD revenues decline 9% organically compared to 11% gains in 2020.

For the full year 2021, LTV revenues declined 9% organically compared to 11% gains in 2020.

Speaker 2: We're planning for continued challenging year-on-year comparison LPD revenues in the first half of 2022, which is factored into our overall revenue outlook.

We're planning for continued challenging year on year compares in LPT revenues in the first half of 2022, which is factored into our overall revenue outlook.

Turning to the P&L sustained high revenue growth drove solid operating profit gains compared to strong prior year levels as we advanced planned investments aligned with our growth strategy.

Speaker 2: Turning to the P&L, sustain high revenue growth growth solid operating propagands compared to strong priority levels. As we advance planned investments aligned with our growth strategy.

Speaker 2: Operating profits increased 8% as reported and 9% on a comparable basis in Q4 driven by continued solid growth profit gain.

Operating profits increased 8% as reported and 9% on a comparable basis in Q4, driven by continued solid gross profit gains.

Speaker 2: Gross profit increased 12% in the quarter, reflecting strong revenue growth and a modest overall increase in gross margin.

Gross profit increased 12% in the quarter, reflecting strong revenue growth and a modest overall increase in gross margins.

Speaker 2: We benefited from continued high-cag diagnostic recurring revenue growth, moderate net price improvement, and higher veterinary software margins, including positive impacts from our expanding SaaS customer base.

We benefited from continued high CAG diagnostic recurring revenue growth moderate net price improvement and higher veterinary software margins, including including positive impacts from our expanding SaaS customer base.

Speaker 2: These factors were moderated by business mix impacts from high-cag instrument revenue growth, and lower LPD and human PCR revenue.

These factors were moderated by business mix impacts from high CAG instrument revenue growth and lower LTV and human PCR revenues.

Speaker 2: Operating expenses increased 15% on a reported and comparable basis in Q4. As planned, we saw a relatively higher levels of operating expense growth as we advanced investments in R&D, enhanced our global CAG sales and marketing capability and integrated the EasyBet acquisition.

Operating expenses increased 15% on a reported and comparable basis in Q4.

As planned we saw relatively higher levels of operating expense growth as we advanced investments in R&D enhanced our global CAG sales and marketing capability and integrated the easy vet acquisition.

Speaker 2: We anticipate sustaining a relatively higher rate of off-ex growth in 2022, aligned with our strong global growth momentum.

We anticipate sustaining a relatively higher rate of opex growth in 2022 aligned with our strong global growth momentum.

Speaker 2: Operating expensive investments drove a 70 basis point contraction and comparable operating margins in Q4. For the full year 2021, our operating margins reached 29% of 220 basis points on a comparable basis for the year. And up approximately 560 basis points on a comparable basis from pre-pandemic levels in 2019.

Operating expense investments drove a 70 basis point contraction in comparable operating margins in Q4.

For the full year 2021, our operating margins reached 29% up 220 basis points on a comparable basis for the year.

And up approximately 560 basis points on a comparable basis from pre pandemic levels in 2019.

Speaker 2: We're targeting to build on the strong performance in 2022 as we invest towards a high return, long-term growth potential in our business.

We're targeting to build on the strong performance in 2022, as we invest towards the high return long term growth potential in our business.

Speaker 2: Q4-APS was $1.89 per share, including 8 cents per share in tax benefit related to share-based compensation activity. For the full year 2021, EPS was $8.60 of 29% on a comparable basis.

Q4, EPS was $1 89 per share, including <unk> <unk> per share in tax benefit related to share based compensation activity.

For the full year 2021, EPS was $8 60 up 29% on a comparable basis.

Speaker 2: Full year EPS results included 32 million or 38 cents per share in tax benefit related to share-based compensation activity, which provided 350 basis points of effective tax rate benefit.

Full year EPS results included $32 million or <unk> 38 per share in tax benefit related to share based compensation activity, which provided 360 basis points of effective tax rate benefit.

Speaker 2: Foreign exchange effects reduce revenue growth by approximately 1% in Q4, resulting in a $0.02 per share profit impact net of a hedge loss of approximately $500,000.

Foreign exchange effects reduced revenue growth by approximately 1% in Q4, resulting in a <unk> <unk> per share profit impact net of a hedge loss of approximately $500000.

Speaker 2: For the four year 2021 foreign exchange rate changes increased increase EPS by 16 cents per share net of net of foreign exchange has losses of seven million.

For the full year of 2021 foreign exchange rate changes increased increase EPS by <unk> 16 per share net of net of foreign exchange hedge losses of $7 million.

Given the recent strengthening of the U S. Dollar we're planning for a one 5% FX revenue growth headwind in 2022 with approximately 2% to two 5% year on year growth headwinds in the first half.

Speaker 2: Given the recent strengthening of the US dollar, we're planning for a 1.5% FX revenue growth headwind in 2022, with approximately 2% to 2.5% year on year growth headwinds in the first half.

Speaker 2: Well, previously established, his positions will mitigate these impacts on profits. Our initial 2020 two outlook and corporates an estimated 8 cent net unfavorable net unfavorable EPS impact from that facts at the rates noted in our press release.

While previously established hedge positions will mitigate these impacts on profits. Our initial 2022 outlook incorporates an estimated <unk> <unk>.

Net unfavorable.

Net unfavorable EPS impact from FX at the rates noted in our press release.

Free cash flow was $636 million for 2021, or approximately 85% of net income, reflecting a $120 million in capital spending including $18 million in real estate purchases.

Speaker 2: We've maintained a strong balance sheet. We ended 2021 with leverage ratios of 0.9 times gross and 0.7 times net of cash with 144 million in cash at the end of the year.

We maintain a strong balance sheet. We ended 2021 with leverage ratios of <unk> nine times gross and seven times net of cash was $144 million in cash at the end of the year.

Speaker 2: In Q4, we established a new 5-year, $1 billion revolving credit facility which provides relatively improved borrowing rates.

In Q4, we established a new five year $1 billion revolving credit facility, which provides relatively improved borrowing rates.

Speaker 2: or 2022 interest expense outlook and corporate seed benefits, current forward interest rates, and expectations for a net leverage ratio of one time next year.

Our 2022 interest expense outlook incorporates these benefits current forward interest rates and expectations for a net leverage ratio of one times next year.

Speaker 2: In Q4, we allocated $245 million to repurchase 391,000 shares in the quarter. We plan to continue to allocate capital to share repurchases as part of our financial approach, which is reflected in a projected 1 to 1.5% reduction in our diluted shares outstanding for the full year 2022.

In Q4, we allocated $245 million to repurchase 391000 shares in the quarter.

We plan to continue to allocate capital to share repurchases as part of our financial approach, which is reflected in our projected one to one 5% reduction in our diluted shares outstanding for the full year of 2022.

Speaker 2: Turning to our 2022-2022 outlook, we're providing initial guidance for reported revenues of $3,500,000,000 to $3,565,000.

Turning to our 2000 22022 outlook, we are providing initial guidance for reported revenues of $3 billion and $500 million to $3 billion of $565 million.

Speaker 2: This outlook reflects a targeted organic revenue growth range of 10 to 12 percent carry over benefits of approximately 0.5 percent from 2021 acquisitions and an estimated 1.5 percent revenue growth had one from that fact.

This outlook reflects a targeted organic revenue growth range of 10% to 12%.

Carryover benefits of approximately <unk>, 5% from 2021 acquisitions and an estimated one 5% revenue growth headwind from FX.

Speaker 2: Our organic growth outlook reports an estimated growth range of 12 to 14% for Cag diagnostic recurring revenue.

Our organic growth outlook reflects an estimated growth range of 12% to 14% for CAG diagnostic recurring revenues.

Speaker 2: The higher end of this range of lines was sustaining the strong year on your growth friends we achieved, exiting 2021, and a corporate additional target benefits for a moderately higher net price realization, and investments in global CAG sector development.

The higher end of this range aligns with sustaining the strong year on year growth trends, we achieved exiting 2021.

And incorporates additional targeted benefits for a moderately higher net price realization and investments in global CAG sector development.

Speaker 2: Our overall, again, a growth outlook also factors in continued benefits from expansion of our premium instrument install base and solid growth in our water.

Our overall organic growth outlook also factors and continued benefits from the expansion of our premium instrument installed base and solid growth in our water business.

Speaker 2: These positive factors are partially upset by expectations for continued year and year pressure on LPD revenues in the first half of 2022 and a projected contraction in human PCR testing revenues reflecting our overall strategic growth focus on our core business.

These positive factors are partially offset by expectations for continued year on year pressure on LPG revenues in the first half of 2022.

And our projected contraction in human PCR testing revenues, reflecting our overall strategic growth focus on our core businesses.

Speaker 2: Our operating reported operating margin outlawed for full year 2022 is 29.7% to 30.2% reflecting a target at 50 to 100 basis points of annual comparable operating margin improvement building on our strong operating margin gains in recent years.

Our operating our reported operating margin outlook for full year 2022 was 29, 7% to 32%.

<unk>, a targeted 50 to 100 basis points of annual comparable operating margin improvement.

Building on our strong operating margin gains in recent years.

Speaker 2: We expect operating margin improvement will be supported by solid gross margin gains as we advance investments in our global commercial and innovation capability and at your high levels of operational business continuity as a priority.

We expect operating margin improvement will be supported by solid gross margin gains as we advance investments in our global commercial and innovation capability and ensure high levels of operational business continuity as a priority.

Speaker 2: We've incorporated anticipated inflationary cost impacts as well as benefits from relatively higher net price gains in our overall operating margin outlook.

We've incorporated anticipated inflationary cost impacts as well as benefits from relatively higher net price gains and our overall operating margin outlook.

Speaker 2: Given exit rates that are off-extending and year-on-year operating profit comparison dynamics, we're planning for operating margin improvements to be very primarily driven by gains in the second half of 2022.

Given exit rates in our opex spending and year on year operating profit comparison dynamics, we're planning for operating margin improvements have been primarily driven by gains in the second half of 2022.

Speaker 2: Our preliminary EPS outlook for 2022 is $9.27 to $9.59 per share, an increase of 8% to 11% as reported.

Our preliminary EPS outlook for 2022 is $927 $9 27 to $9 59 per share an increase of 8% to 11% as reported.

Speaker 2: REPS Outlook factors in an increase in our overall effective tax rate from 17.5% to an estimated 21.5% to 22% in 2022.

Our EPS outlook factors in effect, increasing our overall effective tax rate from 17, 5% to an estimated 21, 5% to 22% in 2022.

Speaker 2: approximately 100 to 150 basis points of this increase relates to projected impacts from international tax changes.

Approximately 100 to 150 basis points of this increase relates to projected impacts from international tax changes.

Speaker 2: We're also projecting lower tax benefits from share-based tax compensation activity. Our EPS Outlook reflects projected 2022 stock-based compensation tax benefits of $10 million or approximately 12 cents per share compared to high realized 2021 tax benefits of $32 million or 38 cents per share.

We're also projecting lower tax benefits from share based tax compensation activity.

Our EPS outlook reflects projected 2022 stock based compensation tax benefits of $10 million or approximately <unk> 12 per share compared to high realized 2021 tax benefits of $32 million or <unk> 38 per share.

Speaker 2: As noted, we've also incorporated an estimated year on year negative impact of 8 cents per share from that fact. Net of established heads, because it's...

As noted we've also incorporated an estimated year on year negative impact of <unk> <unk> per share from FX net of established hedge positions.

Speaker 2: Adjusting for these factors are outlook is for EPS growth of 12 to 16% on a comparable basis including an estimated 15 cents per share of approximately 2% EPS growth impact from international tax rate changes.

Adjusting for these factors our outlook is for EPS growth of 12% to 16% on a comparable basis, including an estimated <unk> <unk> per share approximately 2% EPS growth impact from international tax rate changes.

Speaker 2: Our 2022 free cashflow outlook was for a net income to pre-cashflow conversion ratio of 75 to 80%.

Our 2022 free cash flow outlook or score a net income to free cash flow conversion ratio of 75% to 80%.

Speaker 2: This reflects estimated capital spending of 180 million or approximately 5% of revenues, including $50 million related to a new warehouse and manufacturing site expansion, aligned to support our high growth.

This reflects estimated capital spending of $180 million or approximately 5% of revenues, including $50 million related to our new warehouse and manufacturing site expansion aligned to support our high growth.

Speaker 2: Adjusting for this major project, our normalized net income to pre-cashable conversion ratio is aligned with our longer term age at 90 to 90% targets.

Adjusting for this major project, our normalized net income to free cash flow conversion ratio is aligned with our longer term, 80%, 90% to 90% targets.

Speaker 2: That concludes our financial review. I'll now turn the call over to Jay for his come.

That concludes our financial review I will now turn the call over to Jay for his comments.

Speaker 3: Thank you, Brian , and good morning. I'd like to sustain strong performance in Q4, capping an exceptional year for the company. For the full year, we delivered 16% organic revenue growth, 29% comparable EPS growth supported by solid operating margin gains, and 59% ROIC. These results reflect the attract-

Thank you, Brian and good morning.

Sustained its strong performance in Q4 capping an exceptional year for the company for the full year, we delivered 16% organic revenue growth, 29% comparable EPS growth supported by solid operating margin gains and 59% ROIC.

These results reflect the attractiveness of our businesses, including our core CAG business, which is sustaining very strong growth trends benefiting from our commercial expansion and an expanding innovation portfolio.

Speaker 3: including our core Cag business, which is sustaining very strong growth trends, benefiting from our commercial expansion and an expanding innovation portfolio.

Speaker 3: We're well positioned to build on this momentum in 2022, as reflected in our financial outlook. This morning, I'll recap our recent performance and highlight key areas of business focus moving forward, including advancement of new innovations in the ongoing expansion of our global commercial capabilities. Both of these are strategic elements of our plan to develop the substantial long-term market opportunity still before us. Let me begin with a brief up.

We are well positioned to build on this momentum in 2022 as reflected in our financial outlook. This morning, I'll recap, our recent performance and highlight key areas of business focus moving forward.

<unk> advancement of new innovations and the ongoing expansion of our global commercial capabilities. Both of these are strategic elements of our plan to develop the substantial long term market opportunity is still before us.

Let me begin with a brief update on sector trends.

Overall global companion animal health care trends remained strong driven by ongoing robust demand.

Speaker 3: Overall, global companion animal healthcare trends were made strong. Driven by ongoing robust demand, and veterinary clinics for healthcare services, including diagnosis.

Veterinary clinics for health care services, including diagnostics.

Speaker 3: As Brian highlighted, USA's store critical revenues increased 8% in 2.4, supported by 2% growth in USA's store critical visits to pair it to very strong prior year growth.

Brian highlighted U S same store clinical revenues increased 8% in Q4 supported by 2% growth in same store clinical visits compared to very strong prior year growth levels.

Speaker 3: Dagnostics, same store growth continues to expand at a higher pace of nearly 10%.

<unk> same store growth continues to expand at a higher pace of nearly 10%.

Speaker 3: IDEX U.S. Cagdagonistics Recurring Revenue Growth is leading this expansion. Reflected in 13% organic gains in Q4, building 21% gains in Q4 of 2020. As we provide highly desired diagnostics and information management platforms that support our customers' caremen.

IDEXX U S. CAG diagnostics recurring revenue growth is leading this expansion reflected in 13% organic gains in Q4 building on 21% gains in Q4 of 2020, as we provide highly desired diagnostics and information management platforms to support our customers care mission.

Speaker 3: We're seeing sustained, strong demand trends for clinical service globally, building the step-up achieved through the pandemic. As highlighted in data shared in our earnings snapshot, this includes sustained approximately 2% acceleration in U.S. diagnostics revenue for critical visit in 2021, building on a higher 2020 gain.

Were seeing sustained strong demand trends for clinic critical service globally.

Building on the step up achieved through the pandemic as highlighted in data shared in our earnings snapshot. This includes sustained approximately 2% acceleration in <unk>.

<unk> diagnostics revenue per clinical visits in 2021.

Building on higher 2020 games.

Speaker 3: The solid momentum gives us confidence in investing towards accelerated global CAG sector development and is reflected in our outlook of 12 to 14 percent global CAG diagnostics repairing revenues of 2022 at the high end of our long-term goal.

Solid momentum gives us confidence in investing towards accelerated global CAG sector development and is reflected in our outlook of 12% to 14% global CAG diagnostics recurring revenue gains in 2022.

At the high end of our long term goals.

Speaker 3: Like many sectors of the global economy, veterinary clinics continue to work through the challenging dynamic of increased clinical demand in the face of staffing challenges, including near-term management impacts from the surge of the Omicron variant. It's clear that strong clinical service demand will be a priority for clinics moving forward. I'd X remains committed and extremely well positioned to support the growth of our customers through our focus on high customer service levels and solutions that enhance clinic productivity.

Like many sectors of the global economy veterinary clinics continue to work through the challenging dynamics of increased clinical demand in the <unk>.

<unk> of staffing challenges, including near term management impacts from the search of the Omicron variant, it's clear that strong clinical service finance will be a priority for clinics moving forward IDEXX remains committed and extremely well positioned to support the growth of our customers through our focus on high customer service levels and solutions that enhance.

<unk> clinic productivity.

Speaker 3: As we look forward, we're expanding our global commercial capability aligned with the strong demand trends.

As we look forward, we're expanding our global commercial capability aligned with these strong demand trends are investments in Germany, France, and South Korea in the first half of 2021 continue to pay off as expanded commercial footprint in each country enables significant increases in customer contacts and reach to revenue.

Speaker 3: Our investments in Germany, France, and South Korea in the first half of 2021 continue to pay off. As expanded commercial footprints in each country enable significant increases in customer context and reach to revenue. Critical elements of our high-touch account management philosophy.

Critical elements of our high touch account management philosophy.

Speaker 3: We're tracking towards completion in early 2022 of the already communicated second wave of expansions in three additional countries.

We're tracking towards completion in early 2022 of the already communicated second wave of expansions and three additional countries with more to come.

Speaker 3: with more to come. These are holistic initiatives that only involve the addition of customer facing professionals across multiple job types such as account managers, professional service veterinarians, and field service representatives.

Our holistic initiatives that only involve the addition of customer facing professionals across multiple job types, such as account managers professional service veterinarians and field service Representatives, but also include the extension of marketing programs and new field tools, such as IDEXX 360 <unk>.

Speaker 3: But also include the extension of marketing programs and new field tools such as I-X360. In the addition, a more expensive reference of courier routes and expanded service.

The addition of more extensive referenced Korea routes and expanded service levels increase.

Speaker 3: Increasing our international commercial footprint while maturing our approach will continue to be a key priority beyond wave two countries currently nearing completion.

Increasing our international commercial footprint, while maturing our approach will continue to be a key priority beyond wave two countries currently nearing completion.

Speaker 3: To that end, I'm pleased to share that we are also augmenting our commercial leadership team with an experienced commercial executive in Asia-Pacific CAC, who will join our Texas quarter.

To that end I'm pleased to share it but we're also augmenting our commercial leadership team with an experienced commercial executive in Asia Pacific Keck, who will join that excess quarters.

Speaker 3: As we expand, our commercial team continues to deliver the day, reflected in over 5,000 premium instrument placements in Q4. By far, our largest quarterly placements ever achieved. Premium instrument placement growth of 29% includes comparable growth across US and international regions, and resulted in 14% growth in our global premium and small base, the strong performance across each of our instrument plus.

As we expand our commercial team continues to deliver the day reflected in over 5000 premium instrument placements in Q4 by far our largest quarterly placements ever achieved premium instrument placement growth of 29% includes comparable growth across U S and international regions and resulted.

In 2014% growth in our global premium installed base with strong performance across each of our instrument platforms.

Speaker 3: These exceptional results were delivered despite access challenges. They demonstrate strong commercial execution as well as the fact that customers are increasingly choosing IDEC's innovations to support increased clinical demand today while investing for future business needs.

These exceptional results were delivered despite access challenges they demonstrate strong commercial execution as well as the fact that customers are increasingly choosing IDEXX innovations to support increased clinical demand today, while investing for future business needs.

Speaker 3: Prosai 1 is a great example of this. Our Prosai 1 launch has done exceptionally well. Prosai 1's performance and reliability as used in the demanding environment of a practice has met or exceeded all goals. And feedback remains highly positive as customers love its easy use and how it fits into the veterinary clinic workflow. We see many...

<unk> is a great example of this our press site one launch has gone exceptionally well, perhaps I once performance and reliability is use of the demanding environment of a practice has met or exceeded all goals and feedback remains highly positive as customers love its ease of use and how it fits into the veterinary clinic workflow.

Mid 90%.

Speaker 3: Global attachments with chemistry analyzers in this trend demonstrate pro-side ones importance in building a full diagnostic workup. Furthermore, the pro-side one launched benefits from programs like IdeX 360, which not only provides veterinarians with a flexible customer-friendly way to add this innovative analyzer to their clinics, but also benefits growth across IdeX testing modalities.

Global attach rates with chemistry analyzers, and this trend demonstrate pro side once importance and building a full diagnostic workup.

Furthermore, the prostate one launch benefits from programs like IDEXX, 360, which not only provides veterinarians with a flexible customer friendly way to add this innovative analyzer to their clinics, but also benefits growth across IDEXX testing modalities.

Our global Procyte, one regional Rod is now nearly complete and we have delivered over 2500 instruments globally since launching in late Q1 of 2021.

Speaker 3: The growing install base of premium instruments supports a robust dream of future consumable usage which gives us confidence and guided ranges for CAG to recur in revenue growth.

Our growing installed base of premium instruments supports a robust stream of future consumable usage, which gives us confidence guided ranges for CAG recurring revenue growth.

Speaker 3: In addition to driving placements and adoption, our commercial team continues to educate our customers on the benefits of preventive medicine.

In addition to driving placements and adoption of our commercial team continues to educate our customers on the benefits of preventive medicine.

Speaker 3: The Preventive Care Initiative remains our primary vehicle for driving a preventive agenda in the clinic and provides sales professionals an opportunity to engage in thorough conversations with broad participation from practice staff.

The preventative care initiative remains our primary vehicle for driving a preventive agenda in the clinic and provide sales professionals and opportunity to engage and thorough conversations with broad participation from practice staff.

Speaker 3: Despite restricted access to clinics, we drove approximately 125 new U.S. enrollments in the quarter. We'll also develop and plan to simplify the enrollment process for busy cuts.

Despite restricted access to clinics, we drove approximately 125, new U S enrollments in the quarter, while also developing plans to simplify the enrollment process for busy customers.

Speaker 3: And we look forward to deploying this and continuing to support this broader preventive care effort in 2022.

Look forward to deploying this and continuing to support this broader preventative care effort in 2022.

Speaker 3: We also see continued momentum in software expansion. As our innovative products are helping customers improve clinic efficiency and pet owner communication. The onboarding of EasyVet has got very smooth.

We also see the continued momentum in software expansion is there.

Our innovative products are helping customers improve clinic efficiency and pet owner communications, yes.

Boarding of easy that has gone very smoothly and subscriptions are tracking favorably to our high expectations customers. Appreciate the advanced capabilities and intuitive workflow easy that provides 81% to pinch placements with cloud based in the quarter demonstrating that we are well positioned to support customers in their shift to the cloud.

Speaker 3: Subscriptions are tracking favorably to our high expectations. Customers appreciate the advanced capabilities and intuitive workflow EasyVet provides. 81% of PIMS placements were cloud-based in the quarter, demonstrating that we are well positioned to support customers in their shift to the cloud.

This trend provides a significant growth opportunity and excellent profit flow it puts a robust and easy to use information management products that enhance of our customers that enable them to focus on providing the highest levels of patient care enabled by diagnostics to improve health outcomes.

Speaker 3: as Trent provides a significant growth opportunity in excellent profit flow. It puts robust and easy to use information management products at the hands of our customers that enable them to focus on providing the highest levels of patient care enabled by diagnostics to improve health health.

Speaker 3: Our software portfolio is a strategic area of investment and focus for our

Our software portfolio is a strategic area of investment and focus for IDEXX.

Speaker 3: veterinarians have never been busier and have a deep need and appreciation for software solutions that are easy to use and built on contemporary technology staff.

Veterinarians have never been busier and have a deep need and depreciation for software solutions that are easy to use and built on contemporary technology stacks.

Speaker 3: They look to these solutions to support patient care, staff productivity, and internal as well as pedometer communication.

They look to these solutions to support patient care staff productivity and internal as well as pet owner Communications. Our strategy is to bring enterprise software solutions to our customers that work seamlessly with a broader set of business critical applications, our own or third parties that veterinarians, who used to run their practices.

Speaker 3: Our strategy is to bring enterprise PM software solutions to our customers that work seamlessly with a broader set of business and clinical applications. Our own third parties that veterinarians use to run their practice.

Speaker 3: FECK-NEK-PLUS, our diagnostics results, clinical decision support, and ordering portal, is a great example of this. FECK-NEK-PLUS was launched almost 10 years ago. It's integrated from a workflow standpoint in IDEX and third-party pins. It's now being used in over 30,000 practices global.

Second it plus diagnostics results clinical decision support and ordering portal is a great example of this.

Second <unk> plus was launched almost 10 years ago is integrated from a workflow standpoint, and IDEXX and third party pins and is now being used in over 30000 practices globally.

Speaker 3: Customers who use our software and diagnostic solutions together correlate with higher growth profiles, supporting workflow optimization for our diagnostics testing process.

Customers, who use our software and diagnostic solutions together.

Relate with higher growth profiles supporting workflow optimization for our diagnostics testing platforms.

Speaker 3: Our diagnostic imaging business, which includes our industry-leading WebCAC software solution, also experience the next one quarter. Demonstrating the preference customers have for our premier Lodo Simmaging solution.

Our diagnostic imaging business, which includes our industry, leading <unk> software solution also experienced an excellent quarter demonstrating the preference customers have for our premier low dose imaging solutions.

Speaker 3: Solid placements in the quarter supported full year placement growth of 35% and double digit year-to-year gains in recurring revenue. We also have strong growth in web packs of descriptions for Q4. Up 18% versus the prior year and with continued customer retention rates in a high 90% rate.

Solid placements in the quarter supported full year placement growth of 35% and double digit year over year gains in recurring revenue. We also had strong growth in web Pacs subscriptions for Q4 up 18%.

Percent versus the prior year and with continued customer retention rates and high 90% range.

Speaker 3: Grow with the need to install base a profitable revenue stream, an increased utilization of services of how Pidex Webpacks become an important part of our enterprise software ecosystem.

Both in the installed base.

<unk> revenue stream and increased utilization of services of help IDEXX web Pacs become an important part of our enterprise software ecosystem.

In addition to ensuring the successful rollout and adoption of these recent innovations we were thrilled to launch a series of new product and service enhancements and BMX last month each.

Speaker 3: In addition to ensuring the successful rollout at adoption of these recent innovations, we were thrilled to launch a series of the product and service enhancements at BMX Plus Mom.

Speaker 3: Each of these innovations highlight IDEX's commitment to continually invest in our service and product offerings.

These innovations highlight IDEXX is commitment to continually invest in our service and product offerings with a particular focus on providing insights and decision, making as to help customers deliver higher standard of patient care.

Speaker 3: With a particular focus on providing insights and decision-making aids to help customers deliver a higher standard of patient care.

Speaker 3: These enhancements include an expanded oncology testing platform with additional tests and aids for veterinarians to better identify, stage, treat, and monitor several prevalent cancer types.

These enhancements include an expanded oncology testing platform with additional test today's for veterinarians to better identify stage to treat and monitor several prevalent cancer types.

Speaker 3: An updated 40X plus test with improved parameter performance for Anaplasma, in addition of clinical decision support for 40X plus, and NeuroNetwork 6.0 for CetiView, which has now been trained on 800 million urine sediment images.

An updated 40 X plus test with improved parameter performance for Anaplasma.

And the addition of clinical decision support 40 X plus and narrow network six pointed out for <unk>, which has now been trained on $800 million urine sediment images.

Improving the performance of our products are central to our strategy and we're also supporting greater efficiency, which helps drive higher adoption and customer satisfaction.

Speaker 3: Improving the performance of our products is central to our strategy. And we're also supporting greater efficiency, which helps drive higher adoption and customer satisfaction. Some of this...

Some examples the new catalyst SBA bring through agents on board the test, reducing the number of steps to run the test time to results.

Speaker 3: The new catalyst, SDMA, brings reagents on board the test, reducing the number of steps to run the test and time to result.

Speaker 3: while also reducing storage space and waste due to the removal of separate reagents.

While also reducing storage space and waste due to the removal of separate reagent costs.

Speaker 3: The improved Vecconic Plus mobile app provides an enhanced user experience, improved mobile capability, and easier pedometer communication, and finally coming later in 2022, our 40X Plus test will allow for extended room temperature storage.

That can have plus mobile app provides an enhanced user experience improved mobile capability and easier Paydown, our communication and finally coming later in 2022, 40, <unk> plus test will allow for extended room temperature storage.

The addition of these time saving technologies demonstrates our technology for life approach to product and services designs.

Speaker 3: The addition of these time-saving technologies demonstrates our technology-for-life approach to product and services design.

Speaker 3: Notably, the improved 40X Plus product represents our fifth update to the Heartworm Stat product first launched in 1992. While this test already represents the gold standard for vector-borne disease rapid testing, we remain focused on continuous improvement to support our customers in delivering improved head health outcomes.

Notably the improved 40 X plus product represents our fifth update to the Heartworm staff product first launched in 1992, well test already represents the gold standard for vector borne disease rapid testing, we remain focused on continuous improvement to support our customers and delivering improved health outcomes.

Speaker 3: Underpinning our strong business performance is a prioritized focus on providing continued high-level service to our customers.

Underpinning our strong business performance, it's a prioritized focus on providing continued high levels of service to our customers a.

Speaker 3: A key element in achieving these service levels is consistent, strong execution across our supply chain.

A key element achieving these service levels is consistent strong execution across our supply chain.

Speaker 3: which we saw again in Q4, through high product availability and strong order turnaround.

Which we saw again in Q4, who high product availability and strong order turnaround plans.

Speaker 3: In order to build this capability and support growth in the future, we plan to invest in 2022 in the expansion of our manufacturing footprint and lab capacity.

In order to build this capability and support growth in the future we plan to invest in 2022 and the expansion of our manufacturing footprint about capacity, while also maintaining strong frontline measures to support high service levels and while we anticipate some inflationary dynamics and supply chain headwinds going forward, we have captured these.

Speaker 3: We'll also maintain strong frontline measures to support high service.

Speaker 3: And while we anticipate some inflationary dynamics and supply chain headwinds going forward, we've captured these impacts in our outlook and believe we are well positioned to build upon our year-end margins.

And our outlook and believe we are well positioned to build upon our year end margins.

Speaker 3: Overall, we're very pleased with the momentum and execution in our business, and excited about our plans to build on our progress in 2022.

Overall, we're very pleased with the momentum and execution in our business and excited about our plans to build on our progress in 2022.

Before I open the line for Q&A I'd like to say, thanks to our employees for another top notch here in pursuit of our purpose and our service to our customers.

Speaker 3: And before we open the line for Q&A, I'd like to say thanks to our employees for another top-notch year in pursuit of our purpose and in service to our customers.

Speaker 3: The IDEX organization remains highly focused on our customers.

<unk> organization remains highly focused on our customers' needs.

Speaker 3: continue to perform at a very high level during another dynamic and demanding year. The team's perseverance is seen both in the results highlighted this morning, as well as our high levels of engagement as a team. And I'm proud to be able to share today's excellent results on behalf of the whole team's hard work.

Continued to perform at a very high level during another dynamic and demanding demanding here.

The team's perseverance seen both in the results highlighted this morning, as well as our high levels of engagement as a team and are proud to be able to share today's excellent results on behalf of the whole team's hard work.

Speaker 3: That concludes my opening remarks, we now have time for some questions.

That concludes my opening remarks, we now have time for some questions.

Thank you we'll now begin the question and answer session. If you have a question press Star then one on your Touchtone phone.

Speaker 4: and I'll begin the question and answer session. If you do have a question, press star then one on your touchtone phone. If you wish to be removed from the queue, please press the pound sign or the hash key. If using a speakerphone, you may need to pick up the handset first before pressing a number.

Would you be more from the queue. Please press the pound sign or the hash key if you're using a speakerphone you may need to pick up the handset first before pressing the numbers.

Speaker 4: Once again, if you have a question, press star then one on your touchtone phone. And our first

Once again, if you do have a question press Star then one on your Touchtone phone.

And our first question is from Chris Schott from Jpmorgan.

Speaker 5: Great, thanks so much for the questions. I just want to do a little bit more color on the magnitude of impact you're seeing from Amarcrond to the near-term results. So basically how much of a step down in visits are you seeing currently? And then maybe just pulling on that, just going to broader question. Can you elaborate a little bit more on your expectation for that visit growth as we look out to 2022? And we start to think about annualizing as maybe more normalized comp that we've seen over the past few years. Thanks so much. Good morning.

Great. Thanks, so much for the questions I, just wanted a little bit more color on the magnitude of impact youre seeing from a micron to the near term results. So let's see how much of a step down and visits are you seeing currently and then maybe just pulling on that just a broader question can you just elaborate a little bit more on your expectation for that.

Visit growth as we look out to 2022, and we start to think about annualized maybe more normalized comps that we've seen over the past few years. Thanks, so much.

Good morning, Chris.

Speaker 3: We haven't quantified it, we did see some impact on testing volumes.

We haven't quantified it we did we did see some impact on testing volumes.

Speaker 3: in the international regions from Omicron in late Q4. It primarily manifested itself in a modest drop-off in some lab volumes, and this trend appears to be continuing just in early 22 January .

In the international regions from Omicron in late.

Q4, it primarily manifest itself in that.

Modest drop off in some lab volumes and this trend appears to be continuing just in early 'twenty two January .

Speaker 5: as it affects the U.S. clinical visit growth. You know, the thing to keep in mind is the underlying customer demand is very strong. What vet practices tell us is that they're busy as they've ever been, you know, in terms of, you know, forward booking. We're seeing, you know, month, two months forward booking of patients and peddlers trying to get into practice.

As it affects the U S clinical visit growth, yes, the thing to keep in mind is the underlying customer demand is very strong.

That practices tell us is it they're busy.

Ever been in.

In terms of.

Forward bookings we are seeing.

A month two months forward booking of patience and pet owners trying to get into practices. So we think practices have a playbook in which to deal with this we've all seen this movie a couple of times at this point.

Speaker 5: So we think practices have a playbook in which to deal with this. We've all seen this movie a couple times at this point. They've done the curbside drop-off and pick-up in some cases. There's obviously some staffing issues that they're dealing with. We think that that's.

They've done that curbside drop off and pick up in some cases. This obviously some <unk>.

Having issues that they're dealing with we think that thats.

Speaker 5: more of a temporary basis and we're in a really good position also to be able to support them with our field service organization and technology solutions that help them be more productive and manage the business.

More of a temporary basis and we're in a really good position also.

To be able to support them with our field service organization and technology solutions that help them be more productive and manage that business.

Speaker 2: And to your question, Chris, our 12% to 14% organic growth outlook for CAGDX recurring revenues assumes positive clinic visit growth, you know, in addition to a, you know, short performance, ongoing performance for our teams and helping to grow our revenues faster.

And to your question, Chris our 12% to 14% organic growth outlook for CAG Dx recurring revenues assumes positive.

Clinic visit growth.

In addition to short performance ongoing performance players are.

Our teams have been helping to grow our revenues faster than that.

Speaker 5: And maybe just one really quick follow-up, I know last year you talked about new instrument placement growth adding I think about a percent or so to overall revenue growth. Can you just elaborate on how you're thinking about new instrument placements and its contribution to 2022? Thanks so much.

Okay, and then just one really quick follow up I know last year, you talked about new instrument placement growth, adding I think about a percent or so to overall revenue growth can you just elaborate on how youre thinking about new instrument placements and its contribution to 2022. Thanks so much.

Speaker 2: You know, I'll let Jay talk to the color of the momentum that we have on instrument placements and our priorities. In terms of our outlook, we didn't break it out specifically, but we're targeting continued strong placement growth. The revenue growth may lag the placement growth somewhat as we see the expansion of programs like IDEX 360 and have some...

Oh.

Jay talked to the color of the momentum that we have on instrument placements and our priorities in terms of our outlook, we didn't break it out specifically what we're targeting.

Continued strong placement growth the revenue growth may lag the placement growth somewhat as.

We see the expansion of programs like IDEXX 360, and have some some mix effects from higher growth in international markets, but we are targeting solid instrument year on year growth and that's factored into the overall guidance. We felt we saw record placements in Q4.

Speaker 2: some mixed effects, you know, from higher growth in international markets, but we are we're targeting

Speaker 5: solid instrument urinary growth, and that's factored into the overall guidance. We saw record placements in Q4 of 2021, over 5,000, on the back of record hematology placements and catalysts in CityView, pretty much across the board, and we think that that momentum

2021 over to over 5000.

On the back of record hematology placements of catalyst instead of you pretty much across the board and we think that that momentum.

Speaker 5: you know, will remain intact, practices are clearly investing in technology to help them from a capacity standpoint. They're looking to us and our solutions that, you know, not just support the best standard of care but also.

Well.

Intact.

Practices are clearly investing in technology to help them from a capacity standpoint, they're looking to us and our solution set.

Not just support the best standard of care, but also.

Speaker 5: and staff productivity and enable them to handle higher patient volumes. Thanks so much for the questions.

Support workflow and staff productivity and enable them to handle higher patient volumes.

Okay. Thanks, so much for the questions.

Our next question is from Erin Wright from Morgan Stanley .

Great. Thanks, so much.

Speaker 6: Great, thanks so much. In the inflationary environment that we're in, and you anticipate higher price realization in the 2022 guide, but can you quantify some of the offsetting factors, the higher input cost, labor, freight, net-net, how are these dynamics impacting you from a margin perspective in 2022, just based on your guidance?

And in the inflationary environment that we're in you anticipate higher price realization in 2020 guide. Thank you.

You quantified some of the offsetting factors the higher input costs labor net.

Net net how are these dynamic impacting you from a margin perspective in 2020 based on your guidance.

So we we are seeing some impacts selectively in our in our business I think you highlighted some of the key drivers, but freight and distribution costs have been have been a factor.

Speaker 2: So we are seeing some impacts selectively in our business. I think you highlighted some of the key drivers, but freight and distribution costs have been a factor. We're monitoring higher labor input costs. I think that's something that we anticipate will be something we'll need to manage effectively. And we have selective impacts.

Monitoring higher labor input costs I think that's that's something that we anticipate will be something we'll need to manage effectively and we have selective impacts in different parts of our business, but we do use electronic components and things of that nature I think a lot of our focus areas on me.

Speaker 2: different parts of our business, but we do use electronic components and things of that nature. I think a lot of our focus, Aaron, is on

Speaker 2: Making sure we have continued very high business continuity, reliability, so we're really pleased with that. We're at 99%.

Making sure we have continued very high.

Continuity reliability. So we're really pleased with that we're at 99% and.

Speaker 5: and customer reliability, and that's our primary focus. And so we do have some impacts, and as you pointed out, we have a relatively higher expectation for net emergency improvement that helps to mitigate that, and is reflective of two degree of that, and enables us to support the solid operating margin improvements that we're doing.

Customer reliability and that's our that's our primary focus and so we do have some impacts and as you pointed out we have a relatively higher.

Expectation for net margin improvement that helps to mitigate that and is reflective of to a degree of that and enables us to to support the solid operating margin improvement that we're targeting next year.

Speaker 6: Okay, great. And then more of a philosophical question here, so bear with me, but bigger picture, thinking about broader animal health and more specifically diagnostic trends, and while there will be an element of normalization here near term, just given the tough comps and in barring any sort of Omicron volatility, but...

Okay, Great and then more of a philosophical question here, So bear with me, but bigger picture.

Thinking about broader animal health and more specifically diagnostic change while there will be an element of normalization here near term just given the tough comp.

And barring any sort of volatility, but do you think.

Speaker 6: It does seem that you suggest that we are emerging from the pandemic at a faster underlying growth rate for companion animal diagnostics that may be pre-pandemic over the longer term. Does this change how you're thinking about your five-year outlook, and how are you thinking about some of those changes over the course of the pandemic that may be actually more structural in nature?

It does seem that you suggest that we are emerging from the pandemic at a faster underlying growth rate, our companion animal diagnostics and maybe pre pandemic.

Longer term does it change how you're thinking about your five year outlook.

How are you thinking about some of those changes over to quicken the pace, maybe actually more structural in nature.

Speaker 5: I'll take that. Good morning, Aaron. You know, there's a couple of, I think, longer-term trends that...

Yes, I'll take that good morning Erinn.

Theres a couple of longer term trends that.

Speaker 5: the pandemic probably accelerated that, you know, we're in effect and if anything.

The pandemic probably accelerated that work.

Work.

And if anything.

Speaker 5: as a result of new pet adoptions and the pivot within practices, the more service versus retail product sales.

As a result of new pet adoptions in the pivot within practices that more service versus retail type product sales I think it just accelerated as a result of that the pandemic is clear.

Speaker 5: I think have just accelerated as a result of the pandemic. Clearly, as veterinarians focus on medical services, inpatient care, diagnostics is a big piece of that. I think they recognize.

Clearly as veterinarians focus on medical services and patient care diagnostics is a big piece of that.

Recognized that diagnostics is obviously a.

Speaker 5: that diagnostics is obviously a very high margin, very high profit center within their practices. And so I think the combination of

Very high margin very high profit center within their practices and so I think the combination of more patients pet owners wanting higher.

Standards in patient care veterinarians pivoting to services in the world. The diagnostic plays have been important factors and then you layer on top of that our strategy as a company, which both includes continuing to innovate.

In terms of our testing platforms and information.

Management, and our commercial strategy, which is a high touch model and being able to work with the veterinarians to help them to use these tools effectively both business and medical lives.

I think.

Continue to see very strong.

<unk> that.

Higher than pre pandemic.

Okay, great. Thank you.

Our next question is from Michael <unk> from Bofa.

Speaker 4: Our next question is from Michael from BOA.

Speaker 7: Great. Thanks for taking the question. And congrats, Jay and Brian , on the quarter and the solid guide.

Great. Thanks for taking the question and congrats Jay and Brian on the quarter on the solid guide I want to ask about some of the new products and new initiatives, you announced earlier this year at Vms or around <unk>, including the pet Dx partnership.

Speaker 7: I want to ask about some of the new products and new initiatives you announced earlier this year at VMX or around VMX, including the PetDX partnership. Slightly different than some of the things you've done in the past.

So we're different than some of the things you've done in the past and it does get to a point, where you have questions from investors about.

Speaker 7: And it does get to a point where we have questions from wrestlers about, you know, in terms of additional test and modalities, additional opportunities beyond sort of authority on the market.

In terms of additional testing modalities additional opportunities beyond sort of whats already on the market.

Speaker 7: Could you talk about the oncology opportunity, or if there's others beyond that that you're thinking of in terms of?

Talk about the oncology opportunity or if theres others beyond that that you are thinking of in terms of.

Speaker 7: you know, some of the untapped markets and diagnostics, how do you see this partnership playing out over the next couple of years and just sort of.

Some of the untapped markets in diagnostics, how do you see this partnership playing out in the next couple of years and just sort of.

Speaker 7: of the things you highlighted earlier this year how meaningful is that a contributor to 2022 overall or is that more of a long-term?

All of the things you highlighted earlier this year, how meaningful is that a contributor to 2022 overall or is that more of a long term factor.

Speaker 5: Sure. Good morning, Mike. Yes, cancer is the most prevalent cause of death in dogs. So there are about six billion positive cases of cancer of dogs just in the U.S., so it's very significant. And, you know, if you take a look today, just at a high level in terms of the process by which the veterinarian diagnoses and treats, it's very complex.

Sure.

Mike, Yes captures the most prevalent causes of death.

So there are about $6 billion.

Positive cases of cancer dogs, just in the U S.

Significant and if you.

Take a look just at a high level in terms of.

The process by which the veterinarian diagnosis and creates it's very complex.

Speaker 5: It's fragmented, and there aren't, you know, a complete set of diagnostic tools to help support that. So, we think that there is a longer term, very attractive market opportunity to be able to help veterinarians, you know, navigate cancer diagnosis and treatment.

It's fragmented and there arent a complete set of diagnostic tools to help to help support that so we think that there is a longer term very attractive market opportunity to be able to help veterinarians navigate cancer diagnosis and treatment.

Speaker 5: And so we're building off our expertise in cancer pathology, which is really more today geared towards cancer identification and really trying to.

So we are building off our expertise in cancer pathology, which is really more to de geared towards cancer identification.

And it really trying to yes.

Speaker 5: across the continuum of care, which is the identification and staging and treating and monitoring and bring solutions to that full value chain of care. So the partnerships we announced we think bring best in class technology to support that process. We're excited by it. It's still, you know, it's still early.

Cross the continuum of care, which is C identification and staging and treating and monitoring and bring solutions to that full value chain.

Care. So the partnerships, we announced we think bring best in class technology.

Support that process, we're excited by it it's still it's still early.

Speaker 5: stages in terms of market development. I think it's less about the revenue opportunity near-term and more about supporting fed areas and helping them navigate what's very complex and what is increasingly pet-owner driven demand for these types of services. I think over time, it's a quite attractive opportunity. We bring, I think...

Stages in terms of market development. So I think it's less about the revenue opportunity.

Near term.

It's more about supporting veterinarians and helping them navigate what's a very complex in what is increasingly pet owner driven demand for these types of services I think over time, it's a.

Quite attractive opportunity, we bring I think.

Speaker 5: incredible technical expertise to be able to support the veterinarian through this. And we're excited by what we've learned and continuing to build off those capabilities over time.

Incredible.

Nickel expertise to be able to support the veterinarian through this and we're excited by what we've learned and continuing to build.

Off those capabilities over time.

Speaker 7: Great, thanks, and then a follow-up question on the guide again, the 12 to 14% recurring revenue in CAG is a very solid guide, I think relative to initial expectations. You touched on, I mean, you commented that you expect clinical visit growth in the market to be positive, and you cited price again, but could you talk about some of the other moving pieces there? Just trying to get at the bridge from that clinical visit growth to the CAG recurring revenues, you know, whether it's diagnostic frequency, diagnostic utilization.

Great. Thanks, and then a follow up question on the guide again.

The 12% to 14% of recurring revenue and CAG is.

Very solid guide I think relative to your initial expectations you touched on I mean, you commented that you expect clinical visit growth in the market to be positive and you cited price again, but could you talk about some of the other moving pieces. There just trying to get at the bridge from that clinical visit growth to the CAG recurring revenues, whether its diagnostic frequency diagnostic utilization.

Speaker 7: Just sort of, you know, the tech premium, if you could help us bridge one of the moving pieces there, that'd be awesome.

The cat premium if you could help US bridge what are the moving pieces there that'd be helpful.

Speaker 2: Yeah, Mike. So I think the way to think about this is the as we were coming out of 2021 and clearly we had a big step up in demand through the pandemic that we're confident that we can build off of that. So I think that's that's one key theme.

Yes, Mike So I think the way to think about this as the as we were coming out of 2021, and clearly we had a big.

Step up in demand through the pandemic that we're confident that we can build off of that so I think thats one key theme and as you look at the calibrate. This so the exit rate of our business in Q4, we had 13%.

Speaker 8: And as you look at the, you know, calibrate this to the exit rate of our business in Q4, we have 13%.

Speaker 8: CAGDX recurring growth off that higher base. So we were entering the year with that kind of trajectory.

Dx recurring growth off that higher base. So we are we.

Entering the year with that kind of trajectory and we see some positive drivers here were.

Speaker 8: And we see some positive drivers here where we're.

Speaker 8: We're investing in international growth and feel good about the traction and the potential there and we'll have some incremental benefit from net pricing that we highlighted. So the higher end of the range really reflects kind of building off of the momentum that we had, I think, to build on kind of Aaron's question earlier.

We're investing in international growth and feel good about that.

The traction and the potential there and we will have some incremental benefit from from net pricing that we highlighted and so the.

The higher end of the range really reflects kind of building off of.

The momentum that we had I think to to build on kind of Aaron's question earlier.

Speaker 8: One of the metrics we share in our snapshot is just the average revenue per clinical visit in the...

One of the metrics we share on our snapshot is just the average revenue per clinical visit and the.

Speaker 2: in veterinary clinics in the U.S. And that increase, as Jay noted, nearly 200 basis points from pre-pandemic levels.

In veterinary clinics in the U S and that increase as Jay noted nearly 200 basis points from pre pandemic levels to from 4% to about 6%. So there is some underlying positive service trends here and I think what youre seeing in our outlook is.

Speaker 8: to from 4% to about 6%. So there's some underlying positive service trends here, and I think what you're seeing in our outlook is...

Speaker 8: uh... confidence that we can execute well continue to execute well uh... invest in ways that support that

Confidence that we can execute well continue to execute well.

Vest in ways that support that.

Speaker 8: And if we can sustain that type of momentum, you know, we think we can achieve those higher growth levels. And I think the lower end of the range really is more calibration, going back towards more pre-pandemic type growth. It's not what we're necessarily projecting, but I think that that's a potential scenario as well.

And if we can sustain that type of momentum.

We think we can achieve those higher growth levels and I think the.

The lower end of the range really is more calibration of going back towards more pre pandemic type growth, that's not where we're necessarily.

We are projecting but I think that thats, a potential scenario as well but.

Speaker 8: All of this is building off of the higher demand. So some of this will come down to our execution and I think things like Omicron or your term dynamics that we'll just need to manage through. And as Jay mentioned, we don't see that as...

All of this is building off of the higher demand. So it's some of this will come down to our execution and I think things like omicron, our near term dynamics that will just need to manage through as Jay mentioned, we don't see that as indicative of a longer term or an underlying demand issue but.

Speaker 7: as indicative of a longer term or an underlying demand issue, but, you know, the momentum on our business we feel very positive about and we're investing towards that. I think we've got a good strategy to keep building on that progress. Great. Thanks so much. Appreciate it.

The momentum in our business, we feel very positive about and where we're investing towards that I think we've got a good strategy to keep building on that progress.

Great. Thanks, so much appreciate it.

Our next question is from Jon block from Stifel.

Speaker 9: Hey guys, great. Good morning. Thanks. First question is on wellness clinical visits. They continue to do very well. The two-year average actually accelerated from the third quarter, 21 levels. So, you know, just love management thoughts on staffing, capacity issues at vet practices. We continue to hear a lot about those. I think others do as well.

Hey, guys great. Good morning. Thanks.

First question just on wellness clinical visits they can continue to do very well the two year average actually accelerated from the third quarter 'twenty one level. So.

Just loved management thoughts on staffing capacity issues at bad practices, we continue to hear a lot about those I think others do as well.

Speaker 9: you know jay or brine how difficult are they because you would think wellness would be impacted but again it accelerated and maybe you believe the underlying industry demand from consumers is actually potentially higher from what we're seeing work its way through and then I just got a follow up thanks

Jr, Brian how difficult or they because you would think wellness would be impacted but again it accelerated and then maybe do you believe the underlying industry demand from consumers is actually potentially higher from what we're seeing work its way through and then I've just got a follow up thanks.

Yes.

Speaker 5: John , in terms of the wellness, there's a couple of things.

John in terms of the way.

Needless to say this is a couple of things that are potentially driving that obviously, there's a lot of puppies and kittens now become dogs and cats.

Speaker 5: that are potentially driving that. Obviously, there's a lot of puppies and kittens who've now become, you know, dogs and cats.

Speaker 5: And I think there's a lot of pet owners who want to get their pets into the practice and checked off. And there's been an emphasis...

I think there's a lot of pet owners.

They're in their pets into the practice and checked up and Theres been an emphasis on wellness visits in the U S. Now for quite some time, so it's not new.

Speaker 5: on wellness visits in the U.S. now for quite some time, so it's not new. Obviously, there are some capacity constraints, and some of these visits get, you know, pushed off, you know, a month or six weeks. And, you know, I think over time, that'll get relieved. But I think the under, what we see is the underlying demand for wellness and check-up.

Obviously, there are some capacity constraints in some of these visits get pushed off.

Month, or six weeks and I think over time that'll.

That'll get relief, but I think the under what we see is the underlying demand for wellness and checkups.

Speaker 5: is there and, you know, it's been very robust, as you pointed out, and we expect that to be able to sustain. Certainly, we and others in the marketplace are really focused on emphasizing preventive care as an important part of patient health.

There.

<unk>.

It's very robust as you pointed out and we expect that to be able to sustain certainly we and others in the market place I really focused on emphasizing.

<unk> cur as they add an apartment.

Part of patient health.

Speaker 9: Okay, Farron often. The second one builds on Chris's earlier question. So Brian , I'll try to maybe push you a little bit more. The CagDX Recurring Guide was, I think solid in a lot of people's view. It implies a two-year average of in and around 15.5%.

Okay.

Fair enough. The second one builds on Chris's earlier question, So Brian I'll try and maybe push you a little bit more the CAG Dx recurring guy was.

I think solid and a lot of People's view it implies a two year average of in and around 15, 5%.

Speaker 9: You helped, I thought, a lot on the cadence of op margin expansion in 2022. You called out the comps, but anything specifically to call out for CAGDX recurring?

You helped I thought a lot on the cadence of op margin expansion in 2022, you called out the comps, but anything specifically to call out for CAG Dx recurring two year average for one Q I mean, you've got a wildly tough comp you called out omicron headwinds persist Jan maybe even the February could disappear.

Speaker 9: to your average for one q i mean you got up you know why are we talk com

Speaker 9: you call that home or crime headwinds that persists and maybe even the February you know could this be a situation where we're looking at an organic revenue cagdx of mid single digits when we take that all into account account or maybe just phrase it frame it versus that the two year average of fifteen dot five or four year thanks guys

Situation, where we're looking at inorganic revenue CAG Dx at mid single digits. When we take that all into account account or maybe just phrase it frame it versus the two year average of 15 dot five for full year. Thanks, guys.

Speaker 8: Uh, look, the way I think we're thinking about this is we're building off this higher base. So we clearly had, um,

Look the way I think we're thinking about this is we're building off this higher base. So we clearly had.

Speaker 8: a period there where we needed to look at some two-year metrics here to calibrate for 2020 effectively, you know, the pandemic dynamics. And now we're moving into sort of that phase of building off the higher base. I would say that, you know, there was some incremental benefit last year and present, you know, so.

A period, there where we needed to look at some two year metrics here to calibrate for 2020 effectively.

<unk> dynamics.

And now we're moving into sort of that phase of building off the higher base I would say that.

There was some incremental benefit last year in Q4 from just the puppy boom in that.

Speaker 8: You know, that that I think is probably the key factor that sustains in the near term. But for the most part, we're normalizing off that higher base. And so I think that that.

That I think is probably the key factor that sustained in the near term, but for the most part we're normalizing off that higher base and so I think that that.

Speaker 8: 12 to 14% is that full year number. We're not projecting by quarter, but I think that's reflective of the overall momentum of the business. I think the Omicron dynamic is a near-term dynamic in the U.S. that we didn't really see.

12% to 14% is that full year number we're not.

Projecting by quarter, but I think.

Is that reflective of the overall momentum of the business.

I think the the omnicom dynamic as a near term dynamic in the U S that we didn't really see.

Speaker 8: significantly in Q4, and we're seeing some effects early here. We'll sort that out as we go through the quarter. But I think the underlying momentum and trends, we're targeting to remain strong.

Significantly in Q4, and we're seeing some effects that really here, we'll sort that out as we go through the quarter, but I think the the underlying momentum in trends.

We are targeting to remain strong in.

Speaker 4: And you know, we'll work through these near term dynamics as they play out. All right. Thanks, guys. All right. Next question.

And we'll work through these near term dynamics.

As they play out.

Alright, thanks, guys.

Our next question is from Nathan Rich from Goldman Sachs.

Hi, good morning, Thanks for the questions.

Brian maybe starting with the Opex guidance I think you mentioned kind of the higher levels that you are as you saw in the latter half of this year will continue into 2022.

Speaker 7: Brian , maybe starting with the OPEX guidance, I think you mentioned kind of the higher levels that you saw in the latter half of this year will continue into 2022. I guess it's kind of running in the back half of 21 was in the low 30% range in terms of revenue. Can you maybe talk about what you see the run rate being going forward both for 2022 and beyond? Because OPEX is a percent of revenue has come down a lot relative to historical levels. Do you see that getting back to historical levels or?

I guess, it's kind of running in the back half of 'twenty. One was in the low 30% range in terms of revenue can you maybe talk about what you see the run rate being going forward, both for 2022 and beyond because the opex as a percent of revenue has come down a lot relative to historical levels do you see that getting back to historical levels are.

You kind of feel like the current read there were out as sort of what to expect as we go forward from here.

Speaker 10: You kind of feel like, you know, the current rate that we're at is sort of what to expect as we go forward from here.

Speaker 8: So I think the way to think about it, Nate, is we had a Q4 growth rate year-on-year of about 15%.

So I think the way to think about <unk>.

We had a Q4 growth rate year on year of about 15% and.

Speaker 8: And, you know, we're still working through some compares to some, you know, relatively more controlled growth, the OPEX levels in the comparable prior year. And so entering into Q1, we expect, you know, kind of that same dynamic will have a relatively higher rate of OPEX growth. That will be our most challenging compare.

We're working still working through some compares to some.

Relatively more controlled growth opex levels of the comparable prior year.

And so entering into Q1, where you expect kind of the same dynamic will have a relatively higher rate of opex growth that'll be our most challenging compare and in.

Speaker 8: And in general terms, I think for the full year, you should expect us to be trending back more in line with kind of our overall revenue growth rate. We want to lean in and invest towards future growth. I think our margin dynamics will, as they've been in the past, be supported by solid gross margin improvement.

In general terms I think for the full year, you should expect us to be trending back more in line with kind of our overall revenue growth, we want to lean in and invest towards future growth I think are our margin dynamics as they've been in the past.

Supported by solid gross margin improvement.

Speaker 8: And, you know, so I think longer term, you know, consistent with our longer term outlooks that we've shared it with yesterday, I think in OPEX growth, closer to revenue growth is a reasonable idea.

And.

So I think longer term.

Consistent with our longer term outlooks that we've shared at Investor Day, I think opex growth closer to revenue growth as a as a reasonable expectation.

Speaker 10: Okay, that's helpful. And then, Brian , I don't know if you have any commentary on, you know, how we should expect kind of the weighting of earnings this year between like the first half and the second half. Just kind of given the commentary on kind of the early first quarter trends as well as the higher OPEX levels, is that going to, you know, kind of significantly change the typical seasonality that you usually see in the business?

Okay. That's helpful and then Brian I don't know if you have any commentary on how we should expect kind of the weighting of earnings this year between like the first half in the second half just kind of given the commentary on kind of the early first quarter trends as well as the higher opex levels is that going to significantly change the typical seasonality that you use.

See in the business.

Speaker 8: Yeah, it's it's more driven by compares than necessarily a change in seasonality, but I did mention that our margin improvement would be in the second half.

Yes.

More driven by compares than necessarily a change in seasonality, but I did mention that our margin improvement would be in the second half.

Speaker 8: And as we just discussed, I think our more challenging comparer will be in Q1 in terms of the quarters this year.

As we just discussed I think are more challenging comparable will be in Q1 in terms of the quarters. This year.

Speaker 8: That's, again, more reflective of kind of a year-on-year, you know, dynamic. The one thing to highlight specifically is we'll still be working through.

That's again more reflective of kind of a.

A year on year.

Dynamic.

One thing to highlight specifically is we'll still be working through.

Speaker 8: On LPD, we have the decline in the African swine fever.

On <unk>, we have the.

The decline in the African swine fever.

Speaker 8: revenues that really started in the third quarter of 2021 will still be working through those compare so that will have a dynamic as well.

Revenues that really started in the.

The third quarter of 2021, and it will still be working through those those compares so that'll have a dynamic as well.

Okay, great. Thanks, a lot.

Speaker 4: Our next question is from Ryan Daniels from William Blair.

Our next question is from Ryan Daniels from William Blair.

Speaker 11: Hey, guys. Nick Spiegel for Ryan. Most of my questions have been asked, but I guess in the release, you mentioned you're still working your way through the EZ-VET integration, at least on the off-deck side. I was wondering how far along are you in that until you kind of, you know, fully integrate and you're no longer dealing with those expenses?

Hey, guys Nick speak out in for Ryan most of my questions been asked but I guess in the interim.

Release, you mentioned you are still working our way through the easy button integration.

At least on the Opex side I was wondering how far along are you in that until you kind of.

Fully integrated and you're no longer dealing with those expenses.

Speaker 5: The easy integration has gone quite well, we're far along in terms of really integrating our sales approach and organizations and product roadmaps and that continues to be seen.

Good morning get that the easy that integration has gone quite well where we are.

We're far along in terms of really integrating.

Our sales approach and organization and product Roadmaps and that continues to be received.

Speaker 5: extremely well in the marketplace. You saw from the growth numbers that there's a lot of traction. Behind that is a key part of our strategy and over 80% of our PIMS placements were

Well in that in the marketplace and you saw from the growth numbers that there's a lot of traction behind that it's a key part of our strategy.

Yes over 80% of our placements were worked cloud based placements this quarter.

Speaker 5: where cloud-based placements this quarter. So, really good traction far along, any of the integration being going well.

Alright, good really good traction far along.

Integration is going well.

Speaker 11: Great, thanks. And I guess, kind of just a quick follow-up on the wellness visit, Culler. With kind of that strong, you know, stacked wellness growth, I was wondering if you guys are seeing any change in the proportion of those that have included, you know, a chem panel, like with the large growth, are you seeing that kind of proportion come down, or are you kind of maintaining what the historical rate was with that growth?

Great, Thanks, and I guess.

And then just a quick follow up on the on the wellness visit color.

Kind of that strong stacked wellness growth I was wondering if you guys are seeing any change in the proportion of those that are included 10 panel with the large growth are you seeing that kind of proportion come down are you kind of maintaining.

What the historical rate was with that growth.

Yes, I mean, it's been.

Speaker 3: Yeah, I mean, it's been it's been pretty constant in terms of, you know, panel mix. It's something we don't break out. It's these are, these are largely configured panels for wellness. So when customers, you know, use that, you don't get a lot of variation quarter to quarter.

Pretty constant in terms of.

Panel mix its something that we don't break out.

These are these are largely configured panels for wellness so on customers.

But you don't get a lot of variation quarter to quarter.

Speaker 5: So with that, I'd like to thank everybody for joining this morning's call. I know we have some employees who are listening. I'd like to say thank you to them for their excellent performance and continued passion for our purpose.

With that I'd like to thank everybody for joining this morning's call I know we have some employees who are listening I would like to say thank you to them for their excellent performance with continued passion for our purpose.

Speaker 5: Day in and day out, our team delivered excellent results aligned to our long-term opportunity while also demonstrating an unwavering commitment to our purpose in navigating an evolving landscape due to continued pandemic impacts.

Day in and day out our team delivered excellent results aligned to our long term opportunity. While also demonstrating an unwavering commitment to our purpose and navigating an evolving landscape due to continued pandemic impacts very grateful for the IDEXX team and the purpose, which drives our work and so with that we'll conclude the call. Thank you.

Speaker 5: very grateful for the IDX team and the purpose which drives our work. And so with that, we'll conclude the call. Thanks.

Thank you ladies and gentlemen that concludes today's conference. Thank you for participating and you may now disconnect.

Speaker 4: Thank you ladies and gentlemen, that concludes today's conference. Thank you for participating and you may now disconnect.

[music].

[music].

Good morning, and welcome to the IDEXX Laboratories fourth quarter 2021 earnings Conference call. As a reminder, today's conference is being recorded.

Participating on the call. This morning are Jane Rozanski, President and Chief Executive Officer, Brian Mckeon, Chief Financial Officer, and John Ravens, Vice President Investor Relations IDEXX would like to preface the discussion today with a caution regarding forward looking statements listeners are reminded that our discussion during the call will include forward looking statements that are subject.

Act to risks and uncertainties that could cause actual results to differ materially from those discussed today.

Additional information regarding these risks and uncertainties is available under the forward looking statements notice in our press release issued this morning as well as in our periodic filings with the Securities and Exchange Commission, which can be obtained from the SEC or by visiting the Investor Relations section of our website IDEXX dot com during.

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 and.

In reviewing our fourth quarter 2021 results. Please note all references to growth organic growth and comparable growth refer to growth compared to the equivalent period in 2020, unless otherwise noted.

To allow broad participation in the Q&A, we ask that each participant limit their questions to one with one follow up as necessary. We appreciate you may have additional questions. So please feel free to get back into the queue and if time permits we'll take your additional questions I would now like to turn the call over to Brian Mckeon.

Good morning, everyone I'm pleased to take you through our fourth quarter and full year 2021 results and to provide an overview of our financial outlook for 2022.

In terms of highlights IDEXX delivered excellent financial performance in Q4, driven by double digit topline gains compared to very strong prior year results.

Revenue increased 11% as reported and 10, 5% organically supported by 13% organic growth in CAG diagnostics recurring revenues.

Your average annual organic growth for CAG diagnostic recurring revenues was approximately 17% across U S and international regions consistent with the accelerated two year growth trend seen throughout 2021.

We achieved record premium instrument placements in Q4 with strong gains across our major platforms supporting a 14% year on year expansion of our global global premium instrument base.

Strong revenue growth enabled delivery of $1 89 in EPS up.

Up 12% on a comparable basis as we advance planned investments in our commercial and innovation capability.

Flow through benefits from higher organic revenue growth in 2021 drove outstanding full year financial performance above our long term goals.

I'd X achieved 60% overall organic revenue growth for the full year, driven by 18% gains in CAG diagnostics recurring revenues.

Full year operating margins reached 29% an increase of 220 basis points on a comparable basis and we delivered full year EPS of $8 60 per share up 29% on a comparable basis.

We are well positioned to build on this strong financial performance in 2022.

Targeting revenue gains at the higher end of our long term goals reflected in our outlook for 10% to 12% overall organic revenue growth and 12% to 14% organic growth in CAG diagnostics recurring revenues.

We're also targeting a 50 to 100 basis point improvement in operating margins on a comparable basis building on the strong profit gains through the pandemic as we continued to invest towards the long term development of companion animal health care globally.

Our EPS outlook of $9 27 to $9 59 per share reflects 12% to 16% comparable EPS growth, including an estimated <unk> 15 per share or 2% EPS growth impact related to higher projected international tax rates.

We will discuss our 2022 financial outlook later in my comments, let's begin with a review of our fourth quarter and full year results.

Fourth quarter organic revenue growth of 10, 5% was driven by 13% overall CAG gains and 13% growth in our water business.

These gains were moderated as expected by a 19% organic decline in <unk> revenues, reflecting comparisons to high prior year results that benefited from the ramping of African swine fever testing in China.

As well as by a $5 million year on year decline in human Covid human Covid PCR testing revenues.

Strong CAG diagnostic recurring revenue growth reflected 13% organic gains across U S and international regions compared to 21% organic growth levels in the fourth quarter of 2020.

Strong Q4 in CAG results were also supported by 21% gains in IDEXX lab instrument revenues and 13% organic growth in veterinary software and diagnostic imaging revenues. In addition to benefits from our recent <unk> acquisition.

For the full year 2021, overall CAG revenues increased 19% organically driven by 18% organic growth in CAG diagnostic recurring revenues, reflecting high gains across our major modalities and regions.

Strong U S. CAG diagnostics recurring revenue growth in the fourth quarter was aided by solid year on year gains year on year gains in clinical visits and <unk>.

Continued positive demand trends, which are supporting high levels of clinical revenue growth at the practice level.

Same store U S clinical visit growth was two 2% in Q4 compared to high prior year growth levels.

On a two year basis U S same store, our clinical business increased at five 5% with solid gains across wellness and non wellness categories.

An increased focus on health care services, including diagnostics supported an 8% same store increase in overall veterinary clinic revenues in Q4, and nearly 10% gains in clinical diagnostic revenues, which increased 14% on an average two year basis.

Expanding demand for clinical services and benefits from IDEXX innovation and commercial engagement.

Ported a 1050 basis point premium of IDEXX U S. CAG diagnostic recurring revenue growth to use clinical visit growth in the quarter.

In terms of practice level trends, we did see some modest impact from the recent omicron wave on clinical testing volumes in international regions in Q4.

Which has continued in early 2022.

We've also seen some moderation in clinic visit growth in January and then in the U S, including near term impacts from higher Covid cases on.

Practice level staffing.

We're monitoring these dynamics, which we don't see as indicative of changes and strong underlying demand trends.

Globally, IDEXX achieved strong organic gains across our major testing modalities in Q4, resulting in exceptional full year growth results.

IDEXX Global reference lab revenues increased 12% organically in Q4, reflecting double digit gains in the U S and high single digit organic growth in international regions compared to strong prior year growth levels.

The reference lab gains continued to be driven by solid same store volume growth, including benefits from the expansion of IDEXX 360 program agreements for.

For the full year 2021, global lab revenues increased 17% organically, reflecting consistent high gains across U S and international regions.

I would ask about lab consumable revenues increased 15% on an organic basis in Q4, reflecting double digit gains across U S and international regions.

<unk> consumable growth reflects increases in testing utilization sustained high customer retention levels and expansion of our global premium instrument installed base.

These dynamics supported 20% full year organic growth at IDEXX vet lab consumable revenues in 2021.

IDEXX had another quarter of outstanding instrument placements building on this momentum.

We achieved 5258 premium instrument placements in Q4 up 29% from prior year levels, reflecting robust gains across U S and international regions, we have.

Strong global placement growth across our major platform platforms year on year with catalyst up 8% set of you up 20% and premium hematology up 72%.

Supported by the continued global rollout of Procyte one.

The breadth and quality of CAG instrument placements supported strong gains in our economic value metrics.

New instrument placements and continued very high customer retention levels drove a 14% increase in our growth global premium instrument.

The instrument installed base in 2021 setting.

Setting a foundation for continued strong consumable growth as we move forward.

Rapid assay revenue increased 10% organically in Q4, reflecting continued solid gains in the U S aligned with broader increases in demand for diagnostic testing and high growth in international regions for.

For the full year 2021 rapid assay organic revenue growth was 17%.

Supported by high volume gains for canine 40 ex fee line and specialty testing.

CAG diagnostic recurring revenue growth remains primarily volume driven augmented by moderate net price improvement of approximately 3% in key regions like the U S.

Looking ahead to 2022, we are planning for net price improvement in the range of 3% to 4%, reflecting higher list price increases to reflect higher service costs and continued investment in service quality and product innovation.

In other areas of our CAG business, our veterinary software and diagnostic imaging revenues increased 13% organically and 30% as reported in Q4, including benefits from the easy that acquisition.

Strong gains in recurring software and diagnostic imaging services and high comparable growth in <unk> placements were moderated to a degree by tough compares related to strong prior year diagnostic imaging placements.

For the full year 2021, veterinary software and diagnostic imaging revenues expanded to over $200 million of 15% organically and 27% as reported as we continued to advance the integration of information technology and insight is a key feature of our diagnostic solutions.

Turning to other business segments water revenues increased 13% organically in Q4 compared to flat organic growth in last year's fourth quarter. As this business continues to track back towards pre COVID-19 growth levels.

Business growth was supported by solid gains across compliance and noncompliance testing categories.

For the full year 2021, water revenues increased 12% organically compared to a 2% organic decline in 2020.

Livestock poultry and dairy revenues decreased 19% organically in Q4 compared to 13% organic growth levels in Q4 of 2020.

As expected dynamics in our China, LPG business, including the lapping of high prior year demand for African swine fever testing offset growth in other global regions.

For the full year 2021, LTV revenues declined 9% organically compared to 11% gains in 2020.

We're planning for continued challenging year on year comparison LPT revenues in the first half of 2022.

Which is factored into our overall revenue outlook.

Turning to the P&L sustained high revenue growth drove solid operating profit gains compared to strong prior year levels as we advanced planned investments aligned with our growth strategy.

Operating profits increased 8% as reported and 9% on a comparable basis in Q4, driven by continued solid gross profit gains.

Gross profit increased 12% in the quarter, reflecting strong revenue growth and a modest overall increase in gross margins.

Benefited from continued high CAG diagnostic recurring revenue growth moderate net price improvement and higher veterinary software margins, including including positive impacts from our expanding SaaS customer base.

These factors were moderated by business mix impacts from high CAG instrument revenue growth and lower LCD and human PCR revenues.

Operating expenses increased 15% on a reported and comparable basis in Q4.

As planned we saw relatively higher levels of operating expense growth as we advanced investments in R&D enhanced our global CAG sales and marketing capability and integrated the easy vet acquisition.

We anticipate sustaining a relatively higher rate of opex growth in 2022 aligned with our strong global growth momentum.

Operating expense investments drove a 70 basis point contraction in comparable operating margins in Q4.

For the full year 2021, our operating margins reached 29% up 220 basis points on a comparable basis for the year.

And up approximately 560 basis points on a comparable basis from prepaying demick levels in 2019.

We're targeting to build on the strong performance in 2022, as we invest towards the high return long term growth potential in our business.

Q4, EPS was $1 89 per share, including <unk> <unk> per share in tax benefit related to share based compensation activity for.

For the full year 2021, EPS was $8 60 up 29% on a comparable basis.

Full year EPS results included $32 million or <unk> 38 per share in tax benefit.

Related to share based compensation activity, which provided 360 basis points of effective tax rate benefit.

Foreign exchange effects reduced revenue growth by approximately 1% in Q4, resulting in a <unk> <unk> per share profit impact net of a hedge loss of approximately $500000 for.

For the full year of 2021 foreign exchange rate changes increase to increase EPS by <unk> 16 per share net of net of foreign exchange hedge losses of $7 million.

Given the recent strengthening of the U S. Dollar we're planning for a one 5% FX revenue growth headwind in 2022 with approximately 2% to two 5% year on year growth headwinds in the first half.

While previously established hedge positions will mitigate these impacts on profits. Our initial 2022 outlook incorporates an estimated <unk> <unk>.

Net unfavorable.

Net unfavorable EPS impact from FX at the rates noted in our press release.

Free cash flow was $636 million for 2021, or approximately 85% of net income, reflecting a $120 million in capital spending including $18 million in real estate purchases.

We maintain a strong balance sheet. We ended 2021 with leverage ratios of <unk> nine times gross and seven times net of cash was $144 million in cash at the end of the year.

In Q4, we established a new five year $1 billion revolving credit facility, which provides relatively improved borrowing rates.

Our 2022 interest expense outlook incorporates these benefits current forward interest rates and expectations for our net leverage ratio of one times next year.

In Q4, we allocated $245 million to repurchase 391000 shares in the quarter.

Plan to continue to allocate capital to share repurchases as part of our financial approach, which is reflected in our projected 1% to one 5% reduction in our diluted shares outstanding for the full year in 2022.

Turning to our 2002 and 2022 outlook, we are providing initial guidance for reported revenues of $3 billion and $500 million to $3 $565 million.

This outlook reflects a targeted organic revenue growth range of 10% to 12%.

Carryover benefits of approximately <unk>, 5% from 2021 acquisitions and an estimated one 5% revenue growth headwind from FX.

Our organic growth outlook reflects an estimated growth range of 12% to 14% for CAG diagnostic recurring revenues.

The higher end of this range of lines with sustaining the strong year on year growth trends, we achieved exiting 2021.

And incorporates additional targeted benefits for a moderately higher net price realization and investments in global CAG sector development.

Our overall organic growth outlook also factors and continued benefits from expansion of our premium instrument installed base and solid growth in our water business.

These positive factors are partially offset by expectations for continued year on year pressure on <unk> revenues in the first half of 2022.

And our projected contraction in human PCR testing revenues, reflecting our overall strategic growth focus on our core businesses.

Our operating our reported operating margin outlook for full year 2022 was 29, 7% to 32%.

<unk>, a targeted 50 to 100 basis points of annual comparable operating margin improvement.

Building on our strong operating margin gains in recent years.

We expect operating margin improvement will be supported by solid gross margin gains as we advance investments in our global commercial and innovation capability and ensure high levels of operational business continuity as a priority.

We've incorporated anticipated inflationary cost impacts as well as benefits from relatively higher net price gains and our overall operating margin outlook.

Given exit rates in our opex spending and year on year operating profit comparison dynamics, we're planning for operating margin improvements have been primarily driven by gains in the second half of 2022.

Our preliminary EPS outlook for 2022 is $927 $9 27 to $9 59 per share an increase of 8% to 11% as reported.

Our EPS outlook factors in in effect, increasing our overall effective tax rate from 17, 5% to an estimated 21 5 million% to 22% in 2022.

Approximately 100 to 150 basis points of this increase relates to projected impacts from international tax changes.

We're also projecting lower tax benefits from share based tax compensation activity.

Our EPS outlook reflects projected 2022 stock based compensation tax benefits of $10 million or approximately <unk> 12 per share compared to high realized 2021 tax benefits of $32 million or <unk> 38 per share.

As noted we have also incorporated an estimated year on year negative impact of <unk> <unk> per share from FX net of established hedge positions.

Adjusting for these factors our outlook is for EPS growth of 12% to 16% on a comparable basis, including an estimated <unk> <unk> per share approximately 2% EPS growth impact from international tax rate changes.

Our 2022 free cash flow outlook or score a net income to free cash flow conversion ratio of 75% to 80%.

This reflects estimated capital spending of $180 million or approximately 5% of revenues, including $50 million related to our new warehouse and manufacturing site expansion aligned to support our high growth.

Adjusting for this major project, our normalized net income to free cash flow conversion ratio is aligned with our longer term, 80%, 80% to 90% targets.

That concludes our financial review I will now turn the call over to Jay for his comments.

Thank you, Brian and good morning.

Sustained its strong performance in Q4 capping an exceptional year for the company for the full year, we delivered 16% organic revenue growth, 29% comparable EPS growth supported by solid operating margin gains and 59% ROIC.

These results reflect the attractiveness of our businesses, including our core CAG business, which is sustaining very strong growth trends benefiting from our commercial expansion and an expanding innovation portfolio.

We are well positioned to build on this momentum in 2022 as reflected in our financial outlook. This morning, I'll recap, our recent performance and highlight key areas of business focus moving forward.

<unk> advancement of new innovations and the ongoing expansion of our global commercial capabilities. Both of these are strategic elements of our plan to develop the substantial long term market opportunity is still before us.

Let me begin with a brief update on sector trends.

Overall global companion animal health care trends remained strong.

Even by ongoing robust demand and veterinary clinics for health care services, including diagnostics.

Brian highlighted U S same store clinical revenues increased 8% in Q4 supported by 2% growth in same store critical visits compared to very strong prior year growth levels.

<unk> same store growth continues to expand at a higher pace of nearly 10%.

IDEXX U S. CAG diagnostics recurring revenue growth is leading this expansion reflected in 13% organic gains in Q4 building on 21% gains in Q4 of 2020, as we provide highly desired diagnostics and information management platforms to support our customers care mission.

Were seeing sustained strong demand trends for clinic clinical service globally.

Building on the step up achieved through the pandemic as highlighted in data shared in our earnings snapshot. This includes sustained approximately 2% acceleration in U S. Diagnostics revenue per clinical visits in 2021 building at a higher 2020 games.

Solid momentum gives us confidence in investing towards accelerated global CAG sector development and is reflected in our outlook of 12% to 14% global CAG diagnostics recurring revenue gains in 2022.

At the high end of our long term goals.

Like many sectors of the global economy veterinary clinics continue to work through the challenging dynamic of increased clinical demand in the face of staffing challenges, including near term management impacts from the search of the Omicron variant, it's clear that strong clinical service finance will be a priority for clinics moving forward.

<unk> remains committed and extremely well positioned to support the growth of our customers through our focus on high customer service levels and solutions that enhance clinic productivity.

As we look forward, we're expanding our global commercial capability aligned with these strong demand trends are investments in Germany, France, and South Korea in the first half of 2021.

To pay off as expanded commercial footprint in each country enables significant increases in customer context and reach to revenue critical elements of our high touch account management philosophy.

We're tracking towards completion in early 2022 of the already communicated second wave of expansions and three additional countries with more to come.

These are holistic initiative said that only involve the addition of customer facing professionals across multiple job types, such as account managers professional service veterinarians and field service Representatives, but also include the extension of marketing programs and new field tools, such as IDEXX 360, and the addition of more extensive referenced on Korea.

That's an expanded service levels.

Creasing, our international commercial footprint, while maturing our approach will continue to be a key priority beyond wave two countries currently nearing completion.

To that end I'm pleased to share it but we're also augmenting our commercial leadership team with an experienced commercial executive in Asia Pacific Keck, who will join that X this quarter.

As we expand our commercial team continues to deliver the day reflected in over 5000 premium instrument placements in Q4 by far our largest quarterly placements ever achieved premium instrument placement growth of 29% includes comparable growth across U S and international regions and resulted in.

14% growth in our global premium installed base with strong performance across each of our instrument platforms.

These exceptional results were delivered despite access challenges they demonstrate strong commercial execution as well as the fact that customers are increasingly choosing IDEXX innovations to support increased clinical demand today, while investing for future business needs.

<unk> is a great example of this are pressing one launch has gone exceptionally well procyte once performance and reliability is use of the demanding environment of a practice has met or exceeded all goals and feedback remains highly positive as customers love its ease of use and how it fits into the veterinary clinic workflow.

Mid 90%.

Global attach rates with chemistry analyzers, and this trend demonstrate pro side once importance and building a full diagnostic workup.

Furthermore, the prostate one launch benefits from programs like IDEXX, 360, which not only provides veterinarians with a flexible customer friendly way to add this innovative analyzer to their clinics, but also benefits growth across IDEXX testing modalities.

Our global profile, one regional Rod is now nearly complete and we have delivered over 2500 instruments globally since launching in late Q1 of 2021.

Our growing installed base of premium instruments supports a robust stream of future consumable usage, which gives us confidence guided ranges for CAG recurring revenue growth.

In addition to driving placements and adoption our commercial team continues to educate our customers on the benefits of preventive medicine.

The preventative care initiative remains our primary vehicle for driving a preventive agenda in the clinic and provide sales professionals and opportunity to engage and thorough conversations with broad participation from practice staff.

Despite restricted access to clinics, we drove approximately 125, new U S enrollments in the quarter, while also developing plans to simplify the enrollment process for busy customers.

Look forward to deploying this and continuing to support this broader preventive care effort in 2022.

We also see the continued momentum in software expansion.

Our innovative products are helping customers improve clinic efficiency and pet owner communication.

Boarding of easy that has gone very smoothly and subscriptions are tracking favorably to our high expectations customers. Appreciate the advanced capabilities and intuitive workflow easy that provides 81% pins placements with cloud based in the quarter demonstrating that we are well positioned to support customers in their shift to the cloud.

This trend provides a significant growth opportunity and excellent profit flow it puts a robust and easy to use information management products that enhance of our customers that enable them to focus on providing the highest levels of patient care enabled by diagnostics to improve health outcomes.

Our software portfolio is a strategic area of investment and focus for IDEXX.

Veterinarians have never been busier and have a deep need and depreciation for software solutions that are easy to use and built on contemporary technology stacks.

They look to these solutions to support patient care staff productivity and internal as well as pet owner Communications. Our strategy is to bring enterprise software solutions to our customers that work seamlessly with a broader set of business and clinical applications, our own or third parties that veterinarians, who used to run their practices.

Second it plus diagnostics results clinical decision support and ordering portal is a great example of this that connect plus was launched almost 10 years ago is integrated from a workflow standpoint, and IDEXX and third party pins and is now being used in over 30000 practices globally.

Customers, who use our software and diagnostic solutions together correlate with higher growth profiles supporting workflow optimization for our diagnostics testing platforms.

Our diagnostic imaging business, which includes our industry, leading web Pacs software solution also experienced an excellent quarter demonstrating the preference customers have for our premier low dose imaging solutions.

Solid placements in the quarter supported full year placement growth of 35% and double digit year over year gains in recurring revenue. We also had strong growth in web Pacs subscriptions for Q4 up 18% versus the prior year and with continued customer retention rates and high 90% range growth.

And the installed base, a profitable revenue stream and increased utilization of services of help IDEXX web Pacs become an important part of our enterprise software ecosystem.

Okay.

In addition to ensuring the successful rollout and adoption of these recent innovations we were thrilled to launch a series of new product and service enhancements at <unk> last month each.

Each of these innovations highlight IDEXX is commitment to continually invest in our service and product offerings with a particular focus on providing insights and decision, making AIDS to help customers deliver a higher standard of patient care.

These enhancements include an expanded oncology testing platform with additional testing for veterinarians to better identify stage treat and monitor several prevalent cancer types.

An updated 40 X plus test with improved parameter performance per anaplasma.

And the addition of clinical decision support 40 X plus and narrow network six point out <unk>, which has now been trained on $800 million urine sediment images.

Improving the performance of our products are central to our strategy and we're also supporting greater efficiency, which helps drive higher adoption and customer satisfaction.

Some examples the new catalyst SBA bring through agents on board the test, reducing the number of steps to run the test of time to results.

While also reducing storage space and waste due to the removal of separate reagent costs.

That can have plus mobile app provides an enhanced user experience improved mobile capability and easier Paydown, our communication and finally coming later in 2020 to 40 X plus test will allow for extended room temperature storage.

The addition of these time saving technologies demonstrates our technology for life approach to product and services designs.

Notably the improved 40 X plus product represents our fifth update to the heartworm snap product first launched in 1992, while this test already represents the gold standard for vector borne disease rapid testing, we remain focused on continuous improvement to support our customers and delivering improved health outcomes.

Underpinning our strong business performance and to prioritize and focus on providing continued high levels of service to our customers a.

A key element achieving these service levels is consistent strong execution across our supply chain.

Which we saw again in Q4 through high product availability and strong order turnaround times.

In order to build this capability and support growth in the future we plan to invest in 2022 and the expansion of our manufacturing footprint and lab capacity, while also maintaining strong frontline measures to support high service levels and while we anticipate some inflationary dynamics and supply chain headwinds going forward, we have captured these.

And our outlook and believe we are well positioned to build upon our year end margins.

Overall, we're very pleased with the momentum and execution in our business and excited about our plans to build on our progress in 2022.

Before we open the line for Q&A I'd like to say, thanks to our employees for another top notch here in pursuit of our purpose and our service to our customers.

<unk> organization remains highly focused on our customers' needs and continued to perform at a very high level during another dynamic and demanding demanding here.

Team's perseverance seen both in the results highlighted this morning, as well as our high levels of engagement as a team and are proud to be able to share today's excellent results on behalf of the whole team's hard work.

That concludes my opening remarks, we now have time for some questions.

Thank you we'll now begin the question and answer session. If you have a question press Star then one on you touched on phone.

We should be removed from the queue. Please press the pound sign or the hash key if you're using a speakerphone you may need to pick up the handset first before pressing the numbers.

Once again, if you do have a question press Star then one on your Touchtone phone.

And our first question is from Chris Schott from Jpmorgan.

Great. Thanks, so much for the questions I, just want to get a little bit more color on the magnitude of impact youre seeing from a micron to the near term results. So basically how much of a step down and visits are you seeing currently and then maybe just pulling on that just a broader question can you just elaborate a little bit more on your expectation for that.

Is it growth as we look out to 2022, and we start to think about annualizing that maybe more normalized comps that we've seen over the past few years. Thanks, so much.

Good morning, Chris.

We haven't quantified it we did we did see some impact on testing volumes in the international regions from Omicron in late Q4, it primarily manifest itself in that.

Modest drop off in some lab volumes and this trend appears to be continuing.

In early 'twenty two January .

As it effects.

U S clinical visit growth, yes, the thing to keep in mind is the underlying customer demand is very strong.

That practices tell us is that they're busy.

Ever been in.

In terms of.

Forward bookings we are seeing.

Month to months forward booking of patients.

Pet owners trying to get into practices. So we think practices have a playbook in which to deal with this we've all seen this movie a couple of times at this point.

They've done that curbside drop off and pick up in some cases, there's obviously some.

Having issues that they're dealing with we think that thats.

More of a temporary basis and we're in a really good position also.

To be able to support them with our field service organization and technology solutions that help them be more productive and manage the business.

And to your question, Chris our 12% to 14% organic growth outlook for CAG Dx recurring revenues assumes positive.

Clinic visit growth.

In addition to our strong performance got ongoing performance players are.

Our teams in helping to grow our revenues faster than that.

Okay, and then just one really quick follow up I know last year, you talked about new instrument placement growth, adding I think about a percent or so to overall revenue growth can you just elaborate on how youre thinking about new instrument placements and its contribution to 2022. Thanks so much.

Oh well.

Jay talked to the color of the momentum that we have on instrument placements and our priorities in terms of our outlook. We didn't break it out specifically what we're we're targeting continued strong placement growth the revenue growth may lag the placement growth somewhat as.

We see the expansion of programs like IDEXX 360, and have some some mix effects from higher growth in international markets, but we are we're targeting solid instrument year on year growth and that's factored into the overall guidance and we felt we saw record placements in Q4.

2021 over to over 5000.

On the back of record hematology placements of catalyst and <unk> pretty much across the board and we think that that momentum.

Well.

Intact.

This is a clearly investing in technology to help them from a capacity standpoint, they're looking to us and our solution set.

Not just support the best standard of care, but also.

Support workflow and staff productivity and enable them to handle higher patient volumes.

Okay. Thanks, so much for the questions.

Our next question is from Erin Wright from Morgan Stanley .

Great. Thanks, so much.

And the inflationary environment that we're in.

And you anticipate higher price realization in 2020 guide, but can you quantify some of the offsetting factors the higher input costs labor.

Net net how are these dynamic impacting you from a margin perspective in 2022, just based on your guidance.

So we we are seeing some impacts selectively in our in our business I think you highlighted some of the key drivers for the freight and distribution costs have been have been a factor we're monitoring higher labor input cost I think that's that's something that we anticipate will be something we'll need to manage effectively and we are selective impac.

<unk>.

In different parts of our business, but we do use electronic components and things of that nature, I think a lot of our focus areas.

Making sure we have continued very high business continuity reliability. So we're really pleased with that we're at 99% and.

Customer reliability and that's our that's our primary focus and so we do have some impacts and as you pointed out we have a relatively higher.

Expectation for net price improvement that helps to mitigate that and is reflective of to a degree of that and enables us to to support the solid operating margin improvement that we're targeting next year.

Okay, Great and then more of a philosophical question here, So bear with me, but bigger picture.

Thinking about broader animal health and more specifically diagnostic change and while there will be an element of normalization here near term just given the tough comp.

Barring any kind of volatility but.

Does seem that you suggest that we are emerging and des mcanuff faster underlying growth rate, our companion animal diagnostics and maybe pre pandemic.

Longer term does it change how you're thinking about your five year outlook.

And how are you thinking about TJ adobe to quicken, the pace and maybe actually more structural in nature.

Yes, I'll take that good morning Erinn.

A couple of I think longer term trends.

The pandemic probably accelerated.

That work.

Work.

And if anything.

As a result of new pet adoptions in the pivot within practices that more service versus retail type product sales I think it just accelerated as a result of that the pandemic clears.

Clearly as veterinarians focus on medical services and patient care diagnostics is a big piece of that.

I recognized that diagnostics is obviously a key.

Very high margin very high profit center within their practices and so I think the combination of more patients pet owners wanting higher yeah.

The standards in patient care veterinarians are pivoting to services in the world. The diagnostic plays have been important factors and then you layer on top of that our strategy as a company, which both includes continuing to innovate.

In terms of testing platforms, and information management, and our commercial strategy, which is a high touch model and being able to work with the veterinarians to help them to use these tools effectively bulk business in medical lives.

Thank you.

We continue to see very strong trends that.

Higher than pre pandemic.

Okay, great. Thank you.

Our next question is from Michael My skin from Bofa.

Great. Thanks for taking my question and congrats Jay and Brian on the quarter and the solid guide I want to ask about some of the new <unk>.

And new initiatives, you announced earlier this year it via mix of around <unk> <unk>.

The pet Dx partnership slightly different than some of the things you've done in the past and it does get to a point, where you have questions from investors about.

In terms of additional testing modalities additional opportunities beyond sort of what is already on the market could you talk about the oncology opportunity or if theres others beyond that that you are thinking of in terms of.

Some of the untapped markets in diagnostics, how do you see this partnership playing out in the next couple of years and just sort of.

All of the things you highlighted earlier this year, how meaningful is that a contributor to 2022 overall or is that more of a long term factor.

Sure.

Good morning, Mike, Yes cancer is the most prevalent.

At <unk> in dogs, so there are about $6 billion.

Positive cases of cancer.

Just in the U S. It's very significant.

And if you take a look just at a high level in terms of.

The process by which the veterinarian diagnosis and creates it's very complex.

It's fragmented and there arent a complete set of diagnostic tools to help to help support that so we think that there is a longer term very attractive market opportunity to be able to help veterinarians navigate cancer diagnosis and treatment and.

So we're building up our expertise in cancer pathology, which is really more to de geared towards cancer identification and really trying to yes.

Across the continuum of care, which is C identification and staging of treating and monitoring and bring solutions to that full value chain.

Care. So the partnerships, we announced we think bring best in class technology to support that process. We're excited by it it's still it's still early.

Stages in terms of market development. So I think it's less about the revenue opportunity.

Near term.

And more about supporting veterinarians and helping them navigate what's a very complex in what is increasingly pet owner driven demand for these types of services.

Overtime.

Quite attractive opportunity.

I think.

Incredible technical expertise to be able to support the veterinarian through this and we're excited by what we've learned and continuing to build.

Off those capabilities over time.

Great. Thanks, and then follow up question on the guide again.

The 12% to 14% of recurring revenue and CAG is.

Very solid guide I think relative to your initial expectations you touched on I mean, you commented that you expect clinical visit growth in the market to be positive and you cited price again, but could you talk about some of the other moving pieces there just.

Just trying to get at the bridge from that clinical visit growth to the CAG recurring revenue, whether it's diagnostic frequency diagnostic utilization just sort of the cat premiums. If you could help US bridge what are the moving pieces there that'd be helpful.

Yes, Mike So I think the way to think about this as the.

We were coming out of 2021, and clearly we had a big step.

Step up in demand through the pandemic that we're confident that we can build off of that so I think that's that's one key theme and as you look at the calibrate. This so the exit rate of our business in Q4, we had 13%.

Dx recurring growth off that higher base. So we are we.

We were entering the year with that kind of trajectory and we see some positive drivers here were.

We're investing in international growth and feel good about the.

The traction and the potential there.

And we will have some incremental benefit from from net pricing that we highlighted and so the the higher end of the range really reflects kind of building off of.

The momentum that we had I think to build on kind of Aaron's question earlier.

One of the metrics we share on our snapshot is just the average revenue per clinical visit and the.

And veterinary clinics in the U S and that increase as Jay noted nearly 200 basis points from pre pandemic levels to from 4% to about 6%. So there is some underlying positive service trends here and I think what youre seeing in our outlook is.

Confidence that we can execute well continue to execute well.

<unk> in ways that support that and if we can sustain that type of momentum.

We think we can achieve those higher growth levels and I think the.

The lower end of the range really is more calibration of going back towards more pre pandemic type growth, that's not where we're necessarily projecting but I think that that's a potential scenario as well but.

All of this is building off of the higher demand so.

Some of this will come down to our execution and I think things like omicron, our near term dynamics that will just need to manage through as Jay mentioned, we don't see that as is indicative of a longer term or an underlying demand issue but.

The momentum in our business, we feel very positive about and we're we're investing towards that I think we've got a good strategy to keep building on that progress.

Great. Thanks, so much appreciate it.

Our next question is from Jon block from Stifel.

Hey, guys great. Good morning. Thanks.

First question just on wellness clinical visits they can continue to do very well the two year average actually accelerated from the third quarter 'twenty one level. So just love management thoughts on staffing capacity issues at vet practices. We continue to hear a lot about those I think others do as well.

Jamie Bryan how difficult or they because you would think wellness would be impacted but again it accelerated and then maybe do you believe the underlying industry demand from consumers is actually potentially higher from what we're seeing work its way through and then I've just got a follow up thanks.

Yes.

John in terms of all the <unk>.

This is a couple of things that are potentially driving that obviously there is a lot of puppies and kittens now become <unk>.

<unk> in cats, and I think there's a lot of pet owners.

Get there because their pets into the practice.

<unk> up and Theres been an emphasis on wellness visits in the U S. Now for quite some time, so it's not now.

Obviously, there are some capacity constraints in some of these visits get pushed off a month or six weeks.

I think over time that'll that'll get relief, but I think the under what we see is the underlying demand for wellness and checkups.

There.

It's very robust as you pointed out and we expect that to be able to sustain certainly we and others in the market place I really focused on emphasizing preventive care.

An important part of patient health.

Okay fair enough and the second one builds on Chris's earlier question, So Brian I'll try to maybe push you a little bit more the CAG Dx recurring guy was yes.

I think solid and a lot of People's view it implies a two year average of in and around 15, 5%.

You helped I thought a lot on the cadence of op margin expansion in 2022, you called out the comps, but anything specifically to call out for CAG Dx recurring two year average for one Q I mean, you've got a wildly tough comp you called out <unk> headwinds that persist Jan maybe even a February could this be as.

Situation, where we're looking at inorganic revenue CAG Dx at mid single digits. When we take that all into account account or maybe just phrase it frame it versus the two year average of $15 five for full year. Thanks, guys.

Look the way I think we're thinking about this is we're building off this higher base. So we clearly had.

A period, there where we needed to look at some two year metrics here to calibrate for 2020 effectively.

Pandemic dynamics.

And now we're moving into sort of that phase of building off the higher base I would say that.

There was some incremental benefit last year in Q4 from just the puppy boom in that.

That I think is probably the key factor that sustained in the near term, but for the most part we're normalizing off that higher base.

So I think that that.

12% to 14% is that full year number or not.

Projecting by quarter, but I think we're.

Reflective of the overall momentum of the business.

The the omnicom dynamic as a near term dynamic in the U S that we didn't really see.

Significantly in Q4, and we're seeing some effects that really here, we'll sort that out as we go through the quarter, but I think the the underlying.

Lying momentum and trends, we are targeting to remains strong in and.

We'll work through these near term dynamics.

As they play out.

Alright, thanks, guys.

Our next question is from Nathan Rich from Goldman Sachs.

Hi, good morning, Thanks for the questions.

Brian maybe starting with the Opex guidance I think you mentioned kind of the higher levels that you are that you saw in the latter half of this year will continue into 2022.

I guess, it's kind of running in the back half of 'twenty. One was in the low 30% range in terms of revenue can you maybe talk about what you see the run rate being going forward, both for 2022 and beyond because the opex as a percent of revenue has come down a lot relative to historical levels do you see that getting back to historical levels are.

You kind of feel like the current read there were out as sort of what to expect as we go forward from here.

So I think the way to think about natives we.

Q4 growth rate year on year of about 15%.

And.

We're working still working through some compares to some relatively more.

Trolled growth.

Opex levels of the comparable prior year and so entering into Q1, where you expect kind of that same dynamic will have a relatively higher rate of opex growth that'll be our most challenging compare.

In general terms I think for the full year, you should expect us to be trending back more in line with kind of our overall revenue growth, we want to lean in and invest towards future growth I think are our margin dynamics as they've been in the past the supported by solid gross margin improvement and.

So I think longer term.

Consistent with our longer term outlooks that we've shared at Investor day, I think in the Opex growth closer to revenue growth is a reasonable expectation.

Okay. That's helpful and then Brian I don't know if you have any commentary on how we should expect kind of the weighting of earnings this year between like the first half in the second half just kind of given the commentary on kind of the early first quarter trends as well as the higher opex levels.

Going to significantly change the typical seasonality that you usually see in the business.

Yes, it's more driven by comparison necessarily a change in seasonality, but I did mention that our margin improvement would be in the second half.

As we just discussed I think are more challenging comparable will be in Q1 in terms of the quarters. This year.

That's again more reflective of kind of a.

Our year on year.

Dynamic.

To highlight specifically is we'll still be working through.

On <unk>, we have the.

The decline in the African swine fever.

Revenues that really started in the.

The third quarter of 2021, and it will still be working through those those compares so that'll have a dynamic as well.

Okay, great. Thanks, a lot.

Our next question is from Ryan Daniels from William Blair.

Hey, guys Nick speak out in for Ryan most of my questions been asked but I guess in the release you mentioned, you're still working our way through the easy integration.

At least on the Opex side I was wondering how far along are you in that until you kind of.

Fully integrated and you're no longer dealing with those expenses.

Good morning, yet that the easy that integration has gone quite well where we are.

We're far along in terms of really integrating.

Our sales approach and organization and product Roadmaps and that continues to be received.

Well in the in the marketplace and that you saw from the growth numbers that there's a lot of traction behind that is a key part of our strategy.

Yes over 80% of our placements for cloud.

Cloud based placements this quarter.

Very good very good traction far along.

Integration is going well.

Great, Thanks, and I guess.

And then just a quick follow up on the wellness visit color.

We have kind of that strong stacked wellness growth I was wondering if you guys are seeing any change in the proportion of those that are included time panel with the large growth are you seeing that kind of proportion come down are you kind of maintaining.

What the historical rate was with that growth.

Yes, I mean, it's been it's spread.

Pretty constant in terms of.

Panel mix its something we don't breakout.

These are these are largely configured panels for wellness customers.

You don't get a lot of variation quarter to quarter.

And so with that I'd like to thank everybody for joining this morning's call I know we have some employees who are listening I would like to say thank you.

For their excellent performance with continued passion for our purpose.

Day in and day out our team delivered excellent results aligned to our long term opportunity, while also demonstrating unwavering commitment to our purpose and navigating an evolving landscape due to continued pandemic impacts very grateful for the IDEXX team and the purpose, which drives our work and so with that we'll conclude the call. Thank you.

Thank you ladies and gentlemen that concludes today's conference. Thank you for participating and you may now disconnect.